Bank Records and Net Worth Increases
4 Page3
Guilty
knowledge and willfulness may reasonably be inferred from such conduct
as is revealed by this record. The defendant contended that he relied on
his wife, and on his attorney one year and on his accountant the other.
Yet in this two-year period he failed to record or deposit twenty-two
checks aggregating more than $20,000 paid to his company by customers.
Since these receipts did not appear on his bank statements neither
defendant's wife nor the preparer knew of their existence. In United
States v. Callanan [72-1 USTC ¶9111], 450 F. 2d 145, 148 (4th Cir.
1971), the court wrote that a defendant's "failure to record fees
he personally received or to deposit them in his office bank account
made it virtually impossible for his accountant to include them in his
tax returns." A taxpayer who keeps no regular books but relies on
his bank records to reflect his income engages in a deceptive practice
when he fails to deposit payments from business customers.
The
defendant relies on McCarty v. United States [69-1 USTC ¶9322],
409 F. 2d 793 (10th Cir.), cert. denied, 396
U. S.
836 (1969). Reliance on McCarty is misplaced. In that case the
court found sufficient evidence to support a guilty verdict. As in the
present case there was specific proof of unreported income and
preparation of returns by an accountant who did not see any underlying
records but relied on information furnished by the taxpayer. The
defendant also argues that United States v. Pechenik [56-2 USTC
¶9888], 236 F. 2d 844 (3d Cir. 1956), supports his position. It does so
only as an abstract statement of the proposition that good faith
reliance upon the conduct of employees who prepare tax information is
not a crime. However, Pechenik is readily distinguishable from
the present case. There the government sought to hold a corporation
president criminally liable for a false return of the corporation. The
device used by the corporation to understate taxable income consisted of
treating capital expenditures as operating expenses. The uncontradicted
evidence was that a bookkeeper determined how various expenditures
should be treated and there was no evidence linking the defendant with
the erroneous entries. Here the defendant personally failed to record
receipts which constituted business income.
The
defendant also relies on the decision in Holland v. United States
[54-2 USTC ¶9714], 348 U. S. 121 (1954), for the proposition that the
government was required to investigate all "leads" supplied to
the taxpayer to explain his increased net worth. The case against
Garavaglia did employ the net worth method. However, the
"leads" which the defendant supplied did not relate to his
unexplained increase in net worth, but concerned his explanations of
specific identified items of income which were omitted from his returns.
The record discloses that leads relevant to unexplained net worth
increases which were reasonably susceptible of being checked were
investigated.
A
taxpayer who relies on others to keep his records and prepare his tax
returns may not withhold information from those persons relative to
taxable events and then escape responsibility for the false tax returns
which result. Willfulness may not be inferred from the understatement of
income alone. However, when there is evidence of a consistent pattern of
underreporting substantial amounts of income together with a failure to
record all of the income, an inference of willfulness may be drawn. Holland
v. United States, supra, 348
U. S.
at 139.
The
judgment of the district court is affirmed.
1
§7201. Attempt to evade or defeat tax
Any
person who willfully attempts in any manner to evade or defeat any tax
imposed by this title or the payment thereof shall, in addition to other
penalties provided by law, be guilty of a felony and, upon conviction
thereof, shall be fined not more than $10,000, or imprisoned not more
than 5 years, or both, together with the costs of prosecution.
[78-1
USTC ¶9350]
United States of America
, Plaintiff-Appellee v. Anthony J. Giacalone, Defendant-Appellant
(CA-6),
U. S. Court of Appeals, 6th Circuit, No. 77-5074, 574 F2d 328,
4/7/78
, Aff'g unreported District Court decision
[Code Sec. 7201--result unchanged by 1976 Tax Reform Act]
Crimes: Tax evasion: Net worth prosecution: Miscellaneous defenses.--The
defendant was properly convicted of tax evasion by use of the net worth
method. The opening net worth figure was not uncertain merely because
the amount of cash on hand was represented by an algebraic constant. It
was proper for the government to use a joint net worth statement, since
joint returns had been filed. Pre-trial publicity and publicity during
the trial did not preclude a fair trial. The jury instructions were
adequate. Evidence of the existence of undisclosed wiretap evidence was
not sufficient to require a post-trial hearing.
James
K.
Rob
inson, United States Attorney, Detroit, Mich., Geoffrey A. Anderson,
Richard E. Zuckerman, Department of Justice, Washington, D. C. 20530,
for plaintiff-appellee. Joseph F. Dillon, Raymond, Fletcher, Dillon
& Titcomb, 400 Renaissance Center, Suite 2370, Detroit, Mich. 48243,
for defendant-appellant.
Before:
LIVELY, ENGEL and MERRITT, Circuit Judges.
LIVELY,
Circuit Judge.
The
defendant appeals his jury conviction for income tax evasion. The
indictment charged violation of 26 U. S. C. §7201 1 with respect
to taxes due for the years 1968, 1969, 1970 and 1971. The jury returned
guilty verdicts for the first three years but found the defendant not
guilty with respect to 1971.
The
defendant filed joint income tax returns with his wife and paid the
taxes which the returns indicated were due. The government charged that
the defendant understated his taxable income by substantial amounts in
each of the indictment years. The government's evidence consisted
primarily of a recomputation of the defendant's taxable income by
"the net worth plus non-deductible expenditures method."
(Government summary witness
Rob
ert Campbell, Tr. 9635). Under this method the government seeks to
compute taxable income by determining a taxpayer's net worth (excess of
assets at cost over liabilities) at the end of each year plus his
nondeductible expenditures during the year. The difference between this
figure and the net worth at the beginning of the year is treated as the
taxable income received during the year. The government must show that
it has ruled out the existence of non-taxable funds as the source of
expenditures or increases in net worth. See United States v.
Taglianetti [68-2 USTC ¶9479], 398 F. 2d 558, 562 (1st Cir. 1968), aff'd
[69-1 USTC ¶9295], 399
U. S.
316 (1969); United States v. Goichman [76-1 USTC ¶9470], 407 F.
Supp. 980, 986 (E. D. Pa.), aff'd [77-1 USTC ¶9115], 547 F. 2d
778 (3d Cir. 1976). The net worth method was approved by the Supreme
Court for use in income tax prosecutions in Holland v. United States
[54-2 USTC ¶9714], 348 U. S. 121 (1954), and in three other cases
decided the same day: Friedberg v. United States [54-2 USTC ¶9713],
348 U. S. 142; Smith v. United States [54-2 USTC ¶9715], 348 U.
S. 147; United States v. Calderon [54-2 USTC ¶9712], 348 U. S.
160.
The
defendant raises numerous issues on appeal. We will discuss separately
those which appear to be the most substantial.
Sufficiency
of the Evidence
A.
Accuracy of the Opening Net Worth Figure--The
defendant has contended throughout that the government's evidence was
not sufficient to sustain the verdict because it failed to establish the
"opening net worth" with sufficient certainty. In
Holland
the Supreme Court wrote that "an essential condition in cases of
this type is the establishment, with reasonable certainty, of an opening
net worth, to serve as a starting point from which to calculate future
increases in the taxpayer's assets." 348
U. S.
at 132. A net worth statement prepared by government agents was received
in evidence as exhibit #3517. The itemization of the defendant's opening
net worth--i.e., net worth on
December 31, 19
67, the last day before commencement of the indictment years--on the
government's statement contained no dollar amount for cash.
"Cash" was shown as an item, but was represented by a dash,
and this representation was repeated for each year through 1971. Page 1
of exhibit #3517, reproduced below, shows the use of dashes:
United States
v. Ciacalone
No. 77-5074
The
defendant argues that since the dashes added noting to the totals they
must be treated as zeros. He points out that the government's evidence
showed numerous cash purchases by the defendant and his wife, thus
proving the existence of cash. Since no cash was shown on the statement,
it cannot reflect accurately or with "reasonable certainty"
the opening net worth figure for each year, he contends. This argument
is fallacious. The entire thrust of the case was that the cash
expenditures in each of the prosecution years were made from current
taxable income received in that year, not from cash on hand at the
beginning of the year. The government witness Campbell conceded that the
defendant possessed some cash, but testified that the dashes represented
an unknown, presumably constant amount and were similar to "x"
in an algebraic equation. The defendant is a "professional
gambler" (appellant's reply brief, pp. 4 & 42).
Campbell
testified that the net worth statement assumed the existence of a
"bankroll" of cash which remained approximately the same
throughout the period covered. However, he asserted that as a constant
it did not affect the accuracy of the net worth statement.
The
defendant presented evidence that he had $300,000 in cash on
December 31, 19
67 and that this fund was consumed at the rate of $50,000 per year
thereafter. According to defendant's computations these funds
approximately accounted for his increased net worth year by year. In
anticipation of this defense the government presented a detailed
analysis of the financial transactions of the defendant and his wife
from
October 17, 19
51 through
December 31, 19
67. The analysis purported to show that during this 16-year period the
Giacalones had spent approximately $81,000 more than was available to
them according to their income tax returns.
October 17, 19
51 was chosen as the starting point for the cash analysis because the
defendant gave a statement to an agent of the Internal Revenue Service
on that date in which he detailed all his assets and liabilities. The
government argues that this evidence of a negative cash position on
December 31, 19
67 was sufficient to justify the jury in finding that no cash hoard of
$300,000 existed, as claimed by the defendant, and was sufficient to
support the omission of any cash other than the unknown quantity
representing the gambler's bankroll, shown by dashes, from the net worth
statement.
Because
of the danger of miscarriage of justice inherent in net worth
prosecutions, we review each such case with great care. See
Holland
v.
United States
, supra, 348
U. S.
at 129. The burden of proof is no different than in any other criminal
case--the government must prove all material elements of the offense
beyond a reasonable doubt. However, in these cases the evidence of guilt
is largely circumstantial, and the net worth method is, at best, only an
approximation. As an added measure of protection the government is
required to demonstrate that it has investigated the existence of
sources of net worth other than unreported taxable income. As the
Supreme Court said in
Holland
, ". . . the cogency of its proof depends upon its effective
negation of reasonable explanations by the taxpayer inconsistent with
guilt." 348
U. S.
at 135. Evidence which carefully traces the financial history of a
defendant and discloses expenditures in excess of reported resources in
the period immediately preceding the indictment years is sufficient to
support a finding that there was no cash hoard. Friedberg v. United
States, supra, 348
U. S.
at 144.
The
defendant did not claim that he had nontaxable sources of income during
the indictment years. Instead, he relied upon witnesses who testified
that the $300,000 cash hoard came from the defendant's father prior to
that time. The government presented proof that the father had serious
financial problems during the period it was claimed the gift money was
being accumulated and that he left no probate estate. The evidence was
clearly sufficient to support an inference that the defendant's father
was not the source of funds which explain the increased net worth and
expenditures of the defendant and his wife. See McGarry v. United
States [68-1 USTC ¶9204], 388 F. 2d 862 (1st Cir. 1967), cert.
denied, 394
U. S.
921 (1969).
Though
we have found no case precisely on point we conclude that the use of
dashes did not invalidate the net worth statement. The Supreme Court
held in United States v. Johnson [43-1 USTC ¶9470], 319
U. S.
503, 517 (1943), that the government is not required to produce proof of
the exact amount of unreported income of a large-scale gambler. The
nature of the activities of a professional gambler virtually precludes
such precision. The effect of using the dashes is no different from the
use of zeros approved in
United States
v. Goichman, supra. It avoids the untenable assumption that a
professional gambler could operate without any cash. The recognition of
a cash benkroll treated as a constant, together with proof which would
support a finding that no significant cash hoard existed, was a
sufficient accounting for cash in the opening net worth computation.
B.
Use of a Joint Net Worth Statement.
The defendant also claims that the evidence was insufficient because the
government used a joint net worth statement for the defendant and his
wife. The defendant and his wife filed joint returns for the four years
covered by the indictment and Mrs. Giacalone's occupation was listed on
the returns as "housekeeper." The accountant who prepared the
returns testified that all the information and figures for the returns
were supplied by the defendant. Though the defendant presented evidence
that his wife had a separate estate, or net worth, the government
produced Social Security records which indicated that Mrs. Giacalone had
no earned income between 1937 and 1971. Furthermore, the government
proof traced a number of nondeductible expenditures by the wife to funds
furnished by defendant. The jury was not required to believe the
evidence that some of the expenditures were made from the separate
estate of defendant's wife.
The
district court did not commit error in holding that the use of a joint
net worth statement was sufficient under the facts of this case. By
filing joint returns the defendant and his wife recognized a single
taxable unit.
Rob
ert A. Coerver [Dec. 24,824], 36 T. C. 252 (1961), aff'd per
curiam [62-1 USTC ¶9236], 297 F. 2d 837 (3d Cir. 1962); Furnish
v. C. I. R., 262 F. 2d 727 (9th Cir. 1968); cf. 8A MERTENS
LAW OF FEDERAL INCOME TAXATION §47.10 (rev. 1971). The evidence was
impressive that the defendant personally controlled and handled the
finances, and he alone was charged with attempting to evade taxes owed
by the taxable unit. Although Mrs. Giacalone was not charged with the
criminal offense, her financial transactions were intertwined with those
of her husband. As in United States v. Costello [55-1 USTC ¶9342],
221 F. 2d 668, 674 (2d Cir. 1955, aff'd, [56-1 USTC ¶9321] 350
U. S.
359 (1956), the evidence was sufficient to permit the government to
treat expenditures by Mrs. Giacalone as having been made with her
husband's money.
On
the entire record we conclude that there was sufficient evidence to
support the jury's verdict of income tax evasion for the years 1968,
1969 and 1970. Holland v. United States, supra; United States v.
Newman [72-2 USTC ¶9719], 468 F. 2d 791 (5th Cir. 1972), cert.
denied, 411
U. S.
905 (1973); McGarry v.
United States
, supra;
United States
v. Costello, supra; United States v. Goichman, supra. When the
government shows by competent evidence an increase in net worth together
with nondeductible expenditures and identifies a "likely
source" of unreported income--in this case, gambling--it has
carried its burden of proof. United States v. Costello, supra,
221 F. 2d at 672. The jury could infer willfulness from the evidence of
a consistent pattern of understatement of income and proof which negated
the existence of non-taxable sources of increased net worth.
Unfavorable
Publicity
A.
Pre-trial Publicity. The defendant also urges reversal on the
ground that his trial was tainted by a "saturation" of
unfavorable pre-trial publicity in newspaper articles and television
broadcasts in the
Detroit
area, and on several occasions, in the national media. Though little of
the publicity related to the case which was to be tried, defendant
argues that it placed him in a bad light with the jury. Particularly
objectionable, he maintains, were news accounts linking him with the
disappearance of James Hoffa, an event which occurred approximately ten
weeks before the commencement of the tax evasion trial. One month before
the scheduled trial the district court denied a motion for a 120-day
continuance based in part on extensive publicity. The defendant did not
make a motion for change of venue.
Two
weeks before the trial date the defendant submitted a list of six
proposed voir dire questions for the prospective jurors which were
related to adverse publicity. At a pre-trial hearing on the eve of the
trial the District Judge stated that after asking certain questions he
would "invite questions" from counsel for the defendant and
the prosecution "as it relates to the voir dire examination of the
jury panel." The court advised defense counsel that it declined to
use four of the proposed voir dire questions because they related to
matters of law and contained statements that should properly be
incorporated in the final instructions to the jury. Before the trial
began on October 7, 1975 counsel again moved for a continuance, stating
that the TODAY show that morning had carried a report on the Hoffa case
which discussed a book containing references to the defendant. In
denying the motion for continuance the court advised counsel for the
defendant, ". . . what we will have to do, if your client was
referred to this morning on the TODAY show, in the last chapter of the
book on Hoffa, perhaps during the voir dire you can help the court in
terms of asking that question, whether or not any of the prospective
jurors saw the TODAY show and the reference to to your client Mr.
Giacalone."
The
court conducted a preliminary voir dire examination. Addressing the
entire array Judge Keith inquired as to pre-trial publicity as follows:
THE
COURT: Now, does any prospective juror have any personal knowledge or
information about or concerning the offense with which the defendant
Anthony J. Giacalone, also known as Tony Giacalone, is charged in the
indictment which the court has heretofore read to you--do you have any
personal knowledge or do you know anything about it (no response)
Now,
do any of you prospective jurors have any personal knowledge or
information about or concerning the defendant Anthony J. Giacalone--do
you know anything about him--have you heard anything about Tony
Giacalone at all?
MALE
JUROR: Read his name in the newspapers.
ANOTHER
JUROR: I have, too. On TV. I have watched.
THE
COURT: How many of you have read his name in the newspaper and have
heard something about him on television, would you raise your right
hand?
(show
of hands)
THE
COURT: That is everyone of you.
Now,
do any of you, and I am speaking to all 12 of you, by reason of what you
have read or heard in the newspapers or on television or on the radio
believe that you could not be absolutely fair and impartial as it
relates to this defendant, listen to the testimony that comes from the
witness stand and look at the witnesses that testify and be guided by
their testimony and the law as the court will subsequently charge you as
it relates to this case--now, do any of you have such prejudice that it
would be impossible for you to give this defendant the type of impartial
trial that is guaranteed him by the 6th Amendment to the Constitution
and clothe him and cloak him with the presumption of innocence that he
has presently?
Now,
do you think that you cannot be fair and impartial, if so, raise your
hand.
(pause,
evidently no hands raised)
Now,
if you should unconsciously or unwittingly have any opinion, could you
set aside that, without any reservation, and decide this case solely by
the evidence that comes from the witness stand during the course of this
trial?
Shortly
thereafter the court asked all prospective jurors if any had seen the
TODAY show that morning and received no response. After selection of
jurors began each prospective juror was asked by the court if he or she
had heard of the defendant. Every venireman acknowledged having heard of
the defendant from television or newspaper accounts, and all answered
that this recognition would not prevent them from being fair and
impartial in the case. Following questioning by the court, counsel for
both sides were given an opportunity to question each prospective juror.
Counsel for the defendant asked a number of them if they could put out
of their minds the things they had read or heard about the defendant and
give him the benefit of the presumption of innocence. Each person so
questioned answered in the affirmative. One prospective juror started to
make some reference to the defendant's reputation and was interrupted by
defendant's counsel. Shortly thereafter this person was excused for
cause at the request of the defendant.
During
voir dire consel for the defendant never suggested to the court that he
wished to pursue the matter of pre-trial publicity beyond the questions
which were asked. The defendant did not request an opportunity to
question prospective jurors individually out of the presence of one
another. In view of the questions which were actually asked and the
responses received, we find nothing in the district court's refusal to
ask the six voir dire questions submitted by the defendant which made it
impossible to probe the prospective jurors properly on the effect of
pre-trial publicity. There was no abuse of discretion in declining to
use the questions offered by the defendant and no denial of an
opportunity to conduct an appropriate voir dire. The record does not
support the defendant's contention that he was prevented from conducting
a meaningful voir dire. On the contrary, it is clear that defense
counsel chose not to avail themselves of opportunities for further
questioning.
B.
Publicity During the Trial. In
a related matter the defendant contends that he was prejudiced by
continued unfavorable media publicity which appeared during the trial.
The defendant brought to the court's attention the fact that a radio
news program and a newspaper article had reported the testimony of a
government witness during the trial. These accounts added information
which the jury had not heard in court that implied some connection
between the defendant and James Hoffa. The defendant moved that the
testimony of the witness be stricken "for prejudice." No
request was made to question the jury on whether any of them had heard
the newscast or read the article.
Another
occurrence during the trial also involved the Hoffa association. Defense
counsel advised the court that the Justice Department had released a
status report on an investigation into the disappearance of James Hoffa
and that local media outlets had given wide publicity to the report.
This occurred approximately one week before the present case went to the
jury. No particular action was requested by the defendant. There is no
record of any other discussion of publicity during the trial.
After
the verdict the defendant made a motion to allow the questioning of
jurors "concerning their exposure to any evidence not of record,
such as news releases, publications, and articles mentioned above . .
.." The motion referred to a number of articles and broadcasts and
copies of many articles were appended to it.
The
district court admonished the jury daily throughout the trial not to
read about the case or listen to broadcasts concerning it, or to discuss
the case with anyone. After giving the jury this admonition at the end
of the first day's proceedings the court invited the attorneys to
"speak to any of these points." Counsel for the defendant did
not speak. There is no indication in the record that any juror violated
the court's instructions.
In
Rizzo v. United States, 304 F. 2d 810, 815 (8th Cir.), cert.
denied sub nom. Nafie v. United States, 371 U. S. 890 (1962), the
court cited many holdings to the effect that "[w]here a jury has
been clearly admonished not to read newspaper accounts of the trial in
which they are serving as jurors, it is not to be presumed that they
violated that admonition." See also Estes v. United States,
335 F. 2d 609, 615 (5th Cir. 1964), cert. denied, 379
U. S.
964 (1965). Since the defendant did not seek to question the jurors
during the trial while the allegedly prejudicial publicity was currently
appearing, there was no abuse of discretion in denying the request to
question them after the trial was over, in the absence of some showing
of violation of the court's clear instruction. See
United States
v. Brumbaugh, 471 F. 2d 1128, 1130-31 (6th Cir.) (McCree, J.,
concurring), cert. denied, 412
U. S.
918 (1973).
There
was a great deal of publicity concerning the defendant both before and
during the trial. The District Judge took pains to see that the jury
considered only the evidence presented in court in deciding the case.
Defense counsel were not restricted in their attempts to determine
whether any prospective jurors had been influenced by pre-trial
publicity. When publicity during the trial was brought to the district
court's attention the defendant made no attempt to establish
contamination of the jury. Widespread publicity about a defendant is not
enough, standing alone, to require reversal of a conviction. This is
particularly true when the publicity is largely unrelated to the trial
which is imminent or in progress. There was no showing of actual taint
in this case and none will be presumed. The fact that the defendant was
subjected to considerable notoriety, whether justly so or not, does not
render the courts of the United States incapable of providing him with a
fair trial. United States v. Medlin, 353 F. 2d 789, 792 (6th Cir.
1965), cert. denied, 384
U. S.
973 (1966).
[The
Jury Instructions]
The
defendant contends that the district court erred in failing to give
requested instructions which were based on the evidence. In this court
the defendant argues that the district court failed to instruct on his
theory of the case. This argument was not made to the District Judge,
nor was the decision in United States v. Garner, 529 F. 2d 962
(6th Cir.), cert. denied sub nom. Brown v.
United States
, 426
U. S.
922 (1976), cited to him. In Garner we held that it is reversible
error for a trial judge to refuse to present adequately a defendant's
theory in a criminal case. In the present case the defendant offered a
large number of separate instructions, each of which embodied some
defense theory. Many of the proposed instructions were abstract
statements of legal principles which probably would have only confused
the jury, since they had no clear application to the evidence presented.
Though the substance of many of the offered instructions was included in
the court's charge, it declined to give them as offered.
After
all the evidence was in, the court held an eight-hour session with
counsel devoted entirely to the matter of jury instructions. The trial
judge presented his proposed instructions and counsel commented on them
seriatim. A number of changes were made in the instructions during this
conference. After the court's proposed instructions had been considered
and the court had ruled on various objections, counsel were permitted to
make further objections "to what the court has not given."
Counsel for the defendant then objected to the court's refusal to give
nineteen tendered instructions. The court again declined to give the
offered instructions. No discussion of the substance of these offered
instructions occurred at this time. Instead, a defense attorney merely
referred to each of the nineteen by the "title" which he had
previously assigned to it.
Among
the instructions offered by the defendant and refused by the court was
the following:
[Agency]
An
agent is one who has the authority to act on behalf of another; called
his principal, to transact what the principal may do, and to render an
account of his activity to his principal. Stepherson v. Golden,
279
Mich.
710, 276 N. W. 849 (1937), on rehearing of 279
Mich.
493, 272 N. W. 881 (1937). It is not necessary that the principal be
disclosed to the third party that the agent is transacting business
with. In such a case, the principal is legally referred to as
undisclosed principal. Dodge v. Blood, 299
Mich.
364, 300 N. W. 121 (1941).
The
expenses incurred by the agent in the performance of handling his
principal's affairs are attributable to the principal, and not the
defendant. McKinnon and Mooney v. Fireman's Fund Indemnity Co.,
288 F. 2d 189 (6th Cir. 1961); Bibb v. Allen, 149
U. S.
481 (1893).
Whereupon
if you find that Mr. Anthony J. Giacalone was acting as an agent for
others such as his brother, Vito Giacalone, then such expenses he
incurred are attributable to those other parties and not to Anthony J.
Giacalone.
Furthermore,
if you find that Mr. Anthony J. Giacalone paid bills for others such as
his brother and son and on doing so used their money then such
disbursements are theirs and cannot be charged or attributed to Anthony
J. Giacalone. McKinnon and Mooney v. Fireman's Fund Indemnity Co.,
supra; Bibb v. Allen, supra.
The
jury was not concerned with the
Michigan
law of agency, and the district court properly declined to give the
instruction as offered. However, the final paragraph of the proposed
instruction related directly to testimony by defense witnesses that
Anthony Giacalone was spending their money rather than his own in a
number of instances where the government had attributed the expenditures
to Giacalone as non-deductible items.
On
several occasions during the trial the court acknowledged to defense
counsel, in the presence of the jury, its understanding that the
defendant claimed some of the expenditures charged to him by the
government actually were made with other peoples' money and that some of
the payments were made by persons other than the defendant. 2 No
limitations were placed upon the defendant's attempts to prove this
claim. During closing argument defense counsel was permitted to argue at
length that various expenditures involved funds of other persons for
whom the defendant acted in some agency capacity. In the court's
instructions the jury was directed to acquit the defendant if it found
that the government had failed to establish the joint net worth of the
defendant and his wife at the beginning of each of the indictment years
or if it found that the evidence failed to reflect increased net worth
and nondeductible expenditures substantially in excess of the income
reported in each of the years; or if it had a reasonable doubt that any
of these elements had been proven. Immediately following this portion of
the charge the jury was instructed as follows:
On
the other hand, if the evidence in the case does establish beyond a
reasonable doubt the maximum possible amount of Mr. and Mrs. Giacalone's
net worth as of the beginning of the calendar years 1968, 1969, 1970 and
1971, and further establishes beyond a reasonable doubt that funds
reflected in any increased net worth, plus nondeductible expenditures
during such years substantially exceed the income reported on the tax
returns, you should then proceed to determine whether the evidence in
the case also establishes beyond a reasonable doubt that such additional
funds represented taxable income on which Authony J. Giacalone willfully
attempted to evade or defeat the tax as charged in the indictment.
(Emphasis added).
We
believe from reading the entire charge that it is clear the jury was
instructed that only those expenditures of funds constituting taxable
income of Mr. and Mrs. Giacalone could be considered in determining
whether the government had sustained its burden of proving the defendant
guilty beyond a reasonable doubt. The court's instructions limited the
jury's consideration of expenditures to those which represented taxable
income of Mr. and Mrs. Giacalone. The instruction offered by the
defendant was merely a converse statement--that the jury could not
consider disbursements made by the defendant for other people, using
their money. The jury was instructed to consider all the evidence in the
case. This required it to take into account the testimony of defense
witnesses that expenditures attributed by the government to unreported
income of the defendant actually were made from other sources. Since the
instructions previously quoted permitted consideration only of
expenditures of taxable income of the taxpayers, the entire charge
required the jury to consider the defendant's claim in reaching its
verdict. See
United States
v. Herron, 551 F. 2d 1073 (6th Cir. 1977).
The
instructions fully explained the net worth method as required by
Holland
and made it clear that the government had the burden of proving each
element of the offense charged beyond a reasonable doubt. Read as a
whole, the jury charge properly submitted the factual issues in the
case. Other arguments made by the defendant concerning the instructions
do not require discussion.
Due
Process Issues
The
defendant also seeks reversal on the ground that various actions of the
prosecution violated his due process rights. It is charged particularly
that the prosecution repeatedly brought to the jury's attention the fact
that the defendant exercised his Fifth Amendment right to remain silent.
The defendant did not testify and his silence when charged with income
tax evasion was not disclosed to the jury by cross-examining him, as was
done in Doyle v. Ohio, 426 U. S. 610 (1976), and Minor v.
Black, 527 F. 2d 1 (6th Cir. 1975), cert. denied, 427 U. S.
904 (1976). Rather, several government witnesses testified that
defendant's accountants and counsel failed to furnish certain requested
information. No one testified for the defense that the requested
information was withheld in the exercise of defendant's Fifth Amendment
right to remain silent. In fact, the accountant testified that certain
information was given to government agents in an attempt to assist them.
In a net worth case the government is required to show that it has made
a reasonable attempt to investigate any leads furnished by the taxpayer
which suggest non-taxable sources of funds. It was not error to permit
the prosecution to show that no such leads were furnished. An
examination of the trial transcript reveals no effort by the government
to create an inference of guilt from the silence of the defendant.
The
other claims of due process violations relate to alleged failure by the
government to disclose exculpatory evidence, prosecutorial misconduct
and the receiption of evidence of unsupported prior understatements of
income by the defendant. An examination of the record relating to these
charges fails to support the claim that defendant was denied a fair
trial. The trial lasted approximately seven months. It doubtless was not
a perfect trial. However, there is no basis for a claim that the
defendant was denied fundamental fairness. It was a hard-fought case,
but there was no overreaching by the prosecution, and the presiding
judge permitted the lawyers to "try their case" without undue
interference by the court, while retaining control of the proceedings
and guarding the rights of both parties.
The
Wiretap Issue
In
the early 1960's the government conducted a series of warrantless
wiretaps at a
Detroit
business establishment owned by the defendant. Prior to trial the
defendant made a motion under Rule 16, Fed. R. Crim. P., for disclosure
of all the transcripts of the tapes made during this surveillance.
Several deliveries of transcripts were made by government counsel, and
at the time of the last delivery the prosecutor advised the court that
the last of the transcripts of interceptions had been disclosed. The
transcripts covered only 1963 and 1964. After the trial ended a series
of articles appeared in a
Detroit
newspaper which stated that the interceptions had taken place from 1961
to 1964 and that a much larger volume of intercepted material existed
than had been delivered to the defendant.
The
defendant made a motion for rehearing on his previously denied motion
for a new trial. He also sought an evidentiary hearing to take the
testimony of three reporters who had worked on the series of articles.
The defendant maintains it was an abuse of discretion to deny these
motions. An affidavit filed by counsel for the defendant in support of
the motions did not establish that pre-1963 tapes existed. Rather, it
disclosed that one of the newspaper reporters had told defense counsel
that "to the best of his knowledge" the information in the
articles was accurate and that he had seen transcripts which were
bulkier than those received by the defendant from the government. He
also said he was uncertain whether he had read any transcripts of 1961
or 1962 interceptions. The affidavit quoted another reporter who was
involved in preparing the series as saying his information had come from
a "reliable source." A government attorney stated in open
court that to the best of his knowledge the d
