United States v. Mancuso

• Decision Date: 19 May 1967
• Docket Number: No. 10822.,10822.
• Citation: 378 F.2d 612
• Parties: UNITED STATES of America, Appellee, v. Graziano J. MANCUSO, Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

378 F.2d 612 (1967)

UNITED STATES of America, Appellee, v. Graziano J. MANCUSO, Appellant.

No. 10822.

United States Court of Appeals Fourth Circuit.

Argued March 6, 1967.

Decided May 19, 1967.

Norman P. Ramsey, Baltimore, Md. (Thomas J. S. Waxter, Jr., and H. Thomas Howell, Baltimore, Md., on brief), for appellant.

Ronald T. Osborn, Asst. U. S. Atty. (Thomas J. Kenney, U. S. Atty., Arthur K. Crocker and Clarence E. Goetz, Asst. U. S. Attys., on brief), for appellee.

Before BOREMAN, BRYAN and CRAVEN, Circuit Judges.

CRAVEN, Circuit Judge.

Graziano Mancuso was convicted by a jury of attempting to evade income taxes for the years 1956 through 1960.¹ In this appeal he attacks his conviction on two broad grounds: (1) insufficiency of the Government's case based on the net worth method of proof, and (2) misconduct of Government agents amounting to a denial of his Sixth Amendment right to the effective assistance of counsel, his Fifth Amendment right not to incriminate himself, and his Fourth Amendment right to be secure from unreasonable search and seizure.

I.

The evidence was amply sufficient for the jury to have found that the defendant had been since 1945 the dominant member of a family partnership, V. Mancuso & Sons, a barber supply business in Baltimore; that the defendant's brother, Nicholas, was also a partner, and his son, Vincent, Jr., became a partner in 1958; and that the defendant's father, Vincent, Sr., who was described as a "limited partner" from 1945 until 1958, when he retired from the business, was salaried during this time and did not share in the profits. The defendant testified that ninety-eight percent of all partnership receipts were in cash.

The Government's comparative net worth analysis of the defendant showed an increase in personal net worth over the five years for which prosecution was undertaken of approximately $63,000, of which some $52,000 was shown as derived from unreported taxable income.² The consistent increases in the defendant's personal net worth were attributed by the Government almost exclusively to income from the family partnership.

The Government ascribed $19,000 of the growth in the defendant's net worth over the five year period to increases in the value of his share of the partnership capital. The Government's personal net worth analysis on the defendant included in each year as one asset an apportioned share of the then current partnership capital.³

The defendant maintains that there was a complete lack of evidence to support the Government net worth schedules which were therefore improperly admitted in evidence, and thus his case was erroneously permitted to go to the jury. The challenge to the Government's proof relates specifically to determination of his interest in the partnership capital and its use in calculating his personal net worth. Other assets (and expenditures) in the Government personal net worth schedule were based on direct evidence introduced at trial.

The defendant concedes that amounts assigned by the Government to business assets, liabilities, and depreciation reserve in constructing a comparative net worth statement for the family partnership were proved by competent evidence at his trial.⁴ He contends, however, that key "assumptions" made by the Government in establishing his share in the partnership capital are unsupported by direct evidence.

The Government's theory allocated to the defendant and Nicholas Mancuso each one-half of the partnership capital on December 31, 1953, the starting point in its net worth schedules. Thereafter they were credited with an even one-half of the increments in partnership capital until the addition of Vincent, Jr. in 1958, after which one-third was allotted to each. However, the Government analysis did not assign to Vincent, Jr. any part of the accumulated firm capital. Although the family business began as Vincent, Sr.'s proprietorship, the Government theory does not allow him an interest in the firm capital during the prosecution period.

The jury accepted the Government's theory and, we think, was entitled to do so. It is true that there was a scarcity of direct evidence relating to the ownership interests in the partnership capital. All the evidence was to the effect that there was no capital account as such, and the partnership tax returns did not include a capital account reconciliation.⁵ However, circumstantial evidence was plainly sufficient to support the Government's inferences.

The Government's position that Vincent, Sr. was without a capital interest in the prosecution years is strongly supported by evidence at trial. The partnership tax returns for the years under examination show that he was salaried and did not receive a part of the partnership profits. Furthermore, Internal Revenue Agent Gordon testified that he had an "absolute disclaimer" from the defendant of any interest of his father, Vincent, Sr., in the partnership. Agent Gordon further testified that the defendant had told him that beginning in 1945 Vincent, Sr. had "gradually relinquished and he turned the partnership over to the two * * *" sons and that Vincent, Sr. remained a "limited partner" and received a salary for little things he did about the place.

The inference that Vincent, Jr. did not acquire any part of the accumulated firm capital on acceptance as a partner in 1958 rests on testimony of Agent Gordon that Vincent, Jr. had told him that he brought nothing into the partnership. This was not denied by the defendant.

There was more than sufficient evidence at trial showing the defendant's dominance of the business for the jury to infer that he had at least an even one-half interest in the partnership capital in 1953 and that he owned an equal part of annual increments in firm capital. So comprehensive was the defendant's control over affairs of the family business, especially the financial ones, a reasonable inference would have been that the partnership-in-name was in fact his sole proprietorship. The defendant was proved to be the only active partner who could and did write checks on the business checking account and who could draw on the partnership savings account.⁶ The defendant testified that he alone maintained the partnership books and records. He did not account to other members of the firm.⁷

Granting to defendant the benefit of any doubt, the Government attributed to him on its net worth theory only an equal part of the initial partnership capital and increases in net worth. The apportionment made by the Government followed the distribution of profits as reported on the partnership tax returns which were in evidence, and as stated in testimony by Agent Gordon, conformed to the ordinary legal presumption that in absence of evidence of an agreement to the contrary the partners' interests are equal.⁸

The defendant's principal defense was the familiar cash hoard and gift explanation. He admitted on the witness stand that the immediate source of the funds which inflated his personal bank accounts and paid for physical assets appearing on the Government net worth schedule during the years 1953 through 1960 was the partnership checking account. However, he maintained that the money withdrawn for these purposes did not represent partnership profits but were funds placed in the business accounts for convenience and actually derived from funds acquired before the prosecution period or received as gifts from members of his family.⁹

Inconsistently and in contrast to the position taken by his client, the defendant's counsel advanced the theory at trial and before this court that the Government had not refuted the possibility that the personal assets of his client could have been acquired with partnership capital which had accumulated to his credit before the starting point in the net worth analysis, December 31, 1953. The Government in fact concedes¹⁰ that the defendant would not be delinquent in reporting income if it is presumed that in 1953 he owned the entire partnership capital and thereafter when taking funds from the partnership account to enhance his personal asset position drew only on his accumulated capital and took no partnership profits in excess of those reported on his tax return. This was the theoretical possibility illustrated by a hypothetical net worth schedule used by counsel for the defense at trial. Such a possibility appears to be controverted, however, by the defendant's own explanation of asset accumulation. Suffice it to say that the jury — within its competence — accepted neither defense theory.

Because of the omission of the defendant to maintain adequate records the Government was forced to proceed in its prosecution with the net worth method of proof. Its case, therefore, was necessarily grounded in circumstantial evidence. The jury considered the evidence bearing upon the defendant's partnership interest along with the evidence of other assets and purchases, and weighing the defense theories, made the ultimate inference, with which it was satisfied beyond a reasonable doubt, that during the years covered by the indictment the defendant had received substantially greater income than he reported on his tax returns.

What this court said in Moore v. United States is pertinent:

"If circumstantial evidence be sufficient to support an inference of guilt and the defendant fails to offer a reasonable explanation consistent with innocence, such failure may be considered by the trier of fact. It is not necessary, in appraising the sufficiency of the evidence, that this court be convinced beyond a reasonable doubt of the guilt of the defendant. The question is whether the evidence, construed most favorably for the prosecution, is such that a jury (or trial judge) might find the defendant guilty beyond a reasonable doubt." 271 F.2d 564, at 568 (4th Cir. 1959) (case citations omitted).

We stated in Bell v. United States that an estimate of the taxpayer's net worth as the means of...