United States v. Bridell

• Decision Date: 05 January 1960
• Docket Number: No. 58 CR 475 and 59 CR 157.,58 CR 475 and 59 CR 157.
• Citation: 180 F. Supp. 268
• Parties: UNITED STATES of America, Plaintiff, v. Albert M. BRIDELL and American Carbon Paper Corporation, Defendants.
• Court: U.S. District Court — Northern District of Illinois

180 F. Supp. 268

UNITED STATES of America, Plaintiff, v. Albert M. BRIDELL and American Carbon Paper Corporation, Defendants.

Nos. 58 CR 475 and 59 CR 157.

United States District Court N. D. Illinois, E. D.

January 5, 1960.

A. F. Manion, and Harvey M. Silets, Chicago, Ill., Asst. U. S. Attys., for the Covernment.

George D. Crowley, Chicago, Ill., for defendant, Albert M. Bridell.

John F. Kelly, Chicago, Ill., for defendant, American Carbon Paper Corporation.

CAMPBELL, Chief Judge.

This consolidated cause, consisting of Case No. 58 CR 475 and Case No. 59 CR 157, having come on for trial upon the stipulations, testimony and exhibits of the parties, is presently before me for disposition. Cause No. 58 CR 475 is an indictment consisting of two counts, the first of which I dismissed November 20, 1958. The second and remaining count charges that defendant Albert M. Bridell "did willfully and knowingly attempt to evade and defeat a large part of the income tax due and owing by him and his wife to the United States of America for the calendar year 1952 by filing a * * * false and fraudulent income tax return * * * in violation of Section 145(b) of the Internal Revenue Code of 1939; to be found in Title 26 U.S.C. Section 145(b)."

Cause No. 59 CR 157 is an indictment consisting of six counts, the first five of which charge the defendant, Albert M. Bridell, with willfully and knowingly attempting to evade and defeat income tax due and owing the United States for the years 1953, 1954, 1955, 1956, and 1957, respectively, by filing false and fraudulent returns for those years in violation of Section 145(b) as to 1953, and in violation of Section 7201 of the Internal Revenue Code of 1954; Title 26 U.S.C. § 7201, as to the remaining years. The sixth count charges a conspiracy between defendant Bridell, defendant American Carbon Corporation and Robert J. Blauner to attempt to evade and defeat income tax due and owing the United States by Bridell and his wife from April 4, 1949, up to and including June 13, 1958, in violation of Title 18 U.S.C. § 371.

It appears from the evidence that defendant, Albert M. Bridell, after practicing law for a year, entered the continuous form printing business in 1935 and in 1936, joined the newly formed American Lithofold Corporation (hereinafter referred to as "Lithofold") of St. Louis, Missouri, as a salesman.

In 1937 he was sent by that corporation to Chicago, Illinois, where he has since remained. He is presently vice president of Lithofold and is also in charge of its advertising program, promotional efforts and salesman education.

In 1943, defendant, American Carbon Corporation (hereinafter referred to as "Carbon"), an Illinois corporation, was formed for the purpose of manufacturing carbon paper, inked ribbons and items related thereto and more specifically, for the manufacture of "one-time carbon paper" to be sold and supplied to Lithofold.

Since its inception, defendant, Bridell, has been president, a director and shareholder of Carbon. Bridell's father-in-law, R. J. Blauner, was vice-president of Lithofold when Carbon was incorporated, and is presently president and treasurer. R. J. Blauner, since its incorporation, has been treasurer, a director and shareholder of Carbon. Since September 15, 1945, no person unrelated to the Bridell or Blauner families has acquired, owned or held any of the capital stock of Carbon. Nor has any unrelated person to the Bridells or Blauners served as a director. Since 1947, the majority of the capital stock of Lithofold has been held by the Bridells, Blauners and Carbon. From 1944 through 1957, the percentage of sales by Carbon to Lithofold out of total sales ranged between 96 per cent in 1944 to 28 per cent in 1957.

In 1946, R. J. Blauner purchased a home in Highland Park, Illinois, named "Tara" at his wife's suggestion and in which they lived, until October, 1950. Later the word "Tara" was and is currently used as a trade name for Carbon. In 1948, Bridell and his wife sold their Wilmette home and moved to "Tara" where they have since resided with their children. On April 6, 1949, "Tara" was conveyed to the Bridells as joint tenants.

During December of 1946, one, Virlon Furrow, began working at "Tara" as caretaker and maintenance man and was paid personally by Blauner for that month. On December 30, 1946, he made application for employment with Carbon and was subsequently placed, at Bridell's direction, upon the Carbon payroll. Furrow continued working exclusively at "Tara" until his death, February 17, 1958. During this entire period his wages were paid by Carbon.

One, Frank Carretta, was employed as an outside laborer at "Tara" from June 11, 1951, until April 10, 1952. One, Pat Kline, was employed at "Tara" as an outside laborer from May 16, 1951, until November 1, 1951. One, Morris Nygaard, employed by Carbon from November 24, 1950, until April 17, 1952, also did some work at "Tara." One, Ellarea McKinney, was employed as a cook and housekeeper at "Tara" from January 2, 1951, until December 20, 1951. One, Elfreda Peters, was employed as a cook and housekeeper at "Tara" from December 1, 1951, until April 15, 1952. All the above-named persons received wages from Carbon during the respective periods of their employment.

On or about January 3, 1951, R. J. Blauner leased a furnished residence at 9301 Collins Avenue, Miami Beach, Florida, on behalf of Carbon, for a period extending to May 1, 1951, for a rental of $6,000, which was charged to Carbon as a sales promotion expense at the direction of Blauner.

The Bridells and Blauners, among others, stayed at 9301 Collins Avenue for varying periods during the leasehold. On or about March 7, 1951, R. J. Blauner entered into a contract on behalf of Carbon to buy a house and grounds, later known as "Presque Rio," located at 708 Royal Plaza, Fort Lauderdale, Florida, for $90,000. The sale was completed on April 27, 1951.

In April of 1951, R. J. Blauner bought a yacht, paid for by Carbon, which was later renamed "Tara." Until its sale in July, 1955, many people were entertained at "Presque Rio" and on the yacht.

Carbon furnished the investment capital for the acquisition of these properties and assumed the indebtedness for their unpaid balance. During the years in question, Carbon paid for: maintenance and repairs; interest; legal and audit fees; capital improvements; administrative expenses; telephone expenses; real estate, personal property and franchise taxes; insurance; wages paid to Fort Lauderdale house servants, and the yacht captain; interest and finance charges on the yacht; stationary expenses; and depreciation expenses on both properties.

From 1949 through 1954, Bridell prepared the individual income tax returns on behalf of himself and his wife. Their later individual returns were prepared by Carbon auditors, Ernst & Ernst. No reference was made upon the individual returns of the Bridells as to the employment of Virlon Furrow until their 1957 return was filed in June of 1958 containing a statement to the effect that wages paid Furrow were not considered as income to the Bridells, but as a business expense to Carbon and properly deductible by Carbon, as such. Prior to the 1956 Carbon corporate income tax return which listed Furrow's wages as a "promotional expense" at "Tara," there was no mention in Carbon corporate returns as to Furrow's employment at "Tara." The 1957 Carbon corporate return listed wages paid to Furrow under "cost of goods sold."

After a series of investigations by revenue agents and special agents of the Internal Revenue Service extending over a period of years, the first of the two indictments here involved was returned against Bridell in July, 1958. In regard to the substantive counts of the two indictments, it is clear, in view of Stipulation, Part I, Pars. 13, 14, 16 and 18, as well as Government's Exhibit 61, that the alleged additional net income to Mr. Bridell and his wife, as alleged in Count II of Cause No. 58 CR 475, during the year 1952, is made up of the actual wages paid to Virlon Furrow, Morris Nygaard, Frank Carretta and Elfreda Peters by American Carbon Corporation during that year.

Likewise, in view of Stipulation, Part I, Par. 13, and Government's Exhibit 61, the additional income charged in Cause No. 59 CR 157, as to Count I for the year 1953, Count II for the year 1954, Count III for the year 1955, Count IV for the year 1956, and Count V for the year 1957, is made up of the actual wages paid to Virlon Furrow by American Carbon Corporation during those years. The conspiracy count relates not only to the employment of Furrow and others who worked at "Tara" and who were paid wages by Carbon, but extends to the use of the herein described Florida property as well. It alleges eleven overt acts.

Section 145(b) of the Internal Revenue Code of 1939, Title 26 U.S.C. § 145 (b) provides:

"Any person required under this chapter to collect, account for, and pay over any tax imposed by this chapter, who willfully fails to collect or truthfully account for and pay over such tax, and any person who willfully attempts in any manner to evade or defeat any tax imposed by this chapter or the payment thereof, shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, be fined * * * or imprisoned * * *."

Section 7201 of the Internal Revenue of 1954 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 * * * or imprisoned * * *."

Title 18 U.S.C. § 371 provides:

"If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy,

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