Capone v. United States, 4457.

• Decision Date: 25 September 1931
• Docket Number: No. 4457.,4457.
• Citation: 51 F.2d 609
• Parties: CAPONE v. UNITED STATES.
• Court: U.S. Court of Appeals — Seventh Circuit

51 F.2d 609 (1931)

CAPONE v. UNITED STATES.

No. 4457.

Circuit Court of Appeals, Seventh Circuit.

July 24, 1931.

Rehearing Denied September 25, 1931.

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Dennis M. Kelleher, of Fort Dodge, Iowa, and George Norman Murdock, of Chicago, Ill., for appellant.

George E. Q. Johnson, U. S. Atty., of Chicago, Ill., Cassius Poust, Asst. U. S. Atty., of Sycamore, Ill., Jacob I. Grossman, Asst. U. S. Atty., of Chicago, Ill., and Dwight H. Green and Alfred Page, Sp. Assts. to Atty. Gen.

Before ALSCHULER, EVANS, and SPARKS, Circuit Judges.

EVANS, Circuit Judge (after stating the facts as above).

Pertinent statutory provisions are set forth in the margin.¹

Each count of the first indictment and each count of the third indictment attempts to charge a violation of section 80, title 18, USCA. Appellant contended that no offense is set forth in any of the four counts of these two indictments. He properly presented the question, first, by demurrer to the indictment and then by motion to direct a verdict and still again by motion in arrest of judgment.

His objection to these four counts is based upon the alleged inapplicability of section 80, title 18, USCA, under which the indictments are drawn. It is evident that, if the objection is well taken, all four counts must fail unless the government can show that though drawn to state an offense under section 80, title 18, USCA, they are nevertheless good under section 1266, title 26, USCA.

Substantial parts of count 1 of the first indictment are set forth in the margin.²

It is appellant's contention that the offenses covered by section 80, title 18, USCA, are limited to the presentation of false claims against the government. In support of his position, he cites U. S. v. Cohn, 270 U. S. 339, 46 S. Ct. 251, 253, 70 L. Ed. 616; U. S. v. Bowman, 260 U. S. 94, 43 S. Ct. 39, 67 L. Ed. 149; U. S. v. Hull (D. C.) 14 F. 324.

Appellant relied strongly upon the Cohn Case, supra, to sustain the argument that section 80 applies only to offenders who present false claims against the government. He further supports his position by reference to the Revenue Act, which contains various sections making it unlawful for a taxpayer to willfully fail to file a return, to willfully refuse to pay a tax due the government, to willfully conceal assets in connection with an offer of compromise, and to willfully attempt to evade or defeat a tax. Title 26, USCA, §§ 1265, 1266, 2616.

Appellee meets this argument by contending: First, that section 80, as it now reads, is not limited to offenders who filed fraudulent claims against the government. Second, section 80 is not amended or repealed by implication by the passage of the sections of the Revenue Act dealing with offenders who willfully fail to file returns or pay their tax, or who willfully attempt to evade or defeat a lawful tax due the government. Third, if section 80 be, by implication, amended by the aforesaid sections of the Revenue Act, the 1918 amendment to section 80 is nevertheless still applicable, because section 2616 (title 26, USCA) of the Revenue Act was not enacted until after appellant had made the misrepresentations. Fourth, if section 80 be modified or amended, or, by implication, repealed, so far as it applies to offending taxpayers, the first and third indictments are nevertheless good under section 1266, title 26, USCA, notwithstanding they were drawn with the purpose of stating an offense under said section 80.

The issues thus clearly drawn necessitate the consideration of the history of section 80, as well as the construction placed upon it by the courts that have dealt with it. It seems quite clear, and we accept it as established, that, prior to the amendment of 1918, section 80 applied solely to those offenders who filed fraudulent claims against the government. But in 1918, the act was amended by inserting the words "or for the purpose and with the intent of cheating and swindling or defrauding the Government of the United States, or any department thereof, or any corporation in which the United States of America is a stockholder, shall knowingly and willfully falsify or conceal or cover up by any trick, scheme, or device a material fact, or make or cause to be made any false or fraudulent statements or representations * * *" The presence of these words, inserted by the amendment, can not be ignored. They must be given a meaning. To a certain extent, at least, the amendment makes inapplicable all of the decisions construing the section prior to this amendment. It is also clear that the effect of the amendment was to enlarge the class of offenders to which the section applied.

Who were thus included in the class by the amendment?

If we insert the word "whoever" after the word "or" for the purpose of clarity, there is little doubt or uncertainty as to its meaning. It would clearly include one who is indebted to the government for taxes, and who for the purpose and with the intent of cheating and swindling or defrauding the government knowingly and willingly falsified, concealed, or covered up by any trick, scheme, or device, material facts, or who made or caused to be made any false or fraudulent statement or representation. If, however, we included after the word "or" the limitation found in the first line of the statute, "whoever shall make or cause to be made or present or cause to be presented, for payment or approval, * * * any claim upon or against the Government of the United States," then it is equally clear that the offender must be a claimant against the United States. If the latter construction be adopted, we are at some loss to understand the purpose of the amendment.

The section, before the amendment, made it an offense to file a false claim knowing it to be false, fictitious, or fraudulent. The crime there charged was established without showing any fraud, trick, or scheme to secure its allowance. The section did not require the allowance of a claim, but merely the presentment of such a claim. The amendment, therefore, if construed as appellant contends for, would not only require the presentment of a false claim, but proof that fraudulent means were adopted to secure its allowance. The amendment was enacted a few years after the passage of the Revenue Act calling for the payment of income taxes, the assessment and collection of which supplied a fertile field for the practice of fraud by those who would so evade federal taxes. Such increased opportunity for fraud upon the government might account for the action of Congress in passing the amendment. At any rate the language of the amendment is comprehensive, and we see no reason for giving it a narrow construction.

The Cohn Case, so much relied upon by the appellant, deals with a fact situation entirely different from the one before us. Doubtless, it must be read as applicable only to the facts there disclosed. However, it is significant that the court in disposing of that case dealt with the evidence on two hypotheses: (a) That Cohn was a claimant who filed a false claim knowing it to be false and fraudulent, and (b) that he defrauded the government "within the meaning of the statute." It would have been unnecessary for the court to consider the second hypothesis if section 80 were limited in its scope to offenders who filed or presented false claims. On this second hypothesis, the language of the court, "`Defrauding' * * * is used in connection with the words `cheating or swindling,' indicating that it is to be construed in the manner in which those words are ordinarily used, as relating to the fraudulent causing of pecuniary or property loss," is significant. The court also said: "We may assume, without deciding, that under these Regulations Cohn was not entitled to enter and obtain possession of the cigars until he had paid the draft and become the holder of the bill of lading. But even so, the acts by which the possession of the cigars were obtained did not constitute an offense against the United States unless done for one or other of the purposes entering into the statutory definition of the offense and charged in the indictment, that is, either for the purpose of obtaining the approval of a `claim upon or against' the Government or for the purpose of `defrauding' the Government." United States v. Cohn, 270 U. S. 339, 345, 46 S. Ct. 251, 252, 70 L. Ed. 616.

The court's conclusion is predicated upon the fact basis that the cigars, which Cohn attempted to obtain without paying the import duty on them, were in fact non-dutiable. This fact forced the government to take the untenable position that its construction of the entire section included the offense of impairing or obstructing governmental functions by fraudulent practices, whereas the language of the amendment limited the prosecution to pecuniary or property loss suffered by the government through the fraud of the accused.

Our conclusion is that the amendment included in section 80 those offenders who, by their cheating, swindling, or defrauding, caused a "pecuniary or property loss" to the government. This latter class of offenders need not be claimants, who present claims against the government, but include others, like taxpayers who cause pecuniary or property loss to the government by willfully concealing by some trick, etc., a material fact.

Appellant's argument that this construction of the statute should not be adopted because Congress has enacted three other penal provisions, parts of the revenue act, to punish such offenders, is lost, even though we might otherwise be persuaded thereby, when it is recalled that such provisions were not in existence when the amendment to section 80 was enacted.

Whether section 80, title 18, USCA, is by implication amended by sections 1266 and 2616, title 26, USCA, also presents an interesting and a somewhat close question. Is section 2616 so similar to the amendment to section 80 as to require us...