Cohen v. United States, 3550.

• Decision Date: 18 November 1933
• Docket Number: No. 3550.,3550.
• Citation: 67 F.2d 449
• Parties: COHEN et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Fourth Circuit

67 F.2d 449 (1933)

COHEN et al. v. UNITED STATES.

No. 3550.

Circuit Court of Appeals, Fourth Circuit.

November 18, 1933.

W. A. Self, of Hickory, N. C., and Charles A. Jonas, of Lincolnton, N. C. (Bailey Patrick, of Hickory, N. C., on the brief), for appellants.

Frank C. Patton, U. S. Atty., of Morganton, N. C. (Thos. A. McCoy, Asst. U. S. Atty., of Asheville, N. C., and C. R. Jonas, Asst. U. S. Atty., of Lincolnton, N. C., on the brief), for the United States.

Before PARKER and SOPER, Circuit Judges, and CHESNUT, District Judge.

SOPER, Circuit Judge.

Harry and Abe Cohen, who had been adjudicated bankrupts upon their voluntary petition on January 14, 1930, were convicted in the District Court under an indictment charging them with having knowingly and fraudulently concealed from the trustee in bankruptcy, appointed February 6, 1930, large portions of the assets of their bankrupt estate, in violation of section 29b (1) of the Bankruptcy Act (30 Stat. 544, 554, as amended by Act of May 27, 1926, c. 406, § 11, 44 Stat. 662, 665, 11 USCA § 52 (b) (1). They were sentenced to imprisonment for a year and a day, and appealed, assigning as error the denial of their motions, at the close of the government's evidence in chief, and at the close of all the evidence, for a directed verdict of not guilty, urged on the ground that the evidence was insufficient for submission to the jury.

The evidence for the government, which on such a motion must be considered in the light most favorable to the government's contention, showed that appellants (hereinafter referred to as defendants) had for some five years prior to their bankruptcy conducted as partners in Hickory, N. C., two retail dry goods stores, Cohen's Department Store and The Hub, selling principally ready-to-wear clothing and shoes. The stocks of goods in the two stores were appraised after bankruptcy at $11,365.30, and were sold by the trustee for $7,500. Other minor assets brought the total to $7,681.18. Claims in the aggregate of $62,431.37 were filed, on which the total dividend paid to unsecured creditors was 6½ per cent. The only books and records turned over to the trustee were a journal and a ledger, showing only accounts payable for merchandise purchased for the two stores, and two small books listing accounts receivable in the sum of $4,360.69, which proved to be worthless. The wife of one of the defendants testified that she kept these books, that she was not a trained bookkeeper, and that no other books of account were kept.

There was no direct evidence of the concealment of property from the trustee, but the government undertook to prove its charges by showing a shortage in the assets turned over to the trustee as compared with the amount which should have been delivered as shown by the available records. The evidence on behalf of the prosecution tended to show that the value of the goods on hand on January 1, 1929, was $38,962.28, and that the total purchases during 1929 amounted to $87,274.52, or a total of $126,236.80 to be accounted for; while the total sales were only $62,921.96, so that goods of the value of $63,314.84 should have come into the hands of the trustee. This figure was compared with the sum of $11,356.30, the appraised value of the merchandise actually received by the trustee, and with the sum of $30,000, the value of the goods on hand as stated in the schedules filed by the bankrupts. In other words, the shrinkage unaccounted for was $51,958.54 if the appraisal was accepted, or $33,314.84 if the value declared by the bankrupts was taken as true.

To establish these figures, the journal and ledger were used to show the amount of the purchases during 1929, and the partnership income tax return for that year to show the amount of goods on hand at the beginning, and the gross receipts from sales during the year. The amount on hand at the beginning of the year was also verified by two written statements of the financial condition of the firm as of January 2, 1929, signed by one of the members of the firm, and used to obtain credit. The net worth shown by these statements, to wit, $40,419.43, furnishes a striking contrast with the total assets coming into the hands of the trustee for distribution amongst the creditors. The books of account, as we have seen, were kept by the wife of one of the partners, and the income tax return was made up after the bankruptcy by a deputy collector of internal revenue from these books and from records in the office of the bankrupts' attorney with the assistance of the bookkeeper. The return was sworn to by one of the partners on January 6, 1931. The amount of gross sales indicated by this return, to wit, $62,921.96, was computed from the total bank deposits of $51,061.96, plus cash expenditures of $800 for advertising and $11,060 for salaries of partners and clerks.

It is especially significant that the books of account showed that $58,375.49 of the total...