State v. Karras, 15883

• Decision Date: 27 April 1989
• Docket Number: No. 15883,15883
• Parties: STATE of South Dakota, Plaintiff and Appellee, v. Christos KARRAS, d/b/a Time Out Steakhouse and Restaurant, Defendant and Appellant.
• Court: South Dakota Supreme Court

Page 213

438 N.W.2d 213

STATE of South Dakota, Plaintiff and Appellee, v. Christos KARRAS, d/b/a Time Out Steakhouse and Restaurant,

Defendant and Appellant.

No. 15883.

Supreme Court of South Dakota.

Argued May 25, 1988.

Reassigned Jan. 11, 1989.

Decided March 22, 1989.

Rehearing Denied April 27, 1989.

John P. Dewell, Asst. Atty. Gen., Pierre, and Donald N. Srstka, Sp. Asst. Atty. Gen., Sioux Falls, for plaintiff and appellee; Roger A. Tellinghuisen, Atty. Gen., Pierre, on the brief.

William P. Fuller of Woods, Fuller, Shultz & Smith, P.C., Sioux Falls, for defendant and appellant.

MILLER, Justice (on reassignment).

In this appeal we affirm a conviction on six counts of sales tax evasion and hold (1) that the trial court did not err in admitting certain summary charts and (2) that the jury instructions did not shift State's burden of proof to the defendant.

Appellant Christos Karras (Karras) was indicted by a Minnehaha County Grand Jury on two misdemeanor counts and four felony counts of making false and fraudulent tax returns to evade state sales tax. ¹ These counts involved misreporting of sales at Karras' restaurant, the Time Out Steakhouse, during six two-month periods in 1984. After a jury trial, Karras was found guilty on all six counts and was sentenced to four consecutive one-year terms (one for each felony count) in the state penitentiary and six months in the Minnehaha County Jail for the two misdemeanor counts. His misdemeanor sentence was to run concurrently with the felony sentences. In addition, Karras was ordered to pay $40,336.44 ($24,359.44 in costs of prosecution, $11,668.00 in unpaid sales tax for 1984, and $4,309.00 for 1987 sales taxes). All but sixty days of Karras' sentence was to be suspended if he paid the $40,336.44, plus interest, within six months of entry of judgment. This appeal followed.

FACTS

Karras operated the Time Out Steakhouse from 1975 until 1985. In 1982, agents of the South Dakota Department of Revenue (Department) observed that many meal transactions were not rung up on the cash register. The same pattern was observed by Department agents in 1984. Although Karras was advised by agents to keep register tapes, customer tickets and sales journals, he failed to maintain such records. Instead, Karras had his accountant rely on deposits made into his business checking account.

Department decided to investigate Karras' operation to determine if he was accurately reporting his sales for sales tax purposes. Former employees indicated that their wages were paid partly by check and partly by cash. Cash disbursements were not reported for income tax purposes and tax and other items were not withheld on those payments, unlike payments made by check. These cash payments notwithstanding, Karras informed Department and his own accountant that all sales proceeds were deposited into his business checking account. Department doubted Karras' claim.

Philip Sieler (Sieler), a Department agent, determined that large amounts of gross sales receipts were not reported by Karras, resulting in underpayment of sales taxes. Sieler used two separate approaches: 1) A "percentage" method, by which gross receipts were calculated using the amount of goods purchased by Karras in each tax reporting period, menu prices, wastage, and estimated costs of goods sold, the result of which indicated $199,000 in unreported gross sales; and 2) a "bank deposit" method, by which an analysis of Karras' deposits, transfers and withdrawals from all bank accounts revealed $112,000 of income which could not be traced to a source.

Sieler testified concerning his methods and results. A certified public accountant (CPA), testifying for State, verified that Sieler's procedures were sound. State's CPA, using a "sources and uses" method, estimated that Karras had used approximately $110,000 in unidentified funds in 1984. This CPA also performed a "net worth" analysis, which uncovered an unexplained $138,000 increase in Karras' assets in 1984.

State's estimates were disputed by Karras, who produced, among others, a CPA as a defense witness. This CPA, however, testified that even he could not account for $49,000 of Karras' funds.

DECISION

I

ADMISSION OF SUMMARY CHARTS

Karras argues that he was denied due process of law when the trial court admitted summary charts prepared by the State into evidence. He asserts that the charts were misleading or unsupported by the evidence. Karras suggests that since no cautionary instruction was given to inform the jury that the charts were, in themselves, not evidence, he was convicted in a "trial by chart."

State introduced charts regarding both the bank deposit and percentage methods of analysis. The charts were received in evidence and taken into the jury room. Karras argues that the bank deposit charts were misleading because 1) cash payments of $28,569 to kitchen employees were not supported by the evidence, and 2) Sieler had counted transactions involving $10,500 in certificates of deposit and $4,000 in loans twice. We disagree.

Sieler's estimates of cash payments to kitchen employees were based on detailed testimony of four of the employees, including Vien Nguyen, Karras' former kitchen manager. Nguyen testified that 60% of his pay was made by cash and that the others in the kitchen were also paid partly in cash. Three other employees testified that half of their pay was in cash. Sieler's extrapolation that 35% of the kitchen payroll was made by cash was, if anything, conservative, based on this record.

We also reject Karras' arguments that charts illustrating the "percentage" method were unsupported by evidence or lacking in foundation. Testimony by Sieler and restaurant owner George Christopoulos concerning percentages of waste and cost of goods was challenged by Karras, but this only created questions for the jury to decide.

Karras next complains that Exhibits 134 and 135 were improperly admitted. Karras claims that Exhibit 134 was never explained and was offered with Exhibit 135. The record indicates that these two exhibits were explained together. Exhibit 134 contained five sets of numbers: 1) Goods Purchased; 2) Average Cost of Goods; 3) Gross Receipts; 4) Under-reported Sales; and 5) Percent of Under-reporting. The first four items were explained in reference to Exhibit 135. The fifth, Percent of Under-reporting, was not. This is not enough to render Exhibit 134 inadmissible. Calculation of percentages is not an arcane mathematical concept and not every government calculation need be described in detail. See United States v. Citron, 783 F.2d 307 (2d Cir.1986). In addition, the analysis used in Exhibit 134 was clarified in jury instruction 12A. Evidentiary use of summary charts rests within the sound discretion of the trial court. United States v. Caswell, 825 F.2d 1228 (8th Cir.1987); United States v. King, 616 F.2d 1034 (8th Cir.1980). We find no abuse of discretion in admitting these exhibits.

We next find that the allegation of double counting was a matter of conflicting expert testimony. Sieler and State's CPA, Brian Stuart, stood by their figures and Karras' CPA disagreed. The jury determines the accuracy of the numbers. Caswell, supra. Further, a claim of inaccuracy does not make summary charts inadmissible where the trial court is satisfied that the summaries are reasonably accurate and there is evidence to support them. King, supra.

We conclude Karras' argument that he was prejudiced by the trial court's failure to give a cautionary instruction concerning the charts has not been preserved for appeal. At trial, he merely objected to the exhibits on foundational grounds and never requested or offered a proposed cautionary or guarding instruction. Similarly, on appeal, the issue was only given trivial, token argument.

We conclude further that the failure to give a cautionary instruction, especially when reading all of the other instructions as a whole, does not rise to the level of plain error. State v. Dornbusch, 384 N.W.2d 682 (S.D.1986); State v. Sheridan, 383 N.W.2d 865 (S.D.1986); State v. Bunnell, 324 N.W.2d 418 (S.D.1982); State v. Brammer, 304 N.W.2d 111 (S.D.1981).

II

JURY INSTRUCTIONS

Karras next claims that jury instructions 12A and 12B, defining the "percentage" and "bank deposit" methods of analysis, switched the burden of proof to him, requiring that he prove his innocence. Karras specifically challenges the following sections of these lengthy instructions:

Instruction 12A:

* * * * * *

If you decide that the evidence in the case establishes beyond a reasonable doubt that the State has accurately determined the underlying supporting data in a reasonable and reliable manner, then you may determine that the State computed the gross sales properly for each required reporting tax sales reporting period. In reaching this decision, you may consider other evidence offered by the State which may corroborate sales in excess of those which were reported by the defendant, such as unexplained deposits, cash payment, and other indications of unreported funds.

Instruction 12B:

* * * * * *

This method of proof proceeds on the basis that if a taxpayer is engaged in an income producing business or occupation and periodically deposits money in bank accounts in his name or under his control, an inference arises that such bank deposits represent taxable gross receipts that defendant received from his business unless it appears that the deposits represented redeposits or transfers of funds between accounts, or that deposits came from non sales taxable sources such as proceeds from sales of real estate, rental and interest income, proceeds from the sale of stock and stock dividends, profits or draws from the business, gifts, inheritances or loans. This method also contemplates that any expenditures by the [defendant] of cash or currency from funds not deposited in any bank and not derived from the non sales taxable sources referenced above, similarly...