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[78-1 USTC ¶9410] United States of America , Appellee v. Edgar F. X. Shields, Appellant

(CA-9), U. S. Court of Appeals, 9th Circuit, No. 77-1816, 571 F2d 1115, 3/9/78, Aff'g unreported District Court decision

[Code Sec. 7201--result unchanged by 1976 Tax Reform Act]

Crimes: Tax evasion: Impeachment: Destruction of interview notes: Use of grand jury: Evidence.--The defendant was properly convicted, by the bank deposits method, of three counts of tax evasion. He was not impeached on account of his silence prior to trial as to the sources of his funds. He was not prejudiced by the government's destruction of notes of its interviews with prospective witnesses. He failed to make a timely objection to allegedly improper grand jury proceedings. And he did not show that the government had failed to pursue all leads as to possible nontaxable sources of funds.

Carroll D. Gray, Assistant United States Attorney, Spokane , Wash. 99210 , for appellee. Michael J. Hemovich, Hemovich, Smith & Nappi, 422 W. Riverside Ave. , Spokane , Wash. , for appellant.

Before MERRILL and ELY, Circuit Judges, and ORRICK, ^* District Judge.

ELY, Circuit Judge:

At a jury trial appellant Shields was convicted of three counts of willful evasion of income taxes for the years 1971 through 1973. To prove its case, the Government introduced analyses of appellant's bank deposits and withdrawals. The evidence reflected large deposits that could not be attributable to appellant's reported income. In an effort to explain these deposits, appellant raised the "cash hoard" defense. Appellant's accountant and business associate, one Brickert, testified that appellant had a cash hoard of approximately $33,000, part of which appellant stashed in his car, part at his home, and part at his nightclub. Supposedly, appellant's cash hoard diminished during the prosecution years of 1971-1973 as appellant made periodic bank deposits from that reserve. Brickert also testified that appellant received two loan repayments totalling $9000 during the years in question, which would constitute another nontaxable source of funds. We affirm.

[Suggestion of Silence]

I. Prior to trial, on June 19, 1975, the Internal Revenue Service (IRS) held a conference, attended by appellant, Brickert, and appellant's attorney, Randall, to discuss appellant's tax liability. An IRS representative, Bouker, confronted appellant with his alleged tax deficiency and stated that the purpose of the conference was to permit "anyone to say anything" on behalf of the appellant. Bouker specifically asked if appellant had nontaxable sources of funds that would explain his unaccounted for bank deposits. At the conference Brickert mentioned only the two loan repayments.

At trial the prosecutor impeached Brickert by eliciting that Brickert had said nothing about a cash hoard at the IRS conference. He argued that Brickert's silence was inconsistent with his testimony that he had personally observed appellant's cash hoard. To augment this line of attack, Bouker later testified that Brickert had not referred to the cash hoard at the conference. The prosecutor then asked Bouker whether Randall, appellant's attorney, had revealed by non-taxable sources of funds at the conference. Appellant objected, the District Court sustained the objection, and the jury never heard an answer. Finally, in the closing argument the prosecutor broadly referred to the failure to raise the cash hoard defense at the conference:

The defense which is raised here, and the one that where the evidence is produced for the first time in court, never occurred outside of the court before, before we started on the Tuesday a week ago, the government was never offered these explanations which--

[Shields' counsel]: If Your Honor please, at this time, I would like to move for a mistrial on the basis of . . . that statement . . ..

[Prosecutor]: I'm getting right into the matter of Brickert, what Brickert said, and Brickert's testimony on the stand.

* * *

[Prosecutor]: I am not commenting on the defendant's failure to say anything.

THE COURT: Well, I think it was too general of a statement.

* * *

THE COURT: Well, I'm going to admonish the jury, but I'm not going to grant the motion for a mistrial. . . . Members of the jury, I want to call your attention to one of the instructions I just gave you, that the defendant on trial has no obligation to say anything, and anything he does say, or any silence is not to be used against him, . . ..

The silence of an accused at the time of arrest may not be used to impeach a defense subsequently offered at trial. Doyle v. Ohio , 426 U. S. 610, 96 S. Ct. 2240, 49 L. Ed. 2d 91 (1976); United States v. Hale, 422 U. S. 171, 95 S. Ct. 2133, 45 L. Ed. 2d 99 (1975); Fowle v. United States , 410 F. 2d 48 (9th Cir. 1969). The prohibition of such impeachment stems from the privilege against self-incrimination and from the representation implicit in the Miranda ¹ warnings that a defendant will not be penalized for his decision to remain silent.

Despite the urgings of appellant, we find the above rule inapplicable. Appellant claims that the cross-examination of Brickert, Bouker's testimony concerning Brickert's silence at the IRS conference, and the prosecutor's closing argument reflected upon appellant, implying to the jury that appellant also had failed to mention his cash hoard at the IRS conference. ² Appellant concedes, as he must, that he was not cross-examined concerning his silence and that no direct evidence was introduced concerning his silence. For this reason the rule against impeaching an accused by his prior silence does not apply, and we elect not to extend the rule to situations such as the present one in which the silence of nondefendant witnesses might conceivably suggest that the explanation of a defendant is a recent fabrication.

Rather, Fed. R. Evid. 403 contains the correct standard for determining wheher evidence, though relevant and not directly concerning the silence of an accused, is nonetheless inadmissible because it circumstantially tends to suggest his silence. Rule 403 grants discretion to the District Court to exclude evidence "if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury . . .." Twice the District Court instructed the jury that appellant had the right to remain silent and that his silence could not be used against him. Clearly this minimized the possibility that the jury improperly considered whether appellant was silent at the IRS conference. Thus, the District Court did not err in refusing to exercise its discretion under rule 403 to exclude the evidence of Brickert's silence. ³

Appellant also maintains that Brickert's impeachment, apart from its reflection on appellant, was improper because Brickert's silence was "ambiguous." The argument that Brickert's silence in and of itself lacked probative value was not presented to the District Court, and consequently we decline to consider it now. See Gollaher v. United States, 419 F. 2d 520, 523 (9th Cir.), cert. denied, 396 U. S. 960, 90 S. Ct. 434, 24 L. Ed. 2d 424 (1969).

[Destruction of Notes]

II. Pursuant to the routine practice of government agencies, officials destroyed the rough notes of interviews with four prospective witnesses. It is not clear whether IRS agent Bouker made any notes at the conference with appellant, Randall, and Brickert. All the interviews in question occurred during 1974 and 1975, and the notes were not verbatim transcripts of witnesses' statements. The government officials prepared typed memoranda of the interviews, which were disclosed to appellant.

Appellant insists that the destruction of the notes violated the Jencks Act, 18 U. S. C. §3500 (1970), and the rule of Brady v. Maryland, 373 U. S. 83, 83 S. Ct. 1194, 10 L. Ed. 2d 215 (1963). In United States v. Harris, 543 F. 2d 1247 (9th Cir. 1976), we held that rough interview notes constitute potentially discoverable material and therefore must be preserved. Our court, however, has continually refused to apply the Harris rule retroactively in the absence of a specific demonstration that the destruction of notes resulted in prejudice. United States v. Wood, 550 F. 2d 435, 440 (9th Cir. 1976); United States v. Parker, 549 F. 2d 1217, 1224 (9th Cir.), cert. denied, 430 U. S. 971, 97 S. Ct. 1659, 52 L. Ed. 2d 365 (1977); United States v. Rob inson, 546 F. 2d 309, 312 (9th Cir. 1976), cert. denied, 430 U. S. 918, 97 S. Ct. 1333, 51 L. Ed. 2d 597 (1977). Appellant does not contend that the interview memoranda are incomplete or inaccurate and does not otherwise specify any prejudice to his defense resulting from the destruction of the rough notes. Accordingly, we conclude the appellant's contention in this respect must be rejected.

[Use of Grand Jury]

III. Another issue presented here is whether the Government improperly used an Idaho grand jury to obtain the testimony of one of appellant's witnesses, a man named Popp. ⁴ A memorandum from IRS agent Bouker, dated September 8, 1975, stated:

During the course of the investigation it became necessary to use the grand jury proceedings to elicit testimony from reluctant witnesses. No prior judicial approval required under Rule 6(e) was obtained; however, the testimony was not relevant as regards the revenue agent's computation of gross of taxable income.

Appellant makes four related arguments concerning misuse of the grand jury. First, he claims that Bouker's memorandum concedes a violation of Fed. R. Crim. P. 6(e). ⁵ Second, he asserts that the IRS wrongfully used the Idaho grand jury to collect evidence and did not submit evidence to that grand jury for the purpose of obtaining its indictment. Third, he asserts that at the time of Popp's testimony before the Idaho grand jury, the IRS had not yet recommended criminal sanctions against appellant, and, therefore, the IRS was using the grand jury for the purpose of establishing appellant's civil tax liability. ⁶ Last, appellant maintains that the Government's impeachment of Popp with the transcript of the proceedings before the Idaho grand jury was improper. Generally, impeachment is a proper use of grand jury testimony, e.g., Gollaher v. United States , 419 F. 2d 520, 523 (9th Cir.), cert. denied, 396 U. S. 960, 90 S. Ct. 434, 24 L. Ed. 2d 424 (1969), so appellant's contention must rest upon his previous arguments that the Idaho grand jury proceedings were illegal.

Appellant did not object at trial or even in posttrial proceedings to the Idaho or the Washington grand jury proceedings. Nor did appellant object to Popp's impeachment. We are unable to accept appellant's proffered excuse that he could not have known of the alleged grand jury misuse until too late in the trial to seek recourse. Before trial began the Government had disclosed the Idaho grand jury transcript to appellant. Bouker's memorandum was released to appellant's counsel sometime during the course of the trial. Although the record does not reveal the exact date, it is clear that appellant had the memorandum in his possession on the day before the last trial day. Thus, his failure to permit the district judge to evaluate the grand jury proceedings is unjustified, and we shall not review the alleged improprieties. No plain error is evident, as the record contains nothing that can substantiate or disprove appellant's allegations. Fed. R. Crim. P. 52(b).

[Sufficiency of Evidence]

IV. The Government employed an analysis of appellant's bank deposits and withdrawals to establish appellant's understatement of taxable income. Appellant contends that the Government did not attempt to prove appellant's "cash on hand" on January 1, 1970, the beginning date of the tax years in question. The relevance of cash on hand is that if it were deposited into accounts during the tax years, it would explain those deposits and reduce the understatement of income. Specifically, appellant claims that the Government did not follow leads that might have demonstrated currency withdrawals made in late 1969.

Special Agent White conducted the investigation of appellant's income tax liability, and there is sufficient evidence that he diligently pursued all leads that could have disclosed nontaxable sources of funds, including cash on hand. White testified that he prepared a "complete analysis of all the bank accounts, savings and checking." He also stated that he covered leads and properly credited appellant for all nontaxable sources and that he examined financial statements given by appellant to financial institutions. There is no indication that White failed to evaluate 1969 withdrawals. After his investigation, White decided to use a cash on hand figure of zero, having found no evidence of cash on hand. An expert witness heard all the testimony at trial and examined all the exhibits, concluding that "there was insufficient evidence upon which to form a conclusion that there was cash on hand."

Looking at the evidence in a light most favorable to the Government, as we must, Glasser v. United States, 315 U. S. 60, 80, 62 S. Ct. 457, 86 L. Ed. 680 (1942) the Government clearly presented sufficient evidence for the jury to infer that White had adequately pursued all leads and had correctly shown as the proper amount of cash on hand the zero figure.

AFFIRMED.

^* Honorable William H. Orrick, United States District Judge for the Northern District of California, sitting by designation.

¹ Miranda v. Arizona, 384 U. S. 436, 467-73, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966).

² We reject the Government's argument that this issue was not preserved for appeal. It is true that appellant did not object to the cross-examination of Bricket on the basis that his silence reflected upon appellant; he only objected on the ground that the questions were argumentative. Appellant, however, objected and moved for a mistrial during Bouker's testimony concerning Brickert's silence and during the prosecutor's reference during closing argument to the newness of the cash hoard defense. In light of the latter objections, appellant fully preserved his right to challenge on appeal all the alleged indirect references to appellant's silence. See United States v. Semensohn, 421 F. 2d 1206, 1210 (2d Cir. 1970) (objection made on an incorrect ground preserved appeal because trial judge's attention was later focused on the proper reason for objection).

³ For the purposes of this decision, we have assumed, as did the District Court, the impropriety of a direct reference to appellant's silence at the IRS conference. This issue is not directly presented, and we express no view as to its merits. Doyle, Hale, and Fowle all involved the impeaching use of the postarrest silence of an accused. The IRS conferences, however, occurred during the preindictment stage. The evidentiary use of such silence would not present a Miranda problem and might not be so inherently lacking of probative value so as to justify a per se rule.

⁴ It was the grand jury for the Eastern District of Washington that issued the indictment upon which appellant was convicted.

⁵ Fed. R. Crim. P. 6(e) provides:

Secrecy of Proceedings and Disclosure. Disclosure of matters occurring before the grand jury other than its deliberations and the vote of any juror may be made to the attorneys for the government for use in the performance of their duties. Otherwise a juror, attorney, interpreter, stenographer, operator of a recording device, or any typist who transcribes recorded testimony may disclose matters occurring before the grand jury only when so directed by the court preliminary to or in connection with a judicial proceeding or when permitted by the court at the request of the defendant upon a showing that grounds may exist for a motion to dismiss the indictment because of matters occurring before the grand jury.

⁶ See In re Grand Jury, Nos. 76-1893, 76-1995 (9th Cir. May 2, 1977) (proscribing civil use by IRS of grand jury information without adversary hearing resulting in finding that disclosure is reasonably necessary, withdrawn as moot (9th Cir. June 28, 1977).

 

 

[77-1 USTC ¶9202] United States of America , Appellee v. Jack Levine, Defendant-Appellant

(CA-2), U. S. Court of Appeals, 2nd Circuit, 76-1409, 12/6/76, Affirming unreported District Court decision

[Code Secs. 7201 and 7206--result unchanged by 1976 Tax Reform Act]

Crimes: Tax evasion: False return: Miscellaneous defenses.--The taxpayer was properly convicted of tax evasion and filing a false return. The trial judge's instructions to the jury were proper. A certain tape recording was properly excluded from evidence and the defense was given a fair opportunity to prepare and present its case.

Present: HON. LEONARD P. MOORE, HON. ROBERT P. ANDERSON, HON. WILFRED FEINBERG, Circuit Judges.

This cause came on to be heard on the transcript of record from the United States District Court for the Southern District of New York, and was argued by counsel.

ON CONSIDERATION WHEREOF, it is now hereby ordered, adjudged, and decreed that the judgment of conviction of said District Court be and it hereby is affirmed.

After a jury trial, Jack Levine was convicted of income tax evasion and of filing a false tax return. Levine donated shares of stock to a school, and accepted a backdated receipt, which he used to substantiate a fraudulent deduction. He appeals his conviction on three grounds. First he argues that the trial judge erroneously led the jury to believe the shares he donated were freely negotiable, when in fact they were restricted. But the judge's instruction taken as a whole correctly informed the jury that the restriction on Levine's stock did not completely disable him from selling it. The jury needed no more than a general understanding of this tangential question. Second, Levine argues that the judge erred in refusing to let the jury hear a tape of the principal government witness suborning perjury in an unrelated incident. However, the witness admitted the incident on the stand, and also testified about his previous convictions for other crimes. Exclusion of the tape recording was not an abuse of discretion. Finally, Levine argues that the trial court should have allowed him additional time to review Brady and 3500 material. But the record indicates that the judge acted with reasonable solicitude to provide the defense with a fair opportunity to prepare and present its case.

 

 

[60-1 USTC ¶9163] United States of America , Plaintiff-Appellee v. Raymond A. O'Connor, Defendant-Appellant

(CA-2), U. S. Court of Appeals, 2nd Circuit, Docket No. 25615, 273 F2d 358, 12/21/59, Unreported District Court decision on second trial followed earlier reversal by CA-2 in, 56-2 USTC ¶9956, 237 F. 2d 466

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

Crimes: Income tax evasion: Necessity for production of government agents' investigative reports.--Judgment of conviction of income tax evasion was reversed because of the trial court's refusal to order the production of investigative reports of government agents, for the purpose of impeachment on cross-examination, despite the fact that investigative reports as such are proscribed by statute, where (1) the government based its case on the testimony of the agents as to the results of their investigation, and (2) such reports, relating to the income and expenditure position of the government, were necessary to determine whether any statements of fact were inconsistent with the testimony of the agents and to test their expertness in the making of charts and computations.

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

Crimes: Income tax evasion: Net worth cases: Evidence of accounts receivable and accounts payable: Consistency in treatment.--Judgment of conviction of income tax evasion reversed because the trial court sustained rejection by government witnesses of accounts receivable as opening assets, and accounts payable as closing liabilities, since, in a net worth case, the important consideration is consistency in treatment of such accounts.

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

Crimes: Income tax evasion: Exclusion of oral testimony at trial: Applicability of "dead man" rule in criminal prosecution.--Judgment of conviction of income tax evasion was reversed because the trial court refused to permit oral testimony by the defendant as to (1) opening net worth and (2) transactions and conversations with others since deceased. Since the defendant's credibility was for the jury to determine, there could be no objection to testimony by him as to transactions within his personal knowledge, regardless of the availability of documentary support. By the same token, there was no apparent basis for imposing a "dead man" rule in a criminal case.

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

Crimes: Income tax evasion: Agents' Tax Court Reports: Charts used at first trial: Right to cross-examine and impeach.--Judgment of conviction of income tax evasion was reversed because of the trial court's refusal to allow the use of government agents' prior Tax Court reports and schedules, and charts used by them at first trial to impeach charts used at the second trial. It was up to the trial court to determine whether a particular report, chart, entry, etc., was in fact relevant to any testimony of the maker on the trial and admissible for purposes of his impeachment, and whether computation and expert opinion relating to civil liability had any relevancy in the criminal trial.

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

Crimes: Income tax evasion: Charge to the jury on net worth theory: Relevancy of instructions to jury.--Judgment of conviction of income tax evasion was reversed because the charge did not sufficiently relate the theory of net worth prosecution to the disputed questions. The instruction to the jury that if it would take all the exhibits and compare those of the prosecution with those concerning the same subject matter introduced by the defense, either directly or indirectly, it could then arrive at a conclusion on the whole case demonstrated the generality and inadequacy of the case.

Neil R. Farmelo, First Assistant United States Attorney, Western District of New York, Buffalo, N. Y. (John O. Henderson, United States Attorney, Western District of New York, on brief), for plaintiff-appellee. Charles J. McDonough, Buffalo , N. Y., for defendant-appellant.

Before CLARK, Chief Judge, MOORE, Circuit Judge, and SMITH, District Judge.

SMITH, District Judge:

Defendant, Raymond A. O'Connor, appeals from a judgment entered June 10, 1957 upon a jury verdict finding him guilty on all four counts of an indictment filed February 24, 1953 charging him with wilfully attempting to evade and defeat his income taxes for the years 1946, 1947, 1948 and 1949, by filing for each of those years an income tax return understating the amount of his taxable income. Judge Morgan imposed a sentence of five years on each of the four counts (the sentences on Counts 1, 3 and 4 to be served concurrently), and a fine of $5,000 on each of the four counts. Execution of the sentence of imprisonment on Count Two was suspended and defendant placed on probation for five years after completion of the sentence to be served on Count One.

[Second Trial]

This was the second trial of this defendant on this indictment, an earlier judgment of conviction on February 1, 1954 having been reversed by this court October 18, 1956 and a new trial ordered. United States v. O'Connor, 237 F. 2d 466 [56-2 USTC ¶9956].

[Issues]

The errors claimed are as follows: (1) the court's refusal to order the production of the reports of government witnesses, Agents Montz and Wetzel, (2) the court's refusal to allow the use of the agents' prior Tax Court reports and schedule for the purpose of impeachment on cross-examination, (3) inadequacy of the charge, (4) impossibility of a fair trial due to the government's loss of some of defendant's records in the period between the first and second trials, (5) refusal of the court to permit oral testimony by defendant as to opening net worth without the support of documentary evidence, (6) exclusion of defendant's oral testimony as to transactions and conversations with others since deceased, (7) restriction of proof as to defendant's opening net worth investment in Burt Cold Storage Co., (8) rejection by government witnesses of accounts receivable as opening assets, and accounts payable as closing liabilities, (9) the court's refusal to allow use of charts used by the government at the first trial to impeach charts used at the second trial, (10) government notices to produce served on the defense at trial as violative of the Fifth Amendment.

The indictment alleged an understatement of income for

1946 of ....         $112,297.24

1947 .......           27,935.47

1948 .......           54,608.90

1949 .......           35,072.56

 

On the second trial, the government claimed defendant's opening net worth on December 31, 1945 was $361,077.86, defendant, that it was $526,204.61. Defendant was a certified public accountant with a large accounting practice, and many outside business interests, including two farms and a canning plant, interests in real estate, a cold storage business and a theatre company. The government's case was built mainly on the testimony of the agents and their computations to establish the net worth changes, although there was substantial evidence of attempts to conceal underlying records by defendant, and testimony by the defendant as to a claimed currency hoard which strains credulity.

[Examination of Agents' Reports]

In this setting, it is quite plain that the agents' reports relating to O'Connor's asset, income and expenditure position during the entire tax period in question, whether prepared for criminal or civil tax purposes, were necessary to defendant's preparation and conduct of his defense in two respects, to determine whether any statements of fact therein were inconsistent with or contradictory to testimony on the stand of the makers of the reports, and to test their expertness in preparation of the charts and computations used by them respectively on the stand. Point one, as to production, so far as it concerns the agents' reports, is well taken under the Jencks rule, Jencks v. United States, 353 U. S. 657, decided after the rulings before and in the trial of the instant case, but before the ruling on the motion for new trial. The so-called Jencks statute, Pub. L. 85-269, Sept. 2, 1957, 71 Stat. 595, 18 U. S. C. 3500, would now require their production on trial in the circumstances of this case. 18 U. S. C. Sec. 3500(b) provides: "After a witness called by the United States has testified on direct examination, the court shall, on motion of the defendant, order the United States to produce any statement (as hereinafter defined) of the witness in the possession of the United States which relates to the subject matter as to which the witness has testified." Since statement is defined by subsection (e) to include "a written statement made by said witness," the reports herein involved would clearly seem to fall within the plain language of the statute.

[Investigative Reports]

While the government correctly asserts that the statute was intended to proscribe production of investigative reports as such (italics added), here the government has chosen to base its case on the testimony of the agents as to the results of their investigations. Where such agents have testified, it would seem clear that their reports relating to the same investigation may be obtained by the defendant. See United States v. Prince, 3 Cir., 264 F. 2d 850; United States v. De Lucia, 7 Cir., 262 F. 2d 610 [59-1 USTC ¶9161].

If the government chooses to depend on the expertise of a witness for proof of the essentials of a criminal charge, it cannot insulate him from a thorough cross-examination by any claim of a sovereign right to secrecy of reports or methods of computation.

[Accounts Receivable and Payable]

So far as the treatment of accounts receivable as opening assets, and the treatment of accounts payable as closing liabilities are concerned, the important consideration is consistency in treatment, so that the result arrived at does not reflect apparent increases not fairly ascribable to undeclared taxable income. The net worth theory is actually not based on net worth in the usual accounting sense, but on a comparison of proven total assets at cost at the beginning and end of a year, to determine whether there has been an increase of assets greater than can be accounted for by reported net income plus receipts other than taxable income. This involves proof of how much reportable income has been spent for nonexempt purposes, and so is unavailable to add to assets, and proof negating receipts during the period which are not taxable, such as gifts, loan repayments, withdrawal of capital, etc., as to which leads have been furnished, which could account for the increase in assets from sources other than unreported net income. Holland v. United States, 348 U. S. 121 [54-2 USTC ¶9714]; United States v. Costello, 2 Cir., 221 F. 2d 668; United States v. O'Connor, supra. See Comment: The Defense of a Criminal Net Worth Tax Case in the Light of Recent Supreme Court Decisions, 41 Cornell L. Q. 106, 108. Comment: Proving Tax Evasion by the Net Worth Method, 34 Texas L. R. 606, 607. The Net Worth Approach in Determining Income, 41 Virginia L. R. 927, 940.

[Lack of Fair Trial]

The claim of lack of fair trial because of loss by the government of defendant's records, prior to the second trial, is inadequately supported because of failure of proof in the record that the government was responsible for the loss and by failure to demonstrate that the loss did in fact materially handicap defendant.

[Exclusion of Oral Testimony]

Since the charge is inadequate, as noted below, and the reports of the expert witnesses should have been produced under the Jencks statute, perhaps detailed discussion of the rulings on evidence is unnecessary. We may assume that many of the questions will not arise in a third trial. However, it may do no harm to indicate that we see no apparent basis for exclusion of oral testimony by defendant to transactions within his personal knowledge, regardless of the availability of documentary support. His credibility is for the jury. Nor is there any apparent basis for imposing a "dead man" rule in a criminal prosecution. Points two and nine, complaining of the restriction on the use in cross-examination of similar materials prepared by the agents for use in O'Connor's case in the Tax Court and the first criminal trial, may also be well taken. Whether a particular chart, entry or report is in fact relevant to any testimony of the maker thereof on the trial and admissible for purposes of his impeachment is of course for determination by the trial judge. So also it is for the trial judge to determine the extent to which computations and expert opinions with relation to civil tax liability for Tax Court use may be relevant to the computations and opinions as to which the agents may testify in the criminal trial.

[Demand to Produce]

The demand made during the government's case in chief before the jury for the defendant to produce papers is a dangerous practice and may be prejudicial. See McKnight v. United States , 6 Cir., 115 Fed. 972; People v. Gibson, 218 N. Y. 70. There was no waiver by defendant up to this point in the trial, so far as appears. In the Brown, Gates and Ziegler cases relied on by the government, there were prior waivers. Brown v. United States, 356 U. S. 148, rehearing denied 356 U. S. 948; United States v. Gates, 2 Cir., 176 F. 2d 78; Ziegler v. United States, 9 Cir., 174 F. 2d 439, cert. denied 338 U. S. 822.

[Adequacy of Charge to Jury]

The court on the earlier appeal in this case laid down a general outline of the points to be covered in a charge in a net worth case. The charge here did not sufficiently relate the theory of a net worth prosecution to the disputed questions in this long and involved trial. While perhaps the court was justified in not making a detailed recitation of all the variances between the contentions of the government and of the defense, the major contentions should have been covered more fully and more clearly related to the legal theories and the proof involved. The case took some two months to try and the proof included hundreds of exhibits. An instruction that if the jury would take all the exhibits and compare those of the prosecution with those concerning the same subject matter introduced by the defense, either directly or indirectly, it should be able to arrive at a conclusion on the whole case demonstrates the generality of the charge. The charge refers to the fact that there were many weeks of testimony concerning the defendant, his wife, his four children, his accounting partnership, Burt Cold Storage, Burt Packing and Warehouse, Inc., Falls Mortgage Corporation, and various real estate and security holdings, bank balances and cash, but fails sufficiently to relate the testimony as to these persons, entities and things to the elements of the crimes charged and the defenses on the four counts. The charge is manifestly inadequate to a complete understanding of the issues involved, even when the instructions during the course of the trial are taken into consideration.

The judgment is reversed and the case remanded for a new trial.

 

 

[67-2 USTC ¶9678] United States of America v. Frank A. Jaskiewicz

U. S. District Court, East. Dist. Pa., Criminal Action No. 22706, 272 FSupp 214, 8/28/67

[1954 Code Sec. 7201]

Tax evasion: Pre-trial inspection: Copies of records: Grand jury testimony: Special agent's report.--The taxpayer, charged with tax evasion, was not entitled to inspect a copy of the testimony of his accountant previously presented before the grand jury in the absence of a showing of a definite need (other than to preclude surprise at the trial) to produce such document before trial. In addition, the report of the special agent who conducted the investigation was not available for pre-trial inspection since it could be produced, on taxpayer's motion, after the agent had testified on direct examination at the trial. However, the taxpayer was entitled to inspect copies of records he had submitted to the Government for the purpose of challenging the Government's net worth case based on such records.

Drew J. T. O'Keefe, United States Attorney, Merna B. Marshall, Joseph H. Reiter, Assistant United States Attorneys, 4042 U. S. Courthouse, Philadelphia , Pa. , for plaintiff. Leonard Sarner, Sarner, Cooper & Stein, Six Penn Center Plaza, Room 208, Philadelphia, Pa., for defendant.

Memorandum and Order

DAVIS, District Judge:

The defendant has been charged with income tax evasion. On March 20, 1967, he filed a motion for discovery and inspection. Before this Court are three items of discovery, in which no amicable settlement by the parties could be effected.

In the first item (numbered 1b), the defendant desires to inspect all documents submitted to the Government by the defendant, his attorney, or his accountant. Although the Government contends that it has since returned all documents after copying those in which it held an interest, the defendant desires to ascertain precisely which records have been reproduced and copies retained. Under F. R. Crim. P. 16(a)(1), upon motion of the defendant, the Court may order the attorney for the Government to permit the defendant to inspect and copy written or recorded statements made by the defendant, which are within the possession, custody and control of the Government. The application of this rule extends to records of the type herein sought. United States v. Health [58-2 USTC ¶9772], 260 F. 2d 623 (9th Cir. 1958).

But the Government contends that disclosure of the defendant's records which it has reproduced would reveal its case. It is true that the defendant would obtain some information which would not otherwise be revealed concerning the nature of the Government's case.

However, when the net worth technique is being employed by the Government in a prosecution for income tax evasion, a liberal policy concerning discovery of financial records is demanded, since the entire proceedings is based on circumstantial evidence. In Holland v. United States [54-2 USTC ¶9714], 348 U. S. 121 (1955), it was pointed out that one of the dangers inherent in the net worth system is the problem of corroboration, since the prosecution may pick and choose from the taxpayer's records, relying on the favorable portions, and throwing aside those which do not enhance its position. Since the defendant only seeks a listing of the documents which were submitted to the Government, revelation would practically preclude the problem raised in Holland , since he would then have the opportunity to challenge the analysis and conclusions which the Government may derive therefrom. For this item the defendant's motion for discovery is therefore granted.

Furthermore (In item 1c), the defendant seeks a copy of the testimony of his accountant previously presented before the Grand Jury, contending that inspection of the minutes of this testimony is material to the preparation of the defense in advance of trial, and not merely to contradict the accountant if he is called as a Government witness. The Government opposes, relying upon the authority of United States v. Dennis, 384 U. S. 855 (1966), and the so-called Jencks Act, 18 U. S. C. section 3500, that neither the prosecution nor the Court has the power to produce the grand jury minutes. With regard to the latter contention, it has been determined that the Jencks Act does not relate to minutes of a grand jury, since their disclosure is expressly governed by the Federal Criminal Rules. Pittsburgh Plate Glass Co. v. United States , 360 U. S. 395, 398 (1959). But under Rule 6(e), disclosure of grand jury proceedings to other than a government attorney is authorized only when so directed by the Court preliminary to, or in connection with a judicial proceeding. Burke v. United States, 247 F. Supp. 418 ( Mass. , 1965), aff'd, 358 F. 2d 307. Since the proceedings before the grand jury have been traditionally guarded in secrecy, the requirement that the defendant must be able to demonstrate instances of "particularized need where the secrecy of the proceedings is lifted discreetly and limitedly" has developed. United States v. Procter and Gamble Co., 356 U. S. 677, 683 (1958). There must therefore be a showing that the "particularized need" for disclosure outweighs the established policy of secrecy. Pittsburgh Plate Glass, supra, at p. 400.

The defendant contends that his particularized need is to "forestall surprise", and not merely to contradict the witness when he is called to testify by the Government; that to preclude this result, revelation of the witnesses testimony before the grand jury is sought at the present time, well before trial, and is "essential to the preparation of the defense." The defendant has cited no authority construing Rule 6 which would permit revelation of testimony before grand jury, before the witness has again testified during the subsequent trial. If the defendant desires to preclude the contingency of surprise, he may obtain information concerning the expected testimony of the witness by utilizing the methods of discovery authorized under the Criminal Rules, without asking this court to order the Government to furnish what may be characterized as an extaordinary source of discovery. Since any prudent and zealous counsel would desire to preclude surprise in any judicial proceeding, this alone will not fulfill the requirement for a showing of a "particularized need", so far in advance of trial. This Court shall adhere to the procedure established for the Third Circuit, in United States v. Bertucci, 333 F. 2d 292 (1964), and subsequently approved in Dennis v. United States, 384 U. S. 855, 874 (1965), requiring that disclosure of the prior statements or testimony of a witness shall be made after the judge, during trial has conducted an in camera examination of the Grand Jury minutes for the purpose of ascertaining any inconsistencies. Although this procedure has been criticized in Dennis, nowhere is it suggested that disclosure at any time prior to trial would be authorized. The defendant's motion for discovery of this item is denied, but without prejudice to the right to present a similar motion during trial, in accordance with United States v. Bertucci, supra.

Finally, (In item 1d), the defendant desires to examine the report of the Special Agent who conducted the investigation regarding his financial status, to ascertain whether any bias existed in his recommendation of criminal prosecution, since the defendant has been designated by the Organized Crime and Racketeering Section of the United States Department of Justice as having a possible affiliation with organized criminal activity in the United States.

In Lenske v. United States [66-2 USTC ¶9686], (9th Cir.), a conviction for income tax evasion was reversed upon the demonstration inter alia, that the report of the Internal Revenue Service Special Agent investigating the case included an account of the Defendant's left-wing political and social activities and ideas.

Such information is irrelevant. The admin istration of justice adequately shields an accused from the personal feelings of the initial investigator, or of his collateral findings. The Defendant has been initially charged with a Federal crime, after the Government has successfully sustained its burden of demonstrating to a grand jury that probable cause existed at a proceeding where the defendant was afforded the opportunity to objectively attack any accusation which would be based on such immaterial grounds. In addition to this protection, the defendant may rely on rather rudimentary rules of evidence to preclude admission and consideration by the trier of fact of such collateral and irrelevant information. This alone would therefore not constitute sufficient basis for pre-trial discovery.

Here, the report sought clearly falls within the scope of the Jencks Act. United States v. O'Connor [60-1 USTC ¶9163], 273 F. 2d 358 (2nd Cir. 1959). Consequently, after the Special Agent has testified on direct examination as a witness for the prosecution, which is presently contemplated by the Government, the Court may, on motion by the Defendant, order the United States to produce the report in question, in accordance with the provisions of the Jencks Act, 18 U. S. C. section 3500. The motion for discovery of this item at this pretrial stage, is therefore Denied. It is so Ordered.

 

 

[57-2 USTC ¶9911] United States of America v. Anthony M. Palermo, Defendant

U. S. District Court, So. Dist. N. Y., Criminal No. 152-189, 21 FRD 11, 8/26/57

[1939 Code Sec. 145(b)--similar to 1954 Code Secs. 7201 and 7202]

Criminal proceedings: Federal rules of criminal procedure: Right to pre-trial inspection of statements of prosecution witnesses.--The well settled rule is that defendants in criminal cases do not have the right, before trial, to subpoena and inspect statements of prospective prosecution witnesses, but are entitled to such inspection privileges only when such witnesses are put on the stand for the purpose of determining whether their credibility may be impeached; and such rule will not be relaxed even when it is a foregone certainty, in advance of trial, that particular witnesses will be put on the stand by the prosecution.

Paul W. Williams, United States Attorney (Earl J. McHugh, Assistant United States Attorney, of counsel), for United States . Wyllys S. Newcomb, for defendant.

Opinion

BRYAN, District Judge:

The defendant is charged in a three-count indictment under Section 145(b) of the Internal Revenue Code of 1939, 26 U. S. C. §145(b), with wilfully attempting to evade certain income taxes for the years 1950 through 1952 by filing false and fraudulent returns.

Defendant served upon the Government a subpoena duces tecum calling for the production prior to trial of all written reports and summaries of oral reports of named and unnamed Internal Revenue Agents and Special Agents concerning the subject matter of the indictment, transcripts of their testimony before the Grand Jury, all written reports, affidavits and statements made to the Government by the two accountants for the defendant who prepared the income tax returns called into question by the indictment, and transcripts of their testimony before the Grand Jury. Defendant then moved, pursuant to Rule 17(c) of the Federal Rules of Criminal Procedure, for an order compelling the United States Attorney to produce and make available for inspection before trial the material called for by the subpoena. The Government in turn moved to quash the subpoena pursuant to the same rule.

Defendant has prudently modified his broad demands so as to limit them to reports and statements of two named Special Agents who investigated this matter, and the statements and reports as to the statements of the two accountants. The motion to compel disclosure as so modified and the motion to quash, both raising the same issues, have been heard together.

It has been regarded as well settled that a defendant in a criminal case is not entitled to pre-trial inspection of statements of prospective prosecution witnesses. United States v. Iozia, D. C. S. D. N. Y., 13 F. R. D. 335; United States v. Kiamie, D. C. S. D. N. Y., 18 F. R. D. 421; United States v. Peace, D. C. S. D. N. Y., 16 F. R. D. 423; United States v. Bryson, D. C. N. D. Calif., 16 F. R. D. 431; United States v. Carter, D. C. D. C., 15 F. R. D. 367; United States v. Brown, D. C. N. D. Ill., 17 F. R. D. 286 [55-2 USTC ¶9560]; cf. United States v. Schluter, D. C. S. D. N. Y., 19 F. R. D. 372.

Defendant does not seriously urge that this has not been the rule up to now. Nor would such an argument avail him. The only rights of pre-trial discovery given to a defendant in a criminal case are those in Rules 16 and 17(c) of the Federal Rules of Criminal Procedure. Rule 16 relating to the inspection of papers and objects in the hands of the Government belonging to the defendant or obtained by seizure or process is plainly not applicable here. The last sentence of Rule 17(c) authorizes the court, in its discretion (see United States v. Ward, D. C. S. D. N. Y., 120 Fed. Supp. 57, 59 [54-1 USTC ¶9314]), to direct the production of subpoenaed material prior to trial for good cause shown. One of the elements of good cause is that the material must be "evidentiary and relevant." (United States v. Iozia, supra, at page 338; Bowman Dairy Co. v. United States, 341 U. S. 214.) Statements made by prospective witnesses for the Government are not "evidentiary" at the pre-trial stage. They may ripen into evidentiary material for purposes of impeachment if and when, and only if and when, the witness who has made the statement takes the stand and testifies. The defendant only then is entitled to inspect statements given to the Government by such a witness concerning the subject matter of his testimony or reports concerning such statements for the purpose of impeaching credibility if he can. United States v. Brown, supra; Jencks v. United States, decided by the Supreme Court on June 3, 1957, currently reported at 25 U. S. L. Week 4365.

There is a great difference between permitting an accused, in advance of trial, to have inspection of statements of witnesses taken by the prosecution, and permitting him to use such statements to impeach the credibility of a Government witness who has actually taken the stand. See United States v. Krulewitch, 2 Cir., 145 Fed. (2d) 76, 78. In the former case inspection is not permitted. In the latter case, even prior to the Jencks case, supra, it was settled in this and other district, that such statements could then be shown to the defense, upon a proper foundation being laid and after inspection by the court, if the court determined that they did in fact bear on the credibility of the witness. See, e.g., Gordon v. United States, 344 U. S. 414; United States v. Krulewitch, supra; United States v. Cohen, 2 Cir., 145 Fed. (2d) 82. The Jencks case merely expanded that rule so as to permit defense counsel, initially, rather than the court, to inspect such statements and to determine for themselves what use may be made of them to discredit the witness.

The defendant's argument here, however, is that the Jencks case places a different aspect on the hitherto well-settled rule denying defendants in criminal cases the right to inspect statements of prospective prosecution witnesses. He asserts that at least two of the witnesses from whom the Government has taken statements--his own two accountants who prepared the questioned income tax returns--will necessarily be called by the Government at the trial in order to make out a case. Arguing from this premise, defendant contends that, since, under the Jencks case, he will be entitled to inspect the statements of such witnesses in the hands of the Government when they are put on the stand, he should necessarily be allowed to have such inspection before trial under Rule 17(c), F. R. Crim. P.

The defendant's premise that these witnesses will necessarily be called by the Government cannot be substantiated. Indeed, the United States Attorney on the argument stated that the Government had not yet determined what witnesses it would call at the trial, and was not committed to calling either the two accountants or the two Special Agents. This is the Government's privilege, and, indeed, it may not be required, except possibly in a capital case, even to furnish the names of its witnesses in advance of trial. United States v. Carter, supra.

But even were I satisfied that defendant's diagnosis of the absolute necessity for the Government to call these witnesses is correct, his argument would not persuade me. The Jencks case does not expand or change any of the rules or principles with respect to pre-trial procedure in criminal cases, nor does it authorize the inspection which defendant now seeks.

There appears to be widespread misapprehension in many quarters as to the scope and effect of the Jencks case. It is time that such misapprehensions were laid at rest.

The Jencks case does not introduce any revolutionary principles into the trial of criminal cases. The case enunciates a simple, fair and quite limited rule. It holds that where the prosecution places a witness on the stand the defense is entitled to inspect statements or reports in the Government's possession concerning the subject matter of such witness' testimony for the purpose of determining whether they can be used by the defense to impeach his credibility. This applies whether the witness be a federal agent, an informer, or a member of the general public.

The innovation in the Jencks decision, as I have indicated, is that counsel for the defense are permitted themselves to make the inspection in the first instance, without the necessity of laying a preliminary foundation of inconsistency and of having the court inspect the statements in camera to determine what portions should be made available to the defense. The Jencks case also approves the prior holdings in this circuit in such cases as United States v. Beekman, 155 Fed. (2d) 580, United States v. Andolschek, 142 Fed. (2d) 503, and cf. United States v. Krulewitch, supra, that if the Government, on the ground of privilege, chooses to retain such material in confidence it must risk the penalty of a dismissal.

Since the Jencks case was decided there has been understandable zeal on the part of defense counsel to extend the decision far beyond what the court held. These attempts have been to some extent responsible for misapprehensions concerning the scope and effect of the decision. Most of these attempts have been unsuccessful and in most cases the district courts have properly held that the Jencks case was limited to a situation where a specific prosecution witness had taken the stand and the defense sought to impeach his credibility on cross-examination, e.g., United States v. Benson, 25 U. S. L. Week 2603 (D. C. S. D. N. Y., June 17, 1957), United States v. Grossman, 26 U. S. L. Week 2060 (D. C. N. J., July 12, 1957). However, this has not been uniformly so, e.g., United States v. Hall, 26 U. S. L. Week 2060 (D. C. W. D. Ky., July 22, 1957).

The zealous counsel for the defense in the case at bar is making another such attempt here by arguing, on the basis of the Jencks case, that defendant is entitled to inspect before trial statements of witnesses whom, he says, the Government necessarily will call. There is no merit in his argument.

In my view the Jencks case does not make any changes in pre-trial procedure in criminal cases by implication or otherwise. The case deals solely with problems arising when, and only when, the prosecution has placed a witness on the stand and his credibility is therefore in issue.

As my brother Palmieri pointed out in his recent well-considered opinion in United States v. Benson, supra, in denying a motion by defendant for pre-trial inspection of the statements of prospective Government witnesses:

"Indeed, the very touchstone of the Jencks decision is the issue of credibility of the witness at the trial. Before the defense is entitled to disclosure of any statements made by a Government witness for the purpose of discrediting him, the credibility of the witness whose prior statements are sought must be in issue. * * *.

"But I do not understand it [the Jencks holding] to mean that the vast horizon of pre-trial disclosure, in the sense urged upon me on this motion, is now available to defense counsel in criminal cases. Since there is no trial in progress and since, necessarily, no witnesses have been called to testify, there is no present issue of credibility which can justify the disclosure sought by the defendants."

The well established rule in criminal cases that defendant is not entitled to inspect statements of prospective prosecution witnesses prior to the trial has not been affected by the Jencks case, and remains unimpaired and in full force and effect. Erosion of that rule would give defendants, already protected against discovery by the Government by their privilege against self-incrimination, an undue advantage over the prosecution. It would encourage defendants to cut their cloth to the prosecution's case and would open the door to perjury or intimidation of prosecution witnesses. In my view such erosion would seriously impair the processes of law enforcement.

If attempts by counsel for the defense to expand the Jencks decision beyond its plain scope, meaning and effect are successful the "veritable Pandora's box of troubles" anticipated by Mr. Justice Clark in his dissenting opinion would indeed be opened. But I do not believe that there will be any such results if the Jencks case is properly applied and limited in accordance with its holding.

The defendant's motion to compel production is denied without prejudice to a renewal at the trial and the Government's motion to quash the subpoena duces tecum is granted.

 

 

[56-2 USTC ¶9972]United States of America, Appellee v. H. J. K. Theatre Corporation, Jeanne Ansell and Irving A. Rosenblum, Appellants United States of America, Appellee v. Jeanne Ansell, Irving A. Rosenblum, H. J. K. Theatre Corporation, K. B. Theatre Corporation, K. L. Theatre Corporation, Ansell Theatre Corporation, X. K. Theatre Corporation, M. A. K. Theatre Corporation, T & J Theatre Corporation, K. A. S. Theatre Corporation, J. A. Theatre Corporation, Appellants

(CA-2), U. S. Court of Appeals, 2nd Circuit, Docket No. 24001, 236 F2d 502, 10/15/56, Petition for rehearing of prior decision, denied and prior opinion amended, 56-2 USTC ¶9837

[1939 Code Secs. 1718(a) and (b)--similar to 1954 Code Secs. 7201-7203; 1939 Code Sec. 3616(a)--similar to 1954 Code Sec. 7207]

Tax evasion: Evidence of willfulness to sustain felony conviction.--The Second Circuit denied a petition for rehearing of its prior decision wherein it upheld a jury verdict convicting the defendants, two individuals and a group of corporations owned by one of the individuals, of willfully attempting to defeat and evade the payment of admission taxes. The court also amended its prior opinion to indicate that the U. S. Supreme Court decision in Spies v. U. S., 43-1 USTC ¶9243, 317 U. S. 492, was distinguishable from the instant case because, and only because, the concealment from the government by the two individual defendants of the existence of monthly summaries of the admission taxes was such an affirmative act of evasion as to be sufficient to establish "willfulness" for purposes of a felony conviction under 1939 Code Sec. 1718(b). The amendment eliminated any inference which could be drawn for the court's original opinion that mere proof of a knowing failure to file a return and pay a tax was sufficient to sustain a felony conviction for tax evasion.

Block & Block , New York City (Frederick H. Block, of counsel), for appellant Rosenblum. Bernard Austin, New York City, for appellant Ansell and corporate appellants.

Before FRANK, HINCKS and WATERMAN, Circuit Judges.

PER CURIAM:

The petitions for rehearing are denied.

The opinion of the court [56-2 USTC ¶9837] is amended by substituting for the sentence beginning in the last line on page 2075 and the two subsequent sentences (on the top of page 2076) the following: "We think the Spies case is distinguishable from the case at bar for here there was evidence from which the jury could reasonably have found beyond a reasonable doubt not only the willful and knowing filing of false returns but also that both Rosenblum and Ansell had concealed the existence of the monthly summaries of the admission taxes from the Government."

 

 

[56-2 USTC ¶9837]United States of America, Appellee v. H. J. K. Theatre Corporation, Jeanne Ansell and Irving A. Rosenblum, Appellants United States of America, Appellee v. Jeanne Ansell, Irving A. Rosenblum, H. J. K. Theatre Corporation, K. B. Theatre Corporation, K. L. Theatre Corporation, Ansell Theatre Corporation, X. K. Theatre Corporation, M. A. K. Theatre Corporation, T & J Theatre Corporation, K. A. S. Theatre Corporation, J. A. Theatre Corporation, Appellants

(CA-2), U. S. Court of Appeals, 2nd Circuit, Docket No. 24001, 236 F2d 502, 8/20/56, Affirming District Court, New York

[1939 Code Secs. 1718(a) and (b)--similar to 1954 Code Secs. 7201-7203; 1939 Code Sec. 3616(a)--similar to 1954 Code Sec. 7207]

Tax evasion: Misdemeanor v. felony: Evidence of willfulness: Propriety of lower court rulings.--Where two taxpayers and a group of corporations owned by one were indicted for willful attempt to defeat and evade the payment of admissions taxes, it was held, among other things, 1) the conviction of a felony was justified even though the evidence may have supported a conviction of a misdemeanor; 2) the concealing and withholding from the Government of tax records was a sufficient affirmative, overt act from which willfulness can be presumed; 3) records voluntarily produced by a corporate officer cannot be held to have been illegally obtained evidence; and 4) there was no abuse of discretion in admitting a taxpayer's prior, grand jury testimony, for purposes of impeachment. The convictions were upheld.

Paul W. Williams, United States Attorney for the Southern District of New York (Dennis C. Mahoney, Assistant United States Attorney, of counsel), for the United States. Block & Block (Frederick H. Block, and Rob ert B. Block, of Counsel, for Appellant Rosenblum. Bernard Austin (Isadore B. Hurwitz, of counsel), for Appellant Ansell and Corporate Appellants.

Before FRANK, HINCKS and WATERMAN, Circuit Judges.

[Nature of Charges]

FRANK, Circuit Judge:

Nine indictments and one information were consolidated for trial, and are consolidated for this appeal. In each of the first eight indictments, Jeanne Ansell, Irving Rosenblum and one of the several corporate defendants were charged in numerous counts with wilfully attempting to defeat and evade the payment of admissions taxes due the United States during the period May 1946 through March 1949 by filing false and fraudulent returns in violation of 26 U. S. C. Section 1718(b). ¹ The ninth indictment charged Ansell and the J. A. Theatre Corporation with wilfully failing to account and pay over admissions taxes due the United States, in violation of 26 U. S. C. Section 1718(b). Both offenses charged under Section 1718(b) are felonies. The sole information charged Ansell and the J. A. Theatre Corporation with wilfully failing to file an admission tax return in violation of 26 U. S. C. Section 1718(a), ² a misdemeanor.

[Taxpayers Blame Each Other]

Defendant Ansell was the president and apparently the owner of the corporate defendants. Rosenblum was the corporations' accountant and, at various times, was the treasurer of many of them. The corporations owned the leases of several motion picture theatres in which foreign films were exhibited. Defendants concede that the monthly admissions tax returns were false. But, at the trial, Ansell and Rosenblum each sought to place the blame for the filing of the fraudulent returns on the other.

[Taxes Collected But Not Paid Over]

There was evidence from which the jury could reasonably find the following: Ansell owned and operated the chain of theatres whose leases were owned by the corporate defendants; daily work sheets showing the amounts of taxes due the Government were prepared; from these, monthly summaries were made up; both Ansell and Rosenblum attempted to conceal the existence of the monthly summaries from the Government agents; during part of the indictment period, the tax monies that were collected were deposited in a special bank account, but Ansell drew checks on this account for purposes other than the payment of taxes; Rosenblum had an interest in a corporation which had made loans to some of the corporate defendants; the tax returns were prepared by Rosenblum each month and signed by either him or Ansell; the J. A. Theatre Corporation never filed any return; all the filed returns substantially understated the total tax actually collected.

[Guilty on All Counts]

The jury found all the defendants guilty on all of the counts in which they were named. The trial judge fined each of the theatre corporations $500 on each count in which they were named, for a total of $106,000. The individual defendants, Ansell and Rosenblum, were each fined $100 for each count, for a total of $21,200 for Ansell and $21,000 for Rosenblum. In addition, Ansell was sentenced to a 2 year prison term on all the felony counts and to a 1 year term on each of the misdemeanor counts, sentence on all counts to run concurrently. Rosenblum received an 18 month concurrent prison sentence on each count. All the defendants appeal and raise a variety of grounds for reversal.

[Two Defenses Raised]

1. All defendants raise two objections which we shall consider first.

[One--Improper Sentence]

(1) Defendants, relying on Berra v. United States, 351 U. S. 131 [56-1 USTC ¶9480], contend that we should remand for resentencing under 26 U. S. C. 3616(a). They also suggest that the Berra case may require dismissal of the indictments. We reject defendants' contention for reasons stated in United States v. Moran, -- Fed. (2d) -- (C. A. 2, 8/15/56) [56-2 USTC ¶9836].

The writer of this opinion has some doubt about that reasoning. The question considered by the Supreme Court in Berra was confined to the rejected request for an instruction to the jury. The Court did not discuss Spies v. United States, 317 U. S. 492 [43-1 USTC ¶9243] or United States v. Beacon Brass Co., 344 U. S. 43 [55-2 USTC ¶9528]. If those cases were pertinent, it would seem that the Court would have affirmed, merely citing those cases. There is language in Berra which can be read as holding that the coverage of the two statutes is in all respects identical, and that the question as to which statute applied was not for the jury but solely for the judge when he came to sentencing. Berra can then perhaps be construed to mean that the judge improperly imposed the sentence for conviction of a felony. On that interpretation, we should, in the instant case, remand for resentencing under the misdemeanor statute. However, the writer is not sure enough about the above interpretation of Berra to justify his dissenting here.

[Two--Lack of Wilfulness]

(2) Defendants further contend that, even if they were properly indicted for felonies under Section 1718(b), yet the evidence was insufficient to prove a "wilful" violation under the rule of Spies v. United States, 317 U. S. 492 [43-1 USTC ¶9243]. In Spies, the defendant was indicted under a subsection of the Internal Revenue Code, similar to Section 1718(b), which made it a felony to wilfully attempt, "in any manner," to evade or defeat any tax. Another subsection made it a misdemeanor to wilfully fail to pay a tax or fail to make a return. Defendant was indicted for wilfully attempting to evade the income tax by failing to file a return or to pay a tax. The Supreme Court held that mere proof of a knowing failure to file a return or to pay a tax, without proof of any affirmative act of evasion on the part of the taxpayer, was insufficient to establish "wilfulness" under the felony provision. We think the Spies case is distinguishable from the case at bar: (a) If Spies is read to require some overt act evincing an "evil motive" to evade taxes (as compared with a wilful omission), then we think proof here of the wilful and knowing filing of the false returns is sufficient. (b) Even if the Spies case is read to mean that where, as here, the "manner" of evading taxes alleged in the indictment constitutes a misdemeanor, in and of itself, ³ some additional overt act tending to show an evil motive, and not necessary to prove the misdemeanor, must be shown, ⁴ we think Spies inapposite since such an overt act was here proved. There was evidence from which the jury could reasonably have found beyond a reasonable doubt that both Rosenblum and Ansell had concealed the existence of the monthly summaries of the admissions taxes from the Government. Rosenblum lied to a Government agent concerning these summaries, telling the agent that they did not exist. Ansell failed to reveal their existence when questioned by a Government agent concerning the method by which she obtained the figures for making up the tax returns. She stated that she obtained the figures from the employees in her office. These monthly summaries were never turned over to the Government. Consequently, many hours were spent assembling the information which the defendants had in summary form.

[Additional Defenses]

2. Ansell raises several additional points which we think are without merit:

[One--Right to Separate Trials]

We think the trial judge did not "abuse" his discretion in refusing separate trials. Rules 8(b) and 13 of the Federal Rules of Criminal Procedure; United States v. Lebron, 222 Fed. (2d) 531, 535 (C. A. 2).

[Two--Illegally Obtained Evidence]

Ansell alleges that certain corporate checks and other records were obtained illegally by the Government, and claims the trial judge erred in denying her motion to suppress. These records were voluntarily turned over to the Government by Rosenblum, a corporate officer. As to the corporate records, we think Rosenblum had apparent and actual authority to give them to the Government and that there was no unlawful seizure. Zap v. United States , 328 U. S. 624; United States v. Wolrich, 119 Fed. Supp. 538 [54-1 USTC ¶9276]. In any event, Ansell may not assert the constitutional rights of the corporations in her own behalf. Lagow v. United States , 159 Fed. (2d) 245 (C. A. 2). As to Miss Ansell's personal checks, assuming arguendo that they were illegally obtained, we think their reception in evidence was harmless. Their use as evidence was indeed beneficial to her, since they tended to establish that she had spent personal funds for corporate purposes, thereby reimbursing the corporation for funds withdrawn by her.

[Three--Interest of Government Witnesses]

The trial judge did not err in refusing Ansell's requested charge that the Government agents acting as witnesses were interested witnesses. The judge's charge on this point was adequate.

[Four--Improper Role of Attorney]

The final issue raised by Ansell is that the trial judge erred in not further limiting her cross-examination and the summation to the jury by Block, Rosenblum's attorney. Block had been the attorney for both Ansell and Rosenblum at the time Ansell appeared before the Grand Jury. He was later discharged by her but continued as Rosenblum's lawyer. No objection was made to Block's thus serving as Rosenblum's lawyer until he sought to cross-examine Ansell concerning her appearance before the Grand Jury.

We assume, arguendo, that Ansell correctly argues as follows: Where, as here, an attorney had represented two persons who later become defendants in a criminal prosecution, he remains under an obligation not to reveal any confidential communications made to him by either of these clients. ⁵ But even assuming that argument were correct, it would have no application here. For a careful examination of the record fails to reveal any such impropriety by Block. He based his cross-examination of Ansell on subpoenaed records, records obtained from the Government, a letter written to the Grand Jury, testimony of other witnesses at the trial which contradicted Ansell's testimony, and that part of Ansell's Grand Jury testimony which was made available to him by the trial judge.

Nor do we think Block's summation exceeded the bounds of proper advocacy. Although he attacked Ansell's credibility, nevertheless the testimony of the Government's witnesses, and Ansell's testimony on cross-examination by the Government and Block, amply justified his remarks. In addition, some of his remarks were in answer to questions, concerning his own character and integrity, raised by Ansell's testimony. He had a right so to reply. McCormick, Evidence (1954) page 194. If the jury was adversely affected by the fact that Ansell's former lawyer was critical of her, the fault was Ansell's, since Block's former representation of her was first brought out by her own lawyer at the trial, on his direct examination of Ansell.

[Final Defense and Reply]

3. Rosenblum's only additional contention is that the trial judge erred in restricting his attorney's access to the Grand Jury testimony of Ansell and in limiting the use of the disclosed Grand Jury testimony in his cross-examination of Ansell. After the Government had used Miss Ansell's Grand Jury testimony to impeach her, ⁶ Rosenblum's counsel asked to see the remainder of Ansell's Grand Jury testimony in order to impeach her. We do not think that he was entitled to have access to all of her testimony. However, where, as here, it is shown or alleged that the trial testimony of a witness against the defendant is contradictory of the witness' testimony before a Grand Jury, the rule in this circuit is that the defendant must be permitted to use the contradictory Grand Jury testimony to impeach the witness. The proper procedure is for the trial judge to read the Grand Jury minutes to determine whether the witness' trial testimony is contradictory; if it is, the judge should disclose to defendant that part of the witness' Grand Jury testimony which contradicts the witness' trial testimony; and if not, and if the defendant so requests, the judge should seal the witness' complete Grand Jury testimony and make it part of the record on appeal. ⁷

The trial judge in this case did not follow this procedure. Instead, he ruled that he would read into the record only that portion of Ansell's Grand Jury testimony which related to two matters on which the Government had cross-examined her, i. e., (1) her claim that she thought that the tax returns filed were only for part payment, and (2) the monthly tax summaries. However, the testimony actually read into the record also revealed (3) that Rosenblum had set up a separate tax account, and (4) that Ansell had given the tax figures to Rosenblum who made out the tax returns. In addition, Block had a copy of a prepared statement that Ansell had read to the Grand Jury.

The trial judge also ruled that he would limit Block's cross-examination of Ansell with respect to her Grand Jury testimony to only the two matters brought out by the Government in its cross (i. e., points (1) and (2) supra). He so ruled after Ansell's counsel objected to the cross-examination of his client by Block (who had represented her at the time of the Grand Jury hearing).

We think that Rosenblum's attorney was entitled to have all of Ansell's contradictory Grand Jury testimony read into the record and that he was entitled to cross-examine her concerning this testimony free from the limitations imposed by the trial judge. Statements made to a Grand Jury are not confidential communications which come within the attorney-client privilege. McCormick, supra, Sections 93, 95; 8 Wigmore, Evidence, Section 2311. The modern justification of the privilege is that it encourages full disclosure by a client to his lawyer and thereby promotes the interests of justice, 8 Wigmore, supra, Section 2291; McCormick, supra, Section 91. This purpose is not furthered by restricting an attorney's access to and use of Grand Jury testimony by a former client.

[No Harm Done]

However, after examining the Grand Jury testimony by Ansell, which was sealed and made part of the record on appeal, and after comparing it with the trial testimony, we think that all the points in Ansell's Grand Jury testimony, which contradicted her trial testimony and which supported Rosenblum's defense, were adequately brought out at the trial. The testimony at the trial covered the following points which Rosenblum claims he was prevented from proving by the trial judge's rulings: (1) Rosenblum gave instructions that a special tax account be opened; ⁸ (2) Ansell had used the special tax account for purposes other than the payment of taxes; ⁹ and (3) Ansell had supplied Rosenblum with the figures for the tax returns. ¹⁰ Furthermore, Rosenblum's defense was assisted by the testimony of a Government witness that Ansell had stated to the witness that the entire fault was hers and that Rosenblum was not to blame for the filing of the false returns. Rosenblum's lawyer stressed this point again in his cross-examination of Miss Ansell. We are satisfied that the unrevealed portion of Ansell's Grand Jury testimony contained nothing which would have added weight to the impeachment of her trial testimony touching Rosenblum, impeachment already accomplished by that portion of her Grand Jury testimony which was read to the trial jury at the Government's behest. Thus the effect of the rulings made was not to leave her trial testimony against Rosenblum unimpeached. When her trial testimony as to a particular fact had been impeached by one passage in her prior testimony, we think it lay within the trial court's discretion to prevent, as unduly time-consuming and unimportantly cumulative, an inspection of, and cross-examination on, other passages in her previous testimony given as to the same matters on the same occasion before the Grand Jury. Indeed, the verdict against Ansell imports that the jury rejected her trial testimony to the effect that Rosenblum was solely to blame. This accomplished, further impeachment of her trial testimony could scarcely have affected the verdict against Rosenblum.

Affirmed.

¹ Section 1718(b): "Any person required under this chapter to collect, account for and pay over any tax imposed by this chapter who wilfully fails to collect or truthfully account for and pay over such tax, and any person who wilfully attempts in any manner to evade or defeat any tax imposed by this chapter or the payment thereof, shall, in addition to other penalties provided by law, be guilty of a felony and upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than five years, or both, together with the costs of prosecution."

² Section 1718(a): "Any person required under this chapter 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 chapter, who wilfully 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."

³ Under 26 U. S. C. Section 3616(a), the filing of a false or fraudulent return with intent to defeat or evade "the assessment intended to be made," constitutes a misdemeanor. The Supreme Court has held this section intended to punish the same conduct as Section 1718(b). Berra v. United States, 350 U. S. 131 [56-1 USTC ¶9480].

⁴ Clay v. United States , 218 Fed. (2d) 483 (C. A. 5) [55-1 USTC ¶49,074].

⁵ See McCormick, Evidence (1954) pp. 192-193; 8 Wigmore, Evidence, Section 2312; Anno. 141 A. L. R. 562; Root v. Wright, 84 N. Y. 72, 76; People v. Abair, 228 P. 2d 336; People v. Kor, 277 P. 2d 94; State v. Archuleta, 217 Pac. 619, 621; cf. People v. Ferandez, 301 N. Y. 302, 336-343.

⁶ It is suggested that the Government, by using a portion of the Grand Jury minutes to impeach Ansell, waived its privilege to keep the balance secret. See United States v. Krulewitch, 145 Fed. (2d) 76, 79 (C. A. 2); United States v. Beekman, 155 Fed. (2d) 580, 584 (C. A. 2). We leave that question open.

⁷ U. S. v. Alper, 156 Fed. (2d) 222, 226 (C. A. 2); U. S. v. Lebron, 222 Fed. (2d) 531, 536 (C. A. 2); U. S. v. Cohen, 145 Fed. (2d) 82, 92 (C. A. 2); U. S. v. Krulewitch, 145 Fed. (2d) 76, 78 (C. A. 2); U. S. v. DeNormand, 149 Fed. (2d) 622, 625-626 (C. A. 2); U. S. v. Beekman, 155 Fed. (2d) 580, 583-584 (C. A. 2).

The Government contends that Remington v. United States, 191 Fed. (2d) 246, 261 (C. A. 2) should be construed to hold that, before a defendant may even inspect a witness' contradictory Grand Jury testimony, he must lay a foundation similar to that required before he introduces into evidence prior inconsistent statements. This interpretation of Remington we think is not warranted. Since the Krulewitch case, supra, which the Court cited in Remington, held precisely the opposite, and since the Cohen case, supra, also cited by the Court, contains no indication of such a requirement, we are loath so to interpret Remington so as to require this foundation. No other case in this circuit has imposed this additional requirement for the mere disclosure (as opposed to use as evidence) of contradictory Grand Jury or other privileged testimony. Of course, if defendant seeks to introduce the contradictory statements in evidence, he must lay a proper foundation. McCormick, Evidence (1954), Section 37.

In any event, in this case, the trial judge made it impossible for Rosenblum's attorney to lay the foundation apparently required by Remington, since he very clearly ruled that Rosenblum's attorney was to limit his cross-examination concerning Ansell's Grand Jury testimony to only the two matters touched upon by the Government in its cross-examination of Ansell.

⁸ On direct examination by her attorney, Ansell testified that she thought Rosenblum had given instructions to open up a special tax account. On cross-examination, she testified that Rosenblum had never instructed her to open this account. Although her Grand Jury testimony would have tended to impeach this latter statement, we do not think that its exclusion by the trial judge was so prejudicial as to justify a new trial.

⁹ This was adequately brought out by the Government.

¹⁰ This was shown by the testimony of Government witnesses, and was brought out again on the cross-examination of Ansell by the Government and Block.