Baines v. United States

• Decision Date: 13 May 1970
• Docket Number: No. 26163.,26163.
• Citation: 426 F.2d 833
• Parties: Donald K. BAINES, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

426 F.2d 833 (1970)

Donald K. BAINES, Appellant, v. UNITED STATES of America, Appellee.

No. 26163.

United States Court of Appeals, Fifth Circuit.

May 13, 1970.

Steadman S. Stahl, Jr., of Varon, Stahl & Perlin, Hollywood, Fla., Louis J. DeReuil, Isley & DeReuil (court-appointed) Hugh G. Isley, Jr., Fort Lauderdale, Fla., for appellant.

Robert W. Rust, U. S. Atty., Donald I. Bierman, Asst. U. S. Atty., Miami, Fla., Johnnie M. Walters, Asst. Atty. Gen., Joseph M. Howard, John M. Brant, Attys., Tax Div., U. S. Dept. of Justice, Washington, D. C., for appellee.

Before WISDOM, GEWIN, and AINSWORTH, Circuit Judges.

WISDOM, Circuit Judge:

Donald K. Baines, defendant-appellant, appeals from his conviction by a jury for willfully evading the payment of the federal cabaret sales excise tax imposed by 26 U.S.C. § 4231(6) of the 1954 Code.¹ This is the first and only case in which a taxpayer has ever been tried criminally for the offense of failing to pay the federal cabaret excise tax.² The trial took place in 1968, three years after the statute imposing the cabaret tax was repealed.³

The taxpayer and his wife, Wilma Jean Baines, were charged in an eight-count indictment with willfully attempting to evade the payment of that tax and filing false and fraudulent quarterly excise tax returns for all of 1961 and for the first three quarters of 1962. 26 U.S.C. § 7201. The taxpayer was separately charged with subscribing to a false excise tax return for the fourth quarter of 1961 in violation of 26 U.S.C. § 7206 (1).

At the close of the government's case, the district court granted the motions for judgment of acquittal as to Count IV, with respect to Mrs. Baines, and as to Count V, with respect to Baines. The court later denied motions for judgments of acquittal. The jury acquitted Mrs. Baines as to Counts I, II, and III and acquitted Baines as to Count II, but found him guilty as to Counts I, III, IV, VI, VII and VIII. The court denied all post-trial motions, and sentenced the taxpayer to three years as to Count I and to two years as to each other count, the two-year sentences to run concurrently with each other but consecutive to the three year sentence imposed as to Count I.

On appeal, Baines alleges that the trial court committed a number of reversible errors. Baines also questions whether the evidence was sufficient to show beyond a reasonable doubt that there was either a deficiency in the cabaret tax payments or that he willfully understated and underpaid the tax. This is a close point which we resolve in favor of submission of the case to the jury.

Because of the closeness of the case the Court feels compelled to hold, as we held in Marcus v. United States, 5 Cir. 1970, 422 F.2d 752, "that the cumulative effect of the District Court's errors, which are discussed in detail below, when taken together, require that this case be reversed and remanded to the District Court for a new trial, even though no single error, when viewed in isolation, would necessarily require this disposition. See Getchell v. United States, 5 Cir., 1960, 282 F.2d 681, 691." We limit our holding to the facts peculiar to this rare case involving the failure to pay federal cabaret excise taxes.

I.

Donald K. Baines operated "Porky's Hideaway" in Oakland Park, Florida. The establishment approaches the general public's loose notion of a "cabaret" as a place for entertainment where the music might be furnished by a band of musicians or by a juke-box, and where there might or might not be singing by professional entertainers and dancing by the customers.

In April 1958 two agents of the Internal Revenue Service visited Porky's Hideaway. They concluded that Baines had made certain sales subject to the cabaret excise tax. One of the agents explained to Baines that to avoid further violations his records should reflect the portion of the sales that would be subject to the excise tax. The agent suggested a cut-off time of 9:30 p. m. After that time the cabaret tax would apply to sales when there was either singing or dancing or sales made while space was made available for dancing. The agent informed Baines that if the dance floor was roped off or made unavailable for dancing, there would be no tax even if he had music.

Two weeks later the agents returned, unannounced, and found no violation, that is, that the establishment was not being operated as a cabaret. At the trial, one of the agents testified that there was neither singing nor dancing and that the dance floor was unavailable for dancing. He stated that an orchestra performed during the entire time he was present.

In January 1959, the agents made a third unannounced visit. Again they found no violation.

In accordance with a suggestion from the agents, Baines began to record his sales in four categories: "Before 9:30", "After 9:30", "Package", and "Subject to Amusement Tax". This last category was later abandoned when Baines began to record, in a separate notebook, those sales subject to the excise tax. The figures appearing in that notebook reflected the cost of entertainment, and indicated the nights and hours during which there was dancing. Based on these figures, Baines computed and paid the cabaret excise tax.

In March 1964 Revenue Agent Ted Williams asked and secured Baines's permission to examine his records. These included the sales journal containing those figures upon which the excise tax was determined. Williams continued to examine Baines's records for the next five months. In August 1964 he asked Baines to sign a previously prepared affidavit containing information relating to the reporting and filing of income tax returns and the reporting and filing of cabaret excise tax returns. Williams advised Baines that he was under no obligation to sign the affidavit. Baines signed it. In September 1964 Williams turned over the affidavit to the Intelligence Division along with the final report of his investigation. At the trial, over Baines's objection, that portion of the affidavit relating to the reporting and filing of the cabaret excise tax was admitted into evidence.

October 2, 1964, Special Agent John R. Harrison of the Intelligence Division accompanied Williams to Baines's home. After Harrison had fully identified himself, Baines permitted Harrison to review the sales records and to remove boxes of records. In March 1967 Donald K. Baines and his wife were indicted for willfully evading payment of the cabaret excise tax.⁴

The trial commenced on January 2, 1968. To find the defendants guilty, the government had to prove beyond a reasonable doubt that there was a substantial deficiency in tax owing and that the taxpayer willfully attempted to evade that tax. E. g., Koontz v. United States, 5 Cir. 1960, 277 F.2d 53.

To prove the deficiency in the tax owing, the government had to establish that sales were made during the time when "Porky's Hideaway" was indeed a cabaret. The ten percent cabaret tax applied to amounts paid for admission, refreshments, service, or merchandise at a public place where music and dancing privileges or any other entertainment was being performed. The tax did not apply, however, to payments made while only instrumental or mechanical music was being played.

The government sought to prove the alleged deficiency by establishing that all sales that appeared in the "After 9:30" column of figures in Baines's records were sales that were subject to the cabaret tax. To support its position the government had to show that "Porky's Hideaway" was a cabaret from 9:30 in the evening until closing. The government introduced into evidence sixtysix entertainment employment contracts that Baines had entered into with various entertainment groups. But the government called only one of the 66 entertainers to testify. The contracts were offered through Porter R. Thomas, the Secretary-Treasurer of the Miami local of the American Federation of Musicians. Thomas initially testified out of the presence of the jury as to the general operations of the Union and its relation to the local entertainers. He testified that as each entertainment contract was received at the Miami office it was assigned a job number and that this number was posted on an individual account card. As each contract was completed, the office would then compute the amount that the individual member owed to the Union in the form of work dues. Three such account cards were offered into evidence in an effort to show that three performers had paid their work-dues after allegedly performing at "Porky's Hideaway".

On voir dire examination, Thomas testified that since each entertainer would pay his work-dues based upon performance, he had assumed each contract had actually been performed. He unequivocally stated, however, that he had no direct knowledge whether in fact any of the contracts had been performed and he was unable to tell from the contracts themselves whether the entertainers did in fact perform any services at Porky's Hideaway during 1961 and 1962.

The jury then returned and the government proceeded to have Thomas answer the same questions that were previously asked. After cross-examining Thomas, and again out of the presence of the jury, Baines's attorney moved to strike from the evidence all of the contracts that had previously been accepted on the ground that they constituted hearsay evidence in that the contracts themselves could not prove actual performance. The trial judge agreed that the contracts themselves could not prove performance; and government counsel agreed that as a matter of law the entering into a contract is not proof of its performance; nevertheless, the trial judge permitted the contracts to remain in evidence with an opportunity afforded opposing counsel to argue the point to the jury.

The government then called several witnesses who testified as to the type and the extent of entertainment that was performed at "Porky's Hideaway". Gene Sposato, the only entertainer...