Oertle v. United States, 8032

• Decision Date: 15 February 1967
• Docket Number: 8033.,No. 8032,8032
• Citation: 370 F.2d 719
• Parties: Charles M. OERTLE, Appellant, v. UNITED STATES of America, Appellee. Kenneth B. McCAGUE, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

370 F.2d 719 (1966)

Charles M. OERTLE, Appellant, v. UNITED STATES of America, Appellee.

Kenneth B. McCAGUE, Appellant, v. UNITED STATES of America, Appellee.

Nos. 8032, 8033.

United States Court of Appeals Tenth Circuit.

November 10, 1966.

Rehearing Denied February 15, 1967.

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L. Karlton Mosteller and Robert B. Milsten, of Mosteller, Andrews & Mosburg, Oklahoma City, Okl., for appellant, Charles M. Oertle.

Robert S. Rizley of Crawford & Rizley, Tulsa, Okl., for appellant, Kenneth B. McCague.

John M. Imel, U. S. Atty. (Phillips Breckinridge, Asst. U. S. Atty., on the brief), for appellee.

Before LEWIS, BREITENSTEIN, HILL, SETH and HICKEY, Circuit Judges.

HILL, Circuit Judge.

Appellants appeal from a jury conviction on charges of attempting to evade the payment of excise taxes due the United States from the Oertle Wholesale Drug Company of Tulsa, Oklahoma.¹

The indictment charged the two appellants jointly on nine counts and appellant Oertle separately on eight additional counts. The jury verdict convicted the two accused on all counts charged except count three which had been dismissed by the court.

A preliminary statement of the undisputed basic facts will be helpful in our approach to the various questions raised. Appellant C. Max Oertle assumed the presidency and management of the Oertle Wholesale Drug Company in 1957, after the deaths of his father and brother. He continued in such company capacities during the entire period covered by the indictment. Appellant Kenneth B. McCague, who is an accountant, became employed part time by the company during 1957 to keep and maintain certain books and records of the company and to prepare all tax returns, including the excise tax returns, which the company was required to file. His employment lasted until sometime in the early part of 1960. During his employment he prepared nine quarterly excise tax returns for the company which were filed with the government as provided for by law and the company, through appellant Oertle, paid the tax as shown by the returns. The indictment covers the period of seventeen quarters beginning with the last quarter of 1957 and ending with the first quarter of 1962.

After McCague became disassociated with the company a full time employee, one Dicesare, who was an accountant, assumed the duty of preparing the quarterly excise tax returns and he continued in the performance of that duty during the remainder of the time covered by the indictment.

The Oertle Wholesale Drug Company, during the period of the charged offenses was extensively engaged in the retail sale of such excise tax merchandise as jewelry, toilet preparations, luggage and handbags. In an apparent effort to keep a daily account of the excise tax due or to become due on merchandise sold, the cash registers in the departments where the tax applied were set to show three separate amounts on a tape whenever a sale was rung up. These separate amounts reflected the retail sale price of the article, the state sales tax collected upon the sale and the amount of the excise tax collected upon the sale. At the end of the day the tapes were collected and these three separate amounts entered in a daily cash journal. These figures later were posted in a monthly cash ledger and eventually put in a general ledger. The four quarterly excise tax returns made for the four quarters of 1956 reflected the excise tax due according to these company books and the tax was paid accordingly. Beginning in 1957 and continuing through the period covered by the indictment, the company excise tax returns reflected only a percentage of what the books showed to be due. During that period when McCague was employed by the firm, the percentage varied from 27.5 percent to 68.3 percent. After McCague left the firm's employment the returns filed generally reflected 68.3 percent of what the company books showed the liability to be.

Appellant Oertle first contends that the defendants were "convicted of a crime not charged in the indictment nor defined by the applicable law." Title 26, U.S.C.A. § 7201 makes it an offense to wilfully attempt to defeat or evade payment of any tax imposed under Title 26. The retailers' excise tax is one of the taxes so imposed and clearly is within the scope of the crimes defined by the above section. The indictment in the case followed the admonition of Rule 7 (c) of F.R.Crim.P. in that it was "a plain, concise and definite written statement of the essential facts constituting the offense charged."² Counsel fails to point out any specific defect in the indictment or any ambiguity in the wording of the applicable tax statutes and we find none. Suffice it to say the statute and the regulations impose upon certain enumerated items sold at retail a tax equivalent to 10 percent of the price for which they are sold and the tax is payable by the retailer at the end of each quarter of a year, when such retailer must make a return showing, and pay, all such excise taxes due according to the retail sales made during such quarter. The Oertle Company employed a relatively simple method of keeping account of its taxable sales, which is described above and is a generally accepted accounting method of keeping a record of the taxable sales and of the amount of excise tax due. There is no substance to appellants' attack upon the statutes or the indictment. In appellants' brief, under this heading, counsel goes far afield and points out alleged trial errors in permitting the government to argue and introduce evidence to the effect that a mere collection of amounts allegedly designed as excise taxes created a liability to the government and made these amounts "trust fund taxes which belonged to the government." This contention is not germane to the attack upon the statute and the indictment. It likewise has no substance but we will consider it generally at other places in this opinion.

Oertle's second point concerns the trial court's refusal to compel the government, under 18 U.S.C.A. § 3500, to produce for use in cross-examination all of Special Agent Nathman's report of the investigation. Nathman investigated the case for the Internal Revenue Service and made a report to his superiors of his investigation, which included his recommendation in the case, a list of witnesses who had knowledge of various facts of the case and a list of exhibits in support of the report. He testified at the trial and after completion of his direct testimony, counsel for the defendants moved to require the government to produce, under Section 3500, the entire report so they could inspect it and use it in cross-examination. The government objected to producing certain portions of the report on the ground that they were not covered in Nathman's direct testimony. The trial judge sustained the objections by the government and defense counsel acquiesced in the ruling.³ He then proceeded with the cross-examination of witness Nathman. During the course of the cross-examination, defense counsel renewed the request for production and the same was denied. The trial judge carefully stated that he was not compelling the production of that part of Nathman's report which set forth the agent's conclusions and recommendations, the list of witnesses suggested in support of the factual part of the report and the list of exhibits attached to the report.

Our discussion of this point should be prefaced with an observation concerning the government's proof in this case. In the case the government did not need to rely upon the testimony of Agent Nathman to make a submissible case. The books and records of the company plus the tax returns and the testimony of the former company employees made a submissible case. The testimony of Nathman helped only insofar as his interviews with the two accused were concerned and the defense was given those parts of the report pertaining to all of such interviews.

18 U.S.C.A. § 3500, commonly referred to as the Jencks Act, is clear as to its application to the trial facts of this case. In substance it provides that in a criminal prosecution, after a government witness has testified on direct examination, the court shall, upon motion of the defendant, order the government to produce any statement of the witness in the possession of the government which relates to the subject matter of the testimony of the witness. When the entire contents of the statement requested relate to the subject matter of the testimony of the witness, it is the duty of the court to order the entire statement delivered directly to the defendant. The Act further provides for objection on behalf of the government to production of any part of the statement on the ground that it does not relate to the subject matter of the testimony of the witness.

Properly, under this latter provision the government, in this case, objected to producing the parts of Nathman's report in which he made his conclusions and recommendations and listed the names of the witnesses and the exhibits. The trial court was correct in sustaining the government's objections. A reading of Nathman's entire direct testimony clearly shows that neither the conclusions and recommendations, the list of witnesses nor the list of exhibits relate to or concern in any manner such testimony. The authorities cited by appellants on this question are simply not in point. It is true they stand for the proposition that the report of a government agent is within the purview of the Act and that it may be ordered produced.⁴ However, none of these cases support the contention that the whole statement must be produced if any part of it relates to the testimony of the witness.

Subsequent to the enactment of the Jencks Act this court in Sells v. United States, 262 F.2d 815, cert. denied 360 U. S. 913, 79 S.Ct. 1298, 3 L.Ed. 1262, approved the excising of parts of an otherwise produceable statement the same as was done in ...