Strauch v. United States, 11992

• Decision Date: 13 June 1955
• Docket Number: 11994.,11993,No. 11992,11992
• Citation: 223 F.2d 377
• Parties: Jacob STRAUCH, Appellant, v. UNITED STATES of America, Appellee. Alex STRAUCH, Appellant, v. UNITED STATES of America, Appellee. Harry Benjamin SHER, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

223 F.2d 377 (1955)

Jacob STRAUCH, Appellant, v. UNITED STATES of America, Appellee.

Alex STRAUCH, Appellant, v. UNITED STATES of America, Appellee.

Harry Benjamin SHER, Appellant, v. UNITED STATES of America, Appellee.

Nos. 11992, 11993, 11994.

United States Court of Appeals Sixth Circuit.

June 13, 1955.

Bernard J. Long, Washington, D. C., argued, John J. Hooker, Nashville, Tenn., Bernard J. Long, Washington, D. C., on the brief, for appellants.

Marvin E. Frankel, Special Asst. to the Atty. Gen., argued, H. Brian Holland, Ellis N. Slack, John H. Mitchell, Marvin E. Frankel and Richard B. Buhrman, Washington, D. C., Fred Elledge, Jr., U. S. Atty., Nashville, Tenn., on the brief, for appellee.

Before SIMONS, Chief Judge, and ALLEN and McALLISTER, Circuit Judges.

ALLEN, Circuit Judge.

The judgments in these consolidated cases, Strauch v. United States, 6 Cir., 213 F.2d 805, were vacated by the Supreme Court of the United States in its order of January 10, 1955, 348 U.S. 905, 75 S.Ct. 311, and remanded to this court for re-examination in light of the opinions of the United States Supreme Court in Holland v. United States, 348 U.S. 121, 75 S.Ct. 127; Friedberg v. United States, 348 U.S. 142, 75 S.Ct. 138; Smith v. United States, 348 U.S. 147, 75 S.Ct. 194, and United States v. Calderon, 348 U.S. 160, 75 S.Ct. 186.

Examination has been made of the record and contentions of counsel in light of the above decisions and in each case the court adheres to its original conclusion. While testimony was introduced under the net worth method against Jacob Strauch and under the bank deposit method as to all three defendants,¹ in each case ample independent evidence was presented sustaining the convictions.

Jacob Strauch was charged with evasion of income taxes in an indictment which contained three counts covering the taxable years 1944, 1945, and 1946. The jury found him guilty under all three counts and the separate sentences under each count were ordered to run concurrently. Alex Strauch and Harry Sher were each charged in an indictment containing two counts covering the taxable years of 1944 and 1945. Each defendant was found guilty under both counts and the separate sentences imposed under each count were ordered to run concurrently. If the conviction under any one count is valid as to each defendant, the sentence must be sustained.

During all the period involved Jacob Strauch conducted a wholesale jewelry business of his own and also was a member of the partnership of Strauch & Sher, the other two members being Alex Strauch and Harry Sher. Strauch and Sher conducted a wholesale jewelry business from 1943 to 1946. The government presented evidence to the effect that the partnership made profits of over $100,000 during this period and all three partners in a written statement executed December 12, 1949, declared that the taxable income of the partnership during this period was over $90,000. During the entire period of the partnership it filed no return of partnership income. Jacob Strauch filed no return for 1944 showing income from the partnership, and filed no return whatever for 1945.

As to Count I in the indictment against Jacob Strauch, which covers the calendar year of 1944, the government showed by direct evidence taken from the partnership books that $19,859.80 was received by Jacob Strauch from the partnership in 1944. The balance of unreported income for this year, $2,674.02, was proved by the bank deposit method. For this year of 1944 Jacob Strauch reported income of $9,478.94.

Count II of the indictment against Jacob Strauch charges willful evasion of income tax in 1946, by willful failure to file income tax return for 1945. Jacob Strauch's net taxable income for the year 1945 was shown to be $49,018.91. Of this amount $14,008.93 was proved by direct evidence taken from the books of the partnership and some $800.00 by proof of Jacob Strauch's income from dividends and capital gains.

The balance of $34,159.98 was proved by reconstructing Jacob Strauch's gross income from his sole business on the bank deposit method allowing deductions for cost of goods sold and expenses as shown by Jacob Strauch's records, cancelled checks, and other evidence.

As to Count II of the indictment Jacob Strauch contends that since he filed no income tax return for 1945 he merely omitted an act required under the statute, namely, the filing of a return, and cannot rightly be found guilty of fraudulent evasion of income tax. However, ample evidence of affirmative, fraudulent acts was presented justifying the verdict as to Count II. Jacob Strauch made false statements to agents investigating the case, declaring that there were no books or records of the partnership, that these records were periodically destroyed. They were, however, in existence and formed the basis of the reconstruction of the partnership net income for the years involved of from $90,000 to $100,000. Jacob Strauch kept no books in his individual business, handling most of his transactions in cash. He was a partner in a firm which filed no return. He filed a declaration of estimated tax for 1945 in the amount of $1,214.97, although the correct liability was about $25,000.

As to the evidence under Count III the computation of Strauch's unreported income for 1946 was made up from an analysis of his bank deposits. He reported $16,922.27. The additional amount estimated was $18,078.09. Jacob Strauch told the investigator that the origin of his bank deposits was "receipts from the sale of jewelry" in the form of checks and cash going directly into the bank account or first put in his safe and then deposited in the bank. He stated that no money constituting non-business receipts such as gifts, insurance proceeds, or prior accumulations of money went into the bank account. The deposits during 1946 were made at regular intervals, never less than 5 and never more than 11 in one month. The government agent carefully eliminated from the estimate the proceeds of loans, of capital transactions, deposits representing income from interest and dividends, and amounts drawn from the partnership. Between 1939 and 1949 Jacob Strauch made loans at his bank totalling $8,000. In 1940 he filed a financial statement with the bank, listing a total net worth of $29,039. In 1942 he reported net income of $4,420.38 and in 1943 $5,218.36, yet in 1944 and 1945 his bank deposits were about $106,000 in excess of reported gross income. These circumstances constituted substantial independent evidence sustaining the government's estimate based upon bank deposits.

On November 7, 1946, Jacob Strauch made a sworn statement that his net worth for the taxable year ended November 1, 1946, was $113,043.99. The pattern of Strauch's accounts and his course of conduct during the period involved entitled the jury to take into consideration his admission as to net worth in connection with other evidence as to amounts of unreported income presented by the government. These circumstances corroborate the admissions of Jacob Strauch and his statements that his bank deposits reflected income. United States v. Calderon, supra, 348 U.S. 168, 75 S.Ct. 186; Smith v. United States, supra, 348 U.S. 158, 159, 75 S.Ct. 194.

The convictions of Alex Strauch and Harry Sher each involved charges of evasion of income tax with reference to the years 1944 and 1945, for which years no partnership return was ever made. The written statement heretofore referred to made by the partners December 12, 1949, listed in detail the total receipts...