Brodella v. United States
| Decision Date | 05 September 1950 |
| Citation | 184 F.2d 823 |
| Parties | BRODELLA v. UNITED STATES. |
| Court | U.S. Court of Appeals — Sixth Circuit |
John T. Feighan, Jr., Ned L. Mann, Cleveland, Ohio, for appellant.
Don C. Miller, Frank E. Steel, Cleveland, Ohio, for appellee.
Before MILLER, Circuit Judge.
On motion for bail pending appeal, following denial of bail by District Judge. Rule 38(c), Rules of Criminal Procedure, 18 U.S.C.A.
A jury returned a verdict of guilty against appellant under a 3-count indictment which charged him with having wilfully and knowingly attempted to defeat and evade a large part of the income tax due for the calendar years 1943, 1944 and 1945, in violation of Sec. 145(b) Internal Revenue Code, 26 U.S.C.A. § 145(b). The District Judge imposed a general sentence of two years and six months without reference to any specific count. Thereafter he overruled a motion for bail.
Appellant's brief in support of his motion states that it is not intended on this motion to deal with the issues to be raised upon the merits when the appeal will be later fully argued before this court. The brief is restricted to a discussion of the contention that the evidence was insufficient to take the case to the jury, and it is urged upon us that this contention involves a substantial question which should be determined by the appellate court, thus entitling the appellant to bail pending appeal. Rule 46(a)(2) Rules of Criminal Procedure. He relies upon United States v. Fenwick, 7 Cir., 177 F.2d 488, and Bryan v. United States, 5 Cir., 175 F.2d 223. Accordingly, our consideration of the motion is confined to that single aspect of the case.
The Government relied largely upon the net worth or net asset theory to prove its charge of evasion. Its FBI agent-accountant testified in detail as to the net worth of the appellant as of December 31, 1942, 1943, 1944 and 1945, placing the values as follows:
December 31, 1942 .......... $ 48,056.83
December 31, 1943 .......... 98,362.53
December 31, 1944 .......... 151,179.79
December 31, 1945 .......... 241,897.16
This showed the increase in the appellee's net worth to be as follows for each of the years in question:
Increase during 1943 ............ $50,305.70
Increase during 1944 ............ 52,817.26
Increase during 1945 ............ 90,717.37
The accountant further testified that giving consideration to living expenses and payment of taxes, the appellant's taxable income for 1943 was $55,840.79, whereas the income tax return reported $13,100; for 1944 $60,574.78, whereas the return reported $4,920.40; and for 1945 $95,667.06, whereas the return reported $5,180.96. It is beyond question that on a motion for a directed verdict such evidence on behalf of the Government was sufficient to take the case to the jury, unless the net worth or net asset theory as so used in this case was not a competent or valid means of proving the Government's case. Appellant contends that the method was not properly used in this case for the same reason that the method was adjudged invalid in the Fenwick and Bryan cases referred to above.
The Fenwick and Bryan cases hold that when the Government relies upon circumstances of increased net worth and expenditures in excess of reported income to establish income tax evasion the basic net worth at the beginning of the tax year must be clearly and accurately established by competent evidence. This is true because if the reported net worth of the taxpayer at the beginning of the taxable year does not include all of the taxpayer's assets or property, the increase in net worth in subsequent years could come out of the prior existing assets not so included. Convictions were reversed in both the Fenwick and Bryan cases, because in the opinion of the Court the Government's evidence did not accurately establish the basic net worth of the taxpayer at the start of the taxable year in question. We agree with the general principle of law as stated by those cases. However, it is an entirely different question whether the facts of any particular case bring the rule into play. Without here indicating whether we agree or disagree with the results reached in those two cases, under the particular facts therein involved, we agree with the District Judge that the facts in the present case are so materially different as to make the ruling in those cases inapplicable.
In the Fenwick case 177 F.2d 491, the Government offered no direct testimony of any undisclosed source of income and no proof that the property admittedly owned by the taxpayer at the beginning of the taxable year constituted all the assets he had at that date. There was no proof that the taxpayer had not accumulated cash or assets of other character over the 25 years during which he had been engaged in business. The Government agent admitted on cross examination that he had made no inquiry of defendant as to whether he had cash on hand accumulated from earnings from his business for the years prior thereto. The United States Attorney "remarked that there might have been other assets." The opinion pointed out that the evidence fell far short of excluding "all possible available sources of taxable income from which the increased net worth and the excess expenditures could have been derived."
In the Bryan case, there were available to the Government auditor no financial statements, no books of the defendant showing assets and liabilities, and no admissions by the defendant that could be used as a definite point of beginning. The Government auditor admitted that he did not know whether his...
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