Cross-Examination PART 1 Page5

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[55-1 USTC ¶9267]Louis J. Gariepy, Appellant v. United States of America , Appellee

(CA-6), In the United States Court of Appeals for the Sixth Circuit, No. 12061, 220 F2d 252, March 9, 1955

Appeal from the United States District Court for the Eastern District of Michigan.

[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201]

Tax evasion: Objection to jury panel: Instructions given and refused: Limitation on cross-examination: Court's hostility: Verdict sustained.--The conviction of taxpayer on charges of tax evasion under 1939 Code Sec. 145(b) was, on motion for acquittal, held supported by substantial evidence. The following other assignments of error at the trial were overruled: (1) that the court denied taxpayer's challenge to the array of the jury panel for the reason that it was drawn from only certain counties where there was extensive publicity on the indictment, (2) that the indictment charged no offense under Code Sec. 145(b) for which he could be convicted under the evidence, (3) that the returns in question were unsigned, (4) that the instructions to the jury were improper and requested instructions were improperly refused, (5) that cross-examination was unduly limited, (6) that improper comments were made by the Court in the hearing of the jury, and (7) that the Court manifested hostility to taxpayer's attorneys in the trial.

James E. Haggerty, Harry Nayer (James E. Haggerty, Harry Cohen, Harry M. Nayer, Edward P. Echlin, Detroit , Mich. , on brief), for appellant. George E. Woods, Detroit, Mich., William A. Barnett, Rogional Office Internal Revenue Department, Chicago, Ill. (Fred W. Kaess, Detroit, Mich., John D. Kiley, William A. Barnett, Regional Counsel, Chicago, Ill., on brief), for appellee.

Before MARTIN, MCALLISTER and STEWART, Circuit Judges.

MARTIN, Circuit Judge:

Appellant, Louis J. Gariepy, a Detroit doctor specializing in surgery and enjoying a lucrative practice, was convicted by jury verdict on two counts of an indictment charging him with violation of section 145(b) of the Internal Revenue Code, 26 U. S. C. A., 145(b). He was sentenced to four years' imprisonment on each of the two counts, the sentences to run concurrently, and was fined $5,000 on each count. His office nurse and confidential financial secretary, Marie L. Loechner, who had been jointly indicted with him, was acquitted by the verdict of the jury.

Before returning its verdict, the jury inquired as to whether it "could return a verdict of guilty as to one of the defendants and make a recommendation of mercy." The judge replied affirmatively, but told the jurors that the recommendation would not be binding upon the court. He assured them, however, that their recommendation would be given "full consideration in any consequences that may follow." When subsequently pronouncing sentence on appellant, the judge stated that he had considered the probation report and, "chiefly," the recommendation of mercy made by the trial jury. He asserted that the evidence of guilt of the appellant was overwhelming, and that had the jurors failed to return a verdict of guilty they would have violated their oaths and simply would have pardoned the defendant. He said that appellant had had a fair trial and that his rights had been properly protected, "both by eminent and able counsel and also by the court."

The court was impelled to find that appellant had committed perjury, inasmuch as he knew that he had understated his income; that the doctor had wilfully thrown obstacles in the way of the investigating officers over a long period of time; that he had deliberately destroyed his records and thereby prevented the revelation of the extra sums of money which he had received; and that he had done this after the revenue officers had visited his offices for the purpose of examining his records. The judge considered that he would be recreant in his duty if he failed to impose a sentence which the facts required--not only because the defendant was a man of high reputation in his community, but also because of the example set for people of no influence who would be brought before the criminal bar of the court.

[The Facts]

The income tax returns of Dr. Gariepy for the respective years involved--1945 and 1946--were not signed by him, but had been prepared by his employee, the Rex Beasaw Income Tax Service, from information obtained from the co-defendant, Marie Loechner, who had secured the data in the defendant's office and from the so-called Rex "black books" which were daily record books of receipts and disbursements. The entry of income had been regularly made by Mrs. Lucille Baldinger, receptionist and bookkeeper for the doctor during 1945 and until August of 1946. Disbursements had been entered in these books by Miss Loechner. Payments for major surgery, however, had been deliberately omitted from the "black books" during 1945 and partially during 1946, although, in the latter year, some surgical fees had been entered. The appellant had directed the transmission of the information furnished the Rex Beasaw Service. The record discloses that he was informed as to the system of bookkeeping employed in his office and kept in touch with his business records.

Mrs. Baldinger testified that appellant would "glance" at her entries in the black books and that on one occasion when he observed that the entry of a surgical charge had been made in one of these books had said: "That should be on the account sheet and filed in the closet." The witness testified further that she would either place the account sheets on Dr. Gariepy's desk with the mail, or would take them into his office and show them to him. These were the yellow account sheets on which surgical charges were entered. They were kept, so she said, in a filing cabinet in a closet of the front office. The surgical cases and the non-surgical cases were handled in an entirely different manner, the record of surgical cases being placed in the closet at the end of each day. The open account sheets were kept in the top section of the cabinet and the closed accounts in the bottom section.

Both Dr. Gariepy and Miss Loechner had informed Mrs. Baldinger of the payment of surgical fees so that she could make appropriate entries on the account sheets kept in the closet. Mrs. Baldinger testified that at the end of each day, she would put into a large envelope all the checks and cash received by her during that day, with a notation of the total amount, and would give the envelope to Dr. Gariepy before he left the office. Dr. Gariepy stated that he turned over these receipts to his wife, who made the bank deposits. When she was out of town, a long-time associate of his in the x-ray department would substitute for her in making the deposits.

[Government Investigation]

Revenue Agent Price testified that, when the government investigation began, he was told by Dr. Gariepy that his entire set of books consisted of the "black books" and a commercial check book. When he questioned Dr. Gariepy about his accounts receivable, the doctor stated that he destroyed the record of an account when it was paid; and that he did not maintain an accounts receivable ledger, or duplicate receipts. The revenue agent was shown a sample of the yellow cards upon which patients' accounts are kept, but was told by the doctor that, because the medical history of the patients appeared on the cards, they could not be made available to the agent. When the doctor was informed that it would be necessary to inspect the hospital records in order to determine his income, he admitted that he had duplicate receipts and suggested that these be used by the investigators for that purpose. Shortly thereafter, he stated that he could not furnish the receipt books because they had been destroyed. He explained that Special Agent Kitchen, who was not investigating his returns, had telephoned him concerning the tax liability of his brother; and that the agent informed him that his [appellant's] income tax had been closed and that it was, therefore, unnecessary that the doctor preserve these records. Special Agent Kitchen denied that he had made any such statement to Dr. Gariepy.

The most convincing evidence of Dr. Gariepy's guilt was that, after he knew his income tax returns were being investigated, he deliberately removed from the closet in his office the yellow sheet records of his paid surgical fees and transferred them to the attic of his home. He admitted that he had personally transported them in suitcases at intervals and had permitted them to be destroyed while his house was being cleaned and redecorated. The jury obviously did not believe his rather incredible excuse for destroying important records--that a revenue agent who was not even working on his case had told him that the case against him was closed.

[Testimony of Witnesses]

Numerous patients of Dr. Gariepy were called as government witnesses and testified that, during 1945 and 1946, they had made payments to the doctor, or to his nurse or other representatives, for professional services in various amounts from $50 to $500. Most of these patients had receipts or cancelled checks in support of their testimony. The inference is plain, therefore, that payments made to the doctor for professional services to these patients had not come from and were not made by insurance companies listed on Exhibits 112 and 113, which were made up by the revenue agents from information in the insurance record books kept by Miss Loechner.

Revenue Agent Philpott testified that, upon examination of the black books, he had found no reference to the payments which the patients claimed to have made. He swore that in numerous instances he found an entry, "NC," in the receipt column of a patient who testified that he, or she, had paid the doctor. Dr. Gariepy explained that the entry "NC" meant that no charge had been made. The witness, Philpott, testified further that an examination of the duplicate receipt book covering the period from August 3 to August 21, 1945 , showed fourteen duplicate receipts ranging in amount from $27 to $250. These had not been recorded in the black books. He found four items, corresponding in date with the date of receipts, carrying the entry "NC" following the respective names of the patients.

Another government witness testified that he had computed the additional income revealed by testimony of patients and found that Dr. Gariepy's unreported income amounted to $18,255 for 1945 and $11,733 for 1946. From this, he calculated that the doctor's tax had been understated on his 1945 return by $13,605.85 and, on his 1946 return, by $5,025.88.

After hearing the testimony of the income tax examiners, co-defendant Loechner changed her story from that originally told by her to the government examiners and also from that told to the examiners by Dr. Gariepy and his then attorney. She testified that she took the total of the black books, the total of the yellow sheets less the Michigan Medical Service total, and submitted this information, along with the information from Form 1099 sent by the Michigan Medical Service, to the Beasaw office; and that she used the insurance memorandum books [from which Exhibits 112 and 113 were compiled] in preparing information for the tax returns. Her testimony concerning receipts from surgical fees and payments made by insurance companies was contradicted by many patients who had paid surgical fees without benefit of any insurance or with the aid of the Michigan Medical Service. Her testimony was also contradicted by a representative of the Michigan Medical Service. Of some seventy patients who testified, many said that, in 1945, they were not insured at all but had paid Dr. Gariepy for professional services. Others of them testified that they were insured by Michigan Medical Service and had paid Dr. Gariepy specified amounts. The total of these payments to the doctor aggregated $8,965. Thirty-five patients swore to a total of $5,506 for the year 1946, paid either from their own funds or by Michigan Medical Service. Miss Loechner's testimony concerning the fees and the insurance records was confused and confusing, boiling down to an admission that she did not know where she got the information contained in the records. The record in the case reveals that she said: "Where I got the information that I recorded in that insurance--and I add the word 'surgery' now, I don't know anywhere in particular, except I do know what the amount was taken in from surgery. I got the information from the yellow account sheets. How I knew when I went to the yellow account sheets, that an item that I picked from the yellow account sheet was to go under American Medical Society I didn't know. As I said before, there was no reason for that book. That book had nothing to do with it. I have no reason for it. Why I made such a list I don't know. There is no particular reason, except one thing, as I said before, those insurance companies that different patients had had association with and they were on their charts or account sheets. When I made a list up of those patients from the account sheets right now I wouldn't know from the account sheet under what company to put them. There was no reason. As I say, that had nothing to do with the income tax." The yellow sheets about which she testified so glibly were those destroyed by Dr. Gariepy.

[Substantial Evidence of Evasion]

We think there is unquestionably substantial evidence that appellant Gariepy caused his income tax returns for the years in question to be understated in a deliberate and wilful effort to evade taxes. He was not wholly unacquainted with a simple system of accounting, as evidenced by the fact that when working in a drug store before becoming a doctor he made bookkeeping entries in his employer's records. His testimony disclosed that he was well acquainted with the method by which his books were kept; and that he well understood the difference between a day book and a ledger sheet. He testified that all the money received from his professional services was reflected in ledger sheets, except such portion thereof as was recorded in the Rex Beasaw books. He said that "by adding the Rex books and the ledger sheets you got the total amount." He admitted that he had been given by Mrs. Baldinger, at the end of each day, all checks and cash taken in. He swore that he had not included in the black books all the monies which he received, for the reason that the ledger sheets reflected all such money not appearing on the black Rex books. He knew that to get a complete accounting of the total amount of money received by him in any one year would require the addition of the sums shown on the account ledger cards and the receipts appearing in the black books; and, yet, while the accuracy of his income tax returns for 1945 and 1946 were in serious question, he permitted these allimportant ledger sheets to be destroyed after he had deliberately removed them from his office to the attic of his home. Not until after he was informed that the investigation would require contact with his patients to ascertain what they had paid him did he reveal the fact that he had kept duplicate receipt records.

The doctor told Revenue Agent Price that he maintained a record of accounts receivable but destroyed the record when an account was paid. He preserved records of unpaid accounts only. In January of 1947, Dr. Gariepy commenced transferring the information on the yellow cards to new records and carried the old records home.

The government obtained from Mt. Carmel Hospital a list of the doctor's patients and sent them questionaires in an effort to determine his correct income. One of these patients testified that when she received the questionnaire she telephoned the doctor and asked him what to do with it. He told her to send it to him. She did. When it was returned to the Bureau of Internal Revenue, there was typed on it: "I do not remember the dates. I do not keep my receipts longer than one year." The patient testified that she had not typed this statement on the questionnaire. Another patient stated that when he received the list of questions he took it to Dr. Gariepy and inquired about it. The doctor told him that it was just a routine check-up and to forget it. The doctor stated that he would take care of it, then tore up the questionnaire and threw it into a wastebasket. These two incidents, coupled with the other evidence, were incriminating.

Under the authorities, the conduct of Dr. Gariepy was of such character as to support a plain inference that he wilfully attempted income tax evasion. As was said in Spies v. United States, 317 U. S. 492, 499 [43-1 USTC ¶9243]: ". . . By way of illustration, and not by way of limitation, we would think 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."

[Motion for Acquittal]

As authority for the proposition that the jury in the instant case had substantial evidence upon which to convict appellant of wilful income tax evasion and that the district judge properly denied the motion of appellant for judgment of acquittal made at the close of the government's case and renewed when all the evidence in the case had been received, see opinions of this court in Battjes v. United States, 172 Fed. (2d) 1 (C. A. 6) [49-1 USTC ¶9149]; Gariepy v. United States, 189 Fed. (2d) 459, 463 (C. A. 6) [51-1 USTC ¶9318], wherein conviction of appellant's brother for income tax evasion was affirmed. See illustrative authorities from other circuits: Kobey v. United States, 208 Fed. (2d) 583 (C. A. 9) [54-1 USTC ¶9106]; United States v. Lange, 161 Fed. (2d) 699, 704 (C. A. 7) [47-1 USTC ¶9249]; Myres v. United States, 174 Fed. (2d) 329, 336 (C. A. 8) [49-1 USTC ¶9275], certiorari denied 338 U. S. 49; Olson v. United States, 191 Fed. (2d) 985, 989 (C. A. 8) [51-2 USTC ¶9468]; Sasser v. United States, 208 Fed. (2d) 535, 539 (C. A. 5) [54-1 USTC ¶9118]; Barshop v. United States, 191 Fed. (2d) 286, 293 (C. A. 5) [51-2 USTC ¶9425], certiorari denied 342 U. S. 920; Maxfield v. United States, 152 Fed. (2d) 593, 597 (C. A. 9) [46-1 USTC ¶9115], certiorari denied 327 U. S. 794.

[Undue Publicity]

Appellant avers that the district court erred in denying his challenge to the array of the petit jury panel, for the reason that the entire panel was drawn from Wayne and Oakland Counties , which constitute only two of the sixteen counties comprising the Southern Division of the Eastern District of Michigan. The indictment and trial of appellant's brother, Dr. Bernard Gariepy, had received unusual publicity in newspapers published in Wayne and Oakland Counties , as well as from radio and television. After conviction of appellant's brother [Gariepy v. United States, 189 Fed. (2d) 459 (C. A. 6) [51-1 USTC ¶9318], supra], the indictment of appellant for income tax evasion had been predicted by radio broadcast, as well as in newspapers published in Detroit. There was no professional association between the brothers Gariepy and, as alleged in the affidavit in support of the challenge to the panel array, there had been no "fraternal association" between them for more than fifteen years. Undoubtedly, appellant received bad press notices in Detroit , where he was engaged in practice.

The pertinent Code provision is that both grand and petit juries shall be selected from such parts of the district as the court directs, so as to be most favorable to an impartial trial, and not to incur unnecessary expenses or unduly burden the citizens of any part of a district with jury service. Section 186a, Title 28, U. S. C. A.

Appellant cites Delaney v. United States, 199 Fed. (2d) 107, 113 (C. A. 1); Frantz v. United States , 62 Fed. (2d) 737, 738 (C. A. 6); Walker v. United States , 116 Fed. (2d) 458, 462 (C. A. 9); and Local 36, International Fishermen, etc. v. United States , 177 Fed. (2d) 320, 338-342 (C. A. 9) [opinion written by the designated trial judge in the instant case]. In the first cited authority (Delaney), the court said that it was not "a case of pre-trial publicity of damaging material, tending to indicate the guilt of defendant, dug up by the initiative and private enterprise of newspapers", but was a case where the United States, through open committee hearings in its legislative department shortly before the trial of a pending indictment, had caused and stimulated "massive pre-trial publicity, on a notionwide scale." The Frantz and Walker cases carry no further than to support the power of the trial court to exercise discretion in the matter of summoning jury panels.

Appellant emphasizes the opinion of this court in Marson v. United States, 203 Fed. (2d) 904, 909 (C. A. 6), wherein we reversed a conviction in a criminal case because of the refusal of the district judge to interrogate the jurors to ascertain whether they had been prejudiced by reading a newspaper article that linked the defendant's name with those of two convicted criminals. In that case, moreover, we held that the judge had examined the jurors on voir dire in a manner highly prejudicial to the defendant and had refused to question the jurors in compliance with proper motions made by defendant's counsel. The action of the judge in the Marson case is in no wise comparable to the situation found here. The record fails to show that the examination of jurors in the instant case was in any manner improper. Inasmuch as no showing has been made of abuse of the court's discretionary power, no error is found in the action of the trial court in denying appellant's challenge to the array. See United States v. Gottfried, 165 Fed. (2d) 360, 363, 364 (C. A. 2), certiorari denied 333 U. S. 860, rehearing denied 333 U. S. 883.

[Sufficiency of Indictment]

Appellant urges that the instant indictment cannot sustain his conviction under section 145(b) of the Internal Revenue Code "where the only means of the attempt to defeat and evade income taxes" alleged was the filing of unsigned tax returns. He draws a distinction between the misdemeanor with a maximum penalty of one year's imprisonment and a fine for wilful failure to file a return, as defined in section 145(a), I. R. C., and the felony defined in section 145(b) of the Internal Revenue Code, in the wilful attempt to evade or defeat the payment of income taxes. He relies principally upon the opinion of the Supreme Court in the Spies case (317 U. S. 492). A careful reading of the opinion in that case does not warrant the inference which appellant seeks to draw from it. Mr. Justice Jackson declared that a wilful attempt to defeat or evade taxes may be accomplished by "any conduct, the likely effect of which would be to mislead or to conceal." See United States v. Smith, 206 Fed. (2d) 905 (C. A. 3) [53-2 USTC ¶9538]; Montgomery v. United States, 203 Fed. (2d) 887, 889 (C. A. 5) [53-1 USTC ¶9336]. Compare Emmich v. United States , 298 Fed. 5, 9 (C. A. 6) [1924 CCH ¶3481]. Here the attempted evasion was accomplished by appellant's filing with the Collector of Internal Revenue false documents which purported to be income tax returns. See also United States v. Beacon Brass Co., 344 U. S. 43 [52-2 USTC ¶9528]. The indictment was sufficient to inform the accused of the crime charged, so that he could adequately prepare his defenses and could plead the judgment in bar of another trial for the same offense. United States v. Behrman, 258 U. S. 280. This doctrine is so well established in this jurisdiction and elsewhere as to require no repetition here of authorities so often cited.

[Unsigned Returns]

Appellant argues that the "purported" returns did not constitute income tax returns under the law; that the filing of the unsigned documents did not constitute the commission of an affirmative act requisite to sustain conviction under section 145(b). We think this contention runs contrary to the holding of this court in Emmich v. United States, 298 Fed. 5, 9 (C. A. 6) [1924 CCH ¶3481], where it was said: "The real character of the offense lies, not in the failure to file a return, or in the filing of a false return, but rather in the attempt to defraud the government by evading the tax." The specious contention of appellant comes rather late. At the trial, he did not deny that the documents filed with the Collector of Internal Revenue on his behalf were in fact income tax returns. Indeed, he identified the documents as his income tax returns for 1945 and 1946 and denied that he had purposely omitted signing the returns; and, in respect of the 1946 return, stated that the tax was paid by his wife in conformity with the return.

Appellant insists that the following sentence in the charge of the court to the jury constitutes reversible error: "The defendant Gariepy must be taken to have had knowledge that his income for the calendar years 1945 and '46 was as stated by the accountants in the purported tax returns for those years respectively." The opinion of this court in Lurding v. United States, 179 Fed. (2d) 419, 421, 422 (C. A. 6) [50-1 USTC ¶9159], is cited as direct authority for reversal. There, we said that the "doctrine of respondeat superior is not to be drawn from the law of negligence and applied to criminal liability." But we said, further, that the fact that the taxpayer did not make out the return "becomes immaterial only when the Government has established, by direct proof or by circumstances, that the taxpayer knew or perhaps should have known that the return was false." Lifting out of context an isolated paragraph of a charge as a basis of complaint that the selected statement constitutes reversible error, where the charge in entirety fully and adequately protects the lawful rights of the appellant, does not meet our approbation. The instructions of the experienced trial judge made it clear that Dr. Gariepy should not be convicted unless it was proved by convincing evidence beyond any reasonable doubt that his conduct constituted a knowing and wilful attempt to defeat and evade his lawful income taxes.

[Jury Instructions]

The jurors were told, inter alia, that: "Before the defendant can be found guilty, you must find beyond a reasonable doubt such omissions, if any, had been made with the specific intent to defeat and evade part of the income tax due and owing for the particular year in question." And, following the paragraph of the charge of which complaint is made, the judge instructed: "The defendant cannot be held guilty simply because he was a poor bookkeeper or that there were poor office systems in practice in his office, or that he was pressed by the amount of business that he was doing, if you find such is the case; but you must find that the returns for the year in question failed to reflect the amounts of money received knowingly and wilfully. It must be proved beyond a reasonable doubt that the defendant knew that substantial sums of money received by him from patients for surgery were not placed of record in such a manner that these payments would be reflected in his income tax return. If you find that substantial amounts both in number and in volume were actually paid to the defendant Gariepy either personally or through the defendant Loechner, or to any other person, and of which he knew that such amounts were not shown to be included on the purported tax return, you may consider whether the defendant knew such amount was not being reported on the purported tax return, and then you will consider the question of wilfulness . . . but you cannot find the defendant Gariepy guilty unless you find beyond a reasonable doubt that he had knowledge that he received more money than that reported and wilfully attempted to defeat and evade the tax imposed thereon in the manner charged in the indictment. . . . It must be proved that the defendant acted not only knowingly, as I said above, but that he has acted wilfully in an attempt to evade and defeat a particular tax charged or a portion of it. . . . Wilfulness is an essential element of the crime charged. Wilfulness is the state of mind of the defendant where he is fully aware of the existence of a tax imposed upon him by the law which he seeks to evade or defeat. Wilful evasion requires an intentional act or omission as compared to an accidental or inadvertent. It requires a specific wrongful intent to defeat or evade the tax obligation known to exist. . . . There can be no crime without a criminal intent, as the court has just now instructed you, and in this case, the specific intent is necessary to constitute the crime under the charge made in the indictment."

No exception was taken by appellant's attorneys to the paragraph of which complaint is now made. Rule 30 of the Federal Rules of Criminal Prcedure provides that error cannot be assigned to any portions of or omissions from a charge, unless objection thereto is made before the jury retires. The rule requires that the grounds for the objection be stated distinctly. We agree with the expression in United States v. Raub, 177 Fed. (2d) 312, 315 (C. A. 7) [49-2 USTC ¶9422], that Rule 52(b) should not be lightly invoked. That rule gives the appellate court discretion to notice plain errors or defects affecting substantial rights. See Paschen v. United States , 70 Fed. (2d) 491 (C. A. 7) [1934 CCH ¶9234]; Barshop v. United States, 191 Fed. (2d) 286 (C. A. 5) [51-2 USTC ¶9425], certiorari denied 342 U. S. 920; Norwitt v. United States, 195 Fed. (2d) 127 (C. A. 9), certiorari denied 344 U. S. 17; Norris v. United States, 205 Fed. (2d) 828 (C. A. 2) [53-2 USTC ¶9511].

Appellant assigns error on the part of the court in charging the jury that the duty of filing a correct and accurate income tax return was personal to the appellant and could not be delegated. This assignment of error is, likewise, based on no exception taken at the trial. The law did impose a non-delegable duty upon appellant to file a correct and accurate income tax return; and, in the entire context, as has been plainly indicated heretofore, the appellant was given in the court's charge to the jury the benefit of accurate and fair instructions which adequately protected his interests. Banks v. United States , 204 Fed. (2d) 666, 673 (C. A. 8) [53-1 USTC ¶9402], certiorari denied 346 U. S. 857; Beaty v. United States, 203 Fed. (2d) 652 (C. A. 4) [53-1 USTC ¶9329]; Paschen v. United States, 70 Fed. (2d) 491, 499 (C. A. 7) [1934 CCH ¶9234].

Complaint is made of alleged error in the court's charge when the jurors were told that evidence of previous good reputation "may not only raise a doubt of guilt, but may, in connection with all the other evidence in the case [Italics added], bring conviction of innocence", with the added comment, "however, persons of previous good reputation have been known to commit crimes." The assignment of error is not well taken. See Colbert v. United States , 146 Fed. (2d) 10, 11 (D. C. App.); United States v. Antonelli Fireworks Company, 155 Fed. (2d) 631, 639 (C. A. 2). These cases, we think, correctly interpret the expression of the Supreme Court in Edgington v. United States, 164 U. S. 361, 366. As was stated in the Antonelli case, supra, the effect of the Edgington case, by net balance, seems to be that a trial court should not tell a jury to consider character evidence only when the scales are in balance.

[Requested Instructions Denied]

The district court was not in error in rejecting appellant's special requests to charge, numbered respectively XXV, pertaining to reputation evidence, and XXVI, pertaining to reasonable doubt. The proposition pertaining to XXV has been discussed. As to XXVI, the court accurately charged concerning "reasonable doubt." Appellant avers that the charge of the district court was "erroneous, confusing and contradictory, when it charged (1) that the alleged offense could be committed in any manner, and (2) that it could only be committed in the manner alleged in the indictment." [Italics supplied.] Again, in a strained effort to charge error, the appellant lifts out of context a portion of the court's instructions to the jury. The charge, read as a whole, was both clear and correct. The jury was told specifically: "You cannot find the defendant Gariepy guilty unless you find beyond a reasonable doubt that he had knowledge that he received more money than that reported and wilfully attempted to defeat and evade the tax imposed thereon in the manner charged in the indictment." [Italics added.] The defendant failed to take exception to the portion of the charge of which complaint is now made, thus again failing to observe the requirement of Rule 30, Federal Rules of Criminal Procedure.

Appellant complains that the district judge erred when, in responding to the jury's inquiry, he instructed that one defendant could be convicted by them with a recommendation for leniency. The judge was scrupulously careful and accurate in answering the jury's inquiry as he did. Compare Burchman v. United States , 163 Fed. (2d) 761, 762 (D. C. App.); United States v. Parker, 103 Fed. (2d) 857, 863 (C. A. 3).

[Limitation of Cross-Examination]

Appellant urgently insists that the trial judge committed reversible error in shutting off cross-examination of J. G. Philpott [a special agent and group supervisor of the Internal Revenue Service at Detroit ] concerning reports by government agents working under him as to payments alleged to have been made to Dr. Gariepy by various insurance companies. The subject matter was important, in that the theory of the government was that the amounts of money reflected in the doctor's black books and on the "insurance lists" [prepared by government agents from a "memorandum" book, or books, made up by the doctor's nurse, the co-defendant Marie Loechner], which had been introduced in evidence as Government Exhibits 112 and 113, were the amounts which had been disclosed in his income tax returns; whereas, in fact, they did not constitute a complete record of receipts from his professional practice, inasmuch as some 138 witnesses had testified to having paid the doctor amounts ranging from $25 to $500, of which there was no record any where in the doctor's books.

Dr. Gariepy testified that he had not prepared the insurance books and had never seen them; and that he had no knowledge of them. Miss Loechner testified that she had made up what she called the "insurance memorandum books" after she had given to Rex Beasaw the figures for the doctor's income tax. She said, moreover, that the so-called insurance books were not kept in the ordinary course of the doctor's business and had nothing to do with it. She furnished the accountants with figures derived from the yellow account sheets and from the black books. Asked why she made up these insurance memorandum books, she answered, "Well, the only thing I can recall right now, it was just possibly a way of keeping track of some of the companies that either we, the office, or the patients may have had some dealings with, or insurance papers that were filled out." She said it could be possible that there were some entries in the insurance books of payments made by the insurance companies direct to the patients, who later paid the money to the doctor.

Government Agent Philpott had not personally examined the insurance company records and had not previously testified concerning them when he was questioned by appellant's attorney regarding the results of the government's investigation as to payments made by insurance companies to appellant during the years 1945 and 1946. The best evidence of this would have been the records of the insurance companies. The attorney for the government urged that it was incumbent upon defendants to have brought in the insurance companies "as part of the defense of this case." Defendant's attorneys asserted that they had been taken by surprise. The trial judge disagreed with them.

As far as the record shows, appellant failed, after the incident, to call as witnesses the government agents who had made the investigations at the offices of the insurance companies; but introduced certain insurance company officials with the result that some of the payments were disclosed, but many records, according to the officials, had been destroyed after three years, or were at the home offices and not available for the trial, or such records had not been kept in complete form.

It would seem that the trial court acted within the limits of its discretion in denying appellant the right to cross-examine Philpott concerning records which he, himself, had not made; and, moreover, appellant, in preparation of his defense, should not have relied upon eliciting by cross-examination facts which he deemed important to be proved but should have made timely preparation to present his affirmative proof. Cross-examination is, of course, of highest importance in an effort to elicit truth, but its limitation in the circumstances of each case rests largely within the sound discretion of the trial court. Glasser v. United States , 315 U. S. 60, 83; Banning v. United States , 130 Fed. (2d) 330, 337 (C. A. 6), certiorari denied 317 U. S. 695. See also Bell v. United States, 185 Fed. (2d) 302, 310, 311 (C. A. 4) [50-2 USTC ¶9499]; United States v. Hornstein, 176 Fed. (2d) 217, 220 (C. A. 7) [49-2 USTC ¶9326]; Chevillard v. United States, 155 Fed. (2d) 929 (C. A. 9); United States v. Stoehr, 196 Fed. (2d) 276, 280 (C. A. 3) [52-1 USTC ¶9299], certiorari denied 344 U. S. 826.

[Court's Comments]

Appellant insists that the trial court committed reversible error in saying to the United States Attorney in the presence and hearing of the jury: "I think your case can be made without calling all those witnesses." At the time of the judge's comment, the government had introduced some seventy former patients of Dr. Gariepy who had testified that they had made payments to him for professional services. The judge stated that it would be a waste of both his and the jury's time to call very many more witnesses testifying along the same line and that he would place a limitation upon such testimony. In the context, the judge's remark would not tend to create the impression upon the jury that he considered the proof already adduced sufficient to establish the guilt of the accused. Defendant's attorney made so much ado about it, however, that the judge, later on in the trial, thus addressed the jury: "Ladies and Gentlemen of the Jury, counsel seem to have thought that the court had made a mistake by indicating that I didn't think that maybe it was necessary to call all the witnesses of this type. That is true, and I may find it necessary to place a limitation on this type of witness. I want you to remember that in what I said I did not express any opinion on the merits of this case or the guilt or innocence of the defendant. That is a question we will leave for you." [Italics suppled.] In our judgment, this explanation was adequate to relieve any possible adverse impression which might have been conveyed to the jury by the court's admonition to the district attorney. The criticism of the trial judge would seem to be captious. As was abserved in Glasser v. United States, 315 U. S. 60, 83, magnification on appeal of instances of little importance in their trial setting should be guarded against. The trial judge stated that a parade of government witnesses that was in the offing could have been "quite prejudicial to the defendant" and that in limiting the number of witnesses he had actually acted in the interest of the defendant. We think he acted discreetly.

No parallelism whatever with the present case is found in the circumstances disclosed in Starr v. United States, 153 U. S. 614, cited by appellant.

[Court's Hostility]

Finally, appellant charges that the attitude of the trial judge toward appellant's attorneys manifested extreme impatience and almost hostility, as contrasted with his solicitude and consideration for government counsel; and that his conduct of the trial, when considered as a whole, constituted denial to appellant of his right to a fair and impartial trial. Appellant has cited and we have given due consideration to the following authorities: United States v. Minuse, 114 Fed. (2d) 36, 39 (C. A. 2); Egan v. United States , 287 Fed. 958, 971; Frantz v. United States , 62 Fed. (2d) 737, 739 (C. A. 6); Braswell v. United States , 200 Fed. (2d) 597, 602 (C. A. 5); Starr v. United States, 153 U. S. 614, 626; Bollenbach v. United States, 326 U. S. 607, 612; Sunderland v. United States, 19 Fed. (2d) 202, 216 (C. A. 8); Wheeler v. Wallace, 53 Mich. 355, 358 (opinion by Mr. Justice Cooley).

While in the instant case the distinguished trial judge was at times quite tart toward appellant's counsel in his rulings and comments, we are not convinced that he transcended the bounds of propriety or exhibited an attitude of such hostility towards these able and courteous attorneys as to cause a verdict to be rendered against appellant which otherwise would not have been found by the jury. The evidence of appellant's guilt of the crimes charged was adequately substantial.

There being no reversible error disclosed by the record of proceedings and trial in the district court, its judgment of conviction and sentence is affirmed.

 

 

[56-1 USTC ¶9480]Louis Berra, Petitioner v. United States of America

In the Supreme Court of the United States , No. 60.--October Term, 1955, 351 US 131, 76 SCt 685, April 30, 1956

On writ of certiorari to the United States Court of Appeals for the Eighth Circuit.

[1939 Code Sec. 145(b)--similar to 1954 Code Secs. 7201-7203]

Tax evasion: Felony v. misdemeanor under overlapping laws: Maximum sentence.--The facts necessary to prove that a defendant wilfully attempted to evade taxes by filing a false return, in violation of Sec. 145(b) of the 1939 Code, are identical with those required to prove that he delivered a false return with intent to evade tax, in violation of Sec. 3616(a) of the 1939 Code. The defendant's request that the jury be instructed that a verdict of guilty of a misdemeanor under Sec. 3616(a), instead of a felony under Sec. 145(b), would be permissible was properly refused. This was a question of law for the court.

Two dissents.

Stanley M. Rosenblum, Mark M. Hennelly, Sidney M. Glazer, 408 Olive Street , St. Louis 2, Mo. , for petitioner. Simon E. Sobeloff, Solicitor General, Charles K. Rice, Acting Assistant to the Solicitor General, Philip Elman, Assistant to the Solicitor General, Joseph M. Howard, Richard B. Buhrman, Dickinson Thatcher, Department of Justice, for respondent.

JUSTICE HARLAN delivered the opinion of the Court:

Petitioner was charged, in a three-count indictment, with wilfully attempting to evade federal income taxes for 1951, 1952, and 1953 by filing with the Collector "false and fraudulent" tax returns, "in violation of Section 145(b), Title 26, United States Code." ¹ That section of the Internal Revenue Code of 1939, 53 Stat. 63, provided:

"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."

Section 3616(a) of the 1939 Code, 53 Stat. 440, also made it a crime for any person to deliver to the Collector "any false or fraudulent list, return, account, or statement, with intent to defeat or evade the valuation, enumeration, or assessment intended to be made . . .." The penalty for violation of §3616(a), however, was a fine of not more than $1,000, or imprisonment not exceeding one year, or both, together with the costs of prosecution.

[Overlapping Laws]

At the close of the trial judge's charge to the jury, petitioner asked that the jury be instructed with respect to each count that a verdict of guilty of the "lesser crime" under §3616(a) would be permissible. ² No motions addressed to the validity of the indictment, judgment of conviction, or sentence under §145(b) were made before, during, or after trial, and we read the requested instruction as aimed at leaving to the jury the question of whether the defendant should be convicted under §145(b) or §3616(a), if the jury found him guilty. The instruction was refused, and, after conviction, petitioner was sentenced to four years' imprisonment on each count, the sentences to run concurrently. Thus petitioner has been sentenced to imprisonment greater than the maximum possible had the conviction been under §3616(a) alone. The Court of Appeals affirmed, 221 Fed. (2d) 590 [55-1 USTC ¶9382], and we granted certiorari, 350 U. S. 910, limited to the question of whether it was error for the trial judge to refuse to give the requested instruction.

The Court of Appeals, in affirming the conviction, held that §3616(a) did not apply to income tax returns, and that any instruction relating to that section would therefore have been irrelevant under the evidence in this case. ³ Both parties agree, however, that §3616(a) was applicable to income tax returns, and we shall assume, arguendo, the correctness of that interpretation of the statute.

Rule 31(c) of the Federal Rules of Criminal Procedure provides that a defendant may be found guilty of an offense "necessarily included in the offense charged." ⁴ In a case where some of the elements of the crime charged themselves constitute a lesser crime, the defendant, if the evidence justified it, would no doubt be entitled to an instruction which would permit a finding of guilt of the lesser offense. See Stevenson v. United States , 162 U. S. 313. But this is not such a case. For here the method of evasion charged was the filing of a false return, and it is apparent that the facts necessary to prove that petitioner "willfully" attempted to evade taxes by filing a false return (§145(b)) were identical with those required to prove that he delivered a false return with "intent" to evade taxes (§3616(a)). In this instance §§ 145(b) and 3616(a) covered precisely the same ground. ⁵

Petitioner contends that he was nevertheless entitled to the requested instruction. He argues that since there was no difference in the proof required to establish violations of §§ 145(b) and 3616(a), the indictment must be taken as charging violations of both sections, and the jury under Rule 31(c) should have been permitted to make the choice between the two crimes. We do not agree.

The role of the jury in a federal criminal case is to decide only the issues of fact, taking the law as given by the court. Sparf v. United States , 156 U. S. 51, 102. Certainly Rule 31(c) was never intended to change this traditional function of the jury. ⁶ Here, whether §145(b) or §3616(a) be deemed to govern, the factual issues to be submitted to the jury were the same; the instruction requested by petitioner would not have added any other such issue for the jury's determination. ⁷ When the jury resolved those issues against petitioner, its function was exhausted, since there is here no statutory provision giving to the jury the right to determine the punishment to be imposed after the determination of guilt. ⁸ Whatever other questions might have been raised as to the validity of petitioner's conviction and sentence, because of the assumed overlapping of §§ 145(b) and 3616(a), were questions of law for the court. No such questions are presented here.

The only question before us is whether the jury should have been allowed to decide whether it would apply §3616(a) rather than §145(b), and that we hold was not for the jury. It was, therefore, not error to refuse the requested instruction.

Affirmed.

¹ This case arises under the Internal Revenue Code of 1939. The sections involved have been changed in the 1954 Code; see §§ 7201, 7207, 68A Stat. 851, 853.

² "Defendant's Requested Instruction No. 12.

"Under the law you may find the defendant guilty of a lesser crime than the crime charged in each count of the income tax indictment.

"The statute upon which the lesser crime is based, omitting that part of the act which does not apply in this case, reads as follows:

"Whenever any person . . . delivers or discloses to a collector . . . any false or fraudulent . . . return . . . with intent to defeat or evade the . . . assessment intended to be made, shall be guilty of a misdemeanor.

"Under Count I if you find and believe from the evidence that the defendant delivered, caused to be delivered or disclosed to the Collector of Internal Revenue for the First Collection District of Missouri, a false income tax return with intent to defeat or evade the assessment intended to be made, you will find him guilty of this lesser crime." (This paragraph was repeated for Counts II and III.)

³ In so holding the Court of Appeals followed its earlier decision in Dillon v. United States, 218 Fed. (2d) 97 [55-1 USTC ¶9131].

⁴ "Rule 31. VERDICT . . . (c) Conviction of Lesser Offense. The defendant may be found guilty of an offense necessarily included in the offense charged or of an attempt to commit either the offense charged or an offense necessarily included therein if the attempt is an offense."

⁵ Compare §7207 of the Internal Revenue Code of 1954, under which the wilful filing of a false return no longer requires the element of an "intent to defeat or evade" taxes, as was so under the former §3616(a).

⁶ The Notes of the Advisory Committee state that Rule 31(c) "is a restatement of existing law." The preceding "lessor offense" statutes were Act of June 1, 1872 , 17 Stat. 196; R. S. §1035; 18 U. S. C. §565. Cf. Stevenson v. United States , supra, at pp. 315, 322, 323; Sparf v. United States , supra, at p. 103; Ekberg v. United States, 167 Fed. (2d) 380, 385.

⁷ Indeed, had there been any separate factual issues under §3616(a), it is plain that the requested instruction would have been inadequate to raise them for the jury.

⁸ Cf. Andres v. United States , 333 U. S. 740.

[Dissenting Opinion]

JUSTICE BLACK, with whom JUSTICE DOUGLAS joins, dissenting:

The petitioner here was convicted on three counts under an indictment charging that he "did willfully and knowingly attempt to evade and defeat a large part of the income tax due and owing by him and his wife . . . by filing . . . a false and fraudulent joint income tax return . . . In violation of Section 145(b), Title 26, United States Code." Section 145(b) provides that:

"any person who wilfully attempts in any manner to evade or defeat any tax imposed by this chapter . . . 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." (Italics added.) ¹

The offense charged in the indictment, filing a fraudulent return, could be held to be proscribed by §145(b) because of the phrase "in any manner." But certainly it falls squarely within the specific language of 26 U. S. C. §3616(a), which provides that any person who

"Delivers or discloses to the collector or deputy any false or fraudulent list, return, account, or statement, with intent to defeat or evade the . . . assessment intended to be made . . . shall be fined not exceeding $1,000, or be imprisoned not exceeding one year, or both, at the discretion of the court, with costs of prosecution." (Italics added.) ²

At an appropriate time the petitioner asked the trial judge to charge the jury that if the allegations of the indictment had been proven they should find the petitioner guilty of a misdemeanor under §3616(a). Although §3616(a) unambiguously makes the conduct charged a misdemeanor punishable by no more than one year in prison, the trial judge apparently felt that he was compelled to treat the offense as a felony because of the statement in the indictment that the conduct charged was "In violation of Section 145(b) . . .." ³ The judge not only refused the requested instruction, but after the jury returned a verdict of guilty, he sentenced petitioner to serve four years in prison on each of the three counts, the sentence to run concurrently.

[Propriety of Sentences]

Regardless of whether it was error to refuse the requested instruction, the record raises a serious question as to whether the four-year sentence on each count was lawfully imposed. The Court's opinion takes the position that no proper challenges to the sentence under the felony statute were raised below and hence that "No such questions are presented here." ⁴ In my judgment the requested instruction was adequate to call the trial judge's attention to petitioner's contention that the offense charged was not a felony but a misdemeanor. But even if the question should have been raised again when the judge announced the sentence, "Plain errors or defects affecting substantial rights may be noticed although they were not brought to the attention of the court." Fed. Rules Crim. Proc., 52(b). See also Wiborg v. United States, 163 U. S. 632, 658. Since I think petitioner is right in saying the offense charged was only a misdemeanor, I think we should correct the plain error of the trial judge in sentencing petitioner under the felony statute.

[Felony v. Misdemeanor]

The Government admits here and the Court assumes that filing a false and fraudulent income tax return is both a misdemeanor under §3616(a) and a felony under §145(b). The Government argues that the action of the trial judge must be upheld because "the Government may choose to invoke either applicable law," and "the prosecution may be for a felony even though the Government could have elected to prosecute for a misdemeanor." Election by the Government of course means election by a prosecuting attorney or the Attorney General. ⁵ I object to any such interpretation of §§ 145 and 3616. I think we should construe these sections so as not to place control over the liberty of citizens in the unreviewable discretion of one individual--a result which seems to me to be wholly incompatible with our system of justice. Since Congress has specifically made the conduct charged in the indictment a misdemeanor, I would not permit prosecution for a felony under the broad language of §145(b). Criminal statutes, which forfeit life, liberty or property, should be construed narrowly, not broadly.

So far as I know, this Court has never approved the argument the Government makes here. It certainly did not do so in United States v. Beacon Brass Co., 344 U. S. 43 [55-2 USTC ¶9528], upon which the Government seems to rely. In that case the Court said:

"We have before us two statutes, each of which proscribes conduct not covered by the other, but which overlap in a narrow area illustrated by the instant case. At least where different proof is required for each offense, a single act or transaction may violate more than one criminal statute. . . ." 344 U. S. , at 45.

Here, however, under the Court's opinion and the Government's argument, two statutes proscribe identical conduct and no "different proof" was required to convict petitioner of the felony than would have been required to convict him of the misdemeanor. The Government's whole argument rests on the stark premise that Congress has left to the district attorney or the Attorney General the power to say whether the judge and jury must punish identical conduct as a felony or as a misdemeanor.

A basic principle of our criminal law is that the Government only prosecutes people for crimes under statutes passed by Congress which fairly and clearly define the conduct made criminal and the punishment which can be admin istered. ⁶ This basic principle is flouted if either of these statutes can be selected as the controlling law at the whim of the prosecuting attorney or the Attorney General. "For, the very idea that one man may be compelled to hold his life, or the means of living, or any material right essential to the enjoyment of life, at the mere will of another, seems to be intolerable in any country where freedom prevails, as being the essence of slavery itself." Yick Wo v. Hopkins , 118 U. S. 356, 370.

A congressional delegation of such vast power to the prosecuting department would raise serious constitutional questions. Of course it is true that under our system Congress may vest the judge and jury with broad power to say how much punishment shall be imposed for a particular offense. But it is quite different to vest such powers in a prosecuting attorney. A judge and jury act under procedural rules carefully prescribed to protect the liberty of the individual. Their judgments and verdicts are reached after a public trial in which a defendant has the right to be represented by an attorney. No such protections are thrown around decisions by a prosecuting attorney. Substitution of the prosecutor's caprice for the adjudicatory process is an action I am not willing to attribute to Congress in the absence of clear command. Our system of justice rests on the conception of impersonality in the criminal law. This great protection to freedom is lost if the Government is right in its contention here. See dissenting opinion in Rosenberg v. United States, 346 U. S. 273, 306.

The Government's contention here also challenges our concept that all people must be treated alike under the law. This principle means that no different or higher punishment should be imposed upon one than upon another if the offense and the circumstances are the same. It is true that there may be differences due to different appraisals given the circumstances of different cases by different judges and juries. But in these cases the discretion in regard to conviction and punishment for crime is exercised by the judge and jury in their constitutional capacities in the admin istration of justice.

I would reverse this case or at least remand for resentencing under the misdemeanor statute, §3616(a).

¹ Internal Revenue Code of 1939, 53 Stat. 63. Cf. §7201, Internal Revenue Code of 1954, 68A Stat. 851.

² Internal Revenue Code of 1939, 53 Stat. 440. Cf. §§ 7206(1), 7207, Internal Revenue Code of 1954.

³ But see Williams v. United States, 168 U. S. 382, 389; United States v. Hutcheson, 312 U. S. 219, 229; Fed. Rules Crim. Proc., 7(c), which provides in part that: "The indictment . . . shall state for each count the official or customary citation of the statute . . . which the defendant is alleged therein to have violated. Error in the citation or its omission shall not be ground for dismissal of the indictment . . . or for reversal of a conviction if the error or omission did not mislead the defendant to his prejudice." Cf. Cole v. Arkansas , 333 U. S. 196.

⁴ Apparently the Court means by this to leave open to petitioner the opportunity to challenge his sentence by a motion to correct it under 28 U. S. C. §2255. Of course of I agree that a motion under that section would be appropriate, but I think petitioner is entitled to have it settled now.

⁵ This would always follow where an information is used. And where there is an indictment by grand jury of course the indictment is drawn by the prosecuting attorney, since grand juries normally are not familiar with the applicable statutes. Thus where a prosecuting officer seeks an indictment under a statute making an attempt to evade taxes in any manner a felony, it would be a rare grand juror indeed who would be sufficiently familiar with the Internal Revenue Code to suggest that it might be better to bring the indictment under §3616(a).

⁶ See, e.g., International Harvester Co. v. Kentucky, 234 U. S. 216; Connally v. General Construction Co., 269 U. S. 385, 391-392.

 

 

[55-1 USTC ¶9382]Louis Berra, Appellant v. United States of America, Appellee Louis Berra, Appellant v. United States of America, Appellee

(CA-8), In the United States Court of Appeals for the Eighth Circuit, Nos. 15,214, 15,215, 221 F2d 590, April 22, 1955

Appeal from the United States District Court for the Eastern District of Missouri.

[1939 Code Sec. 145--similar to 1954 Code Secs. 7201-7203]

Tax evasion: Failure to report unlawful gains: Procedure.--Taxpayer arranged with a contractor to submit padded bills for labor to taxpayer's employer, which taxpayer approved and paid, the contractor then returning the amount of the overpayment to taxpayer. Such unlawful gains were includible in taxpayer's income, not being embezzled funds. The trial court did not abuse its discretion in refusing to permit the chief witness for the prosecution to be cross-examined concerning the correctness of his own income tax returns, in admitting testimony concerning taxpayer's prior arrest, in admitting taxpayer's prior grand jury testimony for purposes of impeaching him, or in imposing certain conditions on probation, but it erred in refusing to acquit taxpayer on a count charging him with attempts to influence a witness, since the Government did not prove that the individual was in fact a witness.

Stanley M. Rosenblum (Mark M. Hennelly was with him on the brief), for appellant. Charles H. Rehm, Assistant United States Attorney, and William K. Stanard, II, Assistant United States Attorney (Harry Richards, United States Attorney, was with them on the brief), for appellee.

Before GARDNER, Chief Judge, and WOODROUGH and THOMAS, Circuit Judges.

WOODROUGH, Circuit Judge:

Appellant was convicted on No. 15,214, on both counts of a two-count indictment charging him with corruptly endeavoring to influence a witness before a grand jury and obstruct, influence and impede the due admin istration of justice, in violation of Title 18, U. S. C. A., section 1503. He was also convicted in No. 15,215 on all counts of an indictment charging income tax evasion for the years 1951, 1952 and 1953, in violation of Title 26, U. S. C. A., section 145(b). The two cases were consolidated for the jury trial, a verdict of guilty resulting in both cases. Appellant was sentenced to four years imprisonment on each of the three counts in No. 15,215, the sentences on all counts to run concurrently. In No. 15,214, the court suspended imposition of sentence and placed appellant on probation for five years, said probation to begin and run consecutively with the term of imprisonment imposed in No. 15,215, and with the special condition that appellant shall not, during the period of probation, hold any office in a labor union or labor organization. The motion for judgment of acquittal or in the alternative for a new trial having been overruled, appellant brought this appeal.

The first point urged by appellant is that the trial court erred in overruling his motion for judgment of acquittal on the income tax evasion counts in No. 15,215 for the reason that the monies allegedly constituting income to appellant were, under the government's own proof, funds embezzled from his employer and therefore did not constitute taxable income to him. Appellant also assigns as error the trial court's failure to give his requested instructions to that effect.

[Padded Labor Bills]

The evidence on the trial below, which was not in dispute except as noted hereinafter, showed that during the years 1951, 1952 and 1953, appellant was the business manager ¹ of the St. Louis Labor Health Institute, a nonprofit organization furnishing free medical aid to members of Teamsters' Local 688, A. F. of L., and their families. The Labor Health Institute is operated on funds collected from employers who maintain collective bargaining agreements with Local 688. Appellant was anthorized, as business manager of the Labor Health Institute, to approve payment of bills incurred by the organization and to draw and sign checks therefor. The checks were required to be countersigned by another employee. In 1949 the Labor Health Institute contracted with J. Shulman and Sons Contracting Company for extensive alteration work on its premises in St. Louis . The general contractor sub-contracted the painting work to one John Schmidt. In 1950, after the original painting contract was completed, Schmidt was called back by the Labor Health Institute for further work. It was at this time, Schmidt testified, that appellant approached him with a plan whereby he, Schmidt, would submit padded bills to the Labor Health Institute by overstating his amount of labor performed, appellant would approve the bills and issue payment to Schmidt, and then Schmidt would return the amount of overpayment to appellant. Schmidt testified, and the government introduced some of his checks in substantiation, that he paid over to appellant some $5,000 under this arrangement during the three years covered by the indictment. He testified that he deducted these payments as commissions in computing his own income tax returns. During these same three years he testified that he did approximately $2,500 to $3,000 worth of painting at appellant's home which he charged to and received payment for from the Labor Health Institute. The evidence also showed that in 1951 a subcontractor purchased materials for and performed labor at appellant's home for which he was paid some $1,500 by J. Shulman and Sons Contracting Company, who in turn billed and received payment of that amount from the Labor Health Institute. These amounts constituted the alleged unreported income received by appellant during the three years in question.

Appellant took the stand in his own behalf and did not deny receiving the money Schmidt claimed to have paid him. He insisted, however, that these payments were loans and that he had later partially repaid Schmidt. He further testified that he had never requested Schmidt to submit padded labor bills to the Labor Health Institute or that there had ever been any such arrangement between the two. With respect to the $1,500 collected by J. Shulman and Sons Contracting Company from the Labor Health Institute for material furnished and labor performed at appellant's home, he testified that he never requested Labor Health Institute be billed for that, and had no knowledge of the fact that it was so billed. Al Shulman testified that the erroneous billing was the fault of his company, not appellant, and that as a result of the grand jury investigation appellant paid him for the work and materials and he repaid the Labor Health Institute.

[Taxability of Unlawful Gains]

Appellant does not here contend that the jury was not warranted, under the evidence presented, in finding that the monies paid over to him by Schmidt were not loans. His position, as previously stated, is that all of the unreported funds received during the years in question were embezzeled from his employer Labor Health Institute and therefore, under the decision of the Supreme Court in Commissioner v. Wilcox, 327 U. S. 404 [46-1 USTC ¶9188], did not constitute taxable income to him.

The Supreme Court, however, in its later decision in Rutkin v. United States, 343 U. S. 130 [52-1 USTC ¶9260], expressly limited its holding in the Wilcox case to the facts there existing. And we do not think the facts in the present case bring it within the scope of the Wilcox decision. The prosecution proved, and the appellant admitted, that the monies he received came, not from his employer Labor Health Institute, but from Schmidt. That this was not a case of embezzlement was recognized by the trial court when, in ruling on appellant's motion for bail, it said:

"Under neither the Government's theory nor that of the defendant can the receipt of the funds by defendant be embezzlement. Generally speaking, embezzlement is the receipt by an agent, such as defendant, of money of his principal, and conversion of the funds to his own use. The funds must be received in the course of the employment or defendant be rightfully in possession of them and thereafter convert them to his own use. Admittedly, the funds in this case went first to Schmidt. He manifestly obtained them by fraud and deceit. He never was lawfully entitled to them. Schmidt in some instances put the funds in his bank account. None of the funds came into defendant's possession lawfully or in the course of his employment. Defendant may be guilty of obtaining money of the welfare organization by a fraudulent scheme or device, but he could not be convicted of embezzlement."

We agree.

From the record as a whole we are convinced that the monies received by appellant from Schmidt constituted taxable income under the test laid down in the Rutkin case, supra, and followed by this court in Marienfeld v. United States, 8 Cir., 214 Fed. (2d) 632 [54-2 USTC ¶9489]: "An unlawful gain, as well as a lawful one, constitutes taxable income when its recipient has such control over it that, as a practical matter, he derives readily realizable economic value from it." That appellant had such control over the funds received from Schmidt cannot be doubted on this record. The trial court was not in error, therefore, in overruling appellant's motion for judgment of acquittal or in refusing to give his requested instructions pertaining to the embezzlement theory.

[Limitations on Cross-Examination]

It is next argued that the trial court committed prejudicial error in unduly restricting cross-examination of Schmidt, the principal witness for the government. On direct examination Schmidt testified that at appellant's insistence he had destroyed his check stubs, cancelled checks, and daily work sheets reflecting his payments to appellant, but did not destroy his cancelled checks of 1952 and 1953 reflecting such payments. The government introduced in evidence the working papers of Schmidt's 1951 income tax return to prove his claimed pay-offs to appellant in that year. On cross-examination appellant sought to discredit the witness by introducing in evidence a check of the Labor Health Institute in the amount of $1160.60, dated February 9, 1951, and made payable to Schmidt, which did not appear on his 1951 income tax working papers. Appellant also introduced, without objection, a photostatic copy of Schmidt's 1951 income tax return which also apparently did not include the $1160.60 check. When appellant attempted to cross-examine Schmidt on the correctness of his 1952 and 1953 income tax returns, however, the trial court sustained the government's objection that the matter was irrelevant and collateral to the issues being tried. Appellant offered to prove that Schmidt had omitted certain items of income in his 1952 and 1953 tax returns and that by reason thereof the witness was biased, prejudiced, and interested; that he was under income tax investigation; and that the destruction of his records inured to his own benefit.

The scope of cross-examination is within the judicial discretion of the trial court. Myres v. U. S. , 8 Cir., 174 Fed. (2d) 329 [49-1 USTC ¶9275]; Holmes v. U. S., 8 Cir., 134 Fed. (2d) 125; Hewitt v. U. S. , 8 Cir., 110 Fed. (2d) 1. We are not prepared to say the trial court abused its discretion in this case. Schmidt had testified on direct examination that he was not under investigation for income tax evasion and that no promises had been made to him in respect thereto. This was fully explored on cross-examination. Schmidt had also testified that the payments made to appellant were credited as commissions on his tax returns and his 1951 income tax working papers showed that they had been so credited. In sustaining the objection to questioning concerning the correctness of Schmidt's 1952 and 1953 income tax returns, the court ruled:

"You may go into the subject as to whether or not he included in his return these payments which he claimed he put on to the bills of the Labor Health Institute and gave the money to the defendant. Now, he said in his direct examination that he showed on his income tax return, he showed a credit, paying them to the defendant. That is the extent of your inquiry."

To have permitted further questioning as to other items of Schmidt's income tax returns would have the tendency of confusing the issue before the jury. The appellant, not witness Schmidt, was on trial charged with evading taxes and appellant's income tax returns were the only ones pertinent to the issue. Further, inquiry along this line would have served to unreasonably prolong the trial, another proper consideration before the court in making its ruling. We hold that no abuse of discretion has been shown on the part of the trial court in limiting cross-examination of the witness Schmidt.

[Testimony Concerning Defendant's Character]

Appellant also complains that the prosecution was permitted to put appellant's character in issue in its case in chief. An excerpt from the record is set out to show how this alleged error occurred:

"Q. (Witness Schmidt was asked when appellant requested him to destroy his records).

"A. Well, he was constantly after me to ask me why I kept that daily work sheet, and I told him I kept that for my records. He constantly told me to get rid of them or, oh, I remember very closely after Mr. Berra was arrested, why he called me up, and that was on George Washington's Birthday, the 22nd of February.

"Q. Now, will you tell the jury what the conversation was with Mr. Berra on George Washington's Birthday?

"A. He called me up and asked me--(At this point the court called a recess.)

After recess.

"The Court: This witness was asked to describe a conversation on the 22nd of February, is that correct?

"A. That is right.

* * *

"The Court: Just a moment. I juderstood you to say it was after the defendant had been arrested. Did you say that?

"A. No. No. I did say it, but that is not correct.

"The Court: You better clear that up before you get through your case, because that doesn't correspond with the indictment. It is very material.

"Q. Mr. Schmidt, you have mentioned, I believe, before the recess, something about the defendant's arrest, that has nothing to do with this case, or with this indictment at all?

"A. None whatsoever."

This is the extent of the testimony upon which prejudicial error is predicated. It clearly appears that the witness Schmidt, a layman unversed in judicial rules of evidence inadvertently and innocently referred to an arrest of appellant in attempting to fix the time of a certain event. There is not the slightest intimation that the fact of appellant's prior arrest was mentioned intentionally, maliciously, or at the prompting of the prosecuting attorney. It was simply such an immaterial incident as can and does sometimes occur during a trial. The incident is closely analogous to one that occurred in the case of Means v. United States, D. C., 65 Fed. (2d) 206, where a prosecution witness testified that defendant had told her he had been in prison. The appellate court, in holding the admission of this evidence was not error, said: "It is plain that this statement was not brought into the evidence for the purpose of reflecting upon appellant's reputation or character, but was purely incidental to the testimony relating to the conversation between the witness and appellant, which necessarily disclosed the fact that appellant at one time had been an inmate in the Atlanta Penitentiary." Appellant here, in seeking a reversal of this case, relies on United States v. James, 2 Cir., 208 Fed. (2d) 124, wherein the court held that the admission in evidence in the government's case in chief of defendant's prior arrest was reversible error. But in that case the testimony concerning defendant's prior arrest came from the lips of a government narcotics officer, who, it may be assumed, was more familiar with courtroom rules of evidence than was witness Schmidt in the present case. Admittedly, this distinction is a thin one, and to the extent that the holding in the James case may be inconsistent with our decision herein, we do not apply it. Under the circumstances disclosed in the record here, the admission into evidence of the testimony concerning appellant's prior arrest did not constitute prejudicial error.

[Attempts to Influence Witness]

Appellant next assigns error on the failure of the trial court to sustain his motion for judgment of acquittal on Count One in No. 15,214, the obstruction of justice indictment. Appellant contends that the evidence of the government was insufficient as a matter of law to prove that Schmidt was, during the time alleged in Count One of the indictment, a "witness" within the intendment of section 1503, 18 U. S. C. A. Count One of the indictment charged, and the government's evidence showed, that appellant's endeavors to influence Schmidt to destroy his records pertaining to Labor Health Institute transactions were made during the period of February 21-23, 1954. Schmidt testified that it was almost a month later, on March 18, 1954 , that he first met the revenue agents who were conducting the investigation of the Labor Health Institute. And it was almost a month thereafter, on April 14, 1954 , that Schmidt was subpoenaed and testified before the grand jury. Although the offense charged in Count One allegedly occurred on February 21-23, 1954 , Schmidt testified: "I didn't even know on March 18 [1954] that I was going to have to testify. I had never told anybody on March 18th that I wanted to testify. I didn't tell anybody anything. I didn't express any desire to testify on March 18th."

The question of who is a "witness" within the scope and meaning of section 1503 has been before this court. In Smith v. United States , 8 Cir., 274 Fed. 351, the person defendant was charged with endeavoring to influence had testified in a case, was discharged and returned home, and had been requested to return for further testimony at the time defendant assaulted him. In disposing of the contention that the person was not under subpoena, and hence was not a "witness" within the meaning of the statute, this court said:

"The terms of the statute, the evil it was enacted to prevent, and the protection it was intended to provide, leave no doubt that under its true interpretation each of those who are subpoenaed to come, of those who are called and accept the call to come without subpoenas, of those who are prompted to come by their interests, of those who expect to come, and of those who are selected and expected to come to testify in any case in any court of the United States, falls within the class described by the terms 'any witness, in any court of the United States,' in the section under consideration."

In Walker v. United States , 8 Cir., 93 Fed. (2d) 792, a case charging defendant with endeavoring to influence the testimony of a co-defendant in a pending action, this court held:

"It was not necessary to prove that she [the co-defendant] had been subpoenaed. She was such a witness if she then intended to testify on the trial of the case then pending in the District Court. Smith v. United States , 8 Cir., 274 Fed. 351, 353. There is no evidence that she so intended. * * * She did not say she would testify. The government investigator did not ask her to testify. * * * There is no evidence that the government desired to use her as a witness, even if she should waive her immunity."

The decision in Walker v. U. S. , supra, is controlling here. The government adduced no evidence to show that on February 21-23, 1954, Schmidt intended, desired, or expected to testify before the grand jury or that the government had or would request him to testify. On the contrary, Schmidt testified that as late as March 18, 1954 , he had no desire, intent, or expectation of testifying. On February 21-23, 1954 , the only information Schmidt had concerning the grand jury investigation, as we view the record, was what appellant had told him. This is hardly sufficient to qualify him as a "witness" under the statute.

The government urges that the test is "whether or not the defendant has reasonable grounds to believe that the witness will be called before the grand jury, and whether the witness is so called." Such a test might be applicable in determining whether there was the required knowledge or notice on the part of the defendant to authorize a conviction under the statute. We need not now so decide. But we are cited to no case, and have found none, where such a test was used to determine whether a person was or was not a "witness" as that term is used in section 1503. Odom v. United States , 5 Cir., 116 Fed. (2d) 996, relied on and quoted in the government brief, does not, in our opinion, so hold. The quotation from the Odom case that: "The knowledge necessary is not absolute or direct knowledge that Stansbury [the witness] had testified or would testify; but information or a reasonably founded belief thereof is sufficient to make the requisite scienter; he being in fact a witness," quite obviously refers to the knowledge of the defendant, as evidenced by the preceding sentence, "Touching the knowledge of the accused, and their specific intent to deal with Stansbury as a witness, the question is closer." The court had no difficulty in the Odom case in determining that Stansbury was a witness as he had already testified in a case and was intending to return for another scheduled hearing at the time defendant assaulted him.

We conclude that the government wholly failed to prove that Schmidt was, at the time alleged in Count One of the indictment in No. 15,214, a "witness" within the meaning of section 1503 and that appellant's motion for judgment of acquittal on that count should have been granted. Since appellant was placed on probation for five years on both counts in No. 15,214, our decision on this question becomes important in the event that probation is revoked and appellant brought before the court for sentencing. 18 U. S. C. A., section 3653.

[Admission of Grand Jury Testimony]

Appellant also assigns as error the admission into evidence, for purposes of impeachment, of his prior grand jury testimony wherein he refused to answer certain questions on the grounds that such answers might tend to incriminate him. The refusal to give appellant's requested instruction to the effect that his failure to testify before the grand jury constituted no evidence of his guilt is also urged as error. Although this court has not had occasion to pass upon this precise question, courts which have done so have uniformly held that the admission of such testimony is proper. Viereck v. U. S. , D. C., 139 Fed. (2d) 847; U. S. v. Klinger, 2 Cir., 136 Fed. (2d) 677; U. S. v. Gottfried, 2 Cir., 165 Fed. (2d) 360; U. S. v. Groves , 2 Cir., 122 Fed. (2d) 87. Also, see and compare the following: Raffel v. U. S., 271 U. S. 494 (evidence of defendant's failure to testify at first trial held proper); U. S. v. Mortimer, 2 Cir., 118 Fed. (2d) 266 (evidence of defendant's failure to appear before grand jury held proper); U. S. v. Buckner, 2 Cir., 108 Fed. (2d) 921 (evidence of defendant's refusal to testify before Securities and Exchange Commission held proper); Tomlinson v. U. S., D. C., 93 Fed. (2d) 652 (prosecutor's comment upon defendant's failure to testify before grand jury, and upon defendant's explanation thereof, held proper). The rule of law to be drawn from all these cases is that where a defendant elects to take the stand in his own behalf he thereby waives his privilege of immunity and becomes subject to cross-examination and impeachment the same as any other witness. We discern nothing unjust or unfair in this rule. It must be held, therefore, that the admission into evidence of appellant's grand jury testimony was not improper. It was also not error to refuse the requested instruction since the court had made it clear during the trial that the evidence was being admitted to contradict appellant's position taken on the witness stand.

[Conditions of Probation]

Appellant next contends that the condition imposed in the order of probation in No. 15,214, to-wit, "that during the term of probation the defendant shall not directly or indirectly hold any office in or employment by any organization of labor or any organization affiliated, or sponsored by, a labor union or a labor organization. Such conditions shall not prevent defendant from being a member of any labor organization," was beyond the authority of the sentencing court and ought to be expunged. It seems rather anomalous to us that a person should complain of such an order of probation when it was within the lawful authority of the trial court to have given a sentence of ten years imprisonment and $10,000 fine under the two counts of the indictment. 18 U. S. C. A., section 1503. However that may be, appellant's argument that the condition imposed in the order of probation constituted an unlawful invasion of his right to earn a living is untenable. The trial court was of the opinion that the rehabilitation of appellant would proceed more effectively if he disassociated himself from all union organizational and admin istrative activity during the period of probation. Under the provisions of 18 U. S. C. A., section 3651, the trial court "* * * may suspend the imposition or execution of sentence and place the defendant on probation for such period [not exceeding five years] and upon such terms and conditions as the court deems best." The granting of probation and the terms and conditions thereof are matters clearly discretionary with the sentencing court. No abuse of discretion has been shown here.

Appellant's final contention on this appeal is that the trial court erred in refusing to instruct the jury, on the income tax evasion counts in No. 15,215, that it could find appellant guilty of the lesser offense contained in section 3616(a), 26 U. S. C. A. This point has been decided adversely to appellant's contention by this court in Dillon v. United States, 8 Cir., 218 Fed. (2d) 97 [55-1 USTC ¶9131], and we make the same ruling on the point in this case so that appellant's record thereon is preserved.

The judgment and sentence on Count One in No. 15,214 are vacated and the cause of action set forth in that count is dismissed. Judgment and sentence on Count Two of No. 15,214 and Counts One, Two and Three in No. 15,215 are affirmed.

¹ Although appellant was officially business manager only until September, 1952, he performed the same duties for the remainder of 1952 and during 1953.

 

 

[56-1 USTC ¶9492]Leo J. McKenna, Appellant v. United States of America , Appellee

(CA-8), In the United States Court of Appeals for the Eighth Circuit, No. 15,201, 232 F2d 431, April 26, 1956

Appeal from the United States District Court for the District of Minnesota.

[1939 Code Sec. 41--substantially similar to 1954 Code Sec. 446; 1939 Code Sec. 145(b)--substantially similar to 1954 Code Sec. 7201]

Criminal prosecution: Attempt to evade tax: Proof under net worth and bank deposit methods: Errors at trial.--Taxpayer was tried and convicted under 1939 Code Sec. 145(b) for wilfully filing a false and fraudulent income tax return for 1947. The following assignments of alleged errors in the trial were overruled: (1) that the trial court improperly denied taxpayer's motion for a continuance, (2) that the Government was not compelled to supply certain information on taxpayer's motion for a bill of particulars, (3) that the Government improperly made its proof on the accrual method of accounting, instead of the cash method, (4) that the Government improperly introduced proof based on the net worth method as well as the bank deposit method, notwithstanding that counsel for the Government announced its dependence on the accrual method, (5) that there was no proof that the alleged wrongful acts of taxpayer were "wilful," (6) that cross-examination by taxpayer's counsel was unduly limited, (7) that the Court erred on the admissibility of evidence, and (8) that the Court erred in in refusing certain requested instructions to the jury.

A. E. Sheridan for appellant. Alex Dim, Assistant United States Attorney (George E. MacKinnon, United States Attorney, was with him on the brief), for appellee.

Before GARDNER, Chief Judge, and JOHNSEN and VOGEL, Circuit Judges.

GARDNER, Chief Judge:

Appellant was charged, tried and convicted on Count I of an indictment containing two counts, each count charging a violation of Section 145(b), Title 26 U. S. C., in that he wilfully and knowingly attempted to defeat and evade a large part of the income tax due and owing by him to the United States of America by filing and causing to be filed with the Collector of Internal Revenue for the District of Minnesota, a false and fraudulent income tax return. The indictment involved the calendar years 1947 and 1948 and the counts are substantially identical except as to the year covered and the amount of alleged income and income tax involved. Appellant was acquitted on Count II of the indictment covering the year 1948. We shall hereinafter refer to appellant as defendant.

[The Facts]

At and for some years prior to the year 1947 defendant was and had been engaged in business as a new and used car dealer and as a new and used farm implement dealer at Caledonia , Minnesota . For the calendar year 1947 defendant in his income tax return reported his net income as $8,585.36 and his income tax as reported for that year was $1,316.32. He reported his total receipts from the sale of new and used cars and farm machinery for the year 1947 as $90,927.08 and he reported that his inventory on January 1, 1947 was $4,716.00 and that his inventory at the close of the year 1947 was $5,150.00. He reported his wife as a dependent and she did not make a separate return. At the time of the trial defendant claimed that he had reported his income for the year 1947 on the cash basis but it was the contention of the government that he was reporting on the accrual basis and that the accrual basis was the appropriate method of reporting and calculating his gross and net income under Regulations 111, Section 29.41-2. His books and records as kept by him were incomplete and inadequate to clearly reflect his income and in these circumstances the government accountants calculated his income for the year 1947 on the accrual basis and found that to be $44,653.27. They also, for the alleged purpose of corroboration, calculated his net income for the year 1947 on the net worth basis to be $31,934.78. The government accountants also calculated defendant's net income for the year involved on the bank deposit basis to be $23,855.95.

In making sales defendant used a machine called a "whiz ticket machine" which makes duplicate tickets at the same time which are sort of sales slips. For the years 1947 and 1948 there were over six thousand of such "whiz tickets". When the government accountants first interviewed defendant in 1949 and questioned him concerning his records he told them that everything was in the whiz tickets and the cancelled checks and that everything in the whiz tickets was a reflection of what was happening and that they would be able to get their information from those particular records. He told them, "You can get it all from the whiz tickets and the cancelled checks, it's all there". Relying on defendant's statements the accountants prepared Government's Exhibit 171 which was a transcription of the whiz tickets for the year 1947. Although the government accounts asked all his books and records defendant failed to disclose to them certain books and records which were produced by defendant for the first time at the trial of the case. Defendant as a witness in his own behalf admitted that he had not properly reported his gross receipts from the sale of new and used automobiles and new and used farm machinery for the year 1947 on his income tax return, and his wife testified that the bank account usually reflected the total of the sales from the whiz tickets. The government accountants were not supplied with the ledger sheets for the years 1947 and 1948 although they asked for all defendant's records. The government accountants in calculating defendant's income on the accrual basis relied upon his statement that the so-called whiz tickets reflected everything that was happening and that they could get a record of all his financial transaction from the whiz tickets and cancelled checks. It was disclosed during the trial, however, that a large number of the whiz tickets were in effect duplicates arising from the fact that a whiz ticket was issued at the time of sale and a whiz ticket involving the same transaction was issued at the time of payment if the sale were not a cash one. These duplications amounted in the aggregate to $24,813.20 so that the net income of the defendant as calculated on the accrual basis for 1947 was shown as $19,840.07. The evidence will be further developed during the course of this opinion.

Defendant was given a preliminary hearing January 29, 1954, at which time he was bound over to the grand jury and on February 20, 1954 the grand jury returned the indictment under which he was tried. On March 16, 1954 he filed motion for bill of particulars, to which the government responded by furnishing certain information demanded, and the court denied the motion as to all other demands not supplied by the government in response to his motion. Thereafter and on May 13, 1954, he filed motion for continuance which was supported by affidavit. This motion was denied and the case was called for trial May 27, 1954. The trial continued for nineteen days. At the close of all the testimony defendant interposed a motion for acquittal which was denied and thereupon in due course the case was submitted to the jury on instructions to which no exceptions were saved by defendant, and the jury after due deliberation returned its verdict acquitting defendant on Count II of the indictment and finding him guilty as charged on Count I of the indictment. Thereafter and before entry of judgment defendant moved for judgment of acquittal notwithstanding the verdict or in the alternative for a new trial on the grounds set out in his motion for judgment of acquittal interposed at the close of all the evidence. This motion was in due course denied and the court entered judgment [55-1 USTC ¶9273] pursuant to the jury's verdict sentencing defendant to imprisonment for two and one-half years and to pay a fine of $5,000. From the judgment and sentence thus entered defendant prosecutes this appeal prodigally charging innumerable alleged errors.

[Opinion]

It will not be possible to consider in detail all of these alleged errors. While we have laboriously gone through this entire record and considered each charge of error we shall attempt as far as possible to group the questions presented and limit or discussion to such points as impress us as being substantial.

As has been observed, defendant filed a motion for a bill of particulars and also a motion for continuance. On consideration of the motion for bill of particulars the government furnished a substantial part of the information demanded and the court in its order passing on the motion said:

"(1) Counsel for the Government has stated in open court that the Government is relying in this case on the accrual method of accounting rather than on the cash method;

"(2) The Government has disclosed in open court that its theory in this case is based on defendant's understatement of adjusted gross income resulting in understatement of taxable net income. The Government has advised the Court and counsel for the defendant that it intends to corroborate such theory by the bank deposit method and net worth method;

"(3) The Government has filed a receipt given by the defendant which discloses that all papers, books and documents heretofore obtained by Agents of the Internal Revenue Service from defendant were returned to the defendant;

"(4) Counsel for the Government advised the Court that for the year 1947 the recapitulation of 1947 sales tickets, the so-called 'whiz tickets', have been delivered to counsel for defendant, as well as a summary of disbursements for that year. Counsel for the Government advises that it will deliver to counsel for defendant a recapitulation of the 1948 sales tickets, the so-called 'whiz tickets' as well as a summary of disbursements for 1948;

"(5) In all other respects defendant's motions are herewith denied."

The motion was addressed to the sound judicial discretion of the court and its ruling should not be reversed in the absence of an abuse of that discretion. Ray v. United States , 8 Cir., 197 Fed. (2d) 268. There was in our opinion no abuse of discretion in denying the motion, nor do we think its denial was prejudicial to defendant. The motion for continuance was likewise addressed to the discretion of the trial court and a careful consideration of the record convinces us that there was no abuse of discretion in denying the motion. Mellor v. United States , 8 Cir., 160 Fed. (2d) 757; Braatelien v. United States , 8 Cir., 147 Fed. (2d) 888.

[Motion for Acquittal]

It is strenuously urged that the court erred in denying defendant's motion for judgment of acquittal interposed by him at the close of all the evidence. In considering this contention we must view the evidence in a light most favorable to the prevailing party and we must assume that all conflicts in the evidence were resolved by the jury in favor of the government. The government being the prevailing party was entitled to all such favorable inferences as might reasonably be drawn from the facts proven and if when so considered reasonable minds might reach different conclusions then the case presented questions of fact to be decided by the jury, rather than questions of law to be determined by the court. Myres v. United States , 8 Cir., 174 Fed. (2d) 329 [49-1 USTC ¶9275]; Brinegar v. Green, 8 Cir., 117 Fed. (2d) 316; Gunning v. Cooley, 281 U. S. 90; Finnegan v. United States , 8 Cir., 204 Fed. (2d) 105. Defendant was charged by the indictment with wilfully and knowingly attempting to defeat and evade a large part of the income tax due and owing by him to the United States of America for the calendar year 1947, in violation of Section 145(b), Title 26 U. S. C. It was incumbent upon the government, in effect, to make proof that the defendant had attempted to evade a substantial part of his tax. It was not incumbent upon the government to prove with mathematical certainty the amount of the income tax due, nor was it incumbent upon the government to proceed to make its proof of the charge as laid in the indictment by any particular formula or method. It was not possible from the books and records kept by defendant to determine the exact amount of his income, and for that reason the government had to resort to some other means of proving the fact as charged in the indictment, to-wit, that the defendant had attempted to defeat and evade a large part of his income tax due for the year 1947. Section 41, Title 26 U. S. C., after providing that the net income shall be computed upon the basis of the taxpayer's annual accounting period in accordance with the method of accounting regularly employed by him in keeping his books, also provides that:

"* * * if the method employed does not clearly reflect the income, the computation shall be made in accordance with such method as in the opinion of the Commissioner does clearly reflect the income."

Treasury Regulation 111, Section 29.22(c)(1) provides:

"In order to reflect the net income correctly, inventories at the beginning and end of each taxable year are necessary in every case in which the production, purchase, or sale of merchandise is an income-producing factor."

Treasury Regulation 111, Section 29.41-1, provides as follows:

"* * * If the taxpayer does not regularly employ a method of accounting which clearly reflects his income, the computation shall be made in such manner as in the opinion of the Commissioner clearly reflects it."

Treasury Regulation 111, Section 29.41-2, provides:

"* * * For instance, in any case in which it is necessary to use an inventory, no method of accounting in regard to purchases and sales will correctly reflect income except an accrual method."

[Government's Methods of Proof]

It stands without dispute that the defendant's method of accounting regularly employed by him in keeping his books and records did not clearly reflect his income. While it was claimed that he made his income tax return on a cash basis, his books, so far as disclosed, were not kept upon that basis and his tax return did not disclose on its face that it was made on the cash basis. In fact, his tax return reported the opening and closing inventories for the year 1947, indicating that the report was on the accrual rather than the cash basis. Aluminum Castings Co. v. Routzahn, 282 U. S. 92; Clark v. United States , 8 Cir., 211 Fed. (2d) 100 [54-1 USTC ¶9291]. In these circumstances the government chose to make proof on the accrual method of accounting as provided in Treasury Regulation 111, Section 29.41-2, above quoted, and defendant was so advised. The government made its proof on that basis and the evidence produced by the government indicated that defendant had understated his net income by $11,254.71. Not only did it produce this proof but it then introduced proof based on the net worth method of accounting and this proof indicated that defendant had understated his income for the year 1947 in the amount of $23,349.42. To meet defendant's claim that he was reporting and keeping his records on a cash basis the government introduced evidence based on the bank deposit method and this proof indicated that defendant had understated his income for 1947 in the amount of $15,270.59. It is urged that the government was not entitled to submit proof in support of the net worth method of accounting, nor on the bank deposit method, because in response to defendant's demand for bill of particulars it had announced that it would seek to make proof on the accrual method of accounting and that it had not proven the charge laid in the indictment on that basis. When the exhibit prepared by the government accountants on the accrual basis was, during the trial, purged of all duplicate items it showed a shortage in the defendant's report of net income of $11,254.71. The trial court in passing upon this contention, among other things, said:

"Under defendant's Exhibit Z-179, giving credit for duplications and other credits in the amount of $24,813.20, that would still reduce the net income on an accrual basis to $19,840.07. The understatement of net income would still be $11,254.71. This, in the Court's opinion, is a substantial understatement of net income on which a substantial tax was due and owing for the calendar year 1947."

It is, however, urged that there was no proof that the defendant in making his tax return acted wilfully and with wrongful intent. These are questions not generally susceptible of direct proof but may be inferred from the facts and circumstances attending the act and one may be presumed to intend the necessary and natural consequences of his acts. Myres v. United States, supra; Cleo Syrup Corporation v. Coca-Cola Co., 8 Cir., 139 Fed. (2d) 416. Whether or not the wrongful acts of the defendant were wilfull and with wrongful intent were questions of fact to be determined by the jury on the entire record. They were presented to the jury by instructions to which no exceptions have been saved and we think the undisputed evidence abundantly sustains the jury's verdict on the question of intent. On this phase of the case we conclude that the evidence warranted the jury's verdict of guilty on Count I of the indictment.

[Limited Cross-Examination]

But it is urged that defendant did not have a fair trial because the court limited counsel in his cross-examination of one of the government's accountants. The alleged limitation of the right of cross-examination of this witness occurred after he had been under cross-examination for two or three days. He was being examined on exhibits which had not been received in evidence and the testimony was not for the purpose of laying a foundation for the reception of the exhibits, and, hence, was improper. Barnett v. Terminal R. Ass'n of St. Louis , 8 Cir., 228 Fed. (2d) 756. The immediate occasion for the ruling was after the witness had been re-examined by counsel for the government and further cross-examination was sought by counsel for the defendant. Replying to the statement relative to the propriety of further cross-examination the court said:

"* * * There is no further cross-examination required on that score because the witness has been thoroughly cross-examined on every phase of that question, as I remember it."

The scope of cross-examination is a matter within the discretion of the trial court and in the absence of an abuse of that discretion the ruling of the court will not be reversed. Myres v. United States, supra. In the instant case, as has been observed, the cross-examination was exhaustive and time-consuming. We do not think any prejudice resulted to the defendant because of the limitation placed on the cross-examination of this witness.

The contention that the defendant's wife's property was used in calculating his income is entitled only to passing notice. There was no contention before the lower court that the wife had any interest in defendant's property or that they were partners, and defendant's return for the year 1947 specifically treated his wife as a dependent and his wife made no separate return of income. The question is here raised for the first time and is wholly without merit.

There are some general charges with refence to errors in the court's rulings on the admissibility of evidence. In presenting this contention defendant wholly disregards Rule 11(b)(3) of this court and it is not the province of the court to search the record for error.

Over defendant's objection the witness Edward M. Wegner, a former bookkeeper for defendant, was permitted to testify with reference to certain statements in the nature of inquiries relative to the possibilities of evading income taxes by keeping a double set of books. The testimony was admissible on the question of defendant's intent and wilfullness. It is likewise urged that there was error in admitting in evidence tax returns made by defendant for years prior to those directly involved. They were all admissible and we have so held on numerous occasions. Leeby v. United States , 8 Cir., 192 Fed. (2d) 331 [51-2 USTC ¶9497]; Hanson v. United States, 8 Cir., 186 Fed. (2d) 61 [51-1 USTC ¶9118]; Kampmeyer v. United States, 8 Cir., 227 Fed. (2d) 313.

[Refused Instructions to Jury]

It is contended that the court erred in refusing certain requested instructions. However, at the close of the instructions as given counsel for the respective parties were asked if there were any exceptions, to which counsel for defendant replied, "We have none, your Honor". Rule 30 of the Federal Rules of Criminal Procedure provides:

"* * * 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."

Furthermore, defendant cannot just generally state the refusal to give all of his requested thirteen instructions as error unless he distinctly points out the matter and grounds of his objection and this he has not done. Banks v. United States , 8 Cir., 223 Fed. (2d) 884 [55-2 USTC ¶9532]; Mitchell v. United States, 8 Cir., 208 Fed. (2d) 854 [54-1 USTC ¶9150]. A study of the instructions as given convinces us that all the material issues were properly submitted to the jury by these instructions and there was no prejudice in refusing to give the instructions as requested by defendant.

It is finally argued that the court erred in submitting form of verdict because the jury was required to write the word "not" before the word "guilty" in a space provided for that purpose in the event they found defendant not guilty in any count of the indictment. The jury was fully instructed with reference to the form of verdict and advised that if they found defendant not guilty the word "not" should be written into the blank space before the word "guilty". In passing it is worthy of note that the jury manifestly understood the instruction, as the word "not" was inserted before the word "guilty" as to Count II of the indictment. There was no error in submitting the form of verdict. Hines v. United States , 10 Cir., 131 Fed. (2d) 971.

We have carefully considered all other contentions of the defendant and think they are without merit. Convinced as we are that the defendant had a fair and impartial trial, at which he was represented by able counsel, the judgment appealed from is affirmed.

 

 

[57-2 USTC ¶10,058]R. H. W. Leathers, Appellant v. United States of America , Appellee

(CA-9), U. S. Court of Appeals, 9th Circuit, No. 15,428, 250 F2d 159, 11/22/57, Affirming unreported District Court decision

[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201]

Crimes: Knowingly filing a false return for another: Admission of evidence.--The appellant had been convicted of knowingly filing a false return for a taxpayer. In affirming, the Court of Appeals held that the evidence sustained the finding of a wilful, guilty intent, and that the lower court had not erred in admitting into evidence the books and records of the taxpayer and in restricting the cross-examination of the taxpayer by the appellant's counsel. Nor did the court err in refusing the appellant's motion for a mistrial, since the United States Attorney could properly call attention in his closing argument to the fact that the testimony of the government's witnesses had not been contradicted in a case like this where the appellant was not the only one who could contradict the testimony.

Raymond M. Kell, Clifford B. Alterman, Portland , Ore. , for appellant. C. E. Luckey, United States Attorney, Portland , Ore. , for appellee.

Before HEALY, POPE and CHAMBERS, Circuit Judges.

POPE, Circuit Judge:

Leathers was convicted upon a charge of violating §145(b) of the 1939 Internal Revenue Code by knowingly filing a false return for one Russell A. Peterson for the year 1946. Leathers was an accountant and his client, Peterson, was the proprietor of a fish and crab processing plant near North Bend, Oregon, operated under the name of "Peterson's Sea Foods". They had been acquaintances and friends for a number of years and Leathers had on several earlier occasions made out Peterson's income tax returns.

[Statement of Facts]

In the Spring of 1947, Leathers at Peterson's request, made out the tax return here in question and Leathers attended to the filing of the return. He also paid the tax shown thereon from funds which he had received from Peterson in the manner hereafter described. Upon the return Leathers signed his own name as the person who prepared the return and he also signed Peterson's name on the line provided for the signature of the taxpayer. The return showed net income of $15,910.05, and a total tax of $4010.25. The indictment charges that this was a false and fraudulent income tax return in that Peterson's net income for the year 1946 was $56,910.05 upon which Peterson owed the United States a tax of $28,977.41, all as the defendant Leathers then and there very well knew.

The evidence showed that the return was false and understated Peterson's income to the extent alleged in the indictment. The respect in which it was false was that in the year in question Peterson's total receipts from sales of merchandise were $277,555.64, while the return understated these receipts by exactly $41,000, and showed total receipts of only $236,555.64.

Peterson's bookkeeper, Barrow, who had acted in that capacity for several years, testified that at the end of 1946, he made a recapitulation of the figures making up the receipts and expenses in a form sufficient to supply the necessary information for the making of a tax return. This recap, he testified, was prepared for the expected use of the accountant and a carbon copy was retained in the office. The carbon copy was introduced as a Government exhibit. It disclosed the gross sales figure mentioned above, and listed in detail the business expenses including wages, taxes, insurance, rent, etc. Its substantial accuracy as a transcript of what was shown on the books is not questioned as the books also were produced at the trial and the Government witnesses verified the accuracy of the recapitulation.

[Fraudulent Scheme]

The Government's evidence designed to disclose a wilful falsification of this tax return by Leathers tended to show that he, Leathers, undertook to make this false return as a part of an elaborate scheme to defraud Peterson. Leathers had the complete confidence of Peterson, who was an unlettered man and unfamiliar with the figures of his own books. He told Peterson that his computation of the income and deductions showed that Peterson's income tax for the year 1946 came to "a little over $16,000 Federal and around $4,000 State." Peterson stated that he was short of funds to provide payment of a tax of that amount and Leathers offered to loan him a portion of the required amount. Accordingly Peterson gave Leathers his check for $10,000 and signed notes to Leathers for approximately $10,000 more. However, the federal return made up by Leathers, and not shown to Peterson, stated a total income of $16,410.05, and a total tax of $4,010.25, upon which $600 had been previously paid on declaration of estimated tax. What Leathers then paid on filing this return was only the balance, or $3410.25.

These deceptions thus resulted in Leathers being able to pocket the difference between the amount paid by him on the taxes (which included something under $1000 paid on State taxes) and the $10,000. In addition to that, Leathers had the notes which Peterson gave him for the supposed loan, and it appears from the testimony elicited on cross-examination of Peterson that because he held these notes, Leathers soon wound up in possession of deeds both to Peterson's business and to his home as well. Peterson had to recover his property through litigation in the Oregon courts. ¹ It was not until some time in 1948, when Government agents began interviewing him about the tax return, that Peterson discovered that the $16,410.25 was entered on the return as the net earnings and not as the tax, and that the signature was not his own.

[Defenses]

Appellant asserts that his conviction cannot be sustained because of a lack of proof that he wilfully evaded Peterson's taxes. The argument in support of this contention is based upon an assertion that there was no proof that when Leathers made out the Peterson tax return he had possession of the recapitulation of the book accounts for 1946 which the bookkeeper had prepared, or that he had made up the figures in the return from the books themselves.

Barrow, the bookkeeper, testified that he did not personally deliver the recapitulation sheet, (Government Exhibit 17 at the trial), to Leathers, although he had prepared it for the use of whoever made up the tax return. Peterson's testimony was that he did not give Leathers information relating to his tax return but that he told Leathers he could procure the necessary information from Mr. Barrow. The argument on behalf of appellant amounts to saying that Leathers could not be charged with knowingly or intentionally understating Peterson's income in the return because it was not specifically proven that the recapitulation sheet was ever given or shown to Leathers.

[Evidence Supports Findings]

We are of the opinion that the evidence of a wilful and intentional evasion of a tax was sufficient. In the first place, there is substantial evidence from which the jury could properly infer that Leathers did in fact have the recapitulation sheet, Exhibit 17, when he made up the return. The witness Amos, an intelligence agent in the internal revenue service, testified that when he went to interview Leathers at the office of the latter's attorney, Leathers told him that Peterson had given him some sheets containing data from which to prepare the return, and that he had copied the data on a work sheet. He showed the work sheet to the witness.

An examination of the items of deductions listed by Leathers on the return, show that some 16 of them corresponded precisely with similar items on Exhibit 17, the recapitulation sheet made by Barrow. The jury was warranted in finding that although Peterson testified that he did not hand the recapitulation sheet prepared by the bookkeeper to Leathers, yet Leathers must have come in possession of it before he made the return. If we were to accept appellant's version of the record we would have to assume that the evidence tended to show no more than that Leathers pulled the figures for the return out of the air or drew upon his own imagination. The jury were not required to view the evidence in that light. As previously indicated, the return understated the gross receipts by exactly $41,000 showing $236,555.64, instead of the true amount of $277,555.64. It would tax one's credulity to assert that the figure in the return was arrived at simply by chance.

Other evidence strongly points to the guilty intent. At the time in question Peterson had been drinking heavily and was in no condition to look after his own affairs. Leathers had Peterson's full confidence and in consequence there was an easy opportunity for him to take advantage of that confidence to defraud Peterson through the use of a scheme to understate the income and the tax due and to over-collect from Peterson for the taxes. The circumstances all indicate that he took advantage of this opportunity in carrying out his motive for gain by defrauding both Peterson and the Government. Also significant is the fact that after the Government began investigating the 1946 tax return, Leathers went to Peterson and talked to him at length about the income tax and tried to persuade Peterson to destroy his records. ² This is strong evidence of guilt. "It is today universally conceded that the fact of an accused's flight, escape from custody, resistance to arrest, concealment, assumption of a false name, and related conduct, are admissible as evidence of consciousness of guilt, and thus of guilt itself." Wigmore on Evidence, 3d Ed., §276.

Appellant further argues that Peterson's books were improperly received in evidence and should not have been used against him. There is no substance in this contention. Obviously the books were appropriate for the purpose of showing the true amount of the 1946 income. We have heretofore noted that Leathers was connected with the books because of the circumstance that he must have had access to the recapitulation of the books made by Barrow.

[Cross-examination of Taxpayer]

Appellant also says that the court erred in unduly restricting him in cross-examination of the witness Peterson when he was attempting to show bias, prejudice and interest of such witness, and the latter's prior inconsistent conduct. During this cross-examination of Peterson, it was developed that the witness and Leathers had a civil lawsuit which had gone to the Supreme Court in Oregon, (see footnote 1, supra), and that following the decision of the Oregon Supreme Court, the litigation was settled by an agreement under which Peterson's business and home were returned to Peterson. It was further developed that the effect of the Oregon court's judgment was that Leathers must account to Peterson. It was also brought out that as a part of the settlement between the two, Peterson paid Leathers approximately $3000 in cash. The defense then sought to procure from Peterson an admission that in the course of settlement or negotiation for a settlement Peterson made no demand on Leathers for the approximately $16,000 excess amount, in cash and notes, that Leathers was charged with obtaining from Peterson for the supposed purpose of paying taxes. To this Peterson replied: "He took it from the Federal Government; he didn't take it from me." Defense counsel then asked "Isn't it also true, Mr. Peterson, that in the course of that settlement and as a part of the settlement you did not make any demand and did not require Mr. Leathers to make good any sum to the Federal Government?" This question was objected to on the ground that it would be impossible for Peterson to require Leathers to pay a sum to the Federal Government. The objection was sustained.

We note that during this cross-examination the defense was permitted to show (a) that Peterson had had a lawsuit with Leathers; (b) that the litigation was terminated by a settlement; and (c) that in the settlement, Peterson got back his business and home, and paid Leathers $3000 in cash. Of course the object of this examination was to show bias and hostility on the part of Peterson toward Leathers and to show that the settlement was inconsistent with the present claim of Peterson that Leathers had wrongfully procured some $16,000 from him for taxes which Leathers did not pay. It is difficult to perceive what prejudice the defendant suffered by being prevented from pursuing the inquiry as to whether Peterson required Leathers to make good any sum to the Federal Government.

Appellant further objects that his cross-examination of the witness Peterson was improperly curtailed when the court sustained objections to questions as to whether the Government had indicated to Peterson that he would not be liable for the unpaid taxes for 1946 or as to whether the Government had ever made any demand upon him for payment of those taxes. The appellant's argument is that he had the right to make extended inquiry along this line for the purpose of developing that Peterson had some understanding, or at least a hope, that he would be excused from paying those taxes, and that this would tend to give Peterson a motive to give testimony favorable to the Government.

The record shows that defendant was permitted to elicit from Peterson on cross-examination what in substance amounted to evidence that no demand had been made upon him for the payment of taxes. The question and answer were as follows: "Well, then, let me ask you, what has the Federal Government and the officials told you concerning your liability for these taxes? A. They haven't told me anything as yet." ³ The particular point here made relates to the court's ruling sustaining an objection to the question next following which was "Have they ever indicated to you that you would not be liable for the taxes?" At the time the ruling was made, defense counsel stated the basis for his inquiry, and the following ensued: "Mr. Darling: The basis of that inquiry, it is our understanding that we are at all times entitled to inquire of any witness concerning any interest, any promise of immunity, anything else that he may have obtained from the prosecution in a case like this. The Court: He said the Government has said nothing to him about it. Mr. Darling: Well, I was merely addressing a further question on that same line. Mr. Luckey: If he wants to ask him if he has been promised any immunity or anything, that would be fine. The Court: It is entirely different from whether or not the Government is pressing any claim against him, I will abide with my ruling." Later on in the course of the cross-examination, counsel for the defense again asked: "Well now, since that time has the Government ever made any demand upon you for the payment?" The same objection was again sustained.

It seems clear that in making these rulings the court considered that it was cutting off repetition of an inquiry that the witness had previously answered when he said: "They have not told me anything as yet." It is also apparent that counsel for the Government indicated that no objection would be made to inquiries as to whether Peterson had been "promised any immunity or anything". It would seem that Government counsel was thereby indicating that there would be no objection to an inquiry as to whether the Government had promised either immunity or a release. Defendant was thus able to bring out that Peterson had not been called upon to pay the balance of the taxes and to argue to the jury that Peterson gave his testimony in the hope that he would not be asked to pay the taxes. For reasons satisfactory to the defense counsel he refrained from an inquiry as to whether the Government had promised any release or immunity. In these rulings the trial court did not abuse its discretion.

In respect to the conduct and extent of cross-examination, it has long been the rule that these are matters specially subject to the discretionary control of the trial judge. McCormick on Evidence, §24, p. 47; Wigmore on Evidence, 3d Ed., §944. Blough v. Baltimore & O. R. Co., 2d cir., 164 Fed. (2d) 254, 255. ⁴ The reason for this traditional deference to the discretion of the trial judge in putting a limit to cross-examination is illustrated by what happened here in respect to the attempted continuation of inquiries as to what demands Peterson made on Leathers in connection with the settlement of the civil litigation. Defense counsel were able to elicit that instead of collecting cash from Leathers, Peterson paid Leathers some $3000. It was within the discretion of the trial court to rule that further inquiry was improper for it is plain that if inquiry were extended indefinitely into the terms of that settlement, the court might well find itself trying the collateral issue as to the reasonableness of the settlement. Thus in Meeks v. United States, 9 cir., 179 Fed. (2d) 319, this court held that a defendant might properly elicit testimony on cross-examination of a government witness that the witness and defendant had engaged in a battle in which the witness had been beaten by the defendant. But we ruled that defendant was properly prevented from inquiring into the circumstances of the alleged assault saying, "It is apparent that had appellant been permitted to make the offered proof the court and jury would have been called upon to try a collaterial issue. The ill will and unfriendly feeling of the witness was shown. The details were property [properly] excluded." In so ruling this court followed Lau Fook Kau v. United States, 9 cir., 34 Fed. (2d) 86, 91, where we said in respect to similar rulings: "Both these matters are so largely in the discretion of the trial judge that they can only be reviewed where there has been a manifest abuse of discretion." We hold that there was no abuse of discretion here. It is indeed difficult to perceive how the defendant could have been prejudiced by these rulings.

[Government's Closing Argument]

Finally appellant assigns error on account of the court's refusal of his motion for a mistrial based upon an alleged improper closing argument made by the United States Attorney to the jury. The portions of the argument to which appellant objects were remarks designed to answer arguments which had been made to the jury by counsel for the defense. The United States attorney referred to the defense counsel's argument as to the inferences to be drawn from the terms of the settlement of the civil litigation between Peterson and Leathers. In referring to this Government counsel said: "Where is the settlement if the settlement is so important that the defendant entered into with Mr. Peterson?" Again referring to an argument that had been made that Leathers must have worked from a work sheet other than Exhibit 17 when he made the tax return, counsel said: "Where is such a work sheet? Where is whatever it was that Mr. Leathers showed to Mr. Amos at the office of Vonderheit? If there is another one, where is it, ladies and gentlemen?"

It is the argument of the appellant that only the defendant himself could have testified about the settlement or about the other work sheet and hence that the United States Attorney in commenting upon the defendant's not producing these documents was in effect and substance demanding to know why the defendant did not take the stand and testify. This, it is said, deprived the defendant of due process and of his privilege against self-incrimination and impinged upon his right not to testify.

The premise upon which this argument is based cannot be supported. The record shows that in making the settlement referred to Peterson and Leathers were both represented by counsel and of course Leathers' counsel might have produced the settlement agreement or testified with respect to it. As for the work sheet in question, Amos, the Government agent, testified that the work sheet which Leathers told him he had procured from Peterson was shown to Amos and another agent on an occasion when they visited Leathers and his attorney, Mr. Vonderheit at the latter's office. At that time Amos testified he and the other agent were permitted to examine the work sheet for a brief period. This is the substance of the testimony relating to the work sheet. Certainly there is no basis for saying that Leathers was the only person who could testify with respect to that work sheet for both Leathers and his attorney were present on that occasion. Whatever was said and done then was plainly intended for the ears and understanding of the two Government agents. There was no element of a confidential communication then taking place between Leathers and his attorney, and the knowledge obtained by the attorney on that occasion was in no sense confidential, and his testimony would not be subject to any privilege. ⁵ Cf. Himmelfarb v. United States , 9 cir., 175 Fed. (2d) 924, 929 [49-1 USTC ¶9313]; McCormick on Evidence, §95, pp. 190 to 191.

Since it is apparent that Leathers was not the only person who knew about these matters or could testify to them, the remarks of the United States Attorney did not amount to a comment upon the failure of Leathers to take the stand. As we said in Langford v. United States, 178 Fed. (2d) 48, 55 [56-2 USTC ¶10,079], aside from those special cases where it appears that the accused himself is the only one who could possibly contradict the Government's testimony, the prosecutor may properly call attention to the fact that the testimony of the Government witnesses has not been contradicted. In like manner we think it was not improper here to comment on the failure of defense to produce the settlement or the work sheet.

The judgment is affirmed.

¹ See Leathers v. Peterson, 195 Ore. 62, 244 P. 2d 619.

² "He said, 'Russ,' he said, 'I can turn that property back to you like your home on that Charleston property; but if I do, you owe the Federal money, so much in taxation they will only come in and take it away from you anyway. It will go a lot better if you got any of those record,' he said, 'throw them in the crapper. I haven't got the cash now, but,' he said, 'I will take care of it eventually.'"

³ Defense counsel led up to this inquiry following his prior inquiry, mentioned above, relating to the terms of the civil litigation. The examination proceeded as follows: "Q. (By Mr. Darling): Mr. Peterson, isn't it true that you have taken the position and do now take the position that when you gave the ten thousand dollar check to Mr. Peterson--I mean Mr. Leathers, that when you gave the ten thousand dollar check to Mr. Leathers in March of 1947 or sometime in 1947 and when you gave him notes in the amount of some ten thousand dollars that you gave him that money and notes on the representation made by Mr. Leathers that he was going to use that money in the payment of Federal taxes and State taxes? A. Yeath; the combination of State and Federal tax. Q. Well, then, isn't it true that your position as of this time is that when that happened that he only paid some four thousand dollars on taxes and pocketed the some sixteen thousand dollars? A. That's what it looks to me like. Q. That is the position that you took in the trial of the case between you and Mr. Leathers in the Circuit Court of the State of Oregon , is it not? A. But, really, that money didn't belong to me; it belonged to the Federal Government. It is money that I gave them. Q. That is the position that you took, was it not, that--all during that time? A. Well, now, if he didn't pay the one thing, I don't know as the Federal Government is going to come back after me for collection. If they do, then I owe it. Q. Well, then, let me ask you, what has the Federal Government and the officials told you concerning your liability for these taxes? A. They haven't told me anything as yet."

⁴ "Federal courts have adopted a liberal attitude toward the admission of evidence, otherwise irrelevant and prejudicial, to show bias on the part of a witness. . . . The matter rests largely within the sound discretion of the trial judge."

⁵ "One of the circumstances, by which it is commonly apparent that the communication is not confidential, is the presence of a third person, not being the agent of either client or attorney. Here, even if we might predicate a desire for confidence by the client, the policy of the privilege would still not protect him, because it goes no further than is necessary to secure the client's subjective freedom of consultation . . . and the presence of a third person (other than the agent of either) is obviously unnecessary for communications to the attorney as such,--however useful it may be for communications in negotiation with the third person." Wigmore on Evidence, 3d Ed., Vol. 8, p. 602, §2311.

 

 

[56-2 USTC ¶9622] United States of America v. W. Herbert Hoover, Appellant

(CA-3), U. S. Court of Appeals, 3d Circuit, No. 11,751, 233 F2d 870, 5/29/56, Affirming District Court, 56-1 USTC ¶9430

[1939 Code Sec. 145(b)--corresponding to 1954 Code Sec. 7201]

Criminal prosecution: Tax evasion.--Indictment charging taxpayer with "signing and tendering" a false return is sufficient to charge violation of 1939 Code Sec. 145(b). It is immaterial that the indictment does not explicitly state whether or not the tender was accepted. Prosecution was correctly brought in the Western District of Pennsylvania, where the offense was committed, although the returns were filed in the Eastern District of Pennsylvania. Defendant was indicted for signing and tendering a false return, not for filing one. The defendant was not improperly limited in his cross examination of a Government witness. Since taxpayer was indicted and convicted of a felony under Sec. 145(b), the district court did not err in refusing to charge the jury concerning a misdemeanor under Code Sec. 3616(a). Supreme Court decision in Berra v. U. S., 56-1 USTC ¶9480, followed. The evidence justified the jury's verdict.

Jacob Kossman, 1325 Spruce St. , Philadelphia 7, Pa. , for appellant. Leonard J. Paletta, New Federal Bldg., Pittsburgh 19, Pa. , for appellee.

Before GOODRICH, KALODNER and STALEY, Circuit Judges.

Opinion of the Court

STALEY, Circuit Judge:

Appellant, W. Herbert Hoover, was tried and convicted on three counts of violating Section 145(b) of the Internal Revenue Code of 1939 by wilfully and knowingly attempting to evade and defeat his income tax for the years 1948, 1949, and 1950. 26 U. S. C. §145(b).

[Sufficiency of Indictment]

Appellant first attacks the sufficiency of the indictment, contending that none of the counts charge an offense. The first count ¹ charged:

"That on or about the 10th day of January, 1949, in the Western District of Pennsylvania, W. Herbert Hoover, late of Woodbury, Pennsylvania, did wilfully and knowingly attempt to evade and defeat a large part of the income tax due and owing by him to the United States of America for the calendar year 1948 by signing and tendering to an Internal Revenue Service official at Altoona, Pennsylvania, a false and fraudulent income tax return, where in said false and fraudulent income tax return he stated that his adjusted gross income for said calendar year was the sum of $2,936.93 and that the amount of tax due and owing thereon was the sum of $140.00; whereas, as he then and there well knew, his net income for the said calendar year was the sum of $23,513.00, upon which said net income he owed to the United States of America an income tax of $7,212.97, and which return was filed with the Collector of Internal Revenue for the First Internal Revenue Collection District of Pennsylvania.

"In violation of Section 145(b), Internal Revenue Code; 26 U. S. C., Section 145(b)."

The relevant portion of Section 145(b) states:

". . . any person who willfully attempts in any manner to evade or defeat any tax imposed by this chapter or the payment thereof, shall . . . be guilty of a felony. . . ."

The appellant contends that the "signing and tendering" of a false return charged in the indictment does not constitute a violation of Section 145(b). We disagree. Section 145(b) does not contain any limiting specifications as to what conduct will constitute a violation of the section. On the contrary, that which is prohibited is an attempt to evade or defeat taxes in any manner. In Spies v. United States, 317 U. S. 492 (1943) [43-1 USTC ¶9243], the Supreme Court had occasion to interpret Section 145(b) and made it clear that Congress did not "define or limit the methods by which a willful attempt to defeat and evade might be accomplished and perhaps did not define lest its effort to do so result in some unexpected limitation." 317 U. S. at p. 499.

It is true that in Spies, the Court said that the "attempt to evade or defeat" had to be found in some affirmative willful action by the taxpayer, but the Court explicitly stated that it was not constricting the scope of the Congressional provision that an "attempt" may be accomplished "in any manner." So long as there exists affirmative and positive conduct coupled with a tax-evasion motive, a Section 145(b) violation exists. 317 U. S. at p. 499. See United States v. Croessant, 178 Fed. (2d) 96 (C. A. 3, 1949) [49-2 USTC ¶9483]; United States v. Albanese, 224 Fed. (2d) 879 (C. A. 2, 1955) [55-1 USTC ¶9494].

We think that the present indictment contains charges of affirmative actions which are sufficient to constitute a violation of Section 145(b). It states that the defendant signed his name to an income tax return with knowledge that the return did not correctly state his income, and tendered the return to an Internal Revenue Service official at Altoona . That the indictment does not explicitly state whether or not the tender was accepted is immaterial. The tender was a positive, affirmative attempt to evade taxes. We do not see why it should make a difference whether the Internal Revenue Service official accepted or refused the tender. Either would not make the defendant's attempt any the less an attempt.

[Venue]

Appellant's next contention is that the proof conclusively shows that the prosecution was wrongfully brought in the Western judicial district of Pennsylvania. There is no substance to this contention. The signing and tendering of a false and fraudulent return occurred at Altoona , Pennsylvania , which is in the Western District of Pennsylvania. Thus, the indictment and trial occurred in the same district in which the offense was committed.

It is true that the defendant's returns were filed at Philadelphia , which is in the Eastern District of Pennsylvania, but defendant was not indicted for or convicted of filing a false return. He was indicted for affirmative action, other than filing, namely signing and tendering a false return. The filing is not an essential element of a Section 145(b) violation. United States v. Albanese, 224 Fed. (2d) 879, 882 (C. A. 2, 1955) [55-1 USTC ¶9494].

[Conduct of Trial]

Next the appellant contends that he was improperly limited in his cross examination of government witness Yaskin. Yaskin was a special agent with the Intelligence Division of the Internal Revenue Service who, during the investigation of this case, had interviewed the appellant on three occasions. During these interviews, numerous questions were asked of and answered by appellant. On direct examination, Yaskin testified to some of appellant's answers. These answers tended to impute to appellant knowledge of falsity concerning his income tax returns. On cross examination, the defense sought to elicit from Yaskin additional answers given by appellant during the interviews in an effort to show that Yaskin's direct testimony presented an incomplete and inaccurate picture. Appellant now contends that he was restricted in his attempt to elicit additional answers and that the restriction was improper because "the opponent, against whom a part of an utterance has been put in, may, in his turn, complement it by putting in the remainder, in order to secure for the tribunal a complete understanding of the total tenor and effect of the utterance." 7 Wigmore, Evidence §2113 (3d ed. 1940).

The government challenges the applicability of the "partial utterance" rule to the present situation, but there is no need to decide this point because a reading of the transcript shows that appellant was not prejudicially restricted in cross examination.

What occurred was this. Defense counsel during cross examination apparently had in his possession an alleged transcript of testimony taken during one of Yaskin's interviews with appellant. He began asking Yaskin about a question which had been asked the appellant during an interview. In so doing, defense counsel began reading questions and answers from the alleged transcript which had never been identified. The attorney for the government objected, ² and the objection was sustained.

Immediately thereafter, defense counsel attempted several times to continue his questioning in the same manner and each time he was reminded by the court that the government's objection had been sustained. The court informed defense counsel that he would be permitted to show that Yaskin's direct testimony was inaccurate, but he would not be permitted to "get in statements of the Defendant by reading what he said outside of this Court. . . ." The court said that it did not know whether the admissions of appellant, to which Yaskin testified on direct examination, occurred during an interview.

The court was only prohibiting defense counsel from reading questions and answers from the alleged transcript, under the guise of testing Yaskin's recollection, and from asking about appellant's answers during the interview until it was first shown that those answers related to Yaskin's direct testimony. Both restrictions were certainly proper. What occurred immediately following the district court's discussion with defense counsel makes it clear that proper cross examination was permitted. Defense counsel began to relate his cross examination to the direct examination and was then permitted without objection or interruption to inquire about answers given by appellant during the interview. ³ In the district court's opinion, the following was said:

"To begin with, in nineteen instances defendant's counsel was permitted without objection to elicit from the witness Rice self-serving utterances of the defendant. Again in the examination of the witness Johnson, counsel for defendant drew out on eleven occasions evidence of declarations of the same nature apparently made during the course of the various interviews. Following the rulings complained of, counsel in cross examining Yaskin about the interviews, on some nine occasions obtained from the witness testimony of other self-serving declarations of the defendant and completed his examination by asking the witness a question, without interference, in the very form which had been previously curtailed. It is apparent that broad latitude was allowed the defendant in developing fully the interviews whence came the admissions.

"Defendant cannot complain that he was in the broad sense limited in any attempt to impeach the witness or test his testimonial qualifications. The statements of the court . . . gave the defendant full license to impeach in any proper manner he desired.

"In short, it appears that the defendant's counsel attempted to read to the jury certain questions and answers from an unidentified transcript ⁴ under the guise of testing Yaskin's recollection. Although the court refused to permit this, the defendant appears to have achieved his objective. For, during the course of the cross examination of various government witnesses, many of these same questions and answers were brought out. Viewing the court's ruling in its proper context, the only complaint that the defendant can legitimately have is that he was prevented from using this unidentified transcript precisely when and how he chose. That he was not prejudiced by the court's ruling is further buttressed by the fact that he made no effort to properly identify the transcript for employment in his cross examination of Yaskin, nor did he make any effort to use the transcript in his case-in-chief. Accordingly, this point must also be decided against the defendant."

We agree with the district court.

Appellant urges next that the district court erred in refusing to charge the jury concerning the misdemeanor under Section 3616(a) of the Internal Revenue Code, 26 U. S. C. §3616(a). Appellant contends that the misdemeanor of violating Section 3616(a) ⁵ is necessarily included in the felony for which he was indicted and convicted under Section 145(b), and he was, therefore, under Rule 31(c) of the Federal Rules of Criminal Procedure, entitled to have the jury charged as to both offenses.

This identical question was raised before the Supreme Court in Berra v. United States, 351 U. S. 131 (decided April 30, 1956) [56-1 USTC ¶9480]. As in this case, the sole question raised in Berra was whether it was error to refuse a requested charge concerning §3616(a), and the Supreme Court held that it was not. Accordingly, we must reject appellant's contention. There is no need to repeat here the discussion contained in the Berra case.

The last point raised is that the evidence was insufficient to sustain the verdict. A careful examination of the record reveals clearly that the evidence justified the jury's verdict.

For the foregoing reasons the judgment of the district court will be affirmed.

¹ All three counts are identical, except for dates and the amounts involved.

² Defense counsel questioning which gave rise to the objection was:

"Q. . . . I am going to read to you the question. Mr. Hoover was asked this question: 'Q. Mr. Hoover, couldn't you have corrected your book figure?' And he replied, 'A. What do you mean?'

"And the next question was, 'Q. Couldn't you have taken out the erroneous entries from the book?' Do you remember how he answered that question?

"Well, I will save time, I will read you your answer.

"A. My answer, sir?

"Q. I will read you Mr. Hoover's answer.

"The answer he made, he answered as follows; I am reading from the transcript of the testimony, so that the Assistant District Attorney can follow--

"Mr. Paletta: I don't understand your reading the answer. I don't understand what you are asking this witness about. You are reading the answer, has he denied the answer?"

³ Some of the cross examination was:

"Q. Well, you have used the word 'reduced', that Mr. Hoover reduced certain figures; didn't Mr. Hoover tell you what he did was to estimate what he thought he had made was and that is the gist of what he told you?

"A. That is correct. He told me that he estimated his gross receipts; he estimated his purchases; he estimated his net profit. . . ."

"Q. Do you remember that you asked Mr. Hoover whether he knew he made that kind of money in 1948, 1949 and 1950?

"A. Yes, sir, I--

"Q. What was his reply to you then?

"A. He was quite surprised, he indicated surprise that he had made--that is, he indicated surprise when he found out as to the amount of net profit that Mr. Rice's audit reflected.

"Q. And didn't he give you an explanation as to why when you asked him why didn't he put down the gross receipts the money coming in as from the book, wasn't his explanation that since he didn't have the disbursements correct he couldn't have it on one side coming in and not showing on the other side how it went out, is that correct?

"A. That is right. I asked Mr. Hoover why he didn't use the correct receipts and he said his receipts were correct as reflected by his Mill Record. I asked him, 'Why didn't you use the correct receipts?' Or, 'Why didn't you use the receipts,' on his Return, 'that were reflected by your Mill Records?' And he said that, well, his purchases were incorrect and that he couldn't use his correct receipts because that would throw if [sic] way off."

"Q. Tell me, tell me this, in the year 1950 his books showed as loss but he told you, didn't he, that he knew he had made a gain and that is why he reported a gain, is that correct?

"A. Yes, sir.

"Q. He also told you that, when he was shown the Net Worth Statement, that he wasn't surprised as to how much money he actually had, didn't he?

"A. 'That he wasn't surprised'?

"Q. That he was surprised?

"A. Yes, sir, he indicated he was surprised to find out that he was worth $250,000.00."

⁴ In the course of his cross examination, counsel for the defendant represented that there were over 460 questions in this transcript. . . . (Italics in original.)

⁵ There is a violation of §3616(a) when one "delivers or discloses to the collector or deputy any false or fraudulent list, return, account, or statement, with intent to defeat or evade the valuation, enumeration, or assessment intended to be made. . . ." 26 U. S. C. §3616(a).

 

 

[56-1 USTC ¶9141]Golden C. Chinn, Appellant v. United States of America , Appellee

(CA-4), In the United States Court of Appeals for the Fourth Circuit, No. 7004, 228 F2d 151, December 16, 1955

Appeal from the United States District Court for the Northern District of West Virginia, at Wheeling.

[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201]

Wilful attempts to defeat and evade taxes: Fraudulent understatement of income.--A jury found taxpayer guilty of tax evasion for the years 1947 and 1949, and not guilty for 1948. On appeal, the court holds that taxpayer was not denied the right to a speedy trial, since he at no time demanded or sought an earlier trial on the indictment, and he was tried as soon as the orderly conduct of the business of the court permitted. The evidence supported the Government's recomputation of 1947 income by use of the net worth method and increases of 1949 for specific unreported items. Taxpayer's counsel was not unduly restricted by the trial court in his cross-examination of a Government witness.

L. E. Woods, Jr. (Campbell, McNeer & Woods, and C. F. Bagley on brief), for appellant. Vincent P. Russo, Department of Justice, and John R. Morris, United States Attorney (H. Brian Holland, Assistant Attorney General, and Joseph M. Howard, Department of Justice, on brief), for appellee.

Before PARKER, Chief Judge, and SOPER and DOBIE, Circuit Judges.

DOBIE, Circuit Judge:

On April 6, 1954, the grand jury for the Northern District of West Virginia returned a four-count indictment against appellant Golden C. Chinn, charging him with wilful attempts to defeat and evade a large part of his income taxes for the years 1947 to 1950, inclusive, by filing and causing to be filed returns fraudulently understating his net income in each year in violation of Section 145(b), Internal Revenue Code of 1939. The amounts of net income and the taxes due thereon, as reported on his returns and as corrected, were alleged to be as follows:

                                          Reported                           Corrected

                                Net Income             Tax         Net Income               Tax

Count One (1947) ......           $ 951.22         $ 74.00         $11,368.79         $2,821.63

Count Two (1948) ......           2,243.99          235.00           5,924.93          1,022.34

Count Three (1949) ....           3,385.26          417.00           4,992.54            809.02

Count Four (1950) .....           3,813.30          590.91           4,814.20            799.08

[The Trial]

The trial commenced on February 14, 1955 . Before the jury was empaneled, Chinn made a motion to dismiss the indictment on the ground that he had been denied the right to a speedy trial, in violation of the Sixth Amendment to the Constitution of the United States . The motion was denied. On February 18, 1955, at the conclusion of its case in chief, the Government moved to dismiss count four of the indictment, and the motion was granted. Chinn then moved for a judgment of acquittal on count three or, in the alternative, that specific items of evidence be withdrawn from the consideration of the jury, and for a judgment of acquittal on counts one and two. These motions, as well as additional motions to withdraw specific items of evidence from the jury's consideration, were denied.

On February 22, 1955, at the close of all the evidence, Chinn renewed his motions for judgment of acquittal, which, again, were denied. On the same day the jury returned a verdict of guilty as to counts one and three of the indictment and of not guilty as to count two. Appellant's motion to set aside the jury's verdict and for a new trial was overruled on April 19, 1955.

[The Sentence]

Chinn was sentenced to imprisonment for 18 months and fined $3,000.00 on each of counts 1 and 3, the sentences of imprisonment to run concurrently, the fines to be cumulative. Appeal to us had been duly taken by Chinn.

On this appeal, three questions are presented:

[Issues]

(1) Whether Chinn was denied the right to a speedy trial in violation of the Sixth Amendment of the Constitution of the United States of America .

(2) Whether the judgment of conviction is supported by substantial evidence.

(3) Whether the court unduly restricted Chinn's counsel in his cross-examination of the witness Dickinson.

[Right to Speedy Trial]

We find no merit in Chinn's contention that he was denied his right to a speedy trial under the Sixth Amendment to the United States Constitution. Chinn was indicted on April 6, 1954. His trial commenced on February 14, 1955, at Wheeling, West Virginia, before the Honorable Herbert S. Boreman, who was appointed and entered on duty as United States District Judge for the Northern District of West Virginia on August 16, 1954. Chinn was at large under a $5,000.00 bond. He, at no time, demanded or sought an earlier trial on the indictment, and he was tried as soon as the orderly conduct of the business of the court permitted.

This right to a speedy trial is a personal right which may be waived if the accused fails to claim this right timely. The fixing of a date for a criminal trial in the federal courts is largely a matter in the discretion of the trial judge. Nor can we find here any arbitrary, oppressive or vexatious delay which was prejudicial to Chinn's rights. See, Morland v. United States , 193 Fed. (2d) 297, 298; Shepherd v. United States , 163 Fed. (2d) 974, 976, 191 Fed. (2d) 919; McDonald v. Hudspeth, 113 Fed. (2d) 984, cert. den. 311 U. S. 683; Pietch v. United States , 110 Fed. (2d) 817, 819, cert. den. 310 U. S. 648.

[Evidence Supports Jury Verdict]

This brings us to the second question. We think the jury's verdict was supported by substantial evidence. The record in this case, running into many hundred pages, is large and complicated. There were many conflicts in the evidence, involving questions of the credibility of witnesses. On important points, the jury's verdict indicates clearly that these conflicts were resolved against Chinn. To review this record in minute detail would be utterly impracticable. We must, therefore, content ourselves with comments on what we consider to be the record's most salient features.

For the years 1913 to 1941, Chinn filed no returns. He filed a nontaxable return for 1942, a nonassessable return for 1943 and a return that reflected a tax liability of $152 for the year 1944. For the year 1945, he filed a declaration of estimated tax on which he paid $41.75; his final return for the year disclosed no tax liability and $41.75 was refunded to him. His return for 1946 was an "even" or nontaxable return.

The Government employed the increase in net worth plus non-deductible expenditures method of proof to establish the 1947 offense. Proof of the offense for the year 1947 was supported by direct evidence of specific items of unreported income. Proof of the 1949 offense was made only by direct evidence of specific items of unreported income.

For the calendar year 1947, Chinn reported gross receipts from rentals in the amount of $5,535.00 and a taxable net income of $951.22. A carefully prepared, detailed report by Agent Oxley showed by the net worth method a taxable income of Chinn of $10,401.23, a showing a deficiency in unreported income on Chinn's part of $9,450.01 for 1947.

In addition to the net worth method, the Government introduced direct evidence of specific items of unreported income on Chinn's part. Among these items were taxable income from the sale of certain lots in Proctorville , Ohio , the sale of lots in Chesapeake , Ohio , and the sale of certain restaurant equipment to John Angelo. Moreover, in 1946, Chinn built and subsequently operated a potato chip factory. There was conflicting evidence both on the net worth statement of Oxley for 1947, and on the specific items just mentioned. The record affords evidence for the substantial accuracy of Oxley's computations and the jury must have believed Oxley.

It seems at least a bit odd that the only income reported by Chinn for 1947 was income from rentals. Yet, during this year, he seems also to have been rather actively engaged in buying, selling and trading in real estate, buying, selling and trading in restaurant and beer equipment, lending money at interest, and operating a potato chip factory.

The Government's case for the year 1949 involved taxable income, not reported by appellant, totalling $1,068.62, which consisted of a short-term capital gain of $800.00 from his sale of 1402 Maple Avenue, Kenova, West Virginia, to J. O. Meredith; $180.00 in interest from W. A. Nixon; $87.86 in interest from Goodwin Preston; and $.76 in interest from J. O. Meredith.

Here again were there sharp conflicts in the evidence. Chinn claimed that the Nixon interest was paid in 1951. Nixon's testimony, however, refuted this contention. A photostatic copy of the note was admitted in evidence and from an examination of the document it appeared, and the Government contended, that the date on which the $180.00 interest payment was recorded had been tampered with in that the figure "1951" had been superimposed over the figure "1949." Also, Chinn claimed that he received the Preston interest as trustee for a specified woman friend. Preston testified that he made all payments on the note to Chinn. Here, again, it was the province of the jury to resolve questions of credibility and the jury resolved them against Chinn.

In this case, not only were there inconsistences in Chinn's testimony, but there were a number of suspicious circumstances which well might have influenced the jury in arriving at its verdict. Among these were Chinn's stories of a hoard of concealed cash with his sister, some of which was placed in a jar, covered with parawax and bacon grease and stored in an ice box. Further is Chinn's claim that he made a gift of certain premises to his woman friend, when he actually took from her a note secured by a deed of trust, foreclosed the deed of trust and had title to these premises vested in his own name. There were, too, instances of his taking title, for no satisfactory reason, to property in the names of persons other than himself.

Chinn contended that the agents did not give him credit for cash on hand at the beginning of 1947 and, therefore, did not correctly estimate his net worth as of that date. It might well be that the agents were justified in rejecting Chinn's somewhat incredible claims as to the possession of this money at the beginning of the period.

For cases that seem to uphold our views that there was here adequate evidence to justify the jury's verdict, see United States v. Calderon, 348 U. S. 160 [54-2 USTC ¶9712]; Smith v. United States, 348 U. S. 147 [54-2 USTC ¶9715]; Holland v. United States, 348 U. S. 121, 132 [54-2 USTC ¶9714]; United States v. Ragen, 314 U. S. 513 [42-1 USTC ¶9186]; Pinellas Ice Co. v. Commissioner, 287 U. S. 462 [3 USTC ¶1023]; Rollinger v. United States, 208 Fed. (2d) 109 [53-2 USTC ¶9647]; Jelaza v. United States, 179 Fed. (2d) 202 [50-1 USTC ¶9149]; Himmelfarb v. United States, 175 Fed. (2d) 924 [49-1 USTC ¶9313], cert. den. 338 U. S. 860; Rusk v. Commissioner, 53 Fed. (2d) 428 [2 USTC ¶819].

[Cross-Examination of Government Witness]

Chinn contends that the District Court prejudicially restricted him in his cross-examination of the witness Dickinson with respect to Dickinson 's testimony that he recommended a jeopardy assessment against Chinn in 1951. On his direct examination, Dickinson testified that as a result of an investigation he made at the Twentieth Street Bank in Huntington , West Virginia , in 1951, he recommended a jeopardy assessment against Chinn. We find no ground here for a reversal.

The scope and extent of cross-examination is peculiarly within the sound discretion of the trial judge. United States v. Hornstein, 176 Fed. (2d) 217, 220 [49-2 USTC ¶9326]; United States v. Tandaric, 152 Fed. (2d) 3, 6, cert. den. 327 U. S. 786; Jelke v. United States , 255 Fed. 264, 288. Here, the question whether Chinn had property in his name in excess of the amount of the jeopardy assessment levied against him in 1951, had little relevancy or importance in connection with the charges contained in the indictment.

[Judgment Affirmed]

The judgment of the District Court is affirmed.

Affirmed.