Warring v. United States, 6930.

• Decision Date: 23 May 1955
• Docket Number: No. 6930.,6930.
• Citation: 222 F.2d 906
• Parties: Emmitt R. WARRING, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

222 F.2d 906 (1955)

Emmitt R. WARRING, Appellant, v. UNITED STATES of America, Appellee.

No. 6930.

United States Court of Appeals Fourth Circuit.

Argued April 22, 1955.

Decided May 23, 1955.

G. C. A. Anderson, Baltimore, Md. (Charles E. Ford, Washington, D. C., and Anderson, Barnes & Coe, Baltimore, Md., on brief), for appellant.

George Cochran Doub, U. S. Atty., Baltimore, Md. (James H. Langrall, Asst. U. S. Atty., Baltimore, Md., on brief), for appellee.

Before PARKER, Chief Judge, and SOPER and DOBIE, Circuit Judges.

DOBIE, Circuit Judge.

Emmitt R. Warring, an unmarried resident of Washington, D. C., was indicted in the United States District Court for the District of Maryland for federal income tax evasion in violation of Title 26 U.S.C.A. § 145(b). The indictment charged that Warring unlawfully attempted to defeat and evade income taxes for the year 1947 by filing with the Maryland Collector of Internal Revenue a false and fraudulent return stating his net income was $29,559.96, and the amount of tax was $12,005.31, whereas he knew his net income was actually $147,967.12 upon which he owed a tax of 104,087.45. A jury returned a verdict of guilty and the Court imposed a sentence of three years' imprisonment and a fine of $10,000 and costs; Warring has duly appealed to us.

Since the books exhibited by Warring to representatives of the Treasury Department were deemed worthless for the determination of taxable income, the Government utilized the cash disbursements method and the net worth method of ascertaining the taxpayer's true taxable income for 1947. Under both the cash disbursements method and the net worth method of proof, Warring's true income was shown to have been $163,000 for the year 1947.

Warring did not take the witness stand. The testimony of defense witnesses was largely limited to showing that Warring had on deposit at the Arlington Trust Company, Arlington, Virginia, as of July, 1946, $284.40; as of January, 1947, $285.82; and as of July, 1947, $287.25; that a building association made a loan on January 16, 1939, to Warring in the amount of $10,500; and that Warring had a balance in a building association account at the end of 1946 of $1.23 and at the end of 1947, $1.25. Also, that a member of the bar then representing Warring saw in 1939 "a great deal of money" in a safe of Warring's sister at her home on Massachusetts Avenue in Washington. The amount of this money was not established. The effect of the defense testimony, so the Government contends, was to increase, rather than decrease, Warring's unreported income for the year 1947.

The painstaking and able charge to the jury made by Judge Chesnut was deemed so fair to Warring by his counsel that they assert no error upon this appeal with respect to the charge.

Warring was a professional gambler engaged in the so-called "numbers" business, in which the betting, usually in small amounts, and the pay-off, are on a cash basis. The business requires considerable organization, including a "writer," a "runner," a "controller" and a "backer." Warring was a "backer," who receives the money bet and makes the pay-off, through intermediaries, to the winners.

The chief attack by Warring's counsel seems to be that the net worth statement and the expenditures statement, introduced by the Government, were inadmissible in evidence on the grounds that these statements were inaccurate, replete with errors, uncorroborated and unsupported by any substantial evidence, and that the Government failed to follow obvious leads, furnished by Warring, which would have clearly shown how faulty were these statements. We think there is no merit in these contentions.

Warring's income tax return for 1947 described his income as a single item, bearing the somewhat cryptic designation "money won gambling." No income was reported as dividends from securities, interest from bonds, mortgages or loans, or rents. The return failed to disclose that Warring had a business or occupation, nor did it include any business deductions, such as expenses or losses. The return was prepared by Burdine, a Deputy Collector of Internal Revenue for the District of Maryland. Warring showed no books to Burdine, who merely took the figures furnished to him by Warring, included them in the return and figured the amount of the tax accordingly.

Although taxpayers are required to keep records sufficiently adequate to show true income in order that the Treasury Department might be able to verify tax returns, the books of Warring consisted of "little black books," which were deemed practically worthless for the purpose of verifying his return. The pencil figures in these notebooks were limited to a date, a number and one figure purporting to represent Warring's net income or net loss on that day. The notebooks did not disclose the gross receipts of Warring on any day, or the amount of any losses paid out, or from what the receipts were derived, or to whom the alleged loss payments were made. The "little black books" were admitted in evidence over the Government's objection on the ground that there was no authenticating defense testimony explaining how these books were kept, who kept them, or that they showed or even purported to show Warring's true income for the year 1947. We examined these books on the bench.

The testimony of both Revenue Agent Ford and Special Agent Kennedy that these books were worthless for the purpose of ascertaining Warring's correct income was not controverted. Agent Ford testified that a backer, such as Warring, normally would have a slip from a so-called K book. This slip would show a nickname or symbol identifying the person betting with him, the amount bet and the number bet. From such slips, it seems evident, the Government could have verified any number which Warring claimed had hit and on which the bettor had been paid. No K books were introduced in evidence. There was no defense testimony that any K book slips, which Warring presumably kept, had been destroyed or were otherwise unavailable. The meagre figures in the little black book for the year 1947 purported to confirm the income reported in Warring's tax return.

Warring did not utilize normal business methods of handling his affairs. His business receipts were received in cash. He did not use a checking account at any bank until September 10, 1947, when he made a deposit of $12,000 in cash and checked out $11,750 on September 12, 1947, to pay for the so-called Belfiori property. On September 26, 1947, he deposited the sum of $25,000 in this account, but on the same day withdrew the sum of $24,500 to pay for the so-called Williams property. With the exception of these two deposits and two withdrawals in September, 1947, Warring never used a checking account in the year 1947 or in any prior year. He paid his Federal income taxes in cash. He purchased a Cadillac car in 1947 for the sum of $3,500 for which he must have paid cash. He bought real estate and paid for that in cash, i. e., the Shapero property (3933-35 Massachusetts Avenue, N. W.) in 1937, cash $15,119.35; cash deposit on Williams property in 1947, $2,500; cash purchase of David property in 1947, $15,090.39; and cash deposit of $500 in 1947 on purchase of the Belfiori property. Since he had no checking account, his living expenses must have been paid in cash.

Warring's method of handling the receipts from his business was for him to go to the Pennsylvania Avenue Branch of the Hamilton National Bank two or three times a week with a canvas bag containing coins and currency in small denominations. He took the bag to a teller's window, but, instead of depositing its contents, he converted the coins and currency into bills of large denominations. Warring then carried these large bills away from the bank, which made no record of the currency exchanges.

The currency and coins of a business would normally have been deposited in a taxpayer's bank account and drawn against by checks. The fact that Warring did not deposit them but instead converted them into bills of large denominations could certainly have been properly considered by the jury as a highly suspicious circumstance.

On July 2, 1948, Revenue Agent Ford, to whom Warring's tax returns had been referred for examination, went to Warring's home to obtain information with respect to his income for the years 1946 and 1947 and was shown the "little black books." Ford told Warring that these books were inadequate and inquired whether he had any other books or records. Warring replied that he did not.

Agent Ford then requested permission to inventory Warring's safe deposit box. Warring stated that he would have to talk to his lawyer first. After making a telephone call, he stated that he would open the box.

Agent Ford and Agent William C. Albrecht inventoried Warring's safe deposit box at the Hamilton National Bank on the same date in the presence of Warring, and found cash totaling $250,000 in currency. The currency consisted of two hundred and forty $1000 bills and one $10,000 bill. There were no papers or documents of any kind in the safe deposit box — nothing except the hoard of cash.

In the course of a conference held on July 15, 1948, and in the presence of Warring's attorney, Agent Ford asked Warring whether any part of the $250,000 found in cash in the safe deposit box pertained to his winnings during the year 1948. Warring said "Yes" and produced his black book for the year 1948, which purported to show that Warring's earnings from January 1, 1948, to and including May 28, 1948, were $110,754. This was at the rate of approximately $22,000 a month. May 28, 1948, was the last day on which Warring had entered his safe deposit box prior to its inventory on July 2, 1948, so no cash could have been deposited or taken from the box between May 28, 1948, and July 2, 1948, and the contents of the box must have remained the same during that period. Warring also told the Revenue Agent on that...