United States v. Venuto, 10069.

• Decision Date: 29 May 1950
• Docket Number: No. 10069.,10069.
• Citation: 182 F.2d 519
• Parties: UNITED STATES v. VENUTO.
• Court: U.S. Court of Appeals — Third Circuit

182 F.2d 519 (1950)

UNITED STATES v. VENUTO.

No. 10069.

United States Court of Appeals Third Circuit.

Argued March 7, 1950.

Decided May 29, 1950.

John M. Smith, Jr., Philadelphia, Pa. (Joseph Moss, Philadelphia, Pa., on the brief), for appellant.

Gladstone P. Lillicrapp, Asst. U. S. Atty., Philadelphia, Pa. (Gerald A. Gleeson, U. S. Atty., Philadelphia, Pa., on the brief), for appellee.

Before BIGGS, Chief Judge, HASTIE, Circuit Judge, and LEDERLE, District Judge, sitting by designation.

LEDERLE, District Judge.

This is an appeal from a judgment of conviction and sentence after trial by a jury on a four count indictment charging defendant with willfully and knowingly attempting to defeat and evade some $34,000 in individual income taxes for the calendar years 1942 to 1945, inclusive, in violation of Section 145(b) of the Internal Revenue Code, 26 U.S.C.A. § 145(b).

Defendant asks for judgment of acquittal or alternatively, a new trial, claiming that the Government failed to establish any taxable deficiency beyond a reasonable doubt, that he was deprived of his constitutional right to consult with his counsel during trial, and that the trial court erred in the admission of evidence, in restricting closing arguments, and in his charge to the jury.

Defendant entered the United States from Italy in 1923 at the age of twenty-three. He has spent the intervening twenty-seven years in Philadelphia. He is a butcher by trade, and was so employed with various meat dealers in Philadelphia from 1923 to 1941. He started working in Philadelphia for $3 a week, and was associated with meat dealers at progressively advancing compensation until he opened his own meat store in 1941.

During the prosecution years, 1942-1945, defendant rented and occupied a three-story building, where he operated a retail meat store on the first floor and resided above. Prior to 1942, defendant acquired eight pieces of income-producing property. In 1942, he purchased a slaughterhouse in Philadelphia for $9500. In 1943, he acquired an additional piece of property for $3400, and in 1944, two additional pieces of property for $30,000. Most of these acquisitions were paid for outright by check.

During the four years in question, defendant's income was derived from operation of his retail meat store and slaughterhouse and from rental income on the properties previously mentioned. He maintained no books of account other than check stubs.

Evidence was introduced tending to prove that all receipts from defendant's slaughterhouse, meat store and rentals were deposited regularly and currently in four bank accounts in Philadelphia, and all expenses were paid therefrom by check. Counsel stipulated that these four bank accounts showed deposits totalling $1,009,535.35 for the four years. Counsel also stipulated that third party records and defendant's check stubs showed that defendant's purchases of merchandise bought for sale were understated nearly one-half in his tax return for each year in question. Stipulated actual purchases for the four years aggregated approximately $825,000. Reported purchases approximated $450,000.

Government agents testified that they reconstructed defendant's income picture for the years in question in the following manner. They analyzed the bank accounts and defendant's check stubs and cancelled checks, verifying through third party suppliers, actual purchases of merchandise bought for sale. As to real estate income, this was verified through statements of receipts and disbursements prepared by the real estate firm which managed all of defendant's real estate business and remitted monthly to defendant net income after deducting expenses and commission. The agents determined that bank deposits constituted business receipts except for some $18,000 of non-income items for the four years. For each year in question, these non-income items were first deducted from the respective annual bank deposits. The balance was considered gross business receipts, from which the actual stipulated meat purchases were deducted. No change was made in any other expense deductions appearing in defendant's returns, as to which full credit was allowed as claimed. Upon such reconstructed income figures, the tax deficiencies were computed. The following tabulation shows the discrepancy between the Government agents' computations and those reported in defendant's returns as to gross business receipts less purchases of merchandise bought for sale.

                Government Figures
                                 1942           1943           1944           1945
                  Gross
                  receipts    $192,523.81    $273,071.57    $331,210.78    $172,100.00
                  Stipulated
                  purchases    164,121.14     245,231.62     287,025.72     128,113.69
                              ___________    ___________    ___________    ___________
                  Net
                  Balance     $ 28,402.67    $ 27,839.95    $ 44,185.06    $ 43,986.31
                  Reported
                  Gross
                  receipts    $101,168.42    $131,261.40    $175,170.31    $117,713.58
                  Purchases     85,421.80     110,612.39     145,580.93      99,252.87
                              ___________    ___________   ____________    ___________
                  Net
                  Balance     $ 15,746.62    $ 20,649.01    $ 29,589.38    $ 18,460.71
                

Defendant took the stand and testified that his sole source of income was from the meat businesses and rental of properties, and that all receipts from these enterprises went into these bank accounts.

Since we are of the opinion that a new trial must be ordered on other grounds, we do not feel that it is proper at this time to analyze various phases of the testimony pointing to guilt. Suffice it to say that this record contains evidence from which a jury could conclude beyond a reasonable doubt that during the prosecution years defendant had businesses of a lucrative nature, that he made periodic deposits in, and withdrawals from, bank accounts, that the difference between such deposits and withdrawals reflected current income, and that there was a substantial understatement in reporting income. Such proof meets the requirement of the so-called bank deposit method of reconstructing a taxpayer's income picture, and would be legally sufficient to support a verdict finding that there was a substantial tax deficiency for each of the prosecution years, which defendant knowingly and willfully attempted to defeat and evade. See: Gleckman v. United States, 8 Cir., 1935, 80 F.2d 394, certiorari denied 297 U.S. 709, 56 S.Ct. 501, 80 L.Ed. 996; Stinnett v. United States, 4 Cir., 1949, 173 F.2d 129, certiorari denied 337 U.S. 957, 69 S.Ct. 1531, 93 L.Ed. 1756; Paschen v. United States, 7 Cir., 1934, 70 F.2d 491.

This trial lasted four days. The records upon which the prosecution was predicated were voluminous. Near noon of the second day, the Government closed its case, and defendant took the stand. His direct examination was completed late in the afternoon, and cross-examination commenced immediately. The court excused the jury at 4 o'clock, and thereupon stated: "I would like to say to counsel, I do not want to keep this man in custody overnight — he is now committed for cross-examination so he will not discuss this case with anybody. Otherwise, I will have to commit him." In the ensuing discussion, similar and more explicit directions were given by the trial judge to the effect that defendant and his counsel were required to bind themselves not to consult together during this eighteen hour overnight recess at this crucial point of the trial or the court would revoke defendant's bail and commit him to jail incommunicado so that no consultation would be...