Kampmeyer v. United States, 15276.

• Decision Date: 19 December 1955
• Docket Number: No. 15276.,15276.
• Citation: 227 F.2d 313
• Parties: John P. KAMPMEYER, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

227 F.2d 313 (1955)

John P. KAMPMEYER, Appellant, v. UNITED STATES of America, Appellee.

No. 15276.

United States Court of Appeals Eighth Circuit.

November 22, 1955.

Rehearing Denied December 19, 1955.

Louis E. Lipp, Omaha, Neb. (Bernard J. Boyle, Boyle & Hetzner, Fred S. White, White, Lipp & Simon, Omaha, Neb., and Charles W. Bowers, Des Moines, Iowa, were with him on the brief), for appellant.

Roy L. Stephenson, U. S. Atty., Des Moines, Iowa (H. Brian Holland, Asst. Atty. Gen., John H. Mitchell, Joseph M. Howard and Dumond P. Hill, Sp. Assts. to the Atty. Gen., and John C. Stevens and Robert J. Spayde, Asst. U. S. Attys., Des Moines, Iowa, were with him on the brief), for appellee.

Before STONE, WOODROUGH and VOGEL, Circuit Judges.

VOGEL, Circuit Judge.

Appellant herein was found guilty in two counts of an indictment charging him with wilful attempts to defeat and evade a large part of his income taxes for the years 1947 and 1948 in violation of Section 145(b) of the Internal Revenue Code of 1939, 26 U.S.C.A. Specifically, the government charged that for the year 1947 the appellant filed a false and fraudulent return showing his net income at $13,314.09 and the amount of tax due and owing thereon to be $3,358.31, whereas, the government alleged that for the said year 1947 the appellant's net income was $51,786.40, upon which he owed a tax of $26,039.31. With reference to the year 1948, it was alleged that the appellant filed a false and fraudulent return showing a net income of $22,485.80 with a tax due in the amount of $5,036.36, whereas his net income for said year totalled $53,178.12, upon which he owed a tax of $18,047.00.

Upon being found guilty by a jury, the appellant was sentenced to imprisonment for two consecutive terms of three years and fined $7,000.00 on each count.

The appellant was the operator of a billiard parlor and a bowling alley but derived additional income from a drive-in theater, a horse racing stable and from gambling. In connection with the billiard parlor, he operated two separate types of lottery, one called "Baseball" and the other "Tip Tickets".

The government attempted to establish its case by the net worth method, and in conjunction therewith offered and there was received in evidence what is designated as Exhibit No. 14. Exhibit No. 14 is a summary of the government agents' findings based upon the testimony and other evidence in the case. The exhibit sets forth in detail the appellant's liabilities and assets beginning with December 31, 1939. It shows the net worth as of that date to be $53,577.19. Yearly thereafter, through December 31, 1948, there appears the appellant's net worth arrived at through computing the assets and liabilities of each year. The net worth as of December 31, 1946, immediately preceding the indictment period, was $197,443.29; on December 31, 1947, it was $223,576.54; and on December 31, 1948, it was $273,146.61, an increase during the two indictment years of $75,703.32.

The exhibit also shows appellant's estimated net income for each one of such years and it includes the net income as reported by the appellant in his income tax returns and the additional income upon which the government claims the appellant paid no tax during all of those years, with the exception of the year ending December 31, 1946, in which the government agents found that the appellant overstated his income by the sum of $275.43.

The appellant did not testify in his own behalf but his position with reference to the government's charge becomes apparent through affidavits given to the government agents during the investigation and his oral statements in reply to the agents' questions. As in all cases, where the taxpayer's books are inadequate and incomplete and an attempt to establish failure to pay the proper tax is based upon use of the increase in net worth method, discrepancies and differences appear. That the appellant's books were inadequate and incomplete appears clear from the appellant's statements to the effect that with reference to his gambling income he did not keep records for fear local authorities might procure them and he admits that his reported income might have been understated by "about forty thousand dollars during the period 1940 to 1950 inclusive; that most, if not all of this understatement would have occurred during the war years, 1942, 1943, 1944 and 1945;". It is also apparent that with respect to the income from lotteries, such as Baseball and Tip Tickets, only the net was reported in the books, and consequently there was no possibility of the government agents checking gross income therefrom or doing an accurate job of accounting.

The main point in controversy, however, revolves around the claim of the appellant that on or about December 31, 1939, he had in his possession in various safes and on his person $90,000.00 in currency which he claims to have accumulated between the years 1907 and 1939. In ascertaining the basis for Exhibit 14, the agents disregarded this claim. They based this refusal on their examination of appellant's income tax returns for years prior to the years under inspection, by the introduction into evidence of financial statements given by the appellant on June 4, 1940, in connection with an application for a loan, and on August 1, 1946, given for the same purpose, together with a transcript of his testimony in a divorce proceedings between appellant and his first wife in 1932, in which he claimed that he was operating his business at a loss and was extremely hard up for money.

It must be conceded that if the appellant's claim that he had $90,000.00 in currency on December 31, 1939, was correct, then the government's case must fall, as such an accumulation of currency could at least to a large extent explain what otherwise might appear as income during subsequent years. It is apparent that the jury disbelieved his claim with reference to the accumulation of such a large amount of currency and such disbelief or finding is amply supported in the record.

Appellant's first ground for appeal is:

"The trial Court erred in admitting and not withdrawing the Revenue Agents\' net worth summary, Exhibit 14."

Appellant quotes from Holland v. United States, 348 U.S. 121, 75 S.Ct. 127, and companion cases, with reference to the guideposts the Supreme Court has set up for use of the trial courts and the appellate courts where the government has used the increase in net worth method of attempting to prove its case. He criticizes what he terms the government's failure "on the very threshold of its responsibility by avoiding the essential inquiry as to the taxpayer's currency position at the start of the prosecution years (as finally selected by the Agents) or for that matter, at the start of any year closer thereto than seven years earlier". We think appellant's criticism is unjustified.

According to the testimony, the agents' first step was to verify, if possible, the existence of the claimed $90,000.00 in currency as of January 1, 1940. The agents testified that they examined bank records and balances, business transaction records in the taxpayer's books, loan accounts at banks and public records as well as court records. The indication is that the agents did everything they could to verify the existence of the claimed $90,000.00. They found no justification for such claim and accordingly did not consider it in computing the appellant's net worth at the beginning of the period examined.

The appellant's signed financial or credit statements, his testimony in the divorce proceedings in 1932, his obtaining money in subsequent years from his wife's postal and savings accounts, the liquidation of stock and a life insurance policy are strange actions for one who had in his possession this large amount of cash. It was claimed by appellant that he had approximately $50,000.00 in cash which he gave to his father for safekeeping in about 1932, yet at the same time he testified in his divorce proceedings to the effect that he was operating at a loss and he subsequently asked the court having jurisdiction of the divorce proceedings to set aside an alimony decree for the support of his wife and minor child in the amount of $40.00 per month because of economic conditions necessitating his borrowing money. This was competent evidence to justify the agents' refusal to include the alleged $90,000.00 in their summary.

The claim here is that the agents failed to make "essential inquiry as to the taxpayer's current position at the start of the prosecution years". An examination of Kampmeyer's affidavit of January 23, 1952, which was gone over by Kampmeyer and his counsel before it was executed, indicates that the main concern of the taxpayer was with reference to getting credit for the $90,000.00 as of January 1, 1940. Nowhere therein does he suggest the subsequent accumulation of an additional sum in cash to make up for the unreported income in the prosecution years of 1947 and 1948. Appellant's counsel criticize failure of the government agents to follow "leads" given to them by the appellant and cite Holland v. United States, supra. That case refers to the necessity of the government agents following "relevant leads". Vague gambling earnings, oral claims to large bills in safes and deposit boxes, the changing of large bills to smaller ones are hardly in the category of "relevant leads" as referred to by the Supreme Court in the Holland case. They are not "leads reasonably susceptible of being checked, which, if true, would establish the taxpayer's innocence". The government agents could hardly be expected in 1952 to check the veracity of empty assertions of the appellant that in years prior thereto he had had huge amounts of cash or currency stacked away in safes or deposit boxes in banks. With reference to the burden of proof remaining on the part of the government, the Supreme Court in the Holland case said at page 138 of 348 U.S., at...