United States v. Engle, 71-1594.

• Decision Date: 02 May 1972
• Docket Number: No. 71-1594.,71-1594.
• Citation: 458 F.2d 1017
• Parties: UNITED STATES of America, Appellee, v. John R. ENGLE, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

458 F.2d 1017 (1972)

UNITED STATES of America, Appellee, v. John R. ENGLE, Appellant.

No. 71-1594.

United States Court of Appeals, Eighth Circuit.

Submitted April 14, 1972.

Decided May 2, 1972.

Robert J. Koster, Cook, Murphy, Lance & Mayer, D. Jeff Lance, Don O. Russell, St. Louis, Mo., for appellant.

John A. Newton, Asst. U. S. Atty., Daniel Bartlett, Jr., U. S. Atty., St. Louis, Mo., for appellee.

Before Mr. Justice CLARK,^* MATTHES, Chief Judge, and LAY, Circuit Judge.

MATTHES, Chief Judge.

John R. Engle has appealed from the judgment of conviction finding him guilty under a three-count indictment of violating § 7206(1) Internal Revenue Code.¹

Five contentions of error are presented and relied upon for a reversal. The first claim, which we regard as the central issue, is an indirect, if not a head-on, challenge of the sufficiency of the evidence to warrant submission of the case to the jury. In appellant's language, the point is thus phrased:

"Defendant was charged with a failure to report certain income, undiminished by deductions, on Line 9, Page 1 of Form 1040 for the three years in question. The Government failed to prove defendant guilty of such a violation and the court failed to properly instruct on the law and evidence as adduced under the indictment."

Before proceeding to the merits of this ingenious argument, a review of the facts, concerning which there is slight disagreement, will serve to place appellant's position in proper perspective.

During the subject years appellant was president of Steak'N Shake, a corporation which operated a chain of approximately 75 drive-in restaurants, about 20 being in the metropolitan St. Louis area. For a number of years prior to 1965, including the taxable years in question, the American Cigarette Vending Company had been authorized to and had placed cigarette vending machines in Steak'N Shake restaurants in the St. Louis area. Under an arrangement between appellant and one of the partners of the vending company, the latter agreed to and did pay appellant one and one-half cents on every package of cigarettes sold by the vending company in the St. Louis area restaurants. The evidence conclusively showed that for 1965, 1966, and 1967, the unreported income derived from this source was $3,897.48, $4,400.09, and $2,119.00, respectively.

It is obvious from the evidence that it was intended from the outset to carry out the plan in a clandestine manner to prevent other officers of the two involved corporations, American Vending and Steak'N Shake, from gaining knowledge of the transaction. Knowledge of the payments made to appellant apparently was limited to one Jack O'Shea, an original partner in the vending company, a Mrs. Cronin, who succeeded O'Shea upon his death, and appellant.

According to the undisputed evidence, Mrs. Cronin, who ascertained the amount due appellant on each month's sale of cigarettes, would draw a check on the vending company account payable to that company, would place the check in the cash register, withdraw currency equivalent to the amount of the check, place the currency in an envelope and deliver it to appellant, who regularly called at the office of the vending company for the purpose of taking possession of the amount of his "take." Appellant's income tax returns were prepared by Mr. Roark, secretary-treasurer of Steak'N Shake, on the basis of information forwarded him by appellant. Concededly, the amount paid to appellant on the basis of one and one-half cents for each package of cigarettes was not disclosed to Roark because, in appellant's words, "I didn't think it was any of his business."²

It should also be stated that the failure of appellant to report the amounts received from the vending company on his 1965, 1966, and 1967 returns was not an issue in the trial. That fact was conceded. The thrust of the defense was that the sum of the payments received over the years did not constitute income in the sense that it was taxable. Appellant vociferously advocated throughout the trial that the total of the payments received by him was spent for entertainment of employees of Steak'N Shake and other persons, for the avowed purpose of promoting the business and good will of the Steak'N Shake Company. He regarded his take as "stash money . . . It was like liquor to me, I stuck it in my pocket and spent it." Thus, stripped of all non-essentials, the heart of the controversy turned on the questions (1) whether appellant was legally relieved from reporting the cigarette payments because he derived no personal gain therefrom, and (2) whether he willfully and knowingly filed a return which was false as to a material matter.

The foregoing recitation of the facts should suffice to completely dissipate any doubt as to the sufficiency of the evidence to sustain the conviction. Contrary to appellant's submission of error above delineated, the indictment was not couched in language charging appellant with failure to report certain income "on Line 9, page 1 of Form 1040," and successful prosecution was not confined to such a narrow and unrealistic theory. As pointed out above in the margin, appellant was charged with filing a return believing it not to be true and correct, and that charge was sufficiently proven.

The unique contention here espoused by appellant is closely akin to that advanced by the defendant in Siravo v. United States, 377 F.2d 469 (1st Cir. 1967). In ruling on the question the court observed:

"In our view it is unnecessary to resolve this dispute in semantics, for we hold that a return that omits material items necessary to the computation of income is not `true and correct\' within the meaning of section 7206. If an affirmative false statement be required, it is supplied by the taxpayer\'s declaration that the return is true and correct, when he knows it is not. Therefore, the government has made out a violation of the section, whether it be labelled `a perjury statute,\' or `similar in nature\'."

377 F.2d at 472 (citations omitted).

We dealt with § 7206(1) in United States v. Lodwick, 410 F.2d 1202 (8th Cir.), cert. denied, 396 U.S. 841, 90 S.Ct. 105, 24 L.Ed.2d 92 (1969). In discussing the statute, Judge Van Oosterhout quoted at some length from Gaunt v. United States, 184 F.2d 284 (1950), cert. denied, 340 U.S. 917, 71 S.Ct. 350, 95 L. Ed. 662 (1951), where the First Circuit stated:

"It seems to us clear that the latter subsection Section 145(c), the forerunner of Section 7206(1) makes it a felony merely to make and subscribe a tax return without believing it to be true and correct as to every material matter, whether or not the purpose in so doing was to evade or defeat the payment of taxes. That is to say, it seems to us that the subsection\'s purpose is to impose the penalties for perjury upon those who wilfully falsify their returns regardless of the tax consequences of the falsehood."

184 F.2d at 288, quoted in 410 F.2d at 1205-1206.

To summarize, we hold that the evidence sustained the charge as laid in all three counts. The statute mandates that appellant should have reported the amounts he received on his returns. If in fact he expended this income for legitimate deductible purposes, he could have claimed such deductions. He chose not to pursue that course, but rather to completely ignore the income in making his returns.

Appellant next complains because the court denied his motion for a mistrial when a witness for the Government, in response to a question on direct examination, referred to the payments received by appellant as "kickbacks." The court, upon motion, ordered the question and answer stricken and admonished the jury to disregard both. However, appellant's motion for a mistrial was denied. We are satisfied the incident did not require a mistrial. Indeed, we suspect the agent's use of the term "kickbacks" was warranted. In any event, no prejudice resulted.

Neither did the court err in refusing to admit into evidence a handwritten exhibit, apparently prepared by appellant. The exhibit appears to be a summary of amounts expended by appellant for entertainment, such as bowling, baseball and football games, and refreshments. The summary was admittedly only an estimate of the expenditures; it was not relevant to the...