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[63-2 USTC ¶9837] United States of America v. Milton H. L. Schwartz, Appellant

(CA-3), U. S. Court of Appeals, 3rd Circuit, No. 14,369, 325 F2d 355, 11/27/63, Reversing and remanding District Court, 63-1 USTC ¶9382, 213 F. Supp. 306

[1954 Code Sec. 7201]

Wilful evasion of taxes: Motion for new trial: Prejudicial remarks.--Judgment of conviction and sentence for a wilful evasion of income taxes was reversed and a new trial ordered where the prosecuting attorney made prejudicial remarks in his summation concerning one of the defense witnesses.

Kenneth Syken, Richter, Levy, Lord, Toll & Cavanaugh, 121 S. Broad St. , Philadelphia 7, Pa. , for appellant. Joseph H. Reiter, Assistant United States Attorney, 4042 U. S. Courthouse, Philadelphia 7, Pa. , for appellee.

Before MARIS, KALODNER and GANEY, Circuit Judges.

[Issue]

GANEY, Circuit Judge:

The defendant-appellant was indicted on November 8, 1960, for income tax evasion for the years 1954, 1955 and 1956. The indictment is in three counts, each covering one of the three years. The substance of the counts is that the appellant had wilfully attempted to defeat the payment of a large part of the income tax due and owing by him and his wife by reporting certain income received by him during the years involved as capital gains instead of as ordinary income, in violation of §7201 of the Internal Revenue Code of 1954, 26 U. S. C. A. §7201. The jury disagreed as to the first count, but found him guilty on the other two. His post-trial motions for judgments of acquittal and for a new trial were denied, ¹ and sentence was imposed by the trial court.

His first claim on appeal is that the trial court erred in denying his motion for judgment of acquittal, since there was insufficient evidence to submit to the jury that defendant had wilfully evaded the payment of income taxes. We think there was sufficient evidence of a consistent pattern of his understating income from whcih the jury was reasonably justified in finding him guilty under the counts of the indictment. See Holland v. United States [54-2 USTC ¶9714], 348 U. S. 121 (1954); United States v. Moran [56-2 USTC ¶9836], 236 F. 2d 361 (C. A. 2, 1956). The trial court did not err in denying his motion for judgment of acquittal.

[Prosecuting Attorney's Remarks]

In support of his contention that the trial court abused its discretion in denying his motion for a new trial, defendant vigorously protests the remarks made by the prosecuting attorney regarding the reason for the discharge of one Saul E. Silberstein from the Internal Revenue Service. He maintains that these remarks were so inflammatory and prejudicial as to require the granting of a new trial.

Silberstein had been an employee of the Internal Revenue Service from 1942 to 1959. His deposition had been taken to show that defendant's treating of certain items of income as capital gain in his income tax returns was not done for the purpose of evading a larger payment of income taxes. At the time of trial, because of his illness, he was not available as a witness. The trial court permitted parts of his deposition to be read to the jury. The direct examination of the deposition reveals that Silberstein had examined appellant's returns for the years 1953 to 1956 and found no evidence of evasion. A portion of the deposition on cross-examination, which was also read to the jury, is as follows:

Q. And what were the circumstances of your leaving the Treasury Department?

A. I was removed from the service.

Q. And for what reason?

A. Immoral conduct.

Q. And what did that immoral conduct consist of?

A. Falling in love with a woman.

Q. Were you married at the time?

A. I was; and allow me to say, and while you are bringing this up, there were several charges of immoral conduct at the same time. One individual received a raise and one got a very high promotion, and I won't go into that.

Q. And what did the immoral conduct charge consist of?

A. Well, it is in the record, You can look it up. I do not wish to discuss it.

In rebuttal, the prosecution called an agent of the Internal Revenue Service who had worked with Silberstein in the investigation of appellant's income tax returns. A portion of the colloquy is as follows:

Q. Agent Catrambone, do you know why Silberstein was discharged from the Internal Revenue Service?

A. Yes, I do, for immoral purposes.

Mr. Reiter [prosecuting attorney]: I have no further questions.

The Court: Mr. Reiter, that was wholly unnecessary.

Mr. Richter [defense counsel]: Now I must again ask for the withdrawal of a juror.

The Court: Wholly unnecessary. That is exactly what the witness himself said. How do you impeach somebody by saying twice what he said once? Now go ahead.

Mr. Reiter: I have no further questions.

The Court: The motion is denied.

[Attorney's Summation]

In his summation to the jury, the attorney for the prosecution made the following remarks:

Now let's take a look at the defense. We do have a defense here, we have a defense in every case. And the defense here consists of the defendant saying that "Somebody looked at my books, a Revenue agent, and he said it was all right."

All right, now let's take a look at this Revenue Agent. Let me bring this out to you. This Revenue Agent Sol Silberstein testified that he had worked for Internal Revenue for a long time, I think seventeen years, and then he compromised himself. He was caught in an act of immorality, adultery. Now you know whenever you get these sinners they have some way of, you know, saying that it isn't so bad. What he said was, "Oh, my only error was falling in love." Well,

no matter how he tried to make it sound

nice it boils down to the same thing, immoral conduct, compromise, and he got kicked out.

Now, you must understand that the Internal Revenue Service you know really has no choice. I mean, these people are in sensitive positions and when they start compromising themselves by going into hotel rooms with women when they are married and have kids, I mean, that makes them very susceptible to any kind of nonsense, and that is the reason they had to get rid of him. Now he felt that this was a blast. I mean, he didn't bring this on himself, you know. This wasn't his fault that he was thrown out. I mean, he just took another woman, you know. This wasn't his doing, not at all. He is bitter. He says, "Other people do it and they get promoted and it is all right." That is right there in his deposition.

With this kind of bitterness, with this kind of antagonism, with seventeen years already in the service, what is this guy waiting for? He is waiting for the opportunity to get back at Internal Revenue Service. He wants to strike that one blow. He would love to grab him by the throat and shake him, and he thinks he had his chance here.

At this point counsel for the appellant rose in protest. In answer the trial court advised him that he could argue all of that to the jury when his opportunity came, since it was a matter of argument. The court did, however, request the attorney for the prosecution to stick to the facts because only the facts in the deposition were before the jury. Then after the prosecuting attorney returned to his summation, counsel for appellant interrupted, saying, "Pardon me, Your Honor. To protect the record, now there is absolutely no evidence in any deposition of anybody being found in any hotel rooms or anything like that." The court granted him an exception.

[Trial Judge's Remarks]

During his charge to the jury, the trial court made the following remarks:

Now, early in my charge I am going to relate to this Agent Silberstein. Mr. Silberstein was attacked vigorously by the Government. The issue before you as to Mr. Silberstein is not why he left the service or what he did. I do think that inadvertently the United States Attorney made reference to hotels, or something of that kind. None of that was in the testimony. I don't think it is of any importance but I point it out to you for what it is worth. I am sure that at the time he thought it was in the deposition. The fact is, and I will read the testimony to you, the question was asked by the Government:

Then he re-read to the jury that portion of Silberstein's deposition on cross-examination set forth above. Then he went on to say:

Now, that was all that was said at that time, so that is what you will consider.

Now, why does the Government bring that up? We are back again to the question of credibility. The Government has a right to argue to you, as they have, that you may not want to put credence in his testimony because of this fact. That is a matter for you to decide. You can decide in your own minds that a person who was discharged from the service for immoral conduct might be just as honest as anybody in this courtroom, or you may not. That is a matter solely for you to decide. It only goes to the weight of his credibility, and you put whatever emphasis you want on it.

[Trial Court's Discretion Not Unlimited]

The trial court has wide discretion in its control of the extent of summation by counsel. But such discretion is not unlimited. Though counsel may suggest such legitimate inferences as could be drawn from the evidence produced at the trial, he may not refer to prejudicial facts having no basis in the record, or draw upon conjecture. Berger v. United States , 295 U. S. 78 (1935); Rob inson v. United States , 32 F. 2d 505 (C. A. 8, 1929); Latham v. United States , 226 Fed. 420 (C. A. 5, 1915); Wagner v. Pennsylvania R. Co., 282 F. 2d 392, 396 (C. A. 3, 1960). When counsel does make such references to the jury, that body should be admonished to disregard them. However, as the Court noted in the Rob inson case, supra, at p. 508: "There are times when no admonition or instructions of the court can remove from the jury's mind the effect of improper conduct and remarks of counsel, and we think this is true in this case. . . ." This was not a case, as in United States v. Stirone, 262 F. 2d 571, 577 (C. A. 3, 1958), where "Lawyers for both sides 'clashed on their sounding shields the din of war.' Each side made charges against the witnesses for the other side. . . ." On the contrary, as counsel for the prosecution admitted at argument on appeal, the trial was one of "measured caution". By contrast this made the objectionable remarks all the more glaring.

Yet even if it could be said that the possible adverse effect of the improper remarks could have been neutralized by the trial judge, we cannot say that his admonition to the jury cut deep enough to remove their malignant effect. The court's instructions convey the impression that it did not think the remarks were of any importance but that the jurors could, if they so chose. At the very least, they could have been told to disregard them and that such remarks had no bearing one way or the other in their determination of the guilt or innocence of the defendant.

Since the case must go back for a new trial, we think it appropriate that we answer another contention of the appellant. He maintains that the trial court erred in sustaining the prosecution's objections to an attorney, with whom appellant shared a law office during the critical period in question, testifying that he had told the defendant that one or more of the disputed transactions in this case were, in his judgment, properly treated as capital gains. The trial court sustained the objections on the ground that the jury might give too much weight to this testimony despite the fact that appellant had not shown that the attorney was familiar with all the necessary facts regarding the transaction or transactions. Under such circumstances the trial court did not abuse its discretion. United States v. McCormick [3 USTC ¶1187], 67 F. 2d 867 (C. A. 2, 1933), cert. denied, 291 U. S. 662.

The judgment of conviction and sentence on counts two and three will be reversed and the case will be remanded with directions to grant defendant a new trial.

¹ The opinion of the District Court is reported at [63-1 USTC ¶9382] 213 F. Supp. 306 (E. D. Pa. 1963).

[Dissenting Opinion]

MARIS, Circuit Judge, dissenting:

I am in complete accord with the court in its view that the jury was justified in finding the defendant guilty on the second and third counts of the indictment and that the court did not err in sustaining the Government's objection to the testimony of the defendant's witness Ettinger. But I cannot agree that the defendant is entitled to a new trial because of the remarks made by counsel for the Government in his summation with respect to the defendant's witness Silberstein. I agree that those remarks were ill-advised and in bad taste but I do not believe that they could have operated to discredit the witness in the minds of the jury, and thus to prejudice the defense, to any greater extent than Silberstein's testimony, to which the defendant had made no objection, had already done.

Silberstein testified, on cross-examination, that he had been removed from the service of the Treasury Department for immoral conduct involving the falling in love with a woman, he being at the time a married man. He stated that he did not wish to discuss the nature of the charge of immoral conduct. I am satisfied that any juror of ordinary intelligence and experience with the facts of life would inevitably infer from this testimony that Silberstein had been discharged by the Treasury Department for sexual misconduct with a woman other than his wife. Certainly anything less than adultery would hardly be described in ordinary parlance as "immoral" conduct with a woman other than one's wife. I cannot believe that a juror would have thought that such drastic action as dismissal would have been taken by the Government if Silberstein had merely taken a woman other than his wife to dinner or the theatre or sent her a valentine or Christmas gift. And it is equally certain, to my mind, that a juror would be likely to infer that the witness's admitted immoral conduct took place in a secluded spot. Whether this was a hotel room or some other place would not seem to be a point of any consequence in this case.

I repeat that I regard the remarks of Government counsel with respect to Silberstein's conduct as unfortunate and ill-advised. But I am sure that the ideas which they suggested as to the nature of his conduct were already in the minds of the jurors and others in the courtroom as the result of the reading of his testimony. Moreover, it must be remembered that Silberstein was not the defendant on trial and these facts were relevant, if at all, only on the question of his credibility as a witness. This the trial judge adequately pointed out in his charge which I think put the whole matter in its proper perspective.

In my judgment the defendant was fairly tried and properly convicted. I would affirm the judgment of the district court.

 

 

[60-2 USTC ¶9577]Max Greenberg, Defendant, Appellant v. United States of America , Appellee

(CA-1), U. S. Court of Appeals, 1st Circuit, No. 5636, 280 F2d 472, 7/12/60, Vacating and remainding an unreported District Court decision

[1954 Code Secs. 7201 and 7206]

Conviction for false filing and wilful evasion: Prejudicial conduct of counsel: Hearsay evidence: Defendant's absence during trial.--A new trial was ordered for a taxpayer who was convicted on counts of filing false and fraudulent returns as the president and sole stockholder of a corporation and of wilfully attempting to evade and defeat individual taxes because: (1) the government counsel had made improper comments in final arguments to the jury concerning improper, irrelevant testimony that the taxpayer had made only a nominal tax payment 10 years earlier; (2) the government counsel had improperly expressed his personal belief and opinion in the government's evidence; (3) testimony of an internal revenue agent that checks drawn on the corporation were personal income was hearsay and was uncorroborated by the payees or other third parties; and (4) the defendant's absence during a part of the trial was not shown to be voluntary.

James R. McGowan, Providence , R. I. (Lester H. Salter of Salter & McGowan, Providence , R. I. , with him on brief), for appellant. Joseph Mainelli, United States Attorney, Providence, R. I. (Arnold Williamson, Jr., and Samuel S. Tanzi, Assistant United States Attorneys, Providence, R. I., with him on brief), for appellee.

Before WOODBURY, Chief Judge, and HARTIGAN and ALDRICH, Circuit Judges.

Opinion of the Court

ALDRICH, Circuit Judge:

The defendant was found guilty by a jury of filing false and fraudulent income tax returns on behalf of the Star Pharmacy, Inc., of which he was president and sole stockholder, for the years 1952 to 1954 (3 counts), and guilty of wilfully attempting to evade and defeat the payment of his individual tax for the years 1952 and 1953 (2 counts). Following jail sentences on each count to be served concurrently, and the imposition of separate fines, he appealed. There must be a new trial. Without considering whether there were other errors, we shall deal only with those which seem most likely to reoccur. ¹ These consist of prejudicial conduct by the United States attorney, and proof of the government's case through hearsay evidence.

[Prejudicial Conduct]

The defendant did not file a personal return for the year 1952 or 1953. Over his repeated objections the court permitted the government to show that he had paid a personal income tax in 1943 of $17.81, had filed a return showing no tax due in 1946, and had filed no personal return in any other pre-indictment year. ² In his closing argument to the jury, the United States attorney stated: "Now going back to this year of 1943, as my brother has admonished you--and I join in his admonition--when you go into the jury room don't leave your common sense behind, don't leave your common knowledge behind. Take it with you. In 1943, as you know, we were engaged in one of the most crucial periods of our history, the greatest war in the history of the world. We became embroiled in it, and the whole future of this country was at stake. And the ultimate result of that war would have determined whether our way of life was to continue or whether it was to perish from this earth. And in pursuance and in prosecuting that war there were hundreds of thousands of lives of the flower of American youth lost on the battlefields or on the oceans or in the airways of this world. And the taxpayers in this country, for prosecuting that war, paid and committed themselves to pay hundreds of billions of dollars. And Mr. Greenberg, along with his family, and all of us, are the beneficiaries of the sacrifices that were made during the war years. And Mr. Greenberg shows his gratitude by paying the magnanimous and munificent amount of money of $17.81 by way of income taxes, as his contribution." At this point defendant objected, and the court replied, "I suppose counsel must indulge in a certain amount of oratory."

We do not know what the court had in mind. Oratory on the issues in the case is one thing. The defendant was indicted for the years 1952 and 1953. Even if there were a showing that he had deliberately falsified his return on one occasion ten years earlier, we would doubt its relevancy. But here there was not even this, as there was no evidence that $17.81, paltry as it may have seemed, was a penny less than the amount owed. The government's tawdry charge of unpatriotism was not only unwarranted, it was inexcusable. It called for immediate correction and rebuke even if counsel had not risen to object.

The United States attorney commenced his final argument by informing the jury that he was "a sort of thirteenth juror [who] applies his training in the evaluation of evidence, in analyzing evidence, and tries to convey to the jury just what part the evidence plays in the presentation of a case" (a description we find quite inappropriate, since counsel, unlike a juror, is not required to be impartial). Near the end of his argument the United States attorney sought to put this self-appointment to use. In vigorous language he expressed his personal opinion of the trustworthiness of the government's evidence and the consequent guilt of the accused. Upon objection interposed, the court ruled in the presence of the jury that the prosecutor had a right to argue "his belief in the evidence." Counsel continued, and the court overruled a second objection, but expressed a caution. The argument was then repeated.

Rule 15 of the Canons of Professional Ethics of the American Bar Association reads:

"It is improper for a lawyer to assert in argument his personal belief in his client's innocence or in the justice of his cause."

Government counsel stated in oral argument before us that this was "inapposite" because he is an "advocate." We are not clear whether he disapproves of the principle, or whether he considers himself outside of it. In either event we disagree. To permit counsel to express his personal belief in the testimony (even if not phrased so as to suggest knowledge of additional evidence not known to the jury), would afford him a privilege not even accorded to witnesses under oath and subject to cross-examination. Worse, it creates the false issue of the reliability and credibility of counsel. This is peculiarly unfortunate if one of them has the advantage of official backing. ³ The resolution of questions of credibility of testimony is for impartial jurors and judges. The fact that government counsel is, as he says, an advocate is the very reason why he should not impinge upon this quasi-judicial function. We believe the canon to be elemental and fundamental. See also 1 Bishop, New Criminal Procedure §293 (2d ed. 1913); 6 Wigmore, Evidence §1806 (3d ed. 1940).

It is true that special circumstances, such as a personal attack upon counsel, may occasionally justify a reply. See, e.g., United States v. Socony-Vacuum Oil Co., Inc., 1940, 310 U. S. 150, 240-42; Gridley v. United States, 6 Cir., 1930, 44 F. 2d 716, 739; United States v. Battiato, 7 Cir., 1953, 204 F. 2d 717, 719. Too much has sometimes been read into these cases due in part, perhaps, to language in some of the opinions. ⁴ To the extent that cases may be found that permit counsel to state their personal belief as a matter of course, we do not follow them. We agree with the statement that "No one who is at all conversant with jury trials can fail to see the possible prejudice . . .." State v. Gunderson, 1913, 26 N. D. 294, 297, 144 N. W. 659, 660.

[Defendant Absent]

Before turning to the evidence, there is one further incident that merits attention. During the trial, while testimony was being introduced following a recess, the court remarked that the defendant was not in the room. The United States attorney replied by inquiring whether it could be "stipulated that the defendant had waived his presence in the courtroom?" The court acceded. It may be assumed that defendant's counsel also acceded. It does not appear, however, that the defendant had authorized such a stipulation, or that he even knew that the trial had resumed. Nor does it appear when he eventually returned. A trial may continue in the defendant's absence only if such absence was "voluntary." Fed. R. Crim. P. 43, 18 U. S. C. The government has made no such showing. Cf. Echert v. United States , 8 Cir., 1951, 188 F. 2d 336. But cf. Parker v. United States , 4 Cir., 1950, 184 F. 2d 488 [50-2 USTC ¶9463].

[Hearsay Evidence]

In describing the government's case in his opening government counsel informed the jury that the defendant drew "checks on the corporation which he used for his own personal purposes." What this meant was that the payment of defendant's personal bills by the corporation was income to him. Whose bills it was that were paid, that is to say the purpose of th checks, was an important element on the corporate counts, and was essentially the whole of the government's case on the personal counts. The government proceeded to prove this purpose through conclusory statements of one Gray, a special agent of the Internal Revenue Service, who stated the totals of the checks that represented income and non-income in his opinion, and which were personal and which for corporate purposes. The hearsay nature of this opinion testimony was abundantly revealed. Gray's analysis and compilations were, by his admission, made from . . . "monthly statements provided by the bank, and from independent corroboration from witnesses." "This determination was based on inquiries made of the payees of the checks, the taxpayer, Mr. Greenberg, or his representative . . .." Or, according to the government's brief, "the purpose for which each of the checks was used was determined by him through his investigation." Spelling this out, Gray testified that, for example, on finding that there were corporate checks payable to the telephone company and the light company, he went to these companies and determined that the checks were to meet bills incurred by the defendant at his residence, and were not charges at his place of business. No payee or other third parties testified at the trial. ⁵ No records or admissions of the defendant corroborated this testimony. ⁶

To justify the admission of this evidence the government in its brief charges that the defendant "fails to discern the distinction between testimonial and circumstantial evidence. . . . The statements of the persons interviewed by witness Gray were not offered for the truthfulness of their assertions as to the nature of the transactions for which there checks were issued . . . [but] solely for the purpose of showing as a fact the reaction of witness Gray in his determination of the purposes for which the checks issued. Only the credibility of witness Gray, who took the statements, was involved." (Ital. in orig.) Encouraged by this flight from reality the government moves into orbit, if we may use the vernacular. "The issue before the Court was not whether these checks represented payments for personal investments, fuel, furs, camping privileges, groceries, clothing, life and health insurance, medical expenses, house repairs and renovations, services and other miscellany." (Italics supplied.) Then, after three irrelevant paragraphs, the trajectory suddenly returns to earth. "The only genuine issue with reference to these 336 checks was whether they were drawn for corporate or personal purposes." The government, however, seems not to realize where it has landed.

Even without this inadvertent concession the government's position hardly merits discussion. Obviously the jury was not trying Gray's state of mind. ⁷ Both in his opening and in his final argument to the jury, the United States attorney discussed the actual purpose of the checks, and nothing else. Of course nothing else was material. It is elementary that this purpose could not be established by what third parties told the witness out of court, or by testimony of what he concluded therefrom.

At the conclusion of the evidence the defendant moved for acquittal. This motion was denied. Although the defendant moved for a new trial, he did not move after verdict for judgment n. o. v. pursuant to Fed. R. Crim. P. 29, 18 U. S. C. Passing the point of whether such motion is necessary in a criminal, as distinguished from a civil case, Cone v. West Virginia Pulp & Paper Co., 1947, 330 U. S. 212, we would not be obliged to order an acquittal now even were we satisfied that no properly admissible evidence warranted conviction. Bryan v. United States, 1950, 338 U. S. 552 [50-1 USTC ¶9140]. On a review of the entire record we believe that the more appropriate order is to require a new trial.

Judgment will enter vacating the judgment of the District Court, setting aside the verdict and remanding the case for a new trial.

¹ On this basis we do not pass upon certain testimony which the government informs us should be considered in the light of the fact that it "crept into the record inadvertently," although the basis for asserting inadvertence does not appear, and the government did not seek to withdraw the evidence after it allegedly "crept" in. (Italics in original.) We accept this statement, however, as meaning that it will not be reoffered.

² All of this evidence was improperly admitted. In Spies v. United States, 1943, 317 U. S. 492 [43-1 USTC ¶9243], it was held that wilful failure to file a return and the wilful failure to pay the tax known to be due were not sufficient to constitute the felony of attempting to evade and defeat the tax. The district court seemed to feel, however, that it was admissible evidence to show a fraudulent intent. Whether or not that might be so in some circumstances, it was of little relevance here without evidence that as to any specific pre-indictment year the defendant even owed a tax. However, the evidence itself was less prejudicial than the use the government made of it.

³ Where would this leave a criminal defendant who is entitled to representation, but whose counsel does not believe in his innocence? Must his counsel nevertheless assert such a belief in order to counter the expressed opinion of government counsel, or does such a defendant have an unrefuted witness against him, in the form of the prosecuting attorney? Or should a prosecutor be permitted to argue, for example, "Members of the jury, I tell you that in my opinion trained to examine evidence this defendant is guilty as hell. I know it; he knows it. Even his own counsel knows it. Oh yes, his counsel asked you to find him not guilty. But I notice that not once did he suggest to you that he had even a shadow of belief in his client's innocence. Why didn't he? Because his conscience wouldn't permit him to. Even his own lawyer doesn't think he is innocent, but he wants you . . ." etc., etc. That is not the argument made in this case, but we see no stopping point except the one stated in the canon.

⁴ In Battiato the court stated, "He does not state uncompromising language or even hint the defendants are guilty. He states merely that he is arguing that they are guilty and that he believes them guilty." 204 F. 2d at 719. (Italics supplied). Surely the court must have misspoken itself in suggesting that counsel's personal belief in guilt is something less than a hint. We think the court meant that government counsel had not hinted that there was any evidence which he had in mind that was unavailable to the jury (a hint that all agree would have been the clearest kind of error), and that its actual holding was that his assertion of personal belief in the defendants' guilt was justified by certain prior argument made by defendants' counsel. Whether we would have found that argument adequate special circumstances we need not decide. It is clear that there were none in the case at bar.

⁵ The debatability of the witness' conclusions on this matter is graphically illustrated by the fact that the government came in with two sets of figures for the defendant's personal income deficiency--one civil, and a smaller one for fraud because it was not sufficiently sure of the balance. But apparently the government, through Mr. Gray, was to be the arbiter of the extent that it was appropriate to be certain.

⁶ In many instances the checks themselves did suggest that the payments were for the defendant's individual benefit (in which case the checks were independently admissible), but in many others they did not. For example, the corporation's checks to the telephone company and light company, discussed above, do not show on their face whether they are paying for services rendered the corporation, or someone else. The meat-market checks were similarly ambiguous--having in mind that the corporation made and sold sandwiches. However, the United States attorney, pursuant, perhaps, to his announced ability to analyze evidence, told the jury that "in no instance is a check payable that could conceivably be considered to be a payment on behalf of the corporation." Had this been true, there would have been no need of Mr. Gray's testimony, a suggestion which the government has never made.

⁷ The government states that Gray's duties were to investigate among third parties and to report, and by some unfathomable process it seeks to turn this into an argument that the question before the jury was simply "Gray's credibility." "[T]he availability of witness Gray for cross-examination by the appellant satisfied his constitutional rights of confrontation . . .." In marked contrast to this was the government's position at the trial when it successfully resisted the defendant's attempts to secure, for cross-examination of Gray, those portions of his reports which disclosed what third parties had told him. It is difficult, to say the least, to reconcile these two positions.

 

 

[62-2 USTC ¶9718]J. Monroe Dunn, Appellant v. United States of America , Appellee

(CA-5), U. S. Court of Appeals, 5th Circuit, No. 19206, 307 F2d 883, 9/12/62, Reversing and remanding unreported District Court decision

[1954 Code Sec. 7203]

Failure to report income: Criminal conviction: Improper comments and admission of evidence.--Comments by the U. S. attorney were improper and prejudicial. Certain evidence was erroneously admitted. Defendant's conviction was reversed and remanded.

Charles L. Gowen, Atlanta , Ga. , for appellant. William T. Morton, Assistant United States Attorney, Augusta, Ga., Norman Sepenuk, Department of Justice, Washington 25, D. C., for appellee.

Before JONES, WISDOM and GEWIN, Circuit Judges.

GEWIN, Circuit Judge:

J. Monroe Dunn appeals from a conviction and sentence under a two count indictment charging willful attempts to evade his income tax for the calendar years 1955 and 1956. ¹

The Government contends that Dunn, who was then Mayor of the City of Baxley , Georgia , received funds from the City of Baxley and from contractors and suppliers performing work and furnishing goods to Baxley, Appling County and the City of Surrency , which he did not report for the years involved. ² The Government claims that the unreported funds were received by Dunn in the form of "kickbacks" or for construction work performed by him, but payment for which was made to other contractors and city employees, who in turn delivered cash to Dunn. Dunn denied receiving the cash sums claimed and he contends that certain unreported funds paid to him by check of the City of Baxley were used for the sole purpose of defraying expenses incurred in making trips to Atlanta and other places to secure public works projects. Dunn was a construction contractor and owned and operated heavy equipment used to move earth and for other purposes.

The appellant Dunn complains of error with respect to alleged prejudicial statements or arguments made by the United States Attorney; the improper admission in evidence of Government's Exhibits No. 3, hereinafter mentioned; the refusal of certain requested charges; and errors in the instructions given by the court.

In his opening statement to the jury, the District Attorney made the following assertion:

"This case is replete with fraud and is one of the most flagrant cases we have ever tried in the Southern District of Georgia." ³

In his closing argument, the United States Attorney was commenting upon an alleged arrangement between Dunn and a contractor named DeLaigle, who was a Government witness, who admittedly had converted checks to cash and claimed to have given certain cash to the defendant Dunn, which Dunn denied receiving, when the following argument was made:

"how was Mr. DeLaigle going to get the job? Mr. Dunn was the Mayor. He got them from Mr. Dunn. Whether those accounts (amounts?) were reimbursement for expenses or kick backs--any of you gentlemen that know anything about politics, when you throw out that much money, why, somebody is going to have to take (pay)? somebody else."

The defendant objected and made a motion for a mistrial. ⁴

The duty of a United States Attorney in a criminal prosecution is succinctly stated in Handford v. United States, (5 Cir., 1957) 249 F. 2d 295 as follows:

"A United States district attorney carries a double burden. He owes an obligation to the government, just as any attorney owes an obligation to his client, to conduct his case zealously. But he must remember also that he is the representative of a government dedicated to fairness and equal justice to all and in this respect he owes a heavy obligation to the accused. Such representation imposes an overriding obligation of fairness so important that Anglo-American criminal law rests on the foundation: better the guilty escape than the innocent suffer. In this case zeal outran fairness. The argument of the United States Attorney in the district court was improper, prejudicial and constituted reversible error."

In the instant case "zeal outran fairness" in our judgment. At the outset, the jury was told that in the prosecutor's opinion the case was the most flagrant he had ever tried and was replete with fraud. At this point, it would have been relatively simple for the Court to have discharged the jury who heard the prejudicial remarks and impaneled another one. It is improper for counsel to express his personal opinion or to state facts of his own knowledge, not in evidence, and not part of the evidence to be presented; or to make unwarranted inferences or insinuations calculated to prejudice the defendant. Taliaferro v. United States , (9 Cir., 1931) 47 F. 2d 699. There can be no doubt that the statement in the closing argument to the effect that all politicians take kickbacks on contracts such as these was prejudicial. At the time Dunn was the elected Mayor of the City of Baxley . The case against Dunn on this point rested on the veracity of DeLaigle. To insinuate that Dunn must have gotten the money from DeLaigle because Dunn was a politician and that their relationship was a nefarious political deal, was improper and prejudicial.

The fact that the Court told the jury to "disabuse your minds of that statement" cannot remove the prejudice. This Court reversed a conviction for improper argument in Ginsberg v. United States, (5 Cir., 1958) [58-2 USTC ¶9669] 257 F. 2d 950, where there was no objection to the argument and no corrective charge given. The Court said:

"We hold that this statement of the prosecuting attorney constituted 'plain error . . . affecting substantial rights' under Rule 52(b), 18 U. S. C. A., governing criminal procedure. It was such an error, also, as would have been magnified in its influence on the jury by an objection and a motion for mistrial."

This Court also reversed a conviction on a narcotics charge for a statement much less prejudicial than the one here involved, ⁵ without an objection or motion for mistrial in Nalls v. United States, (5 Cir., 1957) 240 F. 2d 707. In this case, the point was raised by motion for mistrial and motion for a new trial. ⁶

The paths of justice must be cut through a wilderness of facts in every case. Opinions of prosecutors or defense counsel are not issues to be submitted to the jury. The statements made by the District Attorney could not be based on evidence to be presented or actually presented. Evidence to support his statements, if tendered, could not be received. We are always concerned with guilt and innocence in criminal cases; but of equal importance is a fair trial to guilty and innocent alike. Trials are rarely, if ever, perfect, but gross imperfections should not go unnoticed. In every case involving improper argument of counsel, we are confronted with relativity and the degree to which such conduct may have affected the substantial rights of the defendant. It is better to follow the rules than to try to undo what has been done. Otherwise stated, one "cannot unring a bell"; "after the thrust of the saber it is difficult to say forget the wound"; and finally, "if you throw a skunk into the jury box, you can't instruct the jury not to smell it".

The Government relied heavily on witness DeLaigle and Government Agent Abbott to prove its case. For a year or more, Agent Abbott made an investigation of defendant Dunn's income. At a conference attended by several Government agents, including Agent Abbott, the defendant Dunn and a Mr. Atwood, ⁷ who was an accountant for Mr. Dunn, Agent Abbott submitted a list of items of claimed income to Accountant Atwood which he, Abbott, claimed had been received as income by Dunn and not reported. Accountant Atwood took the list and tried to determine whether the alleged unreported items had in fact been reported. He was successful in establishing that several thousand dollars from the list furnished by Abbott had been reported, but he was unable to find any record of many items on the list. He prepared a work sheet which reflected the items he had not been able to find in the records and this list was voluntarily delivered to Agent Abbott with the consent of Dunn. Dunn made no statement except to deny that he had failed to report his income and at no time did Dunn or anyone on his behalf admit the correctness of the list prepared by Agent Abbott. Most, if not all, of the items on the list prepared by Abbott were based on information furnished to him by witness DeLaigle out of the presence of the defendant.

The Government called Accountant Atwood as a witness and requested him to bring a copy of the statement submitted to Agent Abbott. This statement was admitted in evidence over the objection of the defendant. The defendant claims prejudicial error because the defendant contends that the statement was received in evidence for the purpose of proving that Dunn had admitted that the items of claimed income on the list prepared by Abbott and claimed by Abbott and DeLaigle to have been received by Dunn, for which Accountant Atwood could find no record, constituted an admission of the correctness of the items listed as unreported income. For example, the following question was propounded to witness Atwood by the District Attorney:

"Q. Therefore, that statement is a record of undeposited cash received by Mr. Dunn for the years 1955 and 1956, is that right?

"A. I don't know whether he received it or not. It is what Mr. Abbott said he received."

When Agent Abbott was on the stand, some effort was made to lay a predicate for the introduction of a confession. The following question was propounded by the District Attorney to Agent Abbott:

"Q. Now, Mr. Abbott, did you threaten Mr. Dunn or his representatives or offer them any hope of reward if they would submit you that statement?"

In his amended motion for a new trial, defendant makes the following assertion which the distinguished trial judge certified to be facts of record on appeal:

"In this connection, defendant shows that the United States Attorney in his concluding argument to the jury argued that said Government Exhibit No. 3 was an admission by defendant of his guilt and constituted an admission by defendant that he had received the income shown on Exhibit No. 3."

When Exhibit No. 3 was offered by the Government, the defendant objected, contending that it was based on statements made by Agent Abbott to Accountant Atwood asserting that he, Abbott, knew of certain unaccounted for cash. The Exhibit was admitted subject to the objection, but the court suggested that when the evidence was closed, the defendant could further object. This was done by a motion to exclude Exhibit No. 3 upon the grounds previously stated and because the District Attorney had argued that it was evidence of an admission of guilt on the part of the defendant. The defendant claims that the statement was not admissible in view of the fact that witness DeLaigle, who furnished the information to Abbott; and Abbott himself had testified; and the defendant further argues that the evidence clearly showed that the statement was not admissible under the theory that it constituted an admission of guilt. The Court made the following ruling:

"The Court:

"Well, I think your evidence clearly demonstrated, that and I think you thoroughly explained it in your argument to the jury, and your witnesses also testified to that that it was not an admission of guilt. Of course, the government contends that it was and you contend that it wasn't, and that is a question of fact for the jury. Bring the jury back in, Mr. M arshal."

In its brief, the Government argues that the comment by the prosecuting attorney is inconsequential considering the fact that the record clearly proved the defendant's contention that Exhibit No. 3 ". . . was never meant to constitute an admission by appellant." We cannot accept the Government's contention. The document should never have been admitted under the contentions and insinuations of the Government that it constituted an admission of guilt. Even if the defendant carried the burden of showing that it was not an admission of guilt, the Government was permitted in final argument to assert that it was such an admission. If the Government's contention is accepted, the District Attorney's argument is clearly improper. At most, Exhibit No. 3 constituted a list of items of income which DeLaigle told Agent Abbott he paid to Dunn and which Agent Abbott concluded Dunn received and did not report. Accountant Atwood could show that some of the items had been reported, but not all of them. In no sense did the list constitute an admission by Dunn that he did receive the items claimed. DeLaigle testified that Dunn did receive such items, Abbott believed DeLaigle, but Dunn denied DeLaigle's testimony. Both DeLaigle and Agent Abbott testified.

The statement was admissible to show that Dunn's accountant was unable to find a record of the income listed which DeLaigle claimed he paid to Dunn, but it should not be used as proof that Dunn admitted receipt of such items. It was so used by the Government and the prosecuting attorney argued to the jury that it was an admission of guilt. The distinguished trial judge stated that such was the contention of the Government. Error was committed when the court admitted the statement into evidence and permitted the jury to decide whether or not it constituted an admission of guilt. Phoenix Assur. Co. Limited of London , England v. Davis , (5 Cir., 1933) 67 F. 2d 824; State v. Johnson, ( Mo. ) 252 S. W. 623; Wigmore on Evidence, Vol. 10, §2550, p. 501. The Court should have excluded Exhibit No. 3 or instructed the jury that it did not constitute an admission of guilt on the part of the defendant. It constituted evidence to support the Government's contention as to what Dunn's records showed with respect to the items claimed by the Government to be unreported income, but not to prove an admission of guilt.

We have examined the defendant's other specifications of error and conclude that it is unnecessary to discuss them.

For the reasons set out above, the case is REVERSED and REMANDED for a new trial.

¹ "Internal Revenue Code of 1954:

SEC. 7201. ATTEMPT TO EVADE OR DEFEAT TAX.

Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both together with the costs of prosecution.

(26 U. S. C. A., Sec. 7201.)"

² Dunn reported $14,922.98 as net income in 1955 and the Government claims he knew his net income for that year was $22,067.23. For the year 1956 he reported net income of $20,223.68 and the Government claims he knew that his net income for that year was $36,576.24.

³ The defense counsel moved for a mistrial and the Court responded in part: "Just disabuse your minds of that statement, gentlemen, and don't let it influence you in any way. I am sure Mr. Calhoun did not intend to say it, and he should not have said it, but just remove that from your mind in the trial of this case, and with that I overrule your motion. All right you may proceed."

⁴ Whereupon, counsel for the defendant told the Court that he (the United States Attorney) had said, "That everybody that knew anything about politics knew that when a contract of that kind is let out a man expects to get his share as a kick back," and again respectfully moved for a mistrial. Whereupon, the Court said, "Well if he did say that, gentlemen of the jury, just disabuse your minds of that. You do get honest politicians. I overrule the motion for a mistrial." Whereupon Mr. Calhoun said, "Now, gentlemen, as I said, the State is trying to get the money back whether it is kick-backs or what not." Whereupon defendant, through counsel, said, "Your Honor, I object to the reference as to whether the State is undertaking to get the money back or not. That has nothing to do with this case. It is irrelevant and immaterial." Whereupon the Court said, "Well just disregard all of that, gentlemen. You get honest lawyers, honest politicians just like you do honest business men. That all hasn't got anything to do with this case. All of that is a question for you gentlemen to determine anyway. You gentlemen of the jury will remember the evidence. All right, you may proceed."

⁵ The Government at the end of its case announced that it had three additional witnesses but would not put them on because their testimony would be cumulative.

⁶ For an enlightening discourse on the subject under consideration, see Wigmore on Evidence (3rd Ed. 1940) §1806 et seq. p. 259.

⁷ If Atwood was not personally present, a member of his firm was present; Atwood is the accountant who examined the list of items mentioned.

 

 

[60-2 USTC ¶9661]Braxton C. Wallace, Appellant v. United States of America , Appellee

(CA-4), U. S. Court of Appeals, 4th Circuit, No. 7958, 281 F2d 656, 8/12/60, Rev'g and rem'g unreported District Court decision

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

Conspiracy to file fraudulent returns and attempt to evade income tax: Prejudicial conduct by court and U. S. attorney.--The evidence was not insufficient to sustain the jury's verdict of guilty on four counts of conspiracy to file false and fraudulent returns and attempts to evade the income tax, but the prejudicial conduct and statements of the District Court and the U. S. Attorney were such to indicate that the defendant did not have a fair trial. The case was reversed and remanded.

Hal Lindsay, for appellant. Rob ert A. Clay, Assistant United States Attorney, Greenville, S. C. (Joseph E. Hines, United States Attorney, Spartanburg, S. C., on brief), for appellee.

Before SOBELOFF, Chief Judge, BOREMAN, Circuit Judge, and BUTLER , District Judge.

BOREMAN, Circuit Judge:

Braxton C. Wallace, a lawyer and certified public accountant, was indicted for violation of the Internal Revenue Laws. The indictment contained four counts, the first count charging that Wallace combined, conspired, confederated and agreed together with one Maurice Puckett (who was indicted with Wallace, entered a plea of guilty to each count prior to trial and was sentenced) that they would prepare and cause to be prepared false and fraudulent income tax returns in violation of 26 U. S. C. A. §145(b) of the Internal Revenue Code of 1939. ¹ Four specific overt acts were charged to have been committed in furtherance of the conspiracy. The second, third and fourth counts charged the attempt to evade or defeat the income tax of Maurice Puckett for the years 1951, 1952 and 1953 by preparing, or causing to be prepared, false and fraudulent income tax returns and filing or causing said returns to be filed in violation of §145(b) mentioned above. Wallace was tried and convicted on each of the four counts in the United States District Court for the Western District of South Carolina, Greenwood Division, and prosecutes this appeal from a denial of his motion for judgment of acquittal or, in the alternative, for a new trial under Rule 29(b) of the Federal Rules of Criminal Procedure.

Specifications of error are directed at almost every phase of the trial proceedings in this case. With due regard for limitations as to time and space, we shall touch upon only those points which merit discussion.

Preliminarily, the evidence indicates that Wallace is a resident of Greenwood , South Carolina , where he, at the time of trial, had been a lawyer and certified public accountant for some thirty-five years. Wallace had known Puckett for about twenty-five years. During this period he had handled any number of legal matters for Puckett and had done such accounting work as Puckett had required, including the preparation (or supervision of the preparation) of all tax returns for Puckett, Puckett's family and the various corporations and other interests held by Puckett. Additional pertinent facts will be related in the discussion of the points of error.

Sufficiency of the Evidence

Maurice Puckett owned and operated a number of hotels by and through corporations created or purchased for that purpose. As evidence relating to all counts of the indictment, the Government offered proof of hundreds of instances in which personal items purchased by Puckett and members of his family were charged to operating and maintenance expense accounts of these various hotels without a subsequent charge against the personal account of Puckett. There is no dispute that these items were improperly handled and, under Section 145(b) of the Internal Revenue Code of 1939, any person who wilfully attempts to escape the payment of income taxes by this devious method is guilty of a felony.

Attempting to connect Wallace with these improper transactions, the Government produced a number of witnesses. Maurice Puckett stated that he employed Wallace "to keep my bookkeepers straight and make may tax returns". Puckett, when asked as to whether Wallace knew that personal bills were being paid by and charged to the hotel, answered that he and Wallace never discussed the personal bills and that Wallace was there to check the books. Government's witness, Hugh Shearouse, a former resident auditor with the Savannah Hotel Operating Company, hereinafter called S. H. O. C., in Savannah, Georgia, a corporation owned by Puckett, testified that in a conversation he told Wallace, "in my opinion Mr. Puckett was putting some things on the Savannah Hotel Operating books that would not--were not permissible"; that Wallace then turned to Puckett, who had just entered the room, and said: "Mr. Shearouse tells me that we are putting some items on the Savannah Hotel Operating books that he does not think will get by". Mr. Shearouse qualified this statement by adding "or words to that effect". The Government also produced records of instructions given by Wallace to Mr. Russel Holmes, the resident auditor of S. H. O. C. at the time Puckett bought the stock of the company. Mr. Holmes died in 1952. These instructions directed Holmes to make certain entries, as well as telling him to continue using the same system of bookkeeping as had been used when the company was under different management. Mr. Joseph R. Harmon, the Special Agent of the Internal Revenue Service who investigated the case, stated that he did not see how Wallace could have given such instructions without being thoroughly familiar with the books. Another link in the chain of proof against Wallace was the testimony of E. M. Turlington, a certified public accountant who is the vice president and secretary of the hotel chain from which Puckett bought S. H. O. C. Turlington stated that if he had supervision of the accounting of a corporation, he would at least make a spot check of the books, and that in the instant case a spot check would have disclosed that purchased personal items were being charged to corporation expenses.

In defense Wallace contended he was employed to make tax returns from information furnished him either by Puckett or the resident auditors of the various hotels; that he did not supervise the auditors to the extent that he checked the books, and that his only responsibility was to answer any questions the auditors might have. He explained his instructions to Mr. Holmes by stating that these were given solely to indicate to Mr. Holmes how the new management wanted the books kept; that such instructions did not require any special knowledge of these particular books but only a knowledge of the bookkeeping system that was to be continued. He places special emphasis on the fact that not one of the resident auditors who testified in the case said that he had ever received instructions from Wallace as to how specific items should be handled.

This point of error is not well founded. The evidence is, of course, conflicting as to whether Wallace had knowledge that personal items were being charged to hotel expenses. However, there is sufficient evidence from which a jury could have concluded that Wallace did have such knowledge. In determining the sufficiency of evidence to sustain a conviction, the question is not whether the evidence foreclosed all possibility of doubt in the mind of the court, but whether the evidence, construed most favorably for the prosecution, was such that a jury might find that defendant guilty beyond a reasonable doubt. Crawley v. United States , 268 F. 2d 808 (4th Cir. 1959). See United States v. Brill, 270 F. 2d 525 (3rd Cir. 1959).

The Conspiracy Count

Count one of the indictment charges that from October 23, 1945, to and including the date of the filing of the indictment, "the defendant, BRAXTON C. WALLACE, Certified Public Accountant and attorney for Maurice Puckett, did combine, conspire, confederate and agree together with the defendant, MAURICE PUCKETT, that they would prepare and cause to be prepared false and fraudulent income tax returns in violation of Section 145(b), Title 26, Internal Revenue Code of 1939 * * *" (Italics supplied.) It will be noted that the count as laid does not charge Wallace and Puckett with conspiracy to prepare false and fraudulent income tax returns of Puckett but simply charges them with conspiracy to prepare unidentified false and fraudulent tax returns.

Five overt acts are charged to have been committed in furtherance of the conspiracy. The court instructed the jury that the first three of these overt acts, having been alleged or shown to have taken place more than six years prior to the filing of the indictment, were barred by the statute of limitations (26 U. S. C. A. §3748, Internal Revenue Code of 1939). The court further instructed the jury that these three overt acts and the evidence adduced in support thereof could only be considered in determining whether or not such a conspiracy as that described in the indictment existed at the time such overt acts were alleged to have taken place; that Wallace could not be found guilty under Count One of the indictment unless the jury should find from the evidence beyond a reasonable doubt that, at the time of the alleged commission of overt acts four and five, such a conspiracy existed between the two defendants, and that overt acts four and five were committed by the defendants by the filing of a false and fraudulent income tax return for the taxable year 1951 with intent thereby to evade and defeat the tax. These instructions were given with defendant's consent.

The first overt act charges the defendants, Wallace and Puckett, with back-dating a deed, executed by a Puckett-owned corporation and conveying certain real estate in Charlotte, North Carolina, from one fiscal year to another in order to take advantage of a net operating loss carryback, thus "defrauding the Government of tax on the gain on said sale of real estate". There was no evidence introduced on behalf of the Government to show that the mere back-dating of the deed would effect or produce a tax loss to the Government. In fact, the defendants' evidence tended to show that the alleged back-dating did not affect the tax result. Thus, because of manifest lack of proof, the alleged overt act does not aid or support a design or intent on the part of Wallace to conspire to prepare false and fraudulent tax returns or to evade the payment of income taxes. Special Agent Harmon, when testifying as a witness for the Government, stated that the indictment should have alleged that by this transaction Maurice Puckett personally escaped taxation on the gain. His observation was undoubtedly prompted by the fact that the only evidence presented by the prosecution in this connection might tend to prove such a charge. Assuredly, what witness Harmon thought the indictment should have contained is immaterial.

The second overt act charges that the defendants "caused to be made an entry on the books of the Savannah Hotel Operating Company, whereby one-half of the capital stock of Savannah Hotel Operating Company was retired in the form of a dividend which caused the United States to be defrauded out of tax on the dividend of $69,529.78 in violation of the Internal Revenue Code of the United States, in that the dividend was not reported on the Income Tax Return of Maurice Puckett as prepared by Braxton C. Wallace for that year and signed by Maurice Puckett".

The evidence indicates that Puckett and Wallace negotiated the purchase of all of the capital stock of S. H. O. C. from Carling Dinkler, Jr. A stock certificate representing the full number of shares in S. H. O. C. was then issued to Puckett. He paid a certain sum down and agreed to pay the balance at $2,500 per month plus interest on the balance remaining after each payment. As security for the deferred payments, Dinkler held the stock certificate. Wallace then notified the resident auditor at S. H. O. C. to prepare a check for $2,500 and accrued interest each month, such check to be signed by Puckett and delivered to Dinkler. About six months later, Wallace notified the auditor at S. H. O. C. that the interest on the sums paid to Dinkler should be charged against Puckett's personal account and instructed the auditor to make the necessary corrective entries removing such interest payments from the hotel "Interest Paid" account and charging them to Puckett personally.

At some time between the date of issuance of the original stock certificate to Puckett and the date upon which one-half of the stock was retired, stock certificates were issued to both Mr. and Mrs. Puckett, each in the amount on one-half of the original number of shares of stock. The evidence on this point is somewhat hazy, but it is the Government's contention that Wallace set up this sham transaction at the time of the actual stock retirement and back-dated the stock certificate stubs to give the tax treatment of this transaction an appearance of legality. Wallace contends, however, that the issuance to both Mr. and Mrs. Puckett took place either on the same day or the morning following the date of the original issue to Puckett; that the original certificate could not have been canceled earlier because it was in the custody of Dinkler; and that, therefore, Mrs. Puckett was the sole owner of all the stock that was retired. Whether or not the stock certificate stubs were back-dated is of no moment and the District Court instructed the jury that ownership of the stock on the actual date of cancellation or redemption is controlling in the determination of tax liability.

Section 115(g)(1) of Title 26, Internal Revenue Code of 1939, provides:

"If a corporation cancels or redeems its stock (whether or not such stock was issued as a stock dividend) at such time and in such manner as to make the distribution and cancellation or redemption in whole or in part essentially equivalent to the distribution of a taxable dividend, the amount so distributed in redemption or cancellation of the stock, to the extent that it represents a distribution of earnings or profits accumulated after February 28, 1913, shall be treated as a taxable dividend."

A comment upon this section is found in Treas. Reg. §29.115-9 (1941), as follows:

"The question whether a distribution in connection with a cancellation or redemption of stock is essentially equivalent to the distribution of a taxable dividend depends upon the circumstances of each case. A cancellation or redemption by a corporation of a portion of its stock pro rata among all the shareholders will generally be considered as effecting a distribution essentially equivalent to a dividend distribution. * * * On the other hand, a cancellation or redemption by a corporation of all of the stock of a particular shareholder, so that the shareholder ceases to be interested in the affairs of the corporation, does not effect a distribution of a taxable dividend. * * *"

Wallace, of course, contends that since Mrs. Puckett was the actual owner of the redeemed stock as of the date of its redemption, under the above quoted regulation no constructive dividend resulted.

We are of the opinion that the jury, from the evidence presented in support of this overt act, could have concluded that this transaction was a sham and that Wallace and Puckett had at that time engaged in a conspiracy to prepare false and fraudulent tax returns with the design and intent to defraud the Government. The evidence discloses that Mr. Puckett did not put any money into the stock transaction; that all amounts in excess of the down payment, and a sum representing the assumption of liability on certain purchases made by Dinkler, were paid by the corporation. No entries on the books of the corporation indicate a loan to Mrs. Puckett. Mrs. Puckett received nothing when the stock was retired. A further indication that the corporation itself was redeeming the stock directly from Dinkler for the benefit of all shareholders is that the entries made at the time the redemption took place were described as follows: "Debit capital stock $1,670 [the par value of the stock]; debit capital surplus, $67,859.78. Credit Carling Dinkler, Jr., account, $69,529.78." This chain of circumstantial evidence is ample to sustain the jury's determination that Wallace and Puckett had then formed and were engaging in the conspiracy charged in the indictment.

In substance, the third overt act charges that S. H. O. C. maintained two bank accounts, one in Savannah, Georgia, and the other in the Piedmont National Bank of Spartanburg, South Carolina; that the Piedmont National Bank account was used to pay personal expenses of Puckett and his family, the books of S. H. O. C. being balance without entry of any of these personal items; and that to this end the defendants treated these personal items as deductions for tax purposes to S. H. O. C., whereas, they should have been treated as a constructive dividend to Puckett.

The objective of the Government relative to this overt act was to show that Wallace had intimate knowledge of the books of S. H. O. C. and that he made false and "forced" entries on the books of the company to balance the bank account. The evidence, as elicited from Revenue Agent Gillett, was that a balance of $14 remained after appropriate charges had been made against a credit balance in favor of Puckett in the bank account of S. H. O. C. The credit balance in favor of Puckett resulted from the sale of a 1948 Buick automobile by him to S. H. O. C. for which he received no direct payment. On the books of the corporation this $14 item was charged, without any showing of justification, to interest expense. This transaction the Government refers to as a "forced" entry.

Wallace contends that at no time did he attempt to reconcile the bank account and did not make any such entry on the books of S. H. O. C.; further, that the Government's computation as to the charges to be made against Puckett's credit balance in the Piedmont Bank is erroneous and the true computation reveals that Puckett has remaining in that account a credit balance of nearly $1,000.

Once again the jury was confronted with conflicting evidence, a substantial part of which could support a determination that in December 1949 Wallace and Puckett had formed and were engaging in the conspiracy as charged.

The fourth overt act charges that in 1950 and 1951 the defendant caused some $14,300 of air conditioning units to be purchased and installed in the Savannah Hotel and that, through a series of entries on the books of S. H. O. C., Puckett was paid some $16,000 during the years 1951 and 1952 as rentals of these units over and above the original cost of the units, which sums were not reflected in the income tax returns of Puckett prepared by Wallace.

Puckett leased from the owner the building in which the Savannah Hotel was located. Puckett decided that he would need air conditioning units to meet competition, and was advised by Wallace to purchase the air conditioners in his own name and collect his money back through rental of the units to guests. Wallace apparently gave this advice after he had interpreted a certain covenant in the lease to mean that any fixtures such as air conditioners installed by the lessee would automatically become the absolute property of the lessor. Puckett testified that he instructed the resident auditor and Wallace to cut off further payments after he had been repaid his original investment.

Wallace defends upon the ground that his advice as to Puckett's recovery of the original cost of the air conditioners in no way affected any tax claims the Government might have had; that since he did not check the books of S. H. O. C., he did not know and could not have known that Puckett was receiving money in excess of his investment; and that since the tax returns were prepared solely from information furnished him by the taxpayer, he was guilty of no wrong because he received no such information.

As was discussed under the heading, "SUFFICIENCY OF THE EVIDENCE", since there was evidence from which the jury could have concluded that Wallace had knowledge of the contents of the S. H. O. C. books and he thus knew that Puckett was receiving moneys in excess of his original investment, the jury could have further concluded that Wallace improperly omitted such income from Puckett's personal income tax return pursuant to the alleged conspiracy.

It will be noted that this overt act is charged as having been committed within six years prior to the finding of the indictment and in furtherance of the alleged conspiracy. The jury could have found, from this evidence, that the fourth overt act was committed as charged.

In Di Bonaventura v. United States, 15 F. 2d 494, 495 (4th Cir. 1926), Judge Parker, quoting from Fisher v. United States, 13 F. 2d 756, 757 (4th Cir. 1926), said:

`conspiracy' exists whenever there is a combination, agreement, or understanding, tacit or otherwise, between two or more persons, for purpose of committing unlawful act".

Here, while there is no evidence of a specific agreement to prepare or cause to be prepared false and fraudulent tax returns with the intent to evade the payment of income taxes, the conduct of the parties and the inferences to be drawn from such conduct indicate, at least, a "tacit" understanding to accomplish the object of the alleged conspiracy. Martin v. United States , 100 F. 2d 490, 497 (10th Cir. 1939); Wilder v. United States , 100 F. 2d 177, 182 (10th Cir. 1938). See also United States v. Falcone, 311 U. S. 205, 210 (1940).

The fifth overt act is identical to that alleged in the second count of the indictment and will be later considered under the heading "SUBSTANTIVE COUNTS".

We are of the opinion that the evidence was sufficient to sustain a conviction of Wallace under Count One of the indictment

Substantive Counts

Counts Two, Three and Four charge the defendants, Wallace and Puckett, with knowingly attempting to evade the payment of income taxes by preparing or causing to be prepared false and fraudulent income tax returns for the respective years of 1951, 1952 and 1953, wherein Puckett's net income was materially understated with a corresponding understatement of the tax due thereon.

The alleged omissions from income for the year 1951 include the air conditioner income and the personal expenses of Puckett paid by and charged to S. H. O. C. We have already concluded that the evidence as to both is sufficient to sustain the jury's verdict. In addition, there was evidence that Puckett received checks in the amount of about $3,000 from the Savannah Hotel Package Shop which were not included in his income tax return for 1951. The explanation offered for these checks was that Randolph Puckett, Maurice Puckett's brother, worked at the Savannah Hotel and, as a part of his compensation, was to receive the income from the Package Shop; that Maurice Puckett had put Randolph through college and it was impliedly understood that Randolph was to repay Maurice as he could. The checks in question were drawn on the Package Shop, made payable to either cash or the Piedmont National Bank and were either signed or endorsed by Maurice Puckett. Defendant, Wallace, contends that, under the circumstances, the amounts of these checks were not shown in Maurice's tax return because they were not income. Randolph , however, testified that he did not know the checks had been issued.

We can understand that the jury could easily reject the explanation that these checks were intended to repay a loan from Maurice to Randolph . It is true that the only evidence presented on the Government's behalf was that the checks were disbursed to Maurice Puckett. However, the explanation offered by Wallace as to these checks does not necessarily destroy their probative value. While the burden of proof does not shift in a criminal case, it is the rule that when the Government establishes a prima facie case, it is then for the defendant to overcome the inferences reasonably to be drawn from the proven facts. Thus, evidence of unreported funds or property in the hands of a taxpayer establishes a prima facie case of understatement of income, "and it is then incumbent on him to overcome the logical inferences to be drawn from such proof." Davis v. United States, 226 F. 2d 331, 336 (6th Cir. 1955) [55-2 USTC ¶9685]. See also United States v. Lennon, 246 F. 2d 24, 27 (2d Cir. 1957) [57-2 USTC ¶9785]; Beard v. United States, 222 F. 2d 84, 94 (4th Cir. 1955) [55-1 USTC ¶9400]; Bell v. United States, 185 F. 2d 302, 309 (4th Cir. 1950) [50-2 USTC ¶9499]. Even though the defendant became a witness and sought to explain, the jury was not bound to accept his explanation. United States v. Hornstein, 176 F. 2d 217, 220 (7th Cir. 1949) [49-2 USTC ¶9326]; United States v. Zimmerman, 108 F. 2d 370, 373 (7th Cir. 1939) [40-1 USTC ¶9102].

The items of income alleged in Count Three to have been improperly omitted from Puckett's 1952 return are additional and continuing items identical with those allegedly received by Puckett during the fiscal year 1951 and omitted from the return for that year. The evidence concerning these items has been discussed. For the year 1953 the alleged omissions pertain primarily to the expensing to S. H. O. C. of various purchases personal to Maurice Puckett and members of his family. We have hereinbefore dealt with these items.

For the reasons assigned and discussed, if the evidence on all counts of the indictment had been fairly presented, we cannot say that it is insufficient to sustain the jury's verdict. However, for other reasons hereinafter stated, we are of the opinion that prejudicial error was committed by the District Court and the United States Attorney, which leaves us no alternative but to send the case back for a new trial.

Prejudicial Conduct by District Court and United States Attorney

In Simon v. United States, 123 F. 2d 80, 83 (4th Cir. 1941), this Court commented upon the duties of a trial judge in conducting a case before a jury:

* * * It cannot be too often repeated, or too strongly emphasized, that the function of a federal trial judge is not that of an umpire or of a moderator at a town meeting. He sits to see that justice is done in the cases heard before him; and it is his duty to see that a case on trial is presented in such way as to be understood by the jury, as well as by himself. He should not hestitate to ask questions for the purpose of developing the facts; and it is no ground of complaint that the facts so developed may hurt or help one side or the other. * * * The judge is the only disinterested lawyer connected with the proceeding. He has no interest except to see that justice is done, and he has no more important duty than to see that the facts are properly developed and that their bearing upon the question at issue are clearly understood by the jury."

See Hoffler v. United States , 231 F. 2d 660 (4th Cir. 1956).

This is not say, however, that the trial judge is surrounded by an impregnable cloak of immunity. As is stated in Graham v. United States, 12 F. 2d 717, 718 (4th Cir. 1926):

"* * * In the discharge of this high function, it is, however, of the first importance, both to the particular defendant who may be on trial and to the admin istration of justice generally, that every one shall recognize that what is said from the bench is the cool and well balance utterance of an impartial judge, and has in it naught of the heat and partisanship of the advocate."

See Quercia v. United States , 289 U. S. 466, 470 (1933); Virginian Ry. Co. v. Armentrout, 166 F. 2d 400, 405 (4th Cir. 1948).

While no useful purpose would be served in reproducing all of the alleged improprieties in the case at bar, we shall point specifically to such conduct as we feel may have been prejudicial to Wallace.

Witness Maurice Puckett was asked whether Wallace knew personal bills were being paid by the hotel corporation. Mr. Puckett answered that it was never discussed between them and that he (Puckett) did not know they were being paid by the hotel. Then followed a series of questions by the Court, the net result of which may well have influenced the jury. Puckett stated, "Mr. Wallace and me, while that was operating, Savannah Hotel, never did discuss my personal bills." The Court then said, "That doesn't answer the question yet. The question he asked: do you know of your own knowledge whether or not Mr. Wallace knew that the hotel paid your personal bills? Do you know that?" Puckett answered, "The only thing I can say is that he was there to check the books," to which the Court replied, "That answers it. Go ahead." We are unable to see that the last answer by Puckett was more satisfactory, informative or revealing than the first. The jury may have construed the Court's statement to mean that it, the Court, felt that since Wallace was there to check the books, he must have known that Puckett's personal items were being paid by the hotel.

The next incident occurred when Puckett was being questioned with reference to a conversation with Wallace which took place sometime after the conspiracy was alleged to have ended and after the two were indicted. ² We are of the opinion that this colloquy may have unduly influenced the jury to accept the Court's first pronouncement that the statement was against interest. The statement of Wallace as recited by Puckett was patently self-serving and would admit of no other construction but the jury may have attributed greater weight to the Court's interpretation of the language than to the language itself. Since the evidence upon which the conviction was based would not necessarily preclude acquittal, we have the clear impression that the Court's comments were prejudicial and constituted an invasion of the defendant's right to have the jury decide the facts only from the evidence.

Another incident with which we are concerned involves a rather lengthy cross-examination of Wallace by the Court with reference to whether or not he had back-dated the stock certificate stubs discussed under the second overt act. ³ We recognize the right of a federal judge to examine and cross-examine witnesses whenever necessary to bring essential facts to light; but "[w]hen a judge cross-examines a defendant and his witnesses extensively and vigorously, he may present to others an appearance of partisanship and, in the minds of jurors, so identify his high office with the prosecution as to impair the impartiality with which the jury should approach its deliberations." Holmes v. United States , 271 F. 2d 635, 639 (4th Cir. 1959). See also Blunt v. United States, 244 F. 2d 355, 367 (D. C. Cir. 1957); United States v. Brandt, 196 F. 2d 653, 656 (2nd Cir. 1952). The Court's cross-examination in the case at bar highlighted what appeared to be inconsistent and conflicting statements made by Wallace, generally casting the dark shadow of evasiveness around his testimony on this point and creating the impression that the Court may have adroitly and skillfully forced the truth from a fumbling and dodging defendant. Then the Court later instructed the jury that the fact the stock certificates may have been back-dated was immaterial but told the jury also:

"You have a right to take into consideration the demeanor of a witness upon the witness stand, his readiness to answer questions, or his attempt to evade questions or his attempt to argue questions. Consider his entire conduct on the witness stand as to how he impresses you. Does he impress you that he is trying to tell the truth? Does he impress you that he is trying to evade the questions? Does he impress you that he is trying to dodge the questions? Does he impress you that he is trying to argue the case, or does he impress you that he is telling the truth?"

In the leading case of Berger v. United States, 295 U. S. 78, 88 (1935), the Supreme Court defined the duties of the United States Attorney:

"The United States Attorney is the representative not of an ordinary party to a controversy, but of a sovereignty whose obligation to govern impartially is as compelling as its obligation to govern at all; and whose interest, therefore, in a criminal prosecution is not that it shall win a case, but that justice shall be done. As such, he is in a peculiar and very definite sense the servant of the law, the twofold aim of which is that guilt shall not escape or innocence suffer. He may prosecute with earnestness and vigor--indeed, he should do so. But, while he may strike hard blows, he is not at liberty to strike foul ones. It is as much his duty to refrain from improper methods calculated to produce a wrongful conviction as it is to use every legitimate means to bring about a just one.

"It is fair to say that the average jury, in a greater or less degree, has confidence that these obligations, which so plainly rest upon the prosecuting attorney, will be faithfully observed. Consequently, improper suggestions, insinuations and, especially, assertions of personal knowledge are apt to carry much weight against the accused when they should properly carry none. * * *"

The record in the instant case discloses a number of statements and comments by the United States Attorney which, contrary to the teachings of the Berger case, were likely to prejudice the defendant in the eyes of the jury.

Under the heading, "SUFFICIENCY OF THE EVIDENCE", the relevant testimony of Government's witness, Hugh Shearouse, is set forth. On at least six occasions during the trial and in closing argument, the United States Attorney misquoted the language. ⁴ We cannot agree with the Government that the prejudicial effect of such misquoting was removed by the United States Attorney and the trial judge telling the jurors that it was for them to recall the actual statement. Stewart v. United States , 274 F. 2d 42, 47 (D. C. Cir. 1957). These repeated and seemingly deliberate misquotes, which we believe could have created an impression on the jury that Wallace was cognizant of specific instances of improper charges to the S. H. O. C. books, may well have become so firmly implanted on the jurors' minds as to cloud the actual testimony. We are of the opinion that the testimony of Mr. Shearous does not necessarily support the inference attributed to it by the United States Attorney in his distorted version thereof.

In closing argument the United States Attorney made the following statement in speaking of the lease under which Puckett operated the Savannah Hotel in Savannah , Georgia :

"Mr. Watt said that it was a harsh lease or a hard lease, I believe his word was. Mr. Foreman and members of the jury, when you sign a lease, under the law, you read it. And if later it turns out to be hard to your way of thinking, do you then try to cheat the landlord? Let me ask you that question. Do you then try to cheat the landlord? I don't care how hard the lease was."

It will be recalled that the question of the lease arose from the air conditioner transaction in which Wallace advised Puckett to buy the units in his name and regain his investment through rental of these units to guests. We are of the opinion that such statement was improper. Even if there had been evidence that Wallace attempted to "cheat" the landlord, such evidence would have no place in a criminal trial upon the charges contained in the indictment here.

Other prejudicial remarks were made by the United States Attorney near the end of his closing argument and the specific language is set forth in the margin. ⁵ Such argument was completely improper in that it attempted to impose upon the jury the opinion of the United States Attorney as to the character of Wallace, and sought to have the jurors draw an unfavorable inference from the failure of Wallace to call as character witnesses his fellow attorneys from the Greenwood , South Carolina , bar. Wallace called, as witnesses, his minister, the Assistant President and Trust Officer of the State Bank & Trust Company in Savannah , Georgia , and a Certified Public Accountant from Columbia , South Carolina , all of whom testified favorably as to his reputation for truth and veracity. He thus put his character and reputation in issue as to the particulars incorporated in the inquiry, subjecting himself to attack by witnesses who might have testified as to a bad reputation. But the prosecution offered no such witnesses nor was it made to appear that such witnesses could have been produced. Comments similar in nature to those of the United States Attorney formed the basis for reversal of convictions in both Binsberg v. United States, 257 F. 2d 950, 954 (5th Cir. 1958) [58-2 USTC ¶9669], and Steele v. United States, 222 F. 2d 628, 631 (5th Cir. 1955) [55-1 USTC ¶9438]. See also the following cases which should serve to constantly remind the United States Attorney of the rule of Berger v. United States, 295 U. S. 78, 88 (1935), that he must observe scrupulously the rules of law in the discharge of his obligation to be fair to the defendant. United States v. Keenan, 267 F. 2d 118, 124 (7th Cir. 1959) [59-1 USTC ¶9349]; Handford v. United States, 249 F. 2d 295, 298 (5th Cir. 1957); Stewart v. United States , supra, at 48; Hilliard v. United States, 121 F. 2d 992, 997 (4th Cir. 1941).

In combination, the incidents, conduct, comments and statements mentioned herein create the definite impression that it is most improbable the defendant has had the fair trial to which he is entitled. The verdict and judgment will be set aside and the case is remanded with the direction that the defendant, Wallace, be accorded a new trial.

Reversed and Remanded.

¹ 26 U. S. C. A. §145, Internal Revenue Code of 1939.

"Penalties.

"* * *

"(b) Failure to collect and pay over tax, or attempt to defeat or evade tax. Any person required under this chapter to collect, account for, and pay over any tax imposed by this chapter, 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 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 Witness: Maurice Puckett.

"Q. (By Mr. Clay) Did he say anything else to you with regard to it, Mr. Puckett?

"A. I believe that was about all. I believe he did say to me that I knew that he did not know anything about them. [Referring to personal expenses of Puckett paid by hotel.]

"THE COURT: What did you say?

"THE WITNESS: I said: 'Well, that's what I thought you knew. I thought you were checking the books. I thought you knew that.'

"MR. WATT: Your Honor, would that be binding, what was said to Mr. Wallace?

"THE COURT: It's just evidence. That's all. Just a statement of the defendant against interest. That's all. That's the reason it's competent.

"MR. LINDSAY: Your Honor doesn't hold anything said in this conversation he is relating is any statement by this defendant Wallace against interest surely.

"THE COURT: That's what he said.

"MR. LINDSAY: He distinctly said Mr. Wallace . . .

"THE COURT: I am not ruling it was against interest. I am ruling it was what it was worth. I am not ruling whether its for interest or against interest. That's for the jury to say. The testimony was not objected to by counsel for the defense in the first place."

³ "Q. Then, consider my question earlier, which you agreed that once a taxpayer takes a course of action, he is bound by it, why did you back-date the stock certificates?

"MR. LINDSAY: Your Honor, just a minute . . .

"THE COURT: He has a right to ask him why he back-dated them.

"MR. LINDSAY: The trouble is, he is stating about having adopted a course of action . . .

"THE COURT: The simple question is this: why did you back-date the stock certificates? That's the question . . .

"MR. LINDSAY: If he back dated.

"THE COURT: If it was back-dated. Or why was it back-dated, if it was back-dated? Answer that question.

"THE WITNESS: I don't recall the stock certificates being back-dated. Well, I do too. I have seen them today. I saw one today. It was back-dated--it was--it bears the date of May 2.

"THE COURT: You say it was back-dated? Is that right or not?

"THE WITNESS: But I didn't do it.

"THE COURT: I say, it was back-dated. You said first it wasn't and now you say it was. Which is right?

"THE WITNESS: Let me see the stock certificate book. I'm afraid I'm a little confused here. If Mr. Harmon asked any questions about this stock certificate book, I don't know whether it was . . .

"THE COURT: The question is whether the stock certificate was back-dated or not.

"THE WITNESS: There is one certificate in here for 334 shares, dated May 2, 1949, which was issued by Carling Dinkler and E. M. Turlington to Maurice Puckett. That's Certificate No. 11. I know nothing about that certificate.

"THE COURT: The question is whether it was back-dated or not.

"THE WITNESS: I don't know that this certificate is back-dated. I could conceivably be or could conceivably not be.

"THE COURT: Do you know or not?

"MR. CLAY: That's not the one.

"THE COURT: One minute. Do you know or not whether it was back-dated?

"THE WITNESS: This one?

"MR. CLAY: No. sir.

"THE COURT: Whether any of them were back-dated. Do you know whether any were?

"THE WITNESS: Here's Certificate No. 12, which is in the book and I have stubs No. 12 and 13 also in the book. I dated those stubs myself on . . .

"THE COURT: Did you back-date it? That's what we are driving at?

"THE WITNESS: I don't recall that I did.

"THE COURT: Would you say you did or did not?

"THE WITNESS: I might have done it a few hours--in other words, I might not have done it until May 3 but it was done practically as soon as the transaction occurred because Mr. Puckett intended for that stock to be half in his name and half in his wife's name.

"THE COURT: Well, do you know whether you back-dated it or not?

"THE WITNESS: Your Honor, that happened in 1949, ten years . . .

"THE COURT: I asked you the simple question: do you know whether you did or not?

"THE WITNESS: No sir.

"THE COURT: He says he doesn't know whether he did or not. Ask him something else."

⁴ An example of such misquoting is found in the closing argument wherein the United States Attorney said:

"Then--now, this is important and I know you gentlemen remember exactly what Mr. Shearouse said. Mr. Shearouse said that he told Braxton C. Wallace in the office of Savannah Hotel Operating Company, 'Mr. Wallace, how do you expect to get away with them?' You remember what he said, 'How do you expect to get away with them?' Keep in mind when he told him that. He told him that in January, 1953. * * * I don't know whether he mentioned the personal items but that's not important. Mr. Shearouse told him about it and Mr. Puckett was right there too. Wallace then turned to Mr. Puckett and he said, 'Shearouse doesn't think we can get away with them.'"

⁵ "Mr. Watt touched on his reputation. It is normally my policy personally not to cross-examine witnesses or attempt to embarrass any character witness. I want to call your attention to this: I don't know how may lawyers we have in the City of Greenwood . Mr. Wallace is a member of that profession right here. Why didn't we have one of those? Who knows him better than his fellow attorneys? Why didn't he have one of those in here? Think on that, Mr. Foreman and members, from the evidence presented in this case. I don't know what the certified public accountants' organization thinks about him now but as an attorney, frankly, I am ashamed of it. And I mean that sincerely."

 

 

[60-2 USTC ¶9545]Frank W. Jacobs, Sr., Appellant v. United States of America , Appellee

(CA-8), U. S. Court of Appeals, 8th Circuit, No. 16,302, 279 F2d 826, 6/22/60, Reversing and remanding an unreported District Court decision

[1939 Code Sec. 145--similar to 1954 Code Sec. 7201; Title 18, U. S. C. §3500]

Crimes: Prejudicial error: Improper questioning of jury: Denial of motion to produce revenue agents' reports.--A conviction for income tax evasion was reversed and remanded because of prejudicial errors committed by the trial court. The trial judge had improperly questioned the jury (which had not yet reached a verdict) as to whether or not they were evenly divided. In addition, the taxpayer's motion for the production of the written reports prepared by the investigating agents was held to have been improperly denied for the reasons set out by the court in Burke, 60-2 USTC ¶9544.

Sidney M. Glazer, 408 Olive St. , St. Louis , Mo. , for appellant. William C. Dale, Jr., Assistant United States Attorney, St. Louis , Mo. , for appellee.

Before GARDNER, WOODROUGH and VOGEL, Circuit Judges.

VOGEL, Circuit Judge:

Frank W. Jacobs, Sr., appellant, was indicted on charges of willfully attempting to evade income taxes for the years 1950, 1951 and 1952 by the filing of fraudulent income tax returns. After a jury trial, in which the government relied upon the net worth theory of proof, appellant was acquitted on the count applicable to the year 1950 and convicted on the counts relating to the years 1951 and 1952. He was sentenced to concurrent terms of imprisonment of five years and was fined $20,000.00, from which result this appeal is taken.

Appellant urges, first, that the trial court committed error by inquiring as to the division of the jury and in giving an additional charge during the jury's deliberations after the inquiry had elicited the information that the jury was unevenly divided. The court concluded its main charge to the jury at noon of the seventh day of the trial. The jurors were then taken to lunch, subsequent to which they retired. At 5:53 o'clock p. m. on that day the jurors were again brought into court, whereupon the following proceedings transpired:

[Jury Questioned as to Division]

The Court: I am going to ask first that no member of the jury volunteer any statements at all, simply answer as succinctly as you can the questions that I may ask you. You haven't arrived at a verdict, have you?

A Juror: No sir.

The Court: Do you think you are near a verdict?

A Juror: No sir.

A Juror: No sir.

The Court: Are you the foreman?

A Juror: I am.

The Court: Oh. Mr. Foreman, do you think it possible you are going to arrive at a verdict?

The Foreman: I doubt very much.

The Court: Now, let me ask you--I don't want anybody to say, I don't want you to say, I don't want anybody to say how you are divided numerically; but I would like to ask whether there is, whether the division is, the sentiment of the jury, whether it is very largely one-sided, whether or not--I don't want anybody to comment how many taking one position or how many another, but are there--is it equal, largely one-sided?

The Foreman: Can I answer that?

The Court: Without any numbers.

The Foreman: Not equally divided.

The Court: Have you been that way throughout the afternoon?

The Foreman: Yes sir.

The Court: That being the case, I want to say this to you at this time: This is an important case; the trial has been long and expensive. The failure to agree upon a verdict will necessitate another trial, probably equally as expensive. In the Court's opinion the case would not be tried any better or exhaustively than it has on either side. It is therefore very desirable that you should agree upon a verdict.

The purpose of a trial is to arrive at a verdict, a just verdict, not a disagreement. It is the duty of a jury to agree upon a verdict, that is the purpose of a trial. It is your duty to adjust your differences of opinion by comparison of views and by discussion of the evidence, having your minds at all times open to the truth as may be impressed upon you by fair argument and a fair presentation of the evidence. Such a method adopted by reasonable men and women, having due regard to the opinions of your fellow jurymen will almost inevitably lead to an agreement and a just verdict. On the other hand, a dogged persistence in a position which will not listen to a fair argument or to the persuasive force of reason is destructive of justice and has no place in the jury box.

Although the verdict to which a juror agrees must, of course, be his own verdict, the result of his own or her own convictions, and not a mere acquiescence in the conclusion of his or her fellows, yet in order to bring twelve minds to a unanimous result, you must examine the questions submitted to you with candor and with a proper regard and deference to the opinions of each other. You should consider that the case must at some time be decided; and you are selected in the same manner and from the same source from which any future jury must be. There is no reason to suppose the case will ever be submitted to twelve men and women more intelligent, more impartial, or more competent to decide it; or that more or clearer evidence will be produced on one side or the other. With this in view it is your duty to decide the case if you can conscientiously do so.

Thereafter, counsel for appellant moved for a mistrial on the ground that the court's inquiry followed by the supplemental instruction was improper, which motion was overruled. After further deliberation, the jury returned a verdict finding appellant guilty on two counts and acquitting him on one. It is the contention of appellant that the inquiry and the additional instruction coerced the jury into arriving at a compromise verdict. In so contending, appellant calls attention to the fact that the jury was "not evenly divided", that the view of the minority at that time was so strong that the foreman and one other juror indicated that they were not near a verdict, and that the foreman, in response to the court's question, "do you think it possible you are going to arrive at a verdict", replied, "I doubt very much" and that they had been "that way throughout the afternoon".

[Courts Uniformly Hold the Question to Be Improper]

The propriety of inquiring of a jury how they stand has been considered by the Supreme Court and the Courts of Appeals on numerous occasions. In Burton v. United States, 1905, 196 U. S. 283, 305-308, the trial judge inquired of the jurors as follows:

"I would like to ask the foreman of the jury how you are divided. I do not want to know how many stand for conviction, or how many for acquittal, but to know the number who stand the one way and the number who stand another way. I would like the statement from the foreman."

To which the foreman answered:

"Eleven to one."

Thereupon the court instructed the jury further in the language approved by the Supreme Court in Allen v. United States, 1896, 164 U. S. 492, 501, which instruction was similar to that used by the trial judge here. In reversing on this and other grounds, the Supreme Court stated:

"We must say in addition, that a practice ought not to grow up of inquiring of a jury, when brought into court because unable to agree, how the jury is divided; not meaning by such question, how many stand for conviction or how many stand for acquittal, but meaning the proportion of the division, not which way the division may be. Such a practice is not to be commended, because we cannot see how it may be material for the court to understand the proportion of division of opinion among the jury. All that the judge said in regard to the propriety and duty of the jury to fairly and honestly endeavor to agree could have been said without asking for the fact as to the proportion of their division; and we do not think that the proper admin istration of the law requires such knowledge or permits such a question on the part of the presiding judge. Cases may easily be imagined where a practice of this kind might lead to improper influences, and for this reason it ought not to obtain." (Italics supplied.) Burton v. United States, supra, at 307.

More recently, in Brasfield v. United States, 1926, 272 U. S. 448, the Supreme Court had before it the single question of whether or not prejudicial error had been committed by the trial judge in inquiring of the jury, which had failed to agree, how it was divided numerically, which inquiry elicited the reply by the foreman that it stood 9 to 3 without any indication of which number favored conviction.

In forceful language Mr. Justice Stone, speaking for a unanimous court, held the inquiry improper, declaring:

"We deem it essential to the fair and impartial conduct of the trial that the inquiry itself should be regarded as ground for reversal. Such procedure serves no useful purpose that cannot be obtained by questions not requiring the jury to reveal the nature or extent of its division. Its effect upon a divided jury will often depend upon circumstances which cannot properly be known to the trial judge or to the appellate courts, and may vary widely in different situations, but in general its tendency is coercive. It can rarely be resorted to without bringing to bear in some degree, serious although not measurable, an improper influence upon the jury, from whose deliberations every consideration other than that of the evidence and the law as expounded in a proper charge, should be excluded. Such a practice, which is never useful and is generally harmful, is not to be sanctioned." (Italics supplied.) Brasfield v. United States, supra, at 450.

In Jordan v. United States, 9 Cir., 1927, 22 F. 2d 966, the trial court inquired:

"I am not asking you for a division, Mr. Foreman; but I will ask you: Is the jury about evenly divided? You can answer that yes or no.

"The Foreman: Yes, sir."

The Circuit Court reversed the conviction, relying upon both Burton v. United States , supra, and Brasfield v. United States , supra. In referring to the latter decision, the court stated:

"This language is too plain to admit of further controversy. The court condemned both the form of the inquiry and the inquiry itself, and declared that in all future cases any such inquiry should be regarded as ground for reversal. It is idle to say that to ask a jury 'If it is about evenly divided' does not require it to disclose 'the proportion of division of opinion among the jury,' or 'to reveal the nature or extent of its division.'

"For this error, the judgment is reversed, and the cause is remanded for a new trial." Jordan v. United States, supra, at 967.

In Stewart v. United States , 8 Cir., 1924, 300 Fed. 769, 782, this court considered the propriety of a trial court's inquiry of the jury foreman:

"* * * that it did not wish him to say how the jury stood, but that it would like to know whether they were evenly divided, or whether there was a larger preponderance one way or the other, * * *"

to which the foreman replied that there seemed to be a large preponderance one way. In his opinion, Judge Walter Sanborn first reviewed the Supreme Court's decision in Burton v. United States , supra, in detail and then explained:

"The practice forbidden by this opinion [the Burton opinion] seems to be any inquiry 'as to the proportion of the division' of the jury, although 'not meaning by such question how many stand for conviction or how many stand for acquittal, but meaning the proportion of the division, not which way the division may be.' It is difficult to describe the question asked by the court below more clearly and accurately than it is described by this language of the Supreme Court. It was exactly an inquiry how the jury was divided, not meaning how many stood for conviction, or how many stood for acquittal, but meaning the proportion of the division, not which way the division was. While in questions of this nature, which exclude inquiries and answers as to the standing of the jury in regard to the conviction or acquittal of the accused, such as the question asked in this case, and such as, Is there a preponderance of jurors one way or the other? Is there a great preponderance of jurors one way or the other? Is there an overwhelming preponderance of jurors one way or the other? Courts and juries use the word 'preponderance,' they actually think and mean majority, and they think of and seek for the numerical proportion of the division of the jury.

"This court had occasion to consider the true construction and effect of the opinion of the Supreme Court in the Burton case, relative to the question now under consideration, in St. Louis & S. F. R. Co. v. Bishard, 147 Fed. 496, 500, 501, 502, 78 C. C. A. 62, and concluded that the trial court's inquiry of the jury in that case, not how many were for conviction or how many were for acquittal, but what the bare proportion of their division was, was erroneous, reversed the judgment, and ordered a new trial. There is no such difference between the facts in that case and the facts in the case in hand as will warrant a contrary result in this case." Stewart v. United States, supra, at 783, 784.

Subsequently, in Nigro v. United States, 8 Cir., 1925, 4 F. 2d 781, 783, this court had before it the following situation:

`The court inquired of the foreman of the jury if they had agreed upon a verdict. The foreman replied that the jury had not agreed. The court inquired if the foreman thought they would likely agree. The foreman replied that it did not appear that they would likely be able to agree. The court then inquired if the difficulty of the jury was upon a question of fact or in respect to the law of the case, and stated that if it was upon a matter of law he would give further instructions, if they would indicate the difficulty, but if it was upon a question of fact he would not be able to help them. The foreman replied that it was upon a question or issue as to facts. The court then requested the foreman that, without indicating how the jury stood in numbers, he, the foreman, should state to the court whether or not there was a predominance of the individual jurors in favor of a verdict one way or the other; the foreman replied there was a predominance.'"

The trial court then instructed the jury further in accordance with Allen v. United States , supra. On appeal this court concluded:

"On the authority of the Stewart case and for the reasons therein assigned, we hold that the inquiry made of the jury and the reading of the abstract statements from the Allen case was error." Nigro v. United States, supra, at 785.

United States v. Samuel Dunkel & Co., 2 Cir., 1949, 173 F. 2d 506, 507, involved the following inquiry of the jury foreman:

"May I ask you, Mr. Whitney, I believe it is, without disclosing the way in which the jury stands, can you tell me, are they nearly equally divided as to a question of fact, or is there a majority, a pronounced majority in agreement, with a pronounced minority in disagreement? I think you know what I mean.

"The Foreman of the Jury: There is a majority, very much."

The court thereupon gave the Allen instruction. The Court of Appeals, after reviewing prior cases touching the problem and quoting from Brasfield v. United States , supra, stated:

"The language of the Court is so clear and sweeping that further question seems now impossible. * * *

"Under these circumstances we do not see how these convictions can be sustained upon the authorities. Thus two of the cases approved in the Brasfield case were those of reversals for the eliciting of information that 'a large preponderance' [300 F. 783] or 'a predominance' of the jury were voting one way. Such inquiries were at least no more direct than the inquiry here as to whether or not there was 'a pronounced majority' in agreement, bringing out the answer that there was 'a majority, very much.' If the fault is in directing the admonitions of the Allen charge toward a minority, indeed a small minority, of the jury, there seems no justification for advancing fine differentiations resting upon the non-use of specific numbers or upon the nomenclature employed in the isolating of that minority. Practically the possibilities of coercion seem the same; legally it would be undesirable further to add to the uncertainties of criminal law admin istration by such over-refined distinctions.

* * *

* * * the federal precedents are compelling and we would hardly improve the situation by trying to introduce into the system refined distinctions lacking substance." United States v. Samuel Dunkel & Co., supra, at 510-511.

Recently, in Anderson v. United States, 8 Cir., 1959, 262 F. 2d 764, certiorari denied, 360 U. S. 929, rehearing denied, 361 U. S. 855, this court considered the effect of giving the Allen charge after an inquiry had elicited the information that the jury was evenly divided. Conviction therein was affirmed on the basis that there was no minority to coerce. In that case we explained:

"The government concedes that the inquiry made by the trial court in the instant case was 'ill advised' but it contends that it was not prejudicial and, under the circumstances, not coercive of the jury.

"The teaching of most of the cases relied upon by the defendants is that where the inquiry from the court elicits the information that the jury is unevenly divided, the giving of the extracts from the opinion in Allen v. United States, supra, is probably coercive of the minority and, hence, prejudicial error. That is not the situation here. The trial judge was told that the jurors were 'pretty evenly divided'. From a purely practical standpoint, then, we do not see how the giving of a supplemental charge from the Allen case could possibly have been coercive. Here there was no minority to coerce and the trial judge was meticulous in avoiding any reference to a minority." Anderson v. United States, supra, at 773.

Manifestly, where the inquiry of the trial court does clicit the fact that a minority exists, the language of the Anderson decision compels a result contrary to that reached there.

The government attempts to justify the court's inquiry in the instant case by pointing out that the trial court did not ask for the numerical division of the jury. We see no logical distinction between a question to the foreman as to whether or not the division of the jury is "very largely one-sided" and the inquiry "how do you stand numerically". In either case the existence of a minority may be revealed, making possible their coercion. No good can come from the inquiry used in the instant case. Much harm may result. Thus, upon the authority of the decisions discussed herein and upon the sound principles of non-interference with jury deliberations, we are impelled to the conclusion that the inquiry made here, followed by the Allen instruction, had a coercive effect on the jury, constituted prejudicial error and requires a new trial. We repeat the admonition of Judge Walter Sanborn given over thirty years ago in Stewart v. United States , supra, at 785:

"* * * the better and safe way for the presiding judge to proceed is for him to avoid asking any question of the jury or of its foreman as to the standing of the jury or the proportion of their division upon any issue, * * *."

An additional reason necessitates the retrial of this case. During the presentation of its case, the government relied upon the testimony of a Special Agent and an Internal Revenue Agent. These witnesses testified in detail regarding the acquisition and disposition of assets and liabilities during the periods for which the government attempted to show increased net worth in excess of reported income. They further testified with reference to the taxpayer's living expenses as well as to conversations they had with him. Appellant's counsel requested that he be allowed to examine all reports and statements made to the government by those witnesses. Government's counsel furnished appellant memoranda made contemporaneously with interviews of the appellant but rejected his request to inspect other reports or statements. Alternatively, appellant moved that the trial court inspect the statements to determine which ones appellant was entitled to receive. The trial court sustained the government's objections to both requests. The denial of appellant's motions was in violation of the provisions of 18 U. S. C. A. §3500. Appellant's contention of error thereon must be sustained. See our opinion in Burke v. United States filed as of this date.

In view of our conclusions as to the errors already discussed, consideration of appellant's additional contentions will be pretermitted.

Reversed and remanded for retrial.

 

 

[53-2 USTC ¶9646]James Demetree, Appellant v. United States of America , Appellee

(CA-5), In the United States Court of Appeals for the Fifth Circuit, No. 14488, 207 F2d 892, November 24, 1953

Appeal from the United States District Court for the Southern District of Florida.

Criminal penalties: Use of net worth method: Instructions to jury.--There was reversible error where, in discussing the jury's inability to agree, the judgment assured the jury that the maximum penalty would not be imposed, since this had the effect of inducing a verdict of guilty; also, were the judge refused a requested instruction that the defendant should be acquitted if his evidence in rebuttal of the Government's evidence would raise in the minds of the jury a reasonable doubt as to the substantial accuracy of the computations used in the net worth method.

Stafford Caldwell, Jacksonville , Fla. , Harry G. Taylor, Ernest E. Rob erts, Miami , Fla. , for appellant. James L. Guilmartin, United States Attorney, Miami, Fla., Mark Hulsey, Jr., Assistant United States Attorney, Jacksonville, Fla., for appellee.

Before HUTCHESON, Chief Judge, and HOLMES and BORAH, Circuit Judges.

HUTCHESON, Chief Judge:

Tried upon an indictment in two courts charging him with wilfully attempting to defeat and evade income taxes for the calendar years 1945 and 1946, appellant was acquitted on count two and convicted on count one. Appealing from the judgment and sentence on that count, he is here insisting that the trial and conviction were attended with prejudicial errors requiring a reversal of the judgment.

While the specific errors claimed are many in number, they fall roughly into six groups. ¹

[Danger of Using Net Worth Method in Criminal Cases]

This is another of the growing list of criminal cases in which the government, having no or little direct evidence of defendant's guilt to offer and endeavoring to prove it by circumstantial evidence, attempts to do so by what may be called the net worth and expenditures method of proof. In this attempt, unless the greatest care is taken by the district judge to prevent it, there is danger of the case being tried on a theory which, keeping to the ear the promise that a defendant is presumed innocent until his guilt is established beyond a reasonable doubt, breaks it to the hope by allowing a series of theoretical estimates and computations as to defendant's income to take the place of proof of it.

Sometimes conclusions from those computations and estimates are allowed to invade the province of the jury and furnish the basis for a conviction not upon evidence of facts but upon speculation and theorizing by the government's witnesses so to what the facts really are.

Sometimes, without adhering to the essentials of the method, that the net worth at the beginning as well as the end of the period be shown, the proof comes in and the case is submitted with a complete gap in the proof as to the beginning of the period.

[Use of Estimates and Conclusions as Evidence]

This kind of latitudinous allowance of the admission and use of conclusions as evidence and the submission of the case to the jury without a scrupulous adherence to the theory, has resulted in a tendency to accept, if not in the complete acceptance of, the idea that in a case tried by this method, ordinary rules of proof may be relaxed if not disregarded. Further and more prejudicial to a defendant, there has grown up a kind of ancillary theory that the government, by introducing proof of deposits, expenditures, etc., having put up what it calls a prima facie case, the defendant finds himself jockeyed out of the position the law affords him, of insisting that the government establish his guilt by legal and credible evidence beyond a reasonable doubt. This is accomplished by requiring him to prove himself innocent by assuming the burden of overcoming the prejudicial effect of the mass of exhibits, estimates, conjectures, and conclusions which the government has been allowed to get into the record, upon the apparent theory that it is up to the defendant to explain all of it away as part of his burden to prove his innocence.

This court and other courts have, in many cases, ² pointed out the dangers attending trials conducted in this way. Some of them have at times seemed to be more concerned with easing the difficulties attending the proof of guilt by this method than with preserving unimpaired the constitutional rights of a defendant, the fundamental safeguards and guarantees of his liberty. Most of the courts, however, confronted with the situation which this kind of case presents, have withstood all attacks upon, and have held fast to, constitutional principles, including the fundamental premise upon which criminal trials proceed, that the defendant is presumed innocent until his guilt is established by legal and admissible evidence beyond a reasonable doubt.

Because of the dangers and difficulties inherent in this kind of criminal proceeding, we have scrutinized the record with the greatest care to determine whether appellant's claim, that no case was proved and no verdict should have been returned against him, is correct, and we have done this notwithstanding the fact that defendant did not renew his motion for a directed verdict at the conclusion of the whole case.

[Taxpayer's Statements to Government Agents]

Unfortunately for the defendant's position that, because of the method of proof employed, legal evidence is lacking upon which to find him guilty, his willingness to cooperate with the government agents in their many conferences and discussions with him on the theory, as he claims, that he was of the opinion that, instead of laying a predicate to judge him out of his own mouth, he and they were trying to correctly ascertain and straighten his tax liability out, stands strongly in his way. For it has placed him in the position of making many statements to which the government can and does point as admissions in support of their theory, with the result that, everything considered, it may no be said as matter of law that the record is wholly without evidence to support the verdict.

[Denial of Motion for Bill of Particulars Not Prejudicial]

Of the next error assigned, the denial of his motion for bill of particulars, it is sufficient to say that we find this claim deprived of substance by the fact that the government in advance made an oral statement of its case, sufficiently apprising the defendant of the particulars upon which it would rely, and further that we find no showing made that, because of the want of the bill of particulars, defendant was prevented from making his defense against the charges. Indeed, the evidence clearly shows that, as a result of all of the interviews and discussions he had with the agents and of the oral statement made by the government's counsel, he knew their theories and that of the government's counsel as well as they did.

[Portions of General Charge Tending to Confuse Jury]

As to the third group of claimed errors, we are in agreement with the defendant that some portions of the general charge now complained of, including particularly some of the judge's comments upon the evidence, tended to confuse more than to enlighten the jury as to the state of the proof, complicated as the record was by the way and manner in which conclusions, estimates, and computations had come in as evidence, and that, while they appear to have been well intentioned, they were far from helpful. We are yet constrained to hold that, since the defendant made no objection to the charge and since the matters complained of do not amount to a denial of justice, appellant may not now put the judge in error for such aberrations from accepted practices as occurred in his summing up.

[Judge Erred in Inducing the Verdict]

The error dealt with in the fourth group, however, the court's colloquies with, and instructions to, the jury in connection with the question of punishment, constituted reversible error. To demonstrate that this is so requires no more than a reference to, and some quotation from, the record. ³

In view of what occurred, we think it unnecessary to cite authorities. We think, though, that Lovely v. United States , 169 Fed. (2d) 386, is directly in point and that none of the cases relied on by appellee hold to the contrary.

Our conclusion that the judgment should be reversed because of the error of the judge in inducing the verdict, notwithstanding the jury's stated inability to agree, by stating to them that the defendant could be put upon probation or fined, and his ready assurance, in answer to the jury's question as to his own attitude, in effect that he would be lenient, makes it unnecessary for us to consider in detail the grounds of error assigned in groups five and six.

[On Admission and Exclusion of Evidence]

In view, however, of another trial, we think we should say as to those assigned in group five, the admission and exclusion of evidence, that it is not likely that the matters dealt with in those claims of error will come up in the same way again, and it will serve no purpose for us to try now to lay down with precision what the judge's ruling should be with respect to those matters on another trial. It is sufficient to say that, speaking generally, the evidence admitted was admissible under proper safe guards, that the exclusionary rule applied was in principle right, and that it does not appear on the present record to have been unduly restrictive.

[Refusal of Requested Instruction No. 10 Erroneous]

As to the claimed errors falling in group six, the refusal of the judge to give instructions which were properly requested and the refusal of which was properly excepted to by the defendant, we are of the clear opinion that of the charges, whose refusal is complained of, only the refusal of requested instruction No. 10 could possibly be claimed as erroneous, and if this was error, it was so because in it the defendant presented clearly a theory which he was entitled to have given in charge, and the court in the general charge did not fully and clearly present this view. This theory, as he undertook to present it in charge No. 10, was that the defendant could not be convicted upon the net worth and expenditures method unless the conditions of that method as given them in charge by the judge were substantially complied with and that if a consideration of the evidence as a whole, the government's evidence in support of its theory and the defendant's evidence in rebuttal thereof, raised in the minds of the jury a reasonable doubt as to the substantial accuracy of the computations, and therefore of defendant's guilt, it would be their duty to give defendant the benefit of the doubt and acquit him.

Without, therefore, determining that the refusal of the requested charge in the precise form requested was error, we think it appropriate, in view of the nature of much of what was offered as evidence, consisting, as it did, of computations and conclusions of the government's witnesses, some of which were stated not as such but as based upon knowledge and conviction, to say that on another trial it will be highly important that the jury be given in charge an instruction which will clearly and correctly present the defensive theory sought to be presented in defendant's requested instruction No. 10.

For the reasons stated, the judgment is REVERSED and the cause is REMANDED for further and not inconsistent proceedings.

¹ The first group deals with claimed error in not granting the motion of the defendant at the close of the government's case for a directed verdict of not guilty. Under this heading appellant argues that the verdict on count one is contrary to the law and the evidence and not supported by the evidence. It is to be noted that the motion for judgment, made at the conclusion of the government's case was not renewed at the end of the case.

The second group deals with claimed error in denying defendants's motion for a bill of particulars.

The third group deals with many errors of commission claimed to have occurred in the giving of the charge to the jury. It will be noted here that there was no exception taken to the general charge and at the conclusion of it the defendant's counsel especially stated that they had no exception except to the refusal of requested charges. This being so, appellant is under a heavy burden to show that the errors complained of in the general charge were so grievious procedurally as to practically amount to a denial of due process.

The fourth group deals with the action of the court in discussing with, and instructing the jury as to, the question of punishment in the event of conviction, thus bringing pressure upon the jurors to convict by promising leniency in the event of conviction.

The fifth group deals with errors in the admission and exclusion of evidence.

The sixth group deals with claimed errors of the court in refusing to give instructions to the jury.

² Bryan v. United States , 175 Fed. (2d) 223 [49-1 USTC ¶9322]; Fenwick v. United States, 177 Fed. (2d) 488 [49-2 USTC ¶9448]; United States v. Caserta , 199 Fed. (2d) 905 [52-2 USTC ¶9540]; Pollock v. United States, 202 Fed. (2d) 281[53-1 USTC ¶9229]; Montgomery v. United States, 203 Fed. (2d) at 892 [53-1 USTC ¶9336]. Cf. U. S. v. Johnson, 319 U. S. 503 [43-1 USTC ¶9470].

³ ". . . And at 3:30 o'clock in the afternoon, Thursday, Feb. 19th, 1953, the jury retired to consider its verdict.

The Court:

'All right, take a recess, then, for ten minutes, and I will proceed with the next case.'"

". . . And at 5:40 o'clock in the afternoon, Thursday, Feb. 19th, 1953, the jury returned to the Court room, and the following proceedings were had:

The Court:

'Mr. Foreman, have you agreed upon a verdict in this case?'

Foreman Palmer:

'Your Honor, we have been unable to agree on an unanimous verdict.'"

* * *

"Foreman Palmer:

'May I make further comments? It is my opinion and the opinion of several others that we are not going to be able to reach a unanimous agreement.'

The Court:

'Well, I don't think we can give up that easily.'"

* * *

"Foreman Palmer:

'I would like to ask for further instructions, then, on just what the Court means by, what we could consider reasonable doubt--excuse me just a minute again, Your Honor. We understand that it was circumstantial evidence, and that the man would not come out and say "I am guilty"; he has already said he is not guilty now.'

The Court:

'Do you want me to define a reasonable doubt and circumstantial evidence?'

Foreman Palmer:

'Yes, sir.'"

Thereafter the court defined "circumstantial evidence" and "reasonable doubt", and followed this up with a statement that the jury ought to try to reach a verdict, including in his statement that some jury has to decide the case, cases are expensive to try, and it is important that they try to agree.

The jury was excused until 7:30 P. M., they retired to further deliberate on the verdict, and at 8:30 P. M., they returned to the court room to ask for further instructions, when the following colloquy occurred:

"Foreman Palmer:

'* * * I have been requested to ask you if you can--if it's reasonable for you to tell us, in case of a conviction, what the punishment would be, and if not, whether you could enlighten several members as to just what your attitude would be regarding it.'

The Court:

'I will be very happy to do that. I think I will put it this way. I have told you that it was the Court's responsibility to determine what punishment should be inflicted, and I feel like the jury should be willing to trust the Court to exercise discretion in that respect, without attempting to seek that information. And, to tell the truth about it, I don't know what the punishment would be. In the event there should be a verdict in the case, of guilty, it would be necessary for me to give that consideration. Up to this time I have not been forced to consider it. But, that is a matter that the jury should not be concerned with. It should not influence your decision in this case.'"

* * *

"The Court:

'I think you better discuss the case further. You have heard the evidence in the case for three days. There have been a lot of matters discussed during the course of the trial, and I don't feel that it is so that you cannot finally reach a verdict, if you were to discuss the case with a proper attitude and proper frame of mind.'

Foreman Palmer:

'We are trying. I assure you of that.'

The Court:

'I am sure you are, and I think you should consider the case further. Do you have any other questions?'

Foreman Palmer:

'Do you have any other questions you want to ask (addressing the jurors)?'

A Juror:

"The gentleman wants to know if there is any minimum or maximum?'

The Court:

'There is no mandatory sentence. That is, the Court might place the defendant on probation or might impose a fine or might impose an institutional sentence. I really don't know what the maximum is. I really don't know what the maximum penalty is.'

Foreman Palmer:

'May we proceed back to the jury room?'

The Court:

'Yes. I think I can assure you that the maximum penalty would not be imposed. I don't know what it is.'"

The jury then retired at 8:47 P. M. to further deliberate on the verdict, and at 9:35 P. M., returned their verdict.