222 F.2d 678 (9th Cir. 1955), 14094, Legatos v. United States
|Citation:||222 F.2d 678|
|Party Name:||Tony LEGATOS (True Name Antonio Legatos) and John Glynn, Appellants, v. UNITED STATES of America, Appellee.|
|Case Date:||May 12, 1955|
|Court:||United States Courts of Appeals, Court of Appeals for the Ninth Circuit|
Rehearing Denied June 30, 1955.
[Copyrighted Material Omitted]
Harold C. Faulkner, Allan L. Fink, Melvin, Faulkner, Sheehan & Wiseman, San Francisco, Cal., Grant G. Calhoun, Carlson, Collins, Gordon & Bold, F. Walter French, Richmond, Cal., for appellants.
Lloyd H. Burke, U.S. Atty., Robert H. Schnacke, Asst. U.S. Atty., San Francisco, Cal., Macklin Fleming, Sp. Asst. to Atty. Gen., for appellee.
Before DENMAN, Chief Judge, ORR, Circuit Judge, and DRIVER, District judge.
DRIVER, District Judge.
Tony Legatos and John Clynn were indicted April 4, 1951. The first count of the indictment charged that defendants attempted to defeat and evade a large part of Legatos' income tax for the year 1944 by understating the partnership and business receipts of Legatos and, in the case of Legatos, by filing a false and fraudulent income tax return in which the amount of his net income was substantially understated, all in violation of Title 26, U.S.C. § 145(b). The second and third counts were similiar to the first count in all respects except that, they charged attempted evasion of Legatos' income taxes for the years 1945 and 1946, respectively.
The trial began May 18, 1953, and was concluded June 27, of the same year. 1 At the close of the Government's case, Glynn moved for judgment of acquittal and rested. He offered no evidence and did not cross-examine any witness subsequently called. Legatos put on a defense. The jury by its verdicts found each defendant guilty on each count. Thereafter the Court granted Glynn's motion for judgment of acquittal as to count one and denied it as to counts two and three. From judgments and sentences on the verdicts Legatos and Glynn appealed.
During the period covered by the indictment, appellant Legatos, a resident of Sacramento, owned numerous restaurants, bars and taverns in that city and
elsewhere in Northern California. In Vallejo, one of them, Hambers Cafe, was managed by appellant Glynn, and two others-- the Casa Blanca and the States Club-- were operated by a partnership consisting of Legatos, Glynn, and one John Blanas, who testified in the trial as a witness for the Government. During the war, Legatos' enterprises were very profitable, the gross receipts mounting to between $1, 500, 000.00 and $1, 750, 000.00 annually for 1944, 1945, and 1946. In the Vallejo establishments substantial portions of the gross income were not rung up on the cash registers but were kept in the safe at Hambers Cafe and distributed monthly to the partners in currency in separate envelopes for each establishment. Such income consisted of monies from the juke boxes and coin machines, certain miscellaneous items, and receipts from private parties at the Casa Blanca on Wednesdays when it was closed to the general public. There was also evidence that part of the gross receipts of the Casa Blanca and States Club was concealed by 'cutting' or manipulation of the tapes on the cash register machines. Tax returns of Legatos for the years 1942 through 1946 fell far short of disclosing his true income in those years. Amended returns, prepared by an accountant employed by him and filed in 1948, showed unreported income in the original returns amounting in the aggregate to approximately $244, 000.00.
Appellant Legatos asserts nine specifications of error. We group and rephrase them as follows:
1) The sufficiency of the indictment;
2) Voluntary disclosure of tax liability by Legatos;
3) Admission of testimony of the witness Blanas;
4) Testimony of the witness Hubbard;
5) Sufficiency of the evidence to make a net worth case;
6) The instructions to the jury.
Appellant Glynn adopts all of Legatos' specifications of error and advances several of his own. They present, principally, the contention that, the evidence is not sufficient to support the verdict as to Clynn. We shall first discuss Legatos' specifications and then consider the contention urged by Glynn.
(1) The Indictment.
Prior to trial, Legatos moved to dismiss the indictment, and for a bill of particulars, and the motions were denied. He complains that he was not reasonably and fairly informed of the nature of the charges, or of the methods which the Government proposed to use to establish them. The indictment was in the form commonly used in tax prosecutions. The first count, which we take as typical, alleged that Legatos attempted to defeat and evade a large part of his income tax for the year 1944 by understating his partnership and business receipts and by filing a false and fraudulent tax return wherein he stated his net income to be $40, 449.26, and that the amount of tax due and owing thereon was the sum of $20, 903.47, whereas, as he well knew, his net income for that year, computed on the community property basis, was the sum of $71, 607.75, upon which net income he owed the United States an income tax of $45, 150.51. The count sufficiently stated the essential facts constituting the offense charged. 2 And we find no abuse of discretion in the denial of the motion for a bill of particulars. 3 After the Government started to investigate Legatos' tax returns, he employed an expert accountant who worked on his books and records for many months in cooperation and collaboration with an agent of the Bureau of Internal Revenue. The accountant
recomputed his income for the years in controversy on the net worth basis, and prepared amended income tax returns which were filed in 1948. Count one adopted the figures in the amended tax return as the correct net income and income tax of Legatos for the year 1944. The same is true of counts two and three as to the years 1945 and 1946. Legatos knew, or could easily have learned by making inquiry of his own accountant, the nature of the charges against him and, in general, the character of the evidence which the Government would use.
(2) Voluntary Disclosure.
Legatos contends that he was immune from prosecution because of his voluntary disclosure of the understatement of his income and tax liability in compliance with an announced policy of the United States Treasury Department, which had not at that time been withdrawn. 4 Closely allied to that contention is the additional one that, documentary evidence used in his trial was procured from him by government agents after he had been misled into believing that no criminal action against him was contemplated, in violation of his rights under the Fourth and Fifth Amendments to the Federal Constitution. A taxpayer's rights upon a claimed acceptance of the Treasury Department's offer (considering it as such for the purpose of this discussion) can be no broader than the plain, express terms of the offer. Such terms were that the taxpayer make 'a voluntary disclosure of omission or other misstatement in his tax return * * * before an investigation is under way * * *.' Legatos, with the assistance of an attorney, made a formal voluntary disclosure in the form of a letter to the Bureau of Internal Revenue on July 9, 1947. Briefly and chronologically listed, the events leading up to that disclosure were as follows: November 20, 1946, the Bureau of Internal Revenue wrote to Legatos requesting an extension of time for the examination of tax returns, and consent to the extension was received November 24, 1946. On March 5, 1947, Internal Revenue Agent Bakkan, in the course of his investigation of Legatos' tax returns, called at Legatos' Sacramento office to examine his books. The examination was continued on March 7, and March 11, but on none of those days was Legatos present. On April 15, 1947, Bakkan again visited the Sacramento office and was introduced to Legatos by the latter's office manager as 'the Revenue Agent that was working making the examination.' Bakkan was then inspecting some books which were spread out on a desk before him and he told Legatos that he was making an examination of his income tax returns. Bakkan continued his work on the books in Legatos' office on April 16 and 17, 1947, and Legatos came in and out of the office from time to time.
On May 2, 1947, Special Agent Hubbard of the Bureau of Internal Revenue was assigned to investigate the Legatos case. On May 6, he interviewed Blanas (partner of Legatos and Glynn in Vallejo enterprises as stated above) and took a sworn statement from him on May 14. June 5, Legatos, on advice of an attorney, employed accountant Swigard, and on June 9, Swigard called on Bakkan and offered to cooperate with him fully and to furnish him detailed information of Legatos' financial affairs. June 13, Hubbard asked Glynn for books and records of the Vallejo establishments
and Glynn gave him some of them on June 16, and more within two weeks thereafter.
From the foregoing recital, it is apparent that the voluntary disclosure made by Legatos on July 9, came long after investigation was under way, and was insufficient to afford him immunity from prosecution. 5 Legatos calls attention to his directions to his office manager and bookkeeper to furnish agent Bakkan any and all books and records he might request, and the conduct of his accountant Swigard in working in full cooperation with agent Bakkan; but aiding and facilitating a government tax investigation after it has been started manifestly does not bring the taxpayer within the Treasury Department's voluntary disclosure policy. Legatos further complains that he was misled into believing that only a routine, civil liability investigation was being made of his tax returns and that he was not informed until after his voluntary disclosure that criminal prosecution was contemplated. No case has been called to our attention which holds that, a taxpayer may...
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