Ford v. United States, 15672.

• Decision Date: 22 May 1956
• Docket Number: No. 15672.,15672.
• Citation: 233 F.2d 56
• Parties: Fred M. FORD, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

233 F.2d 56 (1956)

Fred M. FORD, Appellant, v. UNITED STATES of America, Appellee.

No. 15672.

United States Court of Appeals Fifth Circuit.

April 19, 1956.

Rehearing Denied May 22, 1956.

COPYRIGHT MATERIAL OMITTED

Douglas W. McGregor, Houston, Tex., McGregor & Sewell, Houston, Tex., of counsel, for appellant.

Harman Parrott, Asst. U. S. Atty., San Antonio, Tex., Frederick B. Ugast, Atty., Dept. of Justice, Washington, D. C., Russell B. Wine, U. S. Atty., San Antonio, Tex., for appellee.

Before BORAH, TUTTLE and JONES, Circuit Judges.

JONES, Circuit Judge.

An indictment in three counts charged that appellant had wilfully and knowingly attempted to evade and defeat a large part of the income tax due and owing by him and his wife for the years 1945, 1946 and 1947 by filing false and fraudulent returns on behalf of himself and his wife wherein he reported income for a less sum than the true amount, and in which he stated the tax for smaller amounts than he knew to be owing. The counts were in substantially the same form. A separate count set forth the amounts of income and tax for each of the three years. The indictment alleged violations of the portion of the Internal Revenue Code of 1939 which provided that:

"* * * any person who willfully attempts in any manner to evade or defeat any tax imposed by this chapter or the payment thereof, shall, in addition to other penalties provided by law, 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." Internal Revenue Code of 1939, Former 26 U.S. C.A. § 145(b); Internal Revenue Code of 1954, 26 U.S.C.A. § 7201.

This is an appeal from a conviction and sentence following a second trial of this case held at Austin, Texas. This court reversed a conviction obtained at the first trial. Ford v. United States, 5 Cir., 1954, 210 F.2d 313. At the second trial, as at the first, the Government relied upon the cash receipts and expenditures method, sometimes called the net worth method, of establishing unreported income. In the first appeal, as in the present appeal, the appellant contended that the District Court should have granted a motion for acquittal because of the insufficiency of the evidence. After relating in some detail the evidence adduced at the former trial it was held by this Court that the motion for acquittal was properly denied. The evidence in the record now before us presents proofs no less convincing, and without setting forth the evidentiary facts, we hold, as we held before, that the motion for acquittal was properly denied.

The appellant contends that error was committed in denying his motion for acquittal because there had been no determination of his tax liability by the Commissioner under § 272 or § 3612 of the Internal Revenue Code of 1939. § 272 of the Internal Revenue Code of 1939, former 26 U.S.C.A., provides for the procedure in determining the correctness of a tax deficiency proposed by the Commissioner of Internal Revenue, including the issuance of the familiar ninety-day letter. § 3612 authorizes the Collector to make a return where no return or a false or fraudulent return has been filed, and requires that the Commissioner of Internal Revenue shall determine and assess all taxes, other than stamp taxes, as to which returns are made pursuant to the section. Whatever bearing the appellant's contention might have in a proceeding for the collection of a tax, it has no application in a criminal prosecution for attempting to evade and defeat a tax by filing false and fraudulent returns. As this Court has heretofore said:

"A prosecution for income tax evasion is not an effort by the Government to compute income tax at all. It is an effort by the Government to prove that the taxpayer failed to compute it honestly. There is nothing in this Section Former 26 U.S.C.A. § 41 nor in any other applicable statute that restricts the Government in the method of proving this fact if it exists." Dupree v. United States, 5 Cir., 1955, 218 F.2d 781, 789.

At the first trial of this case, Margaret Lera testified as a witness for the Government. She testified as a witness for the Government at the second trial. On the first trial this witness testified to the making of pay-offs to the police department of Galveston. There was no testimony in the first trial that the appellant received any of the moneys. We held, on the former appeal, that the admission of the testimony of this witness was erroneous and highly prejudicial. For this error, and another which we need not here mention, a new trial was granted. At the second trial the witness testified that she sent pay-off money to the appellant during the years 1945, 1946 and 1947 by detectives. Being interrogated about conversations between the appellant and herself during these years, she stated that she had asked appellant if the detectives had been delivering what she had been sending, and quoted his reply as being "Yes, that everything was all right". This, we think, was enough to meet the objection which was found to be error on the former appeal. It was shown that Mrs. Lera had made a settlement after the first conviction of the appellant of her own income tax liability. On cross-examination she told of being interviewed by Government agents about a month before the trial, being furnished with a transcript of the questions and answers comprising the interview, and of burning the transcript of the testimony during the noon recess of the day she testified. The owing and settlement of income taxes, the discussion with Government agents regarding some matter, possibly the Ford case, and the destruction of the transcript of the interview are not matters which would exclude Mrs. Lera's testimony.

The District Court admitted testimony as to expenditures made by appellant's wife and error is assigned because such testimony was received. There was evidence that such funds as Mrs. Ford had and spent were received from the appellant. The court declined to give a charge to the jury, requested by appellant, that it should give no consideration to purchases of Mrs. Ford in determing the taxable income of the appellant. We need not discuss these questions as they are disposed of in the former appeal. Ford v. United States, supra. See Lloyd v. United States, 5 Cir., 1955, 226 F.2d 9.

Relying chiefly upon Calderon v. United States, 9 Cir., 1953, 207 F.2d 377, the appellant urges that the unsworn statements made by appellant to Government agents were inadmissible because, he says, the corpus delicti had not been established. The agents testified that appellant had said, in response to questions, that he kept cash in a chifforobe drawer in the amount of two or three thousand dollars in 1945 and 1947. Again he said, that in 1944, prior to the tax years involved, he had $12,000 in cash in the chifforobe drawer. Where the net worth doctrine is relied upon in a criminal prosecution of a tax evasion case, the taxpayer's opening net worth cannot be established by his uncorroborated extra-judicial statement. Smith v. United States, 348 U.S. 147, 75 S.Ct. 194, 99 L. Ed. 192; United States v. Calderon, 348 U.S. 160, 75 S.Ct. 186, 99 L.Ed. 202. In the case before us the Government did not rely upon but rather rejected the statements of the appellant Ford as to the cash in the drawer. When the extra-judicial statements are disbelieved and are not relied upon by the Government it can hardly be error on its part that it produced no corroborative evidence.

The appellant urges that the indictment upon which he was convicted was void because the only witness who appeared before the Grand Jury was a Government agent who had no personal knowledge of the facts, that his testimony was based upon hearsay and hence incompetent. The Supreme Court of the United States has considered the question and given an answer adverse to appellant's contention. In the causa celebre of Frank Costello a conviction was had of income tax evasion upon proof of increases of net worth. The only witnesses before the Grand Jury which returned the indictment were Government agents who had no first-hand knowledge. The Supreme Court, in an opinion rendered March 5, 1956, held the indictment valid and said:

"In Holt v. United States, 218 U.S. 245, 31 S.Ct. 2, 4, 54 L.Ed. 1021, this Court had to decide whether an indictment should be quashed because supported in part by incompetent evidence. Aside from the incompetent evidence `there was very little evidence against the accused.\' The Court refused to hold that such an indictment should be quashed, pointing out that `The abuses of criminal practice would be enhanced if indictments could be upset on such a ground.\' 218 U.S. at page 248, 31 S.Ct. at page 4. The same thing is true where as here all the evidence before the grand jury was in the nature of `hearsay.\' If indictments were to be held open to challenge on the ground that there was inadequate or

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