United States v. Shavin, 13676.

• Decision Date: 26 July 1963
• Docket Number: No. 13676.,13676.
• Citation: 320 F.2d 308
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Nathan SHAVIN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

320 F.2d 308 (1963)

UNITED STATES of America, Plaintiff-Appellee, v. Nathan SHAVIN, Defendant-Appellant.

No. 13676.

United States Court of Appeals Seventh Circuit.

July 2, 1963.

Rehearing Denied July 26, 1963.

William T. Kirby, Anna R. Lavin, Chicago, Ill., for appellant.

James P. O'Brien, U. S. Atty., John Peter Lulinski and John Powers Crowley, Asst. U. S. Attys., Chicago, Ill., of counsel, for appellee.

Before SCHNACKENBERG and SWYGERT, Circuit Judges, and PLATT, District Judge.

PLATT, District Judge.

Defendant, Nathan Shavin, was tried to a jury on a two count indictment charging that he did wilfully and knowingly attempt to evade a part of his income tax due and owing the Government, by filing a false and fraudulent income tax return for the calendar years 1954 and 1955 in violation of Title 26 U.S.C. § 7201. The jury returned a verdict of guilty and the Court sentenced the defendant for a period of eighteen (18) months on each count of the indictment, such sentences to run concurrently; and a fine of $2,500.00 was imposed on each count, such fines to be cumulative. Motions for new trial, judgment for acquittal not withstanding the verdict, and in arrest of judgment were all denied. From this judgment the defendant has appealed.

The defendant and his wife filed joint tax returns. He was licensed to practice law in Illinois in 1926, and maintained offices at 10 North Clark Street, Chicago, Illinois. Most of his law business was in the personal injury field in which he represented plaintiffs. His return for the year 1954 discloses a gross income from business of $216,106.66, less expenses for business of $164,272.74, and after deductions and exemptions, a tax of $11,046.00 was paid on the net income of $33,291.97. The tax return for the year 1955 discloses total receipts from business in the amount of $240,910.20 and expenses in the amount of $198,856.30. After further deductions and exemptions a tax of $13,144.95 was paid on the taxable income of $37,405.56.

November 9, 1956, Mr. George Marseille, an Internal Revenue Agent, was assigned the 1953 income tax of the defendant for examination. In February 1957, he procured a consent extending the period of examination from the defendant and his wife. In March 1957, he started his investigation in Mr. Shavin's office. He requested and was given a copy of the defendant's tax returns for the years 1954 and 1955. The defendant also gave him the cash disbursement books, his list of fees received, and work papers for the returns of those years. Mr. Shavin gave him the use of a room in his office. During the course of the investigation Mr. Marseille requested the cash receipts book, but the defendant informed him that he had given him a list of all the receipts for the years 1953, 1954, and 1955; that he did not keep his bank deposit slips nor cancelled checks; and that the only retained records of fees and expenses were his case files which he allowed Mr. Marseille to use. In June 1957, a search was made in the court records in Cook County, the Chicago Index Corporation, a corporation keeping records of litigation where insurance was involved, and in the records of the various insurance companies to check the payments to plaintiffs in various cases and the payments to their attorneys, Shavin and Hamilton. Mr. Hamilton was not a partner of Mr. Shavin, but was employed by him. From the investigation it was found that Mr. Shavin had understated his income for 1954 in the amount of $28,104.50, and in 1955, $61,063.91.

The defendant in his brief relies upon errors which arise out of the sufficiency of the evidence; ruling on evidence, both admissions and exclusions; failure to grant a hearing on motion to suppress as untimely made; failure to suppress evidence; failure to declare a mistrial for misconduct of the prosecution; erroneous instructions; and the refusal to reassign the cause for trial.

In the oral argument, defendant's counsel has emphasized certain of these errors to which this Court will first give its attention.

The defendant assigns error for the reason that the trial judge denied defendant's motion to recuse himself. Judge Hoffman presided at the trials of the defendant when he was charged with the violation of § 1341, Title 18 U.S.C., commonly known as the Mail Fraud Statute. In the first trial which ended in July 1959, the jury disagreed, and at the second trial in the spring of 1960 the defendant was convicted but the case was reversed by this Court. United States v. Shavin, 7 Cir., 1961, 287 F.2d 647. The defendant insists that since Judge Hoffman twice ruled the evidence was sufficient to permit the case to go to the jury in the previous trials, and since there was fraud again charged in this indictment Judge Hoffman might unconsciously have become prejudiced against the defendant. The defendant's motion was not framed under § 144, Title 28 U.S.C. for change of venue because Judge Hoffman was biased. Whether Judge Hoffman had an opinion as to the guilt or innocence of the defendant, he showed no indication of prejudice either by any remark or ruling. It was his duty to permit the prior case to go to the jury when the Government made a prima facie case. None of the cases cited by the defendant make it mandatory for the presiding judge to disqualify himself under the facts presented here. We believe that in each case the judge should determine on the facts whether he should recuse himself. United States v. Guattrone, D. C.D.C., 1957, 149 F.Supp. 240; Parker v. New England Oil Corporation, D.C.D. Mass., 1926, 13 F.2d 497; United States v. Valenti, D.C.D.N.J., 1957, 120 F.Supp. 80. We do not believe that Judge Hoffman committed error in refusing to reassign this case.

The defendant next assigns error that the Government did not discharge its obligation to demonstrate a prima facie tax due for the years 1954 and 1955. The Government made proof that the defendant's returns failed to report fees which he received in 1954 of $28,104.50, and for 1955, $61,063.91. The defendant maintains that the Government should have investigated and considered defendant's expenses which were not included as deductions in his tax returns. These claimed expenses in 1954 amounted to $28,061.06 which left a balance of unreported net income of $43.44, and in 1955 amounted to $22,690.69, leaving a balance of unreported income of $39,108.63. The only proof that these were legitimate expenses of the defendant was that they were placed under the heading "office" in the cash disbursement books by Mr. Berk, who examined the defendant's checkstubs and noted the amounts under the item "office" regardless of whether they were personal expenses or office expenses. Berk came to the defendant's office from time to time to keep the records, and other employees of the defendant also posted expenses in the disbursement book. The defendant's attorneys evidently recognized the insufficiency of the records when they stated in defendant's brief:

"The various inadequacies and weaknesses of the 1954 and 1955 system of maintaining records in Shavin\'s office are no longer a problem because certified public accountants have been keeping records for some years (A. 314) and the parttime bookkeeper Berk, and the lawyer Hamilton, who prepared the returns in question, have worked on no returns subsequent to the 1955 return."

The defendant offered no receipts or cancelled checks to verify these items. Admittedly, some of them appear on their face to be personal expenses and are not deductible. For his position that the Government should have investigated and considered the deductions, the defendant relies upon Beck v. United States, 9 Cir., 1962, 298 F.2d 622, certiorari denied 370 U.S. 919, 82 S.Ct. 1558, 8 L.Ed.2d 499. He concludes from this case that the Government was required "to exhaust all leads suggested or provided by the taxpayer indicating income and deductions * * *." In Beck the taxpayer was charged with the failure to report income obtained by embezzlement. In order for the Government to prove that these funds were received as income and not as legitimate expenses, it was necessary that the Government prove that all funds received as expenses were not for legitimate expenses and therefore were embezzled funds. It is obvious in Beck that for the Government to prove a prima facie case it had to investigate and consider all leads provided by the taxpayer, to determine if any of the funds which he had failed to report were actually legitimate expenses.

The defendant also insists that the Beck case followed United States v. Stayback, 3 Cir., 1954, 212 F.2d 313, certiorari denied 348 U.S. 911, 75 S.Ct. 289, 99 L.Ed. 714, which also required the Government to investigate and consider all of the defendant's deductions. This is refuted when the Court there stated, 212 F.2d at page 317:

"The crux of the defendant\'s contention is that the government was charged under the law with the burden of establishing (1) defendant\'s gross sales were higher than reported; (2) his deductible operating costs; and (3) that his net income (after deduction of his operating costs from gross sales) was in excess of that which he had reported.

"Because of his view that the government was under the burden stated, the defendant made virtually no attempt to establish that his deductible operating costs exceeded those which he reported in his tax returns.

"Defendant has made his bed and he must lie in it. He was wrong in his view that the burden is on the government to establish his allowable operating costs and other deductions.

"* * * The government is not required to prove the negative, i. e., that the defendant did not have any other deductions."

Obviously, Stayback does not support the defendant's position. The rule which requires the Government to investigate and present evidence upon the claimed deductions applies in the case where the Government proves its case under the net worth theory but not...