Pollock v. United States

• Decision Date: 30 March 1953
• Docket Number: No. 14126.,14126.
• Parties: POLLOCK v. UNITED STATES.
• Court: U.S. Court of Appeals — Fifth Circuit

202 F.2d 281 (1953)

POLLOCK v. UNITED STATES.

No. 14126.

United States Court of Appeals Fifth Circuit.

February 27, 1953.

Rehearing Denied March 30, 1953.

Llewellyn A. Luce and Walter H. Maloney, Washington, D. C. (Warren Roberts Wilmington, Del., of counsel), for appellant.

John D. Hill, U. S. Atty., and L. Drew Redden, Asst. U. S. Atty., Birmingham, Ala. (J. Thomas King, Asst. U. S. Atty., Birmingham, Ala.), for appellee.

Before HUTCHESON, Chief Judge, and STRUM and RIVES, Circuit Judges.

RIVES, Circuit Judge.

The appellant was indicted and convicted for violating 26 U.S.C.A. § 145(b), willfully attempting to evade or defeat income taxes due by him and his wife for the calendar years 1944 and 1945 by filing false and fraudulent income tax returns. He was sentenced to pay a fine of $1,000 and to eighteen months imprisonment. We note the district judge's statement that in imposing that sentence he took into consideration the fact that the appellant would be eligible for consideration for parole after serving one-third of the time.

Appellant contends that Count 1 of the indictment relating to the calendar year 1944 was barred by the statute of limitations of six years, 26 U.S.C.A. § 3748(a) (3). That sub-section provides in part, "Where a complaint is instituted before a commissioner of the United States within the period above limited, the time shall be extended until the discharge of the grand jury at its next session within the district." The indictment was returned more than six years after the income tax return for the year 1944 was filed with the collector. However, within the six year period, a complaint had been instituted before a United States Commissioner, a warrant issued thereon and the appellant arrested. The indictment was returned before the discharge of the grand jury at its next session within that district. It appears to us, therefore, that Count 1 was not barred by the statute of limitations.

If Count 1 were so barred a reversal would not be required, because the sentence was within the maximum punishment permitted under either count and the verdict under Count 2 would support the sentence imposed by the court.¹

Previous to 1944, appellant and his wife had made their income tax returns on a calendar year basis. In August of 1943, the appellant purchased the Dothan Jewelry Company, and thereafter operated that company throughout the years 1944 and 1945. He did not include any of the income from that company in his 1943 tax return. Notwithstanding that company was owned solely by the appellant, he mistakenly informed his accountants that it was a partnership in which he owned a two-thirds interest and his son, R. E. Pollock, a one-third interest. The government at no time has sought to impute any fraudulent purpose to that mistake, but has treated it as having been made in good faith. Acting upon the erroneous assumption of a partnership, the books of the Dothan Jewelry Company were kept upon a fiscal year basis for fiscal years ending July 31, 1944 and July 31, 1945. The income tax returns of appellant and his wife purported to be for the calendar years 1944 and 1945 and were filed on March 15th of the succeeding year, but exhibits attached to the returns showed that as to the Dothan Jewelry Company, the net profit was calculated for a fiscal year ending July 31st. The resulting confusion and uncertainty has given rise to several of the appellant's contentions.

Appellant contends that the indictment covering the calendar years 1944 and 1945 is completely invalid as a matter of law because Section 41 of the Internal Revenue Code, 26 U.S.C.A. § 41, requires his net income to be computed upon the basis of his annual accounting period (fiscal year or calendar year, as the case may be) in accordance with the method regularly employed in keeping his books, citing several decisions in civil tax cases.² The contention is clearly without merit. As a pleading, each count of the indictment is "a plain, concise and definite written statement of the essential facts constituting the offense charged". Rule 7(c), Federal Rules of Criminal Procedure, 18 U.S.C.A.; 26 U. S.C.A. § 145(b).

There was no variance between the allegations and the proof. The returns were on calendar year forms and purported to be for the calendar year. The taxpayer did not have the approval of the Commissioner to change his accounting period from calendar year to fiscal year, 26 U.S.C. A. § 46. Apparently all items of income, except from the Dothan Jewelry Company, were calculated for the calendar year.

The special agent, after examining the taxpayer's books and accounts, the several pertinent bank accounts, and after taking sworn statements from the appellant and his wife, undertook to recompute the net income strictly for the calendar years 1944 and 1945, not including any income for the preceding year but including all of the income for the calendar year. He testified that, on a strictly calendar year basis, he found an aggregate net income for 1944 of $20,518.55, not much more than that shown by the return, $19,503.49, but that for 1945, on a strictly calendar year basis, the total corrected net income was $48,709.91 as against $15,871.83 shown by the return. The confusion and uncertainty occasioned by appellant's own mistake in keeping the books of the Dothan Jewelry Company on a fiscal year basis, while his and his wife's joint return was made on a calendar year basis, was sufficiently explained and clarified by the evidence so that the jury could arrive at the true facts.

Several of the written charges requested by the appellant and refused by the court were rooted in the same error, and sought to have the jury instructed to acquit the appellant if the jury found that the United States had included in his taxable income for the calendar year monies paid during the preceding year. The United States had made various computations, some following the mixed calendar year — fiscal year system originated by the taxpayer. Those computations and that confusion were no cause for requiring the jury to acquit the appellant if they believed from the evidence beyond a reasonable doubt that he was guilty as charged. We find no reversible error in the refusal of any of the requested charges, and, other than those requested, there was no objection to the court's oral charge.

The books and records of the Dothan Jewelry Company for the period involved accounted for monies deposited in the business bank account, but did not reveal that any income of the business was diverted into any of the personal bank accounts of the appellant or his wife. That fact was discovered by the special agent and, upon examination before the trial, was admitted by the appellant. According to the testimony of two bookkeepers, who had been employed by the appellant during the period in question, the source of information used to compute sales receipts was a cash register tape. Any sales omitted from the cash register were not reflected on the books and records of the Dothan Jewelry Company. Four witnesses who were sales people employed by the appellant during this period testified that their instructions were that the proceeds of large sales were not to be run through the cash register, but were to be given to appellant or his wife. A number of customers who had made large purchases produced their receipts or cancelled checks, and the special agent testified that these were not reflected on the Company's books. If this kind of evidence stood alone, however, it would not be sufficient for conviction, because the appellant and his wife did instruct their accountants to add to the amount of sales as shown by the books for the year 1944, $2,500, and for the year 1945, $4,000. These figures were not supported by any record and apparently were added either arbitrarily or from memory. The amounts did, however, exceed the sums testified to by large customers who were produced as witnesses, and the employee witnesses were not able to give any definite figures.

The government was finally forced to the net worth and gross expenditures method in its attempt to prove the appellant guilty of an attempt to defeat or evade his income tax. Using that method to supplement the books and accounts the special agent could be certain of only about $1,000 by which the net income for 1944 was under-reported, while the appellant's accountant, introduced as a government witness, testified that by computing income on the net worth basis for the calendar year 1944, the appellant actually overreported his net income by the sum of $8,565.01.

For the year 1945, the results are more decisive. Both the special agent and appellant's accountant by the net worth method calculated substantially more net income than the amount shown on the return, $15,871.83. The special agent computed a total corrected net income of $48,709.91 for the calendar year 1945, while the final figure of appellant's accountant as a government witness was $57,042.14.

The appellant did not testify in his own behalf, and, introducing some documentary exhibits, rested his case at the close of the government's evidence. The court properly instructed the jury that the appellant's failure to testify in his own behalf created no presumption against him. 18 U.S.C.A. § 3481.

The appellant relies upon the cases of Bryan v. United States, 5 Cir., 175 F.2d 223, and United States v. Fenwick, 7 Cir., 177 F.2d 488, in insisting that the evidence was insufficient to make out a prima facie case against him, and that the case should not have been...