U.S. v. Burrell, 73-3826

• Decision Date: 30 December 1974
• Docket Number: No. 73-3826,73-3826
• Citation: 505 F.2d 904
• Parties: 75-1 USTC P 9152 UNITED STATES of America, Plaintiff-Appellee, v. Arthur BURRELL, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 904

505 F.2d 904

75-1 USTC P 9152

UNITED STATES of America, Plaintiff-Appellee, v. Arthur BURRELL, Defendant-Appellant.

No. 73-3826.

United States Court of Appeals, Fifth Circuit.

Dec. 30, 1974.

Neal Sonnett, Miami, Fla., for defendant-appellant.

Robert W. Rust, U.S. Atty., Miami, Fla., Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Chief, App. Section, Charles E. Brookhart, Tax Div., Dept. of Justice, Washington, D.C., for plaintiff-appellee.

Before TUTTLE, THORNBERRY and SIMPSON, Circuit Judges.

TUTTLE, Circuit Judge:

Arthur Burrell was convicted by a jury of knowingly filing false income tax returns in 1967 and 1968 in violation of 26 U.S.C. 7206(1) ¹ and of attempted income tax evasion for 1968 in violation of 26 U.S.C. 7201. ² He was sentenced to concurrent terms of six months to be served in a jail-type institution followed by three years probation. The defendant appeals, raising four issues. We affirm.

I.

Two of defendant's four points on appeal relate solely to his 1967 conviction. The Government urges us to bypass consideration of these issues as Burrell received concurrent sentences on all three convictions. We feel we must decline the invitation.

The concurrent sentence doctrine is one of 'judicial convenience,' Benton v. Maryland, 395 U.S. 784, 791, 89 S.Ct. 2056, 23 L.Ed.2d 707 (1969); United States v. Varner, 437 F.2d 1195 (5th Cir. 1971); United States v. Bigham, 421 F.2d 1344 (5th Cir. 1970), and does not pose a jurisdictional bar to consideration of any of the issues the defendant raises, Benton v. Maryland, supra. It is a matter of discretion whether to withhold full appellate review of a conviction the outcome of which could not affect the defendant's penal interest. Hirabayashi v. United States, 320 U.S. 81, 63 S.Ct. 1375, 87 L.Ed. 1774 (1943); United States v. Johnson, 496 F.2d 1131 (5th Cir. 1974).

Here we believe it is important to review all three of the counts for which the defendant was convicted, despite the fact that we affirm each of them. The crimes of tax evasion and filing a false income tax return involve delicate questions of intent; while the defendant's 7201 conviction of tax evasion involves a jury finding of specific intent to avoid taxes, his two 7206(1) convictions of knowingly filing false income tax returns also require a finding of scienter. Particularly in 7201 cases, we have frequently held the trier of fact may properly rely on a pattern of understatement of income in previous years to infer the requisite specific intent of tax evasion. See, e.g., Holland v. United States, 348 U.S. 121, 139, 75 S.Ct. 127, 99 L.Ed. 150 (1954); United States v. Tunnell, 481 F.2d 149 (5th Cir. 1973); Holbrook v. United States, 216 F.2d 238 (5th Cir. 1954), cert. denied, 349 U.S. 915, 75 S.Ct. 605, 99 L.Ed. 1249 (1955). Thus in this case, Burrell's 1968 tax evasion conviction may very directly have been affected by the jury's finding of understatement of income in 1967, a finding the defendant challenges as being based on improper evidence.

II.

Burrell's 1967 return was found by the jury to be false in that it failed to report as income a $34,400.05 check which Burrell received from his employer, Hirsch and Co., in December, 1967. The fact that Burrell received this check is undisputed. Rather the defendant claims the check wasn't taxable income because it was in effect a loan.

Burrell was the office manager for the Miami office of Hirsch and Co., a stock brokerage firm. He had margin accounts established with his employer which he used for his own stock transactions. It was his practice to occasionally request that checks be drawn against his margin accounts to prepay a commission he was expecting within the next few days on a sale he had effected. These checks were drawn out of sequence on the firm's check blotter, to attempt roughly to predict at what point the normal commission would be paid. Thus here, Hirsch and Co. check No. 54944 was drawn on December 1, 1967 but the checks immediately preceding it on the blotter weren't drawn until January, 1968, and it wasn't until that time that the check in question was discovered by Hirsch and Co. to have been written.

How check No. 54944 came to be written is still uncertain. Burrell testified he had no recollection of it. Both Burrell's assistant manager and his head cashier testified they did not remember writing such a check-- this despite the defendant's statement that he assumed the cashier must have drawn it. Burrell was shown to be one of only four individuals with access to the check blotter who could have written the check. In any event, once the check was discovered in January, several weeks after Burrell had been discharged by Hirsch and Co., the complany demanded repayment. After seven months of negotiations Burrell repaid the $34,400.05 in July, after the company made the formal statement that it was prepared to accept Burrell's assertion that it must have been drawn inadvertently.

The question presented to the jury was whether this $34,400.05 was money Burrell embezzled from his employer, or whether it was simply an inadvertent advance on the defendant's margin account which was meant to be repaid. The jury found it to be taxable income, and thus inferentially must have found it to be embezzled. Money misappropriated from one's employer is taxable, James v. United States, 366 U.S. 213, 81 S.Ct. 1052, 6 L.Ed.2d 246 (1961); Nordstrom v. United States, 360 F.2d 734 (8th Cir. 1966). We believe the jury's finding was a permissible one in light of all the evidence.

The evidence must be taken in the light most favorable to the Government, Glasser v. United States, 315 U.S. 60, 62 S.Ct. 457, 86 L.Ed. 680 (1942); United States v. Warner, 441 F.2d 821 (5th Cir. 1971), cert. denied, 404 U.S. 829, 92 S.Ct. 65, 30 L.Ed.2d 58 (1971) and after reviewing the record we do not conclude that a 'reasonably minded jury' aware of all the facts in the record, 'must have a reasonable doubt' of the defendant's intention to misappropriate the funds, United States v. Stephenson, 474 F.2d 1353, 1355 (5th Cir. 1973).

The Government proved the normal procedure employed by Burrell in the past when he wished an advance payment on expected commissions was to have his cashier draw the check out of sequence by a few days and credit that amount against his margin account. Burrell claimed that was all that happened in this case-- but the Government proved Burrell's cashier had no knowledge of the check, that it was drawn not a few days out of sequence but more than a month, and that further it was immediately cashed by Burrell and used to cover a previous check for $34,400.00 which he had received in November. The December check was shown to be used to cover the bulk of this earlier advance inasmuch as Burrell's checking account was substantially overdrawn. The balance over the amount his margin account was in arrears was used to cover a part of the overdrawn checking account. Thus, despite Burrell's claim that he had been completely unaware that the December 1 check had even been issued to him, the Government proved it was used immediately to cover past debts which Burrell apparently would have been unable to pay. Despite Burrell's further claim that he was so active in trading on his own account that he was oblivious to checks being drawn (for as he testified he was very active in the market, buying and selling $687,277 worth of securities in November, 1967 and $428,958 in December, 1967), he was shown to have been suffering huge losses in the market-- and had a capital loss carryforward of over $170,000 in 1968. We believe the jury could properly find, beyond a reasonable doubt, that the $34,400.05 check was not merely an inadvertent advance on a loan account, but represented Burrell's intentional misappropriation of his employer's funds for his own use and thus was taxable income to him.

The defendant challenges the method by which the Government proved its case of embezzlement. First the defendant argues Government's Exhibit 35 was improperly admitted into evidence; second the defendant argues a statement made by one of the Government's witnesses was prejudicial and reversible error.

Exhibit 35 was an investigatory report compiled by an accounting firm engaged by Hirsch and Co. to audit Burrell's accounts following his discharge. The report by its own terms is a summary of findings, encompassing both conclusory impressions of the accountant who performed the audit as well as selected portions of Hirsch and Co. records. This report was admitted into evidence as a business record, 28 U.S.C. 1732. ³

The Government contends United States v. DeFrisco, 441 F.2d 137 (5th Cir. 1971) is authority for the admissibility of such a report. We disagree.

In DeFrisco a credit report was held to be admissible in a prosecution against DeFrisco's employer for giving false credit information and thereby assisting DeFrisco in misrepresenting his income to the Federal Housing Administration. As part of the FHA's investigation of DeFrisco it engaged a commercial credit reporting agency which inquired what DeFrisco's annual salary was from his employer. This investigation was done in the credit reporting agency's normal course of business, and the results of its inquiry were recorded within the time required by 28 U.S.C. 1732. In DeFrisco the credit reporting agency's inquiry was itself a transaction of crucial importance to the case, and thus its report was 'a memorandum or record' of an 'act, transaction, occurrence or event' which was at issue in the case. As we said in DeFrisco:

'The purpose of the federal Business Records Act is to dispense with the necessity of proving each and every book entry by the person actually making it. The theory underlying the Act is that business records in the form regularly kept by the particular company and relied on by that company in the ordinary course of its business have a certain probability of...