Identification
7203:
Willful Failure to File Return, Supply Information, or Pay Tax:
Evidence: Identification
[59-2 USTC
¶9784]John C. Barber, Appellant v.
United States of America
, Appellee
(CA-6), U. S. Court of Appeals,
6th Circuit, No. 13,653, 271 F2d 265, 11/4/59, Aff'g an unreported
decision of the District Court
[1954 Code Sec. 7201]
Crimes: Income tax evasion: Frivolous appeal.--In view of oral
arguments of counsel, the briefs, and the record on appeal, an appeal
from a jury verdict convicting taxpayer of income tax evasion was held
to be without merit and frivolous.
[1954 Code Sec. 7201]
Crimes: Income tax evasion: Analysis of testimony by expert witness:
Impairment of jury's verdict.--Where nothing was done to impair the
jury's freedom to exercise its judgment upon the worth and weight of
testimony, it was not error to permit the Government's expert witness to
identify and explain charts summarizing his testimony and that of
others.
[1954 Code Sec. 7201]
Crimes: Income tax evasion: Identification of defendant.--On the
evidence, the claim that the defendant was not sufficiently identified
was without merit.
Clifford
E. Enger, 9405 Brighton Way, Beverly Hills, Calif. (Leo W. Grant, Jr.,
Clinton, Tenn., with him on brief), for appellant. Fred Ellege, Jr., R.
Hunter Cagle, United States Attorney, Nashville, Tenn., for appellee.
Before
MARTIN, MILLER, and WEICK, Circuit Judges.
PER
CURIAM:
The
appeal in this case is from a jury verdict of guilty as charged in an
indictment for unlawful income tax evasion and sentence pronounced
thereon of fifteen months' imprisonment and $500 in fines.
After
hearing the oral arguments of counsel and considering the briefs and the
three-volume record in the case, we find no merit whatever in the
appeal. Indeed, in the circumstances, the appeal could be classified as
frivolous. The evidence adduced by the government was ample to support
the verdict of guilty. See Ross, et al. v.
United States
, 197 F. (2d) 660, 664, 665 (C. A. 6), certiorari denied 344
U. S.
832; Gariepy v. United States, 220 F. (2d) 252, 258 (C. A. 6)
[55-1 USTC ¶9267], certiorari denied 350
U. S.
825.
There
is no point to the argument of appellant that the district court erred
in permitting the expert witness, Leibowitz, to identify and explain
charts summarizing his testimony and that of other witnesses. In United
States v. Johnson, 319 U. S. 503, 519, [43-1 USTC ¶9470], the
Supreme Court said: "* * * The worth of our jury system is
constantly and properly extolled, but an argument such as that which we
are rejecting tacitly assumes that juries are too stupid to see the
drift of evidence. The jury in this case could not possibly have been
misled into the notion that they must accept the calculations of the
government expert any more than that they were bound by calculations
made by the defense's expert based on the defendants' assumptions of the
case. So long as proper guidance by a trial court leaves the jury free
to exercise its untrammeled judgment upon the worth and weight of
testimony, and nothing is done to impair its freedom to bring in its
verdict and not someone else's we ought not to be too finicky or fearful
in allowing some discretion to trial judges in the conduct of a trial
and in the appropriate submission of evidence within the general
framework of familiar exclusionary rules."
The
argument that the defendant here was not sufficiently identified is, on
the evidence in the case, completely without merit.
The
verdict of the jury being abundantly supported by substantial evidence
and there being found no prejudicial error in the record, the judgment
of conviction and sentence is affirmed.
[58-1 USTC
¶9371]Paul E. Moore and Viola H. Moore, Appellants v.
United States of America
, Appellee
(CA-5), U. S. Court of Appeals,
5th Circuit, No. 16804, 254 F2d 213, 3/18/58, Aff'g an unreported
District Court decision
[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201]
Crimes: Willful evasion of income taxes: Admissions: Books and
records.--Since GMAC standard books of account were prescribed for
use by automobile dealerships using GMAC "floor plan"
financing and were designed to show accurately the income and expense of
such dealerships, a jury was entitled to accept those books as an
accurate reflection of income where there was a discrepancy between them
and the income shown on taxpayers' returns. It was not necessary for the
Government to prove the books were accurate. Also, an offer to pay a
deficiency on the basic of book income could be taken by the jury as an
admission of their accuracy. Conviction by a federal district court jury
of the charge of willful income tax evasion by filing false and
fraudulent returns was upheld.
[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201]
Crimes: Willful evasion of income taxes: Original returns destroyed:
Returns unsigned: Copies introduced by Government.--Taxpayers'
conviction by a jury on the charge of willful income tax evasion by
filing false and fraudulent returns was appealed on the grounds that the
Government failed to prove that an extract copy of the 1950 return--the
original had been destroyed by fire in the Government's warehouse--was a
correct copy of the return as filed, and that the return for 1951 was
filed by them, since that return was unsigned. The "dummy"
copy of the 1950 return used at the trial was prepared from a penciled
retained copy furnished an Internal Revenue Agent at his request. Held,
once the original was accounted for, there was sufficient proof of its
contents. The original unsigned return for 1951 was introduced. Held,
further, it was established as taxpayers' return by the District
Director's certificate of assessments and taxpayers' check made out in
the same amount as the assessment. In addition, there was attached to
the return a signed claim for refund of an overpayment of tax for 1951
due to erroneous calculation of income for self-employment tax.
John
D. Cofer, G. Hume Cofer,
Austin
,
Tex.
, for appellant. John R. Locke, Jr., John E. Banks, Assistant United
States Attorneys, San Antonio, Tex., for appellee.
Before
JONES, BROWN and WISDOM, Circuit Judges.
BROWN,
Circuit Judge:
This
is an appeal by defendants, husband and wife, from convictions on a jury
verdict of guilt for willful evasion of income taxes by filing false and
fraudulent returns for the years 1950, 1951 and 1952. There is a frontal
attack that for neither of the years is the evidence sufficient. Several
less decisive attacks are made urging procedural errors requiring a new
trial.
This
is not the case of a wife, unwilling, reluctant, or acquiescent in her
husband's demands, who finds herself criminally liable merely for the
acts of her husband attributed to her. For here the Moores, owners and
operators of the
Pontiac
automobile dealership in
Freeport
,
Texas
, were both active in the business and most, if not all, of the
bookkeeping accounting activities were, as between the two of them, the
immediate responsibility of Mrs. Moore. Nor is this case one of that
kind so endemic in which the pressures of the net-worth method are
brought to bear. For by indictment, bill of particulars and proof, the
Government undertook to show willful error in specific items by which
income was understated, cost of sales misrepresented, or operating
expenses exaggerated, or combinations of two of them. Perhaps even more
unique, the element of willful, fraudulent purpose, normally an
inference from circumstances, was here, certainly as to 1950, proved
directly by categorical admissions of culpability by defendants'
accountant with much the same testimony coming from the other accountant
who prepared the 1951, 1952 returns.
[Taxpayers' Returns Established]
The
substantive complaint of the Court's failure to grant defendants' motion
for judgment of acquittal boils down to these points. As to 1950: the
evidence did not adequately show that the extract copy of the 1950
return was a correct copy of the return as filed, and the element of
incorrectness and willfulness rested wholly on testimony of the
accountant, a self-confessed felon. As to 1951: admittedly the return,
as filed, was not signed by defendants and there was no evidence to show
that its contents were known to them. As to 1951 and 1952: since the
accountant Danforth, who prepared the returns, testified that he thought
they correctly reflected income, there was no evidence of fraudulent
filing. As to all three years, 1950, 1951, 1952: the evidence merely
showed that the income reported in the returns varied substantially from
that shown in the account books of the business with no proof that the
books were correct. In our view none of these contentions is sound.
The
original 1950 return was not introduced. The evidence, however,
demonstrated without qualification that it could not be because it had
been destroyed in the fire of the warehouse in which returns had been
stored by the District Director. Once the original was accounted for,
there was likewise sufficient proof of its contents. The Revenue Agent
who made the initial investigation in November 1953 testified that he
requested, 1 and Mrs.
Moore furnished him, a penciled retained copy of the 1950 return. From
this penciled Taxpayers' retained copy, he made extracts from which he
prepared the typed "dummy" copy 2 used on the
trial. That this was fair and adequate proof that defendants had filed
such a return was overwhelmingly established by impressive facts, 3 extrinsic
and intrinsic.
[Assessment Lists Establish
Returns]
There
is even less to the objections covering the form of the 1951 return. The
original (or agreed photostat) was introduced. While it was not signed
by either Mr. or Mrs. Moore, the accountant, Danforth, testified that it
appeared to be the one prepared by him and, in any case, extrinsic and
intrinsic facts 4 again
overwhelmingly established it as the return submitted by defendants.
The
fact of a filing by defendants of the return for 1950, and the
return for 1951 showing the taxable income and income tax due and paid
thereon, was thus adequately established. No such issues arise as to the
1952 return. We turn then to the questions whether, assuming this to
have been established, there was sufficient evidence to show that
defendants knew of the contents, knew that the true income was something
else, and then willfully filed the false returns to defraud the
Government?
Since
the asserted incorrectness of reported income for all three years is
based on the Taxpayers' books, it simplifies matters to outline this
generally before discussing any specific complaints on the proof of 1950
or 1951-1952 violations.
[GMAC Standard Books of Account]
The
Moores
began this business in late 1949. A
Pontiac
dealer is required to keep a standard set of books in a form and manner
meticulously prescribed by General Motors. As neither of the
Moores
had training in this, they hired Vetterling, on a part time basis, for
the period ending mid-1951 and Danforth (a one-time relative of Mrs.
Moore) through 1952. If, as was the case here, the dealer obtained from
GMAC "floor plan" financing of automobiles purchased from the
manufacturer for resale, or made arrangements with it for the assignment
of all or part of its conditional sales contract paper covering cars
sold at retail, it was necessary for the dealer to submit, under an
express warranty of correctness, a periodic and annual report on GMAC
accounting forms showing the true condition of the business as reflected
by the prescribed books of account. In addition, similar periodic and
annual reports had to be made to the Pontiac Division of General Motors
on the prescribed forms. These were substantially the equivalent of a
trial balance, a detailed profit and loss statement and a balance sheet
showing precisely for comparative analysis, increase in net worth of the
business.
[Establishing Books of Account]
The
fact, so readily discovered by the Revenue Agent in the initial routine
audit, that there was a substantial discrepancy 5 in the
taxable income reported in the three returns and that shown by these
elaborate books and reports, has not, nor can it ever be, denied. To
escape this awful predicament, Taxpayers asserted a plea of good faith
ignorance, but in refutation their main trust was put, not on facts, but
on a legal theory. The legal theory is that while there was proof that
there was a discrepancy as such, there was no proof that the accounts,
as reflected in the books, rather than the accounts as reflected in the
returns, were correct. Elaborating further, it was that since books of
account are normally evidential only, Sitterding v. Commissioner,
4 Cir., 80 Fed. (2d) 939 [36-1 USTC ¶9059]; United States v. Berman,
D. C. Ga., 75 Fed. Supp. 789, 790 [49-2 USTC ¶9396], a taxpayer can be
convicted, not for failing to pay tax on what the books show, but only
on what the real income was. In translating that further into
tangible terms, the Taxpayers, by urging the plea of good faith
ignorance of what the accountants had done, took positions which may
well have been considered by the jury as self-defeating, irreconcilably
inconsistent 6 ones: (1)
the books were incorrect so it was proper not to follow them in
preparing the returns; (2) the books were correct, but the accountants
did not advise Taxpayers that the books were not followed in preparing
the returns.
But
this legal theory collapsed in the face of a record which overwhelmingly
supported the contrary conclusions implied by the verdicts of guilt. A
major part of this refuting evidence serves double harness and satisfies
as well the element that the false returns were knowingly submitted.
There
was first the fact that the books recorded all of the transactions
showing income and expenses of the business. And, it is another one of
the ironic distinctions which set this case off as a unique one that,
instead of proving that the books were in error, defendants' own expert
witness, a Certified Public Accountant, testified that, except for two
items in 1952, these books were correct and taxes, substantially in the
amounts calculated by the Government to be due, were in fact due. The
jury could also credit the strong suggestion that another set of
accountants to whom the books were first submitted when the Special
Agent entered the case, likewise could find nothing wrong with the books
or the tax computations based on them.
The
Revenue Agent checked and tested the books for the three years and found
them to substantiate that which was reflected in the periodic and annual
reports submitted to GMAC and General Motors. Both Vetterling and
Danforth affirmed that the books correctly reflected the state of the
business.
Where
taxpayers obtain essential credit and procure the very inventory of
merchandise which is the main stock in trade on the basis of books and
records regularly kept in accordance with accepted accounting
principles, the jury is entitled to conclude that such books are an
accurate reflection of the business. It is not required, as defendants
seem to assert, that the Government go back and reconstruct the books
item by item, sale by sale, check by check, to establish anew that the
books and records are correct.
[Falsification of Returns]
Moreover,
there is in the circumstance credited by the jury from Vetterling's
testimony further corroboration. He (and his wife corroborated this in
essential detail) stated that in January of 1951 he had prepared the
1950 return. As the filing deadline date was approaching (see note 3, supra),
Mr. and Mrs. Moore came to his home on a Sunday morning to sign the
return which Mrs. Vetterling had typed up. The return was based on the
books and records which had been kept for the
Moores
by Vetterling. When Mr. Moore saw the proposed return, he was indignant
and outspoken. He refused to sign the return and said the tax should be
about $1300 to $1400. When Vetterling told him that that could not be
done without falsifying the return,
Moore
, in effect, told Vetterling that that was
Moore
's worry, not his. A new return was then prepared by Vetterling making
arbitrary adjustments in the
Moores
' presence, signed by the two of them, the initial return and all work
papers torn up and the remnants taken away by Mr. Moore.
Danforth,
the accountant who succeeded Vetterling, was not so strong. But for 1951
and 1952, he testified that
Moore
told him that the business had not earned the profits shown by the
periodic reports, and in preparing the returns, he should use figures
substantially the same as for the preceding year.
[Agreement to Pay Deficiency]
In
addition, the jury had the right to impute to the defendants an
admission-agreement that the books were correct. On the completion of
the Agent's audit, a statement of a proposed deficiency was submitted
for the assessment of additional taxes in almost the identical aggregate
of the three counts of the indictment. Taxpayers, while insisting at
that time that they had not made that much money, nevertheless submitted
a special formal offer 7 to pay the
proposed deficiency which was subsequently declined by the Commissioner.
[Inflated Value of Cars]
Likewise
the jury had the opportunity to determine for itself whether the reason
continually pressed by Taxpayers as the major cause for the books being
incorrect had either substance in fact or was asserted in good faith. As
justification for the instructions which Danforth testified they gave to
him, and as an explanation why they had not followed the books in having
the returns prepared, the
Moores
personally and through Danforth testified that the books did not
correctly reflect income because of excessive allowances on the trade-in
of used cars in the sale of new automobiles. 8
This
theory, though expressly submitted to, was presumably rejected by the
jury. Not the least reason may well have been the fact that whether
excessive or not, whatever was allowed was entered in the books and was
taken into account in all subsequent transactions. While an inflated
value might temporarily swell assets, it was, on the records, the cost
of that used car. If a car, so valued, was sold, there was an automatic
loss to the extent that the resale price was less than the initial
trade-in. And, in any case, the books showed, and
Moore
readily acknowledged, that each December the inventory of used cars was
reappraised, and inventory value written off so far that December, in
contrast to the other months of substantial profits, invariably showed a
marked loss.
The
jury was entitled, of course, in its everyday cumulative wisdom to think
that a businessman, asserting the doubtful correctness of his books,
would have the means of demonstrating it, and if the explanation failed 9 in content,
that that inferentially went far toward establishing correctness, and
certainly in indicating a lack of good faith.
To
this the jury could add a further circumstance, plain and simple in its
obvious existence, and having profound relevance in the business world.
The uncontradicted fact was that instead of this being a business which
remained static (as would have been the case had net profits remained
the same each year as that reported for 1950), it was a business of
marked growth with an increase of over 400% in net worth and 800% in
cash. 10
[Substantial Correctness of
Books]
Once
substantial correctness of the books was established, there was ample
basis for the finding that returns incorrectly showing different taxable
income were willfully filed with fraudulent intent. Vetterling's
testimony, while categorically refuted by the
Moores
, showed, if accepted, a deliberate unlawful purpose. The jury could
read Danforth the same way, for it was not required to accept the
self-serving protestations that he was not intentionally falsifying the
returns and thought that the
Moores
were correct when they stated to him each year that they had not made
the profits indicated on the periodic reports. What 11 he did
may have drowned out the sound of what he said, and in so doing,
it established as well specific omissions and misstatements of income
and expense.
[Procedural Errors]
When
it comes to procedural errors, none require reversal. It was not error
to refuse the requested instruction that the jury, in weighing the
testimony of the Vetterlings and Danforth should "take into
consideration the very keen interest that said witnesses have in giving
the testimony which they gave." Full instructions treating these
witnesses as accomplices and giving the jury the usual precautions for
receiving such evidence, as well as general and specific charges
concerning bias or hostility of any witness were given. We cannot
discern how Vetterling had a "keen interest" in categorically
confessing to a deliberate falsification of a return. Nor was Danforth
aided or his interest advanced in any way by his testimony.
The
instruction on "reasonable doubt" while subject precisely to
the infirmities of the one criticized in Holland v. United States,
348 U. S. 121, 141, 95 L. ed. 150, 167 [54-2 USTC ¶9714], does not,
again for the reasons pointed out in that very case, present a
situation, on this record, of harmful effect. Fed. Rules Crim. Proc.
52(a).
The
final point concerns the objections to the charge as given and the
refusal of the Court to grant a requested charge on evidence of good
reputation. The Court gave one in substantial accord with our prior
decisions, Le More v. United States, 5 Cir., 253 Fed. 887, cert.
den. 248
U. S.
586, 63 L. ed. 434, and Grace v.
United States
, 5 Cir., 4 Fed. (2d) 658, cert. den. 268
U. S.
702, 69 L. ed. 1165, unaware at the time of the trial of our decision in
Holland v. United States, 5 Cir., 245 Fed. (2d) 341, which was
not published until after the trial. In this record with its devastating
facts, both direct and circumstantial, we would not have reached a
conclusion that any such difference in the wording between the requested
and given instructions could have had any harmful effect.
United States
v. Kushner, 2 Cir., 135 Fed. (2d) 668, cert. den. 320
U. S.
212, 87 L. 2d. 1850. Nevertheless, since trial courts are entitled to
guides as clear as can be fashioned, we think it unsound to undertake
any comparative analysis of the instructions here requested in contrast
to those given by the Court or those criticized in
Holland
. Rather we should state plainly that in
Holland
neither by briefs nor argument were our prior decisions in Le More
and Grace called to our attention. Those cases represented the
law in this Circuit, see Kreiner v. United States, 2 Cir., 11
Fed. (2d) 722, at 726, cert. den. 271
U. S.
688, 70 L. ed. 1152. The contrary holding in
Holland
is disapproved so that these two prior decisions continue their
vitality.
Affirmed.
1
He was making a routine audit of the 1951 return, but when the
comparison of that return and the books showed such marked discrepancy,
he made a check as to the other two years and for this, initially at
least, inspected and used Taxpayer's retained copies which they
furnished to him.
2
This contained the totals and sub-totals from the tax return form and
attached schedules showing gross sales, inventories, cost of goods sold,
operating expenses, and taxable income.
3
The reconstructed return showed a tax due of $1,453.28 against which
Taxpayers took as an offsetting credit an overpayment of $218.08 from
1949 with a resulting cash payment of $1,235.20. The District Director's
certificate of assessments covering 1949 through 1952 showed that
defendants were entitled to a 1949 tax credit of $218.08, and that the
1950 tax had been paid by Taxpayer taking the credit and remitting the
balance by check with the 1950 return, the check and return both being
stamped with the routine serial number 3131685. A photostat of the
Taxpayer's check, signed by Mrs. Moore, dated January 15, 1951, in the
precise amount of $1,235.20 bears the stamped number
"3131685."
Whatever
infirmities there might have been earlier, they were all cured when
defendants, in their case, introduced and identified the penciled
retained copy of the 1950 return from which the Agent made his extract.
The totals and sub-totals on the extract "dummy" copy
corresponded exactly.
4
The District Director's certificate of assessments, see note 3, supra,
showed that the tax due, $1,499.89 (the amount shown on the return) was
paid February 20, 1952, under serial No. 3060172. Both the photostat of
Taxpayer's check, dated January 15, 1952, in the amount of $1,499.89,
signed by Mrs. Moore, and the return, bore this serial number stamp
"3060172." In addition, and attached to the return as
introduced, was the claim filed July 23, 1952, signed by Taxpayers
seeking refund of $106.21 for overpayment due to erroneous calculation
of income for self-employment withholding tax. This claim specifically
identified and referred to the 1951 return and the requested refund
($106.21) shows it was based on the specified figures taken from the
return.
5
1950 1951 1952
Net Income per
books ......... $24,886.69 $25,900.17 $26,419.92
Net Income per
return ............ 9,980.59 8,320.89 9,113.94
Difference not
reported .......... $14,906.10 $17,579.28 $17,305.98
Tax due ........... $ 5,701.86 $ 6,835.08 $ 7,697.56
Tax paid .......... 1,453.28 1,499.89 1,365.41
Deficiency in
tax ............... $ 4,248.58 $ 5,335.19 $ 6,332.15
6
Defendants requested and the Court gave specific instructions to the
jury on both of these two special defenses. Where this left defendants
is well described in the Government's brief: "One defense was that
the discrepancies were the result of mistakes on the part of the
bookkeepers and appellants never knew the discrepancies existed. The
other was that they, in good faith, thought their books were wrong and,
accordingly, reported less income on their returns, which they believed
to be their true income. The latter probably would have had the best
chance of success, but either defense, had they chosen it and stuck to
it, would have been more convincing than seesawing between the two. Up
until the time the case went to the jury, appellants had not yet decided
whether they were oblivious to the discrepancies or whether they
recognized them, but thought the returns correct."
7
On pretrial motion of defendants, the Court instructed the Government to
make no reference to this abortive settlement. Silence was kept until
defendants purposely opened up the inquiry and acknowledged that it was
then in the case for all purposes.
8
The record bears out the contention that to meet currently imposed
Federal war-time restrictions on installment credit requiring a
substantial (one-third) down payment the common practice was to inflate
the stated "paper" value fo the used car.
9
This might also have been the fate of the similar plea of innocent
ignorance in which it was urged that these inexperienced, untutored,
self-made laymen were dependent altogether on the accountants as
experts. This, too, was expressly submitted to the jury on a record
which abundantly raised the issue. But cross examination of Mr. Moore
concerning the periodic GMAC and GM reports warranted the jury's
concluding that he did in fact know the meaning and significance of the
items in the balance sheet (e.g., "cash," "contracts in
transit," "new cars," "used cars") and the
resulting figure in the profit and loss statements, and especially the
latter which he stated, he always looked at to see whether they had made
or lost money.
By
Bill of Particulars the Government stated that its proof would be of
specific items and that evidence of increases in net worth might be used
"by way of corroboration or rebuttal but no such * * * method will
be relied upon in itself as establishing an additional tax due and
owing." The use of this evidence, coming both from the books and
bank accounts all of which was received without objection, was within
this purpose to establish correctness of the books. The Court did not,
as defendants contend, err in declining to instruct the jury that this
could be considered on "intent" only. Since these figures came
from the detailed periodic reports which reflected all changes, upwards
or downwards, in all liabilities as well as assets, it was not a
distorted picture as in United States v. Venuto, 3 Cir., 182 F.
2d 519, 523.
[4 USTC ¶1331]F.
F. Nicola, Defendant-Appellant, v.
United States of America
, Plaintiff-Appellee
(CA-3), United States Circuit
Court of Appeals for the Third Circuit, No. 5248. October Term, 1933, 72
F2d 780, Decided August 9, 1934
Appeal from the District Court of the United States, for the Western
District of Pennsylvania.The Trial Court erred in admitting in evidence
a letter relating to defendant's desire to reduce income taxes for 1928,
where the defendant's name was typewritten instead of signed, and the
letter was not identified or proved by other evidence. The fact that the
letter was pinned to a voucher and made part of defendant's books of
account did not justify its admission. Where defendant did not claim
immunity under the Fifth Amendment at the time his books were examined
by a revenue agent, he waived such immunity and could not claim it for
the first time at the trial. Evidence based on book entries made under
defendant's instructions was not sufficient to sustain a verdict of
guilty on a charge of attempting to evade and defeat the income tax. The
Court's instructions to the jury as to when it was necessary for the
defendant to determine whether certain commission should be his or that
of a company controlled by him, were inconsistent and "where two
instructions are given to the jury, one erroneous and prejudicial and
the other correct, it is impossible to tell which one the jury followed
and it constitutes reversible error." Reversing District Court
decision, 1933 CCH ¶9379.
Maynard
Teall, Joseph A. Richardson, and Smith, Shaw, McClay & Seifert, all
of
Pittsburgh
,
Pa.
, for appellant. Horatio S. Dumbauld, U. S. Atty., John A. McCann, Sp.
Asst. to the U. S. Atty., and James I. Marsh, Asst. U. S. Atty., all of
Pittsburgh, Pa. (E. Barrett Prettyman, Gen. Counsel, Bureau of Internal
Revenue, and I. W. Carpenter, Sp. Atty., Bureau of Internal Revenue,
both of Washington, D. C., of counsel), for appellee.
Before
WOOLLEY, DAVIS, and THOMPSON, Circuit Judges.
DAVIS,
Circuit Judge.
This
is an appeal from a judgment of conviction entered upon the verdict of a
jury.
F.
F. Nicola, hereinafter called defendant, was indicted, tried and
convicted for attempting to defeat and evade a part, $26,394.20, of his
income tax for the year 1928, in violation of Section 146(b) of the
Revenue Act of that year which provides that:
(b)
Any person required under this title to collect, account for, and pay
over any tax imposed by this title, who willfully fails to collect or
truthfully account for and pay over such tax, and any person who
willfully attempts in any manner to evade or defeat any tax imposed by
this title or the payment therefor, shall, in addition to other
penalties provided by law, be guilty of a felony and, upon conviction
thereof, be fined not more than $10,000 or imprisoned for not more than
five years, or both, together with the costs of prosecution.
While
the evidence was complicated and technical and consisted almost entirely
of voluminous books of account interpreted by expert opinions, the issue
itself was comparatively simple.
The
Miller Printing Machinery Company, hereinafter called the Miller
Company, a corporation mostly owned and controlled by the defendant,
sold certain patents and other personal property in 1928 to Brandtjen
& Kluge, Inc., for $675,000 in cash on which there was a sales
commission of 15 per cent or $101,250. This commission was credited by
the Miller Company on the day the sale was completed to the Point
Improvement Company, hereinafter called the Point Company, a corporation
of which the defendant was president, as income to it and was so
returned by the Point Company. The contention of the Government is that
this commission was really the income of the defendant which he did not
return and on which he did not pay the tax as personal income to
himself, though it was paid by the Point Company, at the rate applicable
to it, to the Government and is still retained by it.
The
inducement, according to the Government, to have the return made by the
corporation rather than the defendant was to secure a lower tax rate. If
this contention is true, the defendant would thus save the difference
between the higher and lower rate.
There
was no real contradiction between the evidence of the Government and
defendant. The Government relied mainly upon entries in the books of
account interpreted in the light of a certain typewritten letter,
Government Exhibit No. 15. The defendant contends that these entries,
when properly interpreted, show that this commission was income of the
Point Company and not of himself.
The
defendant contends that the judgment should be reversed and a new trial
granted for several reasons:
I.
Because prejudicial error was committed in the admission of evidence.
1.
The first specification relates to the admission of the following
typewritten letter.
Mr. Girts:
Herewith
find a number of salesmen's items that I have taken over from the Miller
P. M. Co. on which the collections are expected to be made and credited
to me.
Report
to me on this the 15th of every month. I have not entered these on my
books although I may do so in connection with taxes if we can declare a
loss without bringing suit.
It
is very important that I have directly and I know this will take a great
deal of time and overtime a study of what shift is necessary for me to
put on the various books in connection with profits and losses for 1928.
As we understand it, there is a heavier tax on the individual than on
the corporation and therefore I want to pass as many of these profits
through land companies like the Point Improvement Company, Nicola Bros.
Co., or Nicola Land Co. as I can. Make a careful survey of all of this
year's transactions. I anticipate in view of having sold 240 shares of
Chase National Bank that I will have a very large amount to account for
there.
Let
me know what each one of the companies seem to have in overhead burden
that would be an offset to possible profits that might be swung to them.
F. F. Nicola.
This
letter was found and secretly copied by Henry A. Wolf, a government
agent who examined the books. It was pinned to a voucher relating to the
account of a number of salesmen, which had been taken over from the
corporation by the defendant. It was not only typewritten, but the name
"F. F. Nicola" which it bore, was also in typewriting. There
was no evidence establishing who wrote it, who pinned it to the voucher
or who left it in the book. It was entirely unidentified and unproved.
Was it admissible against the defendant?
"The
generally accepted rule is to the effect that the mere fact that a
letter (other than a reply letter) purports to have been written and
signed by the person in question is insufficient to establish its
authenticity and genuineness. . . . This rule is especially applicable
where the letter is typewritten or printed and the signature is attached
by a rubber stamp or stencil or is typewritten or printed." 9 A. L.
R. 987, 988.
A
letter does not prove itself. In order to make it evidence, it must be
shown either to have been written by the person against whom it is
produced, or by someone authorized to act in his behalf. Neither the
authenticity nor genuineness of this letter was established by any
evidence. Its admission was clearly erroneous, and unless it appears
"beyond a doubt that the improper evidence admitted did not and
could not have prejudiced the rights of the party duly objecting" a
new trial should be awarded. Sprinkler v.
United States
, 150 Fed. 56; McGowan v. Armour, 248 Fed. 676; Sweeney v.
Oil & Gas Co., 130 Pa. 193, 203; Boston & Albany Railroad
v. O'Reilly, 158 U. S. 334, 337. Counsel for the Government frankly
admitted at the argument that without this letter, they would not have a
case.
Being
entirely unproved, its admission violates the fundamental rules for the
admission of writings and documents, unless it can be admitted on the
theory, for which the Government contends, that it was pinned to the
voucher and, therefore, became part of the books of account or part of
the voucher and so was admissible as an original entry or part of the
voucher. But the nature of the letter and the meager facts about it make
it inadmissible on this theory. A book of original entries and also an
account book of secondary entries is one in which a detailed history of
business transactions is entered. Books of account consist of entries
made in the regular course of business showing the transactions which
have actually occurred in the business and not of orders, executory
contracts, things to be done subsequent to the entries or of methods and
principles according to which the business must be conducted and entries
made. Laird v. Campbell, 100
Pa.
159, 165;
Fulton
's Appeal, 178
Pa.
78, 87, 89. In book entries relating to sales, if the goods are charged
before the contracts of sale are complete, the books are not competent
evidence. They should be guardedly received in evidence and then only if
made in the regular course of business. In order to make a book entry
admissible as evidence, it must be the registry of a sale and delivery
or a transaction actually made of the things therein contained, at the
time of their being so entered. Fairchild v. Dennison, 4 Watts (
Pa.
) 258.
But
assuming that the letter was genuine and its execution proved, it
purported to give the bookkeeper certain instructions to be observed by
him in the allocation of profits in tax returns and was then by him or
someone left attached to a voucher by a pin. The pin has no significance
and no more makes it an entry in the books or a part of the book of
accounts, or a part of the voucher to which it bears no logical relation
than if it had been left with the voucher unattached. It was a mere
separate piece of paper and could not be treated as a part of the
voucher or book of original entry. Rudy v. Myton, 19
Pa.
(Super.) 312, 318. If this letter was properly admitted, then any
unproved and unsigned letter may be admitted against a defendant in any
civil or criminal case, if some person, friend or foe, without
authority, writes it on a typewriter and pins it to a voucher or some
piece of paper and leaves it in an account book. The letter shows upon
its face that it was not intended to be part of the voucher or an entry
in the books. It relates to no transaction made in the regular course of
business and its character and purpose cannot be changed into a proper
entry in a book of accounts or made a part of the voucher by the magic
of a pin or the place where it was found. Its admission on this or any
other theory is untenable. Its admission in evidence was prejudicial and
erroneous.
The
learned trial judge admitted the letter on the authority of Lisansky
v. United States, 31 Fed. (2d) 846, 851. In that case the question
was whether or not Government agents could testify to the contents of
records of defendants used by the Government agent while examining their
tax returns about whose authenticity and genuineness there was no
question. The court held that although the Government could not compel
the production of the records which had been voluntarily turned over to
the agents, the agents could testify to their contents, which they had
secured with the consent of the defendants, without violating the Fourth
and Fifth Amendments to the Constitution. The court in that case based
its ruling on the case of Hester v. United States, 265
U. S.
57 and Olmstead v. United States, 277
U. S.
439. In the Hester case the question was whether or not it
violated the unreasonable search and seizure provision of the Fourth
Amendment to permit prohibition agents to testify to seeing defendants,
while they were concealed 50 to 100 yards away from the house, take from
a car a jug of intoxicating liquor, etc. In the Olmstead case,
the question was whether or not it violated the Fifth Amendment to
permit testimony of conversations heard over tapped telephone wires. The
Supreme Court held that it did not. But the court below went much
further in the case at bar than the Lisansky case went. It is
clear that the letter could not be admitted on the authority of that
case.
2.
The second specification of error relates to the admission of the books
or testimony as to their contents.
Section
1104 of the Revenue Act of 1926 as amended by section 618 of the Revenue
Act of 1928 provides that:
The
Commissioner, for the purpose of ascertaining the correctness of any
return or for the purpose of making a return where none has been made,
is hereby authorized, by any officer or employee of the Bureau of
Internal Revenue, including the field service, designated by him for
that purpose, to examine any books, papers, records, or memoranda
bearing upon the matters required to be included in the return, and may
require the attendance of the person rendering the return or of any
officer or employee of such person, or the attendance of any other
person having knowledge in the premises, and may take his testimony with
reference to the matter required by law to be included in such return,
with power to administer oaths to such person or persons.
Section
146(a) of the Revenue Act of 1928 provides that:
Any
person required under this title to pay any tax, or required by law or
regulations made under authority thereof to make a return, keep any
records, or supply any information, for the purposes of the computation,
assessment, or collection of any tax imposed by this title, who
willfully fails to pay such tax, make such return, keep such records, or
supply such information, at the time or times required by law or
regulations, shall, in addition to other penalties provided by law, be
guilty of a misdemeanor and, upon conviction thereof, be fined not more
than $10,000, or imprisoned for not more than one year, or both,
together with the costs of prosecution.
Two
questions arise here: (1) Was the admission of the testimony of Wolf a
violation of the constitutional provision contained in the Fifth
Amendment that no person shall be compelled in any criminal proceeding
to be a witness against himself? (2) If it was a violation, did
defendant waive his constitutional privilege by not refusing to grant
permission to Wolf to examine the books and by not failing to supply the
information to enable him to compute the tax and ascertain the
correctness of the return?
The
trial court seemed to be of the opinion that the admission of Wolf's
testimony would have been contrary to the constitutional inhibition, if
the defendant had seasonably objected or refused to produce his books
for examination, but that not having done so, he hereby waived the
privilege. He said: "If Mr. Nicola had not been willing to have his
books examined, and if he had been compelled to produce them, then we
would have presented an entirely different question."
The
purpose of requiring the taxpayer to supply the information was to
enable the Commissioner to compute the tax and ascertain its correctness
and the taxpayer under the provisions of Section 146(a) quoted above
could not refuse to supply the information to carry out this purpose
without being guilty of a misdemeanor for for which he might be
indicted, convicted, fined and imprisoned. If he had refused and claimed
immunity under the Fifth Amendment, the Government could have pursued
one of two courses: (1) It could have presented his refusal to a grand
jury and had him indicted, or (2) it could have resorted to the District
Court under the provisions of section 617(a) of the Revenue Act of 1928
(45 Stat. 877; 26 U. S. C. A. 2617) to compel his testimony and the
production of his books. At either time, the trial of the indictment or
the hearing before the District Court to compel testimony, the question
of his constitutional guarantee would have been available as a defense.
But
he did not refuse to supply the information required. Did he waive his
privilege? The constitutional guarantee is for the benefit of the
witness and unless invoked is deemed to be waived. Vajtauer v.
Commissioner of Immigration, 273
U. S.
103, 113. Was it necessary for the defendant to invoke it in the first
place before the revenue agent or could he wait until his trial on
indictment for attempting to evade a part of his income tax? Under the
authority of McKnight v. United States, 115 Fed. 972, 981; Lisansky
v. United States, supra, and United States v. Murdock, 284 U.
S. 141, 148, 149 [2 USTC ¶828], it was necessary for him to claim
immunity before the Government agent and refuse to produce his books.
After the Government had gotten possession of the information with his
consent, it was too late for him then to claim constitutional immunity.
The facts thus secured could be proved by secondary evidence. The
inadmissibility of the letter rests upon a different principle. In the Murdock
case the Supreme Court said: "As the appellee at the hearing
(before the revenue agent) did not invoke protection against federal
prosecution (but did against State prosecution), his plea is without
merit and the government's demurrer should have been sustained. * * *
The validity of his justification depends, not upon claims that would
have been warranted by the facts shown, but upon the claim that was
actually made." If the failure to make the claim for immunity on
the proper legal ground at the hearing before the revenue agent, waived
his privilege, a fortiori the failure to claim his privilege on any
ground waived it.
II.
The next reason alleged for reversal is because the evidence, if
admissible, was insufficient to submit to the jury or to sustain the
verdict.
As
the court charged, the essential fact to be proved was that the
commission of $101,250 was the personal income of the defendant and not
that of the Point Company. This the Government sought to prove by the
testimony of Henry A. Brandtjen, by the book entries and by the
typewritten letter.
1.
Mr. Brandtjen testified that his company purchased certain patents from
the Miller Company for $675,000 between September 13, 1928 and October
23, 1928 and that the negotiations and the sale were conducted on the
part of the Miller Company by its directors; two meetings were held, one
at the Farmers Bank Building of Pittsburgh and the other at the building
of the Point Company.
The
testimony was, of course, a circumstance which was properly in the case,
but it had no probative value. The purpose of it was to show that the
defendant was not only instrumental in effecting the sale, but that he
did it for himself personally and not for, and as president of, the
Point Company. Either might have been true, but it is significant that
the last meeting, where the sale was consummated and the final 90 per
cent of the purchase price, $607,500, was paid, was held in the building
of the Point Company, rather than at the office of some one of the
defendant's other companies which admittedly had no connection with this
transaction.
2.
As to the books, no intimation has been made that any business was done
which was not entered in the books, or that they have been altered in
any particular. The record stands as originally made. Both sides rely
upon it as correct.
On
the day, October 23, 1928, when the sale was completed, the purchase
money fully paid and the commission earned, the Miller Company charged
the sales expense with the commission and credited the Point Company
with it. The Point Company later made the entries in its books and
credited its account with this same amount as commission on the
transaction. On October 31, 1928 the Miller Company debited the Point
Company with this amount and credited it to the defendant as "per
instructions of F. F. Nicola, per L. Girts", who was in charge of
the books of the Point Company, but not of the Miller Company. The Point
Company credited the Miller Company with the $101,250 and charged
defendant with the same, and defendant on his books thereupon debited
the Miller Company with that amount and credited the Point Company with
it. The transaction thus reduced the defendant's debt to the Miller
Company but increased it by just that much to the Point Company. He was
no richer and no poorer than before but owed the Miller Company less and
the Point Company more. That is, the effect of the transaction and
various entries is that at the end of 1928, when the entries were closed
in all the books, the defendant owed the Point Company the commission of
$101,250. This is unquestionably shown by the entries in the books and
admitted by the Government's expert witnesses, who examined them. So
that the entries began with crediting this commission to the Point
Company and likewise ended, with making the commission the Point
Company's and the defendant its debtor to that extent. This must be the
fact unless the entries are false and there is no competent evidence to
establish that they are. If the books, therefore, are reliable, the
commission belonged to the Point Company.
The
Point Company had to make the return of this commission in its income
after it had been credited to it by the Miller Company, otherwise it
would have been guilty of making and filing a false return.
3.
The third piece of evidence by which the Government claims to have
established that this commission was the defendant's and that the
entries to the contrary were made with criminal intent, was the
typewritten paper quoted above.
This
letter shows an honest or dishonest and fraudulent purpose. It speaks of
what shifts it was necessary to put on various books, and the desire of
the defendant to pass as many of the profits through land companies as
he could because he understood that there was "a heavier tax on the
individual than on the corporation". His understanding as to the
heavier tax was correct and there was nothing morally or legally wrong
in desiring to avoid, but not evade, his taxes and to take proper and
legal steps to do this. If by shifts put on the various books and the
passing of profits through land companies, he meant that these
"shifts" and "passings" were not to represent the
facts and real transactions, he had a criminal intent. There is no
evidence that the defendant in making this sale was not operating
through the Point Company from the beginning and the evidence would
indicate that he was.
But
if the "shifts" and "passings" represented facts and
real transactions, the operation through his different corporations
rather than individually and personally, or the shift from operating
through a particular corporation in one enterprise to another
corporation in another enterprise in order to lower his tax rate, he was
within his legal rights and was not guilty of violating the law. United
States v. Isham, 84 U. S. 496; Bullen v. Wisconsin 240 U. S.
625; Superior Oil Co. v. Mississippi, 280 U. S. 390; Clapp v.
Heiner, 51 Fed. (2d) 224 (C. C. A. 3). In view of the fact that
there is no evidence showing that any entry in any or all of the books
did not represent the fact which it purported to represent, or that
there was an alteration of any entry, or that there was a false entry in
any of the books, it is reasonable and legal to infer that he meant
"shifts" and a "passing" within the law.
"Unless there is substantial evidence of facts which exclude every
other hypothesis than that of guilt, it is the duty of the trial court
to instruct the jury to return a verdict for the accused; and where all
the substantial evidence is as consistent with innocence as with guilt,
it is the duty of the appellate court to reverse a judgment of
conviction." Union Pacific Coal Co. v.
United States
, 173 Fed. 737, 740 (C. C. A. 8); Wright v.
United States
, 282 Fed. 799, 801; (C. C. A. 3); Yusem v.
United States
, 8 Fed. 6 (C. C. A. 3); Ridenour v.
United States
, 14 Fed. (2d) 888 (C. C. A. 3).
It
cannot be said that the substantial evidence of the facts in this case
exclude every other hypothesis than that of guilt and we do not think
that the competent evidence is sufficient to sustain the verdict.
III.
The third reason urged for reversal is that the learned trial judge
erred in charging the jury as to the time when it was necessary to make
the allotment of the commission in order to make it legally effective.
1.
He charged the jury that, "it was not unlawful for the defendant to
apportion business transactions among himself and the several
corporations, one transaction to one corporation and another to another
corporation; and if such apportionment, in any instance, was due to the
defendant's desire to keep down his taxes of his several corporations,
the apportionment would not be unlawful on that account alone", but
that such apportionment must be made "at or prior to the inception
of the business and not subsequent to its completion".
Here
there were two times when the allotment could be made; 1. "Prior to
the inception of the business, or 2. at its inception".
Then
followed a statement as to the time when the allotment could not be
made, "not subsequent to its completion", This carried an
implication that if made prior to the completion, it would be effective.
The implication was expressly changed later when the court said that the
defendant "might allot business transactions to himself or to the
corporations, as the circumstances of the case might seem to warrant,
but that allotment, in order to be effective, must be made before the
transaction was completed, and not afterwards". Under this
instruction, the allotment might be made at any time before
the completion of the transaction. This is contrary to the time
mentioned in the previous instruction that it had to be made "at or
prior to the inception".
At
what exact time the allotment had to be made was important for the jury
to know. It was confused by these instructions. So after being out all
night, it returned at 10:30 in the morning and requested to be
instructed as to the time when the allotment must be made, and the court
instructed it as follows:
allotment, in
order to be effective must be made before the transaction was completed
and not afterwards--that is, before the inception of the transaction. He
could not wait until they had begun and were nearly through with the
transaction. Our instruction was that the allotment should be made
before the inception or beginning of the transaction.
Here
again there were two times when the allotment must be made in order to
be effective: (1) Before the transaction was completed and not
afterwards. (2) Before the inception of the transaction.
This
instruction likewise confused the jury. The first statement as to the
time was that the allotment "must be made before the transaction
was completed and not afterwards". That language was plain and
clear and meant that the allotment could be made at any time up to the
moment of the completion of the transaction. But the court then
explained the language by saying, "that is, before the inception of
the transaction. He could not wait until they had begun and were nearly
through with the transaction."
The
jury was still in doubt. It did not know whether the allotment had to be
made prior to the inception, at the inception, or sometime before
"they were nearly through, or before the completion of the
transaction." In this state of mind the jury retired and at 12:40
P. M. it returned and asked the following written question:
The
Jurors in the case against F. F. Nicola believe you stated that Mr.
Nicola would be acting entirely within his rights in alloting any
commission earned from his services rendered Miller Printing Machinery
Co. to himself or any of the corporations in which he was accustomed to
transact business. The question, if this statement is correct, is just
what point marks the line or time when this decision must be made by
Mr. Nicola to make his decision valid.
To
this the Court replied:
Gentlemen,
in my original charge and in the further instructions which I gave you
this morning, I did not state that Nicola would be entirely within his
rights in alloting any commissions earned from his services rendered the
Miller Printing Machinery Company to himself or any corporation with
which he was accustomed to transact business. I did say this morning,
and I reiterate at this time, that Mr. Nicola, as the head of these
different organizations, might allot different transactions to one or
the other of the corporations or to himself, but that that allotment
must be made prior to entering into the transaction.
With
reference to the particular matter under consideration here, and that is
the commission for the sale of patent rights, if Mr. Nicola desired to
employ the Point Improvement Company to carry on that negotiation with
reference to the sale of those patent rights, he should have made that
decision when the negotiations for the sale of those patent rights took
place,--that is, before the negotiations--so the negotiations for the
sale of the patent rights would be carried on by the Point Improvement
Company in behalf of the Miller Printing Machinery Company.
You
heard the testimony of Mr. Nicola as to just how the matter was carried
on. You heard the testimony of the representative of the seller, who was
present at some of the negotiations with reference thereto. The point I
wish to make is this: that the allotment of this project to the Point
Improvement Company should be made before the commission was earned
and not afterward.
The
defendant insists, and there seems to be some reason and authority for
his contention, that the commission was not "earned" until the
sale was completed and it was certain that there would be a commission.
At any rate the final instruction did not inform the jury when the
commission was "earned" and whether or not the allotment had
to be made before the work of earning it began, or at sometime while the
work of earning it was being done, or when that work had been finished
and the sale completed. The several times mentioned left the jury in
doubt. Where two instructions are given to the jury, one erroneous and
prejudicial and the other correct, it is impossible to tell which one
the jury followed and it constitutes reversible error. When an erroneous
instruction has been given, it is not cured by a subsequent correct one,
unless the former is withdrawn. State v. Tapack, 78 N. J. L. 208,
210, 211; Rice v. Olin, 79 Pa. 391; Murray v. Commonwealth,
79 Pa. 311; Commonwealth v. Molten, 230 Pa. 399, 407; Drossos
v. United States, 2 Fed. (2d) 538 (C. C. A. 8); Mills v.
United States
, 164
U. S.
644, 649.
The
time when the allotment had to be made to be effective was important in
this case. Paul C. Dunlevy testified that he was director and vice
president of the Miller Company and the defendant was the president of
the Point Cpmpany, and that at the first meeting, September 13, 1928,
when negotiations began for the sale of the patents, there were present
"nobody but Mr. Nicola and myself representing both the Point
Improvement Company and the Miller Printing Company". Dunlevy was
not connected with the Point Company and so did not represent it. He
represented the Miller Company. This left only the defendant to
represent the Point Company. This would indicate that at the first
meeting, when negotiations first began for the sale of the patents,
allotment had been made to the Point Company, otherwise it had no place
or business at that meeting, and the undisputed testimony is that it was
represented there.
Again
just as soon as the sale was completed and the commission earned, on
that very day, it was credited to the Point Company. This fact is
unquestioned any shows that allotment had been made when the sale was
consummated. This follows as a necessary inference from what they did,
though there is no writing expressly making the allotment and there does
not have to be.
If
the allotment had to be made at the time the negotiations leading up to
the sale first began or when the transaction was completed, the sale
effected and the commission was earned, as the court charged, there was
evidence from which the jury could find that it had been made at either
of those times. The jury was confused as shown by its returning twice to
ask for specific instructions on this very point. Which of these
instructions was right, as to the exact time the allotment had to be
made, prior to the inception of the transaction, at the inception, or
before the transaction was completed, and the commission was earned, the
jury did not know.
The
allotment in order to be effective had to be made by the time
negotiations for the sale of the patents actually began. The fact that
the commission was not actually entered in the books of the Point
Company until December 31, 1928, is without significance for the
evidence is uncontradicted that the allotment had long been made before
then, and the diligence or lack of diligence of the employees of the
Point Company in making the entry, in this case has no bearing upon the
guilt or innocence of the defendant.
2.
He further says that this instruction was erroneous because it shifted
the burden of proof.
Before
the jury could find the defendant guilty, the Government had to
establish beyond a reasonable doubt that the defendant had not made the
allotment when the negotiations for the sale actually began. The
defendant did not have to prove himself innocent by showing that
he had made the allotment. He could stand mute until the Government had
established his failure thus to make the allotment beyond a reasonable
doubt. But the effect of the charge was that unless he affirmatively
established that he had made the allotment to the Point Company at some
one of the times mentioned, the jury could find that he had not made it
and so was guilty. This placed upon him a burden which the law does not
compel him to bear and was not cured by the instruction in the beginning
of the charge that the defendant was presumed to be innocent until
proved to be guilty beyond a reasonable doubt. The court should have
charged that before the jury could find the defendant guilty, the
Government had to establish beyond a reasonable doubt that he had not
made the allotment when the negotiations for the sale actually began. It
charged the reverse and thus placed an illegal burden on the defendant.
This was prejudicial.
It
follows that the judgment must be reversed and a new trial granted.