State v. Fingert, 61775

Decision Date12 November 1980
Docket NumberNo. 61775,61775
PartiesSTATE of Iowa, Appellee, v. Morton S. FINGERT, Appellant.
CourtIowa Supreme Court

Joseph L. Marks of Marks, Marks & Marks, Des Moines, for appellant.

Thomas J. Miller, Atty. Gen., Jeannine Freeman, Asst. Atty. Gen., Dan L. Johnston, Polk County Atty., and Rick L. Olson, Asst. County Atty., for appellee.

Considered en banc.

ALLBEE, Justice.

Defendant Morton S. Fingert was convicted by a jury of evading state income taxes for the years 1973 and 1974, in violation of section 422.25(8), The Code. The issues raised by his appeal largely center on the propriety of the admission of several items of evidence.

On July 11, 1977, defendant was charged by county attorney's information with two counts of evasion of state income tax. Trial of the case commenced January 16, 1978. The State relied upon the so-called "T-account" method of income reconstruction as its means of demonstrating that defendant had understated his income for the years in question. 1 By showing that defendant had lost nearly $100,000 in the commodities market in 1973 and 1974, yet was able to cover these losses despite having reported gross income of only $18,200 and.$19,000 in those years respectively, the State sought to prove its assertion that defendant had understated his income in violation of section 422.25(8). Among the witnesses called by the State were Roger Covault, the Department of Revenue auditor who conducted the investigation of defendant, and several employees of the commodity brokerage firms with which defendant traded. Defendant, on the other hand, asserted that he had in his possession a large cash hoard which he utilized to make up his commodities market losses. Following submission of the case, the jury returned a verdict against defendant on both counts.

Complaint is made of certain rulings concerning the admissibility of the evidence relating to defendant's financial affairs during the years in question. Specifically, defendant contends trial court erred in admitting records regarding his commodity accounts and in allowing Covault's testimony relating to the commodity accounts and certain of defendant's bank accounts. He further alleges error on the part of trial court in refusing to grant a mistrial due to purported prosecutorial misconduct and in denying his motion for directed verdict.

I. Admission of commodity account records. Defendant asserts trial court erred in admitting into evidence State's exhibits 51-68, 113 and 114. These exhibits purported to be copies of records of commodity accounts of defendant, and in one instance, of his former wife, with two commodity brokerage firms, First Mid-America, Inc. and Lincoln-Staley Commodities, Inc., during 1973 and 1974. In general, the records consist of monthly activity and year-end profit and loss statements for those accounts. Defendant asserts that these exhibits constitute documentary hearsay, and as such were erroneously admitted by trial court. He further argues that because the exhibits were not original documents, their admission was also barred by the best evidence rule.

A. Documentary hearsay. This court has adopted the definition of hearsay employed by the federal rules of evidence, that being "a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted." Fed.R.Evid. 801(c); State v. Miller, 204 N.W.2d 834, 840 (Iowa 1973). In this case, because the commodity accounts records were offered by the State to prove the truth of the figures stated in them, they clearly constituted hearsay. Miller, 204 N.W.2d at 840; see State v. Kennedy, 224 N.W.2d 223, 227 (Iowa 1974). As such, unless they fall within some recognized exception to the hearsay rule, their admission by trial court was error.

Prior to resolving this issue, however, we first deal with the State's contention that the records in question constitute adoptive admissions of defendant. We cannot accept this argument. In cases involving criminal prosecutions, this court has previously stated that silence alone is insufficient to constitute an admission which may be used against a defendant; that is, the admission must be adopted, rather than merely tacitly agreed to. See State v. Kidd, 239 N.W.2d 860, 864 (Iowa 1976); State v. Hamilton, 236 N.W.2d 325, 330 (Iowa 1975); State v. Kelsey, 201 N.W.2d 921, 927 (Iowa 1972). Admissions by adoption can only be established by "the totality of circumstances viewed in terms of probable human behavior." Hamilton, 236 N.W.2d at 330. In this case, defendant's silence with respect to the challenged exhibits is the only factor which would support a determination that these records constituted admissions by adoption. Accordingly, they could not properly be utilized as adoptive admissions in this prosecution.

Returning to the documentary hearsay issue, the State contends that the challenged exhibits were properly admitted into evidence under the regularly kept records exception to the hearsay rule. Admissibility under this exception is based upon the circumstantial guarantee of unusual reliability and trustworthiness associated with such documents

furnished by the fact that in practice regular entries have a comparatively high degree of accuracy (as compared to other memoranda) because such books and records are customarily checked as to correctness by systematic balance-striking, because the very regularity and continuity of the records is calculated to train the record-keeper in habits of precision, and because in actual experience the entire business of the nation and many other activities constantly function in reliance upon entries of this kind.

C. McCormick, Evidence § 306, at 720 (2d ed.1972). The foundation required to establish this reliability, and hence to allow the admission of documentary hearsay under this exception, is codified in section 622.28, The Code. That statute provides in pertinent part as follows:

Any writing or record, whether in the form of an entry in a book, or otherwise, including electronic means and interpretations thereof, offered as memoranda or records of acts, conditions or events to prove the facts stated therein, shall be admissible as evidence if the judge finds that they were made in the regular course of a business at or about the time of the act, condition or event recorded, and that the sources of information from which made and the method and circumstances of their preparation were such as to indicate their trustworthiness, and if the judge finds that they are not excludable as evidence because of any rule of admissibility of evidence other than the hearsay rule.

(Emphasis added.) Thus, we have in the past required that documentary evidence of this nature "be vouched for by one having custody of the records or having actual knowledge of the circumstances under which they are kept." State v. Fisher, 178 N.W.2d 380, 384 (Iowa 1970).

In order for trial court to properly have admitted the challenged exhibits in this case, the above-quoted statutory requirements must necessarily have been adequately demonstrated. We recognize, of course, the considerable discretion possessed by trial courts with respect to the receipt of documentary evidence pursuant to section 622.28. Prestype Inc. v. Carr, 248 N.W.2d 111, 117 (Iowa 1976); State v. Anderson, 159 N.W.2d 809, 815 (Iowa 1968). We also note that this statute is to be construed in such a manner as to give it the broad and liberal interpretation it was intended to have. Fisher, 178 N.W.2d at 382. Against this background, we nonetheless are unable to agree that the foundational requirements delineated by the statute were satisfactorily demonstrated in this case.

In its attempt to lay the foundation for the introduction of exhibits 59-65, the State called as a witness Ilene Kriso, a secretary with Lincoln-Staley Commodities, Inc. 2 Exhibits 59-63 represented copies of monthly activity statements for the years 1973-74 for a commodity account with Lincoln-Staley in defendant's name. Exhibits 64 and 65 consisted of a statement of account purchase and sale for one account in the name of defendant's former wife and a statement of profit and loss for defendant's account, respectively. Kriso testified as to her job responsibilities with Lincoln-Staley: as secretary, she was responsible for the commodity records when those records were in her office, and she also did the copying of those statements when copies were requested. While not actually in charge of the storage of the records herself, Kriso had "just as much access to those records as would the assistant treasurer or the margin clerk or the vice-president." Although she did not prepare the records originally, it would appear that Kriso did have sufficient familiarity with the circumstances under which the records were kept, see Fisher, 178 N.W.2d at 383-84, to qualify her as a foundation witness. However, while it could be inferred from the monthly sequence of the account activity statements that these records were made in the regular course of business, Kriso gave no express testimony as to that foundational requirement. More significantly, she proffered no testimony of substance with regard to the timing of the recordation, the sources of information from which the records were made or the method and circumstances of their preparation. These deficiencies formed the bases for defendant's objections to the admission of the exhibits in question.

The record reveals similar deficiencies in the testimony of those witnesses called by the State to authenticate the other challenged exhibits. Lynn Hahn, a compliance supervisor for First Mid-America, Inc., testified with respect to exhibits 51-58, monthly activity statements and year-end profit and loss statements for defendant's commodity account with that company. With the exception of exhibit 53, these documents consisted of microfilm copies...

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