U.S. v. Citron

• Decision Date: 07 February 1986
• Docket Number: Nos. 340,D,341,s. 340
• Citation: 783 F.2d 307
• Parties: -779, 86-1 USTC P 9228, 20 Fed. R. Evid. Serv. 38 UNITED STATES of America, Appellee, v. Ira Paul CITRON, Defendant-Appellant. ockets 85-1253, 85-1269.
• Court: U.S. Court of Appeals — Second Circuit

Page 307

783 F.2d 307

57 A.F.T.R.2d 86-779, 86-1 USTC P 9228,

20 Fed. R. Evid. Serv. 38

UNITED STATES of America, Appellee, v. Ira Paul CITRON, Defendant-Appellant.

Nos. 340, 341, Dockets 85-1253, 85-1269.

United States Court of Appeals, Second Circuit.

Argued Oct. 30, 1985.

Decided Feb. 7, 1986.

Jules Ritholz, New York City (Lawrence S. Feld, Marjorie B. Landa, Kostelanetz & Ritholz, New York City, of counsel), for defendant-appellant.

Patricia A. Pileggi, Asst. U.S. Atty., Brooklyn, N.Y. (Raymond J. Dearie, U.S. Atty., Mary McGowan Davis, Asst. U.S. Atty., Brooklyn, N.Y., of counsel), for appellee.

Before MANSFIELD, MESKILL and CARDAMONE, Circuit Judges.

MANSFIELD, Circuit Judge:

Ira Paul Citron appeals a judgment, entered in the Eastern District of New York after a jury trial before Judge Leonard D. Wexler, convicting him of income tax evasion and filing false income tax returns. The jury found Citron guilty of one count of income tax evasion, 26 U.S.C. Sec. 7201, ¹ for the year 1978 (Count 2), and two counts of filing false income tax returns, 26 U.S.C. Sec. 7206(1), ² for the years 1977 and 1979 (Counts 4 and 6). It acquitted him of two income tax evasion counts relating to his 1977 and 1979 returns (Counts 1 and 3), and three counts of aiding and assisting the preparation of false returns filed by his parents during the period from 1977 through 1979, 26 U.S.C. Sec. 7206(2) (Counts 7 through 9). ³

We vacate the convictions for violation of Sec. 7206(1) and remand with directions to dismiss because, as submitted to the jury, the factual elements of the Sec. 7201 counts were substantially identical to those of the lesser included Sec. 7206(1) counts and no rational basis existed for acquitting Citron on the Sec. 7201 counts while convicting him on the Sec. 7206(1) charges. The Sec. 7201 conviction is reversed and remanded for a new trial because the district court erred in admitting into evidence a summary chart containing figures not demonstrably supported by the evidence.

Citron (sometimes referred to herein as "Ira" to distinguish him from his father "Joseph"), a stock broker at E.F. Hutton & Co., allegedly underreported his income and tax due during the years 1977-79 in the following amounts:

Income Tax Due

Shown Shown on Alleged Alleged

on Return Return Income Tax Due

1977 $21,220 $2,209 $ 32,556.08 $ 5,460

1978 $24,134 $3,169 $113,605.05 $36,851.99

1979 $42,332 $9,508.76 $ 83,584.96 $29,274.63 The government sought to prove unreported income by using the "cash expenditures" method. See United States v. Mastropieri, 685 F.2d 776, 778 n. 2 (2d Cir.), cert. denied, 459 U.S. 945, 103 S.Ct. 260, 74 L.Ed.2d 203 (1982); United States v. Gay, 567 F.2d 1206 (2d Cir.1978); United States v. Bianco, 534 F.2d 501 (2d Cir.), cert. denied, 429 U.S. 822, 97 S.Ct. 73, 50 L.Ed.2d 84 (1976); United States v. Fisher, 518 F.2d 836 (2d Cir.), cert. denied, 423 U.S. 1033, 96 S.Ct. 565, 46 L.Ed.2d 407 (1975); Taglianetti v. United States, 398 F.2d 558, 562 (1st Cir.1968), aff'd, 394 U.S. 316, 89 S.Ct. 1099, 22 L.Ed.2d 302 (1969). This method is a variant of the "net worth" method, which was sanctioned by the Supreme Court in Holland v. United States, 348 U.S. 121, 124-25, 75 S.Ct. 127, 129-30, 99 L.Ed. 150 (1954), where the Court recognized that the special problems faced in proving income tax violations justify methods of indirect proof, subject to close judicial scrutiny. Under the "cash expenditures" method, after taking into account the amount of resources the taxpayer had on hand at the beginning of a period, the income received by the taxpayer for the same period is compared with his expenditures that are not attributable to his resources on hand or non-taxable receipts during the period. A substantial excess of expenditures over the combination of reported income, non-taxable receipts, and cash on hand may establish the existence of unreported income. ⁴

As a first step in preparing the present case the government conducted an investigation and analysis, undertaken by Internal Revenue Service (I.R.S.) Special Agent Levy and Revenue Agent Perrotta, of Ira's apparent sources of income and expenditures. The government calculated that Citron began 1977 with $24,412.27. Its analysis showed that Ira spent $78,928.59 in 1977, $127,262.38 in 1978 and $143,627.81 in 1979.

In arriving at these figures Agent Levy checked bank accounts, insurance coverage, tax returns, wage records, doctor's records, possible loan sources and safe deposit box holdings. Levy also searched real estate records to determine if Citron bought or sold real estate during or prior to the three-year period. Similar research was undertaken relating to the finances of Ira's parents, Joseph and Rose Citron.

The district court admitted into evidence a summary chart, prepared by Agent Perrotta, based on Agent Levy's research. The chart lists various items of expense and income and sets forth the amounts which the government maintained were received and spent by Ira. Next to each item on the chart Agent Perrotta noted the exhibits relied upon in arriving at the figures.

The government also offered underlying evidence regarding the sources of Ira's unreported income and his system of concealing earnings. Three witnesses testified that Ira managed a bookmaking operation. From the fall of 1976 through 1978 Charles Stockley and several friends incurred $20,000-$30,000 in gambling losses which were paid by check or cashier's check sent to Ira at his E.F. Hutton address. Fred Willey placed bets on football games for three or four months in 1978, losing approximately $2,000 to Citron. Finally, Alphonse Bottino placed bets in 1979 and 1980 and also paid his losses to Ira at E.F. Hutton. Ira's name appeared on the checks for winnings that Bottino received.

Albert Weiss, a stationery store employee, made weekly payments of $75 to Ira to repay a 1975 loan of $2,500. Checks made Ira maintained five stock accounts at E.F. Hutton in the names of his parents, Joseph and Rose Citron, into which more than $245,000 was deposited between 1977 and 1979. Deposits included Ira's paychecks and other checks made payable to him. During the three-year period only five of the deposits were items made payable to Joseph and Rose Citron and two of these deposits were payments made in return for the purchase of a stamp collection belonging to and sold by Ira. Ira also drew on the accounts. In 1979 he asked a friend to cash a $34,000 check payable to Rose Citron drawn on one of the accounts. The interest, dividends and capital gains earned by the accounts, which totalled $41,244.74 for the three years were reported on Joseph and Rose Citron's joint returns and omitted from Ira's returns.

out by Weiss to cash or Ira Citron totalled $4,900 and were deposited into Ira's accounts.

At trial Ira introduced a deposition of his father, Joseph Citron ("Joseph" herein), taken in 1984, to the effect that the father, a retired furniture store owner, had accumulated a cash hoard which reached a peak of approximately $365,000 in 1960, but which dwindled to $40,000 by the time of the deposition. Joseph stated that payments to his son Ira made during the period after 1973, ⁵ which constituted most of the $325,000 spent, were either gifts or deposits into the stock accounts. Joseph also testified that the bulk of the hoard represented cash which he had earned speculating in the stock market prior to 1929 and had stored in a shoebox and envelopes hidden around his home. The government countered the deposition by evidence that Joseph did not maintain a life style corresponding to the wealth he claimed to possess. ⁶

On his tax returns for 1972 through 1978, Ira claimed his parents as dependents. In April 1980, after inquiries by the I.R.S., he filed his 1979 return which did not claim his parents as dependents. At the same time Ira's parents filed returns for the years 1977-1979 reporting the earnings from the E.F. Hutton accounts during that period. These returns were prepared at Ira's direction and based on data supplied by him to the accountant. Joseph and

Rose Citron also filed five gift tax returns reporting gifts totaling $30,000 to Ira and his family. These returns claimed that no tax was due.

DISCUSSION

The Propriety of Submitting Both the Sec. 7201 Counts and the Sec. 7206(1) Counts to the Jury

Appellant contends that the district court erred in permitting the jury to consider both the tax evasion charges, 26 U.S.C. Sec. 7201, and the charges of filing false returns, 26 U.S.C. Sec. 7206(1). His argument rests on the principle that a lesser-included offense should not be submitted to the jury when, in light of the evidence presented at trial, the jury could not rationally acquit the defendant of the greater crime and convict him of the lesser included one. See Hopper v. Evans, 456 U.S. 605, 612, 102 S.Ct. 2049, 2053, 72 L.Ed.2d 367 (1982); Keeble v. United States, 412 U.S. 205, 208, 93 S.Ct. 1993, 1995, 36 L.Ed.2d 844 (1973); Sansone v. United States, 380 U.S. 343, 349-50, 85 S.Ct. 1004, 1009, 13 L.Ed.2d 882 (1965).

In United States v. Harary, 457 F.2d 471, 479 (2d Cir.1972), we held that in appropriate cases a defendant may invoke this principle to require that the lesser charge be withheld from the jury. But we cautioned that "we do not consider it to be reversible error to submit a lesser charge to the jury unless no 'disputed factual element' which distinguishes the offenses is present and, in addition, the defendant makes a timely motion or objection at trial," Id. at 479. The inquiry into whether such disputed factual elements separate the two offenses is appropriately undertaken at the close of evidence, United States v. Harvey, 701 F.2d 800, 807 (9th Cir.1983); United States v. DeFabritus, 605 F.Supp. 1538, 1545 (S.D.N.Y.1985), and its outcome must of necessity vary from case to case.

The disputed factual element test is designed to prevent the jury from considering...