Documentary Evidence in Jury Room

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7203: Willful Failure to File Return, Supply Information, or Pay Tax: Trial: Documentary Evidence in Jury Room

 

[92-2 USTC ¶50,555] United States of America , Plaintiff-Appellee v. James C. Payne, Defendant-Appellant

(CA-10), U.S. Court of Appeals, 10th Circuit, 91-8073, 10/28/92, 978 F2d 1177, Affirming, reversing and remanding an unreported District Court decision

[Code Secs. 6531 and 7201 ]

Statute of limitations: Date of beginning: Suits by U.S.: Trials: Documentary evidence in jury room: Evasion or avoidance of tax: Willful evasion.--A taxpayer who provided false social security numbers to his bank and brokerage firms, which in turn caused these payors to issue Forms 1099 to the IRS under the false social security numbers, was properly convicted on four counts of tax evasion. His indictment timely commenced the prosecution for tax evasion within the six-year statute of limitations. The taxpayer's assumption that an affirmative act commences the running of the statute of limitations was incorrect. Therefore, the taxpayer's claim that the failure to correct the erroneous social security numbers satisfied the affirmative act requirement of tax evasion was inconsequential. Further, since the taxpayer was permitted to testify extensively concerning the basis of his good-faith misunderstanding of the tax laws and to read the pertinent excerpts of materials on which he allegedly relied, the district court did not abuse its discretion in refusing to accept the proffered exhibits into evidence.

Richard A. Stacy, United States Attorney, Maynard D. Grant, Special Assistant United States Attorney, John Barksdale, Assistant United States Attorney, Cheyenne , Wyo. 82008 , for plaintiff-appellee. Michael J. Abramovitz, Theodore H. Merriam, Abramovitz, Merriam & Shaw, 1625 Broadway, Denver, Colo. 80202, for defendant-appellant.

Before MCKAY, Chief Judge, BALDOCK and LAY, ^* Circuit Judges.

BALDOCK, Circuit Judge:

Defendant James C. Payne appeals his convictions on four counts of tax evasion, 26 U.S.C. §7201 , and three counts of false representations of social security numbers. 42 U.S.C. §408(a)(7)(B). Defendant contends that the evidence was insufficient on all counts because the affirmative acts giving rise to the criminal charges occurred outside of the applicable statutes of limitations. Defendant also claims that the district court erroneously excluded evidence regarding his good faith belief that his conduct was legal. ¹ Our jurisdiction arises under 28 U.S.C. §1291 .

During the relevant period, Defendant received interest and dividend income from savings and brokerage accounts. When Defendant opened these accounts between 1977 and 1984, he provided false social security numbers to his bank and brokerage firms (collectively "the payors"). The payors issued Internal Revenue Service ("IRS") Forms 1099 annually for the 1984-87 tax years, reporting Defendant's income to the IRS under the false social security numbers. Defendant received the 1099 forms for the 1984-87 tax years from the payors, but never filed income tax returns for these years. In March 1991, Defendant was indicted on four counts of tax evasion for the years 1984-87 respectively and three counts of false representation of social security numbers. Following a jury trial, Defendant was convicted of all counts.

The federal tax evasion statute provides that "[a]ny person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall . . . be guilty of a felony . . .." 26 U.S.C. §7201 . The elements of a §7201 violation are an affirmative act constituting an evasion or attempted evasion of the tax, willfullness, and the existence of a substantial tax deficiency. Sansone v. United States [65-1 USTC ¶9307 ], 380 U.S. 343, 351 (1965); United States v. Swallow [75-1 USTC ¶9267 ], 511 F.2d 514, 519 (10th Cir.), cert. denied, 423 U.S. 845 (1975). The failure to file a tax return is insufficient to establish the affirmative act necessary for a §7201 conviction. Spies v. United States [43-1 USTC ¶9243 ], 317 U.S. 492, 499 (1943). A tax evasion prosecution must be commenced within six years after the commission of the offense. 26 U.S.C. §6531(2) .

Defendant argues that the evidence is insufficient on the four tax evasion counts because the government failed to prove an affirmative act within the six year statute of limitations. Defendant concedes that he provided false social security numbers to the payors between 1977 and 1984, but argues that these affirmative acts cannot support his conviction because they occurred more than six years prior to the indictment. The government counters by arguing that Defendant's "annual reaffirmation"--i.e. failure to correct--the erroneous social security numbers on the 1099 forms that he received from the payors constitutes an affirmative act within the limitations period. See United States v. Williams [91-1 USTC ¶50,197 ], 928 F.2d 145, 149 (5th Cir.) (knowingly maintaining false W-4 form on file with employer constituted affirmative act supporting §7201 conviction), cert. denied, 112 S.Ct. 58 (1991).

We need not decide whether Defendant's failure to correct the erroneous social security numbers satisfies the "affirmative act" element of §7201 because Defendant's argument is premised on the erroneous assumption that an affirmative act commences the running of the statute of limitations. Generally, the statute of limitations does not begin to run until the crime is complete. Toussie v. United States , 397 U.S. 112, 115 (1970); Pendergast v. United States , 317 U.S. 412, 418 (1943). "A crime is complete as soon as every element in the crime occurs." United States v. Musacchio, 968 F.2d 782, 790 (9th Cir. 1991). Because a tax deficiency is an essential element of the crime of tax evasion, Sansone [65-1 USTC ¶9307 ], 380 U.S. at 343; Swallow [75-1 USTC ¶9267 ], 511 F.2d at 514, the statute of limitations did not begin to run on Defendant's §7201 violations until Defendant incurred a tax deficiency. See United States v. Kafes [54-2 USTC ¶9492 ], 214 F.2d 887, 890 (3d Cir.) (tax evasion offense not complete until defendant's tax payment became due), cert. denied, 348 U.S. 887 (1954). Defendant did not incur a tax deficiency until his tax liability for the years 1984-87 became due--i.e. April 15 of each succeeding year. See United States v. DiPetto [91-2 USTC ¶50,407 ], 936 F.2d 96, 97 (2d Cir.) (per curiam) (tax deficiency element satisfied after April 15 of each year defendant failed to file tax return), cert. denied, 112 S.Ct. 193 (1991). Therefore, Defendant's earliest act of tax evasion was not complete until April 15, 1985 . See id. at 98 ("limitations period began on the day on which the tax returns were due"). See also 85 A.L.R.Fed. Limitations Period-Tax Evasion §3 [a] at 885 (1987) (when tax evasion based on failure to file return, statute of limitations begins to run when return is due). The indictment, returned in March 1991, timely commenced the prosecution of Defendant for tax evasion within the six-year statute of limitations. ²

Defendant raises a similar statute of limitations argument relating to his convictions for false representations of social security numbers. 42 U.S.C. §408(a)(7)(B). The statute under which Defendant was convicted provides, in relevant part,

[w]hoever, . . . for any . . . purpose, . . . with intent to deceive, falsely represents a number to be the social security account number assigned by the Secretary to him or to another person, when in fact such number is not the social security account number assigned by the Secretary to him or to such other person, . . . shall be guilty of a felony . . ..

Id. As §408(a)(7)(B) does not contain its own statute of limitations, the general five year statute of limitations for non-capital offenses applies. 18 U.S.C. §3282. Despite the undisputed evidence that Defendant's last false representation of a social security number to a payor occurred in 1984, more than five years prior to the return of the indictment, the government contends that a violation of §408(a)(7)(B) is a continuing offense that is not completed until Defendant corrects the false numbers, and that Defendant committed new acts of false representation when he reaffirmed the social security numbers by failing to correct the 1099 forms he received from the payors.

The continuing offense doctrine "should be applied in only limited circumstances . . . [in which] the explicit language of the substantive criminal statute compels such a conclusion, or the nature of the crime involved is such that Congress must assuredly have intended that it be treated as a continuing one." Toussie, 397 U.S. at 115. See also 18 U.S.C. §3282 (statute of limitations should not be extended "[e]xcept as otherwise provided by law"). In Toussie, the defendant was prosecuted for failing to register for the draft and moved to dismissed on statute of limitations grounds because the prosecution was initiated more than five years after he was initially required to register. The lower courts had interpreted the statute, which required all male citizens between the ages of eighteen to twenty-six to register, as imposing a continuing duty to register until the age of twenty-six. The Supreme Court reversed, finding nothing in the language of the statute or in the nature of the crime to compel the conclusion that failing to register was a continuing offense. Toussie, 397 U.S. at 120-22.

Like the statute at issue in Toussie, nothing in the plain language of §408(a)(7)(B) nor the nature of the crime itself supports the government's contention that Congress intended it to be a continuing offense. Section 408(a)(7)(B) prohibits "falsely represent[ing] a social security number." Had Congress intended the crime to continue beyond the point that Defendant made the false representations, Congress could easily have prohibited concealing or failing to disclose a true social security number as it did in another subsection. See 42 U.S.C. §408(a)(4) (prohibiting "conceal[ing] or fail[ing] to disclose" the occurrence of an event affecting the continued right to payment). See also United States v. Morrison, 43 F.R.D. 516, 519 (N.D. Ill. 1967) (failure to notify Social Security Administration of beneficiary's death was a continuing course of conduct under §408(a)(4) until notification of death was provided). However, by only prohibiting a false representation, Congress expressed its intention that the crime is complete at the time of the representation. See United States v. Joseph, 765 F.Supp. 326, 330 ( E.D. La. 1991) (violation of §408(a)(7)(B) is complete when the false representation is made).

Similarly, we find no merit in the government's contention that Defendant's failure to correct the erroneous social security numbers constituted a reaffirmation of the false representation. After Defendant falsely represented the social security numbers to the payors, he made no further representations of the erroneous social security numbers nor did he file any income tax returns. While the payors relied on Defendant's false representation and conveyed the erroneous social security numbers to the IRS within the limitations period, Defendant is criminally liable only for his own false representations under the plain language of the statute. Cf. United States v. Davis, 533 F.2d 921, 928 (5th Cir. 1976) (government agency's reliance, within five years of indictment, on defendant's earlier false representations did not extend statute of limitations for conspiring to violate 18 U.S.C. §1001 by knowingly and willfully making false statements). To accept the government's construction of the statute would require us to read into the statute an affirmative duty by Defendant to correct the erroneous social security numbers on the 1099 forms he received from the payors. Absent some support in the language of the statute for the government's construction, we decline to adopt it. Because the evidence was undisputed that Defendant's last false representation of a social security number occurred in 1984, and the indictment was not returned until 1991, the prosecution for false representations of social security numbers was barred by the five-year statute of limitations.

Finally, Defendant contends that the district court erroneously excluded documentary evidence relating to his asserted good-faith belief that he had no legal duty to file income tax returns. See Cheek v. United States [91-1 USTC ¶50,012 ], 111 S.Ct. 604, 610-11 (1991) (good-faith misunderstanding of the law or good-faith belief that one is not violating the law negates willfullness element in §7201 prosecution). We review for an abuse of discretion and will reverse "only if the exclusion of the evidence is so significant that it results in 'actual prejudice' because it has a 'substantial and injurious effect or influence in determining the jury's verdict.' " United States v. Fingado [91-2 USTC ¶50,528 ], 934 F.2d 1163, 1164 (10th Cir.) (quoting United States v. Vreeken [87-1 USTC ¶9187 ], 803 F.2d 1085, 1090 (10th Cir. 1986), cert. denied, 479 U.S. 1067 (1987)), cert. denied, 112 S.Ct. 320 (1991).

The district court permitted Defendant to testify extensively about his misunderstanding of the tax laws. Defendant, a retired psychiatrist who up until at least 1978 had annually filed a tax return, testified that he did not file tax returns for 1984-87 due to his honestly held belief that the Internal Revenue Code ("IRC") did not require persons to annually file an income tax return. After receiving information from a tax protester organization, Defendant researched the tax law. Defendant read the United States Supreme Court's opinion in Flora v. United States [60-1 USTC ¶9347 ], 362 U.S. 145 (1960), and copied it, underlining a sentence which reads: "Our system of taxation is based upon voluntary assessment and payment, not upon distraint." Id. at 176 (footnote omitted). Defendant then looked up the definition of "distraint" finding it to be defined as "coercion or force." Defendant testified that this research confirmed his belief that the act of filing a tax return was voluntary, but that if he did not file a return, the government would bill him. Defendant testified that he would have paid the tax if the government had sent him a bill.

Defendant also testified that he later purchased a book entitled How Anyone Can Stop Paying Income Taxes by Irwin Schiff which confirmed his belief that the filing of a tax return is voluntary and that the IRS must assess taxes and send the taxpayer a bill. The Schiff book cited to sections in the IRC which Defendant subsequently purchased. Defendant confirmed that the Schiff book's IRC citations were correct thereby furthering his belief that the filing of a return was voluntary and that the IRS would eventually bill him. During his legal research, Defendant took a series of handwritten notes.

Defendant sought to introduce into evidence his underlined copy of the Flora opinion, his marked up copy of the Schiff book and the 1984 and 1987 IRC's, as well as his handwritten legal research notes. The district court rejected the admission of these exhibits recognizing "a danger of prejudice . . . that outweigh[ed] any evidentiary purpose that could be served with regard to the issue of willfullness . . .." However, the district court permitted Defendant to physically possess the exhibits on the witness stand, to display them to the jury, and to read all pertinent portions to the jury and explain their impact on his alleged misunderstanding of the tax laws. Defendant quoted pertinent passages from the Flora opinion, and the judge even read the underlined passage to the jury. Defendant also quoted several passages from the Schiff book and various portions of the IRC. Finally, Defendant was permitted to explain each passage of his handwritten notes to the jury.

Because the willfullness element of §7201 requires the specific intent to evade taxes, a defendant in a tax evasion prosecution "is entitled to wide latitude in the introduction of evidence which tends to show lack of specific intent." United States v. Brown [69-2 USTC ¶9479 ], 411 F.2d 1134, 1137 (10th Cir. 1969) (reversing tax evasion conviction due to district court's exclusion of transcripts of testimony of the defendant's superior, who was not available to testify, which corroborated defendant's claimed belief that merchandise and services he received were nontaxable). See also Vreeken [87-1 USTC ¶9187 ], 803 F.2d at 1089-90 (district court's limitation of defendant's testimony concerning his reasoning in structuring tax shelters was error in §7201 prosecution). "[F]orbidding the jury to consider evidence that might negate willfullness . . . raise[s] a serious question under the Sixth Amendment's jury trial provision." Cheek [91-1 USTC ¶50,012 ], 111 S.Ct. at 611. Nonetheless, "Cheek [does] not require the admission of any and all evidence showing a basis for the defendant's belief." Fingado [91-2 USTC ¶50,528 ], 934 F.2d at 1165 n.1.

Defendant was permitted to testify concerning the basis of his claimed good-faith misunderstanding of the tax laws. The trial court permitted Defendant wide latitude in reading pertinent excerpts from the Flora opinion, Schiff book, IRC's, and his notes to the jury. Defendant was simply not permitted to introduce these documents as exhibits. In United States v. Hairston [87-1 USTC ¶9356 ], 819 F.2d 971 (10th Cir. 1987), we found no abuse of discretion on similar facts noting that "[t]he court did not prevent [the defendant] from mounting a defense . . . but rather exercised its discretion regarding the form in which such evidence should be admitted so as to minimize jury confusion." Id. at 973. See also United States v. Mann [89-2 USTC ¶9516 ], 884 F.2d 532, 538 (10th Cir. 1989). Defendant's direct testimony was far more probative on the issue of his good faith misunderstanding of the tax laws than the actual materials. See Mann [89-2 USTC ¶9516 ], 884 F.2d at 538; Hairston [87-1 USTC ¶9356 ], 819 F.2d at 973. See also Fingado [91-2 USTC ¶50,528 ], 934 F.2d at 1164-65 (any error in excluding exhibits was harmless when defendant testified about claimed good-faith misunderstanding of tax laws); United States v. Harrold [86-2 USTC ¶9543 ], 796 F.2d 1275, 1284-85 (10th Cir. 1986) (same), cert. denied, 479 U.S. 1037 (1987). Moreover, permitting legal materials into the jury room creates the potential for undue jury confusion concerning the governing law. See United States v. Willie [91-2 USTC ¶50,409 ], 941 F.2d 1384, 1395-98 (10th Cir. 1991) (alternatively holding that exhibits, which included statutes, a treaty, a historical treatise, and letters from defendant, were properly excluded under Fed. R. Evid. 403), cert. denied, 112 S.Ct. 1200 (1992). Given that Defendant was permitted to testify extensively concerning the basis for his claimed good-faith misunderstanding of the tax laws and was permitted read the pertinent excerpts of the materials on which he allegedly relied, we find no abuse of discretion by district court in refusing to accept the proffered exhibits into evidence.

Defendant's motion to transmit the original exhibits to this court as part of the record on appeal is DENIED. Defendant's convictions for tax evasion are AFFIRMED. Defendant's convictions for falsely representing social security numbers are REVERSED. The case is REMANDED to the district court with instructions to VACATE Defendant's convictions for falsely representing social security numbers and for any further proceedings consistent with this opinion.

^* The Honorable Donald P. Lay, Senior Circuit Judge, United States Court of Appeals for the Eighth Circuit, sitting by designation.

¹ Notwithstanding that Defendant has included copies of the exhibits he claims were erroneously excluded in his appendix filed in this court, Defendant has also brought a motion in this court to accept the original exhibits. See 10th Cir. R. 10.2.2.

² Several circuits have held that a prosecution under §7201 is timely if commenced within six years of the last affirmative act of evasion. DiPetto [91-2 USTC ¶50,407 ], 936 F.2d at 98; Williams [91-1 USTC ¶50,197 ], 928 F.2d at 149; United States v. Ferris [86-2 USTC ¶9844 ], 807 F.2d 269, 271 (1st Cir. 1986), cert. denied, 480 U.S. 950 (1987); United States v. Trownsell [66-2 USTC ¶9661 ], 367 F.2d 815, 816 (7th Cir. 1966) (per curiam). Courts have relied on this reasoning to extend the statute of limitations beyond six years after the defendant incurred a tax deficiency when the defendant has taken a subsequent affirmative act to conceal his crime. See Ferris [86-2 USTC ¶9844 ], 807 F.2d at 272 (§7201 prosecution for evading 1976-77 taxes timely commenced in 1985 when defendant made affirmative statements in 1979 and 1983 to IRS agents to conceal income); Trownsell [66-2 USTC ¶9661 ], 367 F.2d at 816 (§7201 prosecution for evading 1946-53 taxes timely commenced in 1964 when defendant transferred assets to Swiss bank account in 1961 to conceal charged evasion). Moreover, the Supreme Court has held that when the defendant, charged under §7201 , files a false tax return subsequent to the due date, the statute of limitations begins running when the return is filed rather than when the return is due. United States v. Habig [68-1 USTC ¶9243 ], 390 U.S. 222, 224-25 (1968). We have similarly held that when the defendant files a false amended return after the due date, the statute of limitations in a tax evasion prosecution does not begin to run until filing of the amended return rather than the original due date. United States v. Samara [81-1 USTC ¶9220 ], 643 F.2d 701, 704 (10th Cir.), cert. denied, 454 U.S. 829 (1981). We do not read these cases to stand for the proposition that the statute of limitations always commences at the point the defendant takes his final affirmative act to evade taxes. Rather, these cases are consistent with our holding that the statute of limitations in a §7201 prosecution does not begin to run until the defendant has taken an affirmative act and incurred a tax deficiency. Cf. United States v. Myerson [66-2 USTC ¶9753 ], 368 F.2d 393, 395 n.1 (2d Cir. 1966) (per curiam) (when defendant filed tax return early, statute of limitations on tax evasion prosecution began running on date return was due rather than date when defendant filed return), cert. denied, 386 U.S. 991 (1967).

 

 

[87-1 USTC ¶9356] United States of America , Plaintiff-Appellee v. Richard P. Hairston, Defendant-Appellant

(CA-10), U.S. Court of Appeals, 10th Circuit, 85-2692, 5/29/87, 819 F2d 971, Affirming an unreported District Court decision

[Code Secs. 7203 --Result unchanged by the Tax Reform Act of 1986]

Crimes: Tax protests: Constitutionality: Willful failure to file return, supply information, or pay tax: Evidence of intent: Documentary evidence.--In affirming the trial court's conviction for three counts of willfull failure to file income tax returns, an appellate court held that the trial court did not err by excluding from evidence tax protest-type literature purportedly relied on by the individual. The individual offered the literature at trial to demonstrate his subjective state of mind to support his defense that at the time he failed to file, he believed that he was under no legal duty to file income tax returns and, consequently, he lacked the requisite willfull intent element of the crime. However, the appellate court determined that it was within the trial court's discretion to prohibit the introduction of such evidence because it might mislead or confuse the jury. Moreover, other evidence indicating that the individual might possibly have received a tax refund had he properly filed a return for the first year in issue was properly determined to be irrelevant to the failure-to-file case. Finally, despite the trial court's erroneously ruling that the admission of evidence relating to the individual's state of mind after the last filing date was irrelevant, the appellate court concluded that this omission was harmless error.

Brent D. Ward, United States Attorney, Tena Campbell, Assistant United States Attorney, Salt Lake City, Utah, 84110, for plaintiff-appellee. Danny Quintana, Salt Lake City , Utah , for defendant-appellant.

Before MCKAY and BALDOCK, Circuit Judges, and BROWN ^*, District Judge.

MCKAY, Circuit Judge

Richard P. Hairston was found guilty by a jury of three counts of willfully failing to file income tax returns for the years 1980, 1981, and 1982 ¹ in violation of 26 U.S.C. §7203 (Supp. III 1985). ²

I.

The record shows that Mr. Hairston filed income tax returns for the years 1973 through 1976, inclusive. In the spring of 1976, his 1975 tax return was audited, and Mr. Hairston was required to pay an additional $465 in taxes. Mr. Hairston then began purchasing literature published by, and attending tax seminars conducted by, Irwin Shiff, William J. Benson, Marvin L. Cooley, George Gordon, and others associated with the so-called "tax protest movement" who claim that the sixteenth amendment was never properly ratified and that filing tax returns is completely voluntary. He even attended some criminal trials of those charged with failure to file and visited acquaintances imprisoned on tax-related charges. See record, vol. 2, at 137, 168. On several occasions, he freely voiced his views that the tax laws were illegal and unconstitutional. See id. at 137, 161-67.

In the years 1977, 1978, 1979, and 1980, Mr. Hairstion filed returns completed with only the words "object," "self-incrimination," or "none." He filed no returns in 1981 and 1982. He received numerous registered letters from the Internal Revenue Service informing him of his obligation to file a return and the possibility of criminal liability for failure to comply. In the years 1980, 1981, and 1982, Mr. Hairston submitted thirty-one withholding certificates commonly known as "W-4s" on which he claimed to be exempt from withholding requirements.

Mr. Hairston's defense at trial was that he did not file due to a bona fide misunderstanding as to his legal duty to file a return. A good faith misunderstanding of the duty to file a return can negate the willfulness element of a failure-to-file charge. See United States v. Murdock [3USTC ¶1194 ], 290 U.S. 389, 396 (1933); United States v. Ware [79-2 USTC ¶9608 ], 608 F.2d 400, 405 (10th Cir. 1979). The misunderstanding need not have a reasonable basis to provide a defense. See United States v. Phillips [85-2USTC ¶9745 ], 775 F.2d 262, 264 (10th Cir. 1985). We have held that "a subjective standard is appropriately applied in assessing a defendant's claimed belief that the law did not require that he file a return." Id. Mr. Hairston claimed that the seminars he attended and literature he read caused him to believe that filing a return was voluntary and that he was under no legal duty to file. ³

II.

On appeal, Mr. Hairston first argues that the trial court erred in failing to admit into evidence the tax protest literature upon which he ostensibly relied in forming his belief that he was under no legal obligation to file. The court allowed Mr. Hairston to testify extensively with respect to the seminars he attended and tax literature he purchased "that might have led him to make a mistake." Record, vol. 3, at 26. Titles were quoted, passages were read, and the thrust of the materials were summarized. See id. at 18-36. In fact, the majority of Mr. Hairston's testimony pertained to the various materials and his interpretation of them, and Mr. Hairston was the sole defense witness. Nearly the entire closing argument was devoted to this defense. See id. at 70-77.

The literature dealt exhaustively with the constitutionality of the tax laws. Because a good faith disagreement with the laws or good faith belief that they are unconstitutional provides no defense, see supra note 2, the court found that the materials themselves might mislead or confuse the jury ⁴ and disallowed them under Fed. R. Evid. 403. ⁵ "[A] trial court's determination that [relevant] evidence's probative value is out-weighed by its potential for prejudicing or confusing a jury" will not be disturbed on appeal "absent a showing of clear abuse of discretion." Beacham v. Lee-Norse, 714 F.2d 1010, 1014 (10th Cir. 1983); see also Higgins v. Martin Marietta Corp., 752 F.2d 492, 497 (10th Cir. 1985); Texas E. Transmission Corp. v. Marine Office-Appleton & Cox Corp., 579 F.2d 561, 567 (10th Cir. 1978).

The critical inquiry for the jury was whether Mr. Hairston subjectively believed that he did not need to file under the law's requirements. Because his subjective belief was central, direct testimony from Mr. Hairston regarding the effect these seminars and publications had on his understanding of the tax law filing requirements was more probative of his proffered defense than the publications themselves. The court did not prevent Mr. Hairston from mounting a defense, as the appellate brief suggests, but rather exercised its discretion regarding the form in which such evidence should be admitted so as to minimize jury confusion. The defense theory was argued, and the jury had the testimonial evidence to consider. We hold that the trial court did not abuse its discretion in prohibiting the documentary evidence offered by defendant.See United States v. Latham [85-1 USTC ¶9180 ], 754 F.2d 747, 751 (7th Cir. 1985) (affirming trial court's exclusion of tax protest literature while allowing defendant to quote portions of its contents because entire text of such literature may mislead or confuse jury); United States v. Kraeger [83-2 USTC ¶9453 ], 711 F.2d 6, 7-8 (2d Cir. 1983) ("trial court did not abuse its discretion in excluding documentary evidence, including federal court decisions, which appellant claims to have read in forming his opinions regarding the tax laws" because likely to confuse jury regarding applicable law).

III.

The court prohibited Mr. Hairston from testifying whether he would have received a refund had he timely filed a tax return for the year 1980. See record, vol. 3, at 37. Mr. Hairston contends that demonstrating that he would have received a refund confirms a lack of willfulness on his part. However, in a failure to file action under 26 U.S.C. §7203 , the Government is not required to show that a tax is due nor must it show an intent to evade taxes. Willful tax evasion is a distinct violation under 26 U.S.C. §7201 (1982). ⁶ Cf. United States v. Afflerbach [77-1 USTC ¶9127 ], 547 F.2d 522, 524 (10th Cir. 1976) (Government must prove substantial income tax deficiency in tax evasion case),cert. denied, 429 U.S. 1098 (1977). The willfulness under section 7203 , is a willful failure to file a return, not a willful evasion of income taxes. "[T]o act willfully in this context means to act 'voluntarily, purposefully, deliberately, and intentionally, as distinguished from accidentally, inadvertently, or negligently.' " United States v. Dillon [78-1 USTC ¶9175 ], 566 F.2d 702, 704 (10th Cir. 1977) (quoting trial court), cert. denied, 435 U.S. 971 (1978). The trial court did not abuse its discretion in ruling that evidence of a possible tax refund was irrelevant in a failure-to-file case. See Beacham, 714 F.2d at 1014; Texas E. Transmission, 579 F.2d at 566.

IV.

Finally, defendant appeals the trial court's ruling that evidence of his state of mind "beyond the last filing date that the government charges is not relevant." Record, vol. 3, at 41. The Third Circuit has for good reason rejected the contention that "any evidence respecting events after the due dates for the filing of returns for the respective years is irrelevant to the crucial question of [the defendant's] state of mind at the time he failed to make the required returns."United States v. Greenlee [75-1 USTC ¶9488 ], 517 F.2d 899, 903 (3d Cir.), cert denied, 423 U.S. 985 (1975). In Greenlee, the Government, not the defendant, was permitted to introduce evidence accruing subsequent to the filing deadlines that supported its claims of willfulness in the defendant's prior failure to file. Nevertheless, if willfulness at the time of the filing deadline may permissibly be proved circumstantially by acts subsequent to that deadline, so should lack of willfulness.

The evidence that defense counsel sought to introduce in this case, however, would not have negated Mr. Hairston's willfulness in failing to file. Defense counsel was attempting to establish, had the court permitted, that Mr. Hairston tried in vain to contact an I.R.S. agent in 1984 in response to telephone calls and to a calling card left with his wife when he was not at home. See record, vol. 3, at 40-45. Essentially, Mr. Hairston argues that the I.R.S.'s failure to sit down with Mr. Hairston in 1984 and correct his alleged misunderstanding of the law, see id. at 42, 72, is evidence of his lack of willfulness in 1980, 1981, and 1982, notwithstanding the several registered letters outlining the law's filing requirements that the I.R.S. sent to him during the years in question. See id. at 54-56.

I think this entire line of questioning goes as to what his knowledge of the law was at that time in terms of his dealing with the Internal Revenue Service and whether or not this matter could have been cleared up long before now.

. . .

What I was going to question him on is his meetings with the Internal Revenue officials because this goes to the knowledge that he had of the requirement of filing and whether or not the Internal Revenue Service would have ever answered any of the questions he presented. And I think on that basis that would go to his state of mind for the years in question.

Argument to the court by defense counsel, id. at 41.

Had this evidence--that representatives from the I.R.S. never personally discussed with Mr. Hairston his alleged misunderstanding of the law--been admitted, it would not have reflected either positively or negatively on whether Mr. Hairston did, indeed, possess a good faith misunderstanding of the law. Only evidence of an actual conversation regarding his perception of the filing requirement, whether or not subsequent to the 1982 filing deadline, would be relevant. The fact that no such conversation occurred simply does not illuminate anything related to Mr. Hairston's subjective understanding of the tax laws. ⁷ Therefore, the court's erroneous ruling that evidence of state of mind was irrelevant, if beyond April 15 of 1983, the last filing date for 1982, was harmless error in this case. See McDonough Power Equip., Inc. v. Greenwood , 464 U.S. 548, 553-54 (1984); Beachum, 714 F.2d at 1014.

AFFIRMED.

^* Honorable Wesley E. Brown, Senior United States District Judge for the District of Kansas, sitting by designation.

¹ Mr. Hairston stipulated that he received gross income of $13,778.40 in 1980, $26,248.44 in 1981, and $24,615.79 in 1982. Stipulation, record, vol. 1, at 46.

² 26 U.S.C. §7203 provides in pertinent part: "Any person required under this title . . . to make a return . . . who willfully fails to . . . make such return . . . at the time or times required by law or regulations, shall, in addition to other penalities provided by law, be guilty of a misdemeanor . . . ."

³ Mr. Hairston did not, and could not, argue that he understood the obligations imposed upon him by law but that his good faith belief that the law is unconstitutional negated the willfulness element. See Ware, 608 F.2d at 405 (defendant's disagreement with the law or his belief it is unconstitutional does not constitute defense of good faith misunderstanding of filing requirements); United States v. Dillon, 566 F.2d 702, 704 (10th Cir. 1977), cert. denied, 435 U.S. 971 (1978).

⁴ The court's warranted concern is reflected in its instructions to the jury with respect to the limited relevancy of the tax materials being discussed during Mr. Hairston's testimony.

Members of the jury, I am receiving this evidence only as it might bear upon the question of whether or not this defendant made a mistake. The content of this material should be disregarded by you except in that context. I will tell you at the conclusion of the evidence in this case what the applicable law is.

Record, vol. 3, at 35.

⁵ Fed. R. Evid. 403 provides: "Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence."

⁶ 26 U.S.C. §7201 provides in pertinent part: "Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony . . . ."

⁷ In effect, Mr. Hairston asks us to presume that he did not understand the law, and, because the I.R.S. failed to personally enlighten him, the Government failed to rebut this presumption. See record, vol. 3, at 72. On the contrary, we must presume that Mr. Hairston understood the law. He must come forward with affirmative evidence of misunderstanding as a defense.

 

 

[86-1 USTC ¶9228] United States of America , Appellee v. Ira Paul Citron, Defendant-Appellant

(CA-2), U.S. Court of Appeals, 2nd Circuit, 85-1253, 85-1269, 2/7/86, 783 F2d 307, Reversing and remanding an unreported District Court decision

[Code Secs. 7201 and 7206 ]

Criminal penalties: Lesser-offense rule: Sufficiency of indictment or information: Failure to file return: Evidence supporting penalty.--A taxpayer's conviction for filing false income tax returns under Code Sec. 7206 was vacated and his conviction for income tax evasion under Code Sec. 7201 was reversed and remanded for a new trial because the factual elements of the Code Sec. 7201 counts were substantially identical to those of the lesser included Code Sec. 7206 counts and no rational basis existed for acquitting him on the false return counts while convicting him on the evasion counts. As presented to the jury, the issue of materiality in the false return counts was defined as requiring proof of underreporting of "substantial" adjusted gross income and therefore was identical to the proof required by the false return counts. According to the court, although the statutory scheme may permit a finding in appropriate cases that a taxpayer made material false statements resulting in insubstantial tax consequences which would permit a finding that Code Sec. 7206 was violated, even though Code Sec. 7201 was not, the jury had been presented with no factual or legal basis for deciding these counts differently. Moreover, the taxpayer's assertion that the district court erred in refusing to dismiss other counts of the indictment on the ground that they did not allege precise amounts of unreported income and tax due was rejected as meritless. However, it was also held that, although the evidence supporting the taxpayer's conviction for tax evasion may have been sufficient, the admission of a summary chart prepared by the government placed before the jury, which contained and relied on a seemingly arbitrary figure of cash on hand constituted prejudicial error requiring a reversal of the conviction, as well as a retrial of the tax evasion charge.

Raymond J. Dearie, United States Attorney, Patricia A. Pileggi, Assistant United States Attorney, Brooklyn, N.Y. 11202, for appellee. Jules Ritholz, Lawrence S. Feld, Marjorie B. Landa, Kostelanetz & Ritholz, 80 Pine Street, New York, N.Y. 10005, for defendant-appellant.

Before MANSFIELD, MESKILL and CARDAMONE, Circuit Judges.

MANSFIELD, Circuit Judge:

Ira Paul Citron appeals a judgment, entered in the Eastern District of New York after a jury trial before Judge Leonard D. Wexler, convicting him of income tax evasion and filing false income tax returns. The jury found Citron guilty of one count of income tax evasion, 26 U.S.C. §7201 , ¹ for the year 1978 (Count 2), and two counts of filing false income tax returns, 26 U.S.C. §7206(1) , ² for the years 1977 and 1979 (Counts 4 and 6). It acquitted him of two income tax evasion counts relating to his 1977 and 1979 returns (Counts 1 and 3), and three counts of aiding and assisting the preparation of false returns filed by his parents during the period from 1977 through 1979, 26 U.S.C. §7206(2) (Counts 7 through 9). ³

We vacate the convictions for violation of §7206(1) and remand with directions to dismiss because, as submitted to the jury, the factual elements of the §7201 counts were substantially identical to those of the lesser included §7206(1) counts and no rational basis existed for acquitting Citron on the §7201 counts while convicting him on the §7206(1) charges. The §7201 conviction is reversed and remanded for a new trial because the district court erred in admitting into evidence a summary chart containing figures not demonstrably supported by the evidence.

Citron (sometimes referred to herein as "Ira" to distinguish him from his father "Joseph"), a stock broker at E.F. Hutton & Co., allegedly underreported his income and tax due during the years 1977-79 in the following amounts:

                                 Income    Tax Due

                                Shown on  Shown on    Alleged    Alleged

                                 Return    Return     Income     Tax Due

1977 ......................... $21,220.00 $2,209.00 $ 32,556.08 $ 5,460.00

1978 ......................... $24,134.00 $3,169.00 $113,605.05 $36,851.99

1979 ......................... $42,332.00 $9,508.76 $ 83,584.96 $29,274.63

 

The government sought to prove unreported income by using the "cash expenditures" method. See United States v. Mastropieri [82-2 USTC ¶9484 ], 685 F.2d 776, 778 n.2 (2d Cir.), cert. denied, 459 U.S. 945 (1982); United States v. Gay [78-1 USTC ¶9170 ], 567 F.2d 1206 (2d Cir. 1978); United States v. Bianco [76-1 USTC ¶9351 ], 534 F.2d 501 (2d Cir.), cert. denied, 429 U.S. 822 (1976); United States v. Fisher [75-2 USTC ¶9766 ], 518 F.2d 836 (2d Cir.), cert. denied, 423 U.S. 1033 (1975); Taglianetti v. United States [68-2 USTC ¶9479 ], 398 F.2d 558, 562 (1st Cir. 1968), aff'd, [69-1 USTC ¶9295 ] 394 U.S. 316 (1969). This method is a variant of the "net worth" method, which was sanctioned by the Supreme Court in Holland v. United States [54-2 USTC ¶9714 ], 348 U.S. 121, 124-25 (1954), where the Court recognized that the special problems faced in proving income tax violations justify methods of indirect proof, subject to close judicial scrutiny. Under the "cash expenditures" method, after taking into account the amount of resources the taxpayer had on hand at the beginning of a period, the income received by the taxpayer for the same period is compared with his expenditures that are not attributable to his resources on hand or non-taxable receipts during the period. A substantial excess of expenditures over the combination of reported income, non-taxable receipts, and cash on hand may establish the existence of unreported income. ⁴

As a first step in preparing the present case the government conducted an investigation and analysis, undertaken by Internal Revenue Service (I.R.S.) Special Agent Levy and Revenue Agent Perrotta, of Ira's apparent sources of income and expenditures. The government calculated that Citron began 1977 with $24,412.27. Its analysis showed that Ira spent $78,928.59 in 1977, $127,262.38 in 1978 and $143,627.81 in 1979.

In arriving at these figures Agent Levy checked bank accounts, insurance coverage, tax returns, wage records, doctor's records, possible loan sources and safe deposit box holdings. Levy also searched real estate records to determine if Citron bought or sold real estate during or prior to the three--year period. Similar research was undertaken relating to the finances of Ira's parents, Joseph and Rose Citron.

The district court admitted into evidence a summary chart, prepared by Agent Perrotta, based on Agent Levy's research. The chart lists various items of expense and income and sets forth the amounts which the government maintained were received and spent by Ira. Next to each item on the chart Agent Perrotta noted the exhibits relied upon in arriving at the figures.

The government also offered underlying evidence regarding the sources of Ira's unreported income and his system of concealing earnings. Three witnesses testified that Ira managed a bookmaking operation. From the fall of 1976 through 1978 Charles Stockley and several friends incurred $20,000-$30,000 in gambling losses which were paid by check or cashier's check sent to Ira at his E.F. Hutton address. Fred Willey placed bets on football games for three or four months in 1978, losing approximately $2,000 to Citron. Finally, Alphonse Bottino placed bets in 1979 and 1980 and also paid his losses to Ira at E.F. Hutton. Ira's name appeared on the checks for winnings that Bottino received.

Albert Weiss, a stationery store employee, made weekly payments of $75 to Ira to repay a 1975 loan of $2,500. Checks made out by Weiss to cash or Ira Citron totalled $4,900 and were deposited into Ira's accounts.

Ira maintained five stock accounts at E.F. Hutton in the names of his parents, Joseph and Rose Citron, into which more than $245,000 was deposited between 1977 and 1979. Deposits included Ira's paychecks and other checks made payable to him. During the three-year period only five of the deposits were items made payable to Joseph and Rose Citron and two of these deposits were payments made in return for the purchase of a stamp collection belonging to and sold by Ira. Ira also drew on the accounts. In 1979 he asked a friend to cash a $34,000 check payable to Rose Citron drawn on one of the accounts. The interest, dividends and capital gains earned by the accounts, which totalled $41,244.74 for the three years were reported on Joseph and Rose Citron's joint returns and omitted from Ira's returns.

At trial Ira introduced a deposition of his father, Joseph Citron ("Joseph" herein), taken in 1984, to the effect that the father, a retired furniture store owner, had accumulated a cash hoard which reached a peak of approximately $365,000 in 1960, but which dwindled to $40,000 by the time of the deposition. Joseph stated that payments to his son Ira made during the period after 1973, ⁵ which constituted most of the $325,000 spent, were either gifts or deposits into the stock accounts. Joseph also testified that the bulk of the hoard represented cash which he had earned speculating in the stock market prior to 1929 and had stored in a shoebox and envelopes hidden around his home. The government countered the deposition by evidence that Joseph did not maintain a life style corresponding to the wealth he claimed to possess. ⁶

On his tax returns for 1972 through 1978, Ira claimed his parents as dependents. In April 1980, after inquiries by the I.R.S., he filed his 1979 return which did not claim his parents as dependents. At the same time Ira's parents filed returns for the years 1977-1979 reporting the earnings from the E.F. Hutton accounts during that period. These returns were prepared at Ira's direction and based on data supplied by him to the accountant. Joseph and Rose Citron also filed five gift tax returns reporting gifts totaling $30,000 to Ira and his family. These returns claimed that no tax was due.

DISCUSSION

The Propriety of Submitting Both the §7201 Counts and the §7206(1) Counts to the Jury. Appellant contends that the district court erred in permitting the jury to consider both the tax evasion charges, 26 U.S.C. §7201 , and the charges of filing false returns, 26 U.S.C. §7206(1) . His argument rests on the principle that a lesser-included offense should not be submitted to the jury when, in light of the evidence presented at trial, the jury could not rationally acquit the defendant of the greater crime and convict him of the lesser included one. See Hopper v. Evans, 456 U.S. 605, 612 (1982); Keeble v. United States, 412 U.S. 205, 208 (1973); Sansone v. United States [65-1 USTC ¶9307 ], 380 U.S. 343, 349-50 (1965).

In United States v. Harary, 457 F.2d 471, 479 (2d Cir. 1972), we held that in appropriate cases a defendant may invoke this principle to require that the lesser charge be withheld from the jury. But we cautioned that "we do not consider it to be reversible error to submit a lesser charge to the jury unless no 'disputed factual element' which distinguishes the offenses is present and, in addition, the defendant makes a timely motion or objection at trial," Id. at 479. The inquiry into whether such disputed factual elements separate the two offenses is apropriately undertaken at the close of evidence, United States v. Harvey, 701 F.2d 800, 807 (9th Cir. 1983); United States v. DeFabritus [85-2 USTC ¶9844 ], 605 F.Supp. 1538, 1545 (S.D.N.Y. 1985), and its outcome must of necessity vary from case to case.

The disputed factual element test is designed to prevent the jury from considering both a greater charge and a lesser one when there is no rational basis for differentiating between the two. Inconsistent jury verdicts rendered at the same time do not normally constitute grounds for reversal, United States v. Zane, 495 F.2d 683, 690 (2d Cir.), cert. denied, 419 U.S. 895 (1974). But when there is no distinction in a given case between the factual elements of both crimes, "to instruct on both offenses 'would only invite the jury to pick between the [greater and lesser] so as to determine the punishment to be imposed, a duty Congress has traditionally left to the judge.' " Harary, supra, at 478 (quoting Sansone, supra, at 350 n.6); United States v. Brown, 551 F.2d 236, 239 n.4 (8th Cir. 1977).

Section 7201 has been described as "the capstone of a system of sanctions which singly or in combination were calculated to induce prompt and forthright fulfillment of every duty under the income tax law." Spies v. United States [43-1 USTC ¶9243 ], 317 U.S. 492, 497 (1943). The elements of a §7201 violation are (1) willfulness, (2) the existence of a tax deficiency, and (3) an affirmative act constituting an evasion or attempted evasion of the tax. See Sansone, supra at 351. We have also required that the tax deficiency be substantial. United States v. Nunan [56-2 USTC ¶9876 ], 236 F.2d 576, 585 (2d Cir. 1956), cert. denied, 353 U.S. 912 (1957); United States v. Norris [53-2 USTC ¶9511 ], 205 F.2d 828, 829 (2d Cir. 1953); see United States v. Burkhart [74-2 USTC ¶9661 ], 501 F.2d 993, 995 (6th Cir. 1974), cert. denied, 420 U.S. 946 (1975).

Section 7206(1) is a lesser-included offense of §7201 . Cf. United States v. LoRusso, 695 F.2d 45, 52 n.3 (2d Cir. 1982), cert. denied, 460 U.S. 1070 (1983) (a charge is a lesser-included offense when "it is composed of fewer than all of the elements of the [greater] offense charged, and if all of its elements are elements of the [greater] offense charged"). It requires the willful making and subscribing to a tax return that is false in a material matter. See United States v. Hedman, 630 F.2d 1184, 1196 (7th Cir. 1980), cert. denied, 450 U.S. 965 (1981). As in United States v. Tsanas [78-1 USTC ¶9187 ], 572 F.2d 340, 343 (2d Cir.), cert. denied, 435 U.S. 995 (1978), in this case "the criminal act charged was the filing of false income tax returns, [and therefore,] the only difference between the two offenses is that §7201 requires proof of an intention to "evade or defeat" a tax whereas §7206(1) penalizes the filing of a false return even though the falsity would not produce tax consequences."

Appellant argues that in the present case this distinction between the two kinds of alleged violations is not supported by disputed facts and that the jury could not rationally have reached a different verdict on a §7201 charge than on a §7206(1) charge relating to the same year. More specifically, he contends that because the alleged false statements consisted solely of material underreporting of adjusted gross income, a guilty verdict on the §7206(1) counts would necessarily mean that §7201 was violated because of the direct relationship between adjusted gross income and tax due. See United States v. Bender [79-2 USTC ¶9656 ], 606 F.2d 897 (9th Cir. 1979). To support this view, appellant maintains that a "material" falsity, as required by §7206(1) , should be construed as one which results in a "substantial" tax due required for violation of §7201 . See Burkhart, supra, at 995; Nunan, supra, at 585; Norris, supra, at 829.

We have already rejected this argument in other cases. In United States v. Greenberg [84-1 USTC ¶9509 ], 735 F.2d 29, 31-32 (2d Cir. 1984), we held that a misstatement resulting in "minimal underpayments" was material. We noted that the

"purpose of sec. 7206(1) is not simply to ensure that the taxpayer pay the proper amount of taxes--though that is surely one of its goals. Rather that section is intended to ensure also that the taxpayer not make misstatements that could hinder the Internal Revenue Service (IRS) in carrying out such functions as the verification of the accuracy of that return or a related tax return." 735 F.2d 31.

The Seventh Circuit has adopted the same appraoch. In Hedman, supra, at 1196, it stated that

"Section 7206(1) does not require that a false statement on an income tax return be substantial; it merely requires that the misstatement be material. This Court has previously held that false statements relating to gross income, irrespective of the amount, constitute a material misstatement in violation of Sec. 7206(1) ." (Footnote omitted).

Thus it is clearly within the statutory scheme that a jury may find that a taxpayer omitted a material matter in violation of §7206(1) , but that the omission did not give rise to a violation of §7201 because the defendant did not intend to evade a substantial tax.

However, our inquiry does not end with an examination of the statutes involved. Appellant maintains that, since his defense in this case was completely exculpatory, if the jury believed it he was entitled to acquittal on all counts, but if the jury rejected the defense its only rational choice was to convict on all counts. In other words, if the jury found that a material misstatement was made, a substantial tax would of necessity be due. The "disputed factual element" requirement does not turn exclusively on the defendant's defense but on whether a rational jury could find that the government had met its burden of proof on all elements of the lesser charge but failed to prove the greater. See United States v. Markis, 352 F.2d 860, 867 (2d Cir. 1965). The government in the present case alleged that the underreporting resulted in understatements of tax due in the amounts of $3,251 in 1977, $33,682.99 in 1978 and $19,765.87 in 1979. A jury could not rationally find these amounts to have been insubstantial. Therefore, if the jury accepted the government's claimed underreporting, its only rational course was to return convictions for tax evasion.

The government maintains that the jury could have determined that smaller amounts were unreported by accepting pieces of the government's case while rejecting other parts. However, Ira did not dispute the expenditures portion of the government's case. Rather he challenged its assertions about net worth--particularly cash on hand. The evidence offered in support of his claim that he had accesss to a cash hoard would, if believed, explain the entire amount alleged to be underreported. No theory was argued or evidence presented suggesting that the cash hoard was big enough to cover some of his expenditures but not others. Thus the jury could not reasonably have found that some underreporting occurred which was less than that alleged but too small to result in substantial tax evasion. Accordingly, a rational jury could not have both convicted Citron of underreporting, yet acquitted him of tax evasion. See Bender, supra.

Furthermore, because the evil Harary seeks to avoid is the placement of judicial functions in the hands of the jury, we must also examine the way the law was presented to the jury. The indictment alleged that in each of the years 1977 through 1979 Ira violated §7206(1) by filing returns for himself and his wife which contained statements of adjusted gross income, when he "well knew and believed their adjusted gross income was substantially in excess" (emphasis added) of the stated amounts. ⁷ Accordingly, Judge Wexler charged the jury:

"The false statement alleged in each of the [sec. 7206(1) ] counts is that the total adjusted gross income reported on the return involved did not reflect substantial adjusted gross income received by the defendant. The Court instructs you that if this is so the error would be material as a matter of law." ⁸ (Emphasis added).

Thus, as presented to the jury the issue of materiality in the §7206(1) counts was defined as requiring proof of underreporting of "substantial" adjusted gross income and therefore was identical to the proof required by §7201 . Although the statutory scheme may permit a finding in an appropriate case that a taxpayer made material false statements resulting in insubstantial tax consequences, which would permit a finding that §7206(1) was violated even though §7201 was not, the jury here was presented with no factual or legal basis for deciding the §7201 and §7206(1) counts differently. Accordingly, the two convictions under §7206(1) must be vacated and remanded with directions that they be dismissed.

Sufficiency of the Indictment. Appellant's assertion that the district court erred in refusing to dismiss Counts 1, 2 and 3 of the indictment on the ground that they did not allege precise amounts of unreported income and tax due is rejected as meritless. Fed. R. Crim. P. 7(c) requires that "the indictment shall be a plain, concise and definite written statement of the essential facts constituting the offense charged." We have held that "[w]here . . . an indictment tracks the statutory language and specifies the the nature of the criminal activity . . . it is sufficiently specific to withstand a motion to dismiss." United States v. Carr, 582 F.2d 242, 244 (2d Cir. 1978); United States v. Salazar, 485 F.2d 1272, 1277 (2d Cir. 1973), cert. denied, 415 U.S. 985 (1974).

The indictment here reiterated the statutory description of the offense and alleged all the required elements of the crime. Counts One through Three alleged that Ira "did wilfully and knowingly attempt to evade and defeat a large part of the income tax due and owing" and that Ira "well knew" that the tax due "was a sum substantially in excess" of the amount he reported on his return. (Emphasis added). Thus it is clear that the grand jury did consider and reach a finding of probable cause that the amount of income underreported and tax due was substantial for each of the years in question. Cf. United States v. Outler, 659 F.2d 1306, 1310-11 (5th Cir. 1981), cert. denied, 455 U.S. 950 (1982).

The grand jury was not required to make further allegations as to the amounts of tax Ira sought to evade. The issue of whether a particular amount is substantial is normally a question for the jury. United States v. Cunningham [83-2 USTC ¶9730 ], 723 F.2d 217, 230 (2d Cir. 1983). This case therefore is unlike Russell v. United States, 369 U.S. 749 (1962), where the indictment offered a legal conclusion, yet omitted the factual basis for the conclusion. In Russell, the indictment was insufficient as a matter of law because it provided the trial court with no basis for resolving a legal issue.

Furthermore, proof at trial need not include a precise amount of unreported income or tax due but is sufficient if it shows that the amount of income underreported and tax due were "substantial". See United States v. Costanzo [78-2 USTC ¶9575 ], 581 F.2d 28, 34 n.7 (2d Cir. 1978), cert. denied, 439 U.S. 1067 (1979); United States v. Parr [75-1 USTC ¶9349 ], 509 F.2d 1381, 1385-86 (5th Cir. 1975); see also United States v. Cole, 463 F.2d 163, 167 (2d Cir.), cert. denied, 409 U.S. 942 (1972) (variation between the amount of income underreported as alleged in the indictment and the amount proven at trial); United States v. D'Anna, 450 F.2d 1201, 1204 (2d Cir. 1971) (variance between amounts of tax due as alleged indictment and amounts proven at trial); United States v. Eley [63-1 USTC ¶9264 ], 314 F.2d 127, 129-30 (7th Cir. 1963); (same). Therefore, since the indictment need not allege that which is not part of the government's required proof, no exact figure need be stated in the indictment.

Sufficiency of the Government's Prima Facie Case and Admissibility of the Summary Chart. Appellant contends that the government failed as a matter of law to establish that he underreported his income for the years in question. The §7201 conviction (Count Two) must be sustained if the proof, viewed in the light most favorable to the government, "is such that a jury, drawing reasonable inferences therefrom, may fairly and logically have concluded that the defendant was guilty beyond a reasonable doubt." United States v. Barnes, 604 F.2d 121, 157 (2d Cir. 1979), cert. denied, 446 U.S. 907 (1980). We find that the evidence supporting the conviction may well have been sufficient, but that it must be vacated because of the improper admission of a summary chart placed before the jury.

Under the cash expenditure method the government bears the burden of demonstrating "to a reasonable certainty" (i) expenditures during the period in question and (ii) the opening net worth of the taxpayer, including cash on hand. See Bianco, supra, at 504. However, net worth need not be established by a formal net worth statement. Rather, accurate inclusion of diminution of resources serves the function of enabling the jurors to determine if expenditures were financed by liquidation of assets, depletion of a cash hoard, or unreported income. See Fisher, supra, at 842 n.7.

Appellant argues that the government failed to meet these burdens in several respects. First, he maintains that the government failed to prove net worth adequately, particularly cash on hand, for each of the years in question. In advancing this claim, he argues that the district court erred in admitting in evidence the government's summary chart specifying his alleged cash on hand. Absent this chart, appellant asserts, the government's case was fatally flawed by a failure to establish cash on hand.

Although formal proof of net worth is not required in a "cash expenditures" case, establishment of cash on hand is essential and recognized to be the most difficult component of proof in a tax prosecution by the net worth or cash expenditures methods. See United States v. Grasso [80-2 USTC ¶9593 ], 629 F.2d 805, 807 (2d Cir. 1980). In Holland, supra, at 135-36, the Court recognized the perils of inadequate evidence relating to taxpayers' cash on hand and noted that "[w]hen the Government fails to show an investigation into the validity of [defendant's claimed cash hoard], the trial judge may consider [the claims] true and the Government's case insufficient to go to the jury." In this case, the sufficiency of Agent Levy's investigation is clear and appellant does not claim that the government inadequately researched the truthfulness of his "hoard of cash" defense. Rather, he questions the manner in which the results of the inquiry were placed before the jury.

The government prepared a summary chart which listed Citron's cash on hand as $24,412.27 and identified government exhibits (Ex. Nos. 96, 98, 99, 100-104, 106, 107, and 117-122) as the source of this figure. The exhibits listed include documents relating to Ira's purchase of a condominium in Florida in 1973 (Ex. Nos. 96, 98, 103), average cost schedules for family budgets for the years 1973-1976 (Ex. Nos. 99-102.) ⁹ credit card statements (Ex. No. 104), documents relating to the sale of Joseph and Rose Citron's home in Long Beach in 1973 (Ex. No. 106), an IRS transcript describing Ira's tax payments and refund in 1974 (Ex. No. 107), Ira's tax returns from 1972-1975, a credit check by a credit card company (Ex. No. 121), and a statement of his salary in 1972 (Ex. No. 122).

At trial the government sought to introduce the summary chart containing and based on the $24,412.27 cash-on-hand figure without providing testimony explaining how cash on hand was calculated from the grab-bag of documents listed above. When defense counsel objected to the lack of foundation for the figure, the district court agreed, stating "I have never seen such playing with numbers and doubletalk and triple talk, which no one understands." Nonetheless, Judge Wexler admitted the chart in evidence on the theory that "if it is weak, cross examination will destroy it totally."

Although reliance on cross-examination may be appropriate in other contexts, the defendant here was entitled to greater protection. Summary charts should not be admitted unless a proper foundation is established connecting the numbers on the chart with the underlying evidence. Courts have long required that district courts ascertain that summary charts "fairly represent and summarize the evidence upon which they are based." United States v. O'Connor [56-2 USTC ¶9956 ], 237 F.2d 466, 475 (2d Cir. 1956); see United States v. Price [84-1 USTC ¶9186 ], 722 F.2d 88, 91 (5th Cir. 1983); United States v. Keltner [82-1 USTC ¶9305 ], 675 F.2d 602, 606 (4th Cir.), cert. denied, 459 U.S. 832 (1982); United States v. Conlin, [77-1 USTC ¶9291 ], 551 F.2d 534, 538-39 (2d Cir.), cert. denied, 434 U.S. 831 (1977); Gordon v. United States, 438 F.2d 858, 876-77 (5th Cir.), cert. denied, 404 U.S. 828 (1971); Conford v. United States [64-2 USTC ¶9752 ], 336 F.2d 285, 287-88 (10th Cir. 1964); United States v. Altruda [55-2 USTC ¶9592 ], 224 F.2d 935, 938-39 (2d Cir. 1955). Unless this requirement is met, the chart is more likely to confuse or mislead the jury than it is to assist it. See Fed. R. Evid. Rule 403. In this case, the summary chart contained a figure for cash on hand that was obviously the product of calculation. Yet the government provided no explanation, either in the form of worksheets, testimony, or other methods of elucidation, showing how it derived the figure. The district court did not consider whether the chart was based on the evidence but instead noted that the chart was "doubletalk" and admitted it. In this respect the court abused its discretion. See Conlin, supra, at 539.

Our ruling that the chart was inadmissible does not mean that the government must provide detailed testimony stating the basis of each calculation undertaken when a summary chart is prepared. All that is required is enough explanation to allow the jury to see how the numbers on a chart were derived from the underlying evidence put before it. The adequacy of the explanation requires the court to exercise practical judgment in recognition of the fact that a jury usually consists of laymen, not mathematicians. See Altruda, supra, at 939.

We cannot label the error as harmless. Kotteakos v. United States, 328 U.S. 750, 764-65 (1946); cf. Conlin, supra. Nor can we, as was the case in Conlin, conclude that the "proof of appellant's guilt was overwhelming." Id. at 539. The jury's acquittal of Ira on six of the nine counts in the indictment does not indicate that it rejected the figures in the summary chart offered by the government. Cf. id. A higher cash-on-hand figure would have directly reduced the amount of income alleged to have been underreported and a lower figure would have had the opposite effect. Thus the seemingly arbitrary figures used in the government's chart were an important link in its case. Because the chart was the only computation of Ira's opening cash provided by the government, its absence would have rendered proof of underreporting less certain and may well have altered the jury's calculation of the resources he received prior to the years in which his taxable income was in dispute.

Nor was the error adequately alleviated by Judge Wexler's instructions to the jury. ¹⁰ In Holland , the Supreme Court cautioned that "[t]here is great danger that the jury may assume that once the Government has established the figures in its net worth computations, the crime of tax evasion automatically follows. The possibility of this increases where the jury, without guarding instructions, is allowed to take into the jury room the various charts summarizing the computations; bare figures have a way of acquiring an existence of their own, independent of the evidence which gave rise to them." Holland, supra, at 127-28; Conlin, supra at 539.

Thus, when the figures on a summary chart are properly established, a cautionary instruction that the chart itself is not evidence may be sufficient to head off any misimpression by the jury. But when the figures on the chart have not been properly established and keyed to the chart, as was the case here, a cautionary instruction is inadequate.

The error in admitting the chart, while prejudicial enough to require reversal, is not sufficiently serious to call for dismissal of the tax evasion charge on the ground that proof of opening cash on hand was necessarily insufficient. See United States v. Quinto, [78-2 USTC ¶9633 ], 582 F.2d 224, 235 (2d Cir. 1978); United States v. Ruffin [78-1 USTC ¶9269 ], 575 F.2d 346, 358-59 (2d Cir. 1978). For in considering whether error is prejudicial, "[t]he inquiry cannot be merely whether there was enough to support the result, apart from the phase affected by error". Kotteakos, supra, at 765. In this case the jury may well have reached different conclusions if the summary chart had not been before it but, absent the chart, convictions would not have been unreasonable or irrational. See United States v. LeRoy, 687 F.2d 610, 616 (2d Cir. 1982), cert. denied, 459 U.S. 1174 (1983).

The government's investigation of Ira's resources was adequate and the documentary evidence was properly introduced into the record. The jury could infer from his bank records, loan applications, prior tax returns, credit card bills, and the like, that he did not have access to a cash hoard to finance his sizeable expenditures from 1977 to 1979. The government is not required to present an exact figure to show opening net worth with "reasonable certainty." See Taglianette, supra, at 565 (in expenditures case, burden of proof may be met without "precise figures" of opening and closing net worth). Moreover, our ruling does not preclude the government, upon a retrial of Count 2, from introducing a properly authenticated and fully explained chart keyed to and supported by admissible evidence.

Moreover, the government did not solely rely on the cash expenditures method proof, but also offered evidence showing the sources of Ira's unreported income, namely his gambling operation, his loan to Albert Weiss and earnings on the stock accounts. The jury was entitled to consider this evidence in deciding whether underreporting occurred. See Costanzo, supra, at 33. As in Mastropieri, "the Government's proof . . . was not simply of a naked increase in wealth or expenditures unaccountable by assets at the beginning of the series of tax years", but also included evidence of activity which generated the unreported income. Mastropieri, supra, at 785.

Appellant also contends that the government's case was insufficient as a matter of law because it attributed to him resources and income in Joseph and Rose Citron's stock accounts and since the jury acquitted him of aiding and assisting them in the preparation of false returns (Counts 7-9), it must have concluded that their returns were accurate. Because their returns claimed income from the stock accounts, the argument goes, the jury therefore found that the stock accounts belonged to his parents, rather than to him. Therefore, he urges, the government's calculations treating him as the owner of the stock accounts were insufficient. The weakness in this chain of reasoning lies in the well-settled principle that acquittal on one count "does not preclude the jury from reliance on facts relevant to that count in assessing the sufficiency of the evidence for conviction on a different count." United States v. Elsbery, 602 F.2d 1054, 1057 (2d Cir.), cert. denied, 444 U.S. 994 (1979); see United States v. Ford, 603 F.2d 1043, 1047 (2d Cir. 1979) (inconsistency is within jury's prerogative); United States v. Zane, 495 F.2d 683, 690 (2d Cir.), cert. denied, 419 U.S. 895 (1974) (same). Here the jury could well have concluded, in finding appellant guilty of tax evasion, that the stock in his parents' accounts, and the income derived therefrom, belonged to him.

Thus there was sufficient evidence of opening cash on hand and of underreporting to sustain the §7201 conviction (Count 2). However, the admission into evidence of the summary chart prepared by the government, which contained and relied on a seemingly arbitrary figure of $24,412.27 for cash on hand, constituted prejudicial error requiring a reversal of the conviction and a retrial of Count 2.

We find appellant's other contentions to be without merit.

CONCLUSION

Citron's convictions for violations of §7206(1) (Counts 4 and 6) are reversed and remanded with directions that they be dismissed. The conviction for violation of §7201 (Count 2) is vacated and the charge is remanded for a new trial.

¹ Title 26 U.S.C. §7201 provides:

"§7201 . Attempt to evade or defeat tax

"Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution."

² Title 26 U.S.C. §7206(1) provides in pertinent part:

"§7206 . Fraud and false statements

"Any person who--

"(1) Declaration under penalties of perjury.--Willfully makes and subscribes any return, statement, or other documents, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter;

* * *

"shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $5,000, or imprisoned not more than 3 years, or both, together with the costs of prosecution."

³ The district court sentenced Citron to 18 months imprisonment, a fine of $10,000, and a $50 special assessment for the violation of §7201 , and concurrent terms of five-year probation periods and $50 assessments on each of the two §7206(1) convictions.

⁴ The government also utilized, in part, the specific items method. See United States v. Marabelles [84-1 USTC ¶9189 ], 724 F.2d 1374, 1377 n.1 (9th Cir. 1984) (citing United States v. Horton [76-1 USTC ¶9219 ], 526 F.2d 884, 886 (5th Cir.), cert. denied, 429 U.S. 820 (1976)). The evidence of Citron's gambling enterprise and loan to Albert Weiss suggested sources of the unreported income. But no claim is made that this evidence was sufficient to obviate the need for proof under the cash expenditures method.

⁵ Joseph Citron expressed uncertainty as to when he made payments to his son. He stated that he began giving gifts to Ira Citron several years after he moved to Florida in 1973:

"Q: How long had you been in Florida when you started to give substantial amount[s] of ah, cash to Ira?

"A: [19]73 I got there, maybe '77, '78, '79.

"Q: Alright

"A: In that neighborhood

"Q: Right. Was it even as early as '76?

"A: It might have been"

⁶ Over the previous 50 years Joseph purchased modestly priced homes with mortgages in Long Beach , New York , and later in West Palm Beach , Florida , and rented out an apartment in his Long Beach home for $160 a month in the mid-1960's. In 1928, he purchased the Long Beach home for $11,990 subject to a $6,000 mortgage, at a time when he claimed to possess $275,000. In 1973 the West Palm Beach apartment was purchased in the nane of Ira for $14,250 subject to a mortgage for $9,000, at a time when Joseph claimed to have $300,000. In 1978 the West Palm Beach apartment was sold for $23,500 and a condominium in Boca Raton purchased for $34,500 in the name of Ira, paid for by money in an E.F. Hutton account in Joseph's name. Joseph and Rose Citron used both the West Palm Beach and Boca Raton apartments as residences. Ira deducted on his income tax returns the state real estate taxes paid on the West Palm Beach apartment. He maintained at trial that Joseph and Rose Citron were the real owners of the properties in Florida . Since the government apparently ascribed ownership of the apartments to Ira it did not challenge his deduction of taxes related to the properties.

Joseph maintained balances of approximately $1,000 in his savings accounts. Joseph testified that he loaned Ira the $35,000 proceeds from the sale of the Long Beach house in 1973, and acknowledged that he required his son to repay the money at the rate of $200 a month.

Moreover, sometime over the past five years Ira gave his father money to help him pay taxes. Although the record is not entirely clear, it appears that payments from Ira to Joseph were made to pay the taxes due when Joseph filed returns in 1980 claiming income from the stock accounts. Joseph's returns filed at that time claimed a total balance of $2,228 due. Prior to the filings in 1980, Joseph had not filed federal tax returns since 1972. He was not employed during that period but received social security benefits.

⁷ As lesser-included offenses the §7206(1) counts could have been submitted to the jury even though not charged in the indictment. Fed. R. Crim. P. Rule 31(c); United States v. Giampino, 680 F.2d 898, 900 n.1 (2d Cir. 1982).

⁸ Judge Wexler correctly viewed the issue of materiality as an issue of law. See Greenberg, supra.

⁹ Ann Perzestzy, a Consumer Economic Specialist employed by the Community Council of Greater New York, testified that the median family budget tables were prepared by the Community Council in the ordinary course of its business, relying on data gathered by the U.S. Department of Agriculture, Bureau of Labor Statistics, the New York Department of Consumer Affairs and the Council's own research. Judge Wexler admitted the tables in evidence as generalizations, rather than evidence of what Citron and his family actually spent.

¹⁰ Judge Wexler instructed the jury that

"[a]ny chart or schedule presented to you by the prosecution or defense was prepared solely for the purpose of summarizing the facts claimed by the lawyers to have been proved by testimony, books, records and other documents which are in evidence. In other words, such a chart or schedule merely is the lawyer's pictoral summary of what he contends the evidence shows and is no better than the evidence on which it is based.

"Such charts and schedules, however, are not in and of themselves evidence or proof of any facts. They were used only as a matter of convenience. Under no circumstances may you consider them as independent evidence of anything.

"If you find that any chart or schedule does not correctly reflect facts shown by the evidence in the case, you should disregard it entirely."

 

 

[71-2 USTC ¶9730] United States of America , Appellee v. Anthony M. Siragusa, Appellant

(CA-2), U. S. Court of Appeals, 2nd Circuit, Docket No. 71-1426, 11/1/71, Affirming unreported District Court decision

[Code Sec. 7201--Result unchanged by '69 Tax Reform Act]

Crimes: Tax evasion: Wilfullness: Extraneous material in jury room: Failure to sequester jury: Insufficiency of evidence: "Two inferences" charge.--A conviction for wilfull evasion was upheld even though a Federal Income Tax Booklet not admitted into evidence was found in the jury room after deliberations, and even though the District Court failed to sequester the jury over the weekend while it was still deliberating and unable to reach a verdict. The booklet was found to have no prejudicial effect because the information in the marked section of the booklet was already in evidence. The District Court's failure to sequester the jury was not an abuse of discretion since no harm resulted from such action. Secondly, the Court found that the evidence was sufficient so as to warrant sending the case to the jury and sustain a guilty verdict. Thirdly, in light of Holland, 51-2 USTC ¶9714, 348 U. S. 121 (1954) the District Court had not erred in refusing to charge the jury with the "two inferences" charge since the Second Circuit does not approve of this charge.

Whitney North Seymour, Jr., United States Attorney, Ross Sandler, Peter F. Rient, Assistant United States Attorneys, New York, N. Y., for appellee. Joseph E. Brill, John L. Pollok, 233 Broadway, New York , N. Y., for appellant.

Before MOORE , SMITH and HAYS, Circuit Judges.

[Facts]

SMITH, Circuit Judge:

This is an appeal from a final judgment of the United States District Court for the Southern District of New York, Dudley B. Bonsal, Judge, convicting appellant, Dr. Anthony Siragusa, after a six-day jury trial, on three counts of evasion of personal federal income tax for the calendar years 1962, 1963 and 1964, in violation of 26 U. S. C. §7201. Appellant was sentenced to 30 days imprisonment on each count, to be served concurrently, and was ordered to pay a fine of $5,000 on counts one and three, and $1,000 on count two, that is, $11,000 plus the costs of prosecution. Execution of sentence was stayed pending appeal. At the same trial, appellant was acquitted of three counts of filing a false tax return for the calendar years 1962-64. We find no reversible error and affirm the judgment.

Using the bank deposits method of proving tax evasion, the government introduced evidence to show that appellant received more money from professional fees and interest on savings bank deposits than he had reported on his tax returns during the years in question. Summing up the information the government had obtained from the numerous banks at which appellant had deposits, from a former employee of appellant, and from appellant himself, a revenue agent calculated the deficiency in tax due to be $3,956.29 for 1962, $900.14 for 1963, and $2,209.48 for 1964. The appellant does not contest the fact that the amounts on the tax returns may be in error. He claimed that, of his and his wife's 23 savings accounts, some were inactive during those years, and the passbooks were not presented for the recording of accrued interest. He also claimed that he was hurried in filling out the tax returns and that he estimated the amount of interest and fees to cover that income for which he did not have exact figures. The government introduced evidence which raised doubt about the sufficiency of these explanations.

[Extraneous Material in Jury Room]

The main issue, then, was one of knowledge and wilfullness: did Dr. Siragusa know that he reported less than his income for those years, and did he wilfully evade his full tax responsibility? After two and a half days of testimony, the jury began deliberating late on a Thursday afternoon. When they did not come to an agreement by 6:00, the court, with the consent of counsel, allowed them to disperse for the night, cautioning them not to discuss the case with anyone. The jury resumed deliberations on Friday, and at 4:45 indicated that they were unable to reach a verdict on any of the counts. After a further unsuccessful attempt to come to some agreement that afternoon, a majority indicate that continued discussion might be productive, and they were requested by the court to return on Monday to deliberate further. This action was taken over objection of defense counsel, who argued that the jury ought not be separated for such a length of time, particularly after they had indicated a repeated inability to agree on any verdict.

The jury met on Monday and at about 4:00 p. m., they announced that they had found Dr. Siragusa guilty of three counts of tax evasion and not guilty of three counts of filing false returns.

When counsel reappeared on the date set for sentencing, the court revealed that after the jury had been dismissed, his law clerk had found a 1970 Federal Income Tax Booklet in the jury room. ¹ Both counsel agreed that the booklet had not been put into evidence. A pencil mark bracketed a portion of the book which said:

You must report any interest you received or which was credited to your account (whether entered in your passbook or not) and which you can withdraw.

Appellant's motion for a new trial based on the prejudicial nature of this non-evidentiary, hearsay material was denied, as was a motion for a hearing to examine the jury on the presence of the booklet and their use of it in their deliberations. The denial was based on the fact that the substance of the information in the circled area had been entered in evidence at the trial.

Appellant raises several points on this appeal. His main contention is that the introduction of non-evidentiary material into the jury room, through no fault of appellant, vitiates the verdict in the case and calls for a new trial. He also claims that a hearing on the circumstances surrounding the presence of the booklet ought to have been held by the court. Further, in this connection, he claims that the failure to sequester the jury over the weekend while it was in the midst of deliberation was the cause of the introduction of the extraneous material, presumably by one of the jurors anxious to persuade a hesitant fellow-juror. ²

The rule that nothing which has not been introduced into evidence may go to the jury room is fundamental. However, the court below found that the booklet had no prejudicial effect because the information in the marked section had been introduced into evidence during the trial, and we agree. It added nothing to the evidence any instructions already before the jury.

[Failure to Sequester Jury]

The claim that the failure to sequester led to the difficulty here raises primarily a question of whether the court abused its discretion in allowing the jury to disperse for the weekend. The trial court had wide discretion in such a matter to decide, depending on the nature of the case, whether to keep the jury together. ³ While the court here might have ruled otherwise than to ask the jury to return after a day and a half of deliberation and several communications regarding their inability to agree on any count, we cannot say that it was an abuse of discretion to do as he did in view of the time and effort already spent, and the fact that it was not a sensational trial or notorious defendant likely to arouse great public interest and danger of outside pressures.

[Sufficiency of Evidence]

The other issues raised by appellant do not merit reversal. His second claim is that the evidence on the second count of tax evasion was insufficient to warrant sending it to the jury or sustaining a verdict of guilty. This seems to be a claim that the amounts in question were so small and the possibility that the appellant might not have been informed by his banks so great that a reasonable man would have to have a reasonable doubt about his guilt. In this case, the credibility of defendant's explanations to the agents, the inferences the jury had to draw about knowledge and wilfullness from the conflicting evidence, and the fact that there was a wilfull pattern in appellant's behavior over the three-year period, created a situation in which the conclusion of the factfinder is particularly to be respected. There was surely enough to go to the jury. If the jury believed that there was a pattern and that appellant's behavior was wilfull, the fact of the smaller amount of deficiency in 1963 is unimportant, as long as it was found by them and can reasonably be seen as substantial.

["Two Inforences' Charge]

The third contention is that the court erred in not charging the jury with the "two-inferences" charge. That is, essentially, that when facts and circumstances proven are susceptible of two inferences, one pointing to innocence and the other to guilt, the jury must adopt the one pointing to innocence. This charge was common many years ago, but the Supreme Court, in Holland v. United States [54-2 USTC ¶9714], 348 U. S. 121 (1954), held that it was not essential for the trial court to charge that in order to justify a conviction, where the evidence is circumstantial, it must be such as to exclude every reasonable hypothesis other than guilt, or in other words, that if an inference of innocence is possible, it must be believed. Although some circuits have persisted in using or approving this charge, this circuit has not departed from Holland . ⁴ There was no error in the court's refusal so to charge. The judgment is affirmed.

¹ This is a booklet sent out in the millions by the Internal Revenue Service to inform taxpayers on how to fill out their returns.

² There were two jurors who felt, on Friday afternoon, that agreement on the case would be impossible; one of them was a woman who lived 88 miles from the courthouse and was anxious for the trial to be concluded.

³ United States v. Breland, 376 F. 2d 721 (2d Cir. 1967); United States v. Acuff, 410 F. 2d 463 (6 Cir. 1969), cert. denied, 396 U. S. 830 (1969). Appellant cites some cases going the other way. However, some are earlier than the Breland case and others involve threats or crimes of violence and attendant publicity.

⁴ United States v. Tutino, 269 F. 2d 488, 490 (2d Cir. 1959); United States v. Woodner [63-2 USTC ¶9515], 317 F. 2d 649, 651 (2d Cir.), cert. denied, 375 U. S. 903 (1963); United States v. Marchisio, 344 F. 2d 653, 622 (2d Cir. 1965).

 

 

[57-1 USTC ¶9607]Joe R. Steele, Appellant v. United States of America , Appellee

(CA-5), U. S. Court of Appeals, 5th Circuit, No. 16234, 243 F2d 712, 4/26/57, Aff'g unreported District Ct. decision

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

Income tax evasion: Trial procedure: Refusal of directed verdict for acquittal.--On a second trial, after reversal, of prior conviction because of sending certain exhibits to the jury room, and because of other errors, the District Court acquitted taxpayer of a charge of tax evasion for the year 1948, but convicted and sentenced him on the count covering the year 1947. On appeal, the court sustains the district court's judgment, finding without merit the defendant's position that the government's disclose on cross-examination of the defendant that he did not take the stand in his own behalf at the first trial was prejudicial error. The defendant also claimed prejudicial error in permitting the government to interrogate the defendant regarding a prior felony conviction for gaming. This, the court holds, was not error, particularly since the major part of the evidence in the tax evasion trial dealt with gambling and the profits therefrom.

Ralph G. Langley, Ben F. Foster, San Antonio , Tex. , for appellant. Fred B. Ugast, Charles K. Rice, Assistant Attorney General, Department of Justice, Washington, D. C., John E. Banks, Assistant United States Attorney, San Antonio, Tex., for appellee.

Before HUTCHESON, Chief Judge, and TUTTLE and JONES, Circuit Judges.

HUTCHESON, Chief Judge:

Tried on an indictment charging income tax evasion, in Count One for the year 1947 and in Count Three for the year 1948, defendant was acquitted on Count Three and convicted and sentenced on Count One to two years imprisonment and a fine of $7,500.

[New Trial]

As on the previous trial, the conviction in which was reversed, Steele v. United States, 222 Fed. (2d) 628 [55-1 USTC ¶9438], while no specific item of unreported income was shown by direct evidence, the government undertook to show understatements of income by the net worth and expenditures method.

Appealing from the verdict and judgment, appellant attacks the trial as unfair and affected with prejudicial error in two respects. One of these is permitting the government, on cross examination of the defendant after he had taken the stand in his own behalf and over defendant's objection, to elicit the answer "Yes" to the question:

"Mr. Steele, will you just give me a yes or no answer. The question will be asked in such a manner that it can be answered yes or no. Isn't it a fact that you did not take the stand in your behalf at a previous trial of this case?"

The other is permitting the government, over defendant's objection that the offense was too remote in time and that it was unrelated to the offenses for which he was on trial, income tax evasion, to interrogate the defendant on cross examination regarding a prior felony conviction for gaming.

In addition to these attacks upon the trial procedure, appellant makes the fundamental attack upon the verdict and judgment, that the evidence was insufficient to sustain it and that a verdict of acquittal should have been and should now be directed on his motion for acquittal.

Confidently urging these claims upon us, singly and together, in a well written and argued brief, appellant insists that they are all well taken and should be sustained, while the United States , resisting the claims with equal confidence and vigor, insists that no reversible error attended the trial and that the judgment must be affirmed. For the reasons hereafter stated, we agree that this is so.

[Reference to Earlier Trial]

Upon its first point, appellant, insisting that on principle the answer sought and elicited was without testimonial relevancy and its admission was error, urges upon us that it was highly prejudicial error both because the very nature and frame of the question cast an aspersion upon him for not having taken the stand, thereby violating his constitutional right to refrain from testifying on the former trial, and because the defendant had taken the stand in reliance upon the prior ruling of the court that the former trial should not be referred to. Arguing that the Supreme Court in the Johnson case, 318 U. S. 189 [43-1 USTC ¶9288], has foreshadowed its departure from the Raffel case, Raffel v. United States, 271 U. S. 494, and that the recent grant of certiorari in the case of United States v. Grunewald, 233 Fed. (2d) 556 [56-1 USTC ¶9452] has confirmed this departure, the appellant asks us to hold that there was error in asking the question, or, if we will not do so, to withhold our decision until the Supreme Court has acted in the Grunwald case.

We are of the clear opinion that neither of these requests should be granted. This is so both because it is clear that, under the decisions as they now stand, there was no error in admitting the evidence and because the facts and issues in the Grunewald case are different from those here, and no sufficient showing is made that a reversal of the decision in Grunewald would require a reversal here. Indeed, when the point now under discussion is considered in the light of the whole record, ¹ it seems clear that, if it was error to admit the evidence, the error was the technical one of asking a question, the answer to which was immaterial and irrelevant, (Cf. Raffel v. United States, 271 U. S. 494, at page 497) which, under Rule 52(a) was "harmless error". ²

While the government in its brief does argue that the question was relevant because, as stated in the Raffel case, if the cross examination had revealed "the real reason for the defendant's failure to contradict the government's testimony on the first trial was a lack of faith in the truth or probability of his own witness, his answer would have a bearing on his credibility and on the truth of his own testimony in chief", here the question was strictly limited to an answer "Yes" or "No". No effort was made to follow the answer up, and the district judge by his instruction excluded the whole matter of the former trial from the jury's consideration.

Appellant's argument that the matter is made more serious by what he calls the ground rule laid down by the judge at the beginning of the trial, that no reference should be made to the former trial, will not, we think, stand up because as the court stated, and it was in effect admitted, at that time it was not supposed that the defendant would take the stand.

Finally, the verdict of the jury, convicting the defendant of the smaller amount of evasion charged in the 1947 tax year and acquitting him of the larger amount in the 1948 tax year, shows plainly that the defendant took no prejudice from the ruling but, on the contrary, obtained a benefit from the defendant's answer, that he was convicted and sentenced to four years, and the judgment was reversed.

[Evidence of Former Conviction]

On its second point, appellant stands no better. Indeed, not as well. Admitting that it is the general rule that when a defendant takes the witness stand he may be impeached as any other witness, and that there are many cases holding that the admission of evidence of convictions of a felony or of a misdemeanor involving moral turpitude is not error, he yet urges upon us that, in admitting this evidence under the facts and circumstances, the district court abused its discretion and the admission was prejudicial error.

We cannot at all agree. We think that but for the matter of remoteness in time there could be no basis for the claim and that, in admitting the evidence under the circumstances of this case, the court was well within its discretion. If, however, we should be mistaken in this, it is quite plain that no prejudicial error occurred. Defendant was allowed to and did show that he received a pardon. Besides, since the major part of the evidence in the case dealt with gambling and the profits derived therefrom, the proof of the conviction for gaming could not be said to have in any way introduced a new element into the case which reflected discreditably upon appellant. If he was prejudiced by the fact of his gaming, the prejudice was established by the necessarily relevant evidence as to the source of his income, and if that did not prejudice him, the mere fact that he had been convicted in connection with his business and received a pardon certainly could not be said to do so. The whole design and purpose of Criminal Rule 52(a) embodying and carrying forward the long continued provision for harmless error embodied in the statutes, was, while protecting a defendant from substantial and harmful error, to prevent wholesale reversals for immaterial and harmless error.

As the Supreme Court said in the Lutwak case, 344 U. S. at 619: "A defendant is entitled to a fair trial but not a perfect one." See also Elder v. United States, 213 Fed. (2d) 876.

[Directed Verdict Refused]

Devoting a large portion of its brief to the presentation of his third and final point, that a verdict of acquittal should have been directed, appellant, by an argument, falling short we think of demonstrating as a matter of law that no case for a jury verdict was made out, so invests with plausibility the claim made to the trier of facts, that on the evidence as a whole he ought not to have been convicted on either count, as to furnish a common sense explanation for the verdict which, convicting him on one count, acquitted him on the other. In short, while the argument, viewed as a jury argument, skillfully and effectively, from defendant's standpoint, points to and attacks the claimed factual weaknesses in the government's evidence as to the opening net worth as of January 1, 1947, it fails to demonstrate, as it claims to do, that the evidence made mandatory the direction of a verdict on the first count. When the appellant was here before, this court, on full consideration, determined adversely his contention that a verdict of acquittal should have been directed because (a) the proof was insufficient to establish an accurate opening net worth as of January 1, 1947, and (b) there was no showing of willfullness.

The evidence adduced by the government in support of its opening net worth on this trial was substantially the same as that it introduced on this point on the first trial, and the testimony of the defendant on this trial did not, as matter of law, effect any change.

As to the claim that the government failed to establish, as a matter of law, a reasonably accurate closing net worth, no such claim was apparently made on the first appeal, and the argument now made presents nothing more than an argument on the facts which the jury has rejected.

Apparently the defendant is of the opinion that the cases hold that in this kind of case the government's proof must attain the accuracy of a scientific demonstration, and that any failure to attain to this standard or any discrepancies in the proof will be fatal to the government's case.

We have been pointed to, we have found, no decision so holding.

Here, as in his argument in respect to the opening net worth statement, appellant makes nothing more than a jury argument against the sufficiency of the proof. He does not, be cannot, show that if the government's evidence is believed, a case for the jury is not made out. In short, appellant, drawing on the cautionary admonition in the cases as to the duty of the courts to see that a defendant is not convicted on insufficient evidence, that when his extra judicial statements are relied on, they must be corroborated, and, confusing what the court said in the Calderon case with respect to the proof showing an increase in net worth "over the prosecution years", the appellant is seeking to make contentions and arguments, which are all right in their place as arguments to the trier of facts, serve as arguments in support of a claim that, as matter of law, there are no facts to argue to a trier.

We find no merit in appellant's contentions and no support for his arguments in the trilogy of cases, Holland v. United States, 348 U. S. 121 [54-2 USTC ¶9714]; Smith v. United States, 348 U. S. 147 [54-2 USTC ¶9715]; and U. S. v. Calderon, 348 U. S. 160 [54-2 USTC ¶9712], he cites.

It is true that in each of these cases the court did point out the perils to the defendant inherent in the net worth method of proof and did enjoin upon the courts special precautions to see to it that the defendant was not thrown into the position by this kind of prosecution of having to prove himself innocent of the charges, and it did discuss the determine the law as to corroboration of extra judicial admissions such as made here with regard to opening and closing net worth. The result, however, of these discussions and determinations was to make it clear that, while corroboration was usually necessary, "admissions given under special circumstances, providing grounds for a strong inference of reliability, may not have to be corroborated.", and that "It is sufficient if the corroboration merely fortifies the truth of the conviction without redependently establishing the crime charged". In Calderon's case where, unlike here, the defendant was convicted for evasion on each of the four counts charged, the court pointed out that corroborating evidence could be sought in the proof of both parties where the defendant introduced evidence in his own behalf after his motion for acquittal has been overruled, and that, "while the evidence as a whole must show a deficiency for each of the prosecution years, the corroborating evidence sufficies if it shows a substantial deficiency for the over all prosecution period." (Italics supplied)

Instead then of holding in effect, as the appellant claims it does, that if the government approaches a net worth case on "a prosecution year theory", if its proof fails in any respect, it must be held to have failed to make out a case for any of "the prosecution years", the court really held that while in order to recover in any year the government must show a deficiency for that year, "the corroborating evidence suffices if it shows a substantial deficiency for the over all prosecution period."

No reversible error appearing, the judgment is AFFIRMED.

¹ Including the testimony of the defendant on redirect, that it was upon the advice of his counsel that he did not take the stand, and his surrebuttal testimony, that he was convicted on the trial and given a sentence, and that his conviction was set aside on appeal, and the instruction of the district judge:

"The evidence in this case has developed the fact that the case has been tried before. In that connection you are instructed that you will not consider for any purpose, nor discuss that fact in determining the guilt or innocence of the defendant. You will consider only the evidence adduced at this trial in determining the guilt or innocence of the defendant and not speculate as to the evidence introduced in the former trial." (Record pp. 14-15.)

² "52(a) Harmless Error. Any error, defect, irregularity, or variance which does not affect substantial rights shall be disregarded." Rules of Criminal Procedure, 18 U. S. C. pp. 570-572, and Ann. Pocket Part p. 236-238 Incl.

 

 

[55-1 USTC ¶9438]Joe R. Steele, Appellant v. United States of America , Appellee

(CA-5), In the United States Court of Appeals for the Fifth Circuit, No. 15187, 222 F2d 628, May 13, 1955

Appeal from the United States District Court for the Western District of Texas.

[1939 Code Sec. 145(b)--substantially unchanged in 1954 Code Sec. 7201]

Criminal prosecution: Government's computations sent to jury room.--Over defendant's objections two computations of defendant's income, one on a net worth basis and one on the expenditures-available funds basis, were admitted in evidence and at the request of the United States Attorney they were sent to the jury room after the jury had retired. The appeals court agreed with defendant that the Government's side was given a great and unfair advantage over that of defendant.

Criminal prosecution: Improper comment by prosecutor.--United States Attorney's statement of his personal opinion that he believed defendant guilty, etc., and his statement in the conclusion of his summation, linking himself, the jury, and judge as interested on the same side of the case, could not be justified and excused.

Criminal prosecution: Motion for acquittal.--It was error to refuse defendant's motion to direct an acquittal on the count dealing with the wife's separation return. The case is reversed and remanded for opportunity to furnish better proof if such is available.

Ben F. Foster, San Antonio , Tex. , Henry H. Brooks, Austin , Tex. , for appellant. Lonney F. Zwiener, Assistant United States Attorney, Charles F. Herring, United States Attorney, Austin, Tex., for appellee.

Before HUTCHESON, Chief, Judge, HOLMES, Circuit Judge, and DAWKINS, District Judge.

HUTCHESON, Chief Judge:

Found guilty on three counts of an indictment charging income tax evasion, count one dealing with his separate return for 1947, count two with the separate return of his wife for that year, and count three with the joint return of himself and his wife for 1948, defendant was sentenced on each count to four years imprisonment and to pay a fine of $5000.00, the prison sentences to run concurrently.

Appealing from his conviction, defendant is here with seven specifications of error, ¹ urging upon us that the judgment was so affected with prejudicial error that it may not stand.

While we cannot agree with appellant that all of his specifications present reversible errors,--indeed we think it clear that the third, fourth and fifth do not, we can and do agree with him that, for the reasons hereafter briefly stated, enough of them do to require a reversal.

[Government Exhibits]

Of these, in our opinion, the most egregious and prejudicial are those under the first specification of error, dealing with the two government exhibits. Government Exhibit 58 purports to be a computation of the Steeles' income on a net worth basis, and Government Exhibit 59 purports to be a computation of such income on the expenditures-available funds basis. These exhibits were the work of Travis Howard, a special agent of the Bureau of Internal Revenue. He was permitted to stay in the courtroom during the entire proceeding, heard all of the testimony of all the Government witnesses, and was the last witness for the Government. He testified that he had not only heard all of the testimony of the Government witnesses but that he had examined all of the exhibits introduced by the Government and that Exhibits 58 and 59 were computations based upon all of the Government's case.

Since the computations contained in these exhibits purport to be a computation of all of the evidence of the government's witnesses, one of appellant's contentions against them is that there are omissions, interpretations and discrepancies between the record and these exhibits and a considerable portion of the testimony of the witnesses Jimmie Lim, Frank Garrett, Lawrence M. Curry, W. L. Bridges, Jr. and Mary Elizabeth Swanson. The exhibits were admitted in evidence over the objections ² of the defendant, and after the jury had retired for deliberation, the United States Attorney requested that Exhibits 58 and 59 be sent to the jury room. Defendant's counsel objected on the ground: that the exhibits were offered and accepted in evidence in a restricted manner; that they were essentially argumentative; and counsel's thought was that to send them to the jury would be to send there the argument and the interpretation of how Agent Howard felt each witness had testified; that, therefore, the exhibits were not really evidence which had gone before the jury but special pleas of the government and its witness. The objections were overruled and defendant excepted.

Recognizing that the Supreme Court, in United States v. Johnson, 319 U. S. 503 [43-1 USTC ¶9470], has held that in a prosecution for income tax evasion, an expert witness such as Howard purported to be may give testimony of his computation based upon substantially the entire evidence on the record as to the defendant's income, the defendant contends that the admission of these exhibits, their offer and reception in evidence, and their sending in to the jury room, were something entirely different from what was authorized in the Johnson case; that agent Howard did not merely attempt to summarize the testimony; that, on the contrary, he undertook to evaluate it, endeavoring to pass upon the realiability and credibility of certain witnesses and to determine what weight should be given their testimony, so that, by his testimony as to the exhibits and their sending to the jury, the Government, through its witness Howard, was enabled to invade, indeed to take over the province of, the jury.

In support of his position, the defendant cites U. S. v. Ward, 169 Fed. (2d) 460, as a case in which the court excluded testimony similar to that of Howard in this case.

[Exhibits Sent to Jury Room]

As to the second portion of the first specification, the sending of such exhibits to the jury at the request of the district attorney after the jury had retired and while it was in the jury room considering its verdict, we agree with appellant that the jury could scarcely consider this act of the court other than as investing these exhibits with an air of credibility as demonstrative evidence over and above, and independent of, the evidence which they purported to summarize and embody, with the undoubted effect of completely erasing from the minds of the jury, as to the so-called exhibits, any therapeutic effect the charge to the jury that the exhibits were not original evidence and were not binding upon the jury, was intended or calculated to have.

Wholly apart from the fact that they were not under any circumstances entitled to be taken to the jury as exhibits and that, by the very fact that they were sent to the jury after their deliberations had begun, the Government's side was given a great and unfair advantage over that of the defendant, since the defendant had no corresponding summaries of its view of the evidence, the purpose for which they were sent to the jury, as evidenced by the statement of the United States Attorney, "I don't think they can have anything to work out without the exhibits", and the manner in which they were sent there made the sending even more greatly prejudicial.

Directly in point we think is this quotation from the case of Holland v. United States, 348 U. S. 121 [54-2 USTC ¶9714]:

"There is much danger that the jury may assume that once the Government has established the figures in its net worth computations, the crime of tax evasion automatically follows. The possibility of this is increased where the jury, without guarding instructions, is allowed to take into the jury room the various charts summarizing the computations; bare figures have a way of acquiring an existence of their own, independent of the evidence which gave rise to them."

[Johnson Case Relied on by Government]

For its answer to this specification, the Government first seeks no minimize the discrepancies between the testimony of the witnesses and the summaries of them set down in the exhibits, and, second, rests its case on United States v. Johnson, supra. We do not think that this will do, for this is not at all the Johnson case.

Putting aside the question of the significance and importance of the claimed discrepancies, we think that it was as clear error to admit the so-called exhibits as it was to admit seven charts prepared in the Elder case, Elder U. S., 213 Fed. (2d) 876, by and under the directions of the government witness, Buol, and agent of the Federal Bureau of Investigation. It is true that in that case, involving theft of automobiles, we held that the error, though a clear one, was not so prejudicial as to be reversible, but, as was carefully pointed out in the opinion, this was because of the nature of the case, the admitted accuracy of the charts, the simple and uncomplicated nature of the evidence attempted to be summarized, and the explicit and careful instructions given by the district judge.

Here, this is an entirely different kind of case, a prosecution under the net worth and expenditures method attended, as we, in the Demetree case, 207 Fed. (2d) 892 [53-2 USTC ¶9646], and the Supreme Court, in the Holland and other cases, have pointed out, with great difficulties and problems in reconciling the right of the government to convict on substantial evidence with the rights of the defendant to a fair trial in accordance with law, and the over-all effect of the exhibits and their handling was far more clearly prejudicial.

The Government's reliance on the statement quoted in its brief from United States v. Johnson, supra, "* * * but an argument such as that which we are rejecting tacitly assumes that juries are too stupid to see the drift of evidence. * * *", is vain in this case. For the argument accepted here is very different from the one rejected there. Besides the quotation is no more than a more or less aimless and glittering generality having little, if any, real bearing upon the decision in that case and certainly none here.

[U. S. Attorney's Statements]

Because the case must be reversed for the glaring errors with respect to these so-called exhibits, it will serve to useful purpose for us to enter into an extended discussion of the other claimed errors since they are not likely to occur on another trial. It will suffice to say of the second specification of error that, though the argument of the United States Attorney was not objected to, it did go unadmonished and uncorrected so far out of bounds as to put the district judge in error in not, of his own motion, admonishing the Government's counsel to desist from that kind of argument and directing the jury that the argument was incorrect and unfair, and that they should not consider it. This was especially so with respect to the United States Attorney's statement of his personal opinion that he believed defendant guilty, his characterization of the defendant as a Dr. Jekyll and Mr. Hyde, a man at home with his family suave and, as Mr. Foster said, "a benign little man, but yet when he gets down in the dark streets of Houston, we find him having his hand in every kind of racket that you can imagine, a man who can do that is smart, he is cunning, he is crafty." Finally, the statement in the conclusion of his summation, linking himself, the jury, and the judge as interested on the same side in the case cannot be justified or excused:

"You know there's three of us concerned now with the outcome of this case besides Steele. I am concerned because I think I have presented here to you, through the untiring efforts of Mr. Zweiner and the accountants, a case which proves beyond any question of a doubt that Joe Steele is guilty. And I don't like a citizen--and as a United States Attorney I don't like to see a man turned loose when he is proved guilty. I don't think it is fair to the innocent people of this country. So I am interested. Judge Rice has sat here on the bench the last week, when you were here, and has more or less presided over the court, ruled on objections, kept us all in line as best he could. So he is in this case to that extent. But, gentlemen, now we are about to reach the point where the only person or persons who can do anything about the crime that has been committed and the law that has been violated are you twelve men. I have done the best I know how . . . I have done everything I can. I have tried to present the case fairly . . . I have done all I can do.

"The judge will give you the charge and he's done all he can do. And you are going to have to do the rest." (Italics supplied.)

[Other Specifications of Error]

We agree with the Sixth Specification that it was error on this record to refuse defendant's motion to direct an acquittal on the second count of the indictment, dealing with the wife's separate return, Benham v. United States, 215 Fed. (2d) 472 [54-2 USTC ¶9574]. Since however, it is quite likely that more evidence can be produced on retrial, the case will not be reversed with directions to acquit on this count, but reversed and remanded for opportunity to furnish better proof if better proof is available. Bryan v. United States , 175 Fed. (2d) 223 [49-1 USTC ¶9322].

Finally, as to the Seventh Specification of Error, we think it sufficient to say that, taking the specification as a whole, it is well grounded, but that since we do not believe that any of the matters referred to will recur on another trial, it is unnecessary to consider and point out which of the many matters complained of in this specification constitute prejudicial error and which do not.

The judgment is REVERSED and the cause is REMANDED for further and not inconsistent proceedings.

¹ Specification No. 1 complains of (1) the admission into evidence of government's exhibits 58 and 59, consisting of summaries of the evidence for the government by way of figures and computations, prepared by, and the conclusions of, the witness Howard, a special agent for the Bureau of Internal Revenue; and (2) the sending of such exhibits to the jury room.

Specification No. 2 complains of the inflamatory character of the opening and closing arguments of the United States Attorney.

Specification No. 3 complains of a statement of the prosecutor in the concluding argument that defendant had testified to certain facts when the defendant did not take the stand.

Specification No. 4 complains of the refusal of the court after the Assistant United States Attorney had made his opening statement, to grant the defendant's request that the case be submitted to the jury without further argument.

Specification No. 5 complains of the refusal to direct an acquittal because: (a) the proof was insufficient to establish an accurate opening net worth as of Jan. 1, 1947 ; and (b) there was no showing of willfulness.

Specification No. 6, that it was error not to instruct a verdict for want of evidence as to the second count dealing with the income tax return of defendant's wife.

Specification No. 7 is a general complaint that the trial was so attended with serious errors as to deny defendants a fair trial.

² (1) That such exhibits are a resume of evidence as seen by the witness Howard and, as such, are not proper evidence to be admitted before the jury; (2) Said exhibits are not evidence of any fact except a resume of what Howard thinks the witnesses said; (3) They are argumentative; and (4) They were improper and not evidence.