United States v. Molasky
| Decision Date | 02 June 1941 |
| Docket Number | No. 7462-6.,7462-6. |
| Citation | 118 F.2d 128 |
| Parties | UNITED STATES v. MOLASKY, and four other cases. |
| Court | U.S. Court of Appeals — Seventh Circuit |
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David Baron, of St. Louis, Mo., and John L. McInerney, Warren Canaday, and Jos. A. Struett, all of Chicago, Ill., for appellants.
J. Albert Woll, U. S. Atty., and Austin Hall, Asst. U. S. Atty., both of Chicago, Ill., for appellee.
Before MAJOR and KERNER, Circuit Judges, and BRIGGLE, District Judge.
Writ of Certiorari Granted June 2, 1941. See 61 S.Ct. 1110, 85 L.Ed. ___.
These are appeals of William Molasky, James M. Ragen, James M. Ragen, Jr., Lester A. Kruse and Arnold W. Kruse, from judgments of conviction entered September 12, 1940. The indictment, upon which they were jointly tried, was returned August 22, 1939, by the regular June term grand jury, which had been authorized to continue for the purpose of completing investigations commenced during the June term. The indictment contained five counts, the first four of which charged these appellants, together with Moses L. Annenberg, Jules Taylor and Herbert S. Kamin, and the Consensus Publishing Company, an Illinois corporation (hereinafter referred to as "Consensus") with wilfully attempting to evade and defeat the Federal tax on the income of Consensus during the years 1933 to 1936, both inclusive, in violation of Section 145(b), Title 26, U.S.C.A. Int.Rev. Code. The fifth count charged the defendants with conspiring to evade and defeat the Federal tax on the income of Consensus for the years 1929 to 1936, both inclusive, in violation of Section 88, Title 18, U.S.C.A.
Prior to trial, the defendants Annenberg, Taylor and Kamin were dismissed as defendants. The case was tried to a jury which returned a verdict finding all of the instant defendants (appellants) guilty on all counts, except Lester A. Kruse, and finding him guilty on the fourth and fifth counts, upon which verdict the Trial Court entered the judgments now under attack. Previous to the trial, certain preliminary motions and pleas were filed, some applicable to all, and others to only certain of the defendants.
The appeals may be said, in a general way, to involve the alleged errors of the Trial Court in its denial of motions to dismiss the indictment; in its refusal to permit inspection of the Grand Jury minutes and to discharge the oath of secrecy surrounding the proceedings of the Grand Jury, in striking certain of the defendants' pleas in abatement based upon the presence of unauthorized persons before the Grand Jury, in dismissing special immunity pleas in bar; in the admission of evidence; in its denial of motions for directed verdict, for a new trial and in arrest of judgment, and in the court's charge to the jury.
Insofar as a discussion of the indictment is concerned, it would be sufficient to set forth the charge in abbreviated form. In view of the theories advanced by the respective parties, however, as to the merits of the controversy, it appears material to make a substantial statement regarding the charge as alleged. The first count is typical of the first four and charges that the defendants filed a return in 1934 for the taxable year of 1933, and did unlawfully, wilfully and knowingly attempt to evade and defeat a large part, to-wit, $9678.02 of a tax due to the United States on the income of Consensus, and that the attempt was in the manner following: That Consensus was engaged in the business of printing and selling "Run Down Sheets" to a class of persons known as "Bookmakers"; that it maintained offices in St. Louis, Missouri and Cincinnati, Ohio; that William Molasky was the president of the corporation, and that the corporation was required to file an income tax return for the year in question, inasmuch as it had received a gross income of $119,960.96. It alleges that the corporation was entitled to deductions as follows:
Rent on Business Property ....... $ 562.50
Interest ........................ 89.55
Taxes ........................... 300.00
Depreciation .................... 1,821.00
Salaries and Wages .............. 12,757.56
Expenses ........................ 23,258.55
__________
Total Deductions ............. $38,789.16
and that it derived a net income of $81,171.80, upon which it owed a tax of $13,340.22. It also alleges that the defendants, knowing the corporation's income to be as above set forth, wilfully attempted to evade and defeat a part of the tax, to-wit, $9,678.02, and as a means of so wilfully attempting to evade and defeat said tax, they filed a sworn return showing the corporation's gross income to be $119,960.96, and claiming deductions as follows:
Rent on Business Property ....... $ 562.50
Interest ........................ 89.55
Taxes ........................... 300.00
Depreciation .................... 1,821.00
Salaries and Wages .............. 12,757.56
Commissions ..................... 54,537.65
Other Expenses .................. 23,258.55
__________
Total Deductions ............. $93,326.81
The indictment further alleges that according to the return as filed, a net income of $26,634.15 was shown, with a total tax due and payable of $3662.20, which was paid.
The second, third and fourth counts are in substantially the same form as count one. In fact, they are exactly the same except for such differences as may be occasioned by dates and amounts. It is said that these counts do not state a cause of action and do not sufficiently apprise the defendants of the charge which they are called upon to meet. We think it is true, as contended, that it requires a mathematical computation to determine what item of deduction is charged to be improper. Such calculation readily discloses, however, (count one) that the item of deduction, "Commissions, $54,537.65" is the one by which the defendants are charged with attempting to evade the tax. This result follows by subtracting the total deduction of $38,789.16, admitted to be proper, from the total deduction of $93,326.81, the amount alleged to have been claimed in the return as filed. Thus, it is apparent that the defendants are charged with claiming an unlawful deduction, designated as commissions, of $54,537.65. While it is not apparent why the draftsman of the indictment should leave the most essential element of the charge to a process of calculation, rather than make a direct allegation as to the unlawful deduction, yet we are of the view that the defendants were sufficiently apprised of the offense charged. After all, the gist of the offense is the attempt to evade and defeat the tax, and if the defendants were in doubt as to the means alleged, they could have requested a bill of particulars. This was not done, and "we can not presume that the request would have been refused." Capone v. United States, 7 Cir., 56 F.2d 927, 931.
We do not understand that defendants question the validity of the fifth count of the indictment, but inasmuch as the substance of the charge is material, as will be subsequently developed, it appears not inappropriate to refer to it at this point. It charges the defendants with conspiring to evade and defeat the taxes on the income of Consensus for the years 1929 to 1936, both inclusive. The gross income, deductions, net income and tax due for each of the years included in the conspiracy is set forth. For instance, for the year 1933 (the return for this year was made in 1934 as shown in count one of the indictment) the gross income was alleged as $119,960.68, deductions $38,789.16, net income $81,171.80, and tax due $13,340.22. There is then set forth for each year an item of improper deduction claimed in the return by reason of alleged false employment contracts. For the year 1933, this item is in the amount of $54,537.65. The difference between the total net income as reported for the years included in the indictment period, and the correct total net income for those years, as alleged, is the amount upon which it is alleged a tax was payable. In other words, this difference represents the amounts which were claimed as deductions in the tax returns under the heading of commissions. This discrepancy, so it is alleged, resulted in a tax evasion in the sum of $77,883.53. The count further alleges, among other things, that the defendants were not employed in an executive capacity, nor in any other capacity whatsoever, by the said corporation during the calendar years 1929 to 1936, inclusive, nor did they or any one of them, or anyone for them, render any service to the said corporation, but that the defendants were owners and holders of beneficial interest for themselves and others in the said corporation, and that all of the moneys paid to them and each of them, were, in truth and in fact, distribution of profits and dividends from earnings of the said corporation. Numerous overt acts are alleged which do not appear material to relate.
On October 30, 1939, there was filed by Kruse and Kruse, and on the same date by Molasky, what are designated as petitions for an order releasing the oaths of grand jury secrecy. Numerous allegations were made in an attempt to show that this secrecy should be removed and the defendants permitted to inspect the minutes and records of the grand jury so that they might properly prepare certain pleas in abatement and bar. (These pleas are later discussed.) The relief sought by these petitions was denied. In our view, it is not necessary to relate in detail the contents of these petitions, as we believe the court correctly ruled thereon. No authorities are cited by the defendants in support of their claimed right in this respect. On the other hand, there are numerous authorities where such procedure has been condemned. United States v....
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