Ford v. United States

• Decision Date: 18 March 1954
• Docket Number: No. 14466.,14466.
• Citation: 210 F.2d 313
• Parties: FORD v. UNITED STATES.
• Court: U.S. Court of Appeals — Fifth Circuit

210 F.2d 313 (1954)

FORD v. UNITED STATES.

No. 14466.

United States Court of Appeals, Fifth Circuit.

February 12, 1954.

Rehearing Denied March 18, 1954.

Douglas W. McGregor, Houston, Tex., William E. Stone, Galveston, Tex., for appellant.

Charles F. Herring, U. S. Atty., Thomas E. James, Asst. U. S. Atty., Austin, Tex., for appellee.

Before HUTCHESON, Chief Judge, and HOLMES and RIVES, Circuit Judges.

RIVES, Circuit Judge.

Appellant, defendant below, was charged in a three count indictment with violating Section 145(b) of Title 26, United States Code.¹ Each count charged that the defendant did willfully and knowingly attempt to defeat and evade a large part of the income tax due and owing by him and his wife by filing and causing to be filed a false and fraudulent joint income tax return on their behalf. The three counts covered the income taxes for the calender years 1945, 1946 and 1947, respectively, and charged the following discrepancies: for 1945, income returned $3,600, actual net income $6,321.83, tax returned $220, tax due $784; for 1946, income returned $3,700, actual net income $6,086.04, tax returned $66, tax due $464; for 1947, income returned $1,507.10, actual net income $29,988.26, tax returned none, tax due $7,476.75.

The jury found the defendant guilty on all three counts of the indictment, and the Court imposed a single sentence of imprisonment for a term of four years. This appeal followed.

It is first insisted that the Court erred in denying defendant's motion for a directed verdict of acquittal because of the alleged insufficiency of the evidence. It is of course clear that the offense punishable under the statute, Section 145 (b) of Title 26, United States Code (footnote 1, supra), relates not only to the defendant's own income tax, but also to that due and owing by others, including the tax on the joint or community income of himself and his wife. See United States v. Johnson, 319 U.S. 503, 518, 63 S.Ct. 1233, 87 L.Ed. 1546; O'Brien v. United States, 7 Cir., 51 F.2d 193, 197; Levin v. United States, 9 Cir., 5 F.2d 598, 603.

The Government's case was presented by the cash receipts and expenditures method of proving unreported income. See United States v. Johnson, 319 U.S. 503, 517, 63 S.Ct. 1233, 87 L.Ed. 1546; United States v. Caserta, 3 Cir., 199 F.2d 905, 907, a variation of the net worth and disbursement method employed in such recent cases decided by this Court as Pollock v. United States, 5 Cir., 202 F.2d 281; Wardlaw v. United States, 5 Cir., 203 F.2d 884; Montgomery v. United States, 5 Cir., 203 F.2d 887; and Sasser v. United States, 5 Cir., 1953, 208 F.2d 535. One of the most difficult matters of proof in such cases is to establish a satisfactory starting point at the beginning of the first of the tax periods included in the indictment, that is as applied to the present case, to negative the existence on January 1, 1945, of resources available to the defendant and his wife from which the excessive expenditures might have come. The Government then has the further burden in such cases of proving that there were no gifts, devices, or other nontaxable income which could have been used for the expenditures, and of proving large cash expenditures within each of the tax years considerably exceeding the taxpayer's accumulated cash resources plus reported income and which expenditures could not be otherwise accounted for than by finding that the taxpayer had received more taxable income than had been reported, and had willfully and knowingly filed or caused to be filed a false and fraudulent income tax return. Proving the receipt of taxable income from increase of net worth or from expenditures or from a combination of the two is really the use of circumstantial evidence which must be sufficient to exclude in the minds of the jury every reasonable hypothesis other than guilt of the defendant. Pollock v. United States, supra; Remmer v. United States, 9 Cir., 205 F.2d 277, 281, 288.

The Government introduced some forty witnesses who testified without contradiction as to the expenditures during the years covered by the indictment, and showed the total cash expenditures for 1945 to be $6,287.55, for 1946, $6,148.58, and for 1947, $45,487.67, or an aggregate for the three years of $57,923.80.² The total income returned during the same three years was only $8,807.10, leaving an excess in expenditures of $49,016.70 (exclusive of the items mentioned in footnote 2, supra) which necessarily came either from prior accumulations, from nontaxable receipts, or from taxable income.

To show how much of the expenditures could have been made from prior accumulations and from nontaxable receipts, the Special Agents of the Bureau of Internal Revenue made a thorough investigation, and also interrogated the defendant with his consent on several different occasions. All of the banks in Galveston were contacted to ascertain whether the defendant, his wife, or any of his children had since the year 1925 maintained a checking account, a savings account or a safety deposit box. No checking account or safety deposit box was discovered, and the defendant stated to the agents that he had never maintained a checking account anywhere and had never had a safety deposit box. He had had two small savings accounts, one showing a balance on January 1, 1945 of $1.73, and the other a balance of $193.50 on that date. He had made some small loans which had been paid in some instances and renewed in others.

The County court records were checked for the ownership of property and for sales of real estate. The defendant owned the home purchased in 1929 for $2,000. He was asked by the agents whether or not he owned any other real property and he said that he did not. He was also asked if all of the property that he owned was in his name or in his wife's name, and whether or not it had been recorded, and he replied in the affirmative.

The probate court records were checked for any inheritances of the defendant or his wife and none were found. The defendant told the agents that he had never received any inheritance and that "as far as he knew" his wife had not. The various insurance agencies in Galveston were checked as to life insurance policies with negative results confirmed by the defendant, and the same was true as to stockbrokers' accounts in Galveston and in Houston. The defendant told the agents that he had never received any gifts of money, and that his wife had not received any "as far as he knew".

The defendant told the agents that his wife was not employed during the years 1945, 1946, or 1947, and in fact had not been employed since the year 1925. The defendant was appointed as a patrolman in the Police Department of Galveston, Texas on May 27, 1925, and continued in the police department until May 22, 1947. His salary remained at $120 per month from the time of his appointment through 1932; from that time through January of 1940 he received $135 per month; during 1940 and a part of 1941 he received $200 per month; in August of 1941 he became Chief of Police and began receiving $300 per month which continued until the latter part of 1946; and from then until his services were terminated on May 22, 1947 he received $320 per month.

The defendant admitted to the agents the existence and operation in Galveston of several gambling houses and of several houses of prostitution, but denied that he had ever received "pay-offs" from any of them. He told the agents that he did not gamble until he got off the police force, but after he got off the police force that he did gamble and that he had won money and had a net gambling gain of about $1,000 in the year 1947. Excluding any gains from gambling or other illegal pursuits, the agents were able to trace funds available for expenditures as follows: for 1945 $3,664.07, for 1946 $3,713.53, for 1947 $16,230.52, or a total of $23,608.12, leaving unaccounted for at least $34,315.68 spent during the three years.

These figures did not take into account $12,000 which the defendant told the agents he had in 1944 in a chifforobe drawer because the agents said that he made conflicting statements, that he had also said that "he had two or three thousand dollars in 1947, and that he also had two or three thousand dollars in 1945, and therefore there was no gain or loss, and therefore it has no bearing on the computation at all." The defendant's claim that he had on hand $12,000 in 1944 was before the jury for its consideration, and the agents explained why they omitted the alleged cash on hand in computing the funds available for expenditure. See Brodella v. United States, 6 Cir., 184 F.2d 823.

The appellant strongly insists that there was not sufficient evidence as to the income of his wife, her net worth, inheritances, and receipt of gifts or bequests. As has been stated, none such were revealed by the agents' investigations, the wife had been continuously unemployed and the defendant told the agents that she had received no gifts or inheritances "as far as he knew". Neither the defendant nor his wife took the stand and the only witnesses offered in his behalf were three character witnesses. The district court charged the jury that the failure of the defendant to testify in his own behalf must not be considered as any evidence of his guilt.³ As to the testimony of the wife, however, the rule is different. The wife is now a competent witness in behalf of her husband, Funk v. United States, 290 U.S. 371, 54 S.Ct. 212, 78 L.Ed. 369, though ordinarily not against him, see Pereira v. United States, 1954, 74 S.Ct. 358. "The rule, even in criminal cases, is that, if a party has it peculiarly within his power to produce witnesses whose testimony would elucidate the transaction, the fact that he does not do it creates the presumption that the testimony, if produced, would be unfavorable." Graves v. United States, 150 U.S. 118, 121, 14 S.Ct. 40, 41, 37 L.Ed. 1021. See, also, Billeci...