Source: http://il.findacase.com/research/wfrmDocViewer.aspx/xq/fac.19550603_0040096.C07.htm/qx
Timestamp: 2017-02-21 19:29:54
Document Index: 342380866

Matched Legal Cases: ['§ 145', '§ 145', '§ 145', '§ 145', '§ 2587', '§ 2497', '§ 145', '§ 145', '§ 145', '§ 145', '§ 145', '§ 145', '§ 145']

| United States v. Bardin
United States v. Bardin
UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,v.LAWRENCE P. BARDIN, DEFENDANT-APPELLANT.
We have awaited the decisions of the United States Supreme Court in Holland v. United States*fn1 and other "net worth" tax cases. Our consideration of the principles of law there formulated which we deem applicable to this case, followed by a divergence of views among the members of this court, has delayed the decision. The writing of an opinion was assigned to the author on April 14, 1955.
On January 1, 1946 defendant's net worth was $51,297.85, and on December 31, 1946, it was $799,610.67. Thus, the difference between the amounts on the first and last days of 1946, or the net worth increase for 1946, was $748,312.82. The addition of non-deductible expenditures for 1946 increased the latter figure to $758,713.94. This was defendant's net income for 1946 computed according to the net worth theory formula. Holland v. United States, 348 U.S. 121, at page 125, 75 S. Ct. 127. The net income reported by defendant on his return for that year is $528,824.56. He filed no returns prior to 1942. According to income tax returns filed with the Internal Revenue Collector, the defendant and his wife had a total income of $3,861.15 and net income of $2,311.15 for the year 1942. For 1943 they had a total income of $12,067.25 and net income of $1,602.25. For the next two years, defendant alone reported as follows:
1944 $8,314.85 None
1945 8,196.15 $3,873.30
These figures tend to show that defendant's income during prior years was insufficient to have enabled him to save any appreciable amount of money, and thus tend to corroborate the relatively low figure set by the government as defendant's beginning net worth. Holland v. United States, supra, 348 U.S. at page 133, 75 S. Ct. 127.*fn2 Defendant failed to file an estimated return for 1946 and delayed filing an actual return until May 27, 1947.
From the foregoing facts the jury was justified in finding that defendant was proved guilty as to count I beyond a reasonable doubt, though not to a mathematical certainty. No more was required. Holland v. United States, supra, 348 U.S. at page 138, 75 S. Ct. 127.
On the trial there was no instruction tendered by defendant which was refused by the court. In this court his counsel has not assigned error on the subject of instructions. He was represented in the trial court by a member of the bar of this court, whose competency has not been questioned herein. In this court, his present counsel has filed a brief and made an oral argument which attests not only to his competency, but also to the diligent effort which he made to properly present all questions deemed to be available on this appeal. Present counsel has not argued or briefed any point on the instructions.*fn3
3. Defendant contends that his prosecution under count II was barred by the three-year statute of limitations,*fn4 because that count charged a misdemeanor under section 145(a),*fn5 not a felony under section 145(b).*fn6 He relies on Spies v. United States, 317 U.S. 492, 63 S. Ct. 364, 87 L. Ed. 418.
Defendant says that the crux of the matter was defendant's refusal to pay his tax obligation, i. e ., his willful failure to pay said tax. The pertinent parts of § 145(a) provide:
"* * * any person who willfully attempts in any manner to evade or defeat any tax imposed by this chapter or the payment thereof, shall * * * be guilty of a felony and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than five years, or both * * *."
A failure to pay a tax, under § 145(a), and an attempt to defeat and evade one, under § 145(b), must both be willful. However, the difference between the two offenses is found in the affirmative action implied from the term "attempt" as used in § 145(b), the felony sub-section. As the court said in Spies v. United States, supra, 317 U.S. at page 499, 63 S. Ct. at page 368:
Accordingly, in count II, a willful and knowing attempt is charged in the affirmative action taken by the defendant to accomplish his purpose, i. e ., "by concealing and attempting to conceal from the collector of internal revenue, the nature and extent of his assets and the location thereof." Indeed, the court in Spies v. United States, supra, 317 U.S. at page 499, 63 S. Ct. at page 368, in illustrating what conduct would justify a basis for "affirmative willful attempt", listed, among others, "concealment of assets or covering up sources of income". In view of the fact that defendant was engaged in transactions which exposed him to prosecution under the federal price regulations, the following statement of the court in Spies v. United States, supra, also 317 U.S. at page 499, 63 S. Ct. at page 368, is pertinent here:
Judicial bouquets handed appellate-defense counsel for earned competency, are small simple solace to this defendant, now confronted with prison. Indeed, I cannot, as easily as the majority does, approve deprivation of liberty, nor countenance such facile stigmatizing with a criminal conviction. I also entertain grave doubts that the Government's fiscal affairs are in so delicate balance that a new trial would jeopardize that financial equilibrium. My concern, here, is whether there are present "plain errors or defects affecting substantial rights" which "may be noticed although they were not brought to the attention of the court." Rule 52(b), Fed.R.Crim.Proc. 18 U.S.C.A. I think Rule 52(b) supersedes Rule 30, Fed.R.Crim.Proc., 18 U.S.C.A. in appropriate cases. This appeal brings into sharp relief some of the ideas captured by Mr. Justice Frankfurter in a passage from Bollenbach v. United States, 1946, 326 U.S. 607, 615, 66 S. Ct. 402, 406, 90 L. Ed. 350, where, speaking for the majority he said:
"From presuming too often all errors to be 'prejudicial,' the judicial pendulum need not swing to presuming all errors to be 'harmless' if only the appellate court is left without doubt that one who claims its corrective process is, after all, guilty . In view of the place of importance that trial by jury has in our Bill of Rights, it is not to be supposed that Congress intended to substitute the belief of appellate judges in the guilt of an accused, however justifiably engendered by the dead record, for ascertainment of guilt by a jury under appropriate judicial guidance, however cumbersome that process may be." (Italics added.)
Previously our court paid homage to those principles [United States v. Levi, 7 Cir., 1949, 177 F.2d 833, 835, United States v. Raub, 7 Cir., 1949, 177 F.2d 312, 315, United States v. Haupt, 7 Cir., 1943, 136 F.2d 661] and now I perceive no justifiable reason for being deflected from them. "Strictly speaking," said Mr. Justice Harlan, when delivering the majority opinion reported as Davis v. United States, 1895, 160 U.S. 469, 487-488, 16 S. Ct. 353, 358, 40 L. Ed. 499, "the burden of proof, as those words are understood in criminal law, is never upon the accused to establish his innocence, or to disprove the facts necessary to establish the crime for which he is indicted. It is on the prosecution from the beginning to the end of the trial, and applies to every element necessary to constitute the crime." Having awaited, as my brothers particularly note, that quartet of decisions lead by Holland v. United States, 1954, 348 U.S. 121, 138, 75 S. Ct. 127, 137, it is well to recall this apt statement from that opinion:
A judicial poultice applied at our reviewing level may palliate the sting of error committed below, but such treatment falls far short of an actual cure attainable only by ordering a new trial. Bihn v. United States, 1946, 328 U.S. 633, 66 S. Ct. 1172, 90 L. Ed. 1485.
Wiborg v. United States, 1896, 163 U.S. 632, 658, 16 S. Ct. 1127, 1137, 41 L. Ed. 289, a precursor to current Rule 52, contains Chief Justice Fuller's trenchant observation concerning a certain question not properly raised and about which he wrote: "* * * yet if a plain error was committed in a matter so absolutely vital to defendants, we feel ourselves at liberty to correct it." That Rule 52(b) Fed.R.Crim.Proc., 18 U.S.C.A. is a restatement of existing law, see 6 Institute Proceedings, N.Y.Univ.Sch. of Law, 88 (Fed.R.Crim.Proc. with Notes, 1946). See also: Barron, Federal Practice and Procedure, Rules Edit., § 2587 (1951).
Merely recording recognition, without more, of the familiar and well settled postulate pervading all criminal prosecutions, i.e., the persuasion must be beyond a reasonable doubt, is insufficient in this appeal. Yet, I am also aware: "the truth is that no one has yet invented or discovered a mode of measurement for the intensity of human belief. Hence there can be yet no successful method of communicating intelligibly to a jury a sound method of self-analysis for one's belief." 9 Wigmore, Evidence, § 2497 (3rd ed. 1940). Despite Dean Wigmore's report of judicial struggles to articulate the definitive characteristics of "beyond a reasonable doubt" that phase remains the bench-mark in criminal cases. In Bardin's case the character of evidence spun on looms of computations powered by the net worth theory would have considerable impact on the minds of his jurors.
Since there is a grave possibility that jurors' reaction to reasonable doubt will vary with instructions given them on various aspects of the case there is an acute need for careful judicial guidance in cases of this sort. When instructions are insufficient in this, or any, net-worth-expenditure case undue strength is lent the prosecution's theory. I think this defendant has the right to have a jury weigh the nature of proof offered against him. The difference between theorizing and suspicioning, in these cases, is that in the former formidable working papers and a maze of figures casts an aurora of reliability around the government's accountants. Indeed, the Holland majority's admonition, 348 U.S. 121, 129, 75 S. Ct. 127, 132, should be pointed up, because at the trial level, in Bardin's case, the Government erected its case against him by coupling the expenditures theory with the net worth theory :
In this case for the tax year 1946 the government has reconstructed what it contends was income flowing into Bardin's hands during that period. It has attempted to form a bridge between the opening and closing of that taxable year by detailing intermediate changes through a summation of transactions. This merely means that a hypothesis is sponsored concerning Bardin's taxable income for 1946, and various changes are analyzed.But these computations involve drawing of inferences by the government's witnesses which are, in turn, passed on to the jury for further extraction of inferences. I am well aware of the difficulties implicit in prosecuting persons accused of violating § 145, but I do think when such estimates are submitted to a jury the fact-finders ought to be told about the method. My cautionary mood, here, is fairly well described by that which Mr. Justice Clark reports as the stimulus for taking and reviewing Holland v. United States, 1954, 348 U.S. 121, 124-125, 75 S. Ct. 127, 130:
To appreciate the impact upon the jury of the net-worth theory - and it is simply a theory, it becomes necessary to examine that technique under one phase of the statutory setting for violation of which this defendant was prosecuted. Section 145(b) of the Revenue Act of 1939, 26 U.S.C.§ 145(b) (1953), 53 Stat. 62-63 (1939) does not contain the words "fraud" or "criminal fraud." Bardin is prosecuted under that section for non-disclosure of alleged income, and the conduct with which he is charged must be willful. United States v. Murdock, 1933, 290 U.S. 389, 394-396, 54 S. Ct. 223, 78 L. Ed. 381. Spies v. United States, 1942, 317 U.S. 492, 499, 63 S. Ct. 364, contains some faint adumbration of criteria indicative of conduct proscribed by the words, "* * * any person who willfully attempts in any A to evade or defeat any tax * * *," appearing in § 145(b). From Spies v. United States, 1942, 317 U.S. 492, 63 S. Ct. 364, 367, comes this explanation of the dichotomy embraced by § 145: (i) "Willful failure to pay the tax when due is punishable as a misdemeanor" § 145(a) and, (ii) the serious and inclusive felony defined to consist of willful attempt in any manner to evade or defeat the tax. § 145(b)." Of course the language of § 145(b) outlawing attempts to evade taxes "in any manner" is sweeping enough to make it a felony to willfully omit income from a tax return which has been filed. United States v. Beacon Brass Co., 1952, 344 U.S. 43. The problem lies in proof of such an act by application of the indirect methods of computing income, i.e ., networth expenditure theory.
"An outgrowth of this net worth method is the 'expenditure' test * * *."
Cash on hand $110.00
sum of $55,000 evidenced by the
promissory note of the said Brower
in the principal sum of $55,000 and
which note is secured by 800 shares
of the pre- ferred stock and by 24,000
shares of the common stock of Cold Springs
Brewing Co., Lawrence, Massachusetts; also
secured by 3000 shares of common stock in
The Wal- nut Corporation, Boston, Mass.,
Creditors claims against Cold Springs
Brewing Co. purchased by Lawrence P.
Bardin for which he paid the sum of
$8,500, the claims amounting to $16,124,
Account with Thomson & McKinnon of Indianapolis, Indiana 450.00
Total Assets $309,810.00
Income Tax, Collector of
Internal Revenue, as shown
by return of Lawrence P. Bardin $481,000.00
or penalty. Furthermore, ...