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[67-2 USTC ¶9757]David B. Vogt, Plaintiff v. Internal Revenue Service United States of America , Defendants

U. S. District Court, East. Dist. Pa., Civil Action No. 43143, 278 FSupp 821, 10/26/67

[1954 Code Sec. 7203]

Tax evasion: Failure to prosecute: Damage suit: Taxpayer's right to be prosecuted.--A $10 billion damages suit by a taxpayer against the Government for failure to prosecute the taxpayer for tax evasion after warning him that a prosecution was forthcoming was dismissed on the ground that the taxpayer had no right to sue. Although the taxpayer claimed that the pending action by the Government prevented him from keeping steady employment and thereby deprived him of property under the due process clause of the Fifth Amendment, the court found that no citizen possesses a "right" either to be criminally prosecuted or to be named as a defendant in a civil suit.

David B. Vogt, 627 Hamilton St. , Allentown , Pa. , for plaintiff. Drew J. T. O'Keefe, United States Attorney, Sullivan Cistone, Assistant United States Attorney, 4042 U. S. Courthouse, Philadelphia , Pa. , Samuel A. Peters, Tax Division, Department of Justice, Washington , D. C. 20530, for defendants.

Memorandum

DAVIS, District Judge:

The plaintiff has instituted a suit against the United States on a rather curious cause of action. It is contended that the defendant is negligent for having failed to prosecute the plaintiff for income tax evasion after having been told by Internal Revenue agents in 1962 that a prosecution was forthcoming.

As a result of this impending action by the Government, the plaintiff alleges that he has been unable to keep steady employment and that this fact constitutes deprivation of property under the due process clause of the Fifth Amendment.

To redress this wrong, the plaintiff herein seeks damages of ten billion dollars, to be divided equally between the Democratic and Republican parties.

Before this Court is the defendant's motion to dismiss. Although the Government has presented formidable authority in support of lack of consent by the sovereign to be sued, under the circumstances herein presented, it is not necessary to explore this line of reasoning.

No citizen possesses a "right" to be either criminally prosecuted, or to be named as defendant in a civil suit, both of which are possible under the Internal Revenue Code. Since no such "right" exists, then there can be no concomitant "duty" on the part of the Government for which damages can be awarded.

 

 

[73-1 USTC ¶9470] United States of America , Appellant v. Albert Goldstein, Alfred Caesar, Sam Jacobson, Murray Geller and Rob ert Wisch, Appellees

(CA-2), U. S. Court of Appeals, 2nd Circuit, Docket No. 73-1165, 479 F2d 1061, 5/25/73, Reversing and remanding unreported order of 1/8/73 subsequent to Dist. Ct., 73-1 USTC ¶9163

[Code Secs. 7203 and 7402]

Court of Appeals: Government's right to appeal: Double jeopardy.--Appeal lay to Court of Appeals where District Court erroneously dismissed a grand jury indictment on the ground that a mistrial declared in a prior trial on the same indictment was unwarranted, and that reprosecution would violate the double jeopardy clause of the fifth amendment.

Rob ert A. Morse, United States Attorney, L. Kevin Sheridan, Assistant United States Attorney, Brooklyn, N. Y., Michael B. Pollack, Dennis E. Dillon, Department of Justice, Washington, D. C. 20530, for appellant. James M. La Rossa, Joseph E. Brill, Thomas J. O'Brien, Kostelanetz & Ritholz, 52 Wall. St., New York, N. Y., for Goldstein, Caesar, Jacobson, and Geller, appellees, Jerome Lewis, H. Elliot Wales on brief, 299 Broadway, New York, N. Y., for Wisch, appellee.

Before CLARK, Associate Judge, ^* WATERMAN and FEINBERG, Circuit Judges.

[Order]

FEINBERG, Circuit Judge:

The United States seeks to appeal from a pre-trial order of the United States District Court [73-1 USTC ¶9163] for the Eastern District of New York, Jack B. Weinstein, J., dismissing an indictment against appellees on the ground that a mistrial declared in a prior trial on the same indictment was unwarranted, and that reprosecution would violate the double jeopardy clause of the fifth amendment. Under the recently amended Criminal Appeals Act, 18 U. S. C. A. §3731 (1972-73 Supp.), the Government may appeal from an

order of a district court dismissing an indictment or information as to any one or more counts, except that no appeal shall lie where the double jeopardy clause of the United States Constitution prohibits further prosecution.

We thus must answer two questions. First, does the language of section 3731 prevent an appeal by the Government? And second, was Judge Weinstein correct in holding that the double jeopardy clause barred a second trial? For reasons which follow, we conclude that an appeal does lie to this court from the order below, and, further, that the indictment was erroneously dismissed. Accordingly, we reverse and remand for further appropriate proceedings.

[Facts]

I. On January 7, 1972, appellees were indicted in the Eastern District of New York, on 20 counts charging various violations of federal internal revenue laws, 26 U. S. C. §§ 7201, 7206, and conspiracy to violate those provisions. ¹ Trial commenced on September 5, 1972, before Judge Orrin G. Judd. Jury deliberation began on the morning of October 5. ² The jury was excused for the evening after failing to reach a verdict with respect to any defendant on any count. That evening, Judge Judd had a brief exchange wit Juror No. 2 (Mrs. Rappaport), which he related to counsel after jury deliberation had recommenced the following morning. As he explained it, she had asked to see him "on a personal matter." The judge had observed her "sniffling" and "quite ill at ease during the day" and he "started commiserating with her on her illness." She replied that she was "all right" but just felt "incapable."

At 11:30 A. M. on this second--and last--day of deliberation, the jury requested and received a re-reading of the charge. At 3:10, the jury sent a note to the judge stating it was

apparently not able to reach a unanimous verdict on any count except number 20. Please advise.

In discussion with counsel, the judge indicated that he intended to tell the jury to deliberate "another couple of hours," but doubted that he would ask them to come back on Tuesday. ³ Defense counsel first objected to

your Honor saying that they should be returned for deliberation for a couple of more hours because it may well be that what that amounts to is an incarceration against their will

And then pointed out with respect to requiring the jury's return on Tuesday:

There would be Friday night, all day Saturday, all day Sunday, all day Monday. So there would be three full days and four nights of separation during which it would be impossible to avoid pollution of the jury. . . .

Judge Judd then called the jury back into the courtroom and told them that he would ask them "to go back and consider further and tell me whether further deliberation would be useful," although he pointed out that he did not intend to have them stay "late tonight" or return on the following Tuesday. He then gave what the Government accurately describes as a modified "Allen charge." Thereafter, defense counsel moved for a mistrial on the ground that the jury was in "deadlock, which apparently is a hopeless one." The motion was denied.

At approximately 5 o'clock, the jury foreman sent a second note, which said:

[A]fter receiving most of the testimony and raising what arguments and persuasion we could bring to bear, Mrs. Rappaport has insisted that under no circumstances can she vote guilty on any of the Counts.

Judge Judd thereupon stated his view that this meant "a disagreement on seventeen counts" and resolved to "bring the Jury in and see." The jury was brought in; they announced a verdict of not guilty on count 20, involving only appellee Goldstein, and were polled at the Government's request. The judge then asked: "And it's clear that you are in disagreement on the rest of the counts?", to which the foreman replied "I am afraid so." The judge then continued:

I appreciate the time you have put in, the effort that's been made. I might have given a more coercive charge, but I thought it was improper. I think we should respect the conscience of anybody on the Jury.

I would like to keep you for five or ten minutes just to give you a little picture of things behind the scenes. You are entitled to wonder about what happened at all these side bars, and this has been only an income tax case. But it has been an important case for everybody.

You have heard some of the best defense counsel in this City for the last five weeks. The Government attorney is not an ordinary assistant U. S. Attorney. . . .

The judge then went on to disclose, among other things, that the government attorney was from the Organized Crime section of the Justice Department, that defendant Goldstein's tax returns disclosed income from gambling, and that certain defendants had threatened a witness prior to the trial. Counsel took vigorous exception to these comments--a concern which we share--and moved to dismiss the indictment. The motion was denied.

The case was set for retrial before Judge Weinstein, but prior to trial, defendants moved to dismiss the indictment principally on the ground of double jeopardy. The judge granted the motion; while his order of January 8, 1973 dismissing the indictment contained no express findings, the bases for the order were carefully stated during the course of the hearing held on the motion. We set these out extensively:

. . . I am particularly impressed with the transcript of October 6, 1972 [the second day of jury deliberation described above] at 5:00 o'clock P.M.

The Court said there is "still disagreement on all but one count." There is no indication that disagreement was fixed or that there could not be some agreement had there been further consultation. There were 18 counts undisposed of at that time. Many of them involved a number of defendants and all of them involved at least two defendants.

The Jury was then polled on Count 20 and the defendant in that count was found not guilty. There's no inquiry made by the Court as to whether the Jury wished to consult further with each other. There is no indication that they disagreed with respect to each defendant on each count. In fact, it is not clear that they had considered in any detail each defendant as to each count.

Immediately after the Jury was polled, the Judge began to address the Jury and there would be nothing from which their counsel could determine the nature of the remarks that would be made up until line 15 of page 6 of the transcript. Then reference is made to the organized crime section of the Department of Justice. Thereafter very quickly there is reference to highly prejudicial material which undoubtedly had taken counsel by surprise and it would be only at that point I would think that the normal practice was not going to be followed, that inquiry was not going to be made to the Jury with respect to whether they might possibly reach an agreement given more time or whether they might possibly reach an agreement on any of the counts as to any of the defendants.

* * *

I must reluctantly conclude that the Court acted without proper consultation with the attorneys and without proper consultation with the Jury and that the case was improperly taken from the Jury at this point without the consent of the defendants and before it had been determined that no agreement could be reached.

Under the circumstances, therefore I reluctantly find that defendants should be placed in double jeopardy if they were to be tried . . ..

From the subsequent order dismissing the indictment, the Government appeals. ⁴

[Government's Right to Appeal]

II. At the outset, appellees claim that the Government cannot appeal from Judge Weinstein's order dismissing the indictment on double jeopardy grounds. The 1970 amendments to the Criminal Appeals Act, enacted as Title III, §14 of the Omnibus Control Act of 1970, P. L. 91-644, 84 Stat. 1880, 1890, 91st Cong., 2d sess., were designed to eliminate much of the tortuous statutory construction, e.g., United States v. Sission, 399 U. S. 267 (1970), and United States v. Apex Distributing Co., 270 F. 2d 747 (9th Cir. 1959) (en banc), to which federal courts had been put in interpreting the coverage of the predecessor act. See S. Rep. No. 91-1296, 91st Cong., 2d sess., at 2 (1970). But a principal purpose of the amendments was to broaden considerably those situations in which the Government could appeal. Id. ⁵ While the predecessor act was to be strictly construed against the Government's right to appeal, e.g., United States v. Sission, supra, 399 U. S. at 291, the present statute expressly directs that its provisions "shall be liberally construed to effectuate its purposes."

Appellees do not--and cannot--dispute this reading of statutory purpose. They contend, nonetheless, that the plain language of the 1970 amendments forecloses our appellate jurisdiction. Any need to undertake a detailed refutation of this assertion has been obviated by this court's recent opinion in United States v. Castellanos, slip op. 3285, 3287-88 (2d Cir. May 4, 1973). Like this case, Castellanos involved an appeal from an ordered dismissing an indictment on grounds of double jeopardy prior to the impaneling of a new jury. In holding that order appealable, Judge Smith observed that such an order was plainly appealable under the predecessor statute in light of United States v. Jorn, 400 U. S. 470 (1971), and that "[n]othing in either the legislative history or the language of the new statute . . . indicates the slightest intention to cut back the scope of former §3731. Indeed, quite the opposite seems true . . .." (Emphasis added.) ⁶ The same conclusions govern here.

Appellees further contend, however, that Judge Weinstein's dismissal was, "as a matter of substantive law tantamount to an acquittal." There is no merit to the argument. United States v. Hill, 473 F. 2d 759 (9th Cir. 1972), on which appellees rely, is not in point. Hill involved indictments charging the sending of obscene advertisements through the mail. Defendant's motion to dismiss the indictments was granted on the ground that the advertisements were not obscene as a matter of law. In finding reprosecution prohibited by the double jeopardy guarantee, the court noted that the judge had received evidence limited to a necessary element of the offense; the dismissal thus decided the general issue of guilt and was the equivalent of a directed acquittal. See United States v. Sisson, supra, 399 U. S. at 290 n. 19; United States v. Ponto, 454 F. 2d 657, 663-64 (7th Cir. 1971) (en banc). Judge Weinstein's dismissal, by contrast, in no sense turned on the general issue of guilt or required the taking of evidence remotely related to any element of the crime. ⁷

Thus, the Government's appeal is properly before us, and appellee's motion to dismiss the appeal is denied.

[Double Jeopardy]

III. We turn now to the merits of Judge Weinstein's dismissal order. Plainly, technical jeopardy had attached in the trial before Judge Judd because the jury had been impanelled, but equally plainly, as a century and a half of cases illustrate, that did not end the matter. See United States v. Perez, 22 U. S. (9 Wheat.) 579 (1824); Illinois v. Somerville , 41 U. S. L. W. 4319, 4320 (U. S. Feb. 27, 1973). What would have ended the matter, however, was defendants' consent to Judge Judd's order declaring a mistrial. See United States v. Gori, 282 F. 2d 43, 47 & n. 5 (2d Cir. 1960), aff'd, 367 U. S. 364 (1961); cf. United States v. Jorn, supra, 400 U. S. at 485. We conclude that defendants did so consent.

On the afternoon of the second day of deliberation, the jury notified Judge Judd that it was "apparently not able to reach a unanimous verdict on any count except number 20"; the judge then gave a modified "Allen charge." Defense counsel immediately moved for a mistrial because the jury was hopelessly deadlocked. Had the judge granted this request, of course, no meritorious double jeopardy claim could later have been made. See United States v. Tateo, 377 U. S. 463, 467 (1964). We are at a loss to understand what transpired thereafter to breathe life into such a claim. Defendants argue that the situation was completely changed less than two hours later by the jury's second note. At that point, according to defendants, counsel realized that they had a favorable jury, that "at worst there would be a hung jury," and that they "decided they did not want a mistrial." ⁸ The initial problem with this position is that defense counsel did not communicate this change in attitude to Judge Judd. Defendants now argue, as they successfully did before Judge Weinstein, that they never had an effective chance to make their new position known to Judge Judd. We do not understand why that is so, as a recounting of the events of that afternoon indicates.

After the judge read the second note to defense counsel, he stated that this "means a disagreement on seventeen counts. We will bring the Jury in and see." The jury then came back to the courtroom and reported its verdict of not guilty on count 20; each juror was then polled on that verdict. On completion of the polling, the foreman confirmed to the judge that the jury was "in disagreement on the rest of the counts." As anyone familiar with trial court procedure knows, all of this took considerable time. It was certainly sufficient for defense counsel, whose performance up to that time had not been marked by excessive timidity, to make their changed views known to the court. Nor was that all. Judge Judd did not immediately launch into his behind-the-scenes discussion which, defendants correctly maintain, made it impossible for the same jury to continue. Instead, the judge took another moment or two in introductory remarks--at which point his intention to order a mistrial became plain--before characterizing the government attorney as "not an ordinary assistant," but from "the section on Organized Crime." This interlude gave defense counsel yet another chance to say that they did not want a mistrial. It is thus apparent to us that defense counsel had adequate opportunity to disabuse the judge of the idea that they still wanted the jury discharged because it was deadlocked; Judge Weinstein's contrary view is not supportable. ⁹

Judge Judd obviously assumed that defendants continued to favor mistrial. Certainly, he would not have proceeded as he did had he thought the trial was to continue before the same jury. There was ample warrant for the judge's assumption. Less than two hours before, defense counsel had characterized a proposed instruction to the jury to deliberate "for a couple of more hours" as "incarceration against their will," and had opposed requiring the jury to continue after the weekend recess because "it would be impossible to avoid pollution of the jury." In addition, the judge's assumption as to defendants' position was buttressed by common sense. When defendants had earlier moved for a mistrial, they had no way of knowing the jury's vote: It might have been anything from 11-1 for acquittal to 11-1 for conviction. Any one of these possibilities except the last would indicate a jury sentiment more--rather than less--favorable than the 11-1 vote for conviction on all remaining counts revealed by the jury's second note. To all appearance, defendants' position had worsened in the time between the first and second notes. Defendants argued before Judge Weinstein, however, that they were then in a better position because they knew that they could not be hurt, and that

They could only get a hung jury and it is possible, as it happens in the movies at any rate, that one person can change the minds of eleven other people.

Anything is possible, of course, but the self-serving nature of this hindsight assertion is patent. Moreover, the silence of defense counsel on this issue was even more deafening after Judge Judd had discharged the jury. At that point, defense counsel argued at length that the judge's disclosure of material not in evidence had hopelessly prejudiced defendants, and required dismissal of the indictment. But this claim itself assumed that another trial would be held, a position inconsistent with their present contention that the double jeopardy clause would bar such a trial, because the discharge of the jury had been premature.

We disagree, therefore, with Judge Weinstein's belief that a mistrial was declared without defendants' consent. ¹⁰ Consent need not be express, but may be implied from the totality of circumstances attendant on a declaration of mistrial. United States v. Gori, supra, 282 F. 2d at 46; see Scott v. United States, 202 F. 2d 354 (D. C. Cir.), cert. denied, 344 U. S. 879 (1952); cf. Raslich v. Bannan, 273 F. 2d 420 (6th Cir. 1959) (per curiam). Defendants had moved for a mistrial a scant two hours before one was declared, at the first suggestion of jury deadlock; little, if anything, had occurred thereafter to warrant a belief that their position had changed; and even if it had, they failed to make this change in position knwon to the trial judge notwithstanding adequate opportunity to do so. See United States v. Pappas, 445 F. 2d 1194, 1199-1200 (3d Cir.), cert. denied, 404 U. S. 984 (1971). ¹¹

Under these circumstances, their consent to mistrial can be properly implied, Judge Judd did not really act sua sponte, and defendants cannot successfully argue double jeopardy.

IV. In what may be an excess of caution, we turn finally to the argument made by the Government that, even if defendants did not consent to the mistrial, reprosection was consistent with the policies served by the double jeopardy clause.

In deciding to abort a criminal trial short of a verdict and without a defendant's consent, after jeopardy has attached, the trial judge is typically afforded "broad discretion," Illinois v. Somerville, supra, 41 U. S. L. W. at 4321, since he is "best situated intelligently to make such a decision," Gori v. United States, 367 U. S. 364, 368 (1961). On the other hand, it is recognized that the double jeopardy clause of the fifth amendment safeguards the defendant's "valued right to have his trial completed by a particular tribunal," Wade v. Hunter, 336 U. S. 684, 689 (1949), which "he might believe to be favorably disposed to his fate," United States v. Jorn, supra, 400 U. S. at 486. With due regard for this right, as well as for other defendant interests served by the double jeopardy clause, see Note, Double Jeopardy: The Reprosecution Problem, 77 Harv. L Rev. 1272, 1274 (1964), the Supreme Court has limited that discretion and has occasionally held a second prosecution barred where a trial judge sua sponte and mistakenly had declared a mistrial. See United States v. Jorn, supra; Downum v. United States , 372 U. S. 734 (1963). In defining standards for the exercise of discretion in this sort of case, the Court has continually adhered to the formulation of Justice Story in United States v. Perez, 22 U. S. (9 Wheat.) 579, 580 (1824):

[T]he law has invested Courts of justice with the authority to discharge a jury from giving a verdict, whenever, in their opinion, taking all the circumstances into consideration, there is manifest necessity for the act, or the ends of public justice would otherwise be defeated.

Beyond these general guidelines, the Court has emphasized, each case must turn on its own facts. E.g., Illinois v. Somerville , supra, 41 U. S. L. W. at 4321.

Turning to the facts in this case, Perez itself and Logan v. United States, 144 U. S. 263, 297-98 (1892), among others, establish that a jury's genuine inability to agree on a verdict constitutes "manifest necessity" warranting the declaration of a mistrial. See United States v. Lansdown, 460 F. 2d 164, 168 (4th Cir. 1972). Requiring a jury to continue deliberations despite genuine and irreconcilable disagreement more often than not defeats the ends of public justice; not only will such compulsion needlessly waste valuable judicial resources, it may coerce erroneous verdicts. On this view of the case, the only question presented to us, therefore, is whether Judge Judd abused his discretion in concluding when he did that the jury was in fact genuinely hung.

The question is a close one. Judge Weinstein believed that Judge Judd had erred because the trial had been lengthy; the evidence and factual issues were complex, as demonstrated by the jury's request to have the charge reread; the jury had only deliberated eight hours even though there were almost 50 possible verdicts to render and no indication that agreement was impossible as to all. Finally, Judge Weinstein felt that no sufficiently in-depth attempts had been made, in accord with "the normal practice," to ascertain the scope of disagreement among jurors, or to determine whether further deliberation might produce some agreement. These are appropriate factors to consider. See ABA , Project on Minimum Standards for Criminal Justice, Trial by Jury §5.4(c); (approved draft 1968); id. at 156-57.

Nonetheless, "taking all the circumstances into consideration," as Perez requires, we are left with the firm conviction that Judge Judd committed no error. The complexity of a case and the amount of time requested by 12 reasonable jurors to reach unanimity on some or all of many possible verdicts are determinations best left to a trial judge and are difficult to gauge by another district judge or by appellate judges on a cold record. The jury twice reported itself unable to agree--in the second instance, less than two hours after the first and after a modified Allen charge in which the judge had instructed the jury to tell him "whether further deliberation would be useful." The second note itself appears to answer the question in the negative and suggests growing frustration on the part of the jurors. Indeed, the second note and final oral response of the jury foreman were unequivocal in tone: Mrs. Rappaport could vote guilty "under no circumstances" and it was "clear" that they were in disagreement on all counts. With the dissenting juror so identified, Judge Judd was entitled to recall his conversation with her on the previous evening, and to conclude that her previously vague reference to feeling "incapable" meant that she was in fact unable or unwilling to vote guilty.

Appellees call our attention to but one case in which the trial court's erroneous decision to order mistrial due to an apparently hung jury has been held to bar reprosecution. United States v. Lansdown, supra. Our research has disclosed no other federal case. But cf. Commonwealth v. Baker, 196 A. 2d 382 ( Pa. 1964) (premature discharge of jury bars retrial on state constitution double jeopardy ground). This itself suggests how rarely the informed judgment of a trial court is disturbed in these or similar circumstances. Moreover, factual differences between this case and Lansdown are striking. In Lansdown, the trial judge ordered a mistrial solely because he felt that the many hours of jury deliberation after a one-day trial had been long enough. ¹² The court of appeals noted that no rule of thumb in terms of hours deliberated could be extrapolated from precedent. 460 F. 2d at 169 & n.2. Of far more significance, however, the jury foreman had told the Lansdown trial judge, immediately before mistrial was declared, that they were "on the verge" of a verdict; another juror took it upon himself to request an additional ten minutes of deliberations. In light of this, the trial judge's action was arbitrary and manifestly an abuse of discretion. In this case, on the other hand, no member of the jury ever suggested that any verdict was remotely possible. We believe that Judge Judd could have reasonably concluded that the jury was hopelessly deadlocked. ¹³ If so, it follows that there was manifest necessity for declaring a mistrial and that doing so was not an abuse of discretion.

Reversed and remanded for further proceedings consistent with this opinion.

^* Retired Associate Justice of the Supreme Court of the United States , sitting by designation.

¹ Count 5 of the indictment was later dismissed and was replaced by a superseding information.

² At the outset, the jury's deliberation involved 18 counts, defendants having successfully moved for acquittal on counts 16 and 19.

³ The second day of deliberation was a Friday. Monday, October 9, 1972 was Columbus Day.

⁴ The statute, 18 U. S. C. A. §3731, provides that:

The appeal . . . shall be taken within thirty days after the . . . order has been rendered and shall be diligently prosecuted. The Government's notice of appeal was filed on February 1, 1973, within 30 days of Judge Weinstein's order dated January 8. The Government's brief, however, was not filed until March 12, nearly six weeks after the notice of appeal. In view of the statutory command of diligent prosecution, we believe that the Government's brief in appeals of this sort should ordinarily be filed within 30 days after the notice of appeal. Cf. Local Appellate Rule §34(f).

⁵ The amendments also eliminated direct appeals to the Supreme Court, lightening the caseload of the Court. S. Rep., supra, at 13-18.

⁶ In addition to Judge Smith's persuasive analysis, see S. Rep., supra, at 7-9, 12, which details the reasons for the change in language.

⁷ Appellees also rely on United States v. Oppenheimer, 242 U. S. 85, 87-88 (1916), but the case is patently inapposite on its facts and rationale.

⁸ Brief for Appellees Goldstein, et al., at 14.

⁹ Toward the end of the morning session of the hearing, Judge Weinstein stated:

[A] mistrial was granted here at a time when the defendants . . . would have opposed it had they been given an adequate opportunity to be heard.

In the course of his remarks set forth earlier in this opinion, he again commented that Judge Judd had acted "without proper consultation with the attorneys . . .." Even if this be a finding of fact, we believe that it must be set aside, regardless of whether the "clearly erroneous" standard applies. We doubt that it does, however. While the "clearly erroneous" standard is applicable to analogous findings in criminal cases, see 8A Moore 's Federal Practice ¶41.09, at 97, Judge Weinstein's view as to the "opportunity to be heard" turned on his reading of the trial transcripts, and these are as available to us as they were to him. Cf. In the Matter of Beck Industries, Inc., slip op. 3179, 3181 n. 3 (2d Cir. April 30, 1973) and authorities there cited.

¹⁰ Indeed, the record before us is somewhat contradictory as to whether such a finding was in fact made. Judge Weinstein made such a comment at the hearing. On the other hand, in his subsequent order after stating that "the case was improperly taken from the jury," the judge deleted additional language proposed by defendants, i. e., that this was "without the consent of the defendants and before it had been determined that no agreement could be reached . . .."

¹¹ We need not go so far as to hold that in the absence of an express objection to discharging the jury, consent is, in effect, to be presumed, see United States v. Phillips, 431 F. 2d 949 (3d Cir. 1970); we believe instead that the failure to object is one of the several probative factors here from which consent may be implied.

¹² The trial judge referred to "20 hours" of deliberation. The court of appeals pointed out, "In fact, the jury had deliberated slightly in excess of 11 hours." 460 F. 2d at 168 n. 1.

¹³ Cf. the standard proposed by §5.4(c) of the ABA Minimum Standards, supra, defining the scope of a trial judge's discretion to declare a mistrial sua sponte:

"The jury may be discharged without having agreed upon a verdict if it appears that there is no reasonable probability of agreement." (Emphasis added.)

 

 

[73-1 USTC ¶9163] United States of America v. Albert Goldstein, Morris Kessler, Alfred Ceasar, Sam Jacobson, Murray Geller, Rob ert Wisch, Edwin Cohen, Joseph Factoroff, Defendants

U. S. District Court, East. Dist. N. Y., 72-CR-18, 342 FSupp 661, 5/5/72

[Code Sec. 7203]

Crimes: Fraud: Conspiracy: Grand jury indictment: Constitutional rights: IRS procedural regulations: Rights to conferences.--Taxpayer's motion to set aside a grand jury indictment charging the taxpayer with conspiracy to defraud the United States of income tax by deducting the salaries of fictitious employees and with filing false income tax returns was denied. The taxpayer's constitutional rights to due process and equal protection of the law were not violated by the fact that he was not afforded various admin istrative conferences with the IRS as provided in IRS regulations and manuals since such regulations and manuals were not intended to create legal rights in taxpayers. The right of a grand jury to indict is not limited by regulations concerning the preliminary procedures to be followed. Motions by other taxpayers to dismiss various indictments on the grounds of failure to charge such individuals with federal offenses, that such individuals were inadequately advised of their rights, and for the lack of speedy prosecution were found to be without merit.

Rob ert A. Morse, United States Attorney, Michael B. Pollack, Assistant United States Attorney, Brooklyn, N. Y., for U. S. Jules Ritholz, Kostelanetz & Ritholz, 52 Wall St., New York, N. Y., for A. Goldstein; Arthur W. Lonschein, for M. Kessler; Joseph E. Brill, 233 Broadway, New York, N. Y., for A. Ceasar; Moses Kove, Irving Anolik, 225 Broadway, New York, N. Y., for S. Jacobson; Thomas J. O'Brien, 2 Pennsylvania Plaza, New York, N. Y., for M. Geller; Bernard Dworkin, 233 Broadway, New York, N. Y., for J. Factoroff; for defendants.

Memorandum and Order (Motions to Dismiss Indictment)

JUDD, District Judge:

Defendants other than Wisch and Cohen have moved to dismiss the complaint on various grounds.

The court will deal first with defendant Goldstein's motion to dismiss the indictment for failure to comply with allegedly necessary procedures preliminary to submission of the case to the grand jury or, in the alternative, for an evidentiary hearing concerning compliance with regulations, manuals, and practices relating to admin istrative due process and to his constitutional rights. Defendants Kessler and Jacobson, without expressly raising the same issues, have asked for the benefit of the motions of all other defendants. Since they are not indicted as taxpayers, they would not have the same pre-indictment rights which Goldstein asserts.

Defendant Geller's motion and Ceasar's are based on their assertion that the indictment does not state a federal offense. Defendant Factoroff asserts that he was inadequately advised of his rights before being asked to give testimony to the grand jury. Defendant Jacobson claims lack of speedy prosecution and statute of limitations.

The Indictment

The indictment, in twenty counts, charges a series of interrelated violations of the Internal Revenue Code.

Court One charges Albert Goldstein, the Secretary-Treasurer of Rojo Trucking Corp., Jobie Trucking Corp. and Scotneil Trucking Corp., and Murray Geller, a former Revenue agent of the Internal Revenue Service assigned to auditing the tax returns of the three corporations and of defendant Goldstein, with conspiracy to defraud the United States of income taxes by deducting the salaries of fictitious employees from the corporate income tax returns of the three trucking corporations.

The substantive counts charge Goldstein and various combinations of defendants with filing false income tax returns for various years for the three corporations named in the conspiracy count, a fourth corporation, and Goldstein himself.

Asserted Rights to Pre-Indictment Conferences

Defendant Goldstein claims that he was entitled to a series of four conferences at various admin istrative levels before the case against him could be presented to the grand jury, that denial of these conferences was arbitrary, and therefore that he has been deprived of due process and equal protection of the laws.

The right to conferences is claimed to exist at the levels of the Special Agent; the Assistant Regional Commissioner, Intelligence; and the Assistant Regional Counsel, Enforcement. Finally, defendant Goldstein claims that any potential prosecution is subject to further review in the Department of Justice, in the Criminal Section of its Tax Division, though it is not clear that he asserts the right to a further conference at this stage. It appears that 50% of prosecutions are declined at the district (Special Agent) level and smaller percentages at each succeeding stage.

The government asserts that the admin istrative conferences are not a prerequisite to grand jury action, that the regulations which defendant Goldstein relies on were not intended to create legal rights in taxpayers, and that the admin istrative practice has been not to provide conferences if information must be obtained through grand jury subpoenas rather than simply from the books and records of the taxpayer, and finally, that the grand jury has plenary power to indict.

No conference was offered at the Special Agent's level. The government points out that the Special Agent on the case did not specifically "recommend prosecution," but suggested instead that the case be referred to the Department of Justice for presentation to a grand jury. The grand jury inquiry was begun in November 1970.

Defendant Goldstein was offered a conference with Regional Counsel, Enforcement, in September 1971, concerning proposed criminal action against him, but the letter to him was returned undelivered with a post-office notation, "Moved, Left No Address." An attorney in the Chief Counsel's office at IRS asserts that it is office policy not to make further efforts to communicate with taxpayers concerning a conference after a mailed notice has been returned. Goldstein had no authorized representative at the time. No other defendant was offered any sort of conference.

Law and Regulations Concerning Pre-Indictment Conferences

The conference with the Special Agent is described in a published regulation, which defendant asserts is mandatory in form. The conference with the Regional Commissioner, Intelligence, is described in the same regulations, but is clearly not mandatory. The subsequent conferences are described in internal manuals (for official use only), and in terms of practice or discretion.

None of the cases cited by defendant Goldstein imposes any limits on a grand jury's power to indict or on a United States Attorney's power to present a case to the grand jury, although they do in general terms give certain IRS regulations the force of law.

The statutory basis for defendants' contention is 26 U. S. C. §7122(a), which in its terms authorizes compromise of criminal cases under the income tax laws, an authority not given in most other criminal cases. The statute provides:

(a) Authorization.--The Secretary or his delegate may compromise any civil or criminal case arising under the internal revenue laws prior to reference to the Department of Justice for prosecution or defense; and the Attorney General of his delegate may compromise any such case after reference to the Department of Justice for prosecution or defense.

(b) Record.--Whenever a compromise is made by the Secretary or his delegate in any case, there shall be placed on file in the office of the Secretary or his delegate the opinion of the General Counsel for the Department of the Treasury or his delegate, with his reasons therefor, with a statement of--

(1) The amount of tax assessed,

(2) The amount of interest, additional amount, addition to the tax, or assessable penalty, imposed by law on the person against whom the tax is assessed, and

(3) The amount actually paid in accordance with the terms of the compromise.

. . .

The statutory compromise provision is in Chapter 74 of the Revenue Act of 1954 which is entitled "Closing Agreements and Compromises." It does not apply to assessments of less than $500.

The statute has been construed not to contemplate compromise of purely criminal cases, unrelated to civil liability. In United States v. McCue [60-1 USTC ¶9147], 178 F. Supp. 426, 434 (D. Conn. 1959), aff'd (without mentioning this point), [62-1 USTC ¶9359] 301 F. 2d 452 (2d Cir.), cert. denied, 370 U. S. 939, 82 S. Ct. 1586 (1962), Judge Anderson held that a compromise agreement concerning civil liability did not justify dismissal of an indictment. Judge Anderson stated (p. 434):

The purpose of the statute was to facilitate the money settlement of tax liabilities. The use of the disjunctive in the phrase to "compromise any civil or criminal case" was intended to take care of circumstances where criminal prosecution has actually been commenced but no formal action has been taken with regard to the civil liabilities and an agreement has been reached covering both the civil and criminal aspects.

Section 7122 in any event merely authorizes the compromise of a criminal case, and does not in itself create any right to pre-indictment conferences.

1. Provision for a conference at the Special Agent level is contained in the published regulations (Federal Tax Regulations (West Pub. Co. 1971)) governing Internal Revenue Practices, which provide in §601.107(b)(2)

Every person who may be the subject of a recommendation for prosecution shall be given an opportunity to explain his participation in the alleged criminal violation prior to the submission of the case to Regional Counsel, unless compelling reasons exist to the contrary. (Emphasis added.)

This regulation is in sub-part A of Part 601 of the Federal Tax Regulations entitled "General Procedural Rules." The provision for an explanation serves a purpose related to efficiency, in avoiding prosecution of cases which may not really merit criminal prosecution. It is not clear that the procedure is intended to confer rights on a taxpayer. Indications are to the contrary as set forth later in this memorandum.

The difference between a recommendation for prosecution and a reference to the Department of Justice for presentation to a grand jury is given specific significance by a provision in the Enforcement Division Manual (for "Official Use Only"), which calls for referral of cases to the Department of Justice for consideration of grand jury investigation in the event that the special agents are unable to develop sufficient evidence to establish a prima facie case within the limits of their statutory authority. Enforcement Division Order #1952-7.

The provision of Reg. 601.107(b)(2) for giving a person an opportunity to explain his alleged criminal violation is subject to the express proviso that the opportunity will not be given if "compelling reasons exist to the contrary."

Defendant Goldstein asserts that "compelling reasons" are restricted to the examples set forth in ¶9355.1(1) of the Internal Revenue Manual, such as arrest, impending statute of limitations or risk of being unable to collect the taxes. This portion of the Manual is for official use only, and is only illustrative. Moreover, any right to a conference must also be qualified by the authorization in Order #1952-7, mentioned above, to recommend a grand jury investigation when facts can be more readily obtained in that way.

The Internal Revenue Manual for official use only, couples the provision of the Regulation for an explanation by the taxpayer with a reference to Policy Statement P-9350-2, which directs that the taxpayer will be informed of the alleged fraudulent features of the case at any conference only "to an extent consistent with protecting the government's interests." Where the Service considers it is not in the government's interests to make any disclosure, there is no obligation to hold a conference.

2. The next possible conference is mentioned in subdivision (c) of Regulation 601.107, which states:

(c) Processing of cases after investigation. (1) The Assistant Regional Commissioner (Intelligence) may grant a conference to the subject of a criminal tax investigation referred to his office.

(2) The Assistant Regional Commissioner (Intelligence) shall ordinarily notify the subject of an investigation and his authorized representative, if any, when he forwards a case to the Regional Counsel with a recommendation for prosecution. This rule will not apply if the case is with a U. S. Attorney.

It does not appear whether the case was in the hands of the U. S. Attorney before it was processed by the Assistant Regional Commissioner (Intelligence), but the conference at this level is clearly optional with the Commissioner, who could properly consider the same factors that led to omitting a conference at the Special Agent level.

3. Defendant Goldstein's claim to a conference opportunity with the Assistant Regional Counsel, Enforcement, is based on Section 401.4 of the Internal Revenue Manual (also for "Official Use Only"), which states:

It is the practice of the Chief Counsel's Office to offer a conference opportunity to each prospective defendant in a criminal tax case. Conferences are generally granted if requested, or if Regional Counsel concludes that such a conference would serve a useful purpose.

Such a conference is clearly not a matter of right.

An Assistant Regional Counsel assigned to Enforcement in the North Atlantic Region states that it has been "the unvarying practice" to deny a conference "if, in the opinion of the Assistant Regional Counsel, Enforcement, the interests of the Internal Revenue Service warrant the denial of conferences."

If the IRS has an obligation to grant pre-indictment conferences it must rest on claims of equal protection of the laws. It cannot be said that a taxpayer relies on the internal procedures of IRS, even if they have become known to private tax attorneys, since a criminal violation will already have taken place, and it is unlikely that the taxpayer's actions would have been affected by the right to explain them in a conference. Nor can it be asserted that a taxpayer is denied due process by the absence of a pre-indictment conference, for his rights at trial will be fully protected.

Defendant Goldstein relies on United States ex rel. Accardi v. Shaughnessy, 347 U. S. 260, 74 S. Ct. 499 (1954) for the necessity of following agency regulations, and on United States v. Heffner [70-1 USTC ¶9152], 420 F. 2d 809 (4th Cir. 1970), and United States v. Leahey [70-2 USTC ¶9636], 434 F. 2d 7 (1st Cir. 1970), for the binding force of IRS rules even though they are not mandated by statute.

The Accardi case was very different from the case before us. It involved deportation, where the allegation was that the Board of Immigration Appeals failed to exercise its own discretion because the Attorney General had informed it that petitioner was on a list of persons the Attorney General wanted deported. The case has nothing to do with conditions precedent to a grand jury indictment. Petitioner there did not have the protection of a full trial at the end of the plenary deportation procedure.

The Heffner and Leahey cases involved instructions to special agents, which provided for Miranda warnings before questioning of a taxpayer who was under investigation with respect to possible criminal action. The Heffner and Leahey cases relate only to the use at trial of statements made at the conferences, not to the grand jury's right to indict the taxpayer. There is a basic distinction, in that questioning without Miranda warnings affects a taxpayer's post-offense actions, while indictment without conference does not. As the court said in the Leahey case (434 F. 2d at 11):

No one has the right to commit a crime, even if misled by the government as to its enforcement methods.

The Accardi, Heffner and Leahey cases were distinguished in United States v. Lockyer [71-2 USTC ¶9641], 448 F. 2d 417 (10th Cir. 1971), where the provision referred to was a section of the Internal Revenue Service Audit Technique Handbook concerning the duty of a Revenue agent to suspend his investigation when he discovers indications of fraud. Although the court there placed some reliance on the fact that the provisions had not been published, the thrust of the decision was that the rule was intended to prevent mistakes by the agent which could result in complicating prosecutions and that it was not available to the taxpayer as a definition of his rights.

Defendant's other cases add nothing to his argument. As to his plea for due process, the rule is that the procedural safeguards required by the due process clause vary with the nature of the governmental function involved and the interests to be protected. Escalera v. New York City Housing Authority, 425 F. 2d 853, 861 (2d Cir. 1970). The stringent safeguards required during a plenary admin istrative hearing or when a criminal suspect is being interrogated are not applicable to pre-indictment procedures, since a defendant is assured of all the protective rights which inhere in a jury trial.

The published material outside court decisions tends to support the view that taxpayers have no legal right to a conference. In Kostelanetz and Bender, Criminal Aspects of Tax Fraud Cases (2d ed. 1968), published by the Joint Committee on Continuing Legal Education of the American Law Institute and the American Bar Association, the authors say (p. 111):

Some time during the course of the investigation by the special agent, and usually it is good practice as soon as you find out about it, a written demand should be made for a conference at the local Intelligence level before any definite action is taken by that office. A conference here, as well as with the Enforcement Counsel and the Criminal Tax Division of the Attorney General's office is not a matter of right. Unless you ask for it, you won't get it. Moreover, unless you ask for it, your client's case may move on for criminal prosecution or for that matter civil determination without your knowledge or the taxpayer's whatever. The occasions are frequent where the taxpayer's case is in the criminal tax section of the Attorney General's office before either he or counsel become aware of its transmittal there.

With respect to the benefit a taxpayer may receive from conferences at the Regional Counsel level, the authors say (p. 113):

The Regional Attorney . . . is a good listener and he will note everything for the record. Most of these attorneys will tell you nothing.

Other articles caution about the risk in giving statements to the Internal Revenue Service at conferences, and comment on the absence of Miranda warnings (before the Internal Revenue Service in 1968 directed special agents to give them). Lyon , "Government Power and Citizen Rights in a Tax Investigation," 25 The Tax Lawyer 79, 93, et seq. In Bacon, "How IRS Views the Practitioner's Role in its Criminal Enforcement Program," 34 Journal of Taxation 198 (1971), the author describes the purpose of the review processes in the criminal tax enforcement program as being (p. 200):

. . . to insure that there is sufficient proof to show guilt beyond a reasonable doubt and that there is a reasonable probability of conviction. . . .

This procedure, in my opinion, demonstrates realistically the IRS's and the Government's objective in striving for the just result.

Again in Goodrich, Redman and Quiggle, Procedure Before the Internal Revenue Service (3d ed. 1965), the authors point out that the purpose of conferences is more to protect the government against unsuccessful prosecutions than to protect the taxpayer. The description of the various admin istrative reviews of a case is preceded by the following statement in the text (p. 154):

Unlike an ordinary tax audit in which complete cooperation with the examining agent is desirable, a case involving potential criminal prosecution poses a very different and difficult question in this regard. The dilemma stems from two conflicting considerations. Although the primary goal in dealing with the special agent is his recommendation against prosecution, it must never be forgotten that, failing that goal, the case is headed for a criminal trial. Thus, what is offered in the hope of obtaining the understanding and favorable recommendation of the special agent may well be precisely enough to fill in his case against the taxpayer and then be extremely prejudicial at the subsequent trial that results from his adverse recommendation. The attitude to be adopted must be chosen before any action is taken.

These publications do not support defendant's contention that a taxpayer is deprived of a substantial right by not being invited to confer with the IRS before he is indicted.

Defendant Goldstein could not have learned much about the government's case at any conference, for he would be given only "a general oral statement of the alleged fraudulent features of the case." The Internal Revenue Manual (for "Official Use Only") states in ¶9355.3 that

extreme care must be exercised to ensure that no information is disclosed to the principal which might reveal or indicate the identity of confidential informants, endanger prospective witnesses, or be detrimental to subsequent prosecution of the case.

There is no unconstitutional denial of equal protection of the laws in the selection by IRS or any other government prosecutor, of particular cases for prosecution--at least in the absence of invidious class discrimination. In Oyler v. Boles, 368 U. S. 448, 82 S. Ct. 501 (1962), where there was a showing of frequent failure to invoke severer criminal penalties upon habitual offenders, the Court stated (368 U. S. at 456, 82 S. Ct. at 506):

Moreover, the conscious exercise of some selectivity in enforcement is not in itself a federal constitutional violation. Even though the statistics in this case might imply a policy of selective enforcement, it was not stated that the selection was deliberately based upon an unjustifiable standard such as race, religion, or other arbitrary classification. Therefore grounds supporting a finding of a denial of equal protection were not alleged.

See also Moss v. Hornig, 314 F. 2d 89, 92-93 (2d Cir. 1963); Breitel, Controls in Criminal Law Enforcement, 27 Univ. of Chi. L. Rev. 427 (1960); Comment, The Right to Non-discriminatory Enforcement of State Penal Laws, 61 Colum. L. Rev. 1103, 1119, et seq.; Miller, Prosecution: The Decision to Charge a Suspect With a Crime (1969) passim.

The failure of IRS to use diligence in locating Goldstein after the invitation to a conference was returned, therefore violated no legal right of his.

No evidentiary hearing on IRS practices is necessary, since the regulations do not confer any legal right to be free of the necessity of defending a grand jury indictment. It is true that a certain number of cases are dropped after each level of admin istrative conference, but the conferences are primarily for the benefit of the United States , to avoid the expenditure of effort on unfounded prosecution, and not for the benefit of defendants.

The Grand Jury's Plenary Power

The right of a grand jury to indict is not limited by regulations concerning the preliminary procedure to be followed. In Sullivan v. United States, 348 U. S. 170, 174, 75 S. Ct. 182, 185 (1954), the Supreme Court refused to dismiss an indictment even though the prosecuting attorney had proceeded without the authorization of the Attorney General which was required under a Circular Letter of the Department of Justice. The court said that the Circular Letters, which were never published in the Federal Register, were internal "housekeeping" provisions, and that

Therefore, it is not contended that, aside from the Executive Order and the departmental letter, a grand jury may not consider evidence of crime known to the grand jurors or revealed by their investigation. It is only urged that the Executive Order and the departmental letter limited the action of the grand jury in respect to cases concerning violations of internal revenue laws. We hold that the Order and the letter had no such restrictive effect, and that the grand jury in this case was free to consider the evidence put before it by Government counsel without authorization from the Attorney General's office in Washington .

348 U. S. at 173, 75 S. Ct. at 185.

Concerning a grand jury's powers, the court in United States v. Bukowski, 435 F. 2d 1094, 1103 (7th Cir. 1970), cert. denied, 401 U. S. 911, 91 S. Ct. 874 (1971), stated:

The grand jury holds broad powers of inquiry into any conduct possibly violating federal criminal law. . . . It proceeds without need of any prior formal charge against any particular individual.

In United States v. Tane, 329 F. 2d 848, 854 (2d Cir. 1964), which defendant cites, the court said:

As long as there is some competent evidence to sustain the charge issued by the grand jury, an indictment should not be dismissed.

Defendant Goldstein cites United States v. Seeley, 301 F. Supp. 811 (D. R. I. 1969), and similar cases in support of the proposition that an indictment may be dismissed for various types of irregularity, but there is no case cited which holds that it may be dismissed because the defendant did not have adequate opportunity to explain his conduct.

On the contrary, it has been held that refusal to permit a prospective defendant to present his case to the grand jury, even though not based on any objective standards, sets forth no ground for dismissal of an indictment. United States ex rel. McCann v. Thompson, 144 F. 2d 604 (2d Cir. 1944); United States v. Rosen, 259 F. Supp. 942 (S. D. N. Y. 1966).

The Geller-Ceasar Motions

Defendant Geller asks that the indictment be dismissed for failure to charge him with a federal offense. It is obviously a federal offense to conspire to defeat the income tax laws or to aid and abet in the filing of fraudulent income tax returns. His argument seems to be based on the theory that it is a violation of the contract clause and the due process clause of the United States Constitution to interfere with the free fixation of compensation for services, and therefore that it is improper to charge in the indictment that certain defendants did "little or no work" for the corporations which deducted their purported compensation. The argument is ingenious but lacking in merit. A deduction taken in bad faith is a tax fraud even though it is cloaked as an employment contract.

The attack on portions of the indictment as surplusage is also lacking in merit. The government is not required to limit the indictment to those allegations which are indispensable to the proof of a crime.

The Factoroff Motion

Defendant Factoroff requests that the indictment be dismissed against him because he was inadequately advised of his rights as a potential "target" before being questioned by the grand jury. The asserted facts may relate to the admissibility of his grand jury testimony, a matter not now determined, but they do not affect the validity of the indictment. The court accepts the statement of the United States Attorney that there was other evidence before the grand jury which would support the indictment. The case of Jones v. United States, 342 F. 2d 863 (D. C. Cir. 1964), which defendant Factoroff cites, arose on an appeal from the conviction and not on a motion directed to indictment and is not pertinent here.

The Jacobson Motion

Defendant Jacobson has moved to dismiss the indictment for lack of speedy prosecution and possible violation of the statute of limitations. It does not appear that any counts are barred by the statute of limitations since the earliest return mentioned in the indictment was due on January 15, 1966 and the indictment was returned within six years thereafter. 26 U. S. §6531. None of the defendants having been arrested before the indictment, and all defendants having joined in the request at the pre-trial hearing on January 28, 1972 that the trial be set for September 5th, there has been no denial of speedy trial.

It is ORDERED that the motions of defendants Goldstein, Kessler, Ceasar, Jacobson, Geller, and Factoroff to dismiss the indictment be denied, and that the motion of defendant Geller to strike out portions of the indictment be also denied.

 

 

[55-1 USTC ¶9416]Michael Campodonico, Appellant v. United States of America , Appellee

(CA-9), In the United States Court of Appeals for the Ninth Circuit, No. 14,089, 222 F2d 310, April 27, 1955

On appeal from the District Court of the United States for the Northern District of California.

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

Criminal prosecution: Net worth method: Likely source of unreported income.--Since appellant kept no books the Government had a right to resort to the net worth increase-expenditures method. The Government's evidence relating to the beginning net worth and the increase in net worth supported the judgment of the trial court. Proof of a likely source of appellant's unreported income is sufficient, and in the case of an admitted gambler the likely source would be winnings from gambling.

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

Criminal prosecution: Defenses: Denial of constitutional right to a speedy trial.--Appellant urged that a year and 2 months from the beginning of the trial to the pronouncement of judgment was a denial of his constitutional rights. This complaint is without merit because many legal questions were involved in this case. Moreover, appellant did not press the trial court for a quick decision.

Willens & Boscoe, Donald D. Boscoe, Stockton, Calif., Emmet J. Seawell, Sacramento, Calif., for appellant. H. Brian Holland, Assistant Attorney General, Washington, D. C., Lloyd H. Burke, United States Attorney, Clyde Maxwell, Internal Revenue Service, San Francisco, Calif., Thomas J. Sullivan, Internal Revenue Service, Los Angeles, Calif., for appellee.

Before MATHEWS, HEALY and LEMMON, Circuit Judges.

LEMMON, Circuit Judge:

Unlike many other trapped tax-evaders, the appellant does not maintain, like Abimelech of Gerar, that "In the integrity of my heart and innocency of my hands have I done this". ¹ With his admitted record of gambling, bootlegging, embezzlement, perjury, and prostitution, such a protestation of purity would hardly be convincing.

On the contrary, the appellant relies upon such technical defenses as these:

"The case at bar is not a proper case in which to apply the net worth theory as it did not clearly and accurately establish by competent evidence the net worth of the appellant for any one of the tax years in question, nor did it produce evidence that excluded all possible sources of taxable income from which any increase of net worth and the excess expenditures could have been derived."

"A strict interpretation of corroboration requirements for circumstantial evidence when used to establish a beginning net worth has been established" by four Supreme Court cases.

Our task, then, is to examine these and similar finespun arguments with the requisite amount of dispassionate judicial calm.

1. Statement Of The Case

The indictment, in five counts, charged violations of 26 U. S. C. A. §145(b), which punishes "Failure to collect and pay over tax, or attempt to defeat or evade tax". Count One alleged that, for the year 1946, the appellant filed a fraudulent joint income tax return for his wife and himself, understating their income tax by $11,730.98. Count Two made similar allegations regarding the appellant's separate return for 1947, charging an understatement of $2,237.47. Count Three dealt with the wife's tax for 1947, alleging that he filed a fraudulent return for her showing the tax due to be $2,317.97 less than the correct amount. In Count Four, it was alleged that the appellant's joint return for 1948, for himself and his wife, was fraudulently $488.52 less than the correct amount. Count Five alleged that the appellant fraudulently understated the joint income tax of his wife and himself for 1949 by $4,775.94.

The appellant waived a jury trial on May 13, 1952, when the taking of testimony began. On May 14, 1952, at the close of the appellee's case, the appellant moved for a judgment of acquittal. The trial was continued in order that briefs might be submitted and that the appellant's motion might be considered by the Court. On August 8, 1952, the trial judge denied the motion for acquittal, and the appellee reopened its case in chief by putting on another witness. The appellant renewed his motion for acquittal, which was denied. The case was continued to September 5, 1952, for final argument.

On June 13, 1953, the trial judge filed a "memorandum and order" adjudging the appellant guilty on each of the five counts, and fixing July 3, 1953, as the date for "judgment and sentence". On July 17, 1953, the appellant filed a motion in arrest of judgment, alleging that the Court was "without jurisdiction of the offense and the defendant, in that the defendant has been deprived of a speedy trial in violation of the Sixth Amendment . . ." This motion was denied. On the same day, the Court sentenced the appellant to eighteen months' imprisonment and fined him $5,000 on Count One, and sentenced him to eighteen months' imprisonment on Count Two, the sentences to run concurrently. No sentence was imposed as to Count Three, and the appellant's motion for acquittal was granted as to Counts Four and Five.

In view of the appellant's argument, to be discussed hereafter, based upon the Sixth Amendment, the chronology of the trial has been given somewhat fully.

2. The Appellee's Evidence

It is hornbook law that even in a criminal case tried to the court, an appellate tribunal will consider the evidence most favorably to the prosecution and will resolve all reasonable intendments in support of the verdict or the judgment. ² In the instant case, however, our task is further simplified by the fact that the appellant put no witnesses upon the stand but presented his case in the form of certain stipulations that need not be rehearsed here.

The appellee's case, then, may be briefly summarized as follows:

From 1943 or 1944 to May, 1947, the appellant was a bouncer, floor man, and substitute manager of a gambling house in Stockton , California . We have already referred to some of his other activities.

His income tax returns for 1945 to 1949, inclusive, were prepared by Mrs. Eva M. McNabb, his employer's bookkeeper.

Chester R. Taynton, an Internal Revenue Agent, investigated the appellant's income tax liabilities. He asked for the appellant's books and records, but was given none. The appellant said that he kept no books. The Revenue Agent then attempted to assemble information with respect to the appellant's net worth. He found no evidence of any cash on hand at the end of 1945, but discovered that at the end of 1946 the appellant had cash on hand amounting to $23,247.25. The appellant's entire assets as of December 31, 1945, totaled $10,525.00.

Taynton examined the public records, inquired at all local banks, and made an audit of the Capitola Liquor Store, in which the appellant had a one-half interest.

The Internal Revenue Agent testified that the appellant said "his personal living expenses ran around $60 a month, and the Bureau's records of taxes paid showed $166.76 in 1946, $143.74 in 1947, $804.73 in 1948, and $295 in 1949".

For the year 1946, the increase in net worth was $34,296.67; for 1947, it was $23,140.77; for 1948, the gain was $6,297.08; and for 1949, the increase was $20,190.78.

In his reply brief, the appellant challenges the appellee's statement "that appellant was well known as a gambler during the years involved". Says the appellant:

"Consider this bald statement in the light of the testimony of all the Government witnesses that he is not a gambler." (Italics is the appellant's)

The foregoing statement is grossly erroneous. Rosario Mandalari testified that he played cards with the appellant for money.

When Revenue Agent Taynton asked the chief of police of Stockton "if he could give me any information on Mike Campodonico, . . . he said, 'Mike Campodonico, oh, yes--a pimp and a gambler'."

Taynton asked the appellant "where he got all the money to buy all the assets when he hadn't reported that much income", and the latter replied that "he made it gambling"--that "he was a gambler".

[Tax Attorney's Testimony]

Wareham Seaman, a tax attorney, retained by the appellant, testified concerning a meeting held in his office on May 4, 1950, at which Shirley S. Atkin, a Special Agent of the Intelligence Unit of the Bureau of Internal Revenue; Taynton, Seaman, and the appellant were present. At that conference the appellant made a sworn statement which, at a meeting held in Seaman's office on May 31, 1950, the appellant refused to sign "because it did not represent the truth". Atkin requested that the appellant make another statement that would be the truth, but the appellant, according to Seaman, "stated that he would not make this statement, upon my advice".

During the cross-examination of Seaman, counsel for the appellant announced that the attorney-client privilege was being "waived completely".

Thereupon Seaman gave some illuminating testimony relative to the appellant's four separate and distinct explanations for "The entire increase in his assets for the years '46 to '49". The conflicting versions or "positions" were given to Seaman, his own lawyer:

1. "Well, as originally reported to me, and as stated in the statement of May 4, he stated that his income had been accumulated prior to [1943]. It had been accumulated from, as I said, gambling and prostitution, bootlegging . . . Going back, as I recall, as far as in the twenties. . . . That was his first position."

2. "As I recall, his next position was that he had accumulated all but $45,000, or approximately that, up until 1943, and that was from embezzled funds subsequent to '43; any increase since that was from embezzled funds."

3. "As I recall, his third position was that all of it had been accumulated from embezzled funds.

"Q. Not just the forty-five?

"A. Just the forty-five."

4. "I believe his final position on that was that the $40,000 had come from other than embezzled funds.

"Q. From what source?

"A. Gambling, from gambling.

"The Court. During what period?

"The Witness. From '43 on."

From the foregoing, it is clear that the appellant did not heed Mrs. McNabb's advice: "Never lie to your doctor or your attorney."

3. The Appellee Presented Substantial Evidence Of A Beginning Net Worth For The Appellant, As Well As Evidence Of His Assets And His Expenditures For 1946 And 1947

As we have seen the appellant kept no books. In such a situation the appellee had a right to resort to the net worth increase-expenditures method of arriving at the appellant's income tax liability. In Holland v. United States, 1954, 348 U. S. 121, 129 [54-2 USTC ¶9714], the Supreme Court, while recognizing the "pitfalls inherent in the net worth method", was careful to add that the "pitfalls" cannot be said to "foreclose its use."

"Evidence of unexplained funds or property in the hands of a taxpayer establishes a prima facie case of understatement of income. It is then incumbent on the defendant to overcome the logical inferences to be drawn from the facts proved." United States v. Hornstein, 7 Cir., 1949, 176 Fed. (2d) 217, 220 [49-2 USTC ¶9326].

In the instant case, the appellant has wholly failed "to overcome the inferences to be drawn from the facts proved."

The appellant relies heavily upon the case of Calderon v. United States, 9 Cir., 1953, 207 Fed. (2d) 377, 378 [53-2 USTC ¶9579], quoting therefrom at some length and declaring that it "alone is sufficient authority to reverse the case at bar." The Calderón case, however, was reversed by the Supreme Court on December 6, 1954, 348 U. S. 160 [54-2 USTC ¶9712].

We have carefully examined the record relating to the appellant's assets and expenditures for the years in question, summarized above, and we find that the appellee's evidence relating to the beginning net worth and the increase in net worth supported the judgment of the trial court.

The appellee "is not required to prove a negative or to refute all possible speculation as to the source of the appellant's asserted funds." Gariepy v. United States , 6 Cir., 1951, 189 Fed. (2d) 459, 463 [51-1 USTC ¶9318], and cases cited. The Gariepy case is cited in an annotation in 97 L. Ed. 71.

Nor need the appellee "prove with mathematical certainty the precise, amount of unreported, taxable income." Jelaza v. United States , 4 Cir., 1950, 179 Fed. (2d) 202, 203 [50-1 USTC ¶9149], and cases cited.

The appellant is inconsistent in his statements as to whether the appellee is required to establish a possible or a probable source of the taxpayer's income under the present-worth system. On one page of his reply brief, the appellant says:

"It is significant that Counsel for the Government has failed to name one case dispensing with the requirement of a probable source of income, and has chosen instead to rely upon isolated statements in the above authorities cited, in which a possible source of income was established." [Italics supplied]

On the next page, however, the appellant relaxes his requirement to a possible source of income:

"It is submitted that had the Government known that the law requires the Government to establish a possible source of income, this prosecution would never have been undertaken." [Italics supplied]

Finally, in the very next paragraph, the appellant goes back to the "probable" test:

"It appears from the brief of the Government in this case that there is no substantial disagreement as to the requirement in a net worth case that: (1) A satisfactory beginning net worth must be established; and (2) that a lucrative business or calling must also be proven [sic], to establish a probable source of taxable income." [Italics supplied]

[Proof of a Likely Source]

Be that as it may, the correct rule is authoritatively laid down in Holland v. United States , supra, 348 U. S. at pages 137-138:

"Increases in net worth, standing alone, cannot be assumed to be attributable to currently taxable income. But proof of a likely source from which the jury could reasonably find that the net worth increases sprang, is sufficient."

A careful scrutiny of the transcript in this case convinces us that the appellee has adduced adequate "proof of a likely source" from which the trial judge "could reasonably find that the net worth increases sprang." In the case of an admitted and notorious gambler the "likely source" would be winnings from gambling. And it is too well settled to require citation of authority that such winnings constitute taxable income.

In four decisions handed down by the Supreme Court on December 6, 1954, lucid semaphores have been set up for the guidance of lower federal courts in the determination of income tax cases in which the taxpayer's non-existent or imperfect bookkeeping makes necessary a recourse to the present-worth method in arriving at his tax liability. In addition to the Calderón and Holland cases, already referred to, our highest tribunal has given us illuminating decisions in Friedberg v. United States, 348 U. S. 142 [54-2 USTC ¶9713], and in Smith v. United States, 348 U. S. 147 [54-2 USTC ¶9715]. The importance of these four cases is emphasized in a per curiam decision handed down by the Supreme Court itself on January 10, 1955, appearing in 348 U. S. 904 [55-1 USTC ¶9139].

It is quite apparent that the appellant is not pleased with at least two of the foregoing decisions, since he devotes five pages of his supplemental brief to a categorical statement of their alleged "isolated apparently conflicting statements." In addition, the appellant labels as "Disturbingly incomprehensible" the statement in United States v. Calderón, supra, 348 U. S. , at page 165, that "we must search for independent evidence which will tend to establish the crime directly, without resort to the net worth method."

It is easily understandable that the appellant should be "disturbed" over Calderón. It damaged his argument considerably when, as we have seen, it reversed this Court's decision in that case--a decision upon which the appellant had relied so heavily that he cited or quoted from it five times in his briefs!

Be that as it may, those four decisions are now the law of the land. We believe that in the instant case the appellee has met the standards there laid down. There is in the record ample corroboration of the appellant's damaging admissions.

4. The Trial Court's Delay In Pronouncing Judgment Did Not Cause It To Lose Jurisdiction

The appellant specifies as error the lower court's denial of "appellant's motion in arrest of judgment upon the grounds that the Court had lost jurisdiction to pronounce judgment therein in that the appellant had been denied a speedy trial in violation of the Sixth Amendment to the Constitution of the United States ."

It is urged that "a year and two months from the beginning of a criminal trial lasting only twelve to fourteen hours, to the pronouncement of judgment, is utterly unfair and a denial of one's rights," etc.

Rule 48(b) of the Federal Rules of Criminal Procedure reads as follows:

"If there is unnecessary delay in presenting the charge to a grand jury or in filing an information against a defendant who has been held to answer to the district court, or if there is unnecessary delay in bringing a defendant to trial, the court may dismiss the indictment, information or complaint."

The appellant was indicted on November 26, 1951, and was brought to trial on May 3, 1952. That is not an inordinate delay.

The gravamen of the appellant's plaint, however, relates, as we have just said, to the lapse of time from the beginning of the trial to the pronouncement of judgment.

The appellant refers to four decisions as supporting his contention. Three of them are not in point: the delay occurred after a conviction by a jury or a plea of guilty. In the instant case, the delay occurred before the Court handed down its judgment of conviction. And even in two of those three cases, the convictions were affirmed. The fourth case, Pinkussohn v. United States, 7 Cir., 1937, 88 Fed. (2d) 70, 71, certiorari denied, 1937, 302 U. S. 702, was indeed tried to the Court, and the judgment was delayed for six months. But Pinkussohn does not aid the present appellant: the conviction was affirmed. The Circuit Court of Appeals did, however, deplore "the long delay that elapsed before the simple case with few or no legal questions involved, was disposed of."

In the instant case, it could hardly be said that there are "few or no legal questions involved," when the parties have filed five briefs in this Court and the Supreme Court has found it advisable to hand down four simultaneous decisions on the vexing subject of present worth alone.

Finally, the appellant does not deny that he did not demand a speedy trial, but contents himself with observing that--

"It certainly would have been an inappropriate act for the appellant to have brought mandamus to compel a Court to render its decision, especially so, since nearly all of the remarks of the Court in reference to the sufficiency of the evidence were favorable to the appellant."

If the appellant deemed it the better strategy not to press the trial court for a quick decision, he cannot now complain when the delayed judgment happens to have gone against him!

It is will settled in this Circuit that "The constitutional guaranty of a speedy trial is a personal right which may be waived by failure to assert it. Collins v. United States , 9 Cir., 157 Fed. (2d) 409." ³

We know of no Constitutional, statutory, or judicial pronouncement that forbids a busy court from taking ample time to ponder involved and troublesome questions of law and of fact before handing down a decision. Speedy justice does not mean hasty justice.

5. Conclusion

The appellee's agents made a painstaking effort to reconstruct the appellant's net worth increase and expenditures for the crucial years of 1946 and 1947. The means that they employed and the results at which they arrived have already been adumbrated herein. The minutiae of the investigations need not be detailed.

It was not necessary for the appellee to put upon the witness stand a parade of professional gamblers--or wise!--to affirm that on such and such a night they lost so many dollars to the appellant. His associates were not of the type that would volunteer information to the Government. Their reluctance, however, affords no reason why the appellant's responsibility for a loss to the federal fisc should go unwhipped.

The judgment is affirmed.

¹ GEN. 20:5.

² Pasadena Research Laboratories v. United States , 9 Cir., 1948, 169 Fed. (2d) 375, 380, certiorari denied, 335 U. S. 853-854, and Norwitt v. United States, 9 Cir., 1952, 195 Fed. (2d) 127, 134 [52-1 USTC ¶9252], certiorari denied, 344 U. S. 817.

³ Danziger v. United States , 9 Cir., 1947, 161 Fed. (2d) 299, 301, certiorari denied, 1947, 332 U. S. 769. See also Daniels v. United States, 9 Cir., 1927, 17 Fed. (2d) 339, 344, certiorari denied, 1927, 274 U. S. 744-745; Iva Ikuko Toguri D'Aquino v. United States, 9 Cir., 1951, 192 Fed. (2d) 338, 349-350, certiorari denied, 1952, 343 U. S. 935.

 

 

[72-2 USTC ¶9523] United States of America , Plaintiff-Appellee v. Russell L. Carter, Defendant-Appellant

(CA-6), U. S. Court of Appeals, 6th Circuit, No. 71-1793, 462 F2d 1252, 6/29/72, Aff'g an unreported District Court decision

[Code Secs. 446 and 7201]

Crimes: Tax evasion: Reconstruction of income: Net worth method: Beginning net worth: Warning of rights: Speedy trial.--Taxpayer, an attorney, was properly convicted of wilfully attempting to evade payment of income taxes due in 1963, 1964 and 1965. The government's opening net worth in reconstructing taxpayer's income by use of the net worth method was established with reasonable certainty. Noncustodial questioning by Internal Revenue Service agents is not subject to the warning requirements of Miranda (384 U. S. 436). Furthermore, the Sixth Amendment "speedy trial" requirement applies only after a defendant is an "accused."

William W. Milligan, United States Attorney, Rob ert A. Steinberg, Assistant United States Attorney, Dayton, Ohio, for plaintiff-appellee. Arnold Morelli, 503 Executive Bldg., Cincinnati , Ohio , for defendant-appellant.

Before WEICK and EDWARDS, Circuit Judges, and CECIL, Senior Circuit Judge.

EDWARDS, Circuit Judge.

Appellant, a former municipal judge and Ohio budget director, and now a practicing lawyer in Dayton , appeals from a jury conviction in the United States District Court for the Southern District of Ohio, Western Division, on three counts of income tax evasion. The indictment had charged that appellant wilfully attempted to evade payment of income taxes due in 1963, 1964 and 1965 by filing false and fraudulent income tax returns, in violation of 26 U. S. C. §7201 (1970). Appellant was sentenced to a total of twelve months in prison, with the sentences suspended on payment of a total of $12,000 in fines.

A summary of the government's claims in the indictment and in the evidence presented at trial follows:

                             1963               1964            1965

Taxable Income

Reported ............   $ 7,527.33         $18,765.49       $ 9,610.33

Actual Taxable Income    32,017.86          33,971.20        51.106.28

Unreported Taxable

Income ..............    24,490.55          15,205.71        41,495.95

 

The government's case was based largely upon the following computation of net worth before and after the taxable periods in question. The government claim was that appellant's beginning net worth (at the end of 1962) was $129,491.51 and at the end of the three year period concerned was $214,194.01.

Government Exhibit No. 9

RUSSELL L. CARTER

Computation of Unreported Taxable Income Based On Net Worth and Personal Living Expenses

                  12-31          12-31           12-31           12-31

                  1962           1963            1964            1965

assets

Cash on Hand .. $ 1,000.00     $ 1,000.00      $ 1,000.00    $ 1,000.00

Cash in Banks

Checking Account  2,556.79         167.56          356.06        264.57

Savings Accounts 90,897.58     121,770.04      122,001.00    131,601.17

Bonds--Series E  15,000.00      15,000.00       30,000.00     30,000.00

Stocks and Notes

Receivable ....   2,983.72       1,983.72          983.72     13,487.50

Real Estate ....  9,386.92       9,386.92        9,386.92     51,886.92

BusinessEquipment 5,700.00       5,700.00        5,700.00      5,700.00

Automobiles ..... 9,428.49       4,950.00        6,854.70      8,554.70

TOTAL ASSETS . $136,953.50    $159,958.24     $176,282.40   $242,494.86

liabilities

Mortgages and 

Loans Payable ... $ 402.88        $ 49.93        $ -0-      $ 22,260.00

Allowance for 

Depreciation ..   7,059.11       5,105.90      4,089.00      6,040.85

TOTAL LIABILITIES$ 7,461.99    $ 5,155.83   $ 4,089.00     $ 28,300.85

net worth ......$129,491.51   $154,802.41  $172,193.40     $214,194.01

Beginning Net 

Worth ........ (129,491.51)   (154,802.41)(172,193.40)

Increase in 

Net Worth .... $ 25,310.90    $ 17,390.99 $ 42,000.61

Personal Living 

Expenses ....... 12,646.61      22,303.34   16,283.63

Adjustments to 

Net Worth ...... (1,144.97)       (861.14)  (1,039.21)

Adjusted Gross 

Income ......  $ 36,182.54    $ 38,833.19  $ 57,245.03

Deductions ..... (2,394.66)     (2,461.99)   (3,738.75)

Exemptions ..... (2,400.00)     (2,400.00)   (2,400.00)

Taxable Income 

Corrected .... $ 32,017.88   $ 33,971.20   $ 51,106.28

Taxable Income 

Reported ......  (7,527.33)   (18,765.49)    (9,610.33)

Unreported 

Taxable Income $ 24,490.55   $ 15,205.71   $ 41,495.95

 

The basic dispute in this case at trial and on appeal concerns the fact that the government's beginning net worth figure allowed only $1,000 for cash on hand, whereas appellant asserts that he had $50,000-$60,000 in cash in a safety deposit box on December 31, 1962, plus approximately $10,000 on his person or in his office safe.

Appellant claims that government proofs as to the cash item in the beginning net worth should not have gone to the jury, because as a matter of law they were not sufficient to establish the $1,000 figure employed by a "reasonable certainty." In this regard appellant relies primarily upon Holland v. United States [54-2 USTC ¶9714], 348 U. S. 121 (1954), and Thomas v. Commissioner, 223 F. 2d 83 (6th Cir. 1955).

The Holland case does establish "reasonable certainty" as the criterion for judging the validity of the government's opening net worth figure.

We agree with petitioners that an essential condition in cases of this type is the establishment, with reasonable certainty, of an opening net worth, to serve as a starting point from which to calculate future increases in the taxpayer's assets. The importance of accuracy in this figure is immediately apparent, as the correctness of the result depends entirely upon the inclusion in this sum of all assets on hand at the outset. Holland v. United States, supra at 132.

It is clear to us, however, that the Supreme Court in Holland contemplated that the basic fact finding on this topic would normally be for the jury. Thus Justice Clark's opinion discussed the net worth method primarily in terms of a jury trial:

While we cannot say that these pitfalls inherent in the net worth method foreclose its use, they do require the exercise of great care and restraint. The complexity of the problem is such that it cannot be met merely by the application of general rules. Cf. Universal Camera Corp. v. Labor Board, 340 U. S. 474, 489. Trial courts should approach these cases in the full realization that the taxpayer may be ensnared in a system which, though difficult for the prosecution to utilize, is equally hard for the defendant to refute. Charges should be especially clear, including, in addition to the formal instructions, 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. Appellate courts should review the cases, bearing constantly in mind the difficulties that arise when circumstantial evidence as to guilt is the chief weapon of a method that is itself only an approximation. Holland v. United States, supra, at 129. (Emphasis added.)

Circumstantial evidence in this respect is intrinsically no different from testimonial evidence. Admittedly, circumstantial evidence may in some cases point to a wholly incorrect result. Yet this is equally true of testimonial evidence. In both instances, a jury is asked to weigh the chances that the evidence correctly points to guilt against the possibility of inaccuracy or ambiguous inference. In both, the jury must use its experience with people and events in weighing the probabilities. If the jury is convinced beyond a reasonable doubt, we can require no more. Id at 140.

A review of the District Judge's charge to the jury convinces us that he followed the principles of Holland with both care and understanding. No objection was made to the critical portions of the charge, nor is any appellate issue presented as to them.

While no doubt there are other deficiencies which may be conceived which could appropriately be viewed by a District Judge as requiring dismissal of a prosecution for failure to establish a case for jury consideration, in Holland , the court's emphasis in this regard was on the responsibility of the government to investigate leads:

While sound admin istration of the criminal law requires that the net worth approach--a powerful method of proving otherwise undetectable offenses--should not be denied the Government, its failure to investigate leads furnished by the taxpayer might result in serious injustice. It is, of course, not for us to prescribe investigative procedures, but it is within the province of the courts to pass upon the sufficiency of the evidence to convict. When the Government rests its case solely on the approximations and circumstantial inferences of a net worth computation, the cogency of its proof depends upon its effective negation of reasonable explanations by the taxpayer inconsistent with guilt. Such refutation might fail when the Government does not track down relevant leads furnished by the taxpayer--leads reasonably susceptible of being checked, which, if true, would establish the taxpayer's innocence. When the Government fails to show an investigation into the validity of such leads, the trial judge may consider them as true and the Government's case insufficient to go to the jury. This should aid in forestalling unjust prosecutions, and have the practical advantage of eliminating the dilemma, especially serious in this type of case, of the accused's being forced by the risk of an adverse verdict to come forward to substantiate leads which he had previously furnished the Government. It is a procedure entirely consistent with the position long espoused by the Government, that its duty is not to convict but to see that justice is done. Holland v. United States, supra at 135-36. (Emphasis added.) (Footnote omitted.)

In the Thomas case (Thomas v. Commissioner, 223 F. 2d 83 (6th Cir. 1955)), Judge Potter Stewart ¹ applies the principles of Holland to a civil action for refund of taxes paid under a redetermination of tax by the Commissioner. There, however, in contrast to the instant case, the Commissioner had found a cash hoard in a safety deposit box on the death of one taxpayer and the question related to when it had been accumulated. In our instant case the principal question of fact pertained to whether or not there was a cash hoard. Appellant did not supply much in the way of specific leads for the government to investigate.

Appellant's testimony attributed his net worth to legal fees and modest living expenses. Appellant's own estimates of the cash hoard varied from $32,000 to nearly $70,000. He explained his keeping this amount of cash by saying that he "liked to have currency on hand," that he was a Negro and had difficulty in getting credit, and that since the depression he had not trusted banks.

It is undisputed, however, that during all three taxable years appellant had bank savings accounts of $90,000 to $131,000. And the government proofs repeatedly demonstrated both before and after December 31, 1962, that appellant had credit available to him.

Appellant kept a Cash Receipts book and an Income and Expense book. From these he made up his income tax returns as far as gross income was concerned for the tax years at issue. He likewise kept similar records for the years 1947 to 1963, but destroyed them after this investigation began.

As to the years 1963, 1964 and 1965, the government proved that appellant received substantial income in fees paid to him which were never entered on the Cash Receipts book or the Income and Expense book for the years concerned.

Appellant's testimony indicated that between 1956 and the end of 1962 he deposited over $90,000 in savings accounts and that between 1949 and the end of 1962 he increased his cash hoard from $6,500 to approximately $70,000.

From 1949 to 1953 appellant was employed as an Assistant County Prosecutor at $4,000 to $6,000 a year, with some outside practice. From 1953 to 1959 he was in private practice, except for six months in 1953, as a municipal judge at $3,255 for that period. During these years he claimed added income from legal fees but did not furnish specifics.

Government exhibits of appellant's income tax returns showed a gross income on such returns of $16,313.94 for 1959, $21,268.11 for 1960, $19,338.26 for 1961, and $13,945.33 for 1962.

Additionally, there was strong circumstantial evidence from which the jury could properly have inferred that appellant did not have the large sum of cash in a safety deposit box in 1962 as he claimed, and several instances where the jury could have found important portions of appellant's own testimony to be incredible. All in all, we conclude that there was ample evidence to support the District Judge's denial of appellant's motion for a directed verdict.

On appeal we must, of course, give the government proofs the favorable view which the jury gave them. Glasser v. United States , 315 U. S. 60, 80 (1942). Viewed in this light, the evidence supports the jury verdict of guilty beyond a reasonable doubt.

Appellant's other stated issues require less discussion. This court has held that noncustodial questioning by Internal Revenue Service agents is not subject to the warning requirements of Miranda v. Arizona, 384 U. S. 436 (1966). United States v. Stribling, 437 F. 2d 765 (6th Cir.), cert. denied, 402 U. S. 973 (1971). Appellant was not in custody during any interview; and we perceive no facts here presented which tend to discredit the District Judge's decision to deny appellant's motion to suppress. There was ample testimony that appellant's conduct was voluntary. See United States v. Goosbey, 419 F. 2d 818 (6th Cir. 1970). Cf. Bustamonte v. Schneckloth, 448 F. 2d 699 (9th Cir. 1971), cert. granted, 405 U. S. 953 (1972). In addition to these dispositive facts, appellant was a trained lawyer with some judicial experience.

The Supreme Court has recently held that the Sixth Amendment "speedy trial" requirement applies only after a defendant is an "accused." United States v. Marion , 404 U. S. 307 (1971).

Appellant's other issues point out no reversible error.

The judgment of the District Court is affirmed.

¹ Now Associate Justice of the United States Supreme Court.

 

[72-1 USTC ¶9433] United States of America , Plaintiff-Appellee v. Richard W. Hauff, Defendant-Appellant

(CA-7), U. S. Court of Appeals, 7th Circuit, No. 71-1296, 461 F2d 1061, 5/23/72, Aff'g an unreported District Court decision

[Code Sec. 7203]

Crimes: Failure to file tax returns: Speedy trial: Electronic surveillance.--Taxpayer's conviction on two counts of wilfully failing to file federal income tax returns was affirmed. The trial court did not err in denying taxpayer's motion to dismiss the information where he was not denied his rights under the Fifth (due process) and Sixth (speedy trial) Amendments to the Constitution or Rule 48(b) of the Federal Rules of Criminal Procedure, authorizing a court to dismiss a prosecution for unnecessary delay. Taxpayer was adequately advised of the extent of electronic eavesdropping by the government.

James R. Thompson, United States Attorney, John Peter Lulinski, Richard M. Williams, Michael P. Siavelis, Assistant United States Attorneys, Chicago, Ill., Shiro Kushiwa, Assistant Attorney General, Department of Justice, Washington, D. C. 20530, for plaintiff-appellee. Terence MacCarthy, 219 S. Dearborn St. , Chicago , Ill. , for defendant-appellant.

Before SWYGERT, Chief Judge, HAMLEY, ^* and PELL, Circuit Judges.

HAMLEY, Circuit Judge:

Richard W. Hauff appeals from a judgment, entered after a bench trial, convicting him of willfully failing to file federal income tax returns for calendar years 1963 (count 1) and 1964 (count 2), in violation of 26 U. S. C. §7203.

Hauff's principal argument on appeal is that the trial court erred in denying his motion to dismiss the information because of assertedly unreasonable, prejudicial, intentional and purposeful delay by the Government in filing the information and in bringing him to trial.

The offenses were complete on April 15, 1964 (count 1), and April 15, 1965 (count 2), when federal tax returns for calendar years 1963 and 1964, respectively, were due. The United States Attorney filed the information on April 13, 1970. With regard to count 1 this was just within the six-year statute of limitations provided by 26 U. S. C. §6531(4). Defendant had been incarcerated on other convictions since at least November, 1968. He makes no contention that he was an "accused" person in the present case until the date of filing of the information. Hauff was brought to trial on January 6, 1971, just short of nine months after the information was filed.

In urging that the trial court erred in denying his motion to dismiss the information, Hauff invokes the Speedy Trial Clause of the Sixth Amendment, the Due Process Clause of the Fifth Amendment, and Rule 48(b), Federal Rules of Criminal Procedure, authorizing a court to dismiss a prosecution for unnecessary delay. We will consider, seriatim, the possible application of each of these provisions under the circumstances of this case.

The Speedy Trial Clause of the Sixth Amendment is not applicable to the time span between the commission of the offense and the arrest of the offender or the filing of an indictment or information against him. That constitutional guarantee is activated only when a criminal prosecution has begun by the filing of an indictment or information, or a prior arrest of the offender on the same charge. United States v. Marion , 404 U. S. 307, 313, 321 (1971).

With regard to the lapse of time between the accusation and the trial, the Speedy Trial Clause guarantees to a criminal defendant:

". . . that the Government will move with the dispatch which is appropriate to assure him an early and proper disposition of the charges against him. '[T]he essential ingredient is orderly expedition and not mere speed.' Smith v. United States , 360 U. S. 1, 10 (1959)." United States v. Marion, supra, at 313.

The purpose to be served by the speedy trial guarantee is stated as follows in United States v. Ewell, 383 U. S. 116, 120 (1966):

"This guarantee is an important safeguard to prevent undue and oppressive incarcertain prior to trial, to minimize anxiety and concern accompanying public accusation and to limit the possibilities that long delay will impair the ability of an accused to defend himself."

In determining whether there has been an unconstitutional deprivation of a speedy trial, the essential inquiry is whether, in view of all of the circumstances of the case, the objectives of this constitutional guarantee have been substantially preserved or defeated. See United States v. Ewell, 383 U. S. 116, 120 (1966).

As stated above, the information was filed on April 13, 1970. Between then and June 15, 1970, an attorney was appointed to represent Hauff, he was arraigned and pleaded not guilty, and most of the issues in connection with defendant's extensive pretrial discovery were formulated and resolved. A pretrial conference was held on June 24, 1970, and the cause was continued to July 1, 1970 for trial. On June 25, 1970, on motion of the Government, the cause was reset for trial from July 1 to September 9, 1970. The record does not indicate the reason for this continuance or that Hauff interposed any objection.

It apparently was not contemplated that the trial would actually commence on September 9, 1970, for, at the outset of the proceedings on that day, the court inquired: "When does somebody want it to go to trial?" Government counsel then asked that the case be set for trial on October 19, 1970. The reasons given for asking for this date were that new Government counsel had just recently been assigned the case and that defendant was scheduled for trial before another judge on September 28, 1970, in another criminal matter. In the colloquy which followed, it was brought out that Hauff was then in the Federal Penitentiary at Atlanta , Georgia .

Counsel for Hauff made no objection to the October 19th trial date, nor did he indicate that he would be ready for trial before that date. When the case came before the court on October 19, 1970, the court was told that Hauff had, two weeks previously, been convicted on other charges concerning which posttrial motions were still pending, with sentencing set for October 30, 1970. Government counsel stated that he was scheduled to try other unrelated cases on October 26, and November 2, 1970, and that he had a vacation scheduled for the middle of November. Government counsel stated that he would probably be free to try this case on December 1 or 2, 1970.

The court then observed that it had scheduled the whole month of December for an antitrust case. The court was informed that Hauff was still incarcerated. Counsel for the Government then agreed to the court's suggestion of a November 24, 1970 trial date. Again counsel for Hauff offered no objection to the continuance.

The cause was set for a status report hearing on October 30, 1970, concerning unresolved pretrial discovery matters. On October 23, 1970, the Government filed its response to defendant's pretrial discovery requests which had not yet been met. At the October 30, 1970 status hearing the final pretrial matters were disposed of. At that time the November 24, 1970 trial date seemed to be firm.

On November 24, 1970, the cause was continued to January 4, 1971, for trial. The record before us does not indicate who requested the continuance, the reasons therefor, or whether Hauff voiced any objection thereto. The trial actually commenced on January 6, 1971. It was at the outset of the trial that Hauff first objected to the continuances which had been granted, doing so by filing his motion to dismiss the information.

Applying the objectives of the Speedy Trial Clause to the circumstances described above we hold that the trial court did not err in ruling that the Speedy Trial Clause did not require dismissal of the information. Throughout the entire period from the filing of the information to the date of trial, Hauff made no objection to the continuances, but concerned himself only with the completion of pretrial discovery. ¹ No showing of prejudice with reference to this period of time was made. The delay did not inconvenience or place undue strain upon Hauff as he was already incarcerated under previous convictions. ² The reasons for continuances, advanced by counsel for the Government, reveal no purpose to prejudice or oppress Hauff, and Hauff makes no such contention.

We turn then to defendant's second ground for asserting error in the denial of the motion to dismiss the information--namely the Due Process Clause of the Fifth Amendment.

The applicable statute of limitations (here six years under 26 U. S. C. §6531) is ". . . the primary guarantee against bringing overly stale criminal charges." United States v. Ewell, 383 U. S. 116, 122 (1966), quoted with approval in United States v. Marion, 404 U. S. 307, 322 (1971). In this case the statute of limitations had not expired when the information was filed.

The Marion Court further noted, however, that ". . . the statute of limitations does not fully define the [defendants'] rights with respect to the events occurring prior to indictment." 404 U. S. , 324. And this court has stated that a delay less than the period of the statute of limitations might be so unreasonable, and the resulting prejudice to the defendant so great, that in some circumstances due process would be denied and relief under the Fifth Amendment should be afforded. United States v. Bornstein, 447 F. 2d 742, 745 (7th Cir. 1971); United States v. Deloney, 389 F. 2d 324 (7th Cir. 1968).

In Marion , the Court made it clear, however, that actual prejudice resulting from delay, standing alone, is not a per se deprivation of due process. The Court pointed out that actual prejudice to the defense of a criminal case may result from the shortest and most necessary delay, and observed that ". . . no one suggests that every delay-caused detriment to a defendant's case should abort a criminal prosecution." (404 U. S. , at 324-325) The Court added:

"To accommodate the sound admin istration of justice to the rights of the defendant to a fair trial will necessarily involve a delicate judgment based on the circumstances of each case." (404 U. S. , at 325)

The cases cited above establish that in order to obtain relief under the Due Process Clause the defendant must show, at least, that the delay has redounded to his substantial prejudice. Whether he was prejudiced is to be determined in the light of the events at trial and the proof which was adduced. See United States v. Bornstein, supra, 447 F. 2d at 745-746; United States v. Lee, 413 F. 2d 910, 913-914 (7th Cir. 1969). ³

In the present case the United States Attorney charged in the first count of the information that Hauff should have filed a federal income tax return for 1963 because he had received a gross income of thirty-five thousand dollars in that year. The United States Attorney made similar charges in count two concerning 1964 because of Hauff's alleged gross income of twenty-one thousand dollars in that year. At trial, the Government sought to prove that, as a result of a fraudulent scheme devised by Hauff and his asociates, one August Circella had in 1963 and 1964 made payments in the indicated amounts to Hauff's associates, who turned the money over to Hauff.

Hauff's defense to count one was that he did not remember defrauding or receiving payments made by Circella in 1963. While defendant admitted at trial the 1964 fraud and receipt of payments which formed the basis of the second count, he defended against that count on the ground that, in the same year, he had made arrangements to pay back the money taken, had actually paid back almost twenty thousand dollars for which Circella had given him a receipt, and had given promissory notes to Circella for the balance.

The trial court, in finding Hauff guilty, rejected these defenses, and Hauff now argues that the defenses were impaired by the Government's delay in that: (1) Government witnesses were unable properly and adequately to recall salient facts; (2) Hauff's own memory and recall of events was inadequate; (3) Hauff's papers and records were destroyed by fire in 1968, through no fault of his own; (4) records and documents of witnesses were unavailable; and (5) a defense witness had died during the period of delay. Hauff contends that these claimed prejudicial factors establish a denial of due process under the rules discussed above.

As to count one, relating to defendant's fraud and receipt of payments in 1963 from Circella, the evidence in support of the Government's case was overwhelming, and much of it was documentary. In addition, Hauff's principal accomplice, Bevery Hanel, was a Government witness and divulged the whole scheme. The Government's most damaging evidence was a fifteen thousand dollar cashier's check, dated October 24, 1963, which Circella gave to Hauff's accomplice, and later cashed for defendant in November, 1963.

Moreover, the possible prejudice on the 1963 phase of the case which Hauff claims resulted from the factors listed above was minor and uncertain at most. The claimed defense witness who died had been Circella's attorney, and Hauff claims only that the witness would have testified that Circella did not inform him of the 1963 fraud. The claimed testimony would thus have established, at best, only that Circella's attorney had not been told of the 1963 fraud, and not that no fraud or payments to Hauff had taken place. ⁴

In view of the overwhelming documentary and testimonial evidence of Hauff's 1963 income, coupled with the speculative and ineffective nature of the evidence he claims was unavailable because of the Government's delay, we conclude that Hauff has failed to show any prejudice violative of due process with respect to his conviction on count one of the information.

Defendant also argues that the asserted prejudicial factors listed above made it impossible for him to prove that he had agreed in 1964 to repay to Circella all the money taken by fraud, thus hampering his defense to the second count of the information. Assuming arguendo that Hauff could have obtained the evidence he now claims was made unavailable by Government delay, and further assuming that the trial court would have accepted the claimed evidence as true, we nevertheless conclude that the unavailability of the evidence could not have prejudiced the defendant in the context of this case, because his asserted defense was insufficient as a matter of law.

It is established that unlawful gains, including those obtained by fraud, may constitute taxable income under the "claim of right" theory. Rutkin v. United States , 343 U. S. 130, 137-138 (1952). See James v. United States , 366 U. S. 213 (1961). A federal income tax return must normally be made on such income in the year it is received, even though the recipient may later be required to restore its equivalent. See James v. United States , supra, 366 U. S. at 219; North American Oil v. Burnet, 286 U. S. 417, 424 (1932). Under these rules, defendant's fraudulently-obtained 1964 gains would require that he make a return for that year, unless the unavailable evidence of his 1964 agreement to repay Circella would have excused him from filing a return.

It has been held that no return need be made on income by a taxpayer where: (1) the income was received under claim of right as a consequence of an honest mistake; (2) the taxpayer's abandonment of his claim of right was unquestionably bona fide, and occurred in the same year in which the income was received; and (3) the good faith of the taxpayer in abandoning his claim to the income was conclusively established by his full repayment of the gains in a later year. United States v. Merrill [54-1 USTC ¶9275], 211 F. 2d 297, 303-304 (9th Cir. 1954).

We are convinced, however, that a different result should obtain in the present case. Here, the defendant admittedly received his 1964 gains as the result of deliberate fraud. And although his asserted "lost" evidence (which we accept arguendo as extant and true) would show that he agreed in the same year to repay the money he had received, his good faith is nowhere apparent, especially as he has never claimed that he paid back to Circella more than a portion of the unlawful gain.

It follows that the asserted evidence of the 1964 agreement to repay Circella would not have established a valid defense to Hauff's failure to file a return for 1964, and we therefore conclude that he was not prejudiced by the unavailability of that asserted evidence. ⁵

It is true that, due to the time span between the occurrences and the trial, some of the Government witnesses were unable to remember details, especially while under cross-examination by Hauff's counsel. But it is difficult to see how defendant could have been substantially prejudiced by this undermining of Government witnesses. Defendant had the assistance of detailed pre-trial discovery, including a statement pursuant to 18 U. S. C. §3500 (Jencks Act).

Defendant also argues that prejudice can be found in the possibility that: (1) had this case been disposed of more expeditiously, defendant's sentence may, at least in part, have run concurrently with his earlier sentences imposed for other crimes, (2) the pendency of this case may have adversely affected his potential for parole under the earlier convictions, and (3) his ability to defend himself was impaired by his incarceration, a status he would not have suffered were this case prosecuted more expeditiously. In support of these contentions, he cites Smith v. Hooey, 393 U. S. 374, 378 (1969).

The argument that, had Hauff been tried at an earlier date, he possibly could have received a sentence concurrent with those imposed on prior convictions, is too speculative for serious consideration. Likewise, the contention that the pendency of this case may have adversely affected Hauff's potential for parole seems almost fanciful, having in view his prior criminal record. The argument that Hauff's ability to defend himself was impaired by his incarceration under the prior offenses, and that he would not have suffered this impairment had the trial been substantially earlier, is likewise without merit. The Government was faced with making an extensive investigation and instituting four criminal proceedings against Hauff. One of the trials had to be last and we perceive no reason why the Government should be faulted because of the order of trials it chose.

Apart from the absence of substantial actual prejudice, we find in the record no indication that the delay in bringing Hauff to trial was motivated by any ulterior motive on the part of the Government. As indicated in footnote 2, a good part of the time span in question was utilized by the Government in trying and convicting Hauff on three other federal charges. Presumably, all four criminal proceedings had to be preceded by extensive investigations. Defendant has offered no factual basis for a finding that the Government delayed the trial for an improper purpose. Finally, the trial court did not rule on the motion to dismiss until the end of the trial, at a time when it was best able to determine whether there had been prejudice or overreaching. We are not convinced that the trial court erred in holding that due process did not require dismissal of the information.

As indicated above, Hauff also relies upon Rule 48(b), Federal Rules of Criminal Procedure, authorizing a court to dismiss a prosecution for unnecessary delay.

As in the case of the Speedy Trial Clause of the Sixth Amendment, Rule 48(b) is limited in its application to post-arrest delays. United States v. Marion , 404 U. S. 307, 319 (1971). The circumstances considered herein in rejecting Hauff's speedy trial argument likewise call for rejection of this Rule 48(b) contention.

Hauff's remaining argument on this appeal is that the district court committed reversible error in denying his motion requesting the Government to acknowledge or, in the alternative, deny the existence of any electronic eavesdropping of defendant or his premises.

The motion in question was filed on May 21, 1970. Over one month prior thereto, on April 13, 1970, which was the same day that the information was filed herein, the Government filed in the mail fraud case against defendant a letter, dated January 28, 1970, from the Department of Justice to the United States Attorney at Chicago, dealing with electronic surveillance of Hauff. In this letter it is stated that a review of the Department of Justice files disclosed no information indicating that conversations of Hauff were at any time overheard by electronic surveillance or that premises known to be owned, leased or licensed by Hauff were covered by electronic surveillance by the Federal Bureau of Investigation. This letter further advised that Hauff had never been subjected to electronic surveillance by the Internal Revenue Service.

After leave of court was granted the Government to file this letter in the mail fraud case, Hauff testified therein concerning his proprietary interest in five specific premises. The court then ordered the Government to ascertain whether those premises had been subjected to electronic eavesdropping. On May 22, 1970, the day after Hauff's motion in the case now before us, a letter dated May 20, 1970, from the Department of Justice to the United States Attorney at Chicago , was filed in the mail fraud case. This letter advised that neither the Federal Bureau of Investigation nor the Internal Revenue Service maintained any electronic surveillance of any of these five premises.

The trial court in the present case, upon being advised of these circumstances, denied Hauff's motion for a statement as to electronic surveillance, ruling that the motion was "earlier adjudicated." In our opinion the Government adequately apprised Hauff of the extent of electronic eavesdropping, and the trial court did not err in so ruling.

AFFIRMED.

^* The Honorable Frederick G. Hamley, United States Circuit Judge for the Ninth Judicial Circuit, sitting by designation.

¹ The right to a speedy trial is the defendant's personal right "and is deemed waived if not promptly asserted." United States v. McCorkle, 413 F. 2d 307, 309 (7th Cir. 1969); United States v. Hephner, 410 F. 2d 930, 932 (7th Cir. 1969).

² Hauff had been convicted in the United States District Court for the Northern District of Illinois on October 21, 1966, for conspiracy to violate the Internal Revenue laws, on June 20, 1967, for wire fraud, and on October 7, 1970, for mail fraud.

³ Defendant contends that both pre- and post-indictment delay should be considered in resolving his due process claim. He also points out that although Fifth Amendment claims usually require a specific showing of prejudice, ". . . at times a procedure . . . involves such a probability that prejudice will result that it is deemed inherently lacking in due process," (Estes v. Texas, 381 U. S. 532, 542-543 (1965)), and he urges that the delay in the present case may be deemed inherently violative of due process without specific proof of prejudice. We agree that both pre- and post-trial delays are relevant in deciding the due process issue; but we are not persuaded that prejudice violative of due process is inherent in a delayed trial.

⁴ We also note that Hauff's attorney, at trial, evinced a lack of knowledge as to what Circella's attorney would have said on the witness stand; and that even if available Circella's attorney might have refused or been forbidden by Circella to repeat what Circella had told him about the 1963 fraud and payments, on the basis of the attorney-client privilege. It appears in the record that Circella had instructed his attorney to invoke that privilege in an earlier trial involving Hauff as a defendant.

⁵ We do not understand Hauff to argue that the claimed 1964 agreement to repay Circella, if proven, would have negated the element of willfulness required to convict Hauff under 26 U. S. C. §7203. In any event, such an argument would be without merit.

To establish a defense based on lack of willfulness in the context of the present case, the defendant would be required to allege a bona fide misunderstanding as to his duty to make a return. See United States v. Matosky, 421 F. 2d 410, 413 (7th Cir. 1970). At no time during the trial did either Hauff or his attorney represent that Hauff misunderstood his duty to file a return. The only indication of such misunderstanding was made at sentencing, after Hauff had been convicted, and it was then too late to raise the defense on which no evidence had been introduced.

 

 

[61-1 USTC ¶9349] United States of America , Appellee v. John Van Allen, Defendant-Appellant

(CA-2), U. S. Court of Appeals, 2nd Circuit, Docket No. 26596, 288 F2d 825, 3/31/61, Affirming unreported District Court decision

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

Evasion of taxes: Motion to dismiss indictment: Right to speedy trial.--A pre-trial motion to dismiss for failure to prosecute an indictment charging tax evasion on the ground that the defendant had been deprived of his right to a speedy trial was properly denied where (1) the defendant was largely responsible for the 6-year delay between the commission of the unlawful acts and the filing of the indictment and (2) he failed to demand an earlier trial at any time after the indictment was filed. Conviction affirmed.

Morton S. Rob son, United States Attorney, New York, N. Y. (Gideon Cashman and George I. Gordon, Assistant United States Attorneys, of counsel), for appellee. Bruno Schachner, 595 Madison Ave. , New York , N. Y., for defendant-appellant.

Before WATERMAN, MOORE and FRIENDLY, Circuit Judges.

PER CURIAM:

Appellant, John Van Allen, was indicted in the United States District Court for the Southern District of New York for wilfully and knowingly attempting to defeat and evade a large portion of the income tax due and owing by him to the United States for the calendar year 1946. The one-count indictment charged that on or about March 15, 1947, the defendant caused a false and fraudulent income tax return to be filed in violation of Section 145(b) of the Internal Revenue Code of 1939. The indictment was filed on March 13, 1953, just before the statute of limitations would bar a prosecution. On March 3, 1954 the case was marked off the trial calendar. Six years later, on September 10, 1959, it was restored. Thereafter, defendant, relying on the Sixth Amendment, on February 9, 1960 moved, pursuant to Rule 48(b) of the Federal Rules of Criminal Procedure, for an order dismissing the Government's case for its failure to prosecute. This motion was denied on February 19, 1960. In due course, on September 1, 1960, trial commenced before Judge Murphy, as trier of the facts, the defendant having waived his right to a trial by jury. Appellant was found guilty.

On the appeal the appellant makes no claim of error in the conduct of the trial or of lack of evidence to support the decision of the trial judge. He contends that the delay of seven and one half years between the filing of the indictment and the trial deprived him of his Sixth Amendment right to a speedy trial, and that therefore the court below erred when it denied the motion to dismiss the indictment. He claims further aggravation because of the six year delay between the commission of the unlawful acts and the filing of the indictment, but his own conduct was largely responsible for this. Moreover, appellant concedes that at no time subsequent to the indictment did he demand any earlier trial; and we held in United States v. Lustman, 258 F. 2d 475 (2 Cir.), cert. denied, 358 U. S. 880 (1958), that an accused who failed to make such a demand waived his constitutional right and could not later assert it in attacking his conviction. We find nothing in this case to distinguish it from U. S. v. Lustman, supra, and affirm the conviction below.

Affirmed.