Circumstantial
Evidence Page4
[72-2
USTC ¶9646]
United States of America
v. Norman Pawlak, Defendant
U.
S. District Court, So. Dist. N. Y., 71 CR. 363, 352 FSupp 794, 8/23/72
[Code Sec. 7201]
Crimes: Tax evasion: Willfulness: Evidence.--The taxpayer was
found guilty of four counts of tax evasion where the evidence showed
that his attempt to evade tax was willful. Testimony of credible Revenue
Agents as to admissions of the taxpayer and statements by his accountant
was supported by independent evidence presented by the Government. In
addition, the Court found circumstantial evidence and evidence of
willfulness subsequent to the filing of the returns in question.
Memorandum
TENNEY,
District Judge:
From
February 4, 1972 until February 18, 1972 the defendant Norman Pawlak
(a/k/a Norman Paris) was tried before this Court without a jury on four
counts of violating 26 U. S. C. §7201 which provides that "[a]ny
person who willfully attempts in any manner to evade or defeat any tax
imposed by this title or the payment thereof shall be guilty of a
felony. . . ." Specifically, indictment 71 Cr. 363 charges that the
defendant willfully attempted to evade his income taxes for the years
1964-67. Employing the bank deposits method of proof, the Government, as
will be demonstrated infra, has proven the defendant's guilt
beyond a reasonable doubt.
[Elements
of Crime]
The
essential elements of the crime are three: (1) an additional substantial
tax must have been due and owing; (2) the defendant must have attempted
to evade or defeat the tax; and (3) the attempt must have been willful.
Sansone v. United States [65-1 USTC ¶9307], 380 U. S. 343, 351
(1965); Holland v. United States [54-2 USTC ¶9714], 348 U. S.
121, 139 (1954); Spies v. United States [43-1 USTC ¶9243], 317
U. S. 492 (1943); United States v. Coppola [69-2 USTC ¶9735],
425 F. 2d 660, 661 (2d Cir. 1969); United States v. Levy [71-1
USTC ¶9274], 326 F. Supp. 1285 (D. Conn.), aff'd [71-2 USTC
¶9684], 449 F. 2d 769 (2d Cir. 1971).
The
defendant has conceded that the Government established the first
element, that a substantial additional tax is owing (Memorandum of Law
at 1-2) although defendant does question the total amount. The
Government, however, need not prove the precise amount by which
defendant understated his income. "[T]he prosecution meets its
burden when it shows that income was underreported by a substantial
amount." United States v. Marcus [68-2 USTC ¶9599], 401 F.
2d 563, 565 (2d Cir. 1968), cert. denied, 393
U. S.
1023 (1969). The Government has shown that a breakdown of defendant's
income and tax liability over the four years in question is as follows:
Summary
of Alleged Taxable Income & Tax Liability
Taxable Income
Year Per Return Corrected Increase
1964 ..... $ 42,681.28 $102,268.37 $ 59,587.09
1965 ..... 33,037.29 90,331.55 57,294.26
1966 ..... 17,921.61 66,568.58 48,646.97
1967 ..... 25,297.82 39,261.54 13,963.72
Total .... $118,938.00 $298,430.04 $179,492.04
Tax Liability
Year Per Return Corrected Deficiency
1964 ..... $14,254.05 $ 49,377.12 $35,123.07
1965 ..... 9,095.66 39,378.93 30,283.27
1966 ..... 3,798.05 25,832.72 22,034.67
1967 ..... 6,127.22 11,807.69 5,680.47
Total .... $33,274.98 $126,396.46 $93,121.48
Thus, the amounts of tax due and owing for each of the years 1964-67
are: $35,123.07; $30,283.27; $22,034.67; and $5,680.47 for a total of
$93,121.48. These are without doubt "substantial" amounts. See
United States v. Siragusa [71-2 USTC ¶9730], 450 F. 2d 592 (2d Cir.
1971), cert. denied, 405
U. S.
974 (1972).
The
Government has also met its burden with respect to the second element
since the filing of a false or fradulent income tax return constitutes
an "attempt" within the meaning of the statute, United
States v. Coppola, supra at 661, and there is no doubt the returns
for 1964-67 were false and fraudulent. See also, Sansone v.
United States
, supra at 352; United States v. Magnus [66-2 USTC ¶9660],
365 F. 2d 1007 (2d Cir. 1966), cert. denied, 386
U. S.
909 (1967); United States v. Raub [49-2 USTC ¶9422], 177 F. 2d
312, 315 (7th Cir. 1949).
[Willfullness]
The
crucial issue at trial was the question whether the defendant acted willfully
in filing or causing to be filed the false returns for 1964-67. Did the
defendant despite knowing that he had a legal duty to pay the tax due
neverthless voluntarily, intentionally and with the specific and
fraudulent intent to conceal his true income file these false returns? United
States v. Dowell [71-2 USTC ¶9642], 446 F. 2d 145, 147 (10th Cir.),
cert. denied, 404
U. S.
984 (1971); Hayes v. United States [69-1 USTC ¶9204], 407 F. 2d
189, 195 (5th Cir.), cert. dismissed, 395
U. S.
972 (1969);
United States
v. Siragusa, supra at 594. In this regard, it is no defense that
the defendant may not have realized the extent by which he understated
his income, Katz v. United States [63-2 USTC ¶9600], 321 F. 2d
7, 10 (1st Cir.), cert. denied, 375
U. S.
903 (1963). The fact question for this Court is simply whether defendant
knew "that he should have reported more income than he did for the
years involved." Sansone v. United States, supra at 353.
The
Government can prove defendant acted willfully either through the use of
direct evidence such as admissions by the defendant or through the use
of circumstantial evidence which gives rise to inferences that the
defendant acted willfully. United States v. Spinelli [71-1 USTC
¶9434], 443 F. 2d 2 (9th Cir. 1971). Both types of evidence were
employed in this case.
[Agent's
Testimony]
The
most damaging evidence offered by the Government of willfulness were the
admissions of the defendant to Revenue Agent Lem in the presence of the
defendant's preparer Thomas Axt at a meeting that occurred on August 2,
1968 in Mr. Axt's office. Specifically, Lem testified that when asked
how he could account for the large excess of deposits into just one of
his bank accounts, the Chemical Bank checking account, over the amount
reported as income on his 1966 return, Mr. Pawlak replied that when he
prepared the return he only included those employers and clients who
actually sent him forms 1099 and W-2 and that although he knew some
employers did not send these forms, he did not include them. (Tr. 109).
The defendant indicated that he did not know how much he failed to
report and was apparently surprised to find that the amount was so
great. The defendant also told Agent Lem that he had been following this
practice for years. (Tr. 110).
The
defendant's attorney characterized Lem's testimony as extremely harmful
(Tr. 191) and so has, of course, attacked the credibility of Lem by
pointing out alleged inconsistencies in his testimony and by suggesting
that Lem, a man of Chinese ancestry, may have had difficulty
understanding English which would account for his alleged
misunderstanding of what defendant claims he actually said at the August
2, 1968 meeting. The Court, however, during the course of the trial had
the opportunity to note that Mr. Lem had been in this country since 1941
and there was no evidence during his testimony of any language
diffculty. (Tr. 191). With regard to the alleged inconsistencies in
Lem's testimony, they have been adequately explained by the Government
and need not be discussed in detail. (Government's Reply Memorandum at
17-25). Suffice it to say that the Court directly observed Mr. Lem at
trial both on direct and cross-examination and found him to be a
credible witness. Defendant's contention that Lem was less than candid
with the Court is without merit.
[Independent
Evidence]
Defendant
claims, however, assuming that Lem is believed, there is no independent
evidence corroborating the defendant's admissions, as required by Smith
v. United States [54-2 USTC ¶9715], 348
U. S.
147, 155 (1954). The independent evidence, however, need only establish
either that the admissions were reliable or that the crime charged was
in fact committed. United States v. Marcus, supra at 565. The
Government's evidence amply meets this requirement especially the
evidence of consistently large understatements, the supplemental lists
of income not backed by W-2's or 1099's which were prepared by defendant
(Gov. Exs. 1756, 1726B), and the fraud referral report of Agent Lem
dated October 10, 1968 which also makes reference to these admissions.
(Gov. Ex. 8C). Smith v. United States, supra at 157; United
States v. Parenti [71-2 USTC ¶9613], 326 F. Supp. 717, 725 (E. D.
Pa. 1971). Certain statements of Thomas Axt were also testified to by
both Lem and Agent Alleva under the theory that Axt was acting within
the scope of his employment and authority when they were made and thus
the statements were admissible against defendant. 1 Hayes v.
United States
, supra at 192;
United States
v. Parenti, supra at 727, 729. While the reasons behind the
corroboration rule would not appear to apply to the statements of Axt
since their reliability should not be suspect, see Smith v.
United States
, supra at 153, 155 n. 3, the evidence of the Government amply
bolsters the statements of Axt as well and indicates that the crime was
in fact committed.
[Failure
to Call Witness]
As
well as relying on these admissions of the defendant and the statements
of his agent, Axt, the Court has drawn an inference adverse to the
defendant by reason of his failure to call Axt as a witness. While
defendant has argued that where a witness is equally available to both
sides no inference should be drawn against either side, the rule in this
circuit is to the contrary, especially where the witness would naturally
side with one party. United States v. Dibrizzi, 393 F. 2d 642,
646 (2d Cir. 1968); United States v. D'Angiolillo, 340 F. 2d 453,
457 n. 5 (2d Cir.), cert. denied, 380 U. S. 955 (1965); United
States v. Cotter, 60 F. 2d 689, 692 (2d Cir. 1932) (L. Hand, C. J.);
United States v. Krechevsky, 291 F. Supp. 290, 293 n. 3 (D. Conn.
1967). Since Mr. Axt had been defendant's preparer for a number of years
including those covered by the indictment, and is now defendant's
accountant as well as preparer, he would naturally have sided with him.
In fact, Mr. Alleva testified on cross-examination that Axt did send a
letter dated April 1970 to the IRS, and while neither the letter nor its
substance were admitted into evidence, defendant made it clear that Axt
was siding with him. (Tr. 459-463). The inference against defendant,
then, is quite proper.
[Circumstantial
Evidence]
In
addition to the direct evidence of defendant's willful conduct, the
Government offered substantial circumstantial evidence of willfulness.
While evidence of a single understatement of income is not alone
evidence of willfulness, a consistent pattern of underreporting large
amounts of income is evidence from which willfulness can be inferred. Holland
v. United States, supra at 139; United States v. Frank [71-1
USTC ¶9208], 437 F. 2d 452, 453 (9th Cir.), cert. denied, 402
U. S.
974 (1971); United States v. Procario [66-1 USTC ¶9263], 356 F.
2d 614, 618 (2d Cir.), cert. denied, 384
U. S.
1002 (1966). See also, H. Balter, Tax Fraud and Evasion
§13.3-4 (3rd Ed. 1963). Inasmuch as Mr. Pawlak failed to report nearly
$180,000.00 over a four year period, the evidence on this score is
practically overwhelming.
Large
nondeductible payments or expenditures are also circumstantial evidence
of knowledge and willfulness. United States v. Dowell, supra at
147. At trial the Government offered evidence that the defendant spent
or placed in savings accounts the following amounts over and above the
income reported on his returns for the years 1964-67, respectively:
$60,204.33; $54,361.23; $48,392.26; and $15,942.08. In fact, during
1964, 1965 and 1967 defendant deposited in savings accounts in his name
alone checks he had drawn on the Chemical Bank in the sum of $70,000.00.
One deposit alone was for $25,000.00. Clearly his spending and
depositing these sums of money belie defendant's argument that he was
unaware of how much he actually earned and that he thought he had
reported all of his income.
Failure
to include all of his income in the records he provided his preparer Axt
is further evidence of the willful nature of defendant's conduct. United
States v. Frank, supra; United States v. Dowell, supra at 147; United
States v. Lindstrom [55-1 USTC ¶9490], 222 F. 2d 761, 763 (3d Cir.
1955). The evidence at trial demonstrated that defendant provided Axt
only with W-2's, 1099's and a short supplemental list of employers who
had not provided him with such statements. Agent Alleva testified that
Axt had told him that bank statements which reflected Mr. Pawlak's
income were never made available to him. (Tr. 442). Although defendant
claims they were not complete he also failed to provide Axt with either
his ledger or his diary both of which at least to some degree reflected
his engagements and the payments he received. United States v.
Procario, supra at 618. Defendant's failure to include on the
supplemental list more than $179,000.00 of unreported income for the
four years, under the circumstances, can be inferred to be more than
negligence. United States v. Dowell, supra at 147.
Additional
circumstantial evidence that the defendant was aware of his financial
situation and in contrast to his contention that he was a musician who
was helpless when dealing with financial matters is the relatively
complete record of business expenses and deductions he was able to
compile during the four years. The evidence demonstrated that defendant
took deductions of $218,300.00 during 1964-67 and that a great deal of
that was backed by documents consisting of 1253 checks and 393 paid
bills, on many of which defendant had noted the nature of the business
expense. Mr. Pawlak also kept records of several business expenses that
had been paid in cash. (Defendant's Reply Memorandum at 25).
While defendant counters that he did not take all of his deductions
(Defendant's Reply Memorandum at 26), those few that he omitted pale
into insignificance when compared to the $218,300.00. Moreover, his not
claiming his mother as a dependent was done for personal reasons not
because he overlooked it or was unable to handle his financial affairs.
[Analogy
to Spies]
Defendant,
on the other hand, argues that the Government has not shown any conduct
on his part of the type from which the Supreme Court held an affirmative
willful attempt could be inferred. Spies v.
United States
, supra. It must first be pointed out, however, that the list given
by the Court in Spies was by way of example only and was not
intended to be exhaustive. Moreover, the Government has analogized
several of defendant's acts to those listed by the Court. In Spies,
the Court stated that an
"affirmative
willful attempt may be inferred from conduct such as keeping a double
set of books, making false entries or alterations, or false invoices or
documents, destruction of books or records, concealment of assets or
covering up sources of income, handling of one's affairs to avoid making
the records usual in transactions of the kind, and any conduct, the
likely effect of which would be to mislead or to conceal." 317
U. S.
at 499.
By
way of analogy the Government argues that: (a) defendant's supplemental
list of income can be considered a false document; (b) the records
defendant provided Axt were one set of books while these same records,
his ledger, his diary and his bank statements constituted a second set
of books; (c) the ledger, diaries, invoices and correspondence were
never shown to the preparer and were destroyed; 2 (d)
defendant has been quite effective in concealing the sources of his
income and at trial was able to offer no hint as to where the excess
bank deposits may have originated; and (e) defendant who served as his
own bookkeeper and secretary handled his affairs, as represented by the
arrangement with Coronado Service Co., whereby the transaction as
reported by defendant on his income tax return differed from the real
effect of such transactions on his profits and losses. 3 These
arguments of the Government are not without merit and when taken
together certainly support an inference of willfulness.
[Subsequent
Willfulness]
The
Government has also pointed to certain evidence of willfulness which
occurred subsequent to the actual affirmative acts of filing the
returns. The failure of the defendant to supply his ledger book to Agent
Lem is evidence of such willfulness. United States v. Eley [63-1
USTC ¶9264], 314 F. 2d 127, 132 (7th Cir. 1963). Other such evidence
includes the instances of false statements to Government agents, 4 and
defendant's admission at one point that he was notified by Axt prior to
April 15, 1968 of the pending IRS audit of his 1966 return and his
subsequent filing of an extension of time to file the 1967 return, and
the augmented supplemental list attached to the 1967 return. 5 The argument
is that this conduct creates the inference that defendant was aware that
he earned income for which he did not receive a statement, that he
decided in April 1968 he should report more of his income in light of
the IRS audit of his 1966 return and that he had the records from which
he could compile a more complete record of income than he had in former
years.
Defendant
attempts to explain the 1967 supplemental list by saying that the nature
of his business had changed. While the defendant did refer to a couple
of events during 1967 that he claims made it easier for him to recall
his employers, his story on the whole was not credible. 6 Furthermore,
despite his contentions to the contrary and the testimony of defendant's
psychiatrist, Doctor Ruddick, defendant appeared to have a good memory
that he was careful to exercise only at convenient times. The evidence
also indicated defendant got along remarkably well in society for a man
who allegedly was a "babe in the woods." During the time
period in question defendant was an arranger, composer, performer and
producer; he was his own bookkeeper, secretary and business manager; he
dealt constantly with a number of people, night clubs and companies; he
employed musicians and operated a publishing company; he maintained
numerous bank accounts, kept a running balance in his check book, kept a
diary and a ledger and mailed invoices, copies of which he maintained
until paid; he also provided his accountant with statements from
employers and a supplemental list of income and kept nearly complete
records of his expenses, purchased his own home, and as testified to by
his character witness Chester Feldman was generally quite reliable and
dependable. This is not the picture of a helpless, passive, fearful and
anxious musician who was so wrapped up in his work he was incapable of
existing in the world of reality as defendant would have the Court
believe. The evidence is clear that defendant was capable of willifully
attempting to evade his income taxes.
[Defenses]
Defendant
has raised a number of defenses. The first is that his attempt to evade
paying his tax could not have been willful since he never attempted to
conceal his income but merely put it into bank accounts where it could
be easily discovered. If that were a defense, however, the Government
would never be able to succeed in proving its case by the bank deposits
method.
Defendant
has also offered the testimony of his psychiatrist, Dr. Ruddick, in
support of his claim that he could not have acted willfully. The Court,
however, has been unable to give much weight to Dr. Ruddick's testimony
in light of defendant's decision not to claim insanity as a defense, United
States v. Freeman, 357 F. 2d 606, 622-23 (2d Cir. 1966), and the
general rule in this circuit that psychiatric testimony is not
admissible solely on the issue of willfulness. United States v.
D'Anna, 450 F. 2d 1201, 1204-05 (2d Cir. 1971); United States v.
Baird [69-2 USTC ¶9595], 414 F. 2d 700, 703-04 (2d Cir. 1969), cert.
denied, 396
U. S.
1005 (1970). In fact Dr. Ruddick himself testified that defendant did
not lack any substantial capacity to conform his conduct to the
requirements of the IRS laws and that he believed that Mr. Pawlak did
realize he had to report all of his income. (Tr. 779). While there is
some authority for defendant's offer of psychiatric testimony on the
issue of willfulness, Rhodes v. United States, 282 F. 2d 59 (4th
Cir.), cert. denied, 364 U. S. 912 (1960), see also, United
States v. Brawner, Slip Op. 22, 714 (D. C. Cir. June 23, 1972) (en
banc), the law is otherwise in this circuit and "[b]eing sane, he
had the capacity to act willfully." United States v. Haseltine
[70-1 USTC ¶9140], 419 F. 2d 579, 581 (9th Cir. 1969). There is an
additional and more fundamental reason, however, for rejecting Dr.
Ruddick's testimony. The Doctor testified that the basis for his
conclusion that defendant did not act willfully constituted a minimal
part of his analysis of Mr. Pawlak and furthermore, Doctor Ruddick was a
very biased witness, and much of his testimony just cannot be believed.
Even if it could, Mr. Pawlak's apparent anxiety over money to which
Doctor Ruddick testified could well explain why defendant did not report
all of his income.
Defendant
has pointed to other evidence that he claims rebuts the Government's
charge that he acted with knowledge and willfulness. Specifically, he
refers to his cooperation with the government agents, his good faith
reliance on his employers to provide him with W-2's and 1099's for all
income he earned, his good faith reliance on his accountant to whom he
gave all his cancelled checks, bank statements, W-2's, 1099's and
for whom he signed his income tax returns in blank, and the testimony of
his character witnesses. In support of his claim that he did provide Axt
with his bank statements and that he signed his returns and the request
for an extension of time in which to file his 1967 return in blank,
defendant relies on Ex. Y and the fact Axt had the bank statements on
June 11, 1968.
[Government's
Response]
The
Government, however, has adequately responded to these claims. First,
since defendant did not supply Axt with all of his records, particularly
the bank statements, he cannot claim that he in good faith relied upon
his preparer and Axt was not called to testify. 7 See
Gov. Ex. 1752. Second, Alleva testified that Axt told him that Mr.
Pawlak did go over the returns in his office and did not sign in blank. 8 Third, the
Government seriously questions defendant's contention that he cooperated
and emphasizes that defendant did not provide Agent Lem with the ledger.
See also, Duke, Prosecutions For Attempts To Evade Income Tax:
A Discordant View of a Procedural Hybrid, 76 Yale L. J. 1, 35-36
(1966). Fourth, the evidence does not support defendant's claim that he
relied on his employers to send him W-2's and 1099's.
The
Government points out that Pawlak's statements to Lem, the use of the
supplemental list, the consistent pattern of large understatements of
income, the augmented supplemental list for 1967, defendant's use of his
ledger all belie defendant's assertion that he in good faith relied on
employers to provide him with a statement of all income earned.
Moreover, defendant, himself, testified that he paid his musicians each
year by check and although he deducted their salaries on his return, he
never supplied them with a W-2 or 1099. That Axt had the bank statements
in June 1968 and January 1969 does not help defendant, since Axt had by
that time been requested by Lem to obtain them. Also, Axt denied having
them for the preparation of the returns. Finally, Ex. Y is an undated,
unauthenticated letter that proves nothing.
[Summary]
In
sum, the combination of direct and circumstantial evidence in
this case proves the third element of the crime charged well beyond a
reasonable doubt--that defendant with bad purpose and the specific
intent to evade his income tax, willfully and knowingly filed and caused
to be filed his 1964, 1965, 1966 and 1967 income tax returns.
Accordingly,
and for the foregoing reasons, judgment will be entered finding
defendant guilty beyond a reasonable doubt on counts one through four of
indictment 71 Cr. 363.
1
The statements of Mr. Axt to agents Lem and Alleva have been admitted
for all four years. At trial, the statements of Axt were limited to 1966
and the Court reserved on the other years. The evidence, consisting in
part of Mr. Pawlak's statement to Alleva in the presence of Axt to call
Axt if Alleva needed anything (Tr. 272), the power of attorney signed by
Mr. Pawlak appointing Mr. Axt as his representative and Mr. Axt's
possession of the defendant's records and his preparation of the returns
for the four years, establishes that Axt was the agent of Mr. Pawlak for
the years 1964-67.
2
Mr. Pawlak contended at trial that his ledger book was stolen in a
mugging incident shortly before Labor Day, 1968. While defendant may
have been mugged, it is unlikely that he would have been carrying his
ledger book that night and there is no mention of the book in the police
report covering the mugging. Furthermore, Mr. Pawlak at the August 2,
1968 meeting did not show the ledger, which he allegedly carried with
him at all times, to Agent Lem and never mentioned it. Even defendant's
corroborating witnesses, Doctor Ruddick and Mr. Dahaney, appear to be
referring in their testimony to Mr. Pawlak's appointment diary rather
than his ledger. Finally, the loss of the ledger occurred at a
particularly suspicious time, coming as it did on the heels of Lem's
meeting with Mr. Pawlak.
3
Defendant utilized Coronado Service Company as a conduit for the payment
of the expenses incurred in doing a job. If the advertising agency
employing defendant for a job, e.g. a jingle, were not a signator
to the union contract
Coronado
would send defendant a bill for all of the expenses incurred in the
production including his salary. Mr. Pawlak would then pay that invoice
and in return receive from
Coronado
his salary and a W-2. Subsequently, the advertising agency would
reimburse defendant for the amount of the
Coronado
bill. The effect of this arrangement was that defendant netted his
salary as represented by the W-2 from
Coronado
. On his income tax returns, however, defendant deducted the amount of
the
Coronado
invoice as a business expense and yet failed to include as income the
amount of the reimbursement from the advertising agency. Thus,
defendant's return showed that he incurred a loss on the job whereas he
made a profit. See Tr. 999-1048. It is reasonable to assume that a great
deal of defendant's unreported income may have come from similar
arrangements as the one diagrammed in Gov. Ex. 11AA. It is also
interesting to note at this point that defendant functioned as his own
bookkeeper and producer for these arrangements, and that although he
claims to be naive when dealing with financial matters, his testimony
concerning the rather complicated
Coronado
arrangement indicates that he understood it and its variations quite
well.
4
While the defendant claimed he did not know of the IRS audit until
shortly before the August 2, 1968 meeting with Lem there is strong
evidence that he did know much earlier as evidence by his signing the
April 12, 1968 extension for filing after Axt had received Lem's notice
of the pending audit and by defendant's signing of the power of attorney
appointing Axt to represent him in connection with the 1966 return.
Also, defendant said he expected all of his employers to send him 1099's
and yet he testified that he himself did not send them to his musicians;
defendant testified that Axt always asked for his bank statements and
yet Alleva testified that Axt never received them; defendant testified
that he told Alleva about the ledger and the mugging incident and yet
Alleva testified to the contrary; defendant also testified that he
signed all of his income tax returns in blank and never saw them or went
over them before Axt sent them to the Government and yet Axt informed
Alleva that the defendant did go over the returns and they were not
signed in blank. (Tr. 441).
5
The supplemental list attached to defendant's 1967 return included 17
employers from whom defendant had not received a statement of earnings
whereas in 1965 and 1966 he had listed only four such employers and in
1964 included none. Furthermore, the amount of income he had reported on
his supplemental list in 1964-1966 was an insignificant percentage of
the total reported professional income in those years and yet in 1967
defendant was able to report on the supplemental list 34% of his total
gross professional income.
6
See note 4 supra.
7
Tr. 436-446.
8
Id.
[72-2
USTC ¶9572]
United States of America
, Plaintiff-Appellee v. Lee W. Merrick, Defendant-Appellant.
(CA-10),
U. S. Court of Appeals, 10th Circuit, No. 71-1460, 464 F2d 1087,
7/19/72, Aff'g unreported DC decision
[Code Sec. 7201]
Crimes: Tax evasion: Defenses: Constitutional rights: Evidence:
Sufficiency.--The taxpayer was properly convicted on two counts of
tax evasion. His rights to a speedy trial and to due process were not
violated by a two-year delay between the filing of the complaint and the
start of the trial. He was given adequate constitutional warnings before
his first interview with a special agent. The circumstantial evidence
upon which he was convicted was sufficient, since every element of the
offense was proved beyond a reasonable doubt. Miscellaneous defenses
were also rejected.
James
L. Treece, United States Attorney, Richard J. Spelts, Assistant United
States Attorney, Denver, Colo., Max D. Wheeler, Department of Justice,
Washington, D. C. 20530, for plaintiff-appellee. Joseph H. Thibodeau,
Melvin A. Coffee,
Rob
ert D. Inman, 690 Capital Life Center, Denver, Colo., for
defendant-appellant.
Before
BREITENSTEIN, SETH, and MCWILLIAMS, Circuit Judges.
BREITENSTEIN,
Circuit Judge:
A
jury found defendant-appellant guilty of Counts II and IV of an
indictment charging evasion of federal income taxes for the years 1963
and 1964 in violation of 26 U. S. C. §7201. He appeals from concurrent
sentences of one year on Count II and 18 months on Count IV.
The
charges were based on failure to report specific items of income
received during the years in question. Defendant owned and operated an
animal by-products plant near
Greeley
,
Colorado
. The plant processed dead and "downer" animals. The principal
product was boneless beef used in pet foods. In 1963-4, defendant sold
quantities of boneless beef to Laurents Packing Company, a sausage maker
in
Fort Wayne
,
Indiana
. Defendant insisted that all payments by Laurents be in cash. The
arrangement was that Laurents would issue a check, have it cashed, and
give the proceeds to the person who delivered the meat. Defendant did
not report the sums so received in his income tax returns.
[Speedy
Trial]
The
first claim is that the delay between the commission of the offenses in
1963 and 1964 and the trial in 1971 denied defendant his Sixth Amendment
right to a speedy trial and his Fifth Amendment right to due process.
The investigation of defendant's tax returns was referred to the
Intelligence Division of the Internal Revenue Service in 1963 and an IRS
agent first interviewed defendant in 1965.
Defendant
was first charged in a complaint filed April 11, 1969. A preliminary
hearing was held four days later. He was bound over for trial and his
bond was continued. An indictment was returned on December 4, 1969, and
later dismissed for technical reasons. A second indictment charging the
same offenses was returned October 6, 1970. Thereafter, defendant filed
14 motions covering a wide range of legal issues and including a
November 19, 1970, motion to dismiss for delay in prosecution. The
record does not sustain defendant's claim that he was denied a
meaningful hearing on any of these motions. Defendant made no request at
any time for a speedy trial. The jury trial was held on March 22-26,
1971.
In
United States v. Morion, 404
U. S.
307, 313, the Supreme Court said that the Sixth Amendment speedy trial
provision "has no application until the putative defendant in some
way becomes an 'accused.'" Defendant in the case at bar became an
accused when the April 11, 1969, complaint was filed. We are not
impressed with the argument that in an income tax case the accusatorial
stage begins when the investigation is focused on the accused by
referral of the case to the Intelligence Division. In
Marion
, business records were delivered to the United States Attorney's
office and defendant was interviewed in the summer of 1968. 404
U. S.
at 309. The indictment was returned in April, 1970. Ibid. On these facts
the Court held that the speedy trial provision was not engaged until
indictment. Accordingly, we are concerned with what occurred after the
filing of the complaint.
In
Barker v. Wingo, --
U. S.
--, 40 LW 4840, the Court considered the speedy trial provision in its
application to a murder conviction in a trial held more than five years
after the arrest of the accused and found no constitutional deprivation.
In so doing, the Court approved a balancing test in which the conduct of
both prosecution and accused is weighed on an ad hoc basis. Although not
excluding other factors, the Court identified four as pertinent. They
are: "Length of delay, the reason for the delay, the defendant's
assertion of his right, and prejudice to the defendant." --
U. S.
at --, 40 LW at 4845.
The
pertinent Sixth Amendment delay was between the filing of the complaint
on April 11, 1969, and the start of the trial on March 22, 1971. The
December 4, 1969, indictment was dismissed on June 9, 1970, on motion of
the United States Attorney because of violation of grand jury secrecy.
Defense counsel was present at the presentation of the motion to
dismiss. Among other things he said that it would be unfair to continue
the personal recognizance bond if the indictment was dismissed. The
trial court agreed. The breach of grand jury secrecy required that the
government await the impaneling of a new grand jury. The second
indictment was returned on October 6, 1970. A bench warrant was issued
and defendant released on an unsecured bond. Various defense motions
were filed on November 19, and heard and decided on November 25.
Supplemental motions were filed and decided in March, 1971.
Thus
we have a total delay of less than two years, a reasonable explanation
of the necessity for reindictment, a defendant who at all times was
released on an unsecured bond, a prompt disposition of defense motions,
and no request by defendant for trial. We are left with the claim of
prejudice to the defendant. This involves both Fifth and Sixth Amendment
rights. See Marion, 404
U. S.
at 325-326, and Barker, --
U. S.
at --, 40 LW at 4847.
Marion
suggests two criteria for determination
of whether due process has been violated by delay in prosecution. They
are whether the delay "caused substantial prejudice to the
appellees' rights to a fair trial and that the delay was an intentional
device to gain tactical advantage over the accused." 404
U. S.
at 324. The record contains nothing which suggests that the government
delayed to secure tactical advantage. The question is whether defendant
had a fair trial.
The
first claim of prejudice is based on the destruction in 1968 and
unavailability of the records of the Laurents Company, the purchaser of
the boneless beef diverted from pet food to sausage production. The two
men who kept the records testified as government witnesses and were
subject to cross-examination by defense counsel. The claim is that the
missing records could have been used to test the reliability and
credibility of their testimony. Nothing suggests that they would have
helped the defense otherwise. The defense made no effort to rebut the
testimony of the Laurents' employees.
Reliance
is also had on the unavailability of two witnesses because of death.
Both were prospective government witnesses. One, Mrs. Woertendyke, was
defendant's bookkeeper and before her death gave an affidavit which was
made available to defense counsel, who did not take advantage of the
principle recognized in United States v. Brown, 10 Cir., 411 F.
2d 1135, 1137, by the offer of the affidavit into evidence. The other, a
Mr. Reuter, died on April 21, 1964, after a long illness. We find
nothing to show that either would have given any specific exculpatory
testimony favoring defendant. Finally, we have the claim that memories
had dimmed. This relates basically to the testimony of the Laurents'
employees. Their uncertainty as to various details hurt the government,
not the defendant. Defense counsel were furnished with the affidavits
which these witnesses had given the government and with their grand jury
testimony. The record does not reveal the loss to the defendant of any
exculpatory evidence. The charged offenses arose from concealment and
nondisclosure, which made difficult the government's investigation and
which minimize the claim of prejudice from delay. Cf. Nickens v.
United States, D. C. Cir., 323 F. 2d 808, 810 n. 2, cert. denied 379
U. S.
905. We are convinced that defendant had a fair trial and was deprived
of no Fifth or Sixth Amendment rights.
[Warnings
Adequate]
After
a hearing the trial court denied defendant's motion to suppress certain
evidence. He claims that an IRS agent failed to give him an adequate
Miranda warning before his first interview. The trial court held that
the warning was adequate and that defendant voluntarily waived his
rights. We agree.
The
differences, if any there be, between Hensley v. United States,
10 Cir., [69-1 USTC ¶9146] 406 F. 2d 481, 484, and United States v.
Lockyer, 10 Cir., 448 F. 2d 417, 422, need not be resolved here. The
interview was the first between an agent and the defendant after the
case was referred to the Intelligence Division. Defendant was not in
custody. The agent told him that he was the subject of a criminal
investigation, that he had a right to consult and appear with a lawyer,
that anything he said could be used against him in a later prosecution,
and that he need not answer questions put to him. Nothing more is
required by United States v. Dickerson, 7 Cir., [69-2 USTC
¶9556] 413 F. 2d 1111, upon which defendant relies heavily. The efforts
of defense counsel to persuade us that defendant was confused and did
not understand his rights are not impressive. Defendant's statements
during the interview indicated an understanding of his rights and he
himself terminated the interview. The contention that the warning was
defective because the agent did not tell him that he was under
investigation for the year 1964 has no merit. He was told that he was
under investigation for criminal offenses. The claim that the word
"evidence" as used in the warning did not encompass books and
records is frivolous.
Several
days after the interview defendant's accountant delivered to an IRS
agent certain books and records of defendant. He sought to suppress the
use of these on the ground that the accountant misinformed him that the
IRS could compel their production. The effort to blame the accountant is
not persuasive. In his interview with the agent, defendant said: "I
would have nothing against giving them [the records] to you if I got
them." We are convinced that the Miranda warning was
adequate, that the statements made in the interview and the delivery of
the records were voluntary, and that the motion to suppress was properly
denied.
[Evidence
Sufficient]
Defendant
attacks the sufficiency of the evidence. The government sought to
establish tax evasion by the specific items method. This requires proof
of specific items of income which were omitted from income tax returns.
See Swallow v. United States [62-2 USTC ¶9693], 10 Cir., 307 F.
2d 81, 82, cert. denied 371
U. S.
950. The roots of the offense lie in concealment and nondisclosure. In
judging the sufficiency of the evidence, it must be viewed in the light
most favorable to the prosecution and the verdict upheld if there is
sufficient direct and circumstantial evidence, together with the
inferences reasonably drawn therefrom, to support the verdict.
United States
v. Ramsdell, 10 Cir., 450 F. 2d 130, 133.
The
defendant was the owner-operator of a meat by-products plant near
Greeley
,
Colorado
. Meat from dead or "downer" cattle was primarily sold to pet
food companies which would haul the meat, packaged in containers labeled
"inedible--for pet food only," from defendant's plant in the
purchasers' trucks. In 1963, the plant manager of Laurents met defendant
and discussed the purchase of frozen boneless beef. Defendant insisted
that all payments for the meat be made in cash. This was contrary to
Laurents' usual business procedures. Sales of the meat were arranged by
defendant, either personally or by telephone, with Laurents. The meat
came frozen in unmarked 50-pound cartons. Defendant specifically ordered
that the manufacturer of the boxes leave them unmarked. The meat was
usually delivered in U-haul or unmarked trucks bearing
Colorado
license plates. On two occasions a tractor-trailer rig was rented for
the meat delivery and each time defendant paid part of the truck rental
to the driver.
Payment
was by check drawn on Laurents' account and payable to cash or a
fictitious payee. The plant manager or the bookkeeper would accompany
the deliverer of the meat to a local bank where the check would be
cashed and the proceeds given to defendant on at least one occasion, and
at various times to Garth Merrick or Don Kane who had delivered the
meat. Garth
Merrick
was the son of the defendant and Don Kane was defendant's son-in-law.
Both were at various times employed by defendant.
Six
checks representing 1963 transactions varied in amount from $3,400 to
$3,700. Sixteen checks representing 1964 transactions varied in amount
from $1,000 to $13,200. The proceeds were not deposited in defendant's
business accounts, shown on defendant's business records, or reported on
defendant's federal income tax returns. The additional tax liability was
$9,135 in 1963 and $48,541 in 1964.
The
government relied on circumstantial evidence and reasonable inferences
to be drawn therefrom. In line with Holland v. United States
[54-2 USTC ¶9714], 348
U. S.
121, 139, the Tenth Circuit is committed to the rule that circumstantial
evidence need not exclude every reasonable hypothesis other than that of
guilt. See Golubin v. United States, 10 Cir., 393 F. 2d 590, 592,
cert. denied 393
U. S.
831. Defense counsel argue that this rule is no longer viable because of
In re Winship, 397
U. S.
358. In Winship the Court held that due process required proof
beyond a reasonable doubt in all proceedings against a juvenile
involving a criminal offense. We see no conflict between Winship
and
Holland
.
Holland
states that the government must "prove every element of the
offense beyond a reasonable doubt." 348
U. S.
at 138. We decline to review our decisions which have followed
Holland
. The trial court properly instructed the jury on both reasonable
doubt and circumstantial evidence. The jury found defendant guilty.
Substantial evidence and reasonable inferences therefrom sustain those
verdicts and we will not disturb them.
[Other
Defenses]
The
tax returns for the years in question were filed in
Louisville
,
Kentucky
. Copies authenticated by the IRS District Director in
Denver
,
Colorado
, were received in evidence. The Director certified that each copy is a
true copy of the identified return "on file in this office."
This is enough to satisfy the requirements of 26
U. S.
C. §7513(c), 28
U. S.
C. §1733(b), Rule 27, F. R. Crim. P., and Rule 44(a)(1), F. R. Civ. P.
See also Hollingsworth v. United States, 10 Cir., 321 F. 2d 342,
352. Defendant does not dispute the truth or accuracy of the
authenticated copies. They were properly received in evidence.
The
trial court's instruction on presumption of knowledge of contents of tax
returns conforms with our decision in United States v. Wainright
[69-2 USTC ¶9503], 10 Cir., 413 F. 2d 796, 802, cert. denied 396
U. S.
1018. The trial court refused to instruct the jury that a civil case
might be brought against defendant to recover unpaid taxes, interest and
penalties. We see no relevance in such an instruction. The remaining
objections to the instructions deserve no mention.
Affirmed.
[71-2
USTC ¶9627]
United States of America
, Plaintiff-Appellee v. Richard H. Ramsdell, Defendant-Appellant
(CA-10),
U. S. Court of Appeals, 10th Circuit, No. 71-1014, 450 F2d 130, 9/9/71,
Aff'g an unreported District Court decision
[Code Secs. 446 and 7201--Result unchanged by '69 Tax Reform Act]
Crimes: Tax evasion: Reconstruction of income: Bank deposits method:
Government's investigative obligation.--Taxpayer's conviction on
three counts of tax evasion was affirmed. The bank deposits method was
proper for the purpose of reconstructing the taxpayer's income. The
conbination of the absence of a means of effectively investigating,
coupled with the lack of possible exoneration, afforded the government a
justifiable basis for refusing to investigate the leads furnished by the
taxpayer. Furthermore, the inferences drawn by the jury in their
determination of guilt even though the conviction rested to a great
extent, if not exclusively, on circumstantial evidence, were proper.
James
L. Treece, United States Attorney, Charles W. Johnson, Assistant United
States Attorney, Denver, Colo., for plaintiff-appellee. James R.
Briscoe, Western Federal Savings Bldg.,
Denver
,
Colo.
, for defendant-appellant.
Before
HILL, SETH and BARRETT,
United States
Circuit Judges.
HILL,
Circuit Judge:
Ramsdell
was indicted on three counts of violation of 26
U. S.
C. §7201 (Internal Revenue Code) charging him with willful attempt to
evade or defeat income taxes owed by him for the years 1963, 1964 and
1965. We was found guilty after trial by jury and sentenced to two
years' imprisonment on each count, the sentences to run concurrently.
In
this appeal, he asserts insufficiency of substantial evidence to support
the jury verdict. Additionally, he charges the reconstruction of his
income by the "bank deposits" method to be deficient due to
failure of the government to investigate information given by him
concerning other sources of money. This failure to investigate, he
claims, defeats the government's reconstruction of his income, thus
defeating the case against him, and thereby entitling him to judgment of
acquittal under F. R. Crim. P. Rule 29.
During
the years in question, Ramsdell operated two parking garages in
Denver
,
Colorado
, under the name All State Parking, a sole proprietorship. These garages
catered to both daily and monthly parking tenants. He maintained a
business account for the garages at a Denver bank. He also kept a joint
personal account with his wife at the same bank. In addition, he had
three savings accounts in local savings institutions.
Ramsdell
had no bookkeeper for the business. The system of accounting used by him
in keeping business records would be best classified as a
"collection-destruction" system. Daily parking receipts,
usually cash, were tallied against the parking tickets. When balanced,
the tickets were destroyed. Likewise, an accounts receivable record was
maintained for the monthly parking tenants. When payment was received
from a tenant, usually by check, the appropriate account record was
destroyed. In reporting the receipts to his lessors for rental purposes,
Ramsdell totaled the check receipts, then "guessed" the amount
of cash receipts, being careful not to exceed a certain amount which
would imposed a rental on his gross income, a "double rent".
The only remaining records by which an indication of business income,
and likewise appellant's personal income, can be gleaned is checking
account deposit slips, canceled checks and check stubs, bank statements
and savings account records.
Most
of the deposits to the All State Parking account, according to Ramsdell,
were made up of the business receipts. From this account he wrote checks
for the business expenses. He also drew checks on this account for his
salary. He also took cash, but kept no record of the amount. In
determining his individual income, he included all the checks but only
part of the cash. It is the unreported cash which formed the basis for
Ramsdell's conviction.
I.
R. S. agents reconstructed appellant's income using the bank deposits
method in which all bank accounts with which the taxpayer is connected
are analyzed on a transaction by transaction basis. In this manner, all
non-taxable items, such as interaccount transfers, etc., are eliminated,
and all deductible business and personal expenses are segregated and
deducted. The remaining balance is a reasonably accurate indicator of
taxable income.
Based
on the reconstructed income, it is obvious, and both parties agree, that
frequent unexplained and unreported deposits of cash were made to the
several Ramsdell accounts. The aggregate of these deposits was quite
substantial. The government's explanation is that the cash came from
monies received by All State Parking which Ramsdell took without first
depositing. The money, as income to the business, would likewise
constitute taxable income to the appellant. Ramsdell, on the other hand,
contends the cash came from non-income sources, including (1)
reimbursement of capital originally advanced to the business, and (2)
large cash gifts from his father.
No
records were kept of the amount of capital originally advanced, nor was
there an accurate accounting of what portion of the cash taken from the
business represented that return of capital. Likewise, no record was
kept indicating the amount of cash he received from his father. The only
testimony relative to this was that it was between $3,000 and $5,000 for
1963 and 1964, and $2,000 in 1965, which he received before his father
died. He also claims another $2,000 gift in 1965 received from his
mother after his father's death.
The
explanation given for these large amounts of cash gifts was that his
father was retired, over 75 years of age, and on social security, but
was still painting houses. He sent the money he earned to his son to
avoid paying tax on it.
It
should be noted that as a part of his defense, appellant introduced an
accountant to testify as to appellant's tax deficiencies for each of the
years. His own testimony indicates his computations were substantially
similar to the I. R. S. agent's with the exception that he reduced
appellant's taxable income by $4,000 for the years 1963 and 1964 and by
$3,000 in 1965. These, he explained, represented the non-taxable gifts
from the father, based on information supplied by Ramsdell. His
testimony, of course, reflected a substantial decrease in the tax
deficiency. He further testified that a tax deficiency would still exist
for the years 1963 ($441.01) and 1965 ($1,622.96), although there would
be an overpayment for 1964 ($28.45).
The
burden of proof which the government must successfully bear to obtain a
conviction under 26
U. S.
C. §7201 has been recently defined by this court in
United States
v. Dowell, -- F. 2d -- (10th Cir. 1971). We there held:
The
Government must prove beyond a reasonable doubt that there was an
attempt made voluntarily and intentionally, and with the specific intent
to keep from the Government a tax imposed by the tax laws. The accused
must be shown by the evidence to have been under a duty to pay the
Government and must be shown to have known that it was his legal duty to
pay.
A
preclusive requisite to conviction under this statute is the proof of
additional tax owing, that is, "the existence of a tax
deficiency." United States v. Brown [71-2 USTC ¶9557], --
F. 2d -- (10th Cir. 1971). It is at this juncture that appellant first
assaults the evidence against him. He contends the government's failure
to investigate his allegation of cash gifts from his father should have
rendered the bank deposits reconstruction of his income fatally
defective, thereby preventing its introduction in evidence against him. 1
The
government's investigative obligation in response to taxpayer
"leads" as to sources of non-taxable income has been defined
in Holland v. United States [54-2 USTC ¶9714], 348
U. S.
121 (1954). It was there held that to avoid injustice to the taxpayer,
the government must investigate the relevant leads furnished by the
taxpayer, that is, those which are "reasonably susceptible of being
checked, which, if true, would establish the taxpayer's innocence."
2
In
reconstructing income, it is not incumbent upon the government to negate
all asserted sources of non-taxable income. Rather, it is obligated only
to investigate those sources which come within the
Holland
guidelines. In doing this, "The government is not required to go
beyond records reasonably available. . . ." Holland v. United
States [54-1 USTC ¶9177], 209 F. 2d 516, 519 (10th Cir. 1954).
Here, there were no records available from either the father, who was
deceased at the time of trial, nor from appellant himself.
The
government enjoys some discretion in the area of investigation of leads.
It is not, however, the final arbiter in determining which leads are
"relevant" or "reasonably susceptible of being
checked." The evidence here devolves into a factual determination
by the jury as to whether the government was unreasonable in its failure
to investigate the taxpayer's alleged sources of non-taxable income. 3 The jury, in
accepting the government's proffered reconstruction of Ramsdell's
income, agreed that an investigation of leads was not required. That
jury finding will not be disturbed if supported by substantial evidence
and not clearly erroneous. 4
The
record reveals no accounting by which the asserted non-taxable gifts
could be substantiated. The death of the alleged donor precluded any
verification from the source of the asserted gifts. The only method of
confirmation of the gifts which appears to us at this point would be a
search for customers of appellant's father This would appear to be
clearly beyond the guideline established in
Holland
of reasonable susceptibleness of being checked. Our review of the record
reveals the failure of the government to investigate these leads to
represent the more reasonable alternative. 5 The bank
deposits method was proper for the purpose of reconstructing Ramsdell's
income.
Additionally,
it should be noted that even had the investigation proven fruithful in
determining there had been cash gifts, appellant would still have had
tax deficiencies for the years 1963 and 1965. Under the
Holland
guidelines, investigation need be made only when the leads, if true,
would establish the taxpayer's innocence. We feel the combination of the
absence of a means of effectively investigating, coupled with the lack
of possible ultimate exoneration, afforded the government a quite
justifiable basis for refusing to investigate Ramsdell's leads.
The
appellant next argues the sufficiency of evidence to establish the
element of willful intent to evade and defeat taxes owed. In all matters
involving a sufficiency of evidence question, to support a conviction
the rule is well established that the evidence must be viewed in the
light most favorable to the prosecution. 6 The jury
verdict must be upheld if there is sufficient direct and circumstantial
evidence, together with reasonably drawn inferences, to support the
verdict. 7 In this type
of case, the conviction rests to a great extent, if not exclusively, on
circumstantial evidence. The offense itself has its roots in concealment
and nondisclosure. One guilty of this crime would hardly be expected to
forego his prior secretive design and confess his criminal intent.
"The issue of criminal intent or guilty knowledge is usually a
question of fact for the jury to determine . . . seldom susceptible of
proof by direct evidence." United States v. Mecham, supra,
at 838. 8
As
stated previously, it is incumbent on the government to prove beyond a
reasonable doubt there was a willful attempt to evade or defeat taxes.
We have had occasion recently to discuss the proof requisite for a
finding of willfulness in
United States
v. Dowell, supra, and
United States
v. Brown, supra. Judge Doyle stated in Dowell that
"Such intent may be proved by circumstantial evidence, upon which
reasonable inferences can be based." In Brown, in
recognizing the virtual impossibility of proof of the crime by
"affirmative or positive evidence," we confirmed that proof of
the commission of the crime could be "based solely on
circumstantial evidence" and the inferences derived from that
evidence.
We
dealt in Dowell with types of evidence from which a reasonable
inference of willfulness could be elicited. In quoting Holland v.
United States [54-2 USTC ¶9714], 348
U. S.
121 (1954), we stated that an inference of willfulness could be drawn
from a consistent pattern of underreporting large amounts of income. We
also feel the additional factor of the complete failure to maintain
adequate records also belie appellant's asserted ignorance of additional
tax owing. 9
Reviewing
the record, we find the inferences drawn by the jury in their
determination of guilt to be in complete accord with both the evidence
presented and our recent decisions in Dowell and Brown.
Affirmed.
1
"When the Government fails to show an investigation into the
validity of such leads, the trial judge may consider them as true and
the Government's case insufficient to go to the jury." Holland
v. United States [54-2 USTC ¶9714], 348
U. S.
121, 136 (1954).
2
See also United States v. Frank [57-1 USTC ¶9254], 151 F. Supp.
866, 872 (W. D. Pa. 1956), aff'd [57-1 USTC ¶9675] 245 F. 2d 284
(3rd Cir. 1957), cert. denied 355
U. S.
819.
3
United States v. Frank, supra, at 872.
4
Cosby v. Shackelford [69-2 USTC ¶12,618], 408 F. 2d 1144 (10th
Cir. 1969) Baer Bros. Land & Cattle Co. v. Reed, 197 F. 2d
569 (10th Cir. 1952).
5
See Boswell v. Chapel, 298 F. 2d 502, 506 (10th Cir. 1961).
6
United States v. Ortiz, -- F. 2d -- (10th Cir. 1971); United
States v. Gurule, 437 F. 2d 239 (10th Cir. 1970); United States
v. Keine, 424 F. 2d 39 (10th Cir. 1970), cert. denied 400
U. S.
840; United States v. Mecham, 422 F. 2d 838 (10th Cir. 1970).
7
United States v. Seasholtz, 435 F. 2d 4 (10th Cir. 1970); United
States v. Parrott, 434 F. 2d 294 (10th Cir. 1970), cert. denied
--
U. S.
--; Havelock v. United States, 427 F. 2d 987 (10th Cir. 1970), cert.
denied 400
U. S.
946.
8
See also Van Nattan v. United States, 357 F. 2d 161 (10th Cir.
1966).
9
"When there are no books and records, willfulness may be inferred
by the jury from that fact coupled with proof of an understatement of
income." Holland v. United States, supra at 128.
[71-1
USTC ¶9434]United States of America, Appellee v. Salvatore J. Spinelli,
also known as Sal J. Spinelli, Appellant
(CA-9),
U. S. Court of Appeals, 9th Circuit, No. 71-1137, 443 F2d 2, 5/17/71,
Aff'g an unreported District Court decision
[Code Secs. 7201 and 7206--Result unchanged by '69 Tax Reform Act]
Attempt to evade tax: Failure to report income: Wilful evasion:
Circumstantial evidence.--The taxpayer's conviction for attempting
to evade tax and for making a false return was affirmed where there was
circumstantial evidence that the earned commission income from the sale
of real estate he failed to report was the same type of income that he
had earned in previous years (which he did report in those years) and
where the need for reporting such income had been explained to him by an
accountant.
Martha
Goldin (argument) of Saltzman & Goldin,
Hollywood
,
Calif.
, for appellant. David P. Curnow, Assistant United States Attorney,
(argument) and
Rob
ert L. Meyer, United States Attorney, Los Angeles, Calif., for appellee.
Before
KOELSCH, BROWNING and TRASK, Circuit Judges.
PER
CURIAM:
This
is an appeal from a jury verdict which found the defendant guilty on two
counts: (1) 26
U. S.
C. §7201 (attempt to evade tax), and (2) 26
U. S.
C. §7206(1) (making and subscribing to a false return). Sentence of 42
months was imposed only on Count I, the court having determined that
Count II was included in Count I. No issue has been raised here as to
this latter finding.
The
defendant acknowledged that the "Government produced evidence which
showed that there was a substantial additional amount of federal income
tax due and owing from the accused for the calendar year 1965 [the year
in question] over and above the amount of the tax which was declared or
disclosed in the defendant's income tax return for that calendar
year."
Spinelli
argues that the Government failed in its burden to prove, as required by
statute, that he knew that the additional amount was due and willfully
attempted to evade his duties.
It
is clear that the Government need not adduce direct proof of intent. It
may be inferred from the defendant's acts. Norwitt v. United States
[52-1 USTC ¶9252], 195 F. 2d 127, 132-33 (9th Cir.), cert. denied
344
U. S.
817 (1952). The same applies to knowledge that additional amounts were
due, and a jury may return a verdict of guilt under this section, 28
U. S.
C. §7201, based upon circumstantial evidence alone. Armstrong v.
United States [64-1 USTC ¶9216], 327 F. 2d 189, 194 (9th Cir.
1964).
Here
the defendant earned commissions from the sale of real estate in 1964.
This income was reported for that calendar year and a tax paid upon it.
In 1965 the same type of income was earned, checks issued to the
taxpayer and endorsed by him to others. His claim that he was a mere
"conduit of title" and thus the income was not his and need
not be reported or a tax paid on it, was not believed. It need not have
been. The need for reporting it had been explained to him by an
accountant. Nevertheless he failed to report it and thus signed an
income tax return which was clearly false.
The
jury was entitled to infer that Spinelli knew the additional amounts of
income were due and that he willfully attempted to evade the tax.
Appellant
also contended that the district court erred in not permitting him
sufficient latitude in the cross-examination of a government witness. We
have examined the record and find no error. Likewise there was no error
in permitting a court reporter to read answers given by appellant in a
deposition in another case for the purpose of impeachment.
Finally
appellant complains that pre-trial publicity prevented him from having a
fair trial and therefore the denial of a motion for change of venue was
error. No authorities have been cited by appellant. The record here does
not disclose the kind of pre-trial prejudice that prevented the
defendant from receiving a fair trial from an impartial jury. Compare
Sheppard v. Maxwell, 384
U. S.
333 (1966). Proper and precautionary questions were addressed to the
jury on voir dire. The court fulfilled its duty in guarding the rights
of the defendant from improper outside influences.
The
judgment is affirmed.
[71-1
USTC ¶9174]
United States of America
, Appellee v. Douglas MacLeod, Appellant
(CA-8),
U. S. Court of Appeals, 8th Circuit, No. 20,106, 436 F2d 947, 1/25/71,
Affirming an unreported District Court decision
[Code Sec. 7203--Result unchanged by '69 Tax Reform Act]
Failure to file returns: Willfulness: Miscellaneous assertions of
errors.--The Eighth Circuit affirmed the taxpayer's conviction for
willfully and knowingly failing to file income tax returns for the years
1963-1965. The Court rejected the taxpayer's arguments that (1) the
evidence was insufficient to show guilty intent, (2) the prosecution was
politically motivated, (3) the IRS agents should have given him a Miranda
type warning, (4) the instruction to the jury gave an erroneous standard
of guilt, (5) the trial court should have made a pre-sentence report
available to him before sentencing, and (6) Code Sec. 7203 is
unconstitutional in that it violates the Fourth, Fifth, Eighth, Tenth
and Thirteenth Amendments.
Kenneth
R. Heineman, Assistant United States Attorney,
St. Louis
,
Mo.
, for appellee. Irl B. Baris,
721 Olive St.
,
St. Louis
,
Mo.
, for appellant.
Before
VAN OOSTERHOUT and BRIGHT, Circuit Judges, and NEVILLE, District Judge.
BRIGHT,
Circuit Judge:
Appellant
Douglas MacLeod, a
St. Louis
,
Missouri
, lawyer, failed to file federal income tax returns for the calendar
years 1963, 1964 and 1965. A three-count indictment charged him with
violation of 26 U. S. C. §7203 in "willfully and knowingly"
failing to make an income tax return to the Director of Internal Revenue
or to any other proper officer of the United States in each of the
years. Each count alleged defendant's receipt of substantial gross
income ($35,133.56 in 1963; $12,821.92 in 1964; $18,143.53 in 1965). A
jury found the defendant guilty on all counts. Judge Meredith sentenced
him to the maximum penalty on the first count, imprisonment for one year
plus a fine of $10,000.00, but granted him probation for five additional
years under counts two and three. The probation terms require that
MacLeod be gainfull employed and abstain from drinking.
[Assertions
of Errors]
In
this appeal, MacLeod raises seven contentions running the gamut from
attacks upon the constitutional validity of the pertinent federal
statute to the legality of the procedures, pre-trial, trial and
post-trial. We have considered each contention and find all wanting in
merit. We briefly comment upon each.
Appellant
argues that the evidence is insufficient to show guilty intent. The
government, however, need not produce direct evidence of guilty intent.
It can establish a willful violation of the federal statute by
circumstantial evidence alone. Gennaro v. United States [66-2
USTC ¶15,725], 369 F. 2d 106, 112 (8th Cir. 1966), vacated and
remanded on other grounds, 390
U. S.
200 (1968). In this case, evidence that the defendant conducted his law
business, paid expenses and collected fees, as well as other evidence,
satisfied the government's burden of proof. See Lumetta v. United
States [66-2 USTC ¶9492], 362 F. 2d 644, 646-47 (8th Cir. 1966).
Appellant
admitted that he failed to file returns for the years in question and
that his receipts exceeded $600.00 in each of the years. He claims the
trial court erred in permitting the government to introduce detailed
evidence bearing upon his total gross receipts for the years in
question. Clearly, this detailed evidence bears upon the willfulness of
defendant's act and, therefore, it is admissible. Lumetta, supra,
362 F. 2d at 645-46.
Appellant
contends that he would have shown the prosecution to be politically
motivated had the trial judge, at a pre-trial proceeding, not restricted
questioning of an IRS agent about the defendant's political background.
Obviously, an accused's political background is immaterial to his
failure to file tax returns. Appellant offers no evidence which even
tends to suggest a "bad faith" prosecution. We deem this issue
to be frivolous and to require no further comment.
Appellant
contends that the IRS agent should have given him Miranda
warnings in telephone conversations prior to their face-to-face meeting.
Firstly, MacLeod furnished no information to the IRS agent at these
conversations. Secondly, our prior decisions make it clear that Miranda
1 is
inapplicable to non-custodial interrogations. United States v. Brevil
[70-1 USTC ¶9374], 422 F. 2d 449, 450 (8th Cir.), cert. denied,
398 U. S. 943 (1970); Muse v. United States [69-1 USTC ¶9133],
405 F. 2d 40, 41 (8th Cir. 1968), cert. denied, 393 U. S. 1117
(1969); Cohen v. United States [69-1 USTC ¶9132], 405 F. 2d 34,
35-40 (8th Cir. 1968), cert. denied, 394 U. S. 943 (1969).
The
trial judge, in his instructions, defined the terms
"willfully" and "knowingly" to the jury in the
context of the indictment which charged that defendant "did
willfully and knowingly fail to make said income tax return[s]."
Appellant argues that the instructions gave an erroneous standard of
guilt to the jury. Although the statute speaks only in terms of
"willful" failure to make a return, we perceive no prejudice
to appellant by including the additional element of
"knowingly". See Jaben v. United States [65-2 USTC
¶9624], 349 F. 2d 913, 915 (8th Cir. 1965). Nor do we perceive any
error in defining the term "willful" as requiring a voluntary
and intentional omission as distinguished from a careless, thoughtless,
heedless, inadvertent or negligent act, and as requiring a "bad
purpose either to disobey or disregard the law." We have reviewed
the instructions and find them fair and appropriate.
Appellant
argues that the trial court should have made the pre-sentence report
available to the defendant prior to sentencing. Appellant recognizes
that Rule 32, Fed. R. Crim. P., specially grants the trial court
discretion to disclose all or part of the pre-sentence investigation
material to the defendant or his counsel. United States v. Gross,
416 F. 2d 1205, 1214 (8th Cir. 1969), cert. denied, 397
U. S.
1013 (1970). Appellant demonstrates no abuse of discretion in this case.
Appellant
urges us to find the pertinent federal statute, upon its face and as
applied in this case, violative of the Fourth, Fifth, Eighth, Tenth and
Thirteenth Amendments. Appellant cites no authority to support his
Fourth Amendment unlawful search and seizure contention. He contends
that the language of 26
U. S.
C. §7203 which requires a taxpayer to supply information to the
government, when considered in conjunction with an IRS agent's power to
summon materials (see 26
U. S.
C. §7602), may compel a taxpayer to subject himself to an unlawful
search and seizure. We recognize that an IRS agent does not have
authority under 26
U. S.
C. §7602 to make an unlawful search and seizure. Wild v. United
States [66-2 USTC ¶9500], 362 F. 2d 206, 209 (9th Cir. 1966). See
United States v. Giordano [70-1 USTC ¶9124], 419 F. 2d 564, 568-69
(8th Cir. 1969), cert. denied, 397
U. S.
1037 (1970). The defendant made no disclosure of any records in response
to legal process. His disclosure otherwise must be deemed voluntary.
Appellant's
Fifth Amendment challenge, resting on double jeopardy,
self-incrimination and deprivation of due process, is, likewise,
inadequately supported by case authority. The mere fact that 26 U. S. C.
§7203 encompasses willful failure to pay a tax, willful failure to file
a tax return, willful failure to keep records, and willful failure to
supply information would not necessarily subject a person to double
jeopardy. See Clemas v.
United States
, 423 F. 2d 461, 462-63 (8th Cir. 1970). The statutory requirement
to file an income tax return does not violate a taxpayer's right against
self-incrimination. United States v. Sullivan [1 USTC ¶236], 274
U. S.
259 (1927). We find nothing vague about the statutory language requiring
each taxpayer to pay a tax, file a return, keep records, and supply
information when required by law.
The
facts in this case demonstrate no violation of the Eighth Amendment
prohibition against inflicting cruel and unusual punishment. We do not
characterize the maximum statutory penalty of one-year imprisonment,
plus a $10,000.00 fine, as cruel and unusual. In this case, the
defendant's cumulative penalty on the three counts is less than the
maximum that could have been assessed. We do not find this so greatly
disproportionate to the offense as to be shocking to the sense of
justice. See Weems v.
United States
, 217
U. S.
349 (1910); Kasper v. Brittain, 245 F. 2d 92, 96 (6th Cir.), cert.
denied, 355
U. S.
834 (1957).
We
have also examined appellant's contentions that §7203 offends against
the Tenth and Thirteenth Amendments. Again, appellant cites no
authority, and we find none.
[Conclusions]
While
we have carefully examined all of appellant's contentions, it should be
apparent that we deem several to be frivolous. The increasing federal
case load places heavy demands upon the time of the federal appellate
judges. Counsel who raise abstract issues on appeal, which are neither
documented by the facts in the case nor supported by legal authority,
serve ill the interests of their client, the courts and the public.
Affirmed.
1 Miranda v. Arizona,
384 U. S. 436 (1966).
[49-1
USTC ¶9281]Harry W. Schuermann, Appellant v.
United States of America
, Appellee
(CA-8),
United States Court of Appeals for the Eighth Circuit, No. 13,798, 174
F2d 397, May 10, 1949, Cert. denied, 338 U. S. 831, 70 S. Ct. 69
Appeal from the United States District Court for the Eastern District of
Missouri.
Penalties: Fraud: Degree of proof: Evidence of expenditures as
evidence of income.--A taxpayer who was indicted for willfully
filing false income tax returns for each of the years 1942-1945 was not
entitled to a directed verdict of acquittal where the government offered
proof of expenditures from which it could be inferred that taxpayer had
income which he deliberately failed to include in his return. Such
evidence was sufficient to take the case to the jury.
Penalties: Fraud: Omission to charge jury as to effect of failure to
testify.--The trial court did not err in denying defendant's request
that the jury be instructed that his failure to testify created no
presumption of guilt, where the requested instruction was not submitted
to the court until after argument of the case and the United States
Attorney was not presented with a copy of the request. Affirming the
decision of the District Court, 79 Fed. Supp. 247, reported at 49-1 USTC
¶9115.
Mr.
Joseph Nessenfeld (Mr. Jerome F. Duggan, Mr.
Rob
ert Kratky and Mr. Morris A. Shenker were with him on the brief) for
appellant. Mr. Drake Watson, United States Attorney (Mr. David M.
Rob
inson, Assistant United States Attorney, was with him on the brief) for
appellee.
Before
SANBORN, THOMAS, and JOHNSEN, Circuit Judges.
SANBORN,
Circuit Judge, delivered the opinion of the Court.
The
defendant (appellant), by an indictment in four counts, was charged with
having willfully attempted to defeat and evade the payment of federal
income taxes by filing a false return for each of the years 1942, 1943,
1944 and 1945. 1 He entered a
plea of not guilty. The case was tried to a jury, which returned a
verdict of guilty upon all counts. Sentence was imposed upon the
verdict, and the defendant has appealed. He asserts that the court
should have directed a verdict of acquittal upon the ground that the
evidence was insufficient to sustain his conviction, and that errors of
law were committed during the trial which entitle him to a reversal.
The
government attempted to prove (1) that the defendant filed a false
income tax return for each of the years covered by the indictment, and
(2) that he did so willfully in an attempt to defeat or evade payment of
a part of his income tax. If the government's evidence was sufficient to
make the question of the alleged falsity of the defendant's returns one
of fact for the jury, the defendant was not entitled to a directed
verdict. We say this because the evidence disclosed the usual badges or
indicia of the deliberate concealment of income, namely: (1) intentional
failure to maintain financial records; (2) a much visited safety deposit
box, rented under an assumed name; (3) the use by the defendant, in his
dealings, of large sums of currency; and (4) purchases of property by
the defendant in others' names.
It
is the position of the defendant that the government completely failed
to produce any substantial evidence that he had any taxable income in
excess of that reported by him or that he owed any more taxes than he
paid.
[Statement
of Facts]
The
defendant is a married man, who, for a number of years, was engaged in
operating in
St. Louis
,
Missouri
, a policy or numbers business, a form of lottery or gambling in which
numbered tickets are sold and some ticket holders evidently win or hope
to do so. The business is illegal in
Missouri
, but is apparently lucrative if well managed. (See
United States
v. Miro, 2 Cir., 60 Fed. (2d) 58 [1932 CCH ¶9396].) It
constituted the defendant's only visible means of support and income
during the years in suit.
The
defendant's income tax returns for the years 1936, 1938, 1939, 1940 and
1941 reported net income and tax liability as follows:
Net Income Tax Liability
1936 .... $ 3,660.80 $ 90.55
1938 .... 3,665.00 91.94
1939 .... 4,831.30 73.93
1940 .... 8,590.00 335.10
1941 .... 14,914.57 2,578.80
In
1941, the taxing authorities investigated the defendant's returns for
the years 1938, 1939 and 1940. As a result of this investigation,
deficiency assessments were agreed to for those years. The assessments
were based on additional income for 1938 of $6,735.00, for 1939 of
$6,394.36, and for 1940 of $4,759.14. The Revenue Agent who made the
examination determined that in 1938 defendant's income from his policy
business was $10,400.00, that in 1939 it was the same amount, and that
in 1940 it was $13,352.70. The report of examination informed the
defendant that he must maintain adequate accounting records.
The
defendant's returns for 1942, 1943, 1944 and 1945 were prepared by a
lawyer and accountant from columnar sheets, furnished by the defendant,
purporting to show the results of his business. These returns showed the
defendant's net income and tax liability to be as follows:
Net Income Tax Liability
1942 .... $15,513.94 $4,280.41
1943 .... none none
1944 .... 3,682.24 645.55
1945 .... 17,295.06 5,851.38
According
to the government accountant who investigated the defendant's returns
for the years in suit, the corrected net income and tax liability of the
defendant were as follows:
Corrected
Net Income Tax Liability
1942 .... $ 20,911.00 $ 6,983.91
1943 .... 32,525.17 14,811.52
1944 .... 105,463.62 74,441.53
1945 .... 85,107.84 56,161.54
This
computation is based upon the theory that on December 31, 1941, the
defendant had no substantial capital and that during the subsequent four
years his expenditures and investments were attributable to and
reflected his current income. The method used by the government for
reconstructing the defendant's probable income for the years in question
is called the "increasing net worth and expenditures" method.
Its use in this case was necessitated by the fact that the defendant had
no record of his receipts. He asserts that, before computations based
upon this method could be accorded probative value, there would have to
be substantial evidence of what the sum total of his assets was on
December 31, 1941, and that this has merely been assumed and not proven.
In the defendant's brief, it is said:
"In
the instant case, there was no proof whatever of income, and no proof of
actual net worth. Yet the jury was permitted to infer, without evidence
establishing net worth, that the loans and investments in excess of
reported taxable income represented an increase in net worth and
to infer on the basis of such inference that the funds so loaned or
invested in any year came from taxable income first earned in
that year. Upon these inferences, and without a scintilla of proof of
income, defendant, was convicted, sentenced to a total of nine years 2 and fined
$40,000."
The
contention of the defendant as to the soundness of the government's
computations is not without substance. The government's case is based
largely upon the theory that proof of expenditures is, under the
circumstances of this case, proof that the defendant, in each of the
years involved, had more income than he reported. The evidence of the
government does not exclude the possibility that the defendant had some
substantial accumulation of capital on December 31, 1941, or that
sometime, somehow and somewhere he acquired a large amount of capital
out of which he made the loans, investments and expenditures which the
government contends reflect income.
[Sufficiency
of Evidence]
While
the government had the burden of proof, it was not required to make a
perfect case or to prove the defendant guilty to a mathematical
certainty. The government did not have to establish the exact amount of
unreported income of the defendant. United States v. Johnson, 319
U. S.
503, 517 [43-1 USTC ¶9470]. Evidence which, if unexplained and
uncontradicted, will justify a conclusion that a taxpayer had income
which he deliberately failed to include in his return, is enough to take
a case such as this to the jury. Compare, Affronti v.
United States
, 8 Cir., 145 Fed. (2d) 3, 6, and Guzik v.
United States
, 7 Cir., 54 Fed. (2d) 618, 620 [1931 CCH ¶9681].
We
think it reasonably may be inferred, from the defendant's returns for
the years prior to 1942, that the likelihood of his having accumulated a
large surplus from his activities was negligible. One can believe that
his business, like many other enterprises, legal and illegal, was a
beneficiary of the prosperity of the war years, and that his
expenditures kept pace with his income. If the skill of the tax evader
in concealing income is not to become "an invincible barrier to
proof" (United States v. Johnson, supra, page 518 of 319 U.
S. [43-1 USTC ¶9470]), the federal appellate courts will have to rely
heavily upon the sound judgment of the trial courts in appraising the
sufficiency of the evidence to warrant submission of a tax evasion case
to a jury, and upon the fairness and common sense of juries in
determining guilt or innocence when such cases are submitted to them.
See
United States
v. Johnson, supra, pages 519-520 of 319
U. S.
[43-1 USTC ¶9470].
We
conclude that the District Court did not err in denying the defendant's
motion for a verdict of acquittal.
[Jury
Instructions]
Other
errors asserted by the defendant relate to the court's failure to give
certain instructions requested by the defendant.
The
case was argued to the jury during the morning of July 1, 1948. The
arguments were concluded at 12:55 P. M. At that time, defendant's
counsel presented to the court twenty-two typewritten pages of requested
instructions. No copies of the requests were furnished counsel for the
government. The court excused the jury until 2:30 P. M., and the
following colloquy took place between the court and counsel for the
defendant:
"The
Court: Let's let the record show that after argument is concluded, the
defendant submits his requests. But that is not right. You gentlemen
know the rules. This is not the first criminal case you tried.
"Mr.
Duggan: First one I tried under the rules.
"The
Court: That rule has been in effect for years. In other words, the Court
has to have some time to examine instructions. If it was not for taking
a noon recess, I would instruct the jury now. I asked you for your
requests yesterday at noon.
"Mr.
Kratky: Well, I understood the request for the--
"The
Court: I will grant some of them, but I have no time now to consider
them. What do you want me to do, take my noon recess and study these
requests?
"Mr.
Kratky: No, but I understood the Court called for the instructions after
the--
"The
Court: No. You read the rules. They require they be given the Court a
sufficient length of time before the arguments start so the Court can go
over them, and now you waited until the arguments are in.
"Mr.
Kratky: I did not do that purposely, your Honor.
"The
Court: I am not saying you did it purposely. I am just saying what the
record shows you have done, and why I can not give these instructions
the attention they should have."
At
2:30 P. M., when the trial was resumed, the court said to counsel:
"I
have gone over the twenty-two instructions submitted to me just before
the noon recess by defendant. I think most of them are included in my
charge, if not in the language they are requested, the substance of
them."
Among
the twenty-two instructions requested was one reading as follows:
"The
Court instructs the jury that the fact that the defendant has not
testified in his own behalf does not create any presumption of guilt
against him. The Court further instructs the jury that, under the law,
the defendant does not have to prove himself innocent of the offenses of
which he is charged in the indictment and that, in our courts of
justice, the defendant has the right to stand on the presumption of
innocence of the offenses of which he is charged and that he cannot be
convicted unless the government has proven the offenses charged against
him beyond all reasonable doubt, as the Court has defined that term to
you. And the Court further instructs the jury that it must not permit
the fact that defendant has not testified in his own behalf to weign in
the slightest degree against the defendant, nor should this fact be
permitted to enter into the discussions or deliberations of the jury in
any manner."
The
charge of the court relative to this same subject matter contained the
following:
"The
defendant is presumed to be innocent, and this presumption abides with
the defendant at all stages in this trial, and this assumption continues
until the evidence proves the defendant guilty beyond a reasonable
doubt.
"And
the burden of convincing you of the guilt of the defendant rests on the
government solely and not on the defendant in any respect whatsoever.
*
* *
"The
burden of proof rests upon the government throughout the case and never
shifts, to sustain the charge as set forth in each count; and under the
law governing this case, the presence of such testimony in the record of
the character I have referred to puts no burden on the defendant to
explain where or how he obtained the money so used by him."
In
the case of Bruno v. United States, 308
U. S.
287, the Supreme Court ruled that it was fatal error for the trial court
in that case to refuse to give the substance of the following
instruction requested by Bruno:
"The
failure of any defendant to take the witness stand and testify in his
own behalf, does not create any presumption against him; the jury is
charged that it must not permit that fact to weigh in the slightest
degree against any such defendant, nor should this fact enter into the
discussions or deliberations of the jury in any manner."
It
is obvious that, in the instant case, the instruction requested by
counsel for the defendant was based upon the Bruno case, although
it was not called to the trial court's attention.
Rule
30 of the Rules of Criminal Procedure for the United States District
Courts, 18
U. S.
C. A., provides:
"At
the close of the evidence or at such earlier time during the trial as
the court reasonably directs, any party may file written requests that
the court instruct the jury on the law as set forth in the requests. At
the same time copies of such requests shall be furnished to adverse
parties. The court shall inform counsel of its proposed action upon the
requests prior to their arguments to the jury, but the court shall
instruct the jury after the arguments are completed. No party may assign
as error any portion of the charge or omission therefrom unless he
objects thereto before the jury retires to consider its verdict, stating
distinctly the matter to which he objects and the grounds of his
objection.
Opportunity
shall be given to make the objection out of the hearing of the
jury."
This
rule is the law. In our opinion, it was intended to prevent the very
thing that occurred in this case, namely, the presentation to the trial
court, after the case was closed and the court had formulated its
charge, of a great mass of requested instructions, not for the purpose
of assisting the trial court, but for the purpose of having something to
argue about in case of a conviction.
The
failure to present the United States Attorney with copies of the
requests was a fatal error on the part of defendant's counsel. One of
the most important duties of counsel for the government in the trial of
a criminal case is to keep error out of the record, and thus to prevent
the frustration of the government's efforts to secure a valid
conviction. In the instant case nothing was done by defendant's counsel
to put government counsel on notice that the defendant had elected to
have the court instruct the jury that his failure to testify created no
presumption of guilt. Counsel knew, of course, that, unless the
defendant chose to have that instruction given, the giving of it would
be of doubtful propriety, since it would call the jury's attention to
the defendant's failure to testify. Wilson v.
United States
, 149
U. S.
60, 65. It is true that, at the conclusion of the court's charge,
counsel for the defendant took an exception "because it did not
include an instruction that the fact that the defendant had not
testified in his own behalf did not create any presumption of
guilt." That exception, however, did not advise the court or
counsel for the government that the defendant had, pursuant to the rule
of the Bruno case, elected to have the court so instruct the
jury.
Counsel
for the defendant, in belatedly presenting their requests for
instructions, may not have intended to set a trap for the court and for
opposing counsel, but that is exactly what they did. They gave the court
an inadequate opportunity to study their requests. They gave counsel for
the government no opportunity at all to consider them. They did not
direct the court's attention to the rule announced in the Bruno
case and its applicability to the specific request based on that case.
Under
the circumstances, we hold that the District Court's denial of the
defendant's request to instruct the jury that his failure to testify
created no presumption of guilt, does not entitle him to a reversal of
the judgment.
The
other requests for instructions which the defendant contends should have
been given, have the same procedural infirmity as the one which we have
discussed. Moreover, the failure to give them, had they been
appropriately presented to the court for consideration, would, we think,
not have been error. The charge of the court was fair, and adequately
covered the issues tried.
The
contention that the trial judge was hostile and unfair to the defendant
during the trial is not substantiated by the record.
The
judgment is affirmed.
1
The charges were based on §145(b) of Title 26, U. S. C. A. Int. Rev.
Code, which, so far as pertinent, provides:
"*
* * 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
The defendant was placed on probation with respect to five years of the
sentence of imprisonment.
[35-2
USTC ¶9645]Leon M. Gleckman, Appellant, v.
United States of America
, Appellee Leon M. Gleckman, Appellant, v.
United States of America
, Appellee
(CA-8),
United States Circuit Court of Appeals, Eighth Circuit, No. 10,203,
10,302. November Term, 1935, 80 F2d 394, Decided November 26, 1935
Appeal from the District Court of the United States for the District of
Minnesota.Appellant, convicted for willfully attempting to evade income
taxes for 1929 and 1930 by making false returns for those years,
contended that the evidence was insufficient to sustain a conviction.
The Court sustains the conviction on the ground that although there was
no direct testimony to show what business transacted by the taxpayer
produced large sums of money that accrued to him in addition to the
items reported in his return and although the Government could not prove
where or how or from whom the taxpayer received large sums of money
deposited to his account in various banks and included by the Government
in his income, there was substantial circumstantial evidence that the
taxpayer did have a business outside of that described in his return and
that at least some of his deposits were derived from it. In such cases
accountants can and do arrive at a basis of assessment for tax upon
analysis of bank accounts and the elimination of receipts from capital
and other nontaxable sources. Asking the plaintiff's witness on cross
examination whether his objection to answering certain questions asked
him by the Government's accountant and investigator was not in substance
"an objection that the defendant through your answering that
question, might tend to criminate himself" did not represent
misconduct on the part of Government's counsel amounting to an invasion
of the constitutional right of the defendant not to be compelled to
testify against himself. Affirming District Court decision.
Mr.
Patrick J. Ryan, for Appellant. Mr. Linus J. Hammond, Assistant United
States Attorney (Mr. George F. Sullivan, United States Attorney, and Mr.
Earl C. Crouter, Attorney, Department of Justice, were with him on the
brief), for Appellee.
Before
GARDNER, WOODROUGH, and FARIS, Circuit Judges.
WOODROUGH,
Circuit Judge, delivered the opinion of the Court.
Appellant
was convicted for willfully attempting to evade and defeat a large part
of his income taxes for the year 1929 (under the first count of the
indictment) and for the year 1930 (under the second count), by making
false returns of his income for those years and paying thereon less than
the amount of income tax due from him to the government, in violation of
26 USCA, Sec. 2146(b). He contends that the evidence was insufficient to
sustain a conviction on either of the first two counts of the indictment
upon which he was found guilty and sentenced to eighteen months
imprisonment and $5,000.00 fine and costs, the sentences to run
concurrently and not consecutively.
It
appears that for many years prior to and during the calendar year 1929,
Leon M. Gleckman was a citizen of the
United States
and was a resident of and had his principal place of business at
St. Paul
,
Minnesota
. Prior to 1926 he had never made any returns for income tax purposes
but in 1928 he made returns for the years 1925, 1926 and 1927, showing a
lump sum net income without details of $15,000.00 for each year and paid
tax thereon. During 1929 he was a married man, living with his wife and
had three dependents and his regular annual accounting period for income
tax purposes was on the basis of the calendar year and not on the basis
of the fiscal year. He was the president of and a stockholder in the
Republic Finance Company, a corporation, and drew a salary from that
corporation during the year. He also received a profit from sales of
stocks and bonds and received rents from property owned by him. These
items of salary, stock sales profits and rents totaled something over
$11,000.00, from which he was entitled to deductions on account of
expenses, interest, taxes and charitable contributions. He made a sworn
joint return for himself and his wife of gross income, $11,167.78, and
deductions of $992.09, leaving net income $10,175.69, calling for $49.02
total tax, which he paid.
In
the year 1930 he drew a salary from the Republic Finance Company,
received rents from property owned by him, and derived profits from the
sale of stocks and bonds; the three items of income amounting to
$9,236.56. During this year, however, before any return for tax was
made, a tabulation was obtained from the banks where Mr. Gleckman did
business, reflecting that many deposits had been entered to his credit
during the year, amounting in the aggregate to a large sum of money and
on account of such bank deposits Mr. Gleckman added to the sworn joint
return of himself and his wife for the year "Income from business,
$5,286.53." This sum added to the above $9,236.56 made the return
for the year 1930, $14,523.09, from which he took deductions on account
of interest, taxes and contributions in the sum of $2,091.25, leaving
taxable net income, $12,431.84, producing a total tax of $185.57, which
he paid.
An
internal revenue auditor, Mr. Schall, was subsequently assigned to make
an audit of the returns for the years 1929 and 1930 and called upon Mr.
Gleckman for his books and papers. Mr. Gleckman had kept no records of
account of his business reflecting his true income or affording means
for the computation thereof, but as he had done business with the Foshay
State Bank and the Commercial State Bank, he directed Mr. Tankenoff, a
public accountant, and the supervising bookkeeper of the Republic
Finance Company to assist the government's agent to get the bank records
and to aid in checking the taxable income. They did not obtain the
deposit slips from the Foshay State Bank covering all of the year, 1929,
but had the record of deposits in that bank for the period from August
23, 1929, to November 1, 1929. The Foshay Bank having failed about that
time, Mr. Gleckman's account in the Commercial State Bank became more
active and they had the record of numerous deposits in his account at
that bank during November and December, 1929. Mr. Tankenoff and the
government agent worked together for a period of several weeks
attempting to trace to their source the many items which Mr. Gleckman
had deposited in the banks in order to eliminate all items which were
receipts from capital or other non-taxable transactions. By the
production of checks and otherwise, many items shown to have been
deposited in the bank account of Mr. Gleckman were explained as arising
out of capital or non-taxable transactions and were eliminated. Mr.
Tankenoff and the government agent each made up a work sheet covering
the numerous items considered by them and arrived at a balance of
$18,036 additional net income for the year 1929 over the amount which
had been returned for that year by Mr. Gleckman. The agent proposed
excess assessment in that amount and although Mr. Gleckman said that if
he had more time and wanted to go to a great deal more expense he could
remember more of the bank deposits, and his attorney declared, in his
presence, that Mr. Gleckman did not owe the additional tax; Mr. Gleckman
paid the proposed deficiency tax assessment together with added
negligence penalty of five per cent before final assessment was made.
Before the auditor Schall had completed his audit of Mr. Gleckman's
return for the year 1930 he was succeeded by another auditor, Mr.
Sullivan, and the subsequent investigations revealed very numerous
receipts of money by Mr. Gleckman and deposits made by him during each
of the years 1929 and 1930, aggregating large sums which had not been
disclosed by him. This prosecution followed.
In
the figures so set out there is included a charge that he had
understated his slary income in his return for 1929 in the amount of
$975.00 and that he had received the sum of $680.87 from University
Cleaners & Dyers, a partnership of which he was a member, and had
not included the item in his return.
In
response to an order for bill of particulars the District Attorney
presented in great detail an itemized list of all the deposits made in
Gleckman's accounts at the two banks during the years 1929 and 1930 and
explained that the government had been able to ascertain that some
deposits made by Mr. Gleckman during these years did not represent
income and were, therefore, eliminated. He also specifically described
many other items of deposit and identified them by their source so far
as known to the government. As to the four items of "unidentifiable
income" referred to in this count as "not deposited in
banks" aggregating $38,975.00, it was stated in the bill of
particulars that the income "consists of moneys received by the
defendant as evidenced by the fact that he used the same for his own use
and benefit" and the manner in which he so used them was set forth
in detail. But it was repeated throughout the bill of particulars that
"the nature of the transactions whereby they (the various items of
receipts and deposits) were received are more peculiarly within the
knowledge of the defendant than the government, and, cannot, therefore,
now be stated." No objection was made to the bill of particulars so
presented.
It
appared on the trial that there had been deposits made to the credit of
Mr. and Mrs. Gleckman in the two banks during 1929 amounting to
$156,822.06, of which the auditor was able to trace and eliminate
$63,915.48 as non-taxable loans, stock and bond transactions, and rents
and salary items, leaving a balance of untraceable cash and unexplained
deposits of $92,906.58.
It
also appeared that Mr. Gleckman had received the two items of $15,000.00
and $7,500.00 respectively, referred to in the first count of the
indictment, and as to three of the other items "not deposited in
banks" identified as Havana, Cuba, $5,000.00, Bennett & Co.,
$5,800.00, Republic Finance Company $13,000.00, it appeared that Mr.
Gleckman had sent $5,000.00 to the Mill Creek Distillery in Havana,
Cuba, and had also paid in stock market transactions to Bennett &
Company $5,800.00, and had paid to Republic Finance Company in the
purchase of stock and otherwise $13,000.00, none of which moneys came
from his bank accounts. As to the item "Sam Fink $15,175.00"
the claim that it represented an item of taxable income for the year in
question was withdrawn by the government.
There
was substantial evidence that the salary drawn by Mr. Gleckman from the
Republic Finance Company was $7,475.00 instead of $6,500.00 as returned
and that he was in fact a member of the partnership University Cleaners
& Dyers and had received $680.87 as his distributive share of its
income, not included in his return for the year. It also appears that on
October 10, 1929, Mr. Gleckman had signed and delivered to the
Commercial State Bank a property statement containing the recitation
that it was made "for the purpose of obtaining loans and
discounting paper and otherwise procuring credit from time to time"
and was "a true and correct statement of my financial condition on
10-10-1929." In the upper right hand corner appeared
"Individual (Merchant)" and the statement showed "net
worth $64,200.00." Later and on March 25, 1930, Mr. Gleckman signed
a similar property statement to the same bank, similarly marked
"Individual (Merchant)," disclosing net worth as of the latter
date $217,373.00.
There
was evidence that in the summer of 1928 Mr. Gleckman went to Mr.
Anderson, who was then Assistant United States District Attorney, and
said that he had learned that there had been a ruling to the effect that
income from illegal liquor transactions was taxable. Following upon that
conversation Mr. Anderson, pursuant to employment from Mr. Gleckman,
aided in making out Mr. Gleckman's income tax returns for the years
1925, 1926 and 1927. He also prepared a statement for Mr. Gleckman to
the Tax Collector for the year 1928 to the effect that Mr. Gleckman had
no taxable income in that year. He also assisted in making out the
returns for the years 1929, 1930 and 1931. Mr. Anderson reported the
statement of Mr. Gleckman concerning the taxability of income derived
from illegal liquor transactions to the Chief Deputy Collector.
On
the part of the defendant, testimony was given by numerous witnesses
tending to show that besides the receipts shown on his tax returns Mr.
Gleckman had received sums of money in 1927, 1928 and 1929 by way of
loans made to him and repayment of advancements and loans which he had
made to others and through liquidation of property interests and
surrender and cancellation of stock in the Republic Finance Company. It
was brought out that he had large investments in the stock of the Mill
Creek Distillery of Havana, Cuba, and also an interest in the Greendale
Distillery in
Canada
--both concerns being actively engaged in the manufacture of whiskey,
and that he received a large sum in 1929 from the sale of his interests
in the Greendale Distillery. The claimed receipts were tabulated by Mr.
Tankenoff for defendant and were shown to aggregate $74,540.00 in
addition to the items included in the return for the year, which, with
corrections claimed, amounted to $10,267.78, making a total of
$84,807.78. Mr. Tankenoff also computed the expenditures for the year as
summarized from the testimony at $64,148.66. There was testimony for the
defendant to the effect that the items of alleged gross income
$15,000.00 received under the assumed name of Abraham Wynehouse and the
$7,500.00 collected through the Journal Square National Bank, Jersey
City, New Jersey, were received from the sale of the interest of
defendant in the Greendale Distillery and were capital transactions and
were nontaxable.
There
was no direct testimony to show what business transacted by Mr. Gleckman
had produced the large sums of money that accrued to him in addition to
the items reported in his return. There was no direct proof of any
specific deals or transactions outside of those included in his return
which were shown to have netted Mr. Gleckman any gains or profits. All
of the testimony adduced for the defendant concerned the large items of
receipts that accrued from non-taxable transactions, and none of the
government's witnesses testified to any particular gain accruing to Mr.
Gleckman from any specific transactions besides those reported by him.
There was no direct testimony that he received any dividends from his
distillery or other stocks.
And
it is the contention of the appellant that the prosecution must fail on
that account. It is conceded that proper foundation was laid for the
receipt in evidence of the deposit slips and ledger sheets of the banks
and that they were admissible if relevant and correctly show the
transactions of Mr. and Mrs. Gleckman with the banks during the years
involved. But the argument is that as the government could not prove
where or how or from whom Mr. Gleckman got the sums aggregating more
than $150,000.00 shown to have come into his hands during the year over
and above all the items eliminated by the auditors and all of the items
included in his income report, it could not be found that he earned it
or that it came to him as gains or profits. The point is particularly
insisted upon with reference to the untraceable items and the cash items
of the bank deposits. Such items it is said may just as well have been
drawn from non-taxable transactions as from services or business.
Undoubtedly
the burden was upon the government to prove that an income tax was due
from Mr. Gleckman for the years in question over and above the amount
returned--he could not be guilty of attempting to evade or defeat a tax
unless some tax was due. O'Brien v.
United States
, 51 Fed. (2d) 193. It may be conceded also that the bare fact,
standing alone, that a man has deposited a sum of money in a bank would
not prove that he owed income tax on the amount; nor would the bare fact
that he received and cashed a check for a large amount, in and of
itself, suffice to establish that income tax was due on account of it.
On
the other hand, if it be shown that a man has a business or calling of a
lucrative nature and is constantly, day by day and month by month,
receiving moneys and depositing them to his account and checking against
them for his own uses, there is most potent testimony that he has
income, and, if the amount exceeds exemptions and deductions, that the
income is taxable.
United States
v. Miro, 60 Fed. (2d) 58;Oliver v.
United States
, 54 Fed. (2d) 48, certiorari denied, 285
U. S.
543; Gusik v. United States, 54 Fed. (2d) 618, certiorari denied,
285
U. S.
545; Capone v. United States, (CCA 7) 51 Fed. (2d) 609, 619; Orzechowski
v.
United States
, (CCA 3) 37 Fed. (2d) 713. See alsoChadick v. United States,
[¶9416 herein], (CCA 5) 77 Fed. (2d) 961; Paschen v.
United States
, 70 Fed. (2d) 491. We think there was in this case substantial
circumstantial evidence that Mr. Gleckman did have a business outside of
that described in his return and that at least some of his deposits were
derived from it. He first began to concern himself about income taxes in
the summer of 1928, when he learned that there had been a ruling to the
effect that income from illegal liquor transactions was taxable. It was
upon that information that he made returns and paid taxes upon income
fixed at $15,000.00 a year for the three years, 1925, 1926 and 1927, and
the only fair inference is that he was engaged in illegal liquor
transactions. On his property statements in the year 1929 there appears
over his signature a description of himself as a "Merchant,"
which is a term broad enough to include one engaged in illegal liquor
transactions. In his income tax return for 1930 a computation was made
of all the bank deposits that he had made during the year and an
estimate was made of the items in the account derived from capital or
non-taxable transactions, and then in his sworn return he reported
"income from business $5,286.53" which was an amount
representing a percentage of the aggregate bank deposits less the
estimated non-taxable items. There could be no reasonable inference to
be drawn from that representation except that moneys were going into his
bank account derived from his business.
His
property statements show that his net worth had increased between
October 10, 1929, and March 25, 1930, from $64,200.00 to $217,373.00, or
$153,173.00. There was evidence that when Mr. Gleckman presented the
earlier property statement to the bank he stated that he had more
accounts receivable than were listed and that he had some distilleries
in
Canada
or
Cuba
. An analytical comparison between the two statements makes it clear
that there were omissions in the first statement of property included in
the second, and substantially different valuations were made of the same
properties--those in the second statement being higher. But
notwithstanding all allowances, the two property statements afforded
some testimony of largely increased net worth between the two dates. A
property statement for November 13, 1931, showed somewhat less net worth
at that time and the jury acquitted on a third count of the indictment
which charged attempting to evade and defeat a 1931 tax.
For
the year 1929 Mr. Gleckman's agent, Mr. Tankenoff, worked for weeks with
the government auditor attempting to find explanations of the items of
the deposits that would justify eliminating them from the taxable
income, and when Mr. Gleckman said that if he had more time and wanted
to go to a great deal more expense he could remember more of the bank
deposits, he made it clear that he understood the attempts to explain
and eliminate the nontaxable items and could not then point out any
additional items that were not derived from the business and taxable
accordingly. Although the mere payment of the excess assessment made
against him for 1929 might not, of itself, have afforded very convincing
proof that he believed he owed the tax, the circumstances under which
the amount was computed by his own agent and the tax was paid by him
before assessment tended to show that the moneys deposited in the banks
were received by Mr. Gleckman as income from business.
The
bank deposits and large items of receipts by Mr. Gleckman do not,
therefore, stand entirely alone as the sole proof of the existence of a
tax due from him, but they are identified with business carried on by
him and so, are sufficiently shown to be of a taxable nature.
We
find there was substantial evidence to show that there was some tax due
from Mr. Gleckman for the year 1929 over and above that returned by him
and that there was some substantial testimony to justify each of the
assumptions in the hypothetical question propounded to the government
accountants who had so long and diligently studied Mr. and Mrs.
Gleckman's accounts.
The
hypothetical question so propounded to the government accountants was as
follows:
Q.
Mr. Schall, assuming that a resident of the State of Minnesota, who
during the calendar year of 1929; and on December 31, 1929, was married
and living with his wife and had three dependents, and whose residence
and principal place of business were at St. Paul, Minnesota, and whose
regular annual accounting period was on the basis of the calendar year,
and not on the basis of a fiscal year, and assuming that such person
maintained and kept no such accounting records that would enable him to
make an income tax return showing his true income or as would enable the
Government to compute his true income, and assume that such person
derived and received a gross income, during the calendar year of 1929,
as follows: Income from salary $7,350.00; income from partnership known
as University Cleaners & Dyers, $680.87; income from rents $3,000;
income from sale of stocks and bonds, $2,067.78; and assume further that
such person received a gross income from business from unidentifiable
sources, which he deposited from time to time during the calendar year
1929, in his bank accounts, and that such deposits therein aggregated
$92,906.58, after eliminating such deposits as could be identified
either as identified income, loans, or return of capital; and assume
further that such person received during said calendar year a gross
income from business and other unidentifiable sources as cash items, or
its equivalent, which he did not deposit in his said bank accounts, and
that such cash items not deposited aggregated $61,475.00, and assume
further that such person was entitled to and allowed by the provisions
of the Revenue Act of 1928, the following deductions:
1.
As against the rental income of $3,000.00, a reduction of $1,836.06,
consisting of interest $242.00, taxes $836.88, insurance $268.18, and
depreciation $400.00.
2.
As against business income a reduction of $841.79, consisting of $426.79
for rent and lights, $202.34 for phone service, and $212.68 for
miscellaneous expenses.
3.
Other deductions of $482.71, consisting of $495.68 interest paid,
$337.03 taxes paid, and contributions to the St. Paul Community Chest of
$25.00, and contribution to the Palestine Relief Fund of $25.00.
What
amount of income tax would you say such person owed and should have paid
to the Government for that year?
The
witness answered that the tax due from defendant for said year was
$30,174.00.
Although
complaint is made against the hypothetical question, it appears to have
been competent. It called for a computation merely, to be made by
experts well qualified to make it. The amount of the tax which it was
charged was attempted to be evaded was not of the gist of the offense,
and, as the trial court instructed: "Proof of the amounts of the
defendant's income need not measure up to the amounts stated in the
indictment." The testimony did not invade the province of the jury.
It
is apparent that when a taxpayer like Mr. Gleckman engages in such a
multiplicity of financial transactions in any year, as he did in 1929
and 1930, and received so many large and small items of money, running
up to a hundred and twenty-five or a hundred and fifty thousand dollars,
as indicated by his bank accounts, and the testimony which he offered,
and if he keeps no accounts whatever and avails himself of his right not
to answer questions; it would not be possible for any complete account
of his business to be made up for the government by any kind of skilled
accountancy. More especially, where the business transacted may be of an
illegal nature. There is reflected in reported cases that in instances
where the government has not brought certain habitual law violators to
effective punishment for such law violation, there has been more success
in disclosing the fruits of the crime--the income, and punishing for
attempts to evade the tax upon it. It is scarcely conceivable that this
could be done however if it were necessary for the government to prove
the complete debit and credit account of such an offender--all the
expenses, as well as all the items of receipts. Nor is such impossible
elaboration required. Taxation is a practical matter and taxpayers do
not terminate all duty to pay income tax by wilfully failing to keep
account of their income. The testimony is clear that in such cases
accountants can and do arrive at a basis of assessment for tax upon
analysis of bank accounts and the elimination of receipts from capital
and other non-taxable sources.
The
gist of the charge here is that there was a tax due and a wilful attempt
to evade it. Testimony sufficient to satisfy the jury beyond a
reasonable doubt upon the issue was all that was required and the proof
that large amounts were taken out of some kind of business and were used
as his own by the defendant, considered together with the circumstantial
evidence referred to and the evidence tending to show that he had
unreported net gains during the year and that his net worth was
increased thereby, required submission to the jury.
Complaint
is made, based upon four assignments of error, concerning the
cross-examination of the defendant's witness Anderson by counsel for the
government. It appears that in the cross-examination on defendant's
behalf of the government's accountant and investigator, Sullivan, it was
brought out that Mr. Anderson had appeared before Mr. Sullivan in
response to notice to produce documents and to answer interrogatories
about Mr. Gleckman's tax returns. A transcript had been made of the
questions put to Mr. Anderson and his answers, which transcript was
offered by and read in evidence on behalf of the defendant. It appeared
that Mr. Anderson was accompanied at the hearing by his attorney, a Mr.
Peterson. The transcript so put in evidence by defendant showed that Mr.
Anderson was asked what records Mr. Gleckman had produced to show the
sources (of receipts in) 1929 to 1931; and whether Mr. Gleckman had made
to Mr. Anderson any explanation of his bank deposits during 1929 to 1931
when Mr. Anderson was preparing the income tax returns covering those
years; and whether Mr. Gleckman had mentioned any investment he had in
the Mill Creek Distillery or in the St. Paul Boxing Club or University
Dry Cleaners or in the business known as Ben's Store at Chippewa Falls;
or any business transacted with several named persons. To each of the
questions Mr. Peterson made objection and said "on advice of
counsel witness refuses to testify, the point being that it involves a
privilege and a confidence and the ethics of counsel as between himself
and his client particularly so in this proceeding as an answer might
tend to a witnessing of Leon Gleckman against himself under the
law." And so Mr. Anderson did refuse to make any answers to the
questions. At about the same time Mr. Gleckman was asked to appear
before Mr. Sullivan and "explain his income" and Mr. Anderson
very carefully prepared a statement which Mr. Gleckman read before Mr.
Sullivan and then "walked out of the room," in effect refusing
to answer questions. It is not appearent why the defendant brought these
matters into the case--but it cannot be said that they were immaterial.
On cross-examination of Mr. Anderson by counsel for the government some
questions were directed to Mr. Anderson for the purpose of eliciting
from him just what objection he had had to answering questions about
sources and bases of income tax returns he had helped Mr. Gleckman to
make up, and in asking the questions the government counsel read and
based a question upon the transcript of the proceedings that had been
offered in evidence by the defendant. The witness Anderson, without
justification, accused counsel of misquoting the transcript,
particularly the objection that had been made by Mr. Peterson. Whereupon
the government counsel put the question to Mr. Anderson whether Mr.
Anderson's objections to answering Mr. Sullivan's questions had not
been, in substance, "an objection that the defendant through your
answering that question, might tend to criminate himself." It is
not indicated that there was any intention to go further than to ask if
such was not Mr. Anderson's understanding of the words used by his
lawyer Mr. Peterson appearing in the transcript offered by the
defendant, and it is significant that Mr. Anderson answered "that
interpretation can be made of that language." The charge is that
this was misconduct of government's counsel amounting to an invasion of
the constitutional right of Mr. Gleckman not to be compelled to testify
against himself. We find no misconduct on the part of government's
counsel and nothing in his questions to either directly or indirectly
prejudice Mr. Gleckman before the jury. The court instructed the jury
that "the fact that the defendant has not seen fit to testify in
this case cannot be considered by you as any evidence against him. The
government must prove him guilty. He is not required to establish his
innocence." There was no request for any instruction concerning the
fact that Mr. Gleckman and his attorney had refused to answer the
government agent's questions nor the grounds assigned by them for such
refusal. The fact had been brought out by defendant and there is no
reason to suppose that the import and significance of it was not
discussed by counsel before the jury. No error is found to sustain any
of these assignments.
It
is contended that the demurrer to the first count of the indictment
should have been sustained. The first count of the indictment is in
substantially the same form as was presented in Capone v. United
States, 56 Fed. (2d) 927, where it was fully considered by the Court
of Appeals for the Seventh Circuit and approved. We are in accord with
the conclusion reached by that court and find no flaw in the first count
of the indictment.
As
to the second count of the indictment and the verdict and judgment
thereon, practically the same considerations as we have found
controlling in regard to the first count are applicable. Although the
amounts of the receipts accruing to Mr. Gleckman during the year 1930
and the bank deposits during that year, both as reflected in the
testimony offered by the government and in defendant's testimony, are
different from those shown for the year 1929, no different questions are
presented. We think the second count of the indictment was good, against
the demurrer and that the evidence was sufficient to take the issue
raised by it to the jury. The instructions given fairly and correctly
explain the issues and the law applicable, and no exceptions were taken
to them.
The
judgment is affirmed.