U.S. v. Kalita, 82-1258
| Decision Date | 10 August 1983 |
| Docket Number | No. 82-1258,82-1258 |
| Citation | 712 F.2d 1122 |
| Parties | 83-2 USTC P 9459, 13 Fed. R. Evid. Serv. 1864 UNITED STATES of America, Plaintiff-Appellee, v. Henry J. KALITA, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Paul M. Brayman, Chicago, Ill., for defendant-appellant.
Daniel Wm. Gillogly, Robert W. Tarun, Dept. of Justice, Washington, D.C., Dan K. Webb, U.S. Atty., Chicago, Ill., for plaintiff-appellee.
Before PELL and POSNER, Circuit Judges, and JAMESON, Senior District Judge. *
Henry J. Kalita was charged in a four count indictment with wilfully failing to file income tax returns for the years 1975, 1976, 1977, and 1978, in violation of 26 U.S.C. § 7203. In a jury trial he was found guilty on all counts and has appealed his conviction. 1 We affirm.
After filing proper tax returns for several years, Kalita in 1976 submitted a return for 1975 showing Federal Income Tax withheld in the amount of $350 and claiming a "refund" in that amount. He objected on Fourth and Fifth Amendment grounds to completing the balance of the 1040 Form. Attached to the Form was a "Petition and Protest" and numerous other documents, totaling over 90 pages, but containing no income information. Similar returns were filed in 1976, 1977, and 1978, except for those years the returns did not show any amount withheld. 2 In each return in place of any amounts appears the notation "Object 4th & 5th Amends." or "Object self-incrimination." Appellant states in his brief that in each return "he asserted constitutional privileges in refusing to answer questions and provide income information." 3
Following the filing of each return, Kalita received a notice from the Internal Revenue Service that the return filed was not acceptable, did not contain information required by law, and did not comply with the Internal Revenue Code requirements.
On March 29, 1971, Kalita entered into a Consignment Agreement with Pepperidge Farm Incorporated, a manufacturer and distributor of bakery products. Under this agreement Kalita was given exclusive franchise territory in the Chicago area within which to sell and distribute Pepperidge Farm products. Provisions of the contract relevant to this case include the following:
2. QUANTITIES CONSIGNED. Bakery will consign and deliver to Consignee and Consignee will accept sufficient quantities of Consigned Products to maintain at all times an adequate and fresh supply thereof in all retail stores in the territory which request such products and whose accounts are not demonstrably unprofitable; provided, however, that Bakery reserves the right to allocate its products as nearly proportionately as practicable if the overall demand for its products exceeds its production. Consignee shall hold and care for all Consigned Products as the sole and exclusive property of Bakery. Title to all Consigned Products shall be vested in, subject to, and under the control of Bakery until sold by Consignee.
3. PROCEEDS AND RECORDS OF SALES. The Consignee will pay promptly each week on the day specified by the Bakery for all Consigned Products sold by him during the preceding week. If any chain store organization refuses to pay or to permit its store managers to pay the Consignee directly for Consigned Products distributed by him and, instead, requires the Bakery to submit a consolidated bill to a central or district office of such chain, the Consignee shall be entitled to deliver to the Bakery for credit to his account all charge tickets signed by such store managers; provided, however, that the Bakery may in its discretion (a) refuse such credit on any charge ticket not received by the Bakery within the time prescribed in its published billing schedule then in effect and (b) debit the Consignee's account with any charge ticket which it is unable to collect within a reasonable time. Consignee guarantees the payment of all bills and accounts for Consigned Products sold by Consignee under this agreement. Consignee will keep such records of Consigned Products received and sales made as Bakery may from time to time request; Bakery may inspect such records and Consigned Products at such times as Bakery may select.
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8. CHAIN STORE ACCOUNTS. If any chain store organization requires that authorization for the distribution of Consigned Products to the chain's retail stores in the territory shall be obtained through a central or district office located outside of the territory, or only in conjunction with the distribution of Consigned Products to its retail stores in other territories, the Bakery will co-operate with the Consignee in procuring such authorization. If any chain store organization refuses to pay or to permit its store managers to pay any Consignee directly for Consigned Products and, instead, requires the submission of a consolidated bill to a central or district office of the chain, the Bakery will handle the billing and the collections for all such products, subject to the terms of Paragraph 3.
9. PROHIBITED SALES AND DELIVERIES. The Consignee will not sell or deliver any Consigned Products directly to consumers or to any other purchasers except retail stores within the territory and such hotels, restaurants, clubs and similar organizations within the territory as the Bakery may authorize in writing. Also, the Consignee will not, without like authorization, make deliveries of Consigned Products to any chain store organization via a central or district warehouse or in any manner other than directly to its retail stores. If, despite the best efforts of the Consignee and the Bakery to obtain permission from any chain to make deliveries directly to its retail stores, such chain refuses to handle Consigned Products except via warehouse deliveries, the Bakery shall have the right in its discretion to sell and deliver its products directly to such chain for its own account via warehouse deliveries as long as such refusal remains in effect.
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15. INDEPENDENT BUSINESSMAN. The Consignee is a self-employed independent businessman, not an agent or employee of the Bakery, and has no authority other than to sell products consigned to him hereunder, express or implied, to do or perform any act or thing or to make any warranty or representation or promise or commitment of any character which will be binding upon the Bakery or for which it will be responsible, and he will refrain from any conduct inconsistent with the terms of this paragraph.
John Silk, Manager of Sales Accounting for Pepperidge Farm for the preceding 16 years, testified at trial regarding the consignment agreement. He stated that basically a distributor consignee such as Kalita sells two ways: (1) to what Pepperidge Farm considers its customers, chain stores and commissaries; and (2) to his other retail customers, which are "Ma and Pa stores." Pepperidge Farm would ship to the consignee (also known as franchisee or distributor) certain products for which the consignee had an obligation to service Pepperidge Farm customers with the products on hand. He also used his inventory to service his own accounts at other retail stores.
Kalita, as with any consignee, would be billed for the products on an inventory depletion system. Pepperidge Farm issued pre-printed tickets used to record the merchandise a consignee delivered at a chain store. One copy of the ticket was left with the store, one was sent to Pepperidge Farm, and one was retained by the consignee. The consignee was given credit for these sales against the money he owed Pepperidge Farm for the products. The consignee would be paid a commission on the chain store and commissary accounts. With respect to these accounts, Pepperidge Farm assumed the responsibility for billing and collection of payments and set prices for its products. The consignee was also allowed to establish his own accounts, and Pepperidge Farm had no knowledge of these customers or the prices charged them.
Silk testified that for 1975 Kalita received compensation or "an approximate profit" somewhere between 19% and 23% on the consignee's cost of products sold to chain stores. The amount of money Kalita made servicing his own retail business was unknown to Silk.
During 1975 Pepperidge Farm used a three-part document called a "Notification of Payment" form, also referred to by Silk as a "distributor invoice". On this form was recorded on a weekly basis the products for which a consignee was accountable and the chain store tickets for which he was given credit. The form also provided entries the consignee used to settle his accounts with Pepperidge Farm.
The Government offered in evidence all of the weekly forms for 1975 which Silk could locate (a few were missing). At the bottom of each form was an entry "Net Per Tickets", showing the total amount of product delivered by a consignee to a chain store and total amount for which the consignee was billed for a particular week. Silk also produced the weekly forms for the period January-July, 1976. Kalita's share during this period was also between 19% and 23% of chain store sales.
In August, 1976, Pepperidge Farm changed its billing system. Among the changes were the payment of a fixed 20% commission for delivering products to Pepperidge Farm customers and a recasting of the "distributor invoice" to a "consigned inventory recap." The new form also included the total of all chain store tickets turned into Pepperidge Farm under the caption "total chain credits" (previously "Net Per Tickets") and specifically set forth the amount of commission earned under the caption "Payable Amount." The weekly inventory recap forms for the periods August-September 1976 and all of 1977 and 1978 were received in evidence as Government exhibits. The new form...
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