Mighell v. United States, 5185.

• Decision Date: 17 May 1956
• Docket Number: No. 5185.,5185.
• Citation: 233 F.2d 731
• Parties: Harvey N. MIGHELL, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

233 F.2d 731 (1956)

Harvey N. MIGHELL, Appellant, v. UNITED STATES of America, Appellee.

No. 5185.

United States Court of Appeals Tenth Circuit.

May 17, 1956.

Carl V. Rice, Kansas City, Kan. (Ernest J. Rice, Topeka, Kan., and Claude L. Rice, Kansas City, Kan., were with him on the brief), for appellant.

Royce D. Sickler, Asst. U. S. Atty., Wichita, Kan. (William C. Farmer, U. S. Atty., Topeka, Kan., was with him on the brief), for appellee.

Before BRATTON, Chief Judge, and HUXMAN and MURRAH, Circuit Judges.

HUXMAN, Circuit Judge.

This is an appeal from a conviction in the United States District Court of Kansas for criminal evasion of federal income taxes. Defendant, Harvey N. Mighell, was found guilty under 26 U.S.C.A. § 145(b) on four counts for wilful failure to report substantial amounts of his income in 1947, 1948, 1949 and 1950. He was fined $3,000 and sentenced to imprisonment for a period of two years on count one, and to imprisonment for two years on each of the other three counts, such sentences to run concurrently with each other and with the sentence imposed on count one.

The proof for the prosecution was based upon the net worth method, sanctioned with limitations by the Supreme Court in Holland v. United States, 1954, 348 U.S. 121, 75 S.Ct. 127, 99 L.Ed. 150, and three companion cases.¹ It is admitted that defendant was actively engaged in the illegal business of buying and selling liquor in Kansas prior to the prosecution period and during 1947. There is dispute over whether such business continued in 1948 and later years. He also had income during the prosecution period from farming, oil, hotel and cafe partnerships, gambling, and some nonrecurring sources. A substantial amount of evidence was presented concerning these various dealings. The appeal raises only two principal questions: (1) Did the Government satisfy its burden of proof to establish a substantially accurate net worth statement as of the beginning of the prosecution period, January 1, 1947; and (2) did the government diligently pursue the leads which would tend to support defendant's innocence?

There is dispute over the inclusion or exclusion of several items in calculating the net worth of defendant at the various crucial dates. The principal controversy, however, is over alleged cash and liquor inventory which defendant claims he had on hand at the beginning of the prosecution period. The Government, in its presentation, gave defendant credit for no liquor inventory and only $10,100 cash on hand as of December 31, 1946. Defendant claims he had approximately $115,000 in cash and liquor inventory as of that date. If defendant's contention is true the excess expenditures during the 1947 to 1950 period relied upon by the Government are very largely explained since it is agreed that at the end of 1950 defendant had only about $10,000 cash and no liquor on hand. The burden of persuasion, of course, is upon the Government, and if we find there was no evidence reasonably tending to support the jury's verdict the judgment of conviction must be reversed.

The Government's computations established the net worth as of December 31, 1946 of $123,318.01, and a net worth at the end of 1950 of $233,803.58, an increase of $110,485.57. The Government's evidence tending to support its calculations of appellant's net worth status was as follows: From 1921 to 1928 defendant was a mechanic making an average of $110 per month. Between 1929 and 1936 he farmed, was a mechanic and tinsmith and bootlegged some whiskey. From 1938 to April, 1940 he was serving a sentence in the Iowa State Penitentiary. Sometime during 1940 he was divorced from his first wife, in which proceeding there was no property settlement and no alimony award. According to his parole reports, between April, 1940 and at least May, 1941 he worked on his father's farm for $20 per month. During this time he reportedly received small amounts of money — from $2 to $10 — from time to time from his mother. A 1941 investigation by the Alcohol Tax Unit of the Internal Revenue Department in Iowa found no assets of the defendant. On November 14, 1941, he placed a $414.30 chattel mortgage on a 1941 Ford automobile, which he had or purchased.

During March and April, 1942 he worked for the Cessna Aircraft Company for 60 cents an hour. During the last six months of 1942 he was serving a Missouri sentence for transportation of liquor and had no earnings. In 1944 when he purchased the home in Russell, Kansas, he mortgaged it for $5,000. It was shown that he had no substantial inheritances or gifts. His first federal income tax return was filed in 1943. From 1943 through 1946 he reported a net income of approximately $57,000.

Appellant was married to his second and present wife in December, 1942. An investigation showed that she had acquired no substantial amount by way of gifts, loans, or inheritances. Her first federal income tax return was filed in 1942 showing income of less than $2,400. She testified that at the beginning of 1943 her assets amounted to about $1,000. This in substance was the Government's evidence from which it prepared appellant's net worth statement as of December, 1946.

Appellant offered substantially the following evidence. His son and his wife testified that $50,000 cash was buried in 1943. A garage owner stated that prior to 1945 appellant had left various amounts of cash of as much as $38,000 with him from time to time for overnight...