Humphreys v. Commissioner of Internal Revenue

• Decision Date: 18 February 1942
• Docket Number: No. 7700.,7700.
• Citation: 125 F.2d 340
• Parties: HUMPHREYS v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Seventh Circuit

125 F.2d 340 (1942)

HUMPHREYS v. COMMISSIONER OF INTERNAL REVENUE.

No. 7700.

Circuit Court of Appeals, Seventh Circuit.

January 28, 1942.

Rehearing Denied February 18, 1942.

Edward J. Hess and Charles P. R. Macaulay, both of Chicago, Ill., for petitioner.

Samuel O. Clark, Jr., Asst. Atty. Gen., and Michael H. Cardozo, J. P. Wenchel, J. Louis Monarch, Carlton Fox, and Joseph M. Jones, Sp. Assts. to Atty. Gen., for respondent.

Before EVANS and KERNER, Circuit Judges, and LINDLEY, District Judge.

KERNER, Circuit Judge.

Petitioner asks us to review an order of the Board of Tax Appeals sustaining a deficiency determination for the years 1930, 1931, and 1932, 25% penalty for 1930 and 50% fraud penalty for all three years, on the ground that petitioner had not included $10,000 protection payments received from dry cleaners in 1930, $5,000 received as a proprietary interest in the Drexel Cleaners in 1931, bank deposits in the name of M. L. Brunswick totaling $29,332.82 for 1931 and $50,114.29 for 1932, and $50,000 received as ransom money in 1931.

Concerning the $50,000 ransom payment in 1931, the facts adduced showed that Robert C. Fitchie, a man 74 years of age who had been president of the Milk Wagon Drivers Union for 32 years, was kidnapped on December 21, 1931; that Steve C. Sumner, pursuant to directions given to him by the kidnappers, placed $50,000 in currency — which had been delivered to him by Brink's Express Company — on the seat of his automobile and drove to a designated street; there he alighted and while standing at a point 25 feet from his automobile, he saw the petitioner take the money and drive away. The receipt of the $50,000 constitutes taxable income. National City Bank v. Helvering, 2 Cir., 98 F.2d 93. Petitioner denied that he had any connection with the kidnapping or that he had collected the ransom.

The further controlling facts adduced at the hearing before the Board showed that during the tax years in question the petitioner was not engaged in any legitimate business. He was regarded as a gangster and racketeer. During 1929 various dry cleaning and dyeing establishments in Chicago were having trouble with a so-called labor organization and a meeting was held to discuss the matter. At the meeting one Ginsberg stated "he had a certain party that had influence with the unions" and if agreeable to those present, he would consult that party about providing protection. A week later another meeting was held and Ginsberg reported that he had made arrangements with the petitioner providing protection from further molestation for $10,000 to be paid by the establishments in weekly instalments. In 1930 that sum was paid to the petitioner. He admits receipt thereof, and claims it was included in his return.

Toward the end of 1930 petitioner discontinued the arrangement providing protection for the establishments. At that time one Ed. Oslan, operating the Drexel Cleaners, was fearful that if the petitioner "stepped out of the deal * * * they would pick on him and tie him Drexel Cleaners up." He advised Ginsberg of his fears. Ginsberg brought Oslan to the petitioner. A conversation ensued among the three in which Ginsberg said: "Why don't you take Humphreys in with you and then you won't have any trouble; then you will get along with them all right." Thereafter in July 1931 petitioner became a part owner of the Drexel Cleaners to the extent of $5,000. Petitioner testified the $5,000 interest in the Drexel Cleaners was given to him as a gift.

On November 2, 1931, an account was opened at the Sears Community Bank under the name of M. L. Brunswick. It was closed on December 28, 1932. The total deposits made in the account were $29,812.82 during 1931 and $52,776.81 in 1932. One Bolker, cashier of the bank, attended to the opening of the account. When called as a witness for the petitioner he testified that the petitioner was not the person who opened the account. On cross examination, however, he admitted that in June 1933, in the presence of the District Attorney and several other persons, he had stated that the account belonged to the petitioner.

The petitioner denied that he was the person who had opened the account or that he had any interest in the account, and submitted the testimony of witnesses to show that one M. L. Leventhal was the owner of the account. Leventhal did not testify. The record, however, discloses that petitioner had carried bank accounts under assumed names, e. g., an account in the Cragin State Bank in the name of M. L. Hurley. A comparison of the signatures of M. L. Hurley and M. L. Brunswick indicates a similarity of the handwriting between them and the admitted signature of the petitioner. It also appeared that two checks drawn on the Brunswick account were used in partial payment of an automobile belonging to petitioner's wife; that a check issued by the Drexel Cleaners, payable to the petitioner, was deposited in the Brunswick account and that several checks payable to petitioner had been deposited to the account of Ed Simson in the Sears Community Bank, which account had been opened with funds taken from the Brunswick account at the time the Brunswick account was closed.

In June, 1933, petitioner was indicted for unlawfully and feloniously attempting to evade income tax for the years in question. The indictment was returned in the name of the United States of America against M. L. Humphreys, alias Murray L. Humphries, alias John Humphrey, alias ...