United States v. Fenwick

• Decision Date: 04 November 1949
• Docket Number: No. 9895.,9895.
• Citation: 177 F.2d 488
• Parties: UNITED STATES v. FENWICK.
• Court: U.S. Court of Appeals — Seventh Circuit

177 F.2d 488 (1949)

UNITED STATES v. FENWICK.

No. 9895.

United States Court of Appeals Seventh Circuit.

November 4, 1949.

Marion J. Rice, Bert C. Cheatham, Evansville, Ind., Geo. C. Forrey III, Edward B. Raub, Jr., Jacob S. White, Indianapolis, Ind., Floyd E. Thompson, Chicago, Ill., for appellant.

B. Howard Caughran, United States Attorney, Elba L. Branigin, Jr., Assistant United States Attorney, Maurice W. Graston, Assistant United States Attorney, Indianapolis, Ind., for appellee.

Before MAJOR, Chief Judge, and KERNER and LINDLEY, Circuit Judges.

LINDLEY, Circuit Judge.

Defendant appeals from a judgment upon a verdict of a jury finding him guilty of wilfully attempting to defeat and evade a part of the income and victory tax due from him for the years 1943 and 1944.

Count 1 of the indictment charged that defendant, for 1943, made a false and fraudulent return in that he reported an income tax net income for the calendar year, of $4940.88, a victory tax net income of $6040.94 and income and victory tax due of $907.50, whereas each of said incomes for the calendar year was $10,709.04, upon which he owed a total tax of $2737.62. Count 2 charged that he falsely and fraudulently stated that his net income for 1944 was $5677.58 and the tax due thereon $1171.50, whereas his net income for the year was $22,198.87, upon which he owed a tax of $8486.94.

Upon appeal, defendant contends that the evidence was insufficient to establish his guilt, in that there was no proof of undisclosed source of income or of unreported taxable income from disclosed sources and no proof of defendant's net worth in 1943 and, therefore, no basis for establishment of increased net worth or expenditures in excess of reported income and, further, that, under the facts of the case, the increased net worth and expenditures method of proof is not properly applicable. The government insists that it has proved that defendant wilfully evaded payment of tax in each year by evidence that in each year defendant's net worth increased in an amount greater than his reported income and by evidence of expenditures in excess, as it says, of defendant's disclosed incomes.

The tax return for each year was prepared by a deputy collector in accord with information supplied by defendant. At the trial, the government offered no evidence that the income reported was erroneously stated; nor did it question any of the deductions made by defendant. On the contrary, it relied entirely upon what it contends is sufficient evidence to establish an increase in net worth during each of these years in excess of the tax reported and expenditures in excess of reported income.

In such a situation we must keep in mind that the conviction can not stand unless there is proof of the corpus delicti, existence of which can not be presumed or established by an extrajudicial admission. The government must, by competent evidence, prove beyond reasonable doubt that the crime charged has actually been committed. Pines v. United States, 8 Cir., 123 F.2d 825, 829; Forte v. United States, 68 App.D.C. 111, 94 F.2d 236, 243, 127 A.L.R. 1120; Gordnier v. United States, 9 Cir., 261 F. 910, 912; United States v. Chapman, 7 Cir., 168 F.2d 997 at page 1001. In the latter case we said: "Appellant contends that, `In a "net worth case," the starting point must be based upon a solid foundation and a Revenue Agent's statement of the defendant's oral admission or confession when uncorroborated is not sufficient to convict.' We fully agree with his statement of the law." In other words to justify the conviction, there must be proof beyond reasonable doubt and exclusive of any express or implied extrajudicial admission by defendant, that defendant evaded some income tax. Gleckman v. United States, 8 Cir., 80 F.2d 394, 399; United States v. Miro, 2 Cir., 60 F.2d 58, 61; O'Brien v. United States, 7 Cir., 51 F.2d 193, 196. Inasmuch as there is no direct proof that defendant received income which he did not report, we must test the validity of his conviction by the rules enunciated in the cases cited to determine whether there is such proof of increase in net worth, irrespective of defendant's implied admissions out of court, as to justify a finding of guilt. Such proof, circumstantial in character, in view of the principles announced, must be such as will exclude every reasonable hypothesis except that of guilt. Evidence of mere probability of guilt, of course, is not sufficient. Whether the proof meets these requirements necessitates some discussion of the evidence.

From 1919 to 1947 defendant owned and operated a drugstore in Evansville, Indiana, and acquired from time to time pieces of real estate in the same city and a farm in an adjoining county. During 1943 and 1944, as well as for sometime previously thereto, he owned a number of coin-operated music boxes and amusement machines, which he placed in various restaurants and taverns for operation, the tenant and the owner dividing the net proceeds from the machines equally. His store, real estate and automatic machines afforded, according to the evidence, his only sources of income. Apparently he was a careless man, in so far as keeping records was concerned, as he kept no formal books of account but only invoices, memoranda, bills and checks. It was from such basic material and his own statements that the tax returns for 1943 and 1944 were prepared by the deputy collector. His return for 1943 showed that he had gross receipts of $55,280.21 and, after undisputed deductions, a net taxable income of $6198.44 and a tax of $1010.39 (including the unforgiven portion of 1942), which was paid. As we have indicated, there is no proof that any of the information furnished or any of the amounts reported was inaccurate or false. In fact the record is devoid of any direct evidence that defendant had any taxable income that he did not report.

Upon the theory that his worth had increased in each of the years, the government assumed that defendant's net worth on January 1, 1943 was $50,829.06. An experienced auditor in the employment of the government testified that this net worth, at the end of 1943...