Contempt Finding Against Defendant's
Counsel
7203: Willful Failure to File Return,
Supply Information, or Pay Tax: Trial: Contempt Finding Against
Defendant's Counsel
[47-1
USTC ¶9286]Alex Steinberg, Appellant, v.
United States of America
, Appellee
(CA-5),
United States Circuit Court of Appeals for the Fifth Circuit, No. 11793,
162 F2d 120, June 12, 1947, Cert. denied, 332 U. S. 808, 68 S. Ct. 108
Appeal from the District Court of the United States for the North
District of Texas.
Penalties: Evidence: Admissibility.--On the evidence, taxpayer's
conviction of wilfully attempting to evade and defeat his income and
victory taxes for 1943 by filing false and fraudulent tax returns, and
wilfully subscribing said false returns not believing them to be true,
is affirmed. Affirming an unreported decision of the District Court.
George
Gordon Battle and Francis L. Kohlman, New York, N. Y., John A. Erhard,
Dallas, Texas, and Eugene Meacham, Washington, D. C., for appellant.
William P. Fonville, Assistant U. S. Attorney, Dallas, Texas, and
Rob
ert B. Young, Jr., U. S. Attorney, Fort Worth, Texas, for appellee.
Before
SIBLEY MCCORD, and LEE, Circuit Judges.
SIBLEY,
Circuit Judge:
Alex
Steinberg was tried, convicted and sentenced on an indictment in four
counts which charged him as to his own income from the calendar year
1943, and that of his wife in community, with wilfully attempting to
evade and defeat their income and victory taxes by filing false and
fraudulent tax returns and concealing the true income and taxes contrary
to Internal Revenue Code §145(b); and with wilfully subscribing said
false tax returns not believing them to be true, contrary to Internal
Revenue Code §145(c). Forty-three errors were specified on taking
appeal, but only a few of them are now insisted on, they being urged as
errors in themselves, and as showing that the trial as a whole was not
fair and impartial. To understand them a brief outline of the evidence
is made.
[The
Facts]
Steinberg
since 1933 was a broker in whiskies, and held in 1943 permits from the
State of
Texas
to do that business, and to represent certain out-of-State distilleries.
In 1943 he began under some arrangement to deal for or with
Rob
ert Gould, who controlled several distilleries and bottling plants; and
Steinberg was given office space in
Cincinnati
,
Ohio
, in Gould's offices there. Steinberg in 1943 is shown to have handled
whisky sales, in barrels and bottles, running above two million dollars,
in about three-fourths of which Gould was concerned. Whisky was scarce,
and almost any price could be obtained for it. In April, 1943, ceiling
prices were fixed by OPA. The prices obtained by Steinberg were far
above the ceiling prices. Usually the distillery or bottling plant was
paid ceiling price by check or on its draft, and the excess price was
separately paid to Steinberg, in whose name the sales were made, by
checks which he indorsed and collected, or in cash. More than a million
dollars were thus traced into his hands. He testified that he had only a
commission, or a "finder's fee" in them, acting otherwise for
the sellers or buyers, and had no interest in the excess prices. He
testified that in the Gould transactions Gould insisted that this excess
over what was collected by the distilleries or other sellers be paid
over to him in cash only, and was so paid, some being paid in person and
some sent by registered mail and express in greatly under-valued
packages. The distilleries' books showed only the ceiling prices charged
and collected by them, and other lawful expenses, such as taxes and
bottling charges. No regular book record was kept by Gould or Steinberg
of the excess prices, and Gould gave him no receipts; Steinberg and the
purchasers, however, had the sales contracts from which the full prices
could be ascertained, and the checks and drafts also showed what was
paid.
Steinberg's
records, made by himself, showed fully and accurately his transactions
in business other than in whisky, his travel and other expenses, and his
commissions on strictly commission sales. He had a record also of
"brokerage" earnings, put into the tax return under that name,
in which most of the whisky sales were represented, and in which
earnings beyond ordinary commissions were entered which he described as
"finder's fees," that is, compensation for finding whisky for
a purchaser or a purchaser for the seller. It is this item of the
returns about which the controversy turns, the prosecution contending
that the income thus received was many times that reported and not mere
fees, but a share in or the whole of the excess price paid for the
whisky both in the Gould transactions and in others, and that the income
was thus grossly understated, and taxes evaded on each return in an
amount exceeding $400,000.
It
was also shown that in November, 1944, Gould was indicted for selling
whisky above ceiling prices; and he sent for Steinberg, and gave him in
cash some $292,000, in addition to $60,000 which he had just previously
sent, and induced him to return the aggregate of some $352,000 as income
earned by Steinberg in sales in 1943, but not realized till 1944, which
returns Steinberg made. Gould was convicted on his trial, though he
testified that he had received no excess sales money. Government
investigators testified in the present case against Steinberg that in
1946 he had stated to them in his counsel's presence that he had with
Gould a rough 50-50 split arrangement during 1943 and that what Gould
turned over to him in November, 1944, was about Steinberg's part under
that arrangement. Steinberg has since filed claim for refund for the
heavy taxes he paid on this money under his 1944 returns.
[Issues]
The
crucial questions for the jury were the credibility as a witness of
Steinberg, and of Gould, who was offered as a witness by the defense,
but who testified as he had in his own trial, that Steinberg had never
paid him any excess sales money, nor had he given Steinberg the $352,000
in November, 1944; and the credibility of Steinberg as to his true
interest in the sales which were not Gould transactions. There was some
circumstantial corroboration of Steinberg to his paying Gould cash
money. There was much testimony and documentary evidence of the large
sums that went into Steinberg's hands from the whisky sales.
[Propriety
of Argument]
1.
It is urged that language used in argument by prosecuting counsel
requires a new trial, though no motion for a mistrial was made, and no
objection offered or ruling invoked save in one instance. In that
instance, the defendant having put his general character in issue,
counsel was discussing that evidence and said: "Is he a law abiding
citizen? Let us look at the evidence in this case. He testified to you
under oath that constantly for nearly a year he engaged in the largest
black market operation of which you probably ever heard, making nearly a
million dollars, at a time when this nation was in a splendid effort to
avoid the catastrophe of wild inflation, in a situation where demand far
exceeded supply and the price of whisky was just a small part of the
whole; here is a man who cynically from the stand tells you he has
violated the federal law every day for nearly a year, and would have the
temerity to introduce witnesses to say he has the reputation for being a
law abiding citizen." Objection was made that the defendant had not
cynically admitted from the witness stand that he had violated the law
every day during 1943. The court said, "Well, that is a deduction
of counsel. We will just let the jury weigh it." The defendant had
testified to his numerous acts in aiding Gould to sell whisky at what he
knew were over-ceiling prices, to lending his own name, collecting the
money, and paying it over to Gould in cash. He had said he had no
concern in the price, whether over-ceiling or not. Counsel, in view of
the federal law that all who aid and abet another in crime are
principals, was justified in arguing as he did that Steinberg was on his
own testimony guilty along with Gould, and that it was cynical to
testify to these facts and disclaim any moral or legal responsibility.
The statement that Steinberg violated the law every day was an
exaggeration, but perhaps an allowable inference. The court did not err
in his ruling that the matter was to be weighed by the jury.
Other
criticisms of the prosecution's speeches are not supported even by
objection. The speeches are reported in full, and appear to us to be
logical and not inflammatory, and not exceeding in vigor what the nature
of the case authorized.
[Propriety
of Taxation]
2.
Unfairness is attributed to the district attorney in asking Steinberg,
"As a matter of fact you did not have your defense until your
Washington lawyers got down here and got ready to try this case, did
you?" No objection was made and the witness answered quietly,
"You are absolutely mistaken in that." The question was asked
after the witness had said that his tax attorneys in
Washington
had advised him to ask refund of the 1944 tax, and that he was not going
to give it back to Gould. He had said the $352,000 so taxed belonged to
the persons who had paid it as over-ceiling price. This newly advanced
idea of refund to them seems to be the defense meant. The question
caused no excitement at the time and should not now.
[Counsel
in Contempt of Court]
3.
Error is assigned in the finding for contempt of the
Washington
counsel, which though not in the presence of the jury is argued to have
been known to them, and to have disconcerted the counsel. It occurred
thus. The counsel wished to prove that certain investigating agents of
the government, apparently investigating Gould, had said to Steinberg,
"We know you did not get the money. We want you to tell us about
Gould." The court ruled the evidence not binding on the
United States
as an admission. There was then an effort to show that a microphone had
been placed in Steinberg's hotel room, probably by these agents. The
judge said, "We are going to warn counsel now not to seek to inject
something indirectly that the court has ruled inadmissible; if you do so
you do it under the court's warning." The finding of the microphone
was then related by the witness, with wires leading to an adjoining
room. The witness was asked who had occupied that room. On objection,
the court said, "If he has got anything in here he ought to have,
and the government has been guilty of wrongdoing, we might as well know
it, and if not we might as well understand counsel is seeking unethical
procedure." The jury was sent out and the court said: "All
right the bars are down and the gate is open; bring out all you have in
mind, counsel." The matter of the microphone was pursued, but
without showing that anything affecting Steinberg's case was learned
therefrom. Then the witness was again asked about the agents' saying,
"We know that you did not get the money and we know that Gould got
it." The court asked counsel on what theory of law this was
admissible. Counsel argued (the jury being still absent) that in such
matters agents' reports were the basis of government action, and that
the finding of the microphone was the cause of Steinberg's refusal to
make further statements to the agents. The court, quietly but with his
mind evidently on the agents' statement which he had previously ruled
out, reprimanded the counsel and fined him $50 for contempt of court,
expressing the opinion that "A lawyer of your ability could
scarcely be in good faith in asking these questions." The jury was
recalled and the case proceeded without further reference to the
incident until the close of the evidence several days later when, the
jury again being absent, the court of his own motion remitted the fine.
For counsel intentionally to try to get before the jury evidence which
the court has ruled out may well be a contempt in some circumstances,
but here the jury was absent and the court invited counsel to go fully
into the matter, and to state his theory of admissibility. There was no
contempt of the former ruling, but only a doing of what the count
invited. But this erroneous dealing with the counsel in the absence of
the jury was not error in the trial. We cannot assume, as we are asked
to do, that the jury learned of it and were unduly affected by it. Nor
is there anything to show that counsel was by the injustice done him
disabled in any way from doing his duty. It appears in the record that
he is a retired naval captain, who has practiced law since 1915, and has
served in the judge advocate's office in the Navy and as a penal trial
attorney for the Bureau of Internal Revenue for five years. His
sensibilities ought not to be unusually delicate. He made no claim to be
disconcerted. He continued to conduct the trial with his accustomed
vigor and skill.
[Hostility
of the Court]
4.
The defendant offered to prove in addition to a good character in
general and for honesty and accuracy in business, that he was
charitable. This trait was ruled out as not relevant to the case. In so
ruling the court said, "I think in a certain book, Gone With the
Wind, one of the most charitable persons in there was of bad reputation
otherwise." On objection to the remark, the court told the jury he
intended no personal application to Steinberg and to disregard it. The
remark was out of place, but we think it was cured by its withdrawal.
The ruling on the evidence offered was correct.
Other
things are brought forward as showing hostility by the judge. These
rulings as such were not erroneous. The report of the trial shows the
judge ruling for one side about as often as the other. We are not
impressed that there was any general hostility to the defendant or his
counsel.
[Refusal
of Court to Call Witness]
5.
Rob
ert Gould was present at the trial. The prosecution having rested, it
announced that it would not use him as a witness. Defendant's counsel
asked the court to call him as the court's witness. The court recognized
the right to do so, but said he did not at the present stage feel called
on to do it. The counsel for defendant then said, "We will call
Rob
ert Gould." The jury was retired on request, and it was made known
by the district attorney that Gould had before the grand jury claimed
his constitutional privilege against self-incrimination and refused to
testify; he suggested that the court in the absence of the jury
ascertain what questions were to be asked and whether the privilege
covered them. Defense counsel desired that it all be done in the jury's
presence. The court held that Gould should be allowed to claim his
privilege in the jury's presence, but that the court would see presently
how far the privilege might protect against the questions to be asked.
This was done. The counsel for Gould who was present then arose and
stated he had previously advised Gould to claim his privilege, but he
would now like to advise him to answer any question which the court
orders him to answer. The jury then returned. Gould answered all
questions asked him without making any claim of privilege at all,
denying that Steinberg had paid him any of the over-ceiling price money
as Steinberg claimed. The defense was allowed to impeach him by proof
that he had nevertheless been convicted and sentenced for forty-eight
OPA violations in liquor sales.
We
have recognized the right of the court in a criminal trial to examine an
important witness whom neither side would vouch for, allowing both sides
the privilege of cross-examination and impeachment. See Young v.
United States
, 107 Fed. (2d) 490. But it is a matter in the discretion of the
court to do or not to do. There was no error in refusing. The defendant
then voluntarily called this witness, apparently expecting that he would
in the jury's presence refuse to testify on the ground that it would
tend to incriminate him, affording an inference that he had received the
over-ceiling price money. We do not, however, say that such an inference
would be allowable. The witness testified just as he was known to have
done in his own trial before another court. There was thus no
entrapment, and impeachment was perhaps not really the right of the
party calling him, but it was allowed. The disappointment of the defense
at the conduct of the witness generates no error in the court's refusal
to call him as the court's witness.
[Corroborative
Evidence Irrelevant]
6.
Steinberg testified that Gould would take no checks but required cash
for the over-ceiling money, and would give no receipts for it. Evidence
was offered to corroborate him by showing by five or six other persons
who at about this time had paid Gould over-ceiling prices for whisky
that he dealt the same way with them. The court held that if Gould were
on trial such similar transactions could be proved to show a plan or to
illustrate Gould's intent and system; but with Steinberg on trial for a
different offense Gould's dealings with others were res inter alios
acta, and irrelevant. The evidence offered did not go to the extent
that Gould had a rule or uniform practice of business, but only that he
had required cash of those customers. There may have been others who
were dealt with otherwise. An endless enquiry might be opened up. For
the purpose for which it was offered, we think the evidence not
relevant.
[Opinion
of Counsel]
7.
As to the $352,000 which Steinberg testified Gould gave him in the fall
of 1944 and requested him to return it as Steinberg's income earned in
1943 but not returnable then because subject to be reclaimed as
over-ceiling money, evidence was allowed that Steinberg's own counsel
advised him that this would be proper, but evidence was rejected that a
counsel of Gould also so advised him. The distinction the court took was
that a man might rely on what his own counsel advised him, but not on
what another's counsel said. All this advice was given many months after
the returns for 1943 had been made and sworn to, and could have no
bearing on the good faith or belief in which they were made. It would
bear only on the 1944 returns if they had been the basis of the
prosecution. Whether over-ceiling money ought as a matter of law to be
returned in the year it passed into the taxpayer's hands as his own, or
whether because it might be reclaimed by the payer or the Administrator
it is to be considered like embezzled funds which are not gain at all,
is a question of law and not of ex post facto advice. The court
could have been called on to decide it, if important to this case. We
find no error in ruling out the opinion of Gould's lawyer expressed in
November, 1944.
[Court's
Noncompliance with R. C. P. 30]
8.
The defendant's counsel submitted to the judge some written requests for
instructions to the jury. The judge did not inform him of his proposed
action on them prior to the argument to the jury as required by Rule of
Criminal Procedure 30. The record shows no request by counsel for this
information, but that the requests were mentioned only after the charge
and in connection with exceptions to their not having been given. There
was an effort to have the record corrected to show a request for
information before argument, but the judge did not remember any request
and said he would have responded if asked, and that in fact he marked
them all refused except as covered by the charge; and he refused to
certify to any request. That we accept as final. The substance of most
of the requests indeed appears in the charge. Some ought not to have
been given. No argument is made as to error in refusing any, though a
general specification of error was made in taking the appeal. None of
them seems to us to be of a sort that would have affected the argument
if it had been known that it would not be given. The irregularity in the
judge's omitting to say before the argument what would be done about the
requests does not seem to us to be error in the absence of a request to
know. If error, it is here of an inconsequential sort and ought not to
set aside the trial.
[Conclusion]
There
is abundant evidence to justify the verdict. Since we find no reversible
error in the trial, the judgment is affirmed.