7203 - Fact Finding Page 5

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Fraud Statutes 

Additional Information:

 

7203 - Accountant-Client Privilege
7203 - Accrual Basis
7203 - Admissibility 1 p1
7203 - Admissibility 1 p2
7203 - Admissibility 1 p3
7203 - Admissibility 1 p4
7203 - Admissibility 1 p5
7203 - Admissibility 1 p6
7203 - Admissibility 2 p1
7203 - Admissibility 2 p2
7203 - Admissibility 2 p3
7203 - Admissibility 2 p4
7203 - Admissibility 2 p5
7203 - Admissibility 3 p1
7203 - Admissibility 3 p2
7203 - Admissibility 3 p3
7203 - Admissibility 3 p4
7203 - Admissibility 3 p5
7203 - Admissibility 4 p1
7203 - Admissibility 4 p2
7203 - Admissions p1
7203 - Admissions p2
7203 - Advice of Counsel p1
7203 - Advice of Counsel p2
7203 - Amendment
7203 - Appeal Right to
7203 - Appeal Timeliness
7203 - Appeal Waiver
7203 - Appeal without merit
7203 - Arrest
7203 - Fraudulent Return
7203 - Defeat & Evade Income Taxes p1
7203 - Defeat & Evade Income Taxes p2
7203 - Defeat & Evade Income Taxes p3
7203 - Defeat &  Evade Income Taxes p4
7203 - Attorney Disqualified
7203 - Attorney's Testimony p1
7203 - Attorney's Testimony p2
7203 - Attorney's Testimony p3
7203 - Attorney's Testimony p4
7203 - Bail
7203 - Bank Records &  Net Worth Increases 1 p1
7203 - Bank Records &  Net Worth Increases 1 p2
7203 - Bank Records &  Net Worth Increases 1 p3
7203 - Bank Records &  Net Worth Increases 1 p4
7203 - Bank Records &  Net Worth Increases 1 p5
7203 - Bank Records &  Net Worth Increases 1 p6
7203 - Bank Records &  Net Worth Increases 2 p1
7203 - Bank Records &  Net Worth Increases 2 p2
7203 - Bank Records &  Net Worth Increases 2 p3
7203 - Bank Records &  Net Worth Increases 2 p4
7203 - Bank Records &  Net Worth Increases 2 p5
7203 - Bank Records &  Net Worth Increases 3 p1
7203 - Bank Records &  Net Worth Increases 3 p2
7203 - Bank Records &  Net Worth Increases 3 p3
7203 - Bank Records &  Net Worth Increases 3 p4
7203 - Bank Records &  Net Worth Increases 3 p5
7203 - Bank Records &  Net Worth Increases 4 p1
7203 - Bank Records &  Net Worth Increases 4 p2
7203 - Bank Records &  Net Worth Increases 4 p3
7203 - Bank Records &  Net Worth Increases 4 p4
7203 - Bank Records &  Net Worth Increases 4 p5
7203 - Bank Records &  Net Worth Increases 5 p1
7203 - Bank Records & Net Worth Increases 5 p2
7203 - Bank Records & Net Worth Increases 5 p3
7203 - Bank Records & Net Worth Increases 5 p4
7203 - Bank Records & Net Worth Increases 5 p5
7203 - Base Sentence p1
7203 - Base Sentence p2
7203 - Base Sentence p3
7203 - Base Sentence p4
I7203 - Bill of Particluar Conspiracy
7203 - Bill of Particulars
7203 - Books and Records
7203 - Burden of going forward with evidence
7203 - Burden of Proof
7203 - Carryback Offset
7203 - Changing Plea
7203 - Character witness p1
7203 - Character witness p2
7203 - Circumstanial Evidence p1
7203 - Circumstanial Evidence p2
7203 - Circumstanial Evidence p3
7203 - Circumstanial Evidence p4
7203 - Collateral Estoppel
7203 - Collection
7203 - Commitment by U.S. Commissioner
7203 - Communication to Jury
7203 - Compromise
7203 - Consolidation
7203 - Conspiracy p1
7203 - Conspiracy p2
7203 - Conspiracy 1 p1
7203 - Conspiracy 1 p2
7203 - Conspiracy 1 p3
7203 - Conspiracy 1 p4
7203 - Conspiracy 1 p5
7203 - Conspiracy 1 p6
7203 - Conspiracy 1 p7
7203 - Conspiracy 1 p8
7203 - Conspiracy 2 p1
7203 - Conspiracy 2 p2
7203 - Conspiracy 2 p3
7203 - Constitutional Grounds 1 p1
7203 - Constitutional Grounds 1 p2
7203 - Constitutional Grounds 1 p3
7203 - Constitutional Grounds 1 p4
7203 - Constitutional Grounds 1 p5
7203 - Constitutional Grounds 2 p1
7203 - Constitutional Grounds 2 p2
7203 - Constitutional Grounds 2 p3
7203 - Constitutional Grounds 2 p4
7203 - Constitutional Grounds 2 p5
7203 - Constitutional Grounds 3 p1
7203 - Constitutional Grounds 3 p2
7203 - Constitutional Grounds 3 p3
7203 - Constitutional Grounds 3 p4
7203 - Constitutional Grounds 3 p5
7203 - Constitutional Grounds 4 p1
7203 - Constitutional Grounds 4 p2
7203 - Constitutional Grounds 4 p3
7203 - Constitutional Grounds 4 p4
7203 - Constitutional Grounds 5 p1
7203 - Constitutional Grounds 5 p2
7203 - Constitutional Grounds 5 p3
7203 - Constitutional Grounds 5 p4
7203 - Constitutional Grounds 5 p5
7203 - Constitutional Grounds 6
7203 - Contempt Finding Ag. Defendant's Counsel
7203 - Continuance p1
7203 - Continuance p2
7203 - Continuance p3
7203 - Conviction Required
7203 - Copies of Records p1
7203 - Copies of Records p2
7203 - Corporation Officer
7203 - Costs
7203 - Credit for Time Served
7203 - Criminal Contempt
7203 - Cross-Examination PART 1 p1
7203 - Cross-Examination PART 1 p2
7203 - Cross-Examination PART 1 p3
7203 - Cross-Examination PART 1 p4
7203 - Cross-Examination PART 1 p5
7203 - Cross-Examination PART 2
7203 - DefendantHaving Facts Available p1
7203 - DefendantHaving Facts Available p2
7203 - DefendantHaving Facts Available p3
7203 - Degree of Proof p1
7203 - Degree of Proof p2
7203 - Depositions
7203 - Different Statute Cited
7203 - Discovery, Scope Of
7203 - Documentary Evidence in Jury Room
7203 - Double Jeopardy 1 p1
7203 - Double Jeopardy 1 p2
7203 - Double Jeopardy 1 p3
7203 - Double Jeopardy 1 p4
7203 - Double Jeopardy 1 p5
7203 - Double Jeopardy 2 p1
7203 - Double Jeopardy 2 p2
7203 - Double Jeopardy 2 p3
7203 - Double Jeopardy 2 p4
7203 - Enhanced Sentence Sophisticated Means p1
7203 - Enhanced Sentence Sophisticated Means p2
7203 - Enhanced Sentence p1
7203 - Enhanced Sentence p2
7203 - Entrapment
7203 - Erroneous calculation of tax
7203 - Exclusion of Oral Testimony
7203 - Exercise Privilege-Exclusion from Courtroom
7203 - Expert Witness p1
7203 - Expert Witness p2
7203 - Expert Witness p3
7203 - Expert Witness p4
7203 - Extenuating Circumstances
7203 - Fact Finding p1
7203 - Fact Finding p2
7203 - Fact Finding p3
7203 - Fact Finding p4
7203 - Fact Finding p5
7203 - Failure of IRS to File Return
7203 - Failure to Assess Tax
7203 - Failure to Prosecute p1
7203 - Failure to Prosecute p2
7203 - Failure to Prosecute p3
7203 - Failure to Prosecute p4
7203 - Failure to Prosecute p5
7203 - Failure to Report Income 1 p1
7203 - Failure to Report Income 1 p2
7203 - Failure to Report Income 1 p3
7203 - Failure to Report Income 1 p4
7203 - Failure to Report Income 1 p5
7203 - Failure to Report Income 1 p6
7203 - Failure to Report Income 2 p1
7203 - Failure to Report Income 2 p2
7203 - Failure to Supply Information
7203 - False Return
7203 - Fictitious names
7203 - Fraud Case Procedures p1
7203 - Fraud Case Procedures p2
7203 - Fraud Case Procedures p3
7203 - Fraud Case Procedures p4
7203 - General Exception
7203 - Good Faith p1
7203 - Good Faith p2
7203 - Good Faith p3
7203 - Good Faith p4
7203 - Government Agent Prosecuting Claim
7203 - Grand Jury 1 p1
7203 - Grand Jury 1 p2
7203 - Grand Jury 1 p3
7203 - Grand Jury 1 p4
7203 - Grand Jury 1 p5
7203 - Grand Jury 2 p1
7203 - Grand Jury 2 p2
7203 - Hearsay Evidence p1
7203 - Hearsay Evidence p2
7203 - Hearsay Evidence p3
7203 - Hearsay Evidence p4
7203 - Hearsay Evidence p5
7203 - Hostility of the Court p1
7203 - Hostility of the Court p2
7203 - Hostility of the Court p3
7203 - Hypnosis
7203 - Identification
7203 - Ignorance of Law
7203 - Immunity p1
7203 - Immunity p2
7203 - Immunity p3
7203 - Impeachment p1
7203 - Impeachment p2
7203 - Improper Comment PART 1 p1
7203 - Improper Comment PART 1 p2
7203 - Improper Comment PART 1 p3
7203 - Improper Comment PART 1 p4
7203 - Improper Comment PART 1 p5
7203 - Improper Comment PART 2 p1
7203 - Improper Comment PART 2 p2
7203 - Improper Comment PART 2 p3
7203 - Improper Comment PART 2 p4
7203 - Improper Comment PART 2 p5
7203 - Improper Comment PART 3
7203 - Improper Question
7203 - Incrimination 1 p1
7203 - Incrimination 1 p2
7203 - Incrimination 1 p3
7203 - Incrimination 1 p4
7203 - Incrimination 1 p5
7203 - Incrimination 2 p1
7203 - Incrimination 2 p2
7203 - Incrimination 2 p3
7203 - Incrimination 2 p4
7203 - Incrimination 2 p5
7203 - Incriminaton Before Grand Jury p1
7203 - Incriminaton Before Grand Jury p2
7203 - Instructions to Jury 1 p1
7203 - Instructions to Jury 1 p2
7203 - Instructions to Jury 1 p3
7203 - Instructions to Jury 1 p4
7203 - Instructions to Jury 1 p5
7203 - Instructions to Jury 2 p1
7203 - Instructions to Jury 2 p2
7203 - Instructions to Jury 2 p3
7203 - Instructions to Jury 2 p4
7203 - Instructions to Jury 2 p5
7203 - Instructions to Jury 3 p1
7203 - Instructions to Jury 3 p2
7203 - Instructions to Jury 3 p3
7203 - Instructions to Jury 3 p4
7203 - Instructions to Jury 3 p5
7203 - Instructions to Jury 4 p1
7203 - Instructions to Jury 4 p2
7203 - Instructions to Jury 4 p3
7203 - Instructions to Jury 4 p4
7203 - Instructions to Jury 4 p5
7203 - Instructions to Jury 5 p1
7203 - Instructions to Jury 5 p2
7203 - Instructions to Jury 5 p3
7203 - Instructions to Jury 5 p4
7203 - Instructions to Jury 5 p5
7203 - Instructions to Jury 6 p1
7203 - Instructions to Jury 6 p2
7203 - Instructions to Jury 6 p3
7203 - Instructions to Jury 6 p4
7203 - Instructions to Jury 6 p5
7203 - Instructions to Jury 7 p1
7203 - Instructions to Jury 7 p2
7203 - Instructions to Jury 7 p3
7203 - Instructions to Jury 7 p4
7203 - Instructions to Jury 7 p5
7205 Convictions p1
7205 Convictions p2
7205 Convictions p3
7205 Convictions p4
7205 Convictions p5
7205 Double Jeopardy
7205 Exemption Certificates
7205 Hostility of the Court
7205 Indictment
7205 Information
7205 Intent to Deceive Lacking
7205 Right to Counsel
7205 Trial, Timeliness
7205 Variance
7205 Venue
7205 Willfulness
7206 False Returns 1 p1
7206 False Returns 1 p2
7206 False Returns 1 p3
7206 False Returns 1 p4
7206 False Returns 1 p5
7206 False Returns 2 p1
7206 False Returns 2 p2
7206 False Returns 2 p3
7206 False Returns 2 p4
7206 False Returns 2 p5
7206 False Returns 3 p1
7206 False Returns 3 p2
7206 False Returns 3 p3
7206 False Returns 3 p4
7206 Basis for Allegation of Fraud
7206 Concealment of Assets p1
7206 Concealment of Assets p2
7206 Conspiracy 1 p1
7206 Conspiracy 1 p2
7206 Conspiracy 1 p3
7206 Conspiracy 1 p4
7206 Conspiracy 2 p1
7206 Conspiracy 2 p2
7206 Constitutionality p1
7206 Constitutionality p2
7206 Constitutionality p3
7206 Costs
7206 Disclosure of Returns
7206 Estoppel p1
7206 Estoppel p2
7206 Estoppel p3
7206 Evidence 1 p1
7206 Evidence 1 p2
7206 Evidence 1 p3
7206 Evidence 1 p4
7206 Evidence 1 p5
7206 Evidence 2 p1
7206 Evidence 2 p2
7206 Evidence 2 p3
7206 Evidence 2 p4
7206 Evidence 2 p5
7206 Evidence 3 p1
7206 Evidence 3 p2
7206 Evidence 3 p3
7206 Evidence 3 p4
7206 Evidence 3 p5
7206 Evidence 4 p1
7206 Evidence 4 p2
7206 Evidence 4 p3
7206 False Claims Against U.S.
7206 False Documents p1
7206 False Documents p2
7206 False Statements in Return 1 p1
7206 False Statements in Return 1 p2
7206 False Statements in Return 1 p3
7206 False Statements in Return 1 p4
7206 False Statements in Return 1 p5
7206 False Statements in Return 2 p1
7206 False Statements in Return 2 p2
7206 False Statements in Return 2 p3
7206 False Statements in Return 2 p4
7206 False Statements in Return 3 p1
7206 False Statements in Return 3 p2
7206 False Statements in Return 3 p3
7206 False Statements in Return 3 p4
7206 False Statements in Return 3 p5
7206 False Statements in Return 4 p1
7206 False Statements in Return 4 p2
7206 False Statements in Return 4 p3
7206 False Statements in Return 4 p4
7206 False Statements in Return 4 p5
7206 False Statements in Return 5 p1
7206 False Statements in Return 5 p2
7206 False Statements in Return 5 p3
7206 False Statements in Return 5 p4
7206 False Statements to IRS Agents p1
7206 False Statements to IRS Agents p2
7206 False Statements to IRS Agents p3
7206 Forgery
7206 Grand Jury
7206 Guilty Plea p1
7206 Guilty Plea p2
7206 Immunity
7206 Indictment 1 p1
7206 Indictment 1 p2
7206 Indictment 1 p3
7206 Indictment 1 p4
7206 Indictment 1 p5
7206 Indictment 2 p1
7206 Indictment 2 p2
7206 Instructions to Jury 1 p1
7206 Instructions to Jury 1 p2
7206 Instructions to Jury 1 p3
7206 Instructions to Jury 1 p4
7206 Instructions to Jury 1 p5
7206 Instructions to Jury 2 p1
7206 Instructions to Jury 2 p2
7206 Instructions to Jury 2 p3
7206 Instructions to Jury 2 p4
7206 Instructions to Jury 2 p5
7206 Instructions to Jury 3 p1
7206 Instructions to Jury 3 p2
7206 Instructions to Jury 3 p3
7206 Instructions to Jury 3 p4
7206 Instructions to Jury 3 p5
7206 Jury Verdict Disregarded
7206 Jury p1
7206 Jury p2
7206 Jury p3
7206 Lesser Included Offense p1
7206 Lesser Included Offense p2
7206 Motion For Continuance
7206 Motion to Sever
7206 Motion to Transfer
7206 Motion to Vacate Sentence
7206 Net Worth Statement
7206 Offer in Compromise
7206 Perjury
7206 False or Fraudulent Returns p1
7206 False or Fraudulent Returns p2
7206 False or Fraudulent Returns p3
7206 False or Fraudulent Returns p4
7206 False or Fraudulent Returns p5
7206 Prior Convictions
7206 Prior Law
7206 Probation
7206 Prosecutor's Comment p1
7206 Prosecutor's Comment p2
7206 Restitution
7206 Right to Counsel p1
7206 Right to Counsel p2
7206 Sentence p1
7206 Sentence p2
7206 Sentence p3
7206 Sentence p4
7206 Sentencing Guidelines 1 p1
7206 Sentencing Guidelines 1 p2
7206 Sentencing Guidelines 1 p3
7206 Sentencing Guidelines 1 p4
7206 Sentencing Guidelines 1 p5
7206 Sentencing Guidelines 2 p1
7206 Sentencing Guidelines 2 p2
7206 Sentencing Guidelines 2 p3
7206 Statute of Limitations p1
7206 Statute of Limitations p2
7206 Venue
7206 Willfulness Defined p1
7206 Willfulness Defined p2
7206 Willfulness Defined p3
7206 Willfulness Defined p4
7207 Conviction
7207 Defenses
7207 Motion to Dismiss
7207 Sentencing
7207 Willfully Defined
7210 Willful Failure to Obey Summons
7212 Assault
7212 Bribery
7212 Constiutionality
7212 Indictment
7212 Interference p1
7212 Interference p2
7212 Interference p3
7212 Interference p4
7212 Jury Instructions
7212 Rescue of Seized, Levied Property p1
7212 Rescue of Seized, Levied Property p2
7212 Sentence p1
7212 Sentence p2
7212 Statute of Limitations
7212 Suppresion of Evidence
7215 Constitutionality
7215 Conviction
7215 Corporation
7215 Defenses
7215 Evidence
7215 Intent
7215 Speedy Trial
7216 Consent
7216 Preparer Defined
7216 Scope of Statute
7217 IRS Employees

 

Fact Finding Page5

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[64-2 USTC 9563]United States of America , Plaintiff-Appellee v. Alfred Joseph Keig, Sr., Defendant-Appellant

(CA-7), U. S. Court of Appeals, 7th Circuit, No. 14417, 334 F2d 823, 6/16/64, Affirming unreported District Court decision

[Constitutional Provisions]

Constitutionality of income tax statutes.--Taxpayer who had been convicted of willful failure to file income tax returns did not sustain his charges that the federal income tax statutes were unconstitutional. He had charged that the taxing statutes were discriminatory and were being used to violate the establishment of a religious clause of the First Amendment and that the moneys derived therefrom were being used for unconstitutional purposes. Acker, (CA-6) 58-2 USTC 9615, 258 F. 2d 568, cert. denied 358 U. S. 940, 79 S. Ct. 346, followed.

[1954 Code Sec. 7203]

Criminal conviction: Failure to file returns: Sufficient evidence.--A criminal conviction of a taxpayer for knowingly and willfully failing to file income tax returns was upheld where the evidence was sufficient to show that in each of the taxable years involved the taxpayer was the recipient of income in sufficient amount to require his filing a tax return.

[1954 Code Sec. 7203]

Criminal conviction: Failure to file returns: Right to cross examine.--Taxpayer was not prejudiced by the nonproduction "for purposes of cross-examination" of a recommendation for prosecution which an internal revenue agent filed with his superiors. Although such recommendation contained references to interviews with the taxpayer, a memorandum of these interviews had been made available to the taxpayer. Furthermore, taxpayer was not unduly restricted in his cross-examination of a government witness where he was not permitted to challenge the competency and adequacy of the evidence which had been presented to the grand jury.

[1954 Code Sec. 7203]

Failure to file returns: Criminal indictment: Sufficiency.--The indictment upon which the taxpayer was convicted of willful failure to file income tax returns was held sufficient. Although it was not signed by the U. S. attorney for the government as required, it had been signed by an assistant U. S. attorney delegated to do so. Furthermore, the indictment was found to be correct in listing separate counts for each year in which the taxpayer failed to file a tax return, rather than in treating the multiple actions as one count.

Edward V. Hanrahan, United States Attorney, John Peter Lulinski, John Powers Crowley, Assistant United States Attorneys, Chicago, Ill., for plaintiff-appellee. Anna R. Lavin, 209 La Salle, Chicago , Ill. , for defendant-appellant.

Before SCHNACKENBERG, CASTLE and KILEY, Circuit Judges.

[Prior Proceedings]

SCHNACKENBERG, Circuit Judge:

Alfred Joseph Keig, Sr., defendant, has appealed from his conviction and sentence, entered September 27, 1963 upon a judgment of the district court, based upon a five count indictment, charging knowing and willful failure to make income tax returns to the District Director of Internal Revenue for the years 1954 through 1958, in violation of 26 U. S. C. A. 7203. He was fined $1,000 on each count and put on probation for a period of three years. A condition of the probation is that he file his income tax returns for the years in the probationary period. He is at liberty on bail.

On defendant's prior appeal, [63-2 USTC 9621] 320 F. 2d 634 (1963), we remanded the cause to the district court with directions to hold an inquiry, pursuant to the Jencks act and our opinion, and to supplement the record with new findings. We directed that, if the district court should conclude that the government should have been required to deliver any additional statement or report to defendant's counsel for examination, it should vacate the judgment of conviction and accord defendant a new trial. Campbell v. United States , 365 U. S. 85, 99 (1961). We further directed that, if, upon hearing on remand and the making of such new findings, the district court concluded that the government was not required to deliver any additional statement or report to defendant's counsel for examination, the court should enter a new final judgment based upon the record as supplemented by its new findings, thereby preserving to defendant the right to appeal to this court. Killian v. United States , 368 U. S. 231, 244 (1961).

[Nonproduction of Document]

1. On this appeal, defendant contends that the district court erred in finding that a report of special agent Carmen J. Marici, a government witness, written on May 23, 1960, was not a "statement" under 18 U. S. C. A. 3500. He further contends that he was prejudiced by the nonproduction thereof "for purposes of cross-examination".

On the other hand, the government argues that the document dated May 23, 1960 was a recommendation for prosecution and that, while it contained references to two interviews with defendant, the memoranda of those interviews, which occurred on March 23 and 30, 1960, had been made available to the defense, even though Marici had testified as to only the March 23 interview and not about the March 30 interview.

We have considered both the direct- and cross-examination of Marici. We have had the opportunity of inspecting the memoranda relating to the March 23 and March 30 interviews, as well as the May 23, 1960 document. We are therefore able to and do confirm the correctness of the findings on remand, especially in regard to the report of May 23, 1960. According to these findings, there are brief references to the interviews of March 23 and March 30 in the May 23 report, which was apparently prepared in part by reference to and direct quotation from the earlier memoranda, which actually contained additional information not included in the May 23 report.

We agree with the finding of the district court that the May 23, 1960 document is not a statement as defined by 3500.

We therefore hold that there was no error committed in the failure of the trial court to turn over that report to the defense.

[Constitutionality Issue]

2. In proceeding to dispose of this appeal, we now consider the contention personally briefed by defendant. 1 That is: "the Income Tax Laws, including Section 7201[ 2] * * * considered as a whole is [sic] unconstitutional on its face in the light of the fact that ordinary individuals cannot meet the requirement of making an honest return; in view of the fact that it is so discriminatory as to denounce it * * * that moneys derived by it are used for unconstitutional purposes; and * * * that it is being used to violate the establishment of a religion clause of the First Amendment".

In the course of his argument he makes the point that one thing about the income tax law is certain and that is that it is incomprehensible. In arguing on the question of unconstitutionality, defendant personally appeared before the bar of this court. His zealous and militant attack upon the constitutionality of the income tax laws left no doubt in anyone's mind that he considers that he has a right to refuse to obey the law in this respect. Weighing the legal basis for his charges of invalidity under the first and fifth amendments, we are unable to agree with him. He states, "No one reading this Brief can doubt the integrity with which it is written." However we doubt whether he is realistic in taking the position that he has a right to refuse to contribute to the support of the federal government until such time as a taxing system, palatable and constitutional according to his lights, has been created.

Directly meeting his contention that the income tax law is unconstitutional, we quote the language of the court of appeals for the sixth circuit in a 1958 decision, where a similar attack was made upon the internal revenue Code of 1939. In Acker v. Commissioner of Internal Revenue [58-2 USTC 9804], 258 F. 2d 568, at 575 that court said:

"The 1939 Code is unquestionably a taxing statute in substance as well as in name. The constitutionality of progressive tax rates is long settled. [Knowlton v. Moore, 1900, 178 U. S. 41, 20 S. Ct. 747, 44 L. Ed. 969; Brushaber v. Union Pacific R., supra, [1 USTC 4] 240 U. S. 1, 36 S. Ct. 236, 60 L. Ed. 493.] The classifications drawn in question here do not appear to be either arbitrary or unreasonable in any constitutional sense. To the contrary, in large part they represent 'the record of the government' s endeavor to keep pace with the fertility of invention whereby taxpayers had contrived to keep the larger benefits of ownership and be relieved of the attendant burdens.' [Burnet v. Wells, 1933, [3 USTC 1108] 289 U. S. 670, 676, 53 S. Ct. 761, 763, 77 L. Ed. 1439.]

"Nor can we say that the rates of tax, admittedly high, have reached confiscation or a 'taking' in the constitutional sense. All in all, much as we may as men sympathize with petitioner's arguments about our tax plight, as judges we must say that he has addressed them to the wrong forum; they are for the Congress, and not for the courts."

It has been held that, even if a taxpayer believes that by filing his income tax return he may incriminate himself in violation of the provisions of the fifth amendment to the constitution of the United States , he still must file a return. United States v. Sullivan [1 USTC 236], 274 U. S. 259 (1927).

We find that defendant has not sustained his charges of unconstitutionality.

It may well be that he is entirely within his right of expression in his concluding statement in his brief, which is "The current Income Tax Laws ought to be denounced". His brief in this court is a mighty long step in that direction. But no court is a forum for defendant's denunciation of the tax laws. If he seeks such a forum, it must be elsewhere, either in the halls of congress, on public platforms, or in the general media of communication.

In the brief filed by defendant's counsel in this court prior to the order for remandment, several points are raised. We shall now discuss them seriatim.

[Improper Signing of Indictment]

3. It is argued by defendant that the indictment upon which he was convicted is insufficient, because, in violation of rule 7(c) of the Rules of Criminal Procedure, it was not signed by the attorney for the government, and a motion to dismiss it on that account was timely filed. However the record contains an affidavit of assistant United States attorney John J. Quan, who was acting for and by designation of the United States attorney, which averred that he was delegated to sign the latter's name to indictments filed on behalf of the United States .

Defendant cites, as the source of authority to sign indictments, 28 U. S. C. A. 507(a) and particularly 507(b) which provides that the attorney general shall direct all assistant United States attorneys in the discharge of their respective duties.

In Wheatley v. United States, 4 Cir., 159 F. 2d 599, 600 (1946), the court said:

"It is also urged that the indictment is defective because it was not signed by United States Attorney for the Northern District of West Virginia. It was in fact signed by one of the assistant United States attorneys for the District who signed the name of the United States Attorney without indicating that it was not signed by that official himself. Rule 7(c) of the Federal Rules of Criminal Procedure provides that an indictment shall be signed by the attorney for the Government. It has been held that the signature of the prosecuting attorney is no part of the indictment and is necessary only as evidence of the authenticity of the document; and it has also been held that the improper signing of an indictment is not such a defect as would invalidate the instrument; In re Lane, 135 U. S. 443, 449, 10 S. Ct. 760, 34 L. Ed. 219; Miller v. United States, 6 Cir., 300 F. 529, 536, certiorari denied, 266 U. S. 624, 45 S. Ct. 123, 69 L. Ed. 474; King v. United States, 5 Cir., 279 F. 103, 104; United States v. McAvoy, C. C. N. Y., 26 Fed. Cas. (No. 15,654) 1044, 1045. These rulings are in harmony with the statutory provision contained in 18 U. S. C. A. 556 which provides that no indictment in a federal case shall be deemed insufficient, nor shall the judgment be affected by reason of any defect or imperfection in matter of form only which shall not tend to the prejudice of the defendant. * * *"

We agree with the reasoning in Wheatley and therefore hold that the indictment is sufficient as against the attack of defendant on the aforesaid ground.

Moreover, we think that, even if there were error here, it was harmless, within the meaning of 18 U. S. C. A. rule 52(a) which reads:

Any error, defect, irregularity or variance which does not affect substantial rights shall be disregarded.

[Separate Counts]

4. Defendant further argues, presumably with seriousness, that the charges contained in five separate counts, covering five successive years for each of which defendant allegedly failed to file a return, means that the indictment fails because all should have been charged in one count. This argument is based upon an unreasonable construction of 26 U. S. C. A. 7203, which reads:

Any person * * * required * * * to make a return * * * who willfully fails to * * * make such return, * * * at the time or times required by law * * * shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned * * *.

26 U. S. C. A. 6012(a) requires every individual having for the taxable year a gross income of $600 or more to make a return. 26 U. S. C. A. 6072(a) provides that such return, when made on the basis of the calendar year, shall be filed on or before the subsequent 15th day of April.

It is apparent that the indictment conforms with the applicable statutes. If defendant's contention were to prevail it would mean that he could require multiple misdemeanors to be treated as one for the purpose of sentencing. This contention is not well-taken.

[Proof of Criminal Intent]

5. Strangely, defendant relies on United States v. Cirillo, 3 Cir., [58-1 USTC 9164] 251 F. 2d 638, 639 (1957), cert. den. 356 U. S. 949, which actually seems to afford strong support for the judgment of the district court in the case at bar. Cirillo was a lawyer who was convicted of failing to file income tax returns. On appeal he raised the question of proof of criminal intent and the court held that, where the evidence showed that he had in two successive years received a substantial amount of taxable income from which no tax had been withheld and of which the government was likely to be uninformed unless he filed a tax return, the jury was entitled to reason--

"* * * that a member of the bar, in the nature of his profession, has some general understanding that the United States requires persons who earn substantial income to file periodic income tax returns. * * *"

Defendant cites Cirillo, evidently in support of his contention that "Only an intent motivated to the specific and that the government would not know the extent of the defendant's tax liability will support the charge." However, we prefer to be guided by the fact that the indictment in the case at bar charges a crime within the meaning of the statute and is therefore sufficient, as held in United States v. Ansani, 240 F. 2d 216 (1957), cert. den. 353 U. S. 936, sub. nom. Milner v. U. S., where we said, at 223:

"* * * The charge of the indictment in the instant case followed substantially the ording of the statute, which embodies all the elements of the crime and such charge clearly informed the defendants of that with which they were accused, so as to enable them to prepare their defense and to plead the judgment in bar of any subsequent prosecution for the same cause. Under these circumstances defendants' contention must fail. * * *"

The indictment is not vulnerable for the wording of the statute, which embodies

[Sufficient Income]

6. Defendant insists that the government failed to prove that he received sufficient income in the taxable years to require his filing returns. Many witnesses testified as to payments of money to him. Some was compensation in the form of fees and some was for reimbursement for various expenses incurred. We have examined in detail the evidence bearing upon this phase of the case. It shows that in each taxable year defendant was the recipient of income in sufficient amount to require his filing a return.

[Cross-Examination]

7. As numerous government witnesses, who testified on the subject of payment of money to defendant in the taxable years, were cross-examined by his counsel, they were systematically asked whether or not they had appeared before the grand jury and they answered in the negative. However, on direct examination, government witness special agent Marici testified that he did appear before the grand jury and testify as to the facts revealed in his investigation.

It is now urged that the district court erred in sustaining an objection of the government to this question asked Marici: "Did you testify that the income of Mr. Keig was as stated in the indictment in this cause?" The defense poined out that it could not show a disparity of testimony until it was determined what the witness had testified before the grand jury.

It is argued that this constituted a limitation on exploration which foreclosed the possibility of conclusively showing that no evidence had been offered to rationally establish the facts [before the grand jury] in accordance with Costello v. United States [56-1 USTC 9321], 350 U. S. 359. Reliance is also placed upon the same case in the second circuit, [55-1 USTC 9342] 221 F. 2d 668, 677 (1955).

It is contended by the government, however, that the decision in Costello when it reached the United States Supreme Court, [56-1 USTC 9321] 350 U. S. 359, 363, supports the action of the district court in this matter.

The government points out that Marici testified in the district court that he began an investigation of the taxpayer in March of 1958 and in June of 1958 caused a search to be made of the Internal Revenue records for the returns of the defendant. He also testified that the defendant admitted to him that he didn't file income tax returns and that he (Marici) testified before the March 1961 grand jury as to the facts revealed in his investigation.

In Costello, the Supreme Court stated, at 363:

"* * * If indictments were to be held open to challenge on the ground that there was inadequate or incompetent evidence before the grand jury, the resulting delay would be great indeed. The result of such a rule would be that before trial on the merits a defendant could always insist on a kind of preliminary trial to determine the competency and adequacy of the evidence before the grand jury. This is not required by the Fifth Amendment. An indictment returned by a legally constituted and unbiased grand jury, like an information drawn by the prosecutor, if valid on its face, is enough to call for trial of the charge on the merits. * * *"

We hold that the district court did not err in sustaining an objection to the questioning of Marici as aforesaid.

[Objection to Cross-Examination]

8. Defendant states that on the same cross-examination, inquiry was made of Marici as to whether he had signed an affidavit attached to an information relating to the facts involved in this cause and that the court sustained an objection to the question on the ground that it was irrelevant. We have referred to the page of the transcript of record as cited by defendant's brief and fail to find that such a question was asked of Marici. The only question on that page of the transcript relating to an information and its disposition follows:

Q. Mr. Marici, there was an information filed prior to this indictment relative to this case, was there not?

Mr. Becco: Objection.

The Court: I don't see the relevance of that, Miss Lavin. Sustained.

At no place in his direct testimony did the witness Marici testify to the amounts of gross income received by defendant in the indictment years. We cannot say as a matter of law that the district court abused its discretion in ruling upon these objections. Our position has been well-stated by the late Judge Lindley of this court. United States v. Lawinski, 195 F. 2d 1, where he said, at 7:

"* * * It is for the presiding judge to exercise a wise discretion in determining whether, considering the examination in chief, it is fit and proper that the questions presented be permitted or excluded. Storm v. U. S., 94 U. S. 76, 24 L. Ed. 42. All the decisions agree that the latitude allowed should be great enough to subserve ends of justice; but once fixed by the trial court it can not be deemed erroneous except where it is clear that that discretion has been abused, even though the discretion is necessarily vague in extent. It is a 'sound, though undefined, judicial discretion, depending upon the circumstances of the particular case'. * * *

* * *

"Upon full consideration of this record, remembering that the trial court was bound to exercise a sound discretion, examining the questions to which objections were sustained, the testimony of the respective witnesses on direct examination, the latitude extended by the court, we are unable to say as a matter of law that the court abused its discretion in its limitation on the cross-examination of any of the witnesses. * * *"

[Other Contentions]

9. Defendant's brief contends that the district court improperly interfered with and deprecated the defense, invading the province of the jury and preventing the making of a full and complete defense. We will not burden this opinion with a recital of a proceeding which was certainly not like a quiet brook on a sleepy summer afternoon, but which was obviously a tempestuous affair due to the forceful and unorthodox participation by defendant in the presentation of his defense. It does not affirmatively appear from the record how near to physical exhaustion the court itself came at times during the proceeding, although it does appear from the record that defendant himself stated at different times that he was getting tired, or that he was tired, although he only once admitted that he was a little bit dull.

We are confident that the district court performed as well as it could have been expected to do under all of the unusual circumstances of this trial. Certainly nothing that it said or did in this respect is ground for reversal here.

10. Lastly, we find no error in the court's instructions on the words "knowingly" and "willfully," as used in the indictment. See Yarborough v. United States, 4 Cir., [56-1 USTC 9295] 230 F. 2d 56 (1956), and Cirillo v. United States , supra; also United States v. Litman, 3 Cir., [57-2 USTC 9820] 246 F. 2d 206 (1957).

For all of these reasons the judgment, conviction and sentence entered by the district court are affirmed.

Affirmed.

1 His brief admits that he did not file any income tax returns for the relevant taxable years; in fact, that except for the year 1938, he never filed such a return. This course of conduct was based upon his belief that the internal revenue laws and regulations cannot intelligently be complied with and because of the other reasons assigned by him in support of his argument of unconstitutionality of the law. All of these views he expressed to treasury officials before testifying in this case.

2 26 U. S. C. A. 7201 provides:

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 * * *.

 

 

 

[63-1 USTC 9306]James G. Ryan, Appellant v. United States of America , Appellee

(CA-10), U. S. Court of Appeals, 10th Circuit, Number 7073, 314 F2d 306, 2/25/63, Affirming an unreported District Court decision

[1954 Code Sec. 7203]

Failure to file employer's returns: Wilfulness: Sufficiency of evidence: Jury instructions.--The evidence was sufficient to support a jury finding that the manager of a corporation wilfully failed to file required quarterly tax returns of the corporation, withholding tax returns, and FICA returns. There was no error in instructions to the jury.

Bernard D. Morley, 1st National Bank Bldg., Denver , Colo. , for appellant. Merle R. Knous, Assistant United States Attorney, Denver, Colo. (Lawrence M. Henry, United States Attorney, Denver, Colo., with him on brief), for appellee.

Before BREITENSTEIN, HILL and SETH, Circuit Judges.

[Wilful Failure to File Employer Returns]

HILL, Circuit Judge:

Appellant, James G. Ryan, was tried and convicted before a jury, in the United States District Court for the District of Colorado, upon an information containing six counts, all brought under 26 U. S. C. 7203. Each count charged a wilful failure to file the required employer's quarterly tax return. Counts I, III and V concerned employees' income taxes withheld, and, Counts II, IV and VI concerned Federal Insurance Contributions Act 1 taxes. Motions for new trial and for judgment of acquittal pursuant to Rule 29, F. R. Crim. P., 18 U. S. C. A., were filed and denied, and this appeal resulted.

In substance, appellant urges error because of insufficiency of the evidence and also attacks the instructions of the trial court.

[Factual Background]

In October, 1955, Ryan, Earl B. Martin and Marjorie C. Smith entered into a business venture, for the purpose of purchasing, clearing and subdividing a tract of land near Denver , and thereafter selling the subdivided lots. At the inception, they operated as a partnership but on December 19, 1955, filed their articles of incorporation as Timberline Corporation. Ryan became president and secretary of the corporation with a monthly salary of $150.00, for the supervisory work he performed for the corporation from an office in the City of Denver . This office was also used by Ryan to carry on other business ventures. Another other office was maintained on the project from which Martin, as vice president and treasurer of the company, supervised the actual development of the project, with a salary of $400.00 per month. Work on the project continued under this arrangement until July, 1956, when Martin left the employ of the corporation after a disagreement with Ryan. Soon thereafter, Martin tied up the corporate bank account by legal action.

At the inception of the venture, by corporate action, the signatures of both Ryan and Martin were required for all banking transactions. In January, 1956, one of the bookkeepers was also authorized to transact banking business for the corporation. On December 10, 1955, Janice LaBounty went to work in the Denver office as a bookkeeper, at a gross salary of $325.00 a month. Income and social security taxes were withheld from her salary for the last quarter of 1955, as well as during her employment with the corporation for the first and second quarters of 1956, these three quarters being the ones covered by the information.

[Accounting System Established]

In December, 1955, an accounting firm was employed to set up books and records for Timberline Corporation. Ryan told the accountant that Timberline was a corporation and corporate books and records were set up, including employment records, and records reflecting salaries of employees, withholding taxes and social security taxes.

On December 23, 1955, Ryan at the suggestion of the accountant, signed the regular Internal Revenue Form of Employers Application For Identification Number under the Federal Insurance Contributions Act. He therein showed the employer to be "Timberline Corporation"; gave its Denver office address as the principal place of business; under type of organization checked "corporation"; gave December 3, 1955, as the first date employer paid taxable wages to one or more employees; and stated the number of employees was 10. This application was filed with the Internal Revenue Service on January 9, 1956.

LaBounty, who had received instructions from the accountant about the bookkeeping, on January 19, 1956, prepared the Employer's Quarterly Federal Tax Return (Form 941) covering the last quarter of 1955, for the corporation, together with a corporation check in the amount of $706.58, in payment of both withholding and social security taxes due. The signatures of both Ryan and Martin were required on the check. Martin signed the same but Ryan refused to sign it that day and on several subsequent occasions. On April 10, 1956, LaBounty prepared for Ryan's signature Form 941 covering the first quarter of 1956, and thereafter a check, in payment of the taxes shown to be due from the corporation for that quarter. Ryan refused to sign this return and check. In June, 1956, LaBounty quit her job and Freida Teeter took her place. Conversations between Ryan and the several bookkeepers were had about the filing of these tax returns but the substance of those conversations is in dispute. Jean Raycraft succeeded Teeter as bookkeeper in August, 1956, and she prepared a Form 941 return for the corporation covering the taxes due for the second quarter of 1956. She talked with Ryan about this return but he did nothing about it. Helen Duvall became an office employee in the summer of 1956 and testified that she was present on one occasion when Raycraft advised Ryan that Form 941 needed to be filled out and filed.

[Representations to IRS]

Early in 1957, Ryan was interviewed by an agent for the Internal Revenue Service and he advised the agent that corporate tax returns had not been filed because the corporation had no employees, thus, nothing had been withheld. Ryan further stated that nothing had been withheld for even the office held because the bookkeeping was subcontracted to a Denver accounting firm. The agent was also advised by Ryan that the corporate books were not available because they were in the hands of an attorney.

About the time of this interview, the corporation received some Forms 941 through the mail, and they were discussed between Ryan and Duvall. Ryan told Duvall to go ahead and fill them out, but Duvall said she did not know how to do it. A short time later Ryan gave Duvall the filled-out forms and told her to sign and file them, which she did on March 29, 1957. These returns covered the first and second quarters of 1956. No return has ever been filed for the last quarter of 1955. During 1959 all of the taxes under the two returns filed were paid, either by levy upon corporation funds or by Ryan from his personal funds.

[Sufficiency of Evidence]

Appellant's first point relates to the sufficiency of the evidence. In our consideration of this issue, we must view the evidence and the inference to be drawn therefrom in the light most favorable to the prosecution. Swallow v. United States , 10 Cir., [62-2 USTC 9693] 307 F. 2d 81, cert. denied, 371 U. S. 950. When so considered, we find little merit to any of appellant's contentions.

Ryan asserts there is no proof that the corporation had a duty or was required to make and file the tax returns. No witness was asked to state whether the corporation was required to file the returns, but that is not the proper method of proving a violation of the tax law. The basic facts bringing the corporation within the purview of the requirements of the law must be proved and the record discloses all of those basic facts. The evidence clearly shows, by the oral testimony of employees themselves, that the corporation was an employer during each quarter in question, that the employees were paid wages, that both income and social security taxes were withheld by the employer and that the quarterly tax returns, as required by law, were not filed when due.

The record before us does not disclose any real issue as to the existence of the corporation, although Ryan says that the evidence was not sufficient to prove a corporation existed. It is true the government did not introduce a copy of the articles of incorporation, but, by other competent evidence the existence of the corporation was proven. This evidence consisted of admissions on the part of Ryan, the testimony of Martin, one of the incorporators, and statements contained in the various exhibits offered and received. As the government points out, the question of the existence of Timberline, as a corporation, was only a collateral issue in the case.

[Manager Had Duty to File Corporate Returns]

Ryan further argues that there is no evidence he owed any tax for the periods in question. We agree with that contention, but that is not the gist of the offenses charged. It was not claimed that he owed a tax. The contention of the government was that the corporation owed the tax and Ryan, as the managing officer of the corporation, had the obligation to make the returns, which he did not do.

Appellant also contends the evidence is insufficient to prove that he had a duty to file the corporate tax returns. It is true Ryan testified Martin was hired to run the affairs of the corporation and that he, Ryan, did not take over the supervision until Martin left his position with Timberline. However, there was an abundance of evidence from which they jury could, as it did, find that Ryan was the one running the venture and, as such, he had the duty to make or cause to be made the corporate returns. All of the employees in the Denver Office, where the books and records were kept, testified that Ryan employed and supervised them in his capacity as president of the concern. There is evidence showing that Ryan hired an accounting firm to set up the corporate books and records and advised the accountant what books and records he wanted. Thereafter, at the instance of the accountant, Ryan signed and caused to be filed an Employers Application For Identification Number under the Federal Insurance Contributions Act. On the application he gave his Denver office address as the principal place of business of the corporation. We think this evidence is clearly sufficient to establish such a duty on his part.

[Jury Instructions]

Appellant raises several questions concerning the giving or failure to give instructions. It is settled law, under Rule 30, F. R. Crim. P., 18 U. S. C. A., that questions pertaining to instructions may be raised on appeal only if objections were timely and properly made to the instructions. Burns v. United States, 10 Cir., 286 F. 2d 152; Sells v. United States, 10 Cir., 262 F. 2d 815, cert. denied, 360 U. S. 913; Corbin v. United States, 10 Cir., 253 F. 2d 646. The only exception to this rule is the authority of an appellate court under Rule 52, F. R. Crim. P., 18 U. S. C. A., to notice "plain errors affecting substantial rights." Wright v. United States, 10 Cir., 301 F. 2d 412; McMurray v. United States, 10 Cir., 298 F. 2d 619, cert. denied, 369 U. S. 860; Fischer v. United States, 10 Cir., [54-1 USTC 9370] 212 F. 2d 441. The record discloses only one statement by defense counsel after the instructions were given, which could be considered as an objection. 2 That objection, if it be so considered, is not in compliance with Rule 30, in that it does not, as required by the rule, state "distinctly the matter to which he objects and the grounds of his objection." Burns v. United States , 10 Cir., 286 F. 2d 152, 157. Counsel for appellant, who was not defense counsel at trial, argues here that such objection relates to the court's failure to instruct on the definition of a "person" as used in 7203. Government counsel has a different view, contending the objection was intended to cover the court's failure to give defendant's requested instruction Number 2, which distinguished between employees and independent contractors, and contained the word "control" in several places. This argument is supported by the fact that the word "control" was used in the questioned objection. The disagreement on the point demonstrates that the objection did not distinctly state the matter to which objection was being made.

[Element of Wilfulness]

Appellant takes issue with the trial court's instruction to the jury on the necessary element of wilfulness. 3 He further contends that the instruction approved by this Court in Haskell v. United States, 10 Cir., [57-1 USTC 9553] 241 F. 2d 790, cert. denied, 354 U. S. 921, does not meet the test laid down in United States v. Murdock [3 USTC 1194], 290 U. S. 389. We do not agree. The instruction under objection in Haskell was approved because the Court considered that instruction, not standing alone, but in connection with all of the instructions given in the case. By applying that test to the instructions the Court was able to conclude that all of the necessary elements of the crime charged had been presented to the jury. Likewise, viewing all the instructions given in this case we feel that the jury was adequately instructed on the elements of the offenses including wilfulness.

The appellant also urges that the trial court erred in refusing to give his requested instructions differentiating between an employee and an independent contractor. The evidence in the case, as set out above, is uncontradicted. It conclusively shows that Timberline Corporation did have employees and Ryan's contention to the contrary was without evidentiary support. Under these circumstances the court was not compelled to give such an instruction. The instructions should be confined to the issues in the case and the pertinent facts developed by the evidence. Even though a requested instruction may be a correct statement of abstract law, it should be refused if it is directed to a matter outside the issues presented and the evidence adduced. Velasquez v. United States , 10 Cir., 244 F. 2d 416.

[Evidence Supports Verdict]

In our consideration of this appeal, we have carefully reviewed the entire record and conclude that Ryan had a fair trial, that there is an abundance of evidence to support the jury verdict and there are no "plain errors affecting substantial rights" in the record that we should take note of under Rule 52.

Affirmed.

1 26 U. S. C. 3101, et seq.

2 "It is the Court's belief that all of the exhibits will be in the jury room. Are there any objections?

"Mr. Knous: I have no objections.

"Mr. Berger: No objections. Your Honor, in chambers we asked the Court to make an instruction on control, I believe.

"Judge Doyle: I didn't tender one. Do you want the record to show that the Court didn't tender an instruction?

"Mr. Berger: Yes, sir. If the action was not within the control of the Defendant then the jury should have been instructed not to find him guilty as a responsible party.

"Judge Doyle: I will note that you made the request and that you had mentioned it in chambers."

3 "In order to find the Defendant guilty, the jury must establish beyond a reasonable doubt that he failed to file a return as described in the information, and two, and it was of a wilful and knowing nature. If the jury establishes this beyond a reasonable doubt, then they shall find the Defendant guilty. However, if the jury entertains a reasonable doubt that the Defendant was not required to file a social security or tax return because of a good faith belief that these people were not in his employ but were independent contractors, then the jury must find the Defendant not guilty.

"If the jury establishes beyond a reasonable doubt the elements of knowledge and intent on the part of the Defendant, then they shall find the Defendant guilty, but if they establish that the Defendant entertained a reasonable belief that he was not required to file a return, then the element of intent is not established and the jury will have to say not guilty.

"An act is done knowingly if it is done voluntarily and purposely, not because of mistake or inadvertence. An act is done wilfully if done voluntarily and purposely and with the specific intent to do that which the law forbids. That is to say, an act done with bad purpose either to disobey or disregard the law. The requirement that the failure to make and file a return be done wilfully exists so that the accused will not be convicted of failing to make or file such return because of mistake or inadvertence. If the jury entertains a reasonable doubt as to whether the man made a mistake, and the act was not intentionally and knowingly done, then the jury shall find him not guilty."

 

 

[63-2 USTC 9502]Charles Samuel Martin, Appellant v. United States of America , Appellee

(CA-9), U. S. Court of Appeals, 9th Circuit, No. 18,434, 317 F2d 753, 5/24/63, Affirming unreported District Court decision

[1954 Code Sec. 7203]

Failure to file returns: Willfulness: Evidence.--Taxpayer's failure to file tax returns was found to be willful where the evidence was sufficient to show that he did not have reasonable cause for his belief that persons with his income were not obliged to file. Each year the taxpayer received a W-2 form from the Army Reserve showing the amount withheld for federal income tax purposes, and each month his brokerage firm sent him a statement and cautioned him to retain it for income tax purposes. His failure to inquire in light of these warnings amounted to a careless disregard of his tax liabilities.

[1954 Code Sec. 7203]

Failure to file returns: Imprisonment: Severity.--Taxpayer's sentence of four weeks' confinement for willful failure to file tax returns is not cruel and unusual punishment since it falls within the limits allowed by statute. The fact that he might suffer possible loss of his Army Reserve status is not a matter within the jurisdiction of the Court of Appeals. It may, however, be brought to the attention of the District Court by filing a timely motion for reduction of sentence.

Charles Samuel Martin, Honolulu, Hawaii, per se. Herman T. F. Lum, United States Attorney, T. S. Goo, Assistant United States Attorney, Honolulu, Hawaii, for the appellee.

Before HAMLEY, HAMLIN and DUNIWAY, Circuit Judges.

[Issues on Appeal]

HAMLIN, Circuit Judge:

An information in four counts was filed in the United States District Court for the District of Hawaii charging appellant, Charles Samuel Martin, with violating section 7203 of the Internal Revenue Code of 1954 (26 U. S. C. 7203) by willfully and knowingly failing to file income tax returns for the years 1955 through 1958. 1 Appellant waived his right to a jury and tried the case in propria persona before the court. The court found appellant guilty on all four counts, fined him $1000 and sentenced him to one week in jail on each count, the jail sentences to run consecutively. Appellant filed a timely notice of appeal and we have jurisdiction under the provisions of 28 U. S. C. 1291.

Appellant raises several points for the first time on appeal concerning, inter alia, the conduct of the trial, which we do not feel merit discussion. 2 Suffice it to say that a careful review of the record reveals that appellant did an excellent job of representing himself and that the court was solicitous throughout the course of the trial to protect his rights. The issues that we shall consider are (1) whether the evidence supports the verdict, and (2) whether the sentence was cruel and unusual.

[Failure Was Willful]

It is clear that appellant had reportable income in the years in question and failed to file returns in those years. Appellant contends, however, that there was insufficient evidence to show that his failure to file was "willful." In this regard, "willful" for the purpose of section 7203 3 means "with a bad purpose or without grounds for believing that one's act is lawful or without reasonable cause or capriciously or with a careless disregard whether one has the right so to act." 4 We feel that there was ample evidence to support the district court's finding that appellant's failure to file was "willful," within the meaning of that term as so defined.

Appellant was born on December 10, 1911. He graduated from Wichita University in 1940, majoring in psychology, and has done substantial post-graduate work at the University of Hawaii since that time. Prior to 1960 he had never filed a federal income tax return. There can be no doubt that he was aware of the existence of such a tax, but he claims that it was his belief that a person with such a low income was not required to file income tax returns. In each of the years here in question, however, he received Internal Revenue Service W-2 forms from the Army showing how much he had been paid by the Army as a result of his service as a reserve officer and how much had been withheld for federal income tax purposes. 5 It was stated on each form (with the exception of the 1955 form) that the form was not an income tax return, but was to be filed with a Form 1040 or 1040A. Each W-2 form received from the Army reported less than $1000 in income. Appellant also received a monthly statement from a brokerage firm which contained an instruction to retain the statement for income tax reporting purposes. Assuming for the moment that appellant was in fact unaware of the exact amount of income one must have before reporting is required, we can only wonder why in the light of these warning signs he made no effort to find out. We conclude that the evidence was sufficient to establish that he did not have reasonable cause for believing he was not subject to the reporting requirements and acted with a careless disregard of whether he was subject to those requirements.

[No Cruel and Unusual Punishment]

Appellant contends that his sentence of four weeks confinement is cruel and unusual punishment, because it will result in possible loss of his Army reserve status. The sentence, however, was within the terms of the statute. That as an incident of his sentence the Army may take administrative action to divest him of his commission has no effect on the validity of the statute or the sentence rendered thereunder. Since it is well settled that a sentence that falls within the terms of a valid statute cannot amount to a cruel and unusual punishment, 6 appellant's contention is without merit. Further, it is clear that this court has no control over a sentence which is within the limits allowed by statute. 7 While we are not unsympathetic with appellant's plea that he faces possible loss of Army reserve retirement pay benefits built up over many years, this is not a matter within our province. Appellant still may bring this to the attention of the district court by filing a motion therein for reduction of sentence within the time prescribed by Rule 35, Federal Rules of Criminal Procedure. 8

An examination of the entire record discloses that appellant was fairly tried and that he was accorded all rights to which he was entitled.

Judgment affirmed.

1 His gross income for those years was as follows:

1955 ....         $2,330.91
1956 ....          1,989.21
1957 ....          1,900.42
1958 ....          1,525.05

 

2 Typical of the lack of merit in these points is the contention that appellant should have been allowed to read to the court Exhibits A1 through A35, which were letters and files offered in evidence by appellant. The district court admitted these exhibits in evidence, but stated to appellant that it was not necessary for appellant to read them to the court. The court said, "I will read them." We see no error in this procedure.

3 Section 7203 of the Internal Revenue Code of 1954 provides:

Any person required . . . to make a return (other than a return required under authority of section 6015 or section 6016) . . . who willfully fails to . . . make such return . . . shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 1 year, or both, together with the costs of prosecution.

4 See Abdul v. United States [58-1 USTC 9453], 254 F. 2d 292 (9th Cir. 1958), in which this court approved instructions that had so defined "willful" for the purpose of section 7203. See also United States v. Murdock [3 USTC 1194], 290 U. S. 389 (1933).

5 See United States v. Cirillo [58-1 USTC 9164], 251 F. 2d 638, 639 (3rd Cir. 1958), in which the Court of Appeals for the Third Circuit stated that "the jury was entitled to view the W-2 forms as reminders of the duty to file received shortly before or during the period within which filing was required." See also United States v. Litman [57-2 USTC 9820], 246 F. 2d 206, 208 (3rd Cir. 1957), in which the same court stated that persistent failure to file "itself suggests willfulness."

6 See Pependrea v. United States , 275 F. 2d 325 (9th Cir. 1960).

7 Ibid.

8 Appellant filed the following three motions with this court: (1) a motion to dismiss the charges against him on the basis that they are unsupported and unsubstantiated; (2) a motion to modify the sentence on the basis that it was cruel and unusual; and (3) a motion to dismiss on grounds of unconstitutionality. While it was inappropriate to file these motions with this court, we nevertheless have examined the contentions contained therein. We have concluded in this opinion that there was sufficient evidence to support his conviction of the crime charged and that the sentence he received was not cruel and unusual. His further contentions in the third motion that he was deprived of due process of law by virtue of the requirement of excessive bail and that he was deprived of a speedy and public trial are without merit.

 

 

[56-2 USTC 10,014]Carl C. Lee, Appellant v. United States of America , Appellee

(CA-9), U. S. Court of Appeals, 9th Circuit, No. 15,039, 238 F2d 341, 10/24/56, Aff'g, unreported DC decision

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

Income tax evasion: Conduct of trial.--The court finds no merit in the four alleged errors on appeal from conviction for tax evasion. These alleged errors were: (1) in overruling the defendant's (appellant's) objections to testimony of the Government witness as to defendant's gross receipts and net income and in thereafter denying motion to strike the testimony; (2) in refusing to give the defendant's requested instruction to the jury regarding intent to evade or defeat tax, the instructions given having been adequate; (3) in refusing to give the jury instructions regarding the lesser offense of willful failure to pay the correct tax, a misdemeanor; and (4) in allowing $434.40, claimed as costs by the Government, and representing fees of the court reporter for a daily transcript purchased by the Government for its own use and convenience. The last objection was overruled because it was not reviewable.

Phillips, Avakian & Johnston, J. Richard Johnston, Fred Pierce, Oakland, Calif., Pierce & Brown, Sacramento, Calif., for appellant. Lloyd H. Burke, United States Attorney, John Lockley, Assistant United States Attorney, San Francisco, Calif., for appellee.

Before MATHEWS, BARNES and HAMLEY, Circuit Judges.

[Tax Evasion]

MATHEWS, Circuit Judge:

On September 14, 1955, in the United States District Court for the Northern District of California, appellant, Carl C. Lee, was indicted for violating 145(b) of the Internal Revenue Code of 1939, 26 U. S. C. A., 1946 Ed., 145(b), which provided that "any person who willfully attempts in any manner to evade or defeat any tax imposed by this chapter 1 or the payment thereof, shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than five years, or both, together with the costs of prosecution."

The indictment alleged that "on or about the 15th day of March, 1951, in the Northern District of California, Carl C. Lee [appellant], late of Sacramento, California, who during the calendar year 1950 was married, did willfully and knowingly attempt to evade and defeat a large part of the income tax due and owing by him and his wife to the United States of America for the calendar year 1950, by filing and causing to be filed with the Collector of Internal Revenue for the First Internal Revenue Collection District of California, at San Francisco, a false and fraudulent joint income tax return on behalf of himself and his said wife, wherein it was stated that their net income for said calendar year was the sum of $9,927.09 and that the amount of tax due and owing thereon was the sum of $1,282.00, whereas, as he then and there well knew, their joint net income for the said calendar year was the sum of $69,162.69, upon which said net income there was owing to the United States of America an income tax of $27,564.42."

Appellant was arraigned, pleaded not guilty and had a jury trial which consumed eight days and resulted in a verdict of guilty. Thereupon, on January 11, 1956, the District Court rendered a judgment sentencing appellant to be imprisoned for five years and to pay a fine of $10,000 and the costs of prosecution. The judgment was filed and entered on January 12, 1956. 2 Appellant appealed from the judgment on January 12, 1956.

On January 13, 1956, appellee, the United States served on appellant's attorney and filed with the clerk of the District Court a document entitled "Bill of Costs." That document, hereafter called the bill, was a bill of costs, within the meaning of 28 U. S. C. A., 1920 and 1924, 3 and was also an application for the taxation of costs, within the meaning of the District Court's Rule 23(a). 4 The costs claimed in the bill aggregated $987.50. The bill contained an itemized schedule thereof. One item was as follows: "Fees of the court reporter for all or any part of the transcript necessarily obtained for use in the case, $434.40."

Attached to and served with the bill was an affidavit of appellee's attorney stating that the costs claimed in the bill were correct and were necessarily incurred, and that the services for which fees were charged were actually and necessarily performed. Also attached to and served with the bill was a notice stating that appellee's attorney would "appear before the clerk to tax said costs" at 10:00 A.M. on January 17, 1956. Appellant did not, at or before that time, object to the bill or any item thereof. No objection having been made, all costs claimed in the bill, including the item of $434.40, were allowed and taxed by the clerk at 10:30 A.M. on January 17, 1956.

On January 19, 1956--two days after the clerk's decision 5--appellant filed the following objection: "Defendant [appellant] objects to the following item on the grounds stated below, in the bill of costs filed herein by plaintiff [appellee] on January 13, 1956: Fees of the court reporter, $434.40. This represents the cost of a copy of a daily transcript purchased by plaintiff for its own use and convenience, 6 which is not taxable against defendant." The objection being untimely, the clerk was not required to consider it and did not consider it.

No appeal was taken from the clerk's decision. 7 The time within which such an appeal could have been taken expired on January 22, 1956. 8 Thus, on January 22, 1956, the clerk's decision became final.

However, on January 26, 1956, the District Court made and entered the following order: "Defendant [appellant] has appealed from the ruling of the clerk of the [District] Court 9 allowing as an item of cost a transcript obtained by the Government [appellee] for its use during the trial. 28 U. S. C. A. 1920(2) provides that a court may tax as costs 'Fees of the court reporter for all or any part of the stenographic transcript necessarily obtained for use in the case; * * *' The [District] Court finds that the stenographic transcript was necessarily obtained by counsel for plaintiff [appellee] for use in the trial of the case. 10 Accordingly, it is ordered that defendant's objection to the allowance of cost in the amount of $434.40 for the transcript be, and the same hereby is, overruled and the item is allowed." The clerk's decision having become final on January 22, 1956, the order of January 26, 1956, had no effect. It benefited no one, aggrieved no one.

On February 3, 1956, appellant took two appeals--one from the judgment entered on January 12, 1956, and one from the order of January 26, 1956. The appeal taken on February 3, 1956, from the judgment entered on January 12, 1956, is dismissed because it was not taken within the 10-day period mentioned in Rule 37(a)(2) of the Federal Rules of Criminal Procedure, 18 U. S. C. A. The appeal from the order of January 26, 1956, is dismissed because appellant was not aggrieved by that order and therefore had no right to appeal from it. 11

There remains for consideration the appeal taken on January 12, 1956, from the judgment entered on January 12, 1956--the only valid appeal in this case.

[Alleged Errors]

In appellant's brief, four alleged errors are specified. 12 Specification 1 is that the District Court erred "in overruling appellant's objections to testimony of the witness Brady 13 as to appellant's gross receipts and his net income, and in thereafter denying appellant's motion to strike such testimony."

Specification 1 does not, as required by our Rule 18, 14 quote the grounds urged at the trial for the objections and the full substance of the testimony referred to. We are therefore not required to consider this specification. 15 However, we have considered it and find no merit in it.

Specification 2 is that the District Court erred in refusing to give the jury the following instruction requested by appellant: "There is only one state of mind that will supply the intent necessary to warrant a conviction in this case, and that is the intent to defeat or evade the tax due. Filing a false return with any other bad purpose would not supply the necessary intent. Nor would filing a false return without a justifiable excuse, or with a careless disregard for whether or not one has the right to do so, constitute, in themselves, the intent which is required by the law. You may find the defendant [appellant] guilty in this case only if you find that he knowingly filed a false return with the intention of evading or defeating the tax due."

The jury was adequately instructed as to the intent necessary to warrant a conviction in this case. 16 The requested instruction referred to in specification 2 was therefore unnecessary and was properly refused. 17

Specification 3 is that the District Court erred in refusing to give the jury the following instruction requested by appellant: "The defendant [appellant] is charged with willfully attempting to evade and defeat his income taxes and those of his wife for the calendar year 1950, an offense which is a felony. 18 If you are not convinced that the defendant is guilty of this offense, but you are convinced beyond a reasonable doubt that he willfully failed to pay his correct income tax for the year 1950, you may find him guilty of this lesser offense, which is a misdemeanor." 19

Appellant contends that, under Rule 31(c) of the Federal Rules of Criminal Procedure, 18 U. S. C. A., 20 he was entitled to the requested instruction referred to in specification 3. The contention is rejected, for obviously the "lesser offense" mentioned in the requested instruction was not necessarily included in the offense with which appellant was charged. 21 The requested instruction was properly refused.

Specification 4 is that the District Court erred in overruling appellant's objection to the item of $434.40 claimed as costs by appellee. Thus, in effect, appellant specifies as error that part of the order of January 26, 1956, which overruled or purported to overrule the objection filed by appellant on January 19, 1956.

As indicated above, the order of January 26, 1956, had no effect. Therefore appellant cannot be said to have been prejudiced by it or by any part of it. Furthermore, as indicated above, the appeal we are now considering--the only valid appeal in this case--was taken on January 12, 1956. Therefore the order of January 26, 1956, is not, nor is any part of it, reviewable on this appeal. 22

Judgment affirmed.

1 Chapter 1, 1-482 of the Internal Revenue Code of 1939, 26 U. S. C. A., 1946 Ed., 142, imposing income taxes.

2 Appended to the judgment is the following notation: "Entered January 13, 1956." Actually, however, the judgment was entered on January 12, 1956. This appears from the supplemental record filed here on September 20, 1956.

3 Section 1920 provides:

"A judge or clerk of any court of the United States may tax as costs the following: * * *

"(2) Fees of the court reporter for all or any part of the stenographic transcript necessarily obtained for use in the case; * * *

"A bill of costs shall be filed in the case and, upon allowance, incuded in the judgment or decree."

Section 1924 provides:

"Before any bill of costs is taxed, the party claiming any item of cost or disbursement shall attach thereto an affidavit, made by himself or by his duly authorized attorney or agent having knowledge of the facts, that such item is correct and has been necessarily incurred in the case and that the services for which fees have been charged were actually and necessarily performed."

4 Rule 23(a) provides:

"(1) Application to the clerk, Within five days after notice of the entry of a judgment allowing costs, the prevailing party shall serve on the attorney for the adverse party and file with the clerk an application for the taxation of costs. The application shall contain an itemized schedule of the costs and a statement signed by the attorney for the applicant that the schedule is correct and that the costs were necessarily incurred. The application shall be heard by the clerk, not less than one nor more than three days after it is served, and notice of the time of hearing shall be endorsed upon it. * * *

"(2) Objections. Upon the hearing, specific objections, supported by affidavits or other evidence, may be made to any item of costs. The clerk shall thereupon tax the costs, and if there is no appeal, shall insert the amount of costs taxed in the blank left in the judgment, and also in the docket.

"(3) Review. A dissatisfied party may take an immediate oral appeal to the [District] Court from the decision of the clerk if the opposing party is present; or may appeal upon written motion served within five days of the clerk's decision, as provided in Rule 54(d), Federal Rules of Civil Procedure. Appeals shall be heard upon the same papers and evidence submitted to the clerk."

Rule 54(d) of the Federal Rules of Civil Procedure, 28 U. S. C. A., provides:

"* * * Costs may be taxed by the clerk on one day's notice. On motion served within 5 days thereafter, the action of the clerk may be reviewed by the court."

5 In this opinion, as in paragraph (3) of the District Court's Rule 23(a), supra, the action of the clerk in allowing and taxing costs is called a decision.

6 The objection was not supported by any affidavit or other evidence. The affidavit attached to the bill was not controverted by the objection or at all.

7 The objection filed on January 19, 1956, did not purport to be and obviously was not an appeal.

8 See paragraph (3) of the District Court's Rule 23(a), supra.

9 Actually, there was no such appeal.

10 This finding has not been challenged.

11 United States v. Adamant Co., 9 Cir., 197 Fed. (2d) 1; 4 C. J. S., Appeal and Error, 183; 2 Am. Jur., Appeal and Error, 152. As to whether the order of January 26, 1956, would have been appealable if appellant had been aggrieved by it, we express no opinion. See, however, Walker v. Lee, 9 Cir., 71 Fed. (2d) 622.

12 Our Rule 18 (formerly Rule 20) provides:

"1. Counsel for the appellant shall file with the clerk of this court 20 copies of a printed brief * * *

"2. This brief shall contain * * *

"(d) In all cases a specification of errors relied upon which shall be numbered and shall set out separately and particularly each error intended to be urged. When the error alleged is to the admission or rejection of evidence the specification shall quote the grounds urged at the trial for the objection and the full substance of the evidence admitted or rejected, and refer to the page number in the printed or typewritten transcript where the same may be found. * * *"

13 Augustus V. Brady, a witness for appellee.

14 See footnote 12.

15 Ziegler v. United States , 9 Cir., 174 Fed. (2d) 439; Mosca v. United States , 9 Cir., 174 Fed. (2d) 448; DuVerney v. United States , 9 Cir., 181 Fed. (2d) 853; Lii v. United States , 9 Cir., 198 Fed. (2d) 109; Cly v. United States , 9 Cir., 201 Fed. (2d) 806; Gordon v. United States , 9 Cir., 202 Fed. (2d) 596.

16 The instructions given were, in part, as follows:

"To establish its case, the Government [appellee] must prove beyond a reasonable doubt both of the following elements:

"1. That substantial income tax was due and owing from the defendant [appellant] in addition to that declared in his income tax return; and

"Second, that the defendant willfully attempted to evade and defeat such tax.

"The gist of the offense charged in the indictment is a willful attempt on the part of the taxpayer to evade or defeat the tax imposed by the income tax law. The word 'attempt,' as used in this law, involves two things:

"1. An intent to evade or defeat the tax, and

"Second, some act done in furtherance of such intent. * * *

"There are various schemes, subterfuges and devices that may be resorted to to evade or defeat the tax. The one alleged in this indictment is that of filing a false and fraudulent return with the intent to defeat the tax or liability. * * *

"The attempt to evade and defeat the tax must be a willful attempt; that is to say, it must be made with the intent to keep from the Government a tax imposed by the income tax laws which it was the duty of the defendant to pay to the Government. The attempt must be willful, that is, intentionally done with the intent that the Government should be defrauded of the income tax from the defendant at bar. * * *

"Before the defendant in this case can be found guilty of the alleged charge set forth in the indictment it must be established by the evidence beyond a reasonable doubt that the defendant had the specific intent to commit the acts therein alleged.

"If, in your judgment as jurors, the prosecution fails to prove such specific intent beyond a reasonable doubt, or if after considering all of the evidence, you or any of you entertain a reasonable doubt as to whether the defendant had such specific intent, then you must return a verdict finding the defendant not guilty."

17 Chevillard v. United States , 9 Cir., 155 Fed. (2d) 929; Nye & Nissen v. United States , 9 Cir., 168 Fed. (2d) 846; Todorow v. United States , 9 Cir., 173 Fed. (2d) 439; Himmelfarb v. Untied States, 9 Cir., 175 Fed. (2d) 924 [49-1 USTC 9313]; D'Aquino v. United States, 9 Cir., 192 Fed. (2d) 338; McFee v. United States , 9 Cir., 206 Fed. (2d) 872 [53-2 USTC 9549]; Lemke v. United States, 9 Cir., 211 Fed. (2d) 73; Silva v. United States , 9 Cir., 212 Fed. (2d) 422; Randall v. United States , 9 Cir., 215 Fed. (2d) 587.

18 See 145(b) of the Internal Revenue Code of 1939, 26 U. S. C. A., 1946 Ed., 145(b), supra.

19 See 145(a) of the Internal Revenue Code of 1939, 26 U. S. C. A., 1946 Ed., 145(a), which provided: "Any person required under this chapter to pay any estimated tax or tax, * * * who willfully fails to pay such estimated tax or tax, * * * at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than one year, or both, together with the costs of prosecution."

20 Rule 31(c) provides: "The defendant may be found guilty of an offense necessarily included in the offense charged or of an attempt to commit either the offense charged or an offense necessarily included therein if the attempt is an offense.

21 United States v. Kafes, 9 Cir., 214 Fed. (2d) 887 [54-2 USTC 9492]; Dillon v. United States, 8 Cir., 218 Fed. (2d) 97 [55-1 USTC 9131]. See also Spies v. United States, 317 U. S. 492 [43-1 USTC 9243]; Berra v. United States, 351 U. S. 131 [56-1 USTC 9480].

22 United States v. Asher, 9 Cir., 111 Fed. (2d) 59 [40-1 USTC 9425].

 

 

[55-1 USTC 9439] Arnold McGrew, Appellant v. United States of America , Appellee

(CA-5), In the United States Court of Appeals for the Fifth Circuit, No. 15188, 222 F2d 458, May 13, 1955

Appeal from the United States District Court for the Northern District of Georgia.

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

Criminal prosecution: Net worth method: Preliminary questions.--On the authority of Holland v. U. S., the Appeals Court rejected defendant's contention that the Government did not make the preliminary proof that (1) the taxpayer had no books; or (2) refused to produce them; or (3) the books did not clearly reflect his income; and (4) the circumstances were such that the net worth method did reflect his income with reasonable accuracy and certainty.

Criminal prosecution: Willful intent: Sufficiency of evidence.--There was ample evidence for a finding by the jury that the discrepancy between income reported and income received was the result of a willful intent to evade the taxes.

Criminal prosecution: Function of jury.--The jury had the right to accept the Government's evidence in part and reject the claims of the defense in part.

Horace E. Richter, LaGrange , Ga. , M. Neil Andrews, Atlanta , Ga. , for appellant. James W. Dorsey, United States Attorney, Atlanta , Ga. , for appellee.

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

PER CURIAM:

Charged in four counts with wilfully attempting, in violation of Sec. 145(b), 26 U. S. C., to defeat and evade a large part of his income taxes for the year 1946, involving more than two-thirds of the claimed deficiencies, and the years 1947, 1948, and 1949, each involving much smaller amounts, defendant was acquitted on Count One and convicted on Counts Two, Three and Four. Sentenced on each of the three counts to pay a fine of $7500 and to serve three years, the sentences to run concurrently, defendant, appealing therefrom is here attacking the judgment and sentence on three general grounds.

[Reasons for Appeal]

The first ground, under which most of his propositions are put forward and argued, presents the claim: that the government did not make the necessary preliminary proof that (1) the taxpayer had no books; or (2) refused to produced them; or (3) the books did not clearly reflect his income; and (4) the circumstances were such that the net worth method did reflect his income with reasonable accuracy and certainty; and that, therefore, an acquittal should have been directed.

Whatever may have been thought to be the state of the law as to these propositions before the decision in Holland v. United States, 348 U. S. 121 [54-2 USTC 9714], and the companion cases decided on the same day came down, the decisions in these cases have made it clear that if they ever were tenable, they are no longer so.

The second ground of attack is that the requirement of Spies v. United States, 317 U. S. 492 [43-1 USTC 9243], and cases decided under its authority, such as Jones v. United States, 164 Fed. (2d) 398 [47-2 USTC 9402], and Spriggs v. United States, 198 Fed. (2d) 782 [52-2 USTC 9454], that willfulness is an essential element of the offense and must be shown, was not met.

The third ground is the broad one, that the evidence was insufficient to convict the defendant of the offenses charged, and his motion for acquittal should have been granted.

[Willful Intent]

The first of these two grounds either misapprehends the nature and effect of the Spies and following decisions as to the proof required to show willfulness, or of the evidence adduced in this case. For it is clear, we think, that if the evidence of the government as to the defendant's net worth was accepted by the jury and the explanation tendered by the defense of the sources of that net worth was rejected by them, there was ample basis in the evidence for a finding by the jury, under the charge of the court to which no exception was taken, that the discrepancy between income reported and income received was the result of a willful intent to defeat and evade the taxes.

The third ground, which in its generality embraces the claimed inadequacy in the proof of willfulness, put forward as the second ground for reversal, and the inadequacy in the proof of an excess of income over that reported, is no better taken. It is true that the jury did reject the large claim of discrepancy between initial and concluding net worth claimed by the government for the year 1946, and that to the extent of the rejection the jury did sustain the defense that at the beginning of that year defendant did have a much larger net worth than the government was willing to accord to him as of that time. It is further true that this finding in defendant's favor should, and no doubt, as shown by the colloquy in the record at the time when the sentence was first imposed, will, when the final determination of the proper sentence is made, have its full weight with the court in determining both the extent and nature of the offending, and the over-all considerations which should enter into and influence the sentencing.

When it comes, however, to the much more modest claims of the later years, the jury, as it had a right to do under the evidence, accepted, at least in part, the government's evidence and, at least in part, rejected the claims of the defense. We are, therefore, unable to agree with defendant's contention that a verdict should have been directed in his favor and that the judgment must be reversed.

No error appearing, the judgment is AFFIRMED.

 

 

[51-1 USTC 9165]R. Avery Dawley, Appellant v. United States of America , Appellee

(CA-4), In the United States Court of Appeals for the Fourth Circuit, No. 6171, 186 F2d 978, February 1, 1951

Appeal from the United States District Court for the Eastern District of Virginia, at Richmond.

Reconstruction of income: Private records discovered: Net-worth increase.--The Internal Revenue agent recomputed the income of the taxpayer, a retail furniture dealer, for 1945 and 1946 by reference to loose-leaf pages and accounts receivable kept in the taxpayer's handwriting in his safe and not known to the independent bookkeeper who kept the other records and prepared the returns. For 1947, the agent recomputed the income by reference to increase in net worth with an adjustment for estimated living costs. A conviction for fraudulent evasion of income taxes was sustained despite the taxpayer's arguments that the agent should have computed the 1946 income on the installment basis and that for 1947 the agent had not included accounts payable.

Robert J. Herberle for Appellant. John P. Harper, Assistant United States Attorney (George R. Humrickhouse, United States Attorney, on brief), for Appellee.

Before SOPER and DOBIE, Circuit Judges, and WARLICK, District Judge.

[Facts]

SOPER, Circuit Judge:

This appeal is from a conviction under Section 145(b) of the Internal Revenue Code, 26 U. S. C. A. 145(b), for the fraudulent evasion of income taxes for the years 1946 and 1947. The indictment contained three counts. The first charged that for the year 1945 the defendant reported a net income of $3,545.64 and a tax due of $520.17 whereas his actual net income was $33,239.11 on which a tax of $13,059.00 was due. The second count charged that for the year 1946 the defendant reported a net income of $2,952.12 and a tax due of $397.83 whereas his actual net income was $36,774.01 on which a tax of $15,839.52 was due. The third count charged that for the year 1947 the defendant reported a net income of $4,836.63 and that the tax thereon was $661.00 whereas his actual net income was $17,953.47 on which a tax of $5,155.40 was due. Upon the motion of the defendant the lower court granted a directed verdict of acquittal on the first count, finding as a matter of law that the evidence was insufficient to sustain a verdict of guilty. The court denied similar motions on the remaining two counts and submitted the case to the jury. Verdicts of guilty were returned on both counts and the court fined the defendant $1,500 on each count or a total of $3,000. The principal question on appeal is whether there was sufficient evidence to warrant a jury determination of guilt under the second and third counts.

R. Avery Dawley, the taxpayer, was engaged in the retail furniture business at Kilmarnock , Virginia . He purchased the business on September 15, 1944 for $4,000 in cash and a $4,000 note, explaining to the vendor that he did not have the money to pay for it completely. He rented the building which housed his business until June, 1946 when he purchased it for $12,000. He carried on a successful business selling approximately half of his goods for cash and half on the installment plan. Sales of the latter type were recorded on an accounts receivable ledger which purported to show each sale, the initial payment, payments on account and the balance due. The defendant employed an independent bookkeeper, outside his office, named John Ennis, to keep additional records on information furnished in daily written reports of the defendant, check stubs and cancelled checks. Ennis used these records to prepare the defendant's tax returns, monthly statements and balance sheets. A third set of records in the defendant's handwriting were kept in the defendant's safe. They consisted of small loose leaf notebook pages, which covered the years 1945 and 1946, and contained, inter alia, figures showing daily time sales and cash sales, as well as the annual totals, inventory figures, balance sheets and the total net worth of the defendant. Neither the accounts receivable ledger nor the loose leaf pages were known to Ennis when he prepared the defendant's tax returns.

Upon inquiry and after search, these records and certain cancelled checks and check stubs were all that the agent could find to compute the defendant's income. Relying on the loose leaf pages in particular, the agent recomputed the defendant's income on a cash basis for the years 1945 and 1946, comparing it with that disclosed in the tax returns for those years. The records for 1947 being unsatisfactory, the agent prepared a net worth statement showing increases in net worth for the years 1945, 1946 and 1947 in order to arrive at the approximate income for 1947 and to substantiate the computations of income already made for the years 1945 and 1946. We concern ourselves with the evidence relating to the years 1946 and 1947.

[Reconstruction of Income for 1946]

The government's proof for the year 1946 centers primarily on a comparison of the defendant's figures on his tax return with those disclosed in his private loose leaf notebook pages. There was little difference between the figures for costs of goods sold and other expenses in the taxpayer's return and in the government's computation. When totaled they came to $64,400.02 in the return and $62,359.50 in the computation. However, the taxpayer's return showed sales in the amount of only $67,352.14 and a net profit of $2,952.12 whereas the loose leaf pages showed cash and time sales of $99,133.51 and a net profit of $36,774.01 according to the government's computation.

The defendant attacks this calculation first on the ground that the agent computed the tax for 1946 on the cash basis and did not compute it on the installment basis, as is permissible for a person who regularly sells on the installment plan under Section 44 of the Internal Revenue Code, 26 U. S. C. A. 44. The agent did not use the installment basis since he was under the erroneous impression that such a taxpayer may not use this basis without the permission of the Commissioner of Internal Revenue, and also because he was told by the defendant that he did not use the installment basis but reported his income partly on cash and partly on accrual basis. It is obvious that the agent's mistake of fact is immaterial since a person in the installment business may report his income either on a cash or an accrual basis if he so desires. Hence it is only necessary to determine whether there was substantial evidence to support the correctness of the agent's computation, that is to say, whether there was substantial evidence to take the case to the jury. Since the agent's figures approximated those used in the defendant's tax return for 1946 except for two items, one showing the amount of the inventory at the end of the year and the other the amount of sales during the year, we confine ourselves to these items. The amount of the inventory at the end of the year used in the agent's calculation exceeded that shown on the taxpayer's return by the sum of approximately $3,000; but the use of the larger figure was justified since it was taken from a detailed inventory set out in the notebook in the defendant's safe. The sales figure, amounting to $99,133.51, for the year was taken from the same source and purported to be the sum total of cash sales and installment sales during the year. It is objected that insofar as the total consists of money due the defendant on installment sales made but unpaid in 1946, it exceeded the cash receipts for the year and thereby erroneously exaggerated the taxable income. The taxpayer's notebook, however, showed that the total amounts receivable at the end of 1946 amounted to $18,551.51 and his accounts receivable ledger showed the sum of $17,973.35 as accounts receivable at that time. If the larger of these figures is deducted from the total sales they will be reduced to the sum of $80,582.00 and the net profit for 1946 will be reduced to $18,222.50 as compared with a profit of $2,952.12 shown by his return. Admittedly these various computations of net profit for the year 1946 leave room for error; but as we stated in Bell v. U. S., 4 Cir., 185 Fed. (2d) 302 [50-2 USTC 9499], "* * * the absence of proof of the exact amounts of unreported income is not fatal if there is substantial evidence tending to prove the defendant's guilt beyond a reasonable doubt." It is obvious that the evidence is sufficient to support the charge contained in the indictment and this conclusion is fortified by the fact that the calculation in the taxpayer's notebook, which we may assume was made on the accrual basis, shows a net profit for the year of $37,062.34. Moreover, it is highly significant that the taxpayer offered no evidence to dispute the correctness of the agent's computation.

[Net-Worth Increase for 1947]

The proof offered by the government to sustain the third count of the indictment in respect to the taxable income of the defendant for the year 1947 consists primarily of a comparison of his net worth at the beginning and at the end of the year, as calculated by the government agent. This method is of necessity an approximation which has been approved by this and other courts and was resorted to in this case because of the absence of accurate records, which it was the duty of the defendant to keep. Bell v. U. S., supra. After extensive investigation the agent found that the assets of the defendant, bank deposits, savings bonds, inventory, accounts receivable, real estate, &c., less his liabilities, totalled $71,935.86 as of December 31, 1946 and $86,719.85 as of December 31, 1947. To the increase in net worth of $14,874.92 was added an estimated cost of living, insurance premiums and federal income taxes paid in the total amount of $3,078.55. The adjusted income as thus determined came to $17,953.47 whereas the defendant reported only $4,836.63.

This computation is criticized chiefly because it includes accounts receivable and also because it does not include accounts payable. It seems axiomatic that in the computation of the net worth of the taxpayer monies owing him as well as monies payable by him must be included. Accounts payable were omitted by the agent because the defendant stated to him that he paid his bills promptly and carried no accounts payable forward. No such accounts were included in the estimate of net worth prepared by the defendant's bookkeeper Ennis and put in evidence by the United States in this case. Accounts receivable were properly included since they were outstanding in considerable amounts at the beginning and end of the year. The decision in Commissioner v. South Texas Co., 333 U. S. 496 [48-1 USTC 5922], upon which the defendant relies, has no bearing in this connection since it related to the exclusion of unrealized and unreported profits from invested capital in computing the excess profits tax of a corporation engaged in installment sales.

The computation of the agent was supported by the defendant himself and by his own records. He was furnished a copy of the computation and after an examination of it stated that it was substantially correct. Moreover, the records prepared by Ennis showed a net worth of $34,047.84 at the beginning and $53,252.05 at the end of 1947, or an increase in net worth of $19,204.21 for the year, as compared with a reported profit of $4,836.63. There was thus substantial evidence to support the verdict of the jury on this count.

Affirmed.

 

[56-2 USTC 9876] United States of America , Appellee v. Joseph D. Nunan, Jr., Defendant-Appellant

(CA-2), U. S. Court of Appeals, 2nd Circuit, Docket No. 23476, 236 F2d 576, 9/6/56, Affirming an unreported District Court Case, N. Y

[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7202]

Willful tax evasion: Criminal prosecution: Miscellaneous defenses.--The taxpayer was properly found guilty of willful income tax evasion. No merit was found in various defenses relating to sufficiency of evidence; failure to exclude evidence of large bank deposits; jury charges; prosecution's summation; and inspection of grand jury minutes. The taxpayer, an experienced and influential lawyer and former Commissioner of Internal Revenue, kept no records of his personal business transactions; failed to report large amounts to income; concealed legal fees from taxing authorities as well as from his law partners; made incredulous and inconsistent statements relative to the amount of cash on hand; and was therefore properly found guilty of tax evasion.

Leonard P. Moore, United States Attorney, Eastern District of New York, Brooklyn, New York (Thomas C. Platt, Jr., Assistant United States Attorney, Brooklyn, New York, of counsel), for appellee. Richard J. Burke, J. Bertram Wegman, New York City , for appellant.

Before MEDINA , HINCKS and WATERMAN, Circuit Judges.

MEDINA , Circuit Judge:

This is an appeal by Joseph D. Nunan, Jr. from a judgment of conviction entered upon the verdict of a jury finding him guilty of income tax evasion, in violation of Section 145(b) of the Internal Revenue Code of 1939, on each of five counts covering the calendar years 1946 to and including 1950. Appellant was sentenced to five years imprisonment on each of the five counts, the sentences to run concurrently, and a fine of $3000 on each of the five counts was imposed.

[Errors Assigned]

We are urged to reverse and dismiss the indictment or remand for a new trial. The points may be briefly summarized: (1) that there was insufficient evidence to establish the commission of the crime charged and that it was error to deny appellant's motion for a directed verdict; (2) that the motion to strike certain evidence of a long and continuous series of bank deposits in currency and payments to brokerage houses and others in currency should have been granted, because there was no basis for a finding that any of this cash constituted taxable income and because of the alleged prejudicial character of such proof; (3) that appellant was deprived of a fair trial by a variety of rulings admitting and excluding evidence, by allegedly erroneous instructions to the jury and refusals to charge as requested and by additional miscellaneous rulings of one kind and another; (4) that the summation of the prosecutor was inflammatory, irrelevant and improper; and (5) that it was error to deny appellant's motions to quash the indictment, to permit an inspection of the Grand Jury minutes and to suppress certain evidence. These points are proliferated and subdivided into so many separate contentions as to make it a tedious and profitless task to attempt further enumeration.

The validity of each of appellant's points depends as usual upon the factual background disclosed by the record, which at first blush seems extremely complicated and confusing. This seeming confusion, however, as we shall see, is due in no small measure to the fact that both sides leaned heavily on pre-trial statements made by appellant to the United States Attorney or to his assistants and to the Grand Jury, he having elected not to testify in his own defense at the trial. These various statements by appellant abound with inconsistencies, contradictions and ambiguities. Moreover, the large number of appellate court opinions of recent vintage in tax evasion cases have furnished a variety of labels or categories; and the zeal of counsel to fix one or another of these labels on the case, or to squeeze it into one or another of these so-called categories, has created the illusion that the basically simple issues are complicated and difficult of resolution.

Sufficiency of the Evidence

Appellant is a lawyer who, in addition to his law practice, served as a member of the New York State Legislature from 1930 to 1940. He functioned as Collector of Internal Revenue in Brooklyn , New York , from 1941 to 1944, when he became Commissioner of Internal Revenue in Washington , D. C., serving in that capacity until June 30, 1947. He had been a member of one law firm in New York City for some time, and, after June 30, 1947, became a member of another law firm in Washington .

On February 2, 1951, by H. Res. 78, a Sub-committee of the House of Representatives was set up to "Investigate the Administration of the Internal Revenue Laws." Not long after this, and on June 27, 1951, appellant filed amended joint returns for himself and wife for the calendar years 1949 and 1950. In October, 1951, two Revenue Agents were assigned to do a special examination of appellant.

[Taxpayer's Practices]

It soon developed that appellant had no checkbooks or cancelled checks for years prior to 1951. He said he had no personal books or records such as a taxpayer keeps and is required by law to keep in order to substantiate the data set forth in his income tax returns and facilitate verification by those charged with the duty of checking the various items. Moreover, he employed no accountant or other person to assist him but made out his returns himself and no other person has knowledge of the basis for the various amounts stated therein, except such as are mere reproductions of figures supplied by brokerage houses or the bookkeepers of his law firms. Schedules and details plainly required by the printed instructions on the returns were completely disregarded and omitted. Appellant's special knowledge of the tax laws which might have been inferred from his law practice and his experience as Collector of Internal Revenue and as Commissioner of Internal Revenue, with general superintendence over the collection of all taxes and the preparation of the regulations, blanks and forms, was said to be non-existent. He denied that he was a tax expert and said he became a federal revenue officer only by "the chance of politics." He is portrayed in his brief and in his various statements as a sort of political lawyer and business getter. And when the investigating. Revenue Agents pointed out the difficulties caused by his lack of any sort of personal records and asked him for a net worth statement, he refused to give it.

So the investigation proceeded and it was discovered that a large number of items of income had been entirely omitted from his returns for the years 1946-1950. Some of these items were small, others were far from negligible in amount. In addition, a close examination of the bank ledgers disclosed a surprising number of deposits by appellant and his wife in currency. These were periodic and continuous, over the years covered by the indictment. The following is the list of such deposits in the year 1946:

March 9 .........           $ 300.00
March 29 ........             300.00
April 29 ........             460.00
April 29 ........             200.00
April 30 ........             500.00
May 15 ..........             500.00
May 20 ..........             550.00
August 23 .......             750.00
August 30 .......             700.00
August 30 .......             750.00
September 5 .....             860.00
September 23 ....             800.00
September 23 ....             500.00
September 30 ....             500.00
October 15 ......             500.00
October 15 ......             550.00
November 7 ......             500.00
November 15 .....             250.00
December 9 ......             900.00
December 12 .....             600.00
December 16 .....             750.00
Total ...........         $11,720.00

 

When appellant bought some stock in 1946 he handed over to the brokerage house one hundred and sixty $100 bills and fourteen $50 bills. A further single payment of $11,253 in currency was made in the same year.

The amount paid to one dress shop during the prosecution years was $29,500; and of this amount $12,014.86 was paid in currency.

The cash deposits and expenditures during these years totalled $98,092.86; and for the years 1945 through 1950, the Revenue Agents unearthed $160,000 of deposits and expenditures in excess of appellant's reported net income.

[Proffered Defense]

Appellant's explanation defies credulity. The ledger sheets of his bank for the years prior to 1937 had been destroyed, so that no evidence was available to show what his balance was in the early thirties or at any time prior to 1937. He knew that safe deposit records showed that he rented a $10 box at the Chemical Safe Deposit Company on July 1, 1935. He said in substance that he had $170,000 in his bank account in March of 1933; that, fearful of the failure of the bank, and during the next two years, he made cash withdrawals in amounts ranging between $2000 and $5000, and put the cash in a metal box which was kept on a shelf in the bedroom in his home; that most of this was his wife's money, that he regarded the contents of the box as belonging to them both, and that she had a key; that in 1935 he decided to put the money in a safe deposit box, which was rented for the purpose; that from July, 1935 to the end of 1944 most of the cash was kept in this safe deposit box; and that, finally, he decided to put the money back in the bank, which he did piecemeal and that these piecemeal deposits made periodically over the years 1946 to 1950, which the government claims constituted taxable income, were not income at all but the same old $170,000 fund he started with, less whatever had been expended in the meantime. This is the substance. There were countless variations as he was questioned by the United States Attorney or his assistants, or by the Foreman or by one of the Grand Jurors. The amount withdrawn from the Irving Trust Company was $100,000 or $150,000 or $125,000. The amount he left on deposit in his personal checking account, despite his fears, was $10,000 or $25,000 or $12,000. There were similar variations in his recollection of the amount of cash he kept in the safe in his law office, the amount kept at home, the amount in the metal box in the bedroom closet, and so on.

Naturally, the Revenue Agents and the prosecuting officers questioned appellant closely, especially after this belated and fantastic explanation was finally forthcoming. And appellant's pre-trial statements were supplemented by his wife's testimony at the trial. She had inherited a substantial sum from a rich uncle and an additional amount from her father. She said she had turned these funds over to appellant prior to 1932. It also appeared that appellant had made the practice over the years of turning his salary checks, as a legislator and as Collector and Commissioner, into cash; and he made other claims of accumulations of cash. We need not follow in detail the testimony of the Revenue Agent who described at the trial the course of the extensive investigation into each and every item in so far as estate and corporate and other documents and records and interviews with persons able to throw some light on real estate transfers, mortgages, and other matters, might reveal the true state of affairs. Suffice it to say that the net result, on the record as a whole, was evidence amply sufficient to warrant a finding by the jury that there never was any such fund of $170,000 or anything approximating such a sum in appellant's possession in the late twenties or early thirties.

[Construction of Income]

Another phase of the government's proof was a meticulous checking of all available items in order to arrive at an approximate figure representing the amount of appellant's taxable income. This was an arduous task, as it has proved to be in many other income tax evasion cases where the absence of records and the handling of large amounts of currency have made it impossible to do more than demonstrate that the taxable income involved greatly exceeded the amounts shown in the returns. The jury was evidently satisfied that the investigation was conducted in good faith and that appellant was given the benefit of any and all circumstances favorable to his side of the case, as claimed by the Revenue Agent who testified. The evidence warranted such a finding.

The government claimed the following deficiencies for the prosecution years:

                    Net Income                Tax
Year                Deficiency         Deficiency
1946 .....         $ 42,489.13         $33,079.50
1947 .....           19,503.69          15,583.44
1948 .....           23,599.48          14,641.46
1949 .....           17,818.91          11,228.34
1950 .....           23,840.76          16,553.86
Total ....         $127,251.97         $91,086.60

 

As to the specific items of taxable income which had been omitted from the returns, the substance of the defense was that they had been carelessly overlooked, that the amounts were not significant when compared with the totals of reported taxable income in each of the years in question, and that, if the proof of periodic cash deposits and expenditures was out of the case, the evidence of omission of specific items was insufficient to support a finding of wilful evasion.

Accordingly, we turn to the specific items, which have significance not only in themselves, but for the light they throw upon the cash deposits and expenditures phase of the case.

[Authorities Cited]

The mere possession of large amounts of cash or the expenditure of large amounts of cash may well arouse suspicion and speculation, but it is well settled that proof of this, standing alone, will not suffice to establish that the amounts involved constitute taxable income. See Gleckman v. United States , 8 Cir., 80 Fed. (2d) 394, 399 [35-2 USTC 9645], cert. denied, 297 U. S. 709; Graves v. United States , 10 Cir., 191 Fed. (2d) 579, 582 [51-2 USTC 9431]; cf. Holland v. United States, 348 U. S. 121 [54-2 USTC 9714]; Smith v. United States, 348 U. S. 147 [54-2 USTC 9715] (semble). But when unreported receipts in the indictment years are established by independent evidence, as here, the proof that the receipts derived from a taxable source may be made by proof of a likely source of taxable income, as in United States v. Johnson, 319 U. S. 503 [43-1 USTC 9470]; Capone v. United States, 7 Cir., 51 Fed. (2d) 609 [2 USTC 786]; Guzik v. United States, 7 Cir., 54 Fed. (2d) 618 [1931 CCH 9681]; United States v. Costello, 2 Cir., 221 Fed. (2d) 668 [55-1 USTC 9342]; United States v. Ford, 2 Cir., August 6, 1956, -- Fed. (2d) -- [56-2 USTC 9823]. The variations of this pattern are legion but a common feature is the necessity for concealment and the method of concealment not infrequently is the use of currency.

Here, as we shall see, there were proofs from which the jury might find that appellant had received fees not included in the earnings of his two law partnerships. Because "of the chance of politics," he was in a position of unusual prominence, in contact with government officials of every rank and stature, and obviously eager and willing to harvest the crop when it was ripe. As a member of two law firms he shared largely in huge partnership income. But he did not hesitate to turn his position as a public figure to account in other ways. And the number of legal fees he concealed not only from the tax authorities but also from his law partners has a special relevancy, in view of his extrajudicial statement that his professional income was reported on the basis of his earnings as they appeared on the partnership books.

[Pattern of Conduct]

In the fall of 1947 Brown & Bigelow Company desired to market some of its securities through Otis & Co. The stockholders' meeting was scheduled for December 6th, and it was necessary to secure a "closing agreement" from the Bureau of Internal Revenue prior to the meeting. The lawyers for the company went to Washington and saw the officials whose duty it was to act in the matter, but were informed that there were so many similar applications ahead of theirs that prompt action was impossible. Appellant, who had ceased to be Commissioner of Internal Revenue about six months previously was retained and in a few hours, as the result of a telephone call or interview, the business was done, and appellant was paid a fee of $25,000. The details are interesting. After agreeing on a fee of $25,000, appellant acceded to the suggestion that this be paid in stock, which the president of Brown & Bigelow Company had bought in at $9.50 a share. Accordingly, a computation was made at the nearest approximation; 2630 shares at 9.50 came to $24,985.00. A bill dated December 28, 1947, was made out by appellant in that amount, duly receipted and sent out to Brown & Bigelow Company in Minnesota ; the 2630 shares were forwarded to appellant on January 2, 1948.

But the bill is not on the billhead of his New York law firm but on an old form of personal, Joseph D. Nunan, Jr., billhead previously used, with the old address crossed out and 55 Liberty Street substituted, and the stock was forwarded to appellant, not at his law office, but at "604 Shore Road, Douglaston, Long Island." The firm bookkeeper had no knowledge of the matter but appellant claims the jury could have found that other members of the firm knew of this fee and were willing to have appellant keep it all. But the jury may well have found that appellant concealed the fee from his partners. True, one of the partners testified that appellant had told him that Brown & Bigelow Company had "given" him some stock, and on cross-examination he said he "understood" the firm would not receive any of the stock. But this is far from saying that he knew of the services rendered by appellant, or that a fee of $25,000 had been agreed upon and paid. Moreover, the credibility of every one of the witnesses constituted an issue in the case.

It is claimed by appellant that this Brown & Bigelow Company fee is included in his 1948 joint return under the heading of "Other income--$22,500." For the purposes of computing the amount of tax evaded by appellant in 1948 the government was willing to make its calculations accordingly. But there is no possible way of making $22,500 equal $24,985, nor did appellant in any of his various statements give any explanation.

[Other Income]

In December, 1949, the Unexcelled Chemical Company retained appellant's firm and paid a retainer of $1500, which was entered on the firm books. But C. D. Waller, President of the Company, purchased 1000 shares of bearer stock of Unexcelled, endorsed in blank, at a cost of $2997.50, for the account of "Mr. Joseph D. Nunan, Jr., care of C. D. Waller, Stamford , Connecticut ." In one of his statements appellant claimed the client had said "we are not in a very strong cash captionposition--would you take stock for a fee," and that he put the stock in the safe and "we forgot about it." But no record of the receipt of the stock was made in the firm books and nothing happened until two weeks after appellant was interviewed by the Revenue Agents in 1951, when the stock was sold and the partnership included the proceeds as income for that year. There was testimony by one of appellant's partners to the effect that this was a sort of "contingent" fee not to be taken "until it was earned," but this, under the circumstances, might not have seemed convincing to the jury.

In 1950 Anheuser-Busch, Inc. was about to complete the construction of a new $30,000,000 brewery in Newark , New Jersey . Foreseeing the possibility of complications over "permits and things of that sort" appellant was "put on a retainer" of $500 a month with the understanding that he might be called upon at any time "for legal advice and counsel." He received three monthly payments, aggregating $1500, in 1950. But none of this ever reached his law firm, nor is there any evidence that any of the partners ever knew anything about it. Appellant's explanation before the Grand Jury was that he was hired not to perform legal services but to "try to get * * * Anheuser-Busch beer into certain places in New York ."

No item of $1500 from Anheuser-Busch, Inc. appears in appellant's 1950 return. In one of his statements appellant said two of the payments were included under the description "Other income--$2250" in the original 1950 return and a third in his amended return, filed June 27, 1951, under the heading "Other income--$2750."

Appellant represented a Dr. Jones who had an income tax problem and appellant claimed to have done considerable work on the matter personally. The fee was $7500 but appellant had certain charities he wanted to help so the fee was paid by a check of $6000 to the order of his law firm, and two additional checks for $500 and $1000 respectively, drawn to appellant's order and endorsed over to the charities in which he was interested. The jury would have been justified on the evidence in concluding not only that the firm lost its share of the $1500 portion of the fee, but that there was at least the possibility that appellant took the charitable deduction twice, one by the simple method above described, and again when he tried to remember, but made no effort to enumerate in detail, as required by the instructions, his gifts to charity during the year, as he filled out his income tax form. He made up a sort of estimate out of his head when writing out his returns, and set down a figure in each return after writing "various church & charities." This figure varied from $5100 in the 1946 return, $6050 in 1947, $9350 in 1948, $9600 in 1949, to $11,360 in 1950. He said he "didn't think" he included the two Dr. Jones items in his charitable deductions for that year.

[Still More Unexplained Income]

There was a forwarding fee due from the law firm of Glass & Lynch. This was one of the matters which appellant and his firm split on a 50-50 basis. He sometimes received the fee and remitted the firm share later. He received two checks, one dated February 28, 1944, for $3333.33 and the other dated November 19, 1945, for $8138.82. The payments to the firm, however, were not 50-50. Of the amount of the first check appellant remitted $1500, and of the other he remitted $2830. The result was not only a diminution of the amount owing to the firm, but the government lost income taxes both on appellant's share of what he withheld, or $1406.08, and also on the firm's share, or another $1406.07, making a total of $2812.15 on which no income taxes were paid. Appellant reported his income from this transaction only on the basis of that fraction of the fee which he remitted to his law firm. It is futile for counsel to make the explanation in appellant's brief that there may have been disbursements deducted by appellant. No such explanation was made at any time by appellant, nor was there any testimony on the subject, and the even figures of appellant's checks do not indicate any such deduction.

Perhaps appellant's lack of books and records and his giving of lump sum totals here and there in persistent disregard of the printed instructions on the returns, and his omissions to give his firm the share of legal fees to which they were entitled, were due to the fact that appellant was so busy that he developed careless habits. But the jury might have found that there were just too many of these slip-ups, that an honest man with his huge income would naturally keep some sort of books and records and procure the usual assistance in preparing his income tax returns. From the circumstances of the case as a whole the jury was well justified in drawing the inference of wilful evasion.

The way appellant handled the fees above described had a bearing on the sources from which he derived the large amounts of currency deposited and expended. If he withheld from his firm and from the government information of fees which he was paid by check, how much more likely was he to withhold information of fees paid in currency. Especially as such opportunities for enrichment presented themselves as in the Brown & Bigelow matter, where contact with an official almost in the twinkling of an eye resulted in a fee of $25,000. It would be far from strange if services of this character were paid for in cash.

In any event, and before we set forth a summary of the evidence concerning the numerous other omitted items, it may be well to say that it is now apparent, we think, that the interrelation between the currency phase of the case and the so-called specific items is such that the trial judge would have erred grievously and to the prejudice of the government's case had he stricken from the case all evidence of the periodic cash deposits and expenditures, and appellant's explanations thereof.

Despite the usual explicit statements from his broker he failed to report a capital gain of $544.80 in 1950. He mailed reminders every year to Dr. Kiffney specifying the amount of principal and interest due on a mortgage but failed to report receipt of any of the interest payments, which aggregated $2278.52 in the five prosecution years. He was paid $1800 which he won on a wager in 1948, but this was not included in his return. He explained that his gambling losses exceeded this amount in that year, although he must have known that the details to such transactions must be specified if the losses are to be allowed against the gains. There was a persistent and continuous failure in each of the prosecution years to report the full amount of dividends received. In April, 1946, the senior member of his law firm died and appellant and another partner agreed to contribute together to the firm the sum of $28,000. As appellant's undistributed earnings for prior years amounted only to $8,474.52, the balance of his $14,000 contribution, or $5525.48, constituted earnings which he should have reported as such, as they were not otherwise included in his partnership earnings. It is claimed that this is the sort of disputed item one might come across in a civil litigation, but it is hard to see any plausible ground for any bona fide dispute. A few omitted directors' fees make up the balance of the $23,536.30 of specific items of unreported income.

None of these items can be considered in vacuo. Nor does the sum of them tell the story. Viewed in perspective against the background of the case as a whole we cannot say that the evidence required a ruling that the jury must render a verdict of acquittal. The showing by the government must warrant a finding that the amount of the tax evaded is substantial. Timkoff v. United States , D. C. Cir., 86 Fed. (2d) 868 [37-1 USTC 9057]; United States v. Schenck, 2 Cir., 126 Fed. (2d) 702 [42-1 USTC 9363]; Graves v. United States, 10 Cir., 191 Fed. (2d) 579 [51-2 USTC 9431]. But this is not measured in terms of gross or net income nor by any particular percentage of the tax shown to be due and payable. All the attendant circumstances must be taken into consideration. Here the total gross income reported by appellant in 1946 was $67,823.57 and in 1950, $143,239.00. But a few thousand dollars of omissions of taxable income may in a given case warrant criminal prosecution, depending on the circumstances of the particular case. Otherwise the rich and powerful could evade the income tax law with impunity. Here, even if the jury had been unable to agree with the contentions of the government to the effect that the cash deposits and disbursements constituted, to the extent alleged, taxable income, still a verdict of guilty would have been warranted by the proof of specific unreported items, viewed in the light of the evidence taken as a whole.

The most serious contention, advanced by appellant in different ways, is that the absence of a statement of his net worth at the beginning of the prosecution period is fatal and that there should at least be a new trial restricted to proofs concerning the specific items of unreported income. It is said that without some proof of appellant's assets prior to the period of periodic and continuous currency bank deposits and expenditures in currency, the effect of the method of proof pursued here deprived appellant of the presumption of innocence and placed upon him the burden of showing that he had not received taxable income in excess of that shown on his returns for the years 1946-1950. We are urged to hold that the requirements of the net worth cases ( Holland v. United States , supra; Friedberg v. United States , 348 U. S. 142 [54-2 USTC 9713]; Smith v. United States , supra; United States v. Calderon, 348 U. S. 160 [54-2 USTC 9712]) must be applied.

[Not A Net Worth Case]

But the answer to all this is that each tax evasion case must rest on its own bottom. This is not a net worth case. All the law requires is that there be proof sufficient to establish that there has been a receipt of taxable income by the accused and a wilful evasion of the tax thereon. It is not necessary to prove that there was a particular amount of tax evaded nor need the computations be exact in an accounting sense. The claim that there is no proof of any probable income-producing source for the cash is completely refuted by the evidence which we have already partially reviewed. The relationship between the various phases of the evidence and the attendant circumstances, such as the complete absence of personal books and records, amply justified a finding by the jury that each of the parts fitted into a pattern of substantial tax evasion. To split the case apart would be to emasculate it.

While it is confidently asserted that there has been no refutation by the government of appellant's statement about his large cash hoard, the fact is that the testimony of the Revenue Agent who testified demonstrated, or at the very least warranted an inference by the jury, that the alleged sources of at least a part of the hoard were fabricated and in many instances exaggerated. Indeed, the description of the metal box and the transfers of cash to the safe deposit box and the curious piecemeal redeposit of the funds in the bank is so fantastic as to provide the basis for its own refutation.

Accordingly, we hold that the motion to strike the evidence of periodic cash deposits and expenditures and appellant's explanations thereof was properly denied, that the state of the evidence did not warrant the granting of the motion for a directed verdict of acquittal, that there was more than ample proof of wilful tax evasion and that the proof relative to the specific items of taxable income which were omitted from the returns in the light of the evidence as a whole was of itself sufficient to suport the verdict.

The Instructions to the Jury

Many of the objections to the charge have already been disposed of as they merely repeat contentions advanced in connection with the claim that the evidence was insufficient to support the verdict. There was no occasion to instruct the jury that "the prosecution must establish defendant's net asset position at the commencement of the period," nor to give "a summary of the nature of the net worth method, the assumptions on which it rests, and the inferences available, both for and against the accused." Holland v. United States, supra, at p. 129. See Gleckman v. United States , supra; Graves v. United States , supra; Stinnett v. United States , 4 Cir., 173 Fed. (2d) 129 [49-1 USTC 9217].

The instructions relative to the crucial issues were simple and clear. Had appellant received income in each of the years in question upon which there was an income tax due which was wilfully evaded, the exact amount of unreported income need not be established by the government to a mathematical certainty, but there must be a substantial evasion of the tax due.

Much is made of the fact that the trial judge refused appellant's Request 18, which read as follows:

"The government must establish beyond a reasonable doubt that the items claimed to be income to the defendant were income in the years in question. On this you may not speculate nor may the government ask you to speculate or guess. If you believe that the cash deposits and cash expenditures during the years 1946 to 1950 came from an accumulation of cash, accumulated prior to 1946, as stated in substance by defendant, then such cash is not income in the years in question and the defendant was not required to report such cash in the years in question nor was he liable for any income tax on such cash."

While the trial judge did not adopt the exact language thus proffered, nor did he cover the same matters in sequence, his instructions adequately and clearly covered the substance of each of the propositions therein contained.

With reference to the first sentence of Request 18, the court charged, "The government must prove to you beyond a reasonable doubt that the defendant wilfully avoided the payment of taxes known to be due upon income received during the years specified in the indictment." Moreover, the jury were instructed not to speculate or guess.

Of course it was important that the jury should know that if the cash deposits and cash expenditures made in the indictment years came from currency accumulated by appellant in prior years, as claimed by appellant, he was not liable for any income tax on this cash. But this was not an issue which crept into the case sub silentio; the pros and cons were referred to again and again in the testimony of various witnesses and in the arguments of counsel. It was as plain as a pikestaff that if the currency deposits and expenditures came from cash in appellant's possession prior to 1946, then this same cash could not be found to be taxable income in the prosecution years. That the jury might have labored under some misunderstanding on the subject seems no more than a hypothetical possibility, too remote from the realities of the trial for serious consideration. In any event, the short answer is that the instructions sufficiently covered the point.

[Burden on Government]

Thus the jury were told that the burden rested exclusively on the government, that "the defendant need not prove to you that expenditures were made from prior accumulations and a source other than taxable income for the years specified in the indictment." And, in a portion of the instructions quoted below, it was made plain to the jury that they were to decide whether appellant had unreported income on which the tax was wilfully evaded, "or whether or not the money was received by the defendant prior to 1946 and therefore is not income."

But appellant contends that certain language in the charge may well have been understood by the jury as a statement "that the cash deposits in banks and the expenditures had been proved by evidence to constitute the financial returns from appellant's occupation." No such inference, we think, is justified when this portion of the charge is read in its entirety. It is as follows:

"The Government has submitted proof in support of its charges of evasion of income taxes and understatements of income by evidence that the defendant had a lucrative occupation, the financial returns from which were reflected in bank deposits, in known receipts and expenditures. It is claimed that the total of these, eliminating duplications, was in excess of the reported income. The claimed differential between the two is the alleged understatement upon which the claimed differences are based.

"It is your function, members of the jury, to determine whether there was such a differential and if the differential was income and whether the tax thereon was wilfully evaded. It is for you to determine whether or not upon all of the evidence the defendant had unreported income, the tax whereon was or was not wilfully evaded, or whether or not the money was received by the defendant prior to 1946 and therefore is not income."

Thus, after stating the claim of the prosecution, the trial judge left it to the jury to say whether there was unreported income or whether, as asserted by appellant, "the money was received by the defendant prior to 1946 and therefore is not income."

Had it been supposed that this was any more than a statement of the broad outlines of the claims of the parties on this phase of the case counsel should have drawn the matter to the attention of the trial judge and requested a clarification, but he did not.

Deductions, Contributions and Miscellanea

Exception was taken, however, to a statement to the jury with reference to the $1800 gambling gain above referred to, that "gambling losses are not deductible unless so claimed and supported." This statement was in all respects accurate. Appellant, after all his experience as a lawyer who handled income tax matters for clients at least occasionally, and after his service as Collector and as Commissioner of Internal Revenue, must have known that he was not entitled to deduct alleged gambling losses without claiming them on the face of the return. This was part of the background the jury was called upon to consider.

It is said that the trial judge, even if not specifically requested to do so, was under a duty to explain to the jury that if appellant honestly believed no tax was due on this item of $1800 they could not find that appellant wilfully evaded the tax thereon. But there is nothing in this. The instructions on the subject of wilfulness were lucid and explicit; the jury must have understood that what was said on that subject applied to each and every item of alleged unreported taxable income.

A few other miscellaneous points may well be disposed of here, as they have to do with certain requirements of law which were relevant to various phases of the case but which appellant says were brought in to his prejudice.

From the very outset of the case, when the returns and amended returns were being offered in evidence, appellant objected to reference to the printed instructions requiring the enumeration of "deductions and contributions," no specific items appearing on the returns and no attached schedules. This particular contention was based upon the statement in the government's Bill of Particulars, "No disallowance of deductions or exemptions claimed."

But it was not the function of the Bill of Particulars to set forth every detail of what the jury was warranted in concluding was appellant's elaborate and ingenious scheme of operations. The lack of any personal books or records, the making out of the returns himself, the persistent disregard of instructions obviously designed to prevent tax evasion and the use of odd lump sums which could be said to mean almost any thing desired if, as and when the evil day arrived and Revenue Agents began to investigate, may well have appeared to the jury, in the light of the evidence as a whole, as part and parcel of appellant's method of tax evasion.

There was nothing in or out of the Bill of Particulars which should have led the trial judge to rule out evidence that appellant had retained no record of his contributions to charities, that he never kept any record of his cash contributions, that he could not identify any of the contributions from memory and that aggregates in round figures in his returns, characterized as "Various church & charities" were no more than guesses or estimates. Naturally the prosecutor commented on this item in his summation and he was plainly entitled to do so.

There was never any concession by the prosecutor that the deductions were "proper," as claimed by appellant, or that they were properly set forth on the returns. Nor did appellant ever claim that the two checks of $1,000 and $500, paid on the Dr. Jones' fee, were included in his total of contributions for the year in which he endorsed those checks over to the two charities in which he said he was interested.

An analogous objection is made with reference to the $24,985 fee for expediting the rendition of the "closing agreement" in the Brown & Bigelow Company matter. When appellant said the item "Other income--$22,500" in his 1948 return represented this item, the government was willing to make its calculations of the amount of tax claimed to be evaded at $2485, the difference between the fee received and the amount claimed to be reported. But this furnished no basis for keeping the full details of the transaction from the jury, as they were relevant to the periodic currency deposits and expenditures phase of the case, and especially so on the issue of motive, intent and wilfulness.

Nor was there error in rejecting the proffered evidence of the bid and asked prices of the Brown & Bigelow Company stock on a when, as and if issued basis, on January 5, 1948, the mean of which is said to be 85/8 rather than the 91/2, which was the basis used when the fee was agreed upon. This evidence could have served no other purpose than to confuse the jury. All the evidence in the case showed an agreed fee of $24,985, the amount of appellant's receipted bill. He made no statement at any time to the effect that he intended to enter on his return the amount the stock might be deemed worth according to the market quotations, nor was any evidence produced on his behalf to indicate that he did so. No calculation made on the basis of the alleged bid and asked prices on January 5, 1948, could be made to come to $22,500.

Moreover, the argument made in the prosecutor's summation, that this fee was not disclosed to appellant's partners, was amply justified, as indicated in an earlier portion of this opinion.

Considerable argument is devoted to the amended returns, two of which were filed on June 27, 1951, shortly after the passage of the Resolution of the House of Representatives, setting up the Sub-committee to "Investigate the Administration of the Internal Revenue Laws," above referred to, and shortly before the two Revenue Agents were assigned to investigate appellant's personal income tax situation. The relevancy of these amended returns to the government's case will appear from a single illustration.

In 1949, one of the officers of American Lithofold Corporation, which manufactured business forms, conferred with appellant over the possibility of getting business for the firm through the medium of appellant's "prominence in the neighborhood," meaning New York City. Appellant was accordingly employed and made a vice-president of the company. Some cards were printed with appellant's name as vice-president and he went around to see some customers and sent out a number of letters. For these services he was paid on February 28, 1949, $750, on March 31, 1949, $750 and on April 30, 1949, $750. A further payment was made to appellant of $1200 in 1950. The 1949 return, as originally filed on January 16, 1950, made no reference to the amounts received from American Lithofold Corporation in that year. In the 1950 return, filed on January 12, 1951, there is an unexplained lump sum statement, "Other income--$2250." The amended return for 1949, filed on June 27, 1951, contains a new item, "Other income--$2250," the equivalent of the three $750 payments above described: and, in the amended 1950 return, filed June 27, 1951, the original statement, "Other income--$2250" is raised to "Other income--$2750." Appellant claimed that the 1949 amended return of "Other income--$2250" represented the payments received from American Lithofold Corporation in 1949. His claim about the "Other income--$2750" in the 1950 amended return is obscured to us, partly because of his answers during the investigation relative to the Anheuser-Busch payments referred to in a foregoing portion of this opinion.

[Proper Jury Question]

In any event, the filing of the amended returns under the circumstances could give appellant no immunity on account of any prior wilful misstatement or omission of taxable income. It was for the jury to consider these items of proof together with all the other evidence in the case and give them such probative weight on the issues as the jury might decide upon.

Much is made of the fact that appellant had a right to file amended returns at any time, and, although not included in the requests for instructions submitted prior to the charge by the trial judge, counsel in a colloquy in the absence of the jury, relative to exceptions to the charge as given, requested the trial judge to supplement his charge by a further instruction "that an amended return does not have to be filed before March 15th, but can be filed at any time." The occasion for this is said to be that in his summation the prosecutor had said: "Now for that year, 1949, when the return was filed on January 16th--and please contrast this with the first one where, on March 12th, he filed an amended return (1946), and we took the amended return because he had a right to file an amended return at any time before the 15th of March."

But no objection had been made to this statement by the prosecutor, which was of trifling significance, and the trial judge wisely, as we think, thought it would not be helpful to emphasize such a point just before the jury retired for its deliberations; and he remarked "if you had made objection at the time we could have said something about it."

We can see no error here. Nothing but confusion and distraction from the main issues could have resulted from the discussion at that stage of the trial of such a minor point. It was well within the discretion of the trial judge to grant or refuse the request.

Two exhibits, consisting of a letter from Gaylord Container Corporation, dated March 15, 1946, requesting a ruling on a proposed stock split-up, and a reply acceding to the request, signed by appellant as Commissioner, dated March 27, 1946, were received in evidence subject to connection. They were not read or shown to the jury; the connection failed to materialize and they were stricken together with the testimony of the witness who identified them. The prosecutor made no comment about these exhibits, and the instructions of the trial judge to the jury to disregard the exhibits and the testimony amply protected appellant. United States v. On Lee, 2 Cir., 193 Fed. (2d) 306, 310, aff'd, 343 U. S. 747; Berlin v. United States , 3 Cir., 14 Fed. (2d) 497, 499; Looker v. United States , 2 Cir., 240 Fed. 932.

It is alleged that the trial judge erred in receiving over objection proof of borrowings by appellant's wife, overdrawings of her bank account and similar evidence which, according to the claim of the prosecution, constituted conduct inconsistent with the existence of the cash hoard in the metal box in the bedroom closet. We are told that the wife was extravagant, that she concealed her borrowings from appellant and that what she did has no relevancy to the charge against appellant.

But appellant stated that the wife turned over to him the money she inherited from her uncle and from her father, that he considered the accumulation of cash in the metal box to belong to both of them and that she had a key to the box. Moreover, appellant stated that she had no income of her own and that all her cash deposits and cash expenditures came from currency he gave to her. Under these circumstances we think the evidence of her borrowings was admissible. 8 Wigmore, Evidence (3rd Ed., 1940) Section 2232(1).

The Prosecutor's Summation

Appellant's brief contains some twenty odd specifications of what are alleged to be improprieties of the prosecutor in his closing statement to the jury. In a few instances objection was made at the time by interrupting the summation, but nothing was said about most of these supposed improprieties until a motion for a new trial was made later. There are six instances of alleged inflammatory appeals to prejudice, three "intimations" of personal knowledge on the part of the prosecutor of facts either not in evidence or contrary to the evidence, and a large number of statements or arguments which appellant claims are without support in the evidence or contrary to the evidence or which called upon the jury to speculate.

Most of the items relied upon are matters of trivial consequence. Counsel was entitled to argue the inferences to be drawn from the proofs, and the jury was instructed that statements by the lawyers in summation are not proof and that the recollection of the evidence by the jury was what they should take into consideration in arriving at their verdict.

The so-called inflammatory appeals turn out to be nothing of the kind. What was said about the Brown & Bigelow Company fee and how it was earned was not only proper but necessary, if the jury were to understand the significance, according to the prosecution's theory of the case, of the legal fees earned by appellant and not turned over to his law firm. Appellant still insists that the firm knew about this fee but the evidence could have justified a finding by the jury to the contrary, as we have already pointed out. So also, with reference to the prosecutor's comments relative to appellant's claim that the moneys he received from Anheuser-Busch were not legal fees but for prospective efforts to get Stevens to sell Anheuser-Busch beer at the ball parks and race tracks. We have already adverted to appellant's claim that he was not a tax expert and to his method of entering lump sums in his returns, despite the plain printed instructions which required details and annexed schedules, if necessary. It was perfectly proper for the prosecutor to refer to the fact that appellant was "top man," as Commissioner of Internal Revenue for part of the prosecution period, and that by law he was responsible for the collection of all taxes in the United States.

True it is that the prosecutor argued that the large amount of currency claimed by appellant to be in his accumulated hoard would not go in a $10 safe deposit box, although the precise dimensions of the box had not been proved. But this was fair argument, and the same may be said of his statement that he too graduated from law school in 1923 and knew that the remuneration young lawyers received in those days "was never as much as we thought would be commensurate." He also said that after the Bank Holiday in 1933 none of the large banks in New York City had any difficulty. This was objected to and there was a colloquy in which the trial judge said he would leave it to the jury to recall what the testimony was. Things of this sort come up in practically every trial and we find no basis whatever for any finding of impropriety.

In his summation defense counsel had argued that the government should have had one of its agents go to the bedroom closet in the Douglaston house, where appellant lived when he said he kept the metal box with the cash there, and take measurements and photographs. In response to this the prosecutor commented: "In his summation, Mr. Burke criticized me for not taking photographs and measurements. Mr. Burke would have been the first to have objected to my photographs, objected because they would have been taken in 1954 and would not fairly represent a thing twenty year ago." This was legitimate argument; and we find no evidence that the prosecutor "went so far as to brandish before the jury photographs never identified or offered."

There is no merit in any of the claims of impropriety on the part of the prosecutor; and we think it unnecessary further to discuss this phase of the case.

The Motion to Suppress

Reversal of the judgment of conviction is also urged on the ground that it was obtained by the admission of evidence, the use of which was prohibited by 18 U. S. C. 3486, since amended. 1 This issue was raised by a motion to suppress, argued before trial and renewed at the commencement of the trial, and by objections to the introduction of certain evidence. We hold that the motion was properly denied, and the objections were properly overruled. The statute then provided:

"No testimony given by a witness before either House, or before any committee of either House, or before any joint committee established by a joint or concurrent resolution of the two Houses of Congress, shall be used as evidence in any criminal proceeding against him in any court, except in a prosecution for perjury committed in giving such testimony. But an official paper or record produced by him is not within the said privilege."

Appellant testified before the King Committee, above referred to, on September 12, 1951 and March 18, 1952 but none of this testimony was offered in evidence at the trial. But appellant was interrogated privately on many occasions by the two revenue agents assigned to investigate his income tax returns and he made certain records available to them, such as the books and records of his law firms, certain photostatic copies of existing records of his bank account and records of his accounts with brokerage houses.

The substance of appellant's contention on this phase of the case is that the revenue agents were acting as agents of the King Committee, that what he told them from time to time in the course of their investigation and the documents he made available to them served as clues or leads to other items of proof, and that all this came within the purview of the immunity statute quoted above.

The testimony of Revenue Agent Saldana at the trial indicated that he and his fellow investigator were not connected with the King Committee but that, after their investigation was under way, they were told to cooperate with the King Committee by answering any questions put to them by the Committee and they had done so. There is no dispute about the fact that, at their first interview with appellant, they told him they desired to make a reexamination of certain of his income tax returns "on behalf of the Bureau of Internal Revenue."

But we need not pursue the question of whether, and to what extent, the two revenue agents may be said to have in some way represented the King Committee, as we agree with the interpretation of the statute made by the Court of Appeals for the District of Columbia in United States v. Brennan, 214 Fed. (2d) 268, cert. denied 348 U. S. 268. There counsel for the Committee informed the defendant "that the Committee, acting through me, would like to see you and ask some questions about the facts." Defendant appeared before Committee counsel with his lawyer, who took the position that none of his client's answers could be used against him in any criminal proceeding, and the answers were given. The court held, nevertheless, that the motion to suppress must be denied, as Committee counsel was "not an organic part of the Committee, which can be composed only of members of Congress," and the statute had no application to statements made to agents or employees of the Committee, which did not constitute "testimony given by a witness * * * before any committee of either House." We do not see how we can hold otherwise, in view of the explicit wording of the statute.

The Motions to Quash the Indictment and Inspect the Grand Jury Minutes

The appeal also brings up for review an order of Chief Judge Inch, denying appellant's motion to quash the indictment, or, in the alternative, to permit an inspection of the minutes of the proceedings before the Grand Jury.

On February 18, 1952, the Grand Jury was impanelled in the Eastern District of New York and commenced to hear witnesses; the indictment against appellant was returned on December 2, 1952; the motion to quash the indictment or inspect the minutes of the Grand Jury was denied on March 19, 1953; the trial commenced on June 8, 1954.

The motion to quash is based upon: (1) a series of sensational newspaper articles and radio and television publicity, between February and September 1952, that is to say, both prior to and during the sessions of the Grand Jury; (2) certain incidents which are said to evidence a controversy between the legislative and executive branches of the government relating to the investigation of appellant's conduct, culminating in the service of a Grand Jury subpoena on Congressman Kean, who gave certain testimony, all of which is claimed to have violated appellant's right to an impartial tribunal, under the Fifth and Sixth Amendments; and (3) the alleged absence of any competent or adequate evidence to warrant the return of the indictment.

As the various disclosures brought to light by the King Committee affected some of the highest ranking officials in the Internal Revenue Service, including appellant, it was inevitable that the resulting publicity would be sensational in character, and much of it was unfair, misleading, and, at least to some extent, untrue and unwarranted. But we are not dealing here with alleged bias or prejudice by a petit jury, caused by widespread publicity during or just prior to a trial of the issues, as was the case in Meyer v. Cadwalader, E. D. Pa., 49 Fed. 32 and Griffin v. United States , 3 Cir., 295 Fed. 437. In such a situation much would depend upon the character of the publicity, proof that it was of such a nature as to be likely to make an impression on the jurors, and the steps taken by the trial judge to mitigate or remove its effect. Instructions that jurors must avoid reading newspapers or listening to or looking at radio and television commentators and that their verdict must be based solely on the evidence introduced in the case in court, will generally suffice. But there must be a careful appraisal of the possibility or likelihood of extraneous influence. And, indeed, there is good sense in this, since petit jurors must remain passive spectators of the court room drama.

But a Grand Jury is not confined to a passive role, but may and often should proceed on its own initiative. 4 Stanford L. Rev. 68, 69, 77-8; Dession, From Indictment to Information, 42 Yale L. J. 163, 176. That it is induced to such action by newspaper reports forms a continuum with its historic function of ferreting out crime and corruption, and is in no way inconsistent with its duty to decide on and in accordance with the evidence adduced before it.

Doubtless the Chairman and members of the King Committee, charged with the duty to "Investigate the Administration of the Internal Revenue Laws," feared that the proceedings before the Grand Jury might be used to "whitewash" appellant and others. We are not concerned here with the removal of the Committee files to Washington , and their subsequent return. Nor was there the slightest impropriety on the part of the Grand Jury in bringing Congressman Kean before it and hearing his testimony. Indeed, this would seem to have been its plain duty in the premises.

We agree with the finding of Chief Judge Inch that the record is barren of any evidence that the grand jurors were prejudiced or coerced by the publicity or by anything said or done by any member of the King Committee. Quite to the contrary, there is every reason to suppose that the Foreman and other members of the Grand Jury pursued the investigation conscientiously and with diligence. Their refusal to be intimidated by what they may have considered to be legislative sound and fury, is commendable. It must not be forgotten that they heard witnesses over a considerable period, and did not return the indictment for some months after appellant had testified before them and provided out of his own mouth evidence which was far from lacking in probative force. And appellant has made much of the fact that at no time did he refuse to answer any question on the ground that the answer might tend to incriminate him.

We find no merit whatever in the contention that there was insufficient evidence before the Grand Jury to justify the return of the indictment. It may well be that some of the evidence was not properly received, but it is well established law that the submission to a grand jury of some incompetent proof is not a ground for dismissing the indictment. Holt v. United States , 218 U. S. 245; Cox v. Vaught, 10 Cir., 52 Fed. (2d) 562; United States v. Pearlman, S. D. N. Y., 247 Fed. 158; Joyce, Indictments 138 (2d ed., Blakemore, 1924); cf. Costello v. United States, 350 U. S. 359 [56-1 USTC 9321], affirming 2 Cir., 221 Fed. (2d) 268 [55-1 USTC 9342].

Accordingly, we do not reach and need not decide the question of whether 18 U. S. C. 3486, above referred to, applies to grand jury investigations. It was held in United States v. Smyth, N. D., Cal., 104 Fed Supp. 283, 307, that the statute only forbade the use on a trial of testimony taken before a Congressional Committee. We have some doubt about the soundness of this ruling. But here, in addition to the excerpts from appellant's testimony before the King Committee, which were read to the Grand Jury, the record discloses that the Grand Jury had considerable other evidence before it, which we find it unnecessary to catalogue.

An effort is made by appellant to eliminate from consideration on this point testimony before the Grand Jury of the Revenue Agent Saldana, who testified at great length at the trial. The basis for this particular argument is the following single question and answer contained in Saldana's testimony before the King Committee, given at a time when the Grand Jury was midway in its investigation:

"Q. Do you actually have any evidence that the $97,000 expended or deposited during the five years constituted unreported income to Mr. Nunan upon which any taxes were due? A. We do not."

But this is the old story of selecting a brief quotation here or there and disregarding the rest. There appears to have been evidence before the Grand Jury of several of the specific items of unreported income; at the time Saldana gave the answer to the question above quoted the grand jury investigation was incomplete; and it seems not improbable that the witness meant merely that he had no direct, as contrasted with circimstantial evidence, that the amount of the cash deposits and expenditures constituted unreported income.

Accordingly, we cannot say that appellant has overcome the strong presumption of regularity accorded to the deliberations and findings of grand juries, e.g., United States v. Gooding, 12 Wheat. 460; Radford v. United States , 2 Cir., 129 Fed. 49; Nanfito v. United States , 8 Cir., 20 Fed. (2d) 376; Joyce, Indictments 140 (2d ed., Blakemore, 1924), or that the district judge abused his discretion in denying the motion to quash.

Nor would we be warranted in holding that it was an abuse of discretion to deny the motion for an inspection of the Grand Jury minutes. United States v. Garsson, S. D. N. Y., 291 Fed. 646; United States v. Violon, S. D. N. Y., 173 Fed. 501; cf. United States v. General Motors, 15 F. R. D. 486, which collects the cases on page 487, nn. 2, 2a.

There is no merit in any of the other contentions of appellant and we find it unnecessary to discuss them.

Judgment affirmed.

1 Act of August 20, 1954, c. 769, 1, 68 Stat. 745.

 

 

[36-2 USTC 9394]Louis J. Schwartz, Appellant, v. United States of America , Appellee

(CA-5), United States Circuit Court of Appeals for the Fifth Circuit, No. 7994, 84 F2d 637, Decided July 2, 1936

Appeal from the District Court of the United States for the Southern District of Florida. District Court's conviction for wilfull failure to file a 1932 return is sustained, the Court finding that appellant had a net income of from six to seven thousand dollars from his partnership, whether the latter was on the cash or accrual basis. Affirming District Court decision.

Before SIBLEY, HUTCHESON, and HOLMES, Circuit Judges.

SIBLEY, Circuit Judge:

Louis J. Schwartz was indicted for that in 1932 he had a named net income on which he owed a tax, part of which was due to be paid March 15, 1933, on filing his tax return, but that he wilfully and feloniously and to evade the tax failed to make any tax return; and in a second count that during 1932 he had a gross income of over $5,000, but on March 15, 1933, and thereafter he wilfully failed to make any return. The jury found him guilty on both counts. His sentence requires both counts to sustain it.

The evidence shows that during 1932 Schwartz was a partner interested one-half, and apparently the managing partner, in a bail-bonding agency in Miami , Florida . It is not disputed that the gross premiums earned were $37,472.50, and that of that sum $13,115.38 was due to and probably paid to a super-agency in New Jersey , leaving an apparent gross income of $24,357.12 for the firm. There is a contention that perhaps five to seven thousand dollars of the premiums were not collected. Office and operating expenses are claimed of $2,004. Schwartz's partnership under his contract with the super-agency was bound to indemnify the super-agency against all losses, demands, liability and expenses of whatsoever kind or nature sustained or incurred by reason or in consequence of the execution of any of the bail bonds, and the super-agency was in like manner bound to the Public Indemnity Company, a corporation of New Jersey, which executed the bail bonds. During 1932, as figured in appellant's brief, judgments were entered on forfeitures of such bonds amounting to $9,652.35. Forfeitures which had not gone to judgment were further had in 1932 amounting to $27,850. There is no evidence that anyone during 1932 paid any of these, or that Schwartz's partnership was called on to pay any of them at any time. The Public Indemnity Company failed in 1933. Schwartz, a married man without children, had no income except that from his partnership, and no individual deductions were claimed. His taxable income therefore depended wholly on the net income of his partnership, his half of which was under law taxable to him whether distributed to him or not. The partnership was not on a fiscal year basis, and the records were so incomplete as not clearly to show its income on either a cash or accrual basis, being hardly more than current bond memoranda and checks. No tax returns appear to have been attempted by anyone. In the summer of 1933 after an investigation the Commissioner made assessments to which protests were filed in which Schwartz mainly claimed deductions for uncollected premiums and expenses, not setting up bond losses, as if accounting on a cash basis. The taxes finally assessed were not paid. In the trial he claimed an accrual basis of accounting in order to bring in the losses by forfeitures of the bonds. The Court allowed in evidence the forfeitures reduced to judgment in 1932, but excluded those which had not gone beyond preliminary estreat. This ruling is excepted to.

[Accrued Liability]

Schwartz's partnership was not directly liable on any bond. The bonding company could call on the super-agency to indemnify it and the super-agency could in turn call on Schwartz. We assume as the trial court did that the indemnity agreements were not only against loss by payment but also against liability. We had occasion to examine the difference recently in Michel v. American Fire & Casualty Co. , -- Fed. (2d) --. We there said: "If the indemnity promised is against liability, the incurring of the liability, or if disputed the rendition of a judgment upon it, will entitle the indemnitee to enforce his indemnity." Some of these bonds were for bail in the United States Courts and some in the Florida State Courts. In neither jurisdiction does the mere failure of the principal to appear establish any final liability against the surety. In Florida (Comp. Gen. Laws of 1927, 8351 and following), the judge issues a certificate of the facts, and a suit or a scire facias against the surety follows. By Sect. 8356 the surety may defend by making excuse for the failure of the principal to appear, to be judged of by the court, and only after trial is a final judgment entered. In the United States Courts sureties are likewise proceeded against and may make defenses which exists as of right, and in addition even after final judgment may often get the penalty remitted in whole or in part under the provisions of 18 U. S. C. A., 601. A number of the judgments in this case were thus greatly reduced during 1932. No call for indemnity was ever made on Schwartz on a preliminary estreat, so as to indicate that the bonding company and the super-agency acknowledged the liability as absolute; and we do not think it can be said that any certain liability of his firm was thus created such as could be called a loss for income tax purposes even on an accrual basis of accounting. Lucas v. American Code Co., 280 U. S. 445; Pharr v. Commissioner, 56 F. (2) 832. We think the judge correctly excluded from consideration as losses accruing in 1932 estreatures of bonds which had not been paid, nor gone to judgment, nor been acknowledged as liabilities by demand on Schwartz for indemnity. He made no claim that he believed in 1932 that they were deductible and had in good faith made no return in that belief, but on the contrary testified that he did not then know that they were deductible.

With the mere estreats thus eliminated, the evidence shows that it is immaterial whether a cash or an accrual basis of accounting be followed, for on the former basis while uncollected premiums will be eliminated from income the judgments on bonds cannot be deducted since none were paid; while on the latter basis the premiums earned must be considered income though not collected while the judgments are deductible. Whichever way it is figured the partnership had a net income of from twelve to fourteen thousand dollars, and Schwartz's half was six to seven thousand dollars. He owed a return and he owed a tax. There remained only the question of his willfulness in failing to make a return, and his fraudulent intent with reference to the tax. He claimed no error or misfortune or forgetfulness. He made no claim that he believed in good faith that the bond estreatures were deductible. The idea that they were was first advanced at the trial. His contention was that the firm had no net income which would make him owe a tax, and that was not true.

The court's charge is subject to criticism, and some of the refused requests to charge might well have been given. The failure to give them is, however, justified because the evidence did not support the theory that the partnership made a net loss, either on cash or accrual accounting. The wilfulness and fraud of Schwartz were clearly put to the jury, as well as the matter of reasonable doubt. These were really the only matters that the jury had room to debate about. Looking to the whole record, we think no error appears on which reversal ought to be had.

Judgment affirmed.

 

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