Strauss v. United States

Citation376 F.2d 416
Decision Date24 April 1967
Docket NumberNo. 22546.,22546.
PartiesRobert L. STRAUSS, Appellant, v. UNITED STATES of America, Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Arthur B. Cunningham, Philip T. Weinstein, Cunningham & Weinstein, Miami, Fla., for appellant.

Aaron A. Foosaner, Edward A. Kaufman, Asst. U. S. Attys., Miami, Fla., Mitchell Rogovin, Asst. Atty. Gen., Richard B. Buhrman, Atty., Tax Division, Department of Justice, William A. Meadows, Jr., U. S. Atty., Aaron A. Foosaner, Asst. U. S. Atty., Miami, Fla., for appellee.

Before GEWIN and GOLDBERG, Circuit Judges, and SPEARS, District Judge.

GOLDBERG, Circuit Judge.

This is an appeal from a conviction for willful tax evasion. 26 U.S.C.A. § 7201. The defendant Robert L. Strauss was indicted for evading federal income taxes for the years 1956 and 1957. After an unplacid and acrimonious two and one-half week trial, Strauss was found innocent of the 1956 charges, but guilty of the 1957 transgressions. The government charged that Strauss had unreported income during 1957 amounting to $190,687.64. In this appeal Strauss complains of errors ranging from the egregious to the picayune. In reversing we discuss the egregious in the expectation that the picayune will not be repeated. We reverse and grant a new trial solely because the trial judge refused to instruct the jury on certain defenses claimed by Strauss.

Strauss's financial gyrations as detailed in the record are complicated, but in view of our disposition we need not follow every personal and corporate pirouette. If financial obfuscation could as a matter of law be equated with tax evasion, the finding of guilt here would be unassailable, but a jury on proper instructions must find more than darkness or shadows. We state the evidence most favorably to the government.

A. The Harold Corporation debentures. Strauss and Ray Goodman controlled the Harold Corporation although Strauss owned no stock in the corporation and was not an officer. Luella Helen Strauss, who was married to the defendant during the questioned years (but who at the time of trial was divorced from him), executed and delivered to the Harold Corporation on August 1, 1956, a non-interest-bearing note for $250,000, payable in ten years. In return for this note, Mrs. Strauss received Harold's debentures in the principal amount of $250,000. On March 4, 1957, these debentures were sold, it is unclear to whom, for $175,000. This sum was paid in three cashier's checks of $76,000, $50,000, and $49,000. Rather than deposit these checks immediately in Mrs. Strauss's account, the defendant and Mrs. Strauss undertook evasive action, using these checks to buy more cashier's checks for smaller sums. Most of these new checks were deposited in her account at various times during the next several months; some were used to buy even more cashier's checks in yet smaller sums, which were then deposited in Mrs. Strauss's account. The $49,000 check was deposited in the account of the Florida International Corporation, whose stock was owned by Mrs. Strauss. More checks were issued from this account. Sleight and deft mutation and distribution of checks led the money, nevertheless, to the Strauss account. Strauss himself ultimately received $42,000 of this sum in cash; most of the rest went to Mrs. Strauss's bank account.

The government offered testimony tending to show that Mrs. Strauss's affairs were at all relevant times under the complete control of her husband, that any property in her name was in reality his, and that any money paid to her was in fact paid to him. Luella Strauss was Robert Strauss's amanuensis. The government also offered testimony which the jury could believe to show that the note given by Mrs. Strauss to Harold was worthless when it was made, that the "sale" of the debentures to her for the note was sham, and that therefore her sale of the debentures yielded income to Strauss which he never reported.

Strauss defended by seeking to show that the note given by Mrs. Strauss had value equal to the worth of the debentures and that therefore the debentures had a basis equal to their sale price so that there was no gain on the sale. Strauss offered testimony to show that Mrs. Strauss owned $60,000 or $70,000 in jewelry and an undivided interest in the home in which she and her husband lived.

Further, the defendant claimed that the following transaction demonstrated that the note had value. The Harold Corporation owned the Cadillac Hotel in Miami Beach, Florida. Strauss and Goodman were seeking, in 1957, a mortgage loan on the hotel for renovation. They approached Sam Kay, who succeeded in negotiating a $1,250,000 loan without subordination of the ground fee. Kay was promised a fee of 15 per cent of the principal. He was given as payment $50,000 cash, a Lincoln Continental automobile, and the Luella Strauss note, endorsed without recourse by Harold. If this defense were believed, it would show that the note was thought to have value by Sam Kay, who was a businessman.

B. The Pan American Loan. Mrs. Strauss owned all of the stock of the Florida International Corporation, but the jury could believe that Strauss dominated and controlled this corporation too. As of March, 1957, Harold owed Florida International $55,000, and Florida International owed the Pan American Bank $81,000. Harold, through Strauss's negotiations, procured a third mortgage of $330,000 from Pan American. When the funds had been credited to Harold's account on March 20, 1957, Strauss issued a check on that account for $111,000, payable to Florida International. This was $56,000 more than Harold owed Florida International. On March 26, Florida International repaid Harold $14,750 by check, leaving $41,250 of the overpayment still in Florida International's hands. The government offered evidence to show that the corporate veil of Florida International should be pierced and the $41,250 counted as income to Strauss for 1957.

The defense to this claim is that $30,000 of the $41,250 was a fee paid to Florida International for obtaining the loan, and was not distributed by that corporation. The $11,250 remainder was paid to Mrs. Strauss, the defense claimed, to reimburse her for prepayment of a premium for an insurance policy on Strauss's life which Pan American had demanded before it would lend the money. The only evidence of such a policy was the defendant's...

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