Ashe v. United States

• Decision Date: 10 April 1961
• Docket Number: 13928.,No. 13927,13927
• Citation: 288 F.2d 725
• Parties: Neil W. ASHE, Appellant, v. UNITED STATES of America, Appellee (two cases).
• Court: U.S. Court of Appeals — Sixth Circuit

288 F.2d 725 (1961)

Neil W. ASHE, Appellant, v. UNITED STATES of America, Appellee (two cases).

Nos. 13927, 13928.

United States Court of Appeals Sixth Circuit.

April 10, 1961.

Clyde W. Key, Knoxville, Tenn. (Frederick Zissu, New York City, on the brief), for appellant.

John F. Dugger, Asst. U. S. Atty., Knoxville, Tenn. (John C. Crawford, Jr., U. S. Atty., Knoxville, Tenn., on the brief), for appellee.

Before MILLER, Chief Judge, and CECIL and O'SULLIVAN, Circuit Judges.

O'SULLIVAN, Circuit Judge.

Defendant-appellant, Neil W. Ashe, appeals from judgments entered on a jury's verdict convicting him on all counts of two indictments which charged him with violation of Section 145(a) of the Internal Revenue Code of 1939, 26 U.S.C.A. § 145(a). He was sentenced to eighteen months imprisonment on each of six counts, the sentences to run concurrently. In the indictment involved in appeal No. 13,927, he was charged, in separate counts for each year, with filing on behalf of Ashe Hosiery Mills of Knoxville, Tennessee, a Corporation of which he was President, false and fraudulent income tax returns for the calendar years of 1950, 1951 and 1952. In the indictment involved in appeal No. 13,928, he was charged, in separate counts for each year, with filing on behalf of himself and his wife, false and fraudulent income tax returns for the calendar years of 1950, 1951 and 1952. All counts of each indictment charged that the offenses were committed in the Middle District of Tennessee by filing the respective returns with the Collector of Internal Revenue at Nashville. In Bills of Particulars, supplied upon defendant's motions therefor, the government averred that the respective returns were signed and the alleged wilful and fraudulent intent occurred in the Northern Division of the Eastern District of Tennessee, in which the City of Knoxville is located.

For reversal the defendant claims: First, that there was not substantive evidence to support a verdict of guilty and the court should have directed his acquittal on all counts. Second, that the district judge erred in giving and refusing various instructions to the jury. Third, that the offense charged in the first count of each indictment was barred by the Statute of Limitations. Fourth, that there was a fatal variance between the third count of each indictment and the proofs, in that on March 13, 1953, the date of filing of the 1952 returns, the office of "Collector of Internal Revenue" had been abolished and that of "Director of Internal Revenue" created. The third count of each indictment charged that the return for 1952 had been filed with the "Collector of Internal Revenue." Fifth, that the district judge erred in denying his motion for new trial, made on the ground of newly discovered evidence. This motion was made after the appeals had been originally docketed in this court. We shall discuss these contentions in the above order.

First. Should an acquittal have been directed? Since about 1917, appellant had, with his father and brother, been engaged in the business which at the time of the events here involved was known as the Ashe Hosiery Mills. In 1937, an accountant, Leonard Barker, was employed by the Ashe business. He was described by defendant as a financial genius in whom defendant and others of his family had a "childlike" confidence. For some years prior to 1950, the first tax year here involved, the said Barker maintained a bank account at the American National Bank and Trust Company in Chattanooga, Tennessee, under the style of "Yarns Associated." During the years in question, and in prior years, substantial amounts were withdrawn from the funds of Ashe Hosiery Mills by its checks signed by appellant, as its President, payable to Yarns Associated, and the proceeds deposited in the Yarns Associated account — $16,637.24 in 1950, $20,425.84 in 1951, and $12,472.28 in 1952. The amounts of these checks were set up on the books of Ashe Hosiery Mills as paid out for the purchase of yarn and deducted on its income tax returns as part of the cost of doing business. The government claims that no such purchases of yarn were actually made. The evidence showed that, except for a few relatively small, unidentified withdrawals, and an amount paid to Leonard Barker in 1950 of $1,019.63, the monies thus paid by Ashe Hosiery Mills to Yarns Associated were paid out by Yarns Associated either to defendant Ashe, or to his sister-in-law, Irene Ashe. The amounts paid to Irene Ashe were in payment of promissory notes given by defendant at a time in 1948 when he purchased from her, his deceased brother's widow, the shares of stock that his brother had owned in the Ashe Hosiery Mills. In 1950 there was thus paid to Irene Ashe from the Yarns Associated account the sum of $14,547.00; in 1951, such payments to Irene Ashe totalled $13,881.72, and in that year there was paid from the Yarns Associated account directly to defendant, $1,500.00; in 1952, like payments from Yarns Associated were made to Irene Ashe in the sum of $4,479.48, which amount paid off the last of defendant's stock purchase notes, and in that year there was paid directly to defendant the sum of $6,000.00. Leonard Barker handled the mechanics of making these payments by purchasing with Yarns Associated checks cashier's checks in the respective amounts of such withdrawals.

The deduction of the monies thus paid to Yarns Associated by Ashe Hosiery Mills from the gross income of Ashe Hosiery Mills as the cost of yarn purchased was the basis for the indictment involved in appeal No. 13,927. None of the monies paid to Irene Ashe on the stock purchase notes, or money paid directly to defendant from the Yarns Associated funds, were reported by defendant as income received as dividends, or otherwise from the corporation. Such conduct was the basis of the charges made in the indictment involved in appeal No. 13,928.

In November, 1947, defendant's brother, Ragon Ashe, died owning 452½ shares of the capital stock of Ashe Hosiery Mills. An agreement had existed between defendant and his brother providing that upon the death of either the survivor would purchase the shares of the deceased at their book value. On January 13, 1948, a contract was drafted by an attorney representing the widow and the estate of the deceased Ragon Ashe, providing for the purchase by defendant of the said 452½ shares at a price of $158.34 per share. Of the total price of $71,648.85, the sum of $15,121.47 was paid in cash at the closing of the deal, and the balance of $56,527.38 was payable in 51 monthly installments. Each installment was evidenced by defendant's note for $1,108.38. Certificates for the stock so purchased by defendant, (452½ shares) were issued in his name. Fifty-one certificates, each for seven shares, were endorsed in blank by defendant and delivered as collateral for the unpaid notes. One such certificate was pledged with each note of $1,108.38. A contract evidencing the entire transaction was signed by defendant at the attorney's office at the time of closing.

Evidence was received of the use made of the Yarns Associated account for the period from January 1, 1946, through December, 1952. This evidence disclosed a continuing practice of payments made to such account by Ashe Hosiery Mills with such monies being redistributed directly to defendant, to pay his liability for purchase of his deceased brother's stock, to pay for some additional shares purchased by him from third persons, and to pay some substantial accounts owed by Ashe Hosiery Mills for construction of additions to its plant. A composite of such transactions showed that for the period above mentioned, a total of $160,858.30 paid to Yarns Associated by Ashe Hosiery Mills was redistributed as follows: to defendant Neil W. Ashe, $61,438.80; to Irene Ashe, (for stock purchased by defendant) $57,449.18; to one Darnall, $3,576.75; and to one Hutsill, $7,647.75. These latter two amounts represented the cost of stock in Ashe Hosiery Mills purchased from Darnall and Hutsill by defendant. An amount of $30,745.82 was paid to business firms for work done for Ashe Hosiery Mills.

The defendant, a witness in his own behalf, gave the following explanation of the above transactions. As to the money received by him from the Yarns Associated account, he claimed that it represented repayment of loans made by him to Leonard Barker. The payments to Darnall and Hutsill, in the amount of $11,222.57 for stock purchased by defendant from them, were made by Barker out of Yarns Associated account in repayment of Barker's borrowings from Ashe. Defendant claimed that most of the money loaned by him to Barker came from savings that defendant had accumulated over a period of years and which he had kept in cash in the company safe. It had reached a total of about $30,000.00 at one time. He claimed that outstanding loans to Barker were as much as $25,000.00 at one time. The only record kept of these loans was a little book in which were noted the various loans and the repayments made thereon. The little book had been destroyed. During the course of the Internal Revenue Department's investigation of the tax returns involved, defendant with his attorney and his then accountant attended a conference. A stenographic record was made of a sworn statement then made by him. He then denied that he had ever had any personal transactions with Yarns Associated. Asked directly whether he had ever loaned any money to Barker, he replied, "Not that I recall." He then also asserted that he had never accumulated any cash funds which he had hidden in a secret place. On the trial, he charged these very crucial admissions to his faulty memory at the time they were made.

Defendant produced two employees of Ashe Hosiery Mills, one his son-in-law, who testified that yarn was actually purchased and received by Ashe Hosiery Mills from Yarns Associated. On this appeal, it is claimed that the government produced no...