Berra v. United States, 15214

• Citation: 221 F.2d 590
• Decision Date: 22 April 1955
• Docket Number: No. 15214,15215.,15214
• Parties: Louis BERRA, Appellant, v. UNITED STATES of America, Appellee (two cases).
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

221 F.2d 590 (1955)

Louis BERRA, Appellant, v. UNITED STATES of America, Appellee (two cases).

Nos. 15214, 15215.

United States Court of Appeals Eighth Circuit.

April 22, 1955.

COPYRIGHT MATERIAL OMITTED

Stanley M. Rosenblum, St. Louis, Mo., (Mark M. Hennelly, St. Louis, Mo., on the brief), for appellant.

Charles H. Rehm, Asst. U. S. Atty., St. Louis, Mo., and William K. Stanard, II, Asst. U. S. Atty., St. Louis, Mo. (Harry Richards, U. S. Atty., St. Louis, Mo., on the brief), for appellee.

Before GARDNER, Chief Judge, and WOODROUGH and THOMAS, Circuit Judges.

WOODROUGH, Circuit Judge.

Appellant was convicted in No. 15,214, on both counts of a two-count indictment charging him with corruptly endeavoring to influence a witness before a grand jury and obstruct, influence and impede the due administration of justice, in violation of Title 18 U.S.C.A. § 1503. He was also convicted in No. 15,215 on all counts of an indictment charging income tax evasion for the years 1951, 1952 and 1953, in violation of Title 26 U.S.C.A. § 145(b). The two cases were consolidated for the jury trial, a verdict of guilty resulting in both cases. Appellant was sentenced to four years imprisonment on each of the three counts in No. 15,215, the sentences on all counts to run concurrently. In No. 15,214, the court suspended imposition of sentence and placed appellant on probation for five years, said probation to begin and run consecutively with the term of imprisonment imposed in No. 15,215, and with the special condition that appellant shall not, during the period of probation, hold any office in a labor union or labor organization. The motion for judgment of acquittal or in the alternative for a new trial having been overruled, appellant brought this appeal.

The first point urged by appellant is that the trial court erred in overruling his motion for judgment of acquittal on the income tax evasion counts in No. 15,215 for the reason that the monies allegedly constituting income to appellant were, under the government's own proof, funds embezzled from his employer and therefore did not constitute taxable income to him. Appellant also assigns as error the trial court's failure to give his requested instructions to that effect.

The evidence on the trial below, which was not in dispute except as noted hereinafter, showed that during the years 1951, 1952 and 1953, appellant was the business manager¹ of the St. Louis Labor Health Institute, a non-profit organization furnishing free medical aid to members of Teamsters' Local 688, A. F. of L., and their families. The Labor Health Institute is operated on funds collected from employers who maintain collective bargaining agreements with Local 688. Appellant was authorized, as business manager of the Labor Health Institute, to approve payment of bills incurred by the organization and to draw and sign checks therefor. The checks were required to be countersigned by another employee. In 1949 the Labor Health Institute contracted with J. Shulman and Sons Contracting Company for extensive alteration work on its premises in St. Louis. The general contractor subcontracted the painting work to one John Schmidt. In 1950, after the original painting contract was completed, Schmidt was called back by the Labor Health Institute for further work. It was at this time, Schmidt testified, that appellant approached him with a plan whereby he, Schmidt, would submit padded bills to the Labor Health Institute by overstating his amount of labor performed, appellant would approve the bills and issue payment to Schmidt, and then Schmidt would return the amount of overpayment to appellant. Schmidt testified, and the government introduced some of his checks in substantiation, that he paid over to appellant some $5,000 under this arrangement during the three years covered by the indictment. He testified that he deducted these payments as commissions in computing his own income tax returns. During these same three years he testified that he did approximately $2,500 to $3,000 worth of painting at appellant's home which he charged to and received payment for from the Labor Health Institute. The evidence also showed that in 1951 a subcontractor purchased materials for and performed labor at appellant's home for which he was paid some $1,500 by J. Shulman and Sons Contracting Company, who in turn billed and received payment of that amount from the Labor Health Institute. These amounts constituted the alleged unreported income received by appellant during the three years in question.

Appellant took the stand in his own behalf and did not deny receiving the money Schmidt claimed to have paid him. He insisted, however, that these payments were loans and that he had later partially repaid Schmidt. He further testified that he had never requested Schmidt to submit padded labor bills to the Labor Health Institute or that there had ever been any such arrangement between the two. With respect to the $1,500 collected by J. Shulman and Sons Contracting Company from the Labor Health Institute for material furnished and labor performed at appellant's home, he testified that he never requested Labor Health Institute be billed for that, and had no knowledge of the fact that it was so billed. Al Shulman testified that the erroneous billing was the fault of his company, not appellant, and that as a result of the grand jury investigation appellant paid him for the work and materials and he repaid the Labor Health Institute.

Appellant does not here contend that the jury was not warranted, under the evidence presented, in finding that the monies paid over to him by Schmidt were not loans. His position, as previously stated, is that all of the unreported funds received during the years in question were embezzled from his employer Labor Health Institute and therefore, under the decision of the Supreme Court in Commissioner of Internal Revenue v. Wilcox, 327 U.S. 404, 66 S.Ct. 546, 90 L.Ed. 752, did not constitute taxable income to him.

The Supreme Court, however, in its later decision in Rutkin v. United States, 343 U.S. 130, 72 S.Ct. 571, 96 L.Ed. 833, expressly limited its holding in the Wilcox case to the facts there existing. And we do not think the facts in the present case bring it within the scope of the Wilcox decision. The prosecution proved, and the appellant admitted, that the monies he received came, not from his employer Labor Health Institute, but from Schmidt. That this was not a case of embezzlement was recognized by the trial court when, in ruling on appellant's motion for bail, it said:

"Under neither the Government\'s theory nor that of the defendant can the receipt of the funds by defendant be embezzlement. Generally speaking, embezzlement is the receipt by an agent, such as defendant, of money of his principal, and conversion of the funds to his own use.

The funds must be received in the course of the employment or defendant be rightfully in possession of them and thereafter convert them to his own use. Admittedly, the funds in this case went first to Schmidt. He manifestly obtained them by fraud and deceit. He never was lawfully entitled to them. Schmidt in some instances put the funds in his bank account. None of the funds came into defendant\'s possession lawfully or in the course of his employment. Defendant may be guilty of obtaining money of the welfare organization by a fraudulent scheme or device, but he could not be convicted of embezzlement."

We agree.

From the record as a whole we are convinced that the monies received by appellant from Schmidt constituted taxable income under the test laid down in the Rutkin case, supra, and followed by this court in Marienfeld v. United States, 8 Cir., 214 F.2d 632, 636: "`An unlawful gain, as well as a lawful one, constitutes taxable income when its recipient has such control over it that, as a practical matter, he derives readily realizable economic value from it.'" That appellant had such control over the funds received from Schmidt cannot be doubted on this record. The trial court was not in error, therefore, in overruling appellant's motion for judgment of acquittal or in refusing to give his requested instructions pertaining to the embezzlement theory.

It is next argued that the trial court committed prejudicial error in unduly restricting cross-examination of Schmidt, the principal witness for the government. On direct examination Schmidt testified that at appellant's insistence he had destroyed his check stubs, cancelled checks, and daily work sheets reflecting his payments to appellant, but did not destroy his cancelled checks of 1952 and 1953 reflecting such payments. The government introduced in evidence the working papers of Schmidt's 1951 income tax return to prove his claimed pay-offs to appellant in that year. On cross-examination appellant sought to discredit the witness by introducing in evidence a check of the Labor Health Institute in the amount of $1160.60, dated February 9, 1951, and made payable to Schmidt, which did not appear on his 1951 income tax working papers. Appellant also introduced, without objection, a photostatic copy of Schmidt's 1951 income tax return which also apparently did not include the $1160.60 check. When appellant attempted to cross-examine Schmidt on the correctness of his 1952 and 1953 income tax returns, however, the trial court sustained the government's objection that the matter was irrelevant and collateral to the issues being tried. Appellant offered to prove that Schmidt had omitted certain items of income in his 1952 and 1953 tax returns and that by reason thereof the witness was biased, prejudiced, and interested; that he was under income tax investigation; and that the destruction of his records inured to his own benefit.

The scope of cross-examination is within the judicial discretion of the trial court. Myres v. U. S., 8 Cir., 174 F.2d 329; Holmes v. U. S., 8 Cir., 134 F.2d 125; Hewitt v. U. S., 8...