Schuermann v. United States, 13798.
| Decision Date | 08 June 1949 |
| Docket Number | No. 13798.,13798. |
| Citation | 174 F.2d 397 |
| Parties | SCHUERMANN v. UNITED STATES. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Joseph Nessenfeld, of St. Louis, Mo. (Jerome F. Duggan, Robert Kratky, and Morris A. Shenker, all of St. Louis, Mo., on the brief), for appellant.
Drake Watson, U. S. Atty., of St. Louis, Mo. (David M. Robinson, Asst. U. S. Atty., of St. Louis, Mo., on the brief), for appellee.
Before SANBORN, THOMAS, and JOHNSEN, Circuit Judges.
The defendant (appellant), by an indictment in four counts, was charged with having willfully attempted to defeat and evade the payment of federal income taxes by filing a false return for each of the years 1942, 1943, 1944 and 1945.1 He entered a plea of not guilty. The case was tried to a jury, which returned a verdict of guilty upon all counts. Sentence was imposed upon the verdict, and the defendant has appealed. He asserts that the court should have directed a verdict of acquittal upon the ground that the evidence was insufficient to sustain his conviction, and that errors of law were committed during the trial which entitle him to a reversal.
The government attempted to prove (1) that the defendant filed a false income tax return for each of the years covered by the indictment, and (2) that he did so willfully in an attempt to defeat or evade payment of a part of his income tax. If the government's evidence was sufficient to make the question of the alleged falsity of the defendant's returns one of fact for the jury, the defendant was not entitled to a directed verdict. We say this because the evidence disclosed the usual badges or indicia of the deliberate concealment of income, namely: (1) Intentional failure to maintain financial records; (2) a much visited safety deposit box, rented under an assumed name; (3) the use by the defendant, in his dealings, of large sums of currency; and (4) purchases of property by the defendant in others' names.
It is the position of the defendant that the government completely failed to produce any substantial evidence that he had any taxable income in excess of that reported by him or that he owed any more taxes than he paid.
The defendant is a married man, who, for a number of years, was engaged in operating in St. Louis, Missouri, a policy or numbers business, a form of lottery or gambling in which numbered tickets are sold and some ticket holders evidently win or hope to do so. The business is illegal in Missouri, but is apparently lucrative if well managed. See United States v. Miro, 2 Cir., 60 F.2d 58. It constituted the defendant's only visible means of support and income during the years in suit.
The defendant's income tax returns for the years 1936, 1938, 1939, 1940 and 1941 reported net income and tax liability as follows:
Tax
Net Income. Liability
1936 $ 3,660.80 $ 90.55
1938 3,665.00 91.94
1939 4,831.30 73.93
1940 8,590.00 335.10
1941 14,914.57 2,578.80
In 1941, the taxing authorities investigated the defendant's returns for the years 1938, 1939 and 1940. As a result of this investigation, deficiency assessments were agreed to for those years. The assessments were based on additional income for 1938 of $6,735, for 1939 of $6,394.36, and for 1940 of $4,759.14. The Revenue Agent who made the examination determined that in 1938 defendant's income from his policy business was $10,400, that in 1939 it was the same amount, and that in 1940 it was $13,352.70. The report of examination informed the defendant that he must maintain adequate accounting records.
The defendant's returns for 1942, 1943, 1944 and 1945 were prepared by a lawyer and accountant from columnar sheets, furnished by the defendant, purporting to show the results of his business. These returns showed the defendant's net income and tax liability to be as follows:
Tax
Net Income. Liability
1942 $15,513.94 $4,280.41
1943 none none
1944 3,682.24 645.55
1945 17,295.06 5,851.38
According to the government accountant who investigated the defendant's returns for the years in suit, the corrected net income and tax liability of the defendant were as follows:
Corrected Tax
Net Income. Liability
1942 $ 20,911.00 $ 6,983.91
1943 32,525.17 14,811.52
1944 105,463.62 74,441.53
1945 85,107.84 56,161.54
This computation is based upon the theory that on December 31, 1941, the defendant had no substantial capital and that during the subsequent four years his expenditures and investments were attributable to and reflected his current income. The method used by the government for reconstructing the defendant's probable income for the years in question is called the "increasing net worth and expenditures" method. Its use in this case was necessitated by the fact that the defendant had no record of his receipts. He asserts that, before computations based upon this method could be accorded probative value, there would have to be substantial evidence of what the sum total of his assets was on December 31, 1941, and that this has merely been assumed and not proven. In the defendant's brief, it is said:
The contention of the defendant as to the soundness of the government's computations is not without substance. The government's case is based largely upon the theory that proof of expenditures is, under the circumstances of this case, proof that the defendant, in each of the years involved, had more income than he reported. The evidence of the government does not exclude the possibility that the defendant had some substantial accumulation of capital on December 31, 1941, or that sometime, somehow and somewhere he acquired a large amount of capital out of which he made the loans, investments and expenditures which the government contends reflect income.
While the government had the burden of proof, it was not required to make a perfect case or to prove the defendant guilty to a mathematical certainty. The government did not have to establish the exact amount of unreported income of the defendant. United States v. Johnson, 319 U.S. 503, 517, 63 S.Ct. 1233, 87 L.Ed. 1546. Evidence which, if unexplained and uncontradicted, will justify a conclusion that a taxpayer had income which he deliberately failed to include in his return, is enough to take a case such as this to the jury. Compare, Affronti v. United States, 8 Cir., 145 F.2d 3, 6, and Guzik v. United States, 7 Cir., 54 F.2d 618, 620.
We think it reasonably may be inferred, from the defendant's returns for the years prior to 1942, that the likelihood of his having accumulated a large surplus from his activities was negligible. One can believe that his business, like many other enterprises, legal and illegal, was a beneficiary of the prosperity of the war years, and that his expenditures kept pace with his income. If the skill of the tax evader in concealing income is not to become "an invincible barrier to proof," United States v. Johnson, supra, 319 U.S. at page 518, 63 S.Ct. at page 1240, 87 L.Ed. 1546, the federal appellate courts will have to rely heavily upon the sound judgment of the trial courts in appraising the sufficiency of the evidence to warrant submission of a tax evasion case to a jury, and upon the fairness and common sense of juries in determining guilt or innocence when such cases are submitted to them. See United States v. Johnson, supra, 319 U.S. 503, at pages 519-520, 63 S.Ct. 1233, 87 L.Ed. 1546.
We conclude that the District Court did not err in denying the defendant's motion for a verdict of acquittal.
Other errors asserted by the defendant relate to the court's failure to give certain instructions requested by the defendant.
The case was argued to the jury during the morning of July 1, 1948. The arguments were concluded at 12:55 P.M. At that time, defendant's counsel presented to the court twenty-two typewritten pages of requested instructions. No copies of the requests were furnished counsel for the government. The court excused the jury until 2:30 P.M., and the following colloquy took place between the court and counsel for the defendant:
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