Wallace v. United States, 7958.

• Decision Date: 12 August 1960
• Docket Number: No. 7958.,7958.
• Parties: Braxton C. WALLACE, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

281 F.2d 656 (1960)

Braxton C. WALLACE, Appellant, v. UNITED STATES of America, Appellee.

No. 7958.

United States Court of Appeals Fourth Circuit.

Argued March 16, 1960.

Decided August 12, 1960.

COPYRIGHT MATERIAL OMITTED

Hal Lindsay, Atlanta, Ga., for appellant.

Robert A. Clay, Asst. U. S. Atty., Greenville, S. C. (Joseph E. Hines, U. S. Atty., Spartanburg, S. C., on brief), for appellee.

Before SOBELOFF, Chief Judge, BOREMAN, Circuit Judge, and BUTLER, District Judge.

BOREMAN, Circuit Judge.

Braxton C. Wallace, a lawyer and certified public accountant, was indicted for violation of the Internal Revenue Laws. The indictment contained four counts, the first count charging that Wallace combined, conspired, confederated and agreed together with one Maurice Puckett (who was indicted with Wallace, entered a plea of guilty to each count prior to trial and was sentenced) that they would prepare and cause to be prepared false and fraudulent income tax returns in violation of 26 U.S.C.A. § 145(b) of the Internal Revenue Code of 1939.¹ Four specific overt acts were charged to have been committed in furtherance of the conspiracy. The second, third and fourth counts charged the attempt to evade or defeat the income tax of Maurice Puckett for the years 1951, 1952 and 1953 by preparing, or causing to be prepared, false and fraudulent income tax returns and filing or causing said returns to be filed in violation of § 145(b) mentioned above. Wallace was tried and convicted on each of the four counts in the United States District Court for the Western District of South Carolina, Greenwood Division, and prosecutes this appeal from a denial of his motion for judgment of acquittal or, in the alternative, for a new trial under Rule 29(b) of the Federal Rules of Criminal Procedure, 18 U.S.C.A.

Specifications of error are directed at almost every phase of the trial proceedings in this case. With due regard for limitations as to time and space, we shall touch upon only those points which merit discussion.

Preliminarily, the evidence indicates that Wallace is a resident of Greenwood, South Carolina, where he, at the time of trial, had been a lawyer and certified public accountant for some thirty-five years. Wallace had known Puckett for about twenty-five years. During this period he had handled any number of legal matters for Puckett and had done such accounting work as Puckett had required, including the preparation (or supervision of the preparation) of all tax returns for Puckett, Puckett's family and the various corporations and other interests held by Puckett. Additional pertinent facts will be related in the discussion of the points of error.

Sufficiency of the Evidence

Maurice Puckett owned and operated a number of hotels by and through corporations created or purchased for that purpose. As evidence relating to all counts of the indictment, the Government offered proof of hundreds of instances in which personal items purchased by Puckett and members of his family were charged to operating and maintenance expense accounts of these various hotels without a subsequent charge against the personal account of Puckett. There is no dispute that these items were improperly handled and, under Section 145(b) of the Internal Revenue Code of 1939, any person who wilfully attempts to escape the payment of income taxes by this devious method is guilty of a felony.

Attempting to connect Wallace with these improper transactions, the Government produced a number of witnesses. Maurice Puckett stated that he employed Wallace "to keep my bookkeepers straight and make my tax returns". Puckett, when asked as to whether Wallace knew that personal bills were being paid by and charged to the hotel, answered that he and Wallace never discussed the personal bills and that Wallace was there to check the books. Government's witness, Hugh Shearouse, a former resident auditor with the Savannah Hotel Operating Company, hereinafter called S. H. O. C., in Savannah, Georgia, a corporation owned by Puckett, testified that in a conversation he told Wallace, "in my opinion Mr. Puckett was putting some things on the Savannah Hotel Operating books that would not — were not permissible"; that Wallace then turned to Puckett, who had just entered the room, and said: "Mr. Shearouse tells me that we are putting some items on the Savannah Hotel Operating books that he does not think that will get by". Mr. Shearouse qualified this statement by adding "or words to that effect". The Government also produced records of instructions given by Wallace to Mr. Russel Holmes, the resident auditor of S. H. O. C. at the time Puckett bought the stock of the company. Mr. Holmes died in 1952. These instructions directed Holmes to make certain entries, as well as telling him to continue using the same system of bookkeeping as had been used when the company was under different management. Mr. Joseph R. Harmon, the Special Agent of the Internal Revenue Service who investigated the case, stated that he did not see how Wallace could have given such instructions without being thoroughly familiar with the books. Another link in the chain of proof against Wallace was the testimony of E. M. Turlington, a certified public accountant who is the vice president and secretary of the hotel chain from which Puckett bought S. H. O. C. Turlington stated that if he had supervision of the accounting of a corporation, he would at least make a spot check of the books, and that in the instant case a spot check would have disclosed that purchased personal items were being charged to corporation expenses.

In defense Wallace contended he was employed to make tax returns from information furnished him either by Puckett or the resident auditors of the various hotels; that he did not supervise the auditors to the extent that he checked the books, and that his only responsibility was to answer any questions the auditors might have. He explained his instructions to Mr. Holmes by stating that these were given solely to indicate to Mr. Holmes how the new management wanted the books kept; that such instructions did not require any special knowledge of these particular books but only a knowledge of the bookkeeping system that was to be continued. He places, special emphasis on the fact that not one of the resident auditors who testified in the case said that he had ever received instructions from Wallace as to how specific items should be handled.

This point of error is not well founded. The evidence is, of course, conflicting as to whether Wallace had knowledge that personal items were being charged to hotel expenses. However, there is sufficient evidence from which a jury could have concluded that Wallace did have such knowledge. In determining the sufficiency of evidence to sustain a conviction, the question is not whether the evidence foreclosed all possibility of doubt in the mind of the court, but whether the evidence, construed most favorably for the prosecution, was such that a jury might find the defendant guilty beyond a reasonable doubt. Crawley v. United States, 4 Cir., 1959, 268 F.2d 808. See United States v. Brill, 3 Cir., 1959, 270 F.2d 525.

The Conspiracy Count

Count one of the indictment charges that from October 23, 1945, to and including the date of the filing of the indictment, "the defendant, Braxton C. Wallace, Certified Public Accountant and attorney for Maurice Puckett, did combine, conspire, confederate and agree together with the defendant, Maurice Puckett, that they would prepare and cause to be prepared false and fraudulent income tax returns in violation of Section 145(b), Title 26, Internal Revenue Code of 1939 * * *" (Emphasis supplied.) It will be noted that the count as laid does not charge Wallace and Puckett with conspiracy to prepare false and fraudulent income tax returns of Puckett but simply charges them with conspiracy to prepare unidentified false and fraudulent tax returns.

Five overt acts are charged to have been committed in furtherance of the conspiracy. The court instructed the jury that the first three of these overt acts, having been alleged or shown to have taken place more than six years prior to the filing of the indictment, were barred by the statute of limitations (26 U.S.C.A. § 3748, Internal Revenue Code of 1939). The court further instructed the jury that these three overt acts and the evidence adduced in support thereof could only be considered in determining whether or not such a conspiracy as that described in the indictment existed at the time such overt acts were alleged to have taken place; that Wallace could not be found guilty under Count One of the indictment unless the jury should find from the evidence beyond a reasonable doubt that, at the time of the alleged commission of overt acts four and five, such a conspiracy existed between the two defendants, and that overt acts four and five were committed by the defendants by the filing of a false and fraudulent income tax return for the taxable year 1951 with intent thereby to evade and defeat the tax. These instructions were given with defendant's consent.

The first overt act charges the defendants, Wallace and Puckett, with back-dating a deed, executed by a Puckett-owned corporation and conveying certain real estate in Charlotte, North Carolina, from one fiscal year to another in order to take advantage of a net operating loss carry-back, thus "defrauding the Government of tax on the gain on said sale of real estate". There was no evidence introduced on behalf of the Government to show that the mere back-dating of the deed would effect or produce a tax loss to the Government. In fact, the defendants' evidence tended to show that the alleged back-dating did not affect the tax result. Thus, because of manifest lack of proof, the alleged overt act does not aid or support a design or intent on the part of Wallace to conspire to prepare false and fraudulent tax returns or to evade the...