U.S. v. Scharf, 76-1957

• Decision Date: 20 July 1977
• Docket Number: No. 76-1957,76-1957
• Citation: 558 F.2d 498
• Parties: 77-2 USTC P 9586, 2 Fed. R. Evid. Serv. 679 UNITED STATES of America, Appellee, v. Raymond L. SCHARF, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 498

558 F.2d 498

77-2 USTC P 9586, 2 Fed. R. Evid. Serv. 679

UNITED STATES of America, Appellee, v. Raymond L. SCHARF, Appellant.

No. 76-1957.

United States Court of Appeals Eighth Circuit.

Submitted May 16, 1977.

Decided July 20, 1977.

Merle L. Silverstein, Clayton, Mo., for appellant.

Richard D. Billeaud, Asst. U. S. Atty., St. Louis, Mo., for appellee; Barry A. Short, U. S. Atty., St. Louis, Mo., on brief.

Before GIBSON, Chief Judge, and BRIGHT and HENLEY, Circuit Judges.

PER CURIAM.

Raymond L. Scharf of St. Louis, Missouri, appeals from his conviction in the United States District Court for the Eastern District of Missouri ¹ of having willfully failed to collect, truthfully account for and pay over to the government federal income and social security taxes that he was required to withhold from the wages of employees of Ray Scharf Coin Machines, Inc., a corporation wholly owned and controlled by the defendant.

The indictment, which was brought under the provisions of 26 U.S.C. § 7202, ² was in seven counts and charged violations with respect to the last three calendar quarters of 1973 and all four quarters of 1974. The defendant was tried to a jury, and the jury found him guilty on all seven counts. The defendant was sentenced later by Judge Regan to imprisonment for five years on each count of the indictment. It was stipulated that the sentences on Count 1 and count 2 were to be served consecutively; the sentences on the remaining counts were made to run concurrently with each other and with the sentence imposed on Count 2. ³

The defendant does not question the sufficiency of the evidence to sustain the conviction, nor does he complain of the instructions that the trial judge gave to the jury.

For reversal, the defendant urges that the district court erred in the following respects: (1) In refusing to require the government in advance of trial to disclose that certain former employees of the defendant ⁴ whom the government proposed to call as witnesses would testify under grants of immunity; (2) in admitting certain items of evidence that will be mentioned; (3) in refusing requested instructions based on the lesser included offense doctrine; and (4) in imposing the maximum sentences authorized by law on the respective counts of the indictment.

We affirm.

Prior to, during and after the period covered by the indictment the defendant, acting through his corporation, was the owner of certain coin operated pinball and vending machines located in various establishments in St. Louis and St. Louis County. The business was managed by Jack Hale; William Brandt and Richard Stephens were employed as route men.

It was the duty of the route men and part of the duties of Hale to visit the machines daily and remove money from them, placing the money in collection bags. Each collection was recorded on a daily route sheet. At the end of each day the total amount of the collections was recorded on a single document known as a "wraparound."

Hale and the route men were paid fixed wages or salaries. They were paid in part by checks drawn on the bank account of the business, and in part by cash which they withheld from collections with the consent and at the direction of the defendant. When money was withheld from a collection, the amount of the withholding would be noted in writing, and the notation would be placed in the employee's collection bag along with the cash that had not been withheld. During 1972, 1973 and 1974 and on into 1975 the cash withholdings were also noted on the daily wraparounds.

The defendant as an employer of labor was required by law to withhold from the wages of his employees federal income and social security taxes and to account for and pay over to the government the amounts withheld following the end of each calendar quarter. Each quarterly return was prepared on IRS Form 941 and was supported by a declaration that it was made under the penalties of perjury.

With respect to that part of the compensation of the employees that was evidenced by checks, the defendant withheld the required amounts and properly accounted for them and paid them over to the government. However, he withheld nothing with respect to that part of the compensation of the employees that they collected by taking cash from their collections, and that portion of their compensation was not reflected on the quarterly returns filed by the defendant. The jury was justified in finding and evidently did find that the conduct of the defendant amounted to a willful failure on his part to withhold, account for and pay over federal taxes and constituted violations of § 7202. ⁵

The employees of the defendant seem to have been aware of what was going on, and their participation in the scheme probably involved violations of the law on their part as well as on the part of the defendant. And that is apparently the reason why they were granted immunity in exchange for their testimony.

The Internal Revenue Service undertook an investigation of defendant's withholding tax liabilities in 1975. When the defendant learned of the investigation, he altered and caused to be altered the daily wraparounds for 1972, 1973 and 1974 so as to delete from them all references to the amounts of cash that the employees had withheld from their collections. Hale altered the 1972 wraparounds and in order to do so, he had to use some business forms that had not been printed prior to 1974. The defendant personally altered the 1973 and 1974 wraparounds.

At the trial of the case the principal defense tendered was that the cash that the employees took out of their collections was not compensation for their services but was reimbursement to them of expenses incurred by them in the discharge of their duties. That theory was exploded by the testimony of the former employees. The defendant also contended to some extent that the real villain in the piece was Hale, and that the defendant had always acted innocently and in good faith as far as his tax liabilities were concerned; the jury did not accept that theory.

Some months before the commencement of the trial the defendant moved to require the government to advise him, among other things, of the names of all prospective government witnesses to whom immunity had been granted. The district court did not require the government to supply that information in advance of trial, and the government did not supply it prior to the commencement of the trial. The employee witnesses who had been granted immunity were permitted to testify, and the defendant contends that it was error for the district court to permit them to do so in the circumstances.

If a government witness has been granted immunity or promised leniency or other reward in exchange for his testimony, that fact may be used by defense counsel on cross-examination to impeach the witness and impair his credibility. Although defense counsel in this case was not advised of the immunity grants prior to the beginning of the trial, he was aware of them prior to his cross-examination of the witnesses and he took full advantage of his knowledge. Thus, if the district court erred in not requiring the government to furnish the requested information prior to trial, its error was harmless and does not call for reversal.

Over the objections of the defendant the government was permitted to introduce the altered 1972 wraparounds, and Hale was permitted to testify that he altered them at the direction of the defendant. The defendant argues that the admission of this evidence was prejudicial error because it permitted the government to show other crimes not charged in the indictment.

We think that the evidence was admissible at least for the purpose of showing the defendant's motive, intent and willfulness, that it was not unduly prejudicial, and that the trial judge did not abuse his discretion in admitting it. See Fed.R.Evid. 404(b); United States v. McMillian, 535 F.2d 1035, 1038 (8th Cir. 1976); United States v. Bledsoe, 531 F.2d 888, 890-91 (8th Cir. 1976).

In the course of the trial the government called a number of witnesses and introduced a large number of documentary exhibits. As its last witness the government called Internal Revenue Agent Henry Purk who testified as an expert witness. Agent Purk had sat through the trial at the counsel table and had followed the evidence and was familiar with the exhibits. To illustrate and explain his testimony the government was permitted to introduce as its Exhibit No. 324 a summary that had been prepared by Purk which broke down the underlying evidence so as to show unreported wages and unpaid withholding taxes due with respect to those wages; the summary also related the basic evidence in the case to the respective calendar quarters mentioned in the indictment. The jury was appropriately cautioned about the limited use for which the summary exhibit had been admitted and with respect to the effect to be given to the exhibit.

The defendant concedes that in cases of this kind summary exhibits are admissible in evidence, and he does not complain about the cautionary instructions given by the district court. His sole contention is that his attorney was entitled under Fed.R.Crim.P. 16(a)(1)(C) to be supplied with a copy of the exhibit in advance of trial.

There are two answers to that contention. First, although the exhibit had been partially prepared in advance of trial, its preparation was an ongoing process and was not, and in the nature of things could not be, finally completed until all of the underlying evidence on which the summary was based had come into the record. In the second place, we think that a summary exhibit prepared by a government expert to be used in connection with his testimony, to the extent that the exhibit is prepared in advance of trial, falls within the limitation on discovery in criminal cases that appears in Rule 16(a)(2).

Although defense counsel was not supplied with Exhibit No....