United States v. Terrell
| Decision Date | 20 February 1975 |
| Docket Number | No. 74 Cr. 1058.,74 Cr. 1058. |
| Citation | 390 F. Supp. 371 |
| Parties | UNITED STATES of America v. William S. TERRELL, a/k/a James Terrell and Goldfinger, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Paul J. Curran, U. S. Atty., S.D.N.Y., New York City, for United States; Steven A. Schatten, Asst. U. S. Atty., of counsel.
Nancy Rosner, New York City, for defendant.
FINDINGS OF FACT
The defendant, William S. Terrell, is charged with willful evasion of his individual income taxes for the years 1968, 1969 and 1970, under counts 1, 3 and 5, respectively, in violation of 26 U.S.C., section 7201.
The tax evasion charges are based upon a claim that in each year the defendant received substantial taxable income, knew that taxes were due thereon, and that his failure to file returns was deliberate, intentional and with the unlawful purpose of evading the payment of taxes due.
The indictment further charges that with respect to each of the years 1968, 1969 and 1970, the defendant willfully and knowingly failed to file tax returns, counts 2, 4, and 6, respectively, in violation of 26 U.S.C., section 7203. Thus as to each year the defendant is charged with the lesser included offense under section 7203.
The government urges that upon the totality of evidence it has fully sustained its burden of proof beyond a reasonable doubt as to the essential elements under counts 1, 3 and 5, the willful tax evasion counts: (1) that the defendant received substantial taxable income upon which substantial federal income tax was due and owing from the defendant for the year in question; (2) that the defendant made an attempt to evade or defeat the tax due; and (3) that he did so willfully.
The government contends that in each of the tax years the defendant had substantial income derived from extensive illicit narcotic activities. The evidence received on this subject was limited strictly to the issue of whether or not the defendant had a source of taxable income during this period.
As to this first element, the government has met its burden that the defendant received substantial income as a result of his activities as a narcotics distributor. This was abundantly established by the defendant's admission to James Nauwens, a member of the Joint Task Force, that his largest income from narcotics activities was in the year 1969, when he made as much as $60,000 a day for about a four-month period. The defendant also acknowledged that he was good for more than $100,000 a week from a narcotics partnership operation in Detroit, Michigan. There was no evidence to impugn the integrity or the reliability of these admissions made by the defendant after he was fully advised of his constitutional rights.1
In addition, Ferdinand Hunt testified that he made deliveries of half kilo and kilogram packages of narcotics for the defendant, for which he picked up $18-20,000 for each delivery, following which he left the moneys at designated premises. Hunt's testimony was received under a grant of immunity. He sought at this trial to limit his services with the defendant up to the year 1967 in contrast with his sworn testimony at another trial previously conducted in this district in which Hunt was a defendant. Hunt then testified that his dealings with the defendant took place from 1967 through 1969. It was evident to this court, based upon Hunt's demeanor, that he was trimming his testimony by dating his activities with the defendant prior to the income tax years at issue in an effort to help the defendant. However, his prior sworn trial testimony may be and is considered affirmative evidence.2
Entirely apart from the foregoing, as already noted, the defendant admitted that the largest income derived from his narcotics dealings was in the year 1969. This rationally permits an inference that his narcotics activities existed for a reasonable time both before and after that date, absent a showing of material change in circumstances, and none has been shown to exist.3 An inference that defendant had income from narcotics dealings in 1968 and 1970, as well as in the year 1969, based upon his admission to Agent Nauwens, is warranted from his similar course of conduct in 1968 and 1970, discussed hereafter —large cash expenditures; continuous purchases of cars coupled with defendant's statements to Nauwens that he bought cars frequently to frustrate attempts by government agents at surveillance of his activities; the use of sham corporations and individuals as conduits for transactions in an effort to cover up that he was the true party in interest; and evidence that in 1968 and 1970, as in 1969, the defendant had no probable source of any other income except through his narcotics activities.
To further support its claim, the government relies upon the specific cash expenditure method to demonstrate that in each of the tax years the defendant expended, directly or through nominees, substantial sums for the purchase of homes, improvements on one of them, and the purchase of expensive cars, and that these expenditures indicate that defendant had taxable income in these years. In support of this contention, the government effectively negated that prior to 1968, the defendant had sufficient funds or access to nontaxable funds to account for those expenditures.
The evidence establishes that the last time the defendant filed a personal income tax return was in the year 1960, when he obtained a refund of $84.30; that for the years 1961 through 1966 he filed no personal income tax returns with the Manhattan District of the Internal Revenue Service; and that for the years 1967 through 1970 he did not file any personal income tax return anywhere, and that the Social Security records show no earnings of the defendant beyond the first quarter of 1963. In 1967, defendant opened a bank account, the balance of which never exceeded $175. An investigation by an Internal Revenue Agent into various banks in the area of the defendant's residences and business addresses revealed no other bank accounts in the name of the defendant, Zula Terrell (his mother), Frances Terrell (his wife), Olive Terrell, Olive McDonald, Teasla Taxi or Terrell Productions.4
The evidence also establishes that for 1966-1971 Frances Terrell, his wife, and Olive McDonald, referred to hereafter, whom he at one time described as a secretary and at another as a dependent, filed no personal income tax returns with the Brooklyn, Manhattan and Newark District Offices of the Internal Revenue Service. In a 1970 loan application the defendant represented that Frances Terrell was a housewife with no income.
In 1966 the defendant was arrested on two separate State charges and held in bail, which was reduced to $15,000 on each charge. He did not post bail for more than four months and remained in detention until bail was furnished upon collateral put up by a friend of his mother whose help had been solicited by the mother,5 and others.
The defendant was a lessee of store premises in the Bronx, New York, and a dispossess proceeding for nonpayment of three months' rent totalling $375 was commenced in July 1967 and a judgment by default was entered on September 8, 1967, awarding possession of the premises to the landlord. The inference is permissible that in 1966 the defendant was without funds to put up the bail required to effect his release or to pay the premium for bonds, and further that in September 1967 he was without funds to pay the modest three months rent of $375 for the store premises.
There is no contention that the defendant furnished any leads to the government as to any possible nontaxable source of income to account for his expenditures from 1968 through 1970.6 Here the government proved a likely source of income. It was not required to negate all possible sources of nontaxable income,7 particularly when defendant himself furnished no leads to the government, a matter within his peculiar knowledge.8
Following the defendant's dispossess in early September 1967, he thereafter commenced to purchase expensive automobiles to the end of the year. Upon the evidence it appears likely that it was at or about this period that defendant commenced his illicit narcotics activities and that the income derived therefrom accounts for the purchase of those cars. The court finds that as of December 31, 1967 the defendant did not have sufficient funds on hand to make the very substantial expenditures totalling almost $300,000 in the tax years in question.
In the year 1968 the defendant purchased seven automobiles, six Cadillacs and a Lincoln Continental, for an approximate net cost of $37,000.9 These purchases were made by the defendant either in his own name or in the name of Terrell Productions, Inc., a corporation dominated, controlled and wholly owned by the defendant, of which he described himself as "president and principal . . . ." The evidence warrants a finding that Terrell Productions, Inc., as well as Teasla Taxi, Inc., also used by the defendant, were sham corporations used by him to cover up or conceal that he was the real party in interest in various transactions and that he was the individual making the payments for various acquisitions. In the instance of Teasla Taxi, Inc., he acknowledged he was the owner of a fleet of thirty cars operated under its name. The payment for cars was generally made in cash. While the defendant did not personally hand over cash for a number of these transactions, the evidence is overwhelming that he was the source of the funds and the purchaser of the cars. He ordered the cars, signed various purchase orders for the cars, had control of them, and acquired them for the purpose of throwing off surveillance agents.
In all, the evidence establishes by the required degree of proof that for the year 1968 defendant received substantial income, approximately $35,000, upon which substantial taxes were due.
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US v. Ferranti
...of prosecution and harm to the state. See, e.g. 26 U.S.C. §§ 7201 (tax evasion), 7203 (costs of prosecution); see also United States v. Terrell, 390 F.Supp. 371 (1975) (defendant received substantial income upon which substantial taxes were due, and his failure to file returns was deliberat......