U.S. v. Goichman

• Decision Date: 22 November 1976
• Docket Number: No. 76-1132,76-1132
• Citation: 547 F.2d 778
• Parties: 77-1 USTC P 9115, 1 Fed. R. Evid. Serv. 459 UNITED STATES of America, Appellee, v. William A. GOICHMAN, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

Page 778

547 F.2d 778

77-1 USTC P 9115, 1 Fed. R. Evid. Serv. 459

UNITED STATES of America, Appellee, v. William A. GOICHMAN, Appellant.

No. 76-1132.

United States Court of Appeals, Third Circuit.

Argued Sept. 9, 1976.

Decided Nov. 22, 1976.

J. Clayton Undercofler, III, Walter S. Batty, Jr., Gilbert J. Scutti, Philadelphia, Pa., for appellee.

Stephen M. Feldman, Francis R. Tunney, Jr., Feldman & Feldman, Philadelphia, Pa., for appellant.

Before VAN DUSEN, HUNTER and WEIS, Circuit Judges.

PER CURIAM:

This is an appeal from a conviction for a willful attempt to evade or defeat payment of income taxes, in violation of 26 U.S.C. § 7201. Defendant, William A. Goichman, argues on appeal that certain documents were improperly admitted at trial and that a remark by the trial judge warrants a retrial. After careful consideration of these and other contentions, and a thorough review of the record, we find no reversible error.

I.

Section 7201 of Title 26 of the United States Code provides

Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof, shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both, together with the costs of prosecution.

The elements of a § 7201 violation are easily stated: the government must prove the existence of a tax deficiency, an affirmative act constituting an evasion or attempted evasion of the tax due, and willfulness. Sansome v. United States, 380 U.S. 343, 351, 85 S.Ct. 1004, 13 L.Ed.2d 882 (1965); United States v. House, 524 F.2d 1035, 1038-39 (3d Cir. 1976). To determine the existence of a tax deficiency in this case, the government used the net worth method. Under the net worth method, the government attempts to establish by circumstantial proof the existence of unreported income by selecting an opening year for which it can reasonably ascertain the defendant's net worth and comparing that amount with a closing year's net worth. Any estimated nondeductible living expenses during that period are added to the closing net worth. The opening net worth is subtracted from the closing net worth to gauge the amount of unreported income the defendant must have had. But the government's burden does not rest there, it must then either prove that there is a likely source of the unreported income, Holland v. United States,348 U.S. 121, 75 S.Ct. 127, 99 L.Ed. 150 (1954), or negate all possible nontaxable sources of that income. United States v. Massei, 355 U.S. 595, 78 S.Ct. 495, 2 L.Ed.2d 517 (1958).

Furthermore, when the government bases its case on circumstantial evidence, as it did here, it has the additional burden of investigating any possible sources offered by the defendant as legitimate explanations of the increase in his net worth. This depends entirely on the defendant's offer of relevant leads; the government "is not required to negate every possible source of nontaxable income, a matter peculiarly within the knowledge of the defendant." Holland v. United States, supra, 348 U.S. at 138, 75 S.Ct. at 137.

Here, the government did establish a likely source of unreported income, the method by which this defendant conducted his law practice. Moreover, there was extensive evidence negating the existence of any nontaxable sources, and the defendant appears to have suggested no likely leads. In denying defendant's post-trial motions, the district court thoroughly discussed the government's proof in this case. See United States v. Goichman, 407 F.Supp. 980 (E.D.Pa.1976). We will briefly discuss three of appellant's claims: the admissibility of evidence concerning checks endorsed to defendant's stockbroker during a pre-prosecution year; the admissibility of a document entitled "History of Children's Assets"; and the court's remark that "(w)hy this case is here is as simple as A B C."

II.

A.

The first ground urged for reversal is the admission of evidence relating to 1967, a pre-prosecution year, consisting of five checks Goichman received in settlement of personal injury cases. Goichman maintained two accounts at Philadelphia National Bank: an escrow account, which held the total amounts received in settlement, and an attorney account into which Goichman would then deposit the amount of settlement that represented his fee. His accountant would treat deposits to the attorney account as taxable income; settlement receipts would not be counted as taxable unless and until they were deposited in that attorney account.

The five checks received in settlement in 1967, exhibits G44 to G47B, were not deposited in Goichman's attorney account. Instead they were endorsed to Goichman's stockbroker, Goodbody & Co., for stock purchased by Goichman. Thus it is quite possible that Goichman's accountant did not include the five checks as taxable income in the pre-prosecution year of 1967.

Appellant claims the district court committed reversible error in admitting the 1967 checks because 1) there was no evidence that Goichman had earned any part of the sums represented by the checks, and 2) if there was earned income, there was no showing that any of it had gone unreported. The district court, however, admitted the evidence "for the limited purpose of showing opportunity or method of generating unreported income," 407 F.Supp. 980, 992 (E.D.Pa.1976), and the jury was instructed accordingly.

This circuit has long held that evidence of other crimes or bad acts, despite its inadmissibility to prove the crime in question, is admissible "if relevant for any purpose other than to show a mere propensity or disposition on the part of the defendant to commit the crime." United States v. Stirone, 262 F.2d 571, 576 (3d Cir. 1958), reversed on other grounds,361 U.S. 212, 80 S.Ct. 270, 4 L.Ed.2d 252 (1960). As with any other relevant evidence, the trial court is to weigh its relevance against any prejudice that may occur to the defendant. See also United States v. Hines, 470 F.2d 225, 227-28 (3d Cir. 1972). The new Federal Rules of Evidence ¹ would not exclude this evidence of other offenses merely because it relates to a pre-prosecution year and was not proven to be an "offense." It was relevant as proof of a likely method of concealing taxable income. Federal Rule 404(b) provides:

(B) Other crimes, wrongs, or acts. Evidence of other crimes, wrongs, or acts is not admissible to prove the character of a person in order to show that he acted in conformity therewith. It may, however, be admissible for other purposes, such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident.

As the advisory committee notes, the above refers only to the initial admissibility of the evidence. For the determination of whether the relevance outweighs any prejudice, we are reminded that "(n)o mechanical solution is offered." 28 U.S.C. Rule 404, Advisory Committee Note to Subdivision (b).

In this case, Goichman's bypass of his attorney account was relevant to show opportunity or method of generating unreported income. The jury was properly instructed that it could consider those five 1967 checks only for that purpose. We find no abuse of discretion in the trial court's determination that the relevance of those checks was not outweighed by possible prejudice to defendant.

We also find no merit in appellant's contention that the government had to prove that the 1967 bypass of the attorney account itself constituted an offense, by showing that the checks represented some income and that the income was never reported. The latter would be a fair statement of the government's burden for the prosecution years, but not for a pre-prosecution year when the evidence is admitted solely to show that defendant could generate unreported income, not that he did so. ²

B.

The second alleged error is also a question of the admissibility of evidence. A document entitled "History of Children's Assets," exhibit G41(A), was admitted for the purpose of showing that various assets of Goichman's children were purchased by Goichman. The document was found in the clerk's office of the Court of Common Pleas in Montgomery County, Pennsylvania, by an IRS agent. There had been a proceeding in equity, William A. Goichman v. Beverly Goichman, in that court, in which Mr. Goichman claimed to have provided the funds for many of his wife's and children's assets, which he wanted returned to him. Several documents from that proceeding were introduced in the criminal case sub judice.

The "History of Children's Assets" is a two-page unsigned document, typewritten except for the title, which is in block printing by hand. Both pages contain the seal and signature of the clerk of the Court of Common Pleas, and a certification that they are "(f)rom original record docket." On the back of the second page is a mark in black felt-tip pen, about one-half inch in height, "D-15." ³

Appellant correctly contends that the certification on the document does not govern its admissibility. It is well-settled that "no certified copy whatever may be used where the original record itself is not admissible under the rules of evidence for the purpose in hand." 5 J. Wigmore, Evidence § 1677, p. 862 (Chadbourn rev. 1974).

Appellant contends the document is inadmissible because the only evidence to connect the document to Goichman was 1) references to "my wife" and "Gail, Jeff, and Daniel" (the first names of Goichman's three children) and 2) the "cryptic symbol, D-15" on the back. For the first point appellant relies on 7 J. Wigmore, Evidence § 2130, at 570 (3d ed. 1940), for the proposition that contents cannot be used until there has first been external evidence to connect the document to the defendant. For the second point, that "D-15" is merely a cryptic symbol, appellant argues that the government produced no evidence to show that...