United States v. Jannsen

• Decision Date: 27 January 1965
• Docket Number: No. 14699.,14699.
• Citation: 339 F.2d 916
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Robert C. JANNSEN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

339 F.2d 916 (1964)

UNITED STATES of America, Plaintiff-Appellee, v. Robert C. JANNSEN, Defendant-Appellant.

No. 14699.

United States Court of Appeals Seventh Circuit.

December 30, 1964.

Rehearing Denied January 27, 1965.

John F. Kelly, Daniel A. Taylor, Jr., Chicago, Ill., for defendant-appellant, Taylor & Kelly, Chicago, Ill., of counsel.

Edward V. Hanrahan, U. S. Atty., John Peter Lulinski, John Powers Crowley, Asst. U. S. Attys., William O. Bittman, Asst. U. S. Atty., for plaintiff-appellee, Richard J. Phelan, Asst. U. S. Atty., of counsel.

Before HASTINGS, Chief Judge, CASTLE and SWYGERT, Circuit Judges.

SWYGERT, Circuit Judge.

Defendant Robert C. Jannsen was charged in a five-count indictment for willfully and knowingly attempting to evade his income tax for each of the years 1956 to 1960, both inclusive. The total amount of unreported income approximated $46,000. A jury found defendant guilty of the offenses charged and the district court sentenced him to a term of imprisonment. Defendant appeals from the judgment of conviction, relying on alleged errors claimed to have arisen from failure to grant his motion for judgment of acquittal, failure to grant a mistrial, giving of certain instructions, and rulings on evidence.

Since November 8, 1951, defendant has been the president of the Avalon Laundry Company. Avalon is primarily engaged in a general family laundry business with its plant located in Chicago. In addition to its regular work, Avalon also offered a dry cleaning service to its customers. Much of the actual dry cleaning, however, was performed by an independent dry cleaner, John Spomar, doing business as Normal Cleaners. In 1954, there was a renegotiation of the contract between Avalon and Normal. Having been authorized by Avalon to act in its behalf, defendant reached an understanding with Spomar that there would be a 50-50 per cent division of the receipts of the dry cleaning business taken in by Avalon, but performed by Normal. Defendant, however, requested Spomar to show a 63-37 per cent division (63 per cent for Normal and 37 per cent for Avalon) on the Normal invoices and to give him the excess 13 per cent in cash. The evidence showed that this procedure was followed until March, 1957, when defendant attempted to obtain an increased share of the profits for Avalon. When Spomar refused, defendant requested him to send the invoices to Avalon showing a 60-40 per cent division (60 per cent for Normal and 40 per cent for Avalon), thereafter giving defendant 10 per cent in cash. This procedure was followed until June, 1961.

The payments made by Spomar to defendant were in cash and given directly by Spomar to Jannsen. Defendant retained these payments for himself and did not surrender them to his company. On June 10, 1961, he confessed to the secretary-treasurer of the company that he had been receiving payments from Spomar. Subsequently, he returned substantially all of the money to Avalon. It is for failure to report as income these payments and interest earned thereon that the Government prosecuted defendant for evasion of income tax.

Defendant's motion for judgment of acquittal was based on the ground that the payments made to him by Spomar were embezzled funds and that, therefore, he need not have reported them as income. Defendant argues that because the taxable years in question were prior to the decision in James v. United States, 366 U.S. 213, 81 S.Ct. 1052, 6 L.Ed.2d 246 (1961), that case must govern the instant situation. There the Supreme Court overruled Commissioner v. Wilcox, 327 U.S. 404, 66 S.Ct. 546, 90 L.Ed. 752 (1946), which held that embezzled money does not constitute taxable income to the embezzler under section 22 of the Internal Revenue Code of 1939 (now section 61(a) of the Internal Revenue Code of 1954). The Court in James held additionally, however, that "so long as the statute contained the gloss placed upon it by Wilcox at the time the alleged crime was committed," willfulness cannot be proven in a prosecution for failing to include embezzled funds in gross income. Accordingly, it becomes necessary for us to decide the exact nature of defendant's acquisition of the amounts he failed to report in his tax returns during the period from 1956 to 1961. If defendant's conduct amounted to an embezzlement, he contends that under the decision in Commissioner v. Wilcox, supra, he was not required to report the embezzled monies as income.

By general definition, embezzlement is the felonious conversion of property by a person to whom it has been entrusted and into whose lawful possession it has come prior to the conversion. Moore v. United States, 160 U.S. 268, 269-270, 16 S.Ct. 294, 40 L.Ed. 422 (1895); Tredwell v. United States, 266 F. 350, 352 (4th Cir.), cert. denied, 253 U.S. 496, 40 S.Ct. 587, 64 L.Ed. 1031 (1920). Moreover, the Illinois supreme court has on more than one occasion said that in order to constitute embezzlement under Illinois law the property must be in lawful possession of the accused and that there must be a subsequent felonious conversion of it. People v. Strong, 363 Ill. 602, 2 N.E.2d 942 (1936); People v. Streich, 361 Ill. 490, 198 N.E. 350 (1935).

We are convinced that defendant's conduct did not amount to an embezzlement. The payments made by Spomar were not monies belonging to Avalon entrusted to defendant and coming into his possession lawfully. Rather, they were monies which came into his possession unlawfully by reason of his secret and fraudulent agreement with Spomar.

Defendant's reliance on Adame's Estate v. Commissioner, 320 F.2d 811 (5th Cir. 1963), is faulty. In that case, the school districts' trustees entrusted Adame, the county superintendent of schools, with...