U.S. v. DiBenedetto, 76-1305

• Decision Date: 07 October 1976
• Docket Number: No. 76-1305,76-1305
• Citation: 542 F.2d 490
• Parties: 76-2 USTC P 9705 UNITED STATES of America, Appellee, v. Jack F. DiBENEDETTO and Phillip J. Forte, Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 490

542 F.2d 490

76-2 USTC P 9705

UNITED STATES of America, Appellee, v. Jack F. DiBENEDETTO and Phillip J. Forte, Appellants.

No. 76-1305.

United States Court of Appeals Eighth Circuit.

Submitted Sept. 12, 1976.

Decided Oct. 7, 1976.

A. Glenn Sowders, Jr., Kansas City, Mo., argued and on brief, for appellants.

David B. B. Helfrey (argued), Burt C. Hurn, U. S. Atty., Kansas City, Mo., on brief, for appellee.

Before VAN OOSTERHOUT, Senior Circuit Judge, and BRIGHT and WEBSTER, Circuit Judges.

VAN OOSTERHOUT, Senior Circuit Judge.

Defendants were jointly tried and convicted on a multiple count indictment charging violations of 26 U.S.C. §§ 7206(1) and 7201. Defendant DiBenedetto appeals from his conviction by a jury on Counts I and VII of the indictment charging knowingly filing false corporate income tax returns, in violation of 26 U.S.C. § 7206(1), and on Counts II, V, and VIII charging knowingly and willfully filing false and fraudulent individual income tax returns, in violation of § 7201, and the resulting sentence. Defendant Forte appeals from his conviction on Counts III, VI and IX of the same indictment, charging § 7201 violations, and on Count IV, charging § 7206(1) violation, and the resulting sentence.

Defendants DiBenedetto and Forte were equal owners of Motel Capri, Inc., a Sub-Chapter S corporation, which did not directly pay income tax but filed required information returns. The individual owners were required to report and account for the income filed in the corporate information returns. Both the corporation and the individuals operated upon a cash income basis. The corporation was engaged in the business of operating a motel, lounge and restaurant. The § 7206(1) charges are based on defendants' filing false and fraudulent corporate returns. The § 7201 charges are based on defendants' intentionally, knowingly and willfully filing false individual tax returns with intent to evade income tax. The years involved are 1970, 1971 and 1972.

Internal Revenue Agent Paulsen testified and demonstrated that the corporation had underreported taxable income in 1970 by $16,443.52, which consisted of $15,786.59 in unreported Mastercharge and Bankamericard receipts, and $2,205.75 in Missouri Sales Tax deducted in excess of the amount paid to the State of Missouri. For the year 1971, he determined that the corporation had underreported income by $15,611.91, which consisted of $14,170.59 in unreported Mastercharge and Bankamericard receipts, and $2,552.75 in Missouri Sales Tax deducted as an expense in excess of the amount paid to the State of Missouri. For 1972, he determined the corporation underreported its income by $28,828.76, which consisted of $28,049.57 in unreported Mastercharge and Bankamericard receipts, and $3,213.57 in Missouri Sales Tax expense deducted in excess of the amount paid to the State of Missouri. The unreported income for each of the years was calculated after allowing some minor deductions. He further testified that one-half of such unreported income for each year was attributable to each defendant for each of the years involved, and that defendants, by failing to include such income in their individual returns, substantially understated their liability for income tax for each of the years involved. Defendants have not disputed such computations and have, subsequently to the audit, filed amended returns and paid taxes due on the amounts determined due by the audit.

Points relied upon for reversal are:

I. The court erred in denying their motion for acquittal made at the close of all the evidence because the Government failed to prove the defendants willfully and knowingly violated the statutes they are charged with violating.

II. The court committed plain error and prejudicial error in its materiality instruction.

We affirm the convictions for the reasons hereinafter set out.

I.

As heretofore stated, defendants do not challenge the fact that the corporate income and consequently the individual income derived from the corporation were substantially understated as claimed and established by the Government. Their defense is based on their contention that the understatements were inadvertent and were the result of errors by their bookkeepers. They contend they had no knowledge the returns were false and that the Government has failed to establish that they had a specific intent to defraud or that their actions were willful.

The Government properly concedes that in prosecutions under §§ 7201 and 7206(1) here involved the burden is upon the Government to establish beyond a reasonable doubt that the defendants acted willfully with the specific intention to violate the criminal statutes under which they were indicted, and that such willfulness and intent is not established by the mere understatement of income.

Willfulness in a criminal tax case may be established by a consistent pattern of not reporting large amounts of income. Sansone v. United States,334 F.2d 287, 292-93 (8th Cir. 1964), aff'd, 380 U.S. 343, 85 S.Ct. 1004, 13 L.Ed.2d 882 (1965); United States v. Rischard, 471 F.2d 105, 107 (8th Cir. 1973); Blackwell v. United States, 244 F.2d 423, 429 (8th Cir. 1957).

The Government's evidence supports a finding by the jury that the corporate and individual returns failed to include substantial motel receipts from Mastercharge and Bankamericard for the entire 1970 to 1972 period, and also failed to include as income the substantial difference between Missouri sales tax collected and the amount of such tax paid to the state of Missouri.

Defendants attempt to place the blame for their...