United States v. Stoehr

Decision Date05 September 1951
Docket NumberNo. 12000 C. D.,12000 C. D.
Citation100 F. Supp. 143
CourtU.S. District Court — Middle District of Pennsylvania





Arthur A. Maguire, U. S. Atty., Scranton, Pa., Thomas Wood, Jr., Asst. U. S. Atty., Lewisburg, Pa., Edmund Doyle, Dept. of Justice, Washington, D. C., for plaintiff.

Russell J. O'Malley, Scranton, Pa., Thomas D. Caldwell, Harrisburg, Pa., Charles J. Margiotti, and Samuel Goldstein, Pittsburgh, Pa., for defendant.

MURPHY, District Judge.

Defendant, found guilty by verdict of a jury of three violations of § 145(b), Internal Revenue Code, 26 U.S.C.A. § 145 (b),1 moves for a judgment of acquittal and in the alternative for a new trial.2 Defendant was charged with having wilfully and knowingly attempted to defeat and evade a large part of his income taxes3 due and owing to the United States of America for 1943, 1944 and 1945 by filing and causing to be filed4 a false and fraudulent income tax return for each year wherein he knowingly understated his net income and the amount of tax due thereon.

Defense counsel moved for judgment of acquittal at the end of the government's case in chief and again at the conclusion of all the evidence. Although opportunity was afforded no argument was made in support of either motion. Being obviously without merit, both motions were denied. In the consideration of the present motion5 we have carefully reviewed the entire record of testimony including the exhibits, viewing the evidence and all inferences reasonably deducible therefrom in the light most favorable to the government to ascertain whether or not there was substantial competent evidence to support the verdict.6 We are of course not here concerned with the weight of the evidence, the credibility of witnesses or conflicts in the testimony, all questions for the jury.7

It is unnecessary to recount the evidence at length. Suffice it to say that the jury could have found and, in support of their verdict we may properly assume, did find the following:

Defendant, as sole owner and proprietor, operated a retail household furnishing store at Scranton, Pennsylvania, under the name of Robert E. Stoehr, trading as Stoehr and Fister. Edith Passetti as bookkeeper was in charge of the books of original entry. August W. Tross, defendant's office manager, did all the posting, was in charge of the general ledger cards, and prepared defendant's financial statements. Donald C. Griffiths, a certified public accountant, prepared defendant's income tax returns. He never made an audit of or examined defendant's books of account but relied solely on information prepared by Tross and submitted by defendant or at his direction.

All of defendant's pertinent books, records and income tax returns for 1943, 1944 and 1945 are in evidence. Special Agent Earley and Internal Revenue Agent Watkins made an examination of the books of account and returns in question. They testified — and in this they were corroborated by the documentary evidence — that in each of the three years there were false entries in defendant's ledger cards, unsubstantiated by any entries in defendant's books of original entry, whereby sales were understated, purchases and expenses overstated; that defendant's returns grossly understated his net income and the tax due thereon. The agents computed and Watkins testified as to the exact amount of tax due and unreported in defendant's returns. Their testimony may be summarized as follows:

                                Sales          Purchases       Expenses
                               Omitted        Overstated      Overstated     Total
                    1943     $ 48,283.39     $118,784.06      $ 4,059.00    $171,126.45
                    1944       51,716.61       35,196.75        8,497.04      95,410.40
                    1945       71,187.40       32,847.57                     104,034.97
                             ___________     ___________      __________    ___________
                             $171,187.40     $186,828.38      $12,556.04    $370,571.82
                                                                            Net income
                             Actual Net Income      Reported Net Income     Understated
                    1943        $237,620.40             $ 66,493.95         $171,126.45
                    1944         174,039.03               78,628.63           95,410.40
                    1945         164,739.84               60,704.87          104,034.97
                                ___________             ___________         ___________
                                $576,399.27             $205,827.45         $370,571.82
                                                                           Actual Tax Due
                              Actual Tax Due         Reported Tax Due       Understated  
                    1943        $193,547.77               $ 39,261.70         $154,286.07
                    1944         137,311.05                 50,238.05           87,073.25
                    1945         128,651.46                 35,517.80           93,133.66
                                ___________               ___________         ___________
                                $459,510.28               $125,017.55         $334,492.98

In reporting a net income of $205,827.45 for the three years defendant understated correct net income by $370,571.82; in reporting a tax due of $125,017.55 he understated the correct amount by $334,492.98 (exclusive of penalties and interest).

In each of the three years after the true net income for the year was ascertained, two sets of financial statements were prepared, one set true for the eyes of defendant and Tross only, the other set false to be submitted to Griffiths for preparation of defendant's income tax return. At defendant's request and direction and with his knowledge, in order to reduce apparent net income and the amount of income taxes defendant would have to pay, false entries were made whereby a portion of inventory was dropped, purchases and expenses overstated, sales understated. Likewise defendant's living expenses, the purchase of $110,000 in United States government bonds, and the payment of $32,847.57 personal life insurance premiums, were disguised on defendant's records — personal expenses charged as business expenses, life insurance premiums charged as furniture, carpet and drapery purchases. Bonds were not listed as an asset or as a reduction in capital account.9 None of the foregoing was shown on the statements furnished to Griffiths.

In 1943 Tross explained to the defendant the items and amounts used (defendant's reason 15C). In 1944 and 1945 the mechanics were left to Tross' discretion. In 1944 Tross suggested the formation of a family partnership as a safe method. In 1945 the figures had to be revised three times before defendant was satisfied with the result.

As evidence of intent the government proved by Tross that in the defendant's returns for 1939 to 1942, inclusive, at defendant's request and with his knowledge and direction, the amount of inventory was deliberately understated in order to defeat and evade payment of defendant's income taxes for each of those years.

March 15, 1946, defendant sold the business. In early 1947 Griffiths made repeated requests for a balance sheet and reconciliation of capital account in order to prepare defendant's income tax return for 1946. When the information was not forthcoming, a return was prepared without the basic information and filed with a certificate that no audit of defendant's books of account was made.

In order to get the facts involved, a meeting was arranged with defendant and Tross. After much insistence he finally learned from papers then submitted that the figures furnished him for 1944 were false. When he confronted the defendant with this fact and asked if the same was true as to the other years, defendant broke down and admitted that the statements furnished Griffiths had been falsified to reduce defendant's income taxes; that while he did not know the amounts, he knew what it meant, felt very bad about it, and offered to pay Griffiths any price, any fee, if he would keep the matter quiet.

On the witness stand defendant admitted that he signed the returns, caused them to be filed and paid the tax stated to be due thereon; that the 1943 return was false; that in 1943 and 1945, sales and purchases were incorrectly stated; that they obviously varied from those shown in a private personal record prepared by Tross for defendant's eyes only and kept in his possession; that for the three years in question he paid far less taxes than were due; that Peterson, his accountant, advised him that for the three years there were taxes owed and unpaid of $278,000.

He insisted that he never examined more than the front page of the return; never compared the figures thereon with those in his possession, or checked the calculations made. Despite his many years experience and his close attention to details of his business he testified that he was not aware of what profits he made. He stated — and all the evidence is to the same effect — that Griffiths was in no manner responsible for the variance between defendant's records and his returns. He denied making any requests or giving any directions to Tross to falsify his records on his behalf, insisted he never had any knowledge that such things were done.

As to the accuracy of his books and records he relied on Tross. As to the correctness and accuracy of his returns he relied on Tross and Griffiths.

When Griffiths was unable to obtain the facts in connection with defendant's returns, prepared and filed by him and attested as having been correct, he reported the matter to the Group Chief of the Internal Revenue Office at Scranton, Pennsylvania, on April 23, 1947, advising that the defendant and Tross had admitted to him that the information furnished to him to prepare defendant's returns was falsified, and that he no longer represented the defendant. An investigation was commenced immediately. Defendant was indicted March 1, 1950.

In view of the foregoing, a jury would have no difficulty in finding that...

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