United States v. Magnus

• Decision Date: 20 September 1966
• Docket Number: No. 410,Docket 30087.,410
• Parties: UNITED STATES of America, Appellee, v. Percy C. MAGNUS, Appellant.
• Court: U.S. Court of Appeals — Second Circuit

365 F.2d 1007 (1966)

UNITED STATES of America, Appellee, v. Percy C. MAGNUS, Appellant.

No. 410, Docket 30087.

United States Court of Appeals Second Circuit.

Argued June 22, 1966.

Decided September 20, 1966.

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Neal J. Hurwitz, Asst. U. S. Atty., New York City (Robert M. Morgenthau, U. S. Atty. for the Southern District of New York, and John E. Sprizzo, Douglas S. Liebhafsky, Asst. U. S. Attys., New York City, on the brief), for appellee.

Boris Kostelanetz, New York City (Kostelanetz & Ritholz, Lloyd A. Hale, and Louis Bender, New York City, on the brief), for appellant.

Before LUMBARD, Chief Judge, and MOORE and FEINBERG, Circuit Judges.

LUMBARD, Chief Judge.

The appellant, Percy C. Magnus, stood trial in the Southern District of New York on nine counts, three charging the felony of wilfully attempting to evade and defeat his federal income taxes for the three years 1955, 1956, and 1957, in violation of 26 U.S.C. § 7201, three charging the misdemeanor of wilfully failing to file federal income tax returns for the same years, in violation of 26 U.S.C. § 7203, and three charging the misdemeanor of wilfully failing to pay federal income taxes for the same years, also in violation of 26 U.S.C. § 7203. Magnus appeals his conviction on the three counts alleging wilful failure to pay, and his six-month sentence on each count, to run concurrently. The jury acquitted Magnus on the felony counts and on the counts charging wilful failure to file returns.

Magnus conceded his failure to pay federal income taxes due in the amounts of approximately $26,000 for 1955, $33,000 for 1956, and $27,000 for 1957.¹ Thus the only question for the jury on the failure to pay counts was whether Magnus' failures to pay were knowing and wilful.

Magnus alleges five grounds for reversal of his conviction: (1) the trial court should have granted judgment of acquittal; (2) acquittal was required on the failure to pay counts under the rationale of Sansone v. United States, 380 U.S. 343, 85 S.Ct. 1004, 13 L.Ed.2d 882 (1965), because the jury acquitted Magnus on the felony charges; (3) the trial court erred in its charge defining the wilfulness required for the failure to pay counts; (4) the trial court erred in its instructions regarding Magnus' subsequent payment of his federal income taxes for 1955, 1956, and 1957; and (5) evidence was admitted regarding Magnus' failures to pay taxes, both federal and state, for eleven years prior to 1955. We find no errors in the rulings of the trial court, and affirm the convictions.

The question whether Magnus' admitted failures to pay substantial taxes due for the years 1955, 1956, and 1957 were wilful was for the jury. Magnus argues that the testimony of Cummings, who prepared personal income tax returns for Magnus for those years, precluded a jury finding that Magnus knew of or authorized the failures to pay. Cummings testified, however, that he presented the completed returns to Magnus and told him how much was due, that Magnus had not authorized him to draw checks to pay Magnus' income taxes, and that Magnus told him in 1949 that he would not file a declaration of estimated tax. The credibility of this testimony was a question for the jury. Moreover, there was substantial testimony probative of wilfulness other than that of Cummings. There was proof, for example, that Magnus underpaid his taxes by at least $20,000 for every year between 1948 and 1954, in addition to his conceded underpayments for 1955, 1956, and 1957. Such consistent substantial underpayment itself supports a finding of wilfulness. Holland v. United States, 348 U.S. 121, 139, 75 S.Ct. 127, 99 L.Ed. 150 (1954); United States v. Procario, 356 F.2d 614 (2 Cir. 1966).

Magnus argues that his acquittal on the failure to file counts required acquittal on the failure to pay counts as well, since the prosecution argued that Magnus must have known that he could expect no bills for taxes due because he must have known that he had filed no returns. It is settled that inconsistency between the verdicts of a jury on different counts is not a ground for reversal. Dunn v. United States, 284 U.S. 390, 393-394, 52 S.Ct. 189, 76 L.Ed. 356 (1932). In any event, as shown above, there was other substantial evidence that Magnus' failures to pay were wilful.

Magnus' acquittal on the felony counts did not require acquittal on the failure to pay counts under the rationale of Sansone v. United States, 380 U.S. 343, 85 S.Ct. 1004, 13 L.Ed.2d 882 (1965). Sansone held that a lesser-included offense instruction, on wilfully failing to pay or any other misdemeanor under 26 U.S.C. § 7203, need not be given in a felony prosecution under 26 U.S.C. § 7201 if the only disputed element in the felony prosecution is wilfulness. Magnus contends that where Sansone would not require a lesser-included offense instruction if the felony count stood alone, the prosecution should not be allowed to go to the jury on both felony and misdemeanor counts. We need not decide whether this contention has merit, because Sansone would have required a lesser-included offense instruction here had the felony count stood alone. The Court stated in Sansone that "a lesser-included offense instruction is only proper where the charged greater offense requires the jury to find a disputed factual element which is not required for conviction of the lesser-included offense." 380 U.S. at 350, 85 S.Ct. at 1009. There was such a disputed factual element in this case: the existence of affirmative acts of evasion, required for the felony under Spies v. United States, 317 U.S. 492, 499, 63 S.Ct. 364, 87 L.Ed. 418 (1943). To establish such affirmative acts of evasion, the prosecution tried to prove that Magnus authorized Cummings to show purported file copies of his 1954, 1955, and 1956 personal income tax returns to revenue agents auditing the corporate returns of Magnus, Mabee & Reynard, Inc., of which Magnus was president and principal stockholder, and from which Magnus received a large portion of his income in salary and dividends. Magnus contends that these alleged affirmative acts of misrepresentation were undisputed, since he testified that "every member of our organization always has been instructed to be courteous and give information as required by the official requesting it, if he was an authorized official."

Magnus' defense to all the charges against him, however, was that he believed that his returns had been filed and his taxes paid. If this defense were believed, Magnus' general...