United States v. Rifkin, 109

• Citation: 451 F.2d 1149
• Decision Date: 17 November 1971
• Docket Number: Docket 71-1411.,No. 109,109
• Parties: UNITED STATES of America, Appellee, v. Louis RIFKIN, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

451 F.2d 1149 (1971)

UNITED STATES of America, Appellee, v. Louis RIFKIN, Appellant.

No. 109, Docket 71-1411.

United States Court of Appeals, Second Circuit.

Argued October 15, 1971.

Decided November 17, 1971.

Louis Bender, New York City (Lloyd A. Hale, New York City of counsel), for appellant.

Elliot G. Sagor, Asst. U. S. Atty. New York City (Whitney North Seymour, Jr., U. S. Atty. for the Southern District of New York, Peter F. Rient, Asst. U. S. Atty., New York City, of counsel), for appellee.

Before FRIENDLY, Chief Judge, CLARK, Associate Justice,^* and KAUFMAN, Circuit Judge.

Mr. Justice CLARK:

Appellant stands convicted by a jury on a five-count indictment charging him with attempts to evade payments of substantial portions of his income taxes for the calendar years 1961 through 1963, inclusive, by the filing of false and fraudulent joint income tax returns (Counts one through three); and with the evasion of corporate income taxes of Vim Chemists 134 Inc., of which he was the sole stockholder and president, for the corporate fiscal years ending March 31, 1962 and 1963 (Counts four and five); all in violation of 26 U.S.C. § 7201. Six errors are claimed on this appeal: (1) Insufficient evidence to prove income tax evasion on the theory adopted — i. e., the bank deposits and expenditures method of computation; (2) abuse of grand jury process on the ground that only hearsay testimony was produced before the grand jury; (3) refusal of the trial judge to permit the appellant to counter prosecution evidence that his wife had no safe deposit box at a named bank by presenting as a surrebuttal witness an official of the bank who would testify that a flood had destroyed some of the bank's records as to safe deposit boxholders; (4) failure of the prosecution to produce at pre-trial some notes of the Special Agent covering conversations with appellant's tax counsel as to the facts of the case; (5) error in permitting the jury to continue deliberations after it had advised the trial judge that one of the jurors had traded at appellant's pharmacy; and (6) colloquy of the trial judge and prosecutor at various times in the case which was prejudicial; and a question of the prosecutor — later stricken — as to a sales tax investigation by the City of New York. We have carefully considered each of the points — as well as the totality of the trial — and have concluded that there is no ground for reversal. The judgment, therefore, is affirmed.

I.

Appellant, a pharmacist, was the sole stockholder and president of Vim Chemists 134 Inc., which operated a pharmacy at No. 2 Broadway in Manhattan from 1960 to 1965.¹ Both appellant's personal income tax returns and the corporation's income tax returns were prepared by an accountant who also prepared the corporation's formal books of account, using daily cash receipts sheets and check book stubs furnished to him monthly.

The Government's investigation of appellant began in December, 1962, as an audit of his 1961 joint return, notice of which was given on February 7, 1963. Appellant's accountant contacted the Internal Revenue Agent, and they met in April, 1963, to conduct the audit. Soon thereafter the Agent began a check of appellant's brokerage account. Tax counsel for appellant then contacted the Agent, and the latter requested him to furnish all records of appellant's income, stock purchases and other financial transactions and sources of funds. On September 27, 1963, the same tax counsel reported to the Agent that the money for appellant's stock purchases, save one that had been financed from his checking and savings account, came from a cash inheritance of some $65,335 from his father. According to the attorney, appellant's father had given the cash to appellant in a paper bag in 1957 or 1958. Appellant was to distribute the cash after his father's death — "since he was the most educated one in the family, and the father could trust him, he relied on him to distribute it equally between the balance of the family." Appellant, his counsel continued, kept the money in the bag from 1957 or 1958 until the father's death on May 11, 1961, when he opened it and found $65,335 in cash. At the close of the interview, the appellant's counsel showed the agent a copy of an estate tax return for the father which was filed on September 6, 1963, and pointed out that the amount in Schedule C of the return was the same as the amount in the paper bag.

Appellant's tax file, as well as that of Vim Chemists, was then referred to the Intelligence Division of the IRS, and a Special Agent took over the investigation. The Division uncovered that during the period January 1, 1961 through February 11, 1963, appellant and his wife made 122 deposits in savings and brokerage accounts, and purchased stocks, bonds and an automobile. The stock purchases totalled $65,355.75 and were made by cash, through teller's checks purchased at banks for cash by appellant's wife or employees of Vim Chemists, as well as by personal checks. The employees testified that they often received packages of cash from appellant, standing behind the counter at the pharmacy at the time, with instructions to purchase teller's or cashier's checks at the bank, payable to the name of the person designated on the outside of the packages a broker, and to return them to appellant. Although appellant's wife testified that she always brought the cash to appellant for the stock purchases from a lock box, the evidence showed that the employees would perform these transactions earlier in the day than when the wife came to the pharmacy. In addition, other teller's checks were purchased by appellant's wife for cash from other banks. The bond purchases totalled $23,342 and were made at nine different banks, some from different banks on the same day. All of the bonds were issued to appellant's wife and himself.

The Government tried the case on a bank deposit and expenditure method of proof and contended that the purchases of stocks and bonds came from cash drained off from the cash receipts of the pharmacy and unreported on either the corporation or the personal tax returns. They estimated that some 16 percent of the pharmacy receipts were involved. During the nearly twenty-six month period in question, appellant's and his wife's deposits and expenditures allegedly exceeded his take-home pay as reported on their joint returns by $87,578.

Appellant's wife testified that she purchased the bonds at various times from funds given to her by her mother before her mother's death in 1950. She claimed these gifts were in cash, one being for $10,000 and others ranging from $50 to $1500, all of which she put in a lock box. She also received the balance of a bank account of her mother's which was in the amount of $2709.20.

Appellant's wife also testified about the "cash hoard." She said that after appellant's father died in 1961, he took his father's metal box from his father's apartment. At their home appellant opened the box and took out a paper sack containing money. He counted it — $65,355 in twenties, fifties and hundreds — and told her to put it in the lock box which she did the next day.

Appellant's sister, Helen, also testified about the cash hoard. She said that her father had a metal box which he kept in his closet and in which he kept large sums of money and family papers; that she had seen a paper bag — a grocery kind of bag — in which he kept the money; that at a family gathering before his death, her father told the family that everything in the box was to go to appellant, except some personal effects of the family; and that after her father's death, she saw appellant and his wife leave with the metal box.

The Government's evidence showed that the bond and stock purchases began a short time after appellant became the sole owner of the pharmacy and that they continued regularly, though intermittently, until the notice of tax audit of February 7, 1963; that the purchases then tapered off to a few isolated transactions; that there was a discrepancy in the statements made by the appellant's tax counsel to the Revenue Agent and the testimony at trial of other witnesses, especially about the time appellant had received the cash from his father; that the $2709.20 balance appellant's wife received from her mother's bank account was the approximate cost of three stock issues that were purchased in her name about a year later; that all the remaining stock was in the appellant's name; that the appellant's wife had also purchased $23,342 of bonds which was more than the cash she had received from her mother; that...