Elwert v. United States

• Decision Date: 26 April 1956
• Docket Number: No. 14846.,14846.
• Citation: 231 F.2d 928
• Parties: Leo ELWERT, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

231 F.2d 928 (1956)

Leo ELWERT, Appellant, v. UNITED STATES of America, Appellee.

No. 14846.

United States Court of Appeals Ninth Circuit.

March 22, 1956.

Rehearing Denied April 26, 1956.

COPYRIGHT MATERIAL OMITTED

S. J. Bischoff, George W. Mead, Portland, Or., for appellant.

H. Brian Holland, Asst. Atty. Gen., Joseph M. Howard, Dickinson Thatcher, Attorneys, Department of Justice, Washington, D. C., C. E. Luckey, U. S. Atty., Portland, Or., Jean G. Guise, Jr., Asst. U. S. Atty., Seattle, Wash., for appellee.

Before DENMAN, Chief Judge, and STEPHENS and CHAMBERS, Circuit Judges.

DENMAN, Chief Judge.

Elwert appeals from his conviction of tax evasion in the United States District Court for the District of Oregon. He contends that the indictment failed to charge him with a crime, that there is a variance between the indictment and the evidence, that the evidence does not support the conviction and that the District Court erred in giving certain instructions to the jury and in denying others.

Section 145(b) of 26 U.S.C. now 26 U.S.C. § 7201 provided so far as relevant:

"* * * any person who willfully attempts in any manner to evade or defeat any tax imposed by this chapter or the payment thereof, shall * * * be guilty of a felony and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than five years, or both, together with the costs of prosecution."

Elwert was sentenced to 18 months imprisonment on each of the three counts, the sentences to run concurrently, and fined $1,000 on the first count, $1,000 on the second count and $500 on the third count.

I. The Indictment.

Elwert contends that the indictment failed to charge him with a crime in any of its three counts. So far as relevant, the indictment charged the crime in the language of Section 145(b). Count One charged that appellant

"willfully and knowingly attempted to defeat and evade a large part of the income tax owing by him to the United States of America for the calendar year 1947, by filing and causing to be filed * * * a false and fraudulent income tax return * * *."

Count Two made a similar charge for the year 1948. Count Three charged that appellant

"willfully and knowingly attempted to evade and defeat the said income tax by * * * failing to make such income tax return * * * and by failing to pay * * * said income tax and by concealing and attempting to conceal from all proper officers of the United States of America his true and correct gross and net income for said calendar year 1949 * * *."

An indictment meets the requirements of the Fifth Amendment and Rule 7 of the Federal Rules of Criminal Procedure, 18 U.S.C.A., if it charges all the essential elements of the crime clearly enough to enable the defendant to prepare his defense and to plead the judgment in bar to a future prosecution for the same offense. Todorow v. United States, 9 Cir., 1949, 173 F.2d 439, 446-447. The sufficiency of an indictment is tested by practical considerations, and defects not affecting substantial rights are disregarded. See, e. g., Hopper v. United States, 9 Cir., 1943, 142 F.2d 181.

Here Elwert asserts that the indictment was defective in that it failed to allege that he acted with a "specific intent" to defraud the Government. The requirement of such a specific intent resulted from an interpretation of the word "willfully" in Section 145(b) and imposed on the United States a more difficult burden of proof than is normally required in a criminal case. See Bloch v. United States, 9 Cir., 1955, 221 F.2d 786. A number of cases have been decided holding that it is sufficient to indict in the language of Section 145(b). See, e. g., Himmelfarb v. United States, 9 Cir., 175 F.2d 924, certiorari denied 1949, 338 U.S. 860, 70 S.Ct. 103, 94 L. Ed. 527; Capone v. United States, 7 Cir., 56 F.2d 927, certiorari denied 1932, 286 U.S. 553, 52 S.Ct. 503, 76 L.Ed. 1288. However, Elwert points out that they did not specifically consider the question of whether specific intent had to be alleged since this requirement has crystalized only in recent years.

Elwert's contention may have merit, but it need not be here decided since he has failed to show that he was prejudiced by the failure of the indictment to charge he acted with a specific intent to defraud the United States. At least a week before the trial his attorneys knew that the Government was required to prove that he acted with a specific intent to defraud the United States. If this discovery upset their plan of defense, they were free to move for a continuance. They failed to do so. It is difficult to believe that had the indictment alleged Elwert had acted with such a specific intent the defense would have been aided in any way. One of the major arguments presented at the trial by Elwert was that the underpayment of tax was due to his carelessness and that his actions could be explained by difficulties with his wife rather than a specific intention to evade taxes. This does not constitute reversible error.

Elwert next contends that Count Three of the indictment is defective in that it failed to allege any "willful commission" or "affirmative action" constituting the felony of tax evasion as distinguished from the misdemeanor of failing to observe statutory duties as a taxpayer. Spies v. United States, 1943, 317 U.S. 492, 63 S.Ct. 364, 87 L.Ed. 418. He argues that the charge of "concealing and attempting to conceal * * * his true gross and net income for * * * 1949 * * *" was insufficient. Concealing one's true income could be "mere passive inaction" and only a misdemeanor.

However, this court has held that it is sufficient to charge one with attempting to defeat and evade taxes without specifying the means since Section 145(b) condemns evasion "in any manner." Himmelfarb v. United States, 9 Cir., 175 F.2d 924, 936, certiorari denied 1949, 338 U.S. 860, 70 S.Ct. 103, 94 L.Ed. 527. Here allegations of many affirmative acts of concealment were furnished Elwert in a bill of particulars well in advance of trial. There is no reversible error here.

II. Variance.

The indictment and bills of particulars all charged that Elwert had understated his taxable income and attempted to evade his taxes while most of the evidence introduced showed an understatement of partnership income. Elwert claims this constitutes a variance calling for a reversal of his conviction.

However, an understatement of partnership income was an understatement of Elwert's income. Such evidence was highly relevant to prove Elwert's evasion of the taxes due. One might conceive a case where the failure of the Government to specify whether they were speaking of partnership income or individual income would prejudice a defendant. However, the record makes it clear that the defense attorneys here were in no way surprised by the failure to denominate items as partnership or individual.¹ The objection is one going only to form.

III. The Sufficiency of the Evidence.

Elwert next argues that the trial court erred in denying his motions for acquittal under F.R.Crim.P. 29 as to each of the counts of the indictment. He claims that the evidence was insufficient to warrant submission of the case to the jury.

To convict one of violating Section 145(b) the Government must prove that there was a tax owed to it by the defendant,² and that he has done acts of evasion³ with a specific intent to defraud the United States.⁴ Here there is no question that acts of evasion were done. The issue is whether Elwert owed a tax to the United States and whether he acted for the purpose of evading that tax.

Here, as in most tax evasion cases, much of the Government's evidence is circumstantial. The trial judge must grant a motion for acquittal where the evidence of guilt is circumstantial only if, as a matter of law, reasonable minds as triers of fact must be in agreement that reasonable hypothesis other than guilt could be drawn from the evidence.⁵ If, under this test, the case was properly submitted to the jury, its decision will be final. Unlike the practice in some circuits,⁶ this court applies no special rule to review circumstantial evidence on appeal. As to circumstantial proof of intent see this court's in banc decision in McCoy v. United States, 9 Cir., 169 F.2d 776, certiorari denied 1948, 335 U.S. 898.

(A) Was Any Tax Owed to the United States in 1947, 1948 and 1949?

Elwert contends that if the overstatement of his income in 1949 and the deductions to which he was entitled, but did not claim, in the years in question were taken into account, there would be no tax liability for 1947, 1948 and 1949. However, it must be remembered that in a tax evasion case the burden is on the defendant to prove that he had allowable deductions which were not shown in his return once the Government establishes unreported income and allows the deductions claimed by the defendant in his return and others that it can calculate without his assistance.⁷

Elwert urges that the United States' computation of his income for 1949 overstated it by approximately $19,000. If this were true, the unreported income for 1949 could be wiped out, and, because of the carry-back provisions of 26 U.S.C. § 122, the amount of taxable income for 1947 and 1948 could be affected.

Elwert and his wife operated a nursery and a farming business as a partnership. The partnership filed no informational return in 1949 although one was made out for it by its accountant. Elwert filed no individual return for that year either. The United States used the unfiled and unsigned partnership return as a starting point to prove Elwert's unreported individual income for 1949.

Hammond, the accountant who prepared the informational return, testified that he had prepared it from six books listing the receipts of the business. The return stated that the gross receipts of the partnership were $173,319.76 and after deductions the net income was $1,833.32. On cross-examination Hammond...