212 F.2d 61 (9th Cir. 1954), 13825, Bateman v. United States

Docket Nº:13825.
Citation:212 F.2d 61
Case Date:April 15, 1954
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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212 F.2d 61 (9th Cir. 1954)




No. 13825.

United States Court of Appeals, Ninth Circuit.

April 15, 1954

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Cameron Sherwood, Robert A. Comfort, Walla Walla, Wash., James Leavy, Pasco, Wash., for appellants.

William B. Bantz, U.S. Atty., Harvey Erickson, Sp. Asst. to U.S. Atty., Spokane, Wash., for appellee.

Before STEPHENS, BONE and ORR, Circuit Judges.

ORR, Circuit Judge.

The appellants, Charles and Wallace Bateman, are brothers. Their counsel attempt to depict them as two ignorant, unsuspecting individuals, victims of a misplaced trust in the integrity and ability of an incompetent and drunken accountant. In order not to be misled by the doleful picture presented, we need keep in mind that appellants possessed the ability to amass a fortune within a few years by the exercise of a business acumen and foresight which establishes beyond question that intellects engineering such success must be charged with a perception keen enough to detect an omission of over one hundred thousand dollars in an income tax return.

Appellants were convicted of aiding and assisting in the preparation and filing of false and fraudulent partnership income tax returns for the year 1945 in violation of 26 U.S.C.A. § 3793(b) (1) and with wilfully attempting to defeat and evade taxes by filing false and fraudulent joint income tax returns on behalf of themselves and their respective wives in violation of 26 U.S.C.A. § 145(b). Appellant Charles was convicted of the same offenses for the year 1946.

In the years 1939 to 1944 appellants acquired considerable land near Kennewick, Washington, which they planted in wheat and from which operation they derived large profits. In 1944 they purchased the Kennewick Hotel. Wallace took charge of the farm property and he and his wife kept the books for that part of the partnership. They took no active part in the hotel business. Charles operated the hotel and employed a bookkeeper to handle the books.

In 1944 a group of eight men in Kennewick, including two professional gamblers, opened a 'social club' in the basement of the Kennewick Hotel. Charles was an incorporator and president of the club. Large scale gambling was conducted in the club, one witness testifying that between $28, 000 and $30, 000 was on the table during a single card game.

Appellants did not maintain complete and adequate books and such records as they did keep were destroyed by fire in 1948; hence, the Government was forced to resort to the net worth method. The accountant produced by appellants as a witness admitted that the Bateman brothers received more than $52, 944.41 unreported farm income and a substantial amount of unreported non-farm income for the year 1945. The Government computations showed $48, 624.35 unreported income from sources other than the farm operations. With regard to the year 1946, the Government concedes that the farm income was correctly reported but introduced evidence to establish unreported non-farm income of more than $46, 000. 1

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That false returns were filed is admitted. The defense is that no intent to defraud or to evade taxes existed. In this connection appellants say they relied on their tax consultant, Isham, to properly prepare their returns and they signed the returns believing their income was correctly reported.

The theory advanced by the Government is that appellants furnished Isham false and incomplete information for use in preparing the returns and signed the returns knowing this false information to be incorporated therein.

Seventeen specifications of error are urged. We summarize them as follows: (1) voluntary disclosure as a bar to prosecution; (2) challenge of juror Dunlap for cause; (3) misconduct on the part of the prosecuting attorney and the court; (4) admission and exclusion of evidence; (5) impeachment of Government's witness Owens; (6) instructions to the jury; and (7) sufficiency of the evidence to support the verdict.

(1) Voluntary Disclosure.

Appellants claim that they voluntarily disclosed their tax liabilities to government agents prior to initiation of any investigation and, hence, were entitled to immunity from prosecution under announced Treasury Department policy and under the self-incrimination clause of the Fifth Amendment to the Constitution of the United States. 2 No disclosure of tax deficiencies was made until June, 1950, long after an investigation had been instituted by the Treasury Department. In April, 1948, the Collector of Internal Revenue received an anonymous letter naming Charles and Wallace Bateman as tax evaders. On June 7, 1948, the Collector forwarded the letter, together with appellants' returns for the years 1945 and 1946, to the Deputy Collector in Pasco, Washington, with directions to initiate an investigation. In December, 1948, agents visited appellants and had them sign Treasury Department Form No. 872, waiver of statute of limitations upon assessment of income taxes. Special agent Williams testified that waivers are procured only in active cases under investigation when it appears that an investigation may not be completed before the running of the period of limitations. He testified further that before a taxpayer is requested to sign Form No. 872 he is told that his tax return for the particular period in question is under examination and that the Government needs more time to investigate the matter. Absent a claim to the contrary, it must be assumed that the prescribed procedure was followed in the instant case. This we think was sufficient to put appellants on notice that they were under investigation. Claimed disclosure thereafter could not operate as a bar to prosecution. United States v. Lustig, 2 Cir., 1947, 163 F.2d 85; United States v. Weisman, D.C. Mass. 1948, 78 F.Supp. 979. It was knowledge that an investigation was under way that motivated appellants to inform the Collector that their 1945 returns were erroneous. They then co-operated with the Government by handing over such books and records as were available. 3 Such disclosures as were made by appellants after investigation had been instigated were voluntary and not induced by Treasury Department promises of immunity. No constitutional rights were invaded. United States v. Lustig, 2 Cir., 1947, 163 F.2d 85; United States v. Weisman, D.C. Mass. 1948, 78 F.Supp. 979.

It appears that not only was an investigation under way prior to the claimed disclosure but that appellants have never in fact made a full and complete statement of their tax liabilities.

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Unlike In re Liebster, D.C. Pa. 1950, 91 F.Supp. 814, cited by appellants, the taxpayers in the instant case at no time filed or offered to file amended returns containing a correct report of their earnings for the years in question. In fact, it was late in the trial before admission was made that substantial sums of income were unreported. This partial disclosure was not a 'voluntary disclosure' within the meaning of the Treasury Department's immunity policy.

(2) Challenge of Juror Dunlap for Cause.

Error is assigned because of the Court's refusal to sustain appellants' challenge of juror Dunlap for cause. On voir dire Dunlap stated that perhaps he had some prejudice against one of appellants' attorneys because he though a friend of his did not get a fair deal in a mortgage foreclosure handled by said attorney. On further questioning he stated that he would not let his dislike for the attorney influence his decision as to the guilt or innocence of the attorney's present clients. In response to the Court's questions, he said that he would be fair and impartial to the defendants and decide the case on the evidence and the Court's instructions. The refusal to excuse juror Dunlap was a proper exercise of the Court's discretion.

(3) Prejudicail Conduct of the Prosecuting Attorney and the Trial Court.

Complaint is made that the prosecuting attorney was guilty of prejudicial misconduct by stating in oral argument that the Government would show that appellants failed to report their income for the years 1947, 1948 and 1949. Appellants were not charged with failure to report income for said years, but have no just ground for complaint on this score. In fact, they were favored by the Court's ruling excluding testimony of failure to report income in other years. Such evidence is admissible to show intent or design to evade taxes. Johnson v. United States, 1943, 318 U.S. 189, 63 S.Ct. 549, 87 L.Ed. 704; Hanson v. United States, 8 Cir., 1950, 186 F.2d 61. The Court took the precaution to caution the jury to disregard the prosecutor's remarks.

We have examined other alleged errors and find them to be without merit. For instance, the Court did not abuse its discretion in permitting cross-examination of appellants' character witnesses as to their knowledge of gambling in the Kennewick Hotel. This was within the range of legitimate cross-examination.

It is claimed that the jury may have read a prejudicial newspaper story concerning 'rackets' which appeared during the time of the trial. The trial court took every required precaution in this regard. It had, prior to the appearance of the newspaper story, instructed the jury not to read the newspapers and cautioned the jury a second time when appellants called the Court's attention to the newspaper story in question. No showing was made that any member of the jury disregarded the admonition. At no time did appellants request that the jury be held together.

Rather trivial contentions are made to the effect that the trial court indirectly injected itself into the trial. We find no merit in them.

(4) Admission and...

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