Olender v. United States

• Decision Date: 15 February 1954
• Docket Number: No. 13658.,13658.
• Parties: OLENDER v. UNITED STATES.
• Court: U.S. Court of Appeals — Ninth Circuit

210 F.2d 795 (1954)

OLENDER v. UNITED STATES.

No. 13658.

United States Court of Appeals Ninth Circuit.

February 15, 1954.

COPYRIGHT MATERIAL OMITTED

Leo R. Friedman, San Francisco, Cal., for appellant.

H. Brian Holland, Asst. Atty. Gen., S. Walter Shine, Sp. Asst. to Atty. Gen., Ellis N. Slack, Chief, Appellate section, Department of Justice, David L. Luce, Joseph M. Howard, Sp. Assts. to Atty. Gen., Lloyd H. Burke, U. S. Atty., Robert J. Drewes, Asst. U. S. Atty., San Francisco, Cal., for appellee.

Before STEPHENS, HEALY and BONE, Circuit Judges.

BONE, Circuit Judge.

Appellant stands convicted on all counts of a four-count indictment charging him with wilfully attempting to defeat and evade federal income taxes by filing false and fraudulent income tax returns on behalf of himself and his wife for the taxable years 1945 and 1946 in violation of 26 U.S.C.A. § 145 (b). Appellant was sentenced to three years' imprisonment and a fine of $10,000 on each of the counts 1, 2 and 3, the sentences to run concurrently, and to pay an additional fine of $10,000 on count 4.

During the taxable years involved appellant was the sole owner and operator of the "Army and Navy Store" in Oakland, California, which sold service men's uniforms and other merchandise at retail. Appellant employed a part-time bookkeeper but supervised the maintenance of the books himself. The books were admittedly incomplete, and the government therefore relied upon the familiar net worth-expenditures method to prove that appellant and his wife received taxable income in 1945 and 1946 which they failed to report. This method of proof requires the government to show the net worth of the taxpayer as of the beginning and the end of the taxable year and the nondeductible expenditures made by him that year. If the increase in his net worth plus his non-deductible expenditures exceed his reported income for the year, and such excess is not attributable to gifts, devises, loans or other non-taxable receipts, then the conclusion may be drawn that the taxpayer realized income which he failed to report. McFee v. United States, 9 Cir., 206 F.2d 872; Papadakis v. United States, 9 Cir., 208 F.2d 945.

Appellant presents 11 specifications of error. In the first five specifications he challenges the sufficiency of the evidence on all counts. Specifications 6 through 10 deal with questions as to the admissibility of certain government evidence, and in specification 11 appellant attacks an instruction given the jury by the trial court.

The Evidence

The government claims to have established, under the net worth-expenditures theory, that appellant and his wife realized taxable income which they failed to report in the amounts shown in the following table (the figures including the income of both appellant and his wife, who reported their income on a community property basis):

                            Net
                  Year     Income      Reported    Unreported
                  1945   $88,052.77   $41,067.61   $46,985.16
                  1946   $48,856.23   $23,514.62   $25,341.61
                

The defense attempted to show that the net worth of appellant and his wife as of December 31, 1944 was higher than that stated by the government in its computation of unreported income, that the increase in their net worth for the two years was less, and that a part of this increase did not represent taxable income. The defense evidence, if believed, established that appellant and his wife received only a negligible amount of unreported income in 1945 and that they over-reported their income for 1946.

Most of the facts on which the government based its calculations were stipulated. The more than 1400 pages of record and the stacks of exhibits deal with about eight issues of fact, of which only three, the parties agree, were of critical importance. The three critical issues were these: (1) Did appellant have $50,000 or $72,000 in his safe deposit box on December 31, 1944 (the starting date for determining the income of appellant and his wife for the years 1945 and 1946 under the net worth-expenditures theory)? (2) Did appellant's Army and Navy Store have on hand $20,550 in sailor suits from the Goodman Sales Agency on December 31, 1944, as appellant claimed? (3) Were certain government bonds in the amount of $20,000, purchased in 1945, the property of appellant's mother and acquired with her funds, as appellant contended?

We have carefully studied the record. It would serve no good purpose to discuss the evidence in detail. On two minor issues defects in the government's case were established. On the second of the three major issues stated above, involving the so-called "Goodman Transaction," the theory of the defense was corroborated in part, but only in part, by Lewis Leavy, a government witness. On the third of the critical issues, relating to the $20,000 in government bonds, Charles Ringo, appellant's accountant and a government witness, testified that in May of 1948 he saw the $20,000 in bonds in appellant's safe deposit box and that they were earmarked as belonging to appellant's mother. This was after the investigation of appellant's tax matters had been commenced, however, and it was conceded that appellant reported the interest on the bonds as income of himself and his wife in 1947.

There is substantial evidence in the record to sustain the conclusion that appellant and his wife realized very sizable amounts of income in 1945 and 1946 which they failed to report. With the exceptions noted above, the defense had to rely almost wholly upon the uncorroborated testimony of appellant to refute the government's case. Bearing in mind that the credibility of the witnesses was a question for the jury, that the evidence must be viewed in the light most favorable to the government, and that it was not necessary for the government to prove with mathematical certainty any precise amount of unreported income, we think the evidence was sufficient to sustain the verdict on all counts, even if we disregard that evidence which, as will be pointed out shortly, was erroneously admitted in evidence. Papadakis v. United States, supra; McFee v. United States, supra; Gendelman v. United States, 9 Cir., 191 F.2d 993; Rollinger v. United States, 8 Cir., 208 F. 2d 109.

Admissibility of Evidence

Government Exhibit 55. Appellant testified that in 1945 his mother-in-law, Mrs. Laura J. Foote, made a gift to him of $2500. His sister-in-law, Ella Widrin, testified that on Mrs. Foote's death in 1945 she gave $575 which she had been holding for Mrs. Foote to appellant to use for Mrs. Foote's funeral expenses or as appellant saw fit. If believed, this evidence established that the government overstated the taxable income of appellant and his wife for the year 1945 by the amount of the money appellant received from Mrs. Foote and Ella Widrin.

In rebuttal the government called as a witness Donald A. Jensen, Director of the Fresno County Department of Public Welfare. Jensen identified a group of papers as the file of Laura J. Foote from the official files of the Fresno County Public Welfare Department. This file related to old age security benefits paid to Mrs. Foote in the years 1939-1942. The file contained the following documents:

(1) Four forms filled out and signed by Mrs. Foote during the period 1940-1942. Two of these forms were affidavits. Summarizing the contents of the four documents, they contained, inter alia, statements by Mrs. Foote that no change had occurred in her property holdings after 1939, at which time she had, according to another form in the file, only $152.09 in personal property; that she had no personal property in excess of $500; that she had no real property; and that by June 17, 1942 she had disposed of her $150 worth of personal property.

(2) Six reports of investigators for the Welfare Department containing, inter alia, the same information as that appearing in the forms filled out by Mrs. Foote summarized above.

(3) An affidavit by Betty Olender, appellant's wife, as a "responsible relative" of Mrs. Foote, stating that she (Betty Olender) and her husband did not own their own home; that she (Mrs. Olender) had no cash on hand, no bank deposits, no postal savings, no funds in a safe deposit box, and no negotiable securities; that her personal property consisted of a $100 automobile; and that the earnings of her spouse (appellant) were "$150." This affidavit was dated May 23, 1939.

(4) Five reports from banks, four stating that Mrs. Foote had no deposits and one stating that she had a joint deposit with Mrs. Betty Olender of $152.09.

The government offered this file, first, to show that Mrs. Foote had no money to give appellant in 1945 and, second, to impeach, by means of Betty Olender's affidavit, appellant's testimony that his father had made gifts of $5000 a year to appellant and his wife jointly in the years 1930 to 1940.

In the court below the defense objected to the admission of the entire (Ex. 55) file in evidence on the ground that it was irrelevant and hearsay. The first of these grounds has been abandoned. On this appeal the hearsay objection is reasserted and two additional contentions are made. First, appellant argues that the file should have been excluded because it is made confidential by a statute of the State of California. Deering's California Codes, Welfare and Institutions, § 118. Appellant did not invoke this statute in the court below. By failing to do so he waived any objection based upon the confidentiality of the file and cannot now raise the question on appeal.

Appellant next contends that the affidavit of Mrs. Olender (in government Ex. 55) should have been excluded under the rule that a wife cannot testify against her husband. It is generally held that this rule extends to extra-judicial statements of a wife, such as the affidavit of Mrs. Olender in the instant case, as well as to the testimony of the wife in Court. 8 Wigmore on Evidence, §§ 2232, 2233 (3rd Ed.). Appellant contends that...