Opinion ID: 395207
Heading Depth: 3
Heading Rank: 2

Heading: The Net Worth Increase

Text: 14 Between December 31, 1971 and December 31, 1972, the relevant year for purposes of this appeal, Scott's net worth increased by approximately $21,000, giving him a total net worth at the end of 1972 of approximately $51,420. The evidence showed that most of this increase was reflected in increased savings: in 1972 Scott deposited $21,877 in savings accounts and certificates of deposit. The primary source for these deposits was Scott's paychecks. Indeed, the evidence showed that Scott did not cash a single paycheck in 1972. Instead, he deposited each paycheck in one of his checking accounts or invested them in certificates of deposit, savings accounts or interest bearing securities. Another source for Scott's investments was his reimbursement warrants for state travel, which totaled $2,657 in 1972. When he received them, he generally deposited or invested them: that year, he cashed warrants for only $265.82. 15 Having introduced proof that Scott's net worth increased between the close of 1971 and 1972, the government then traced Scott's expenditures during 1972. These expenditures would be added to the net worth increase to complete the government's proof of Scott's putative adjusted gross income. This proved to be a difficult task, however, as Scott left few records of his expenses. He wrote no checks to cash during 1972; he used his checking accounts only for expenses mandated by his divorce decree or for his savings and certificates of deposit. Neither did Scott write any 1972 checks for his ordinary living expenses, such as rent, food, clothing, entertainment and gifts for friends and family. Nor did Scott pay for his living expenses by credit card; in 1972 he used only a Holiday Travel House personal credit card for occasional travel expenses. 16 From this information alone, it can be inferred that Scott paid for almost all of his day to day expenses in cash, cash which he was not reporting as income. This inference is supported by Scott's state travel vouchers which showed that he usually spent cash when he traveled on behalf of the state. As previously indicated, however, he almost always deposited his travel reimbursements in his bank accounts rather than cashing them for future expenses. 17 Because Scott used cash for most of his expenditures in 1972, the government was forced to calculate the total amount of those expenditures. Taglianetti v. United States, 398 F.2d 558, 562 (1st Cir. 1968), aff'd, 394 U.S. 316, 89 S.Ct. 1099, 22 L.Ed.2d 302 (1969). The government's evidence showed that Scott spent at least $13,000 in cash during 1972. According to the government's analysis, however, only $3,400 of that total amount was from legitimate sources such as the reimbursement warrants for state travel that he cashed, other cash reimbursements and nontaxable gifts. 6 Almost $10,000 therefore came from undocumented sources. 18 Scott spent a large portion of the undocumented income on personal travel. Although he was running for reelection as Illinois Attorney General in 1972, he traveled to Ft. Lauderdale in January, Miami in February, the Bahamas in April, England and Scotland in May, Copenhagen, Nice and Nevada in June, California and Texas in July, Ft. Lauderdale, Miami and Orlando in August, New Orleans, Miami, Ft. Lauderdale, San Diego and Beverly Hills in November, and San Diego, Beverly Hills and Ft. Lauderdale in December. On only six of these trips did Scott pay for any expenses by check. Nor are there credit card records for any of the travel expenses he most likely incurred. Few of Scott's travel expenses on these trips were charged to or reimbursed by the state, 7 his campaign committee, Holiday Travel House, Inc., or the William J. Scott Host Fund. 8 Only the cash travel expenses that the government was actually able to document were added to the government's calculations of Scott's total cash expenditures and hence to the net worth schedules. Therefore, any undocumented expenditures Scott made during his 1972 travels increased his unreported income for that year over and above the government's proof. 19 In addition to documenting certain of Scott's travel expenses, the government offered evidence of other large cash expenditures. Scott paid cash for $3,000 worth of traveler's checks in 1972. 9 Additionally, on May 3, 1972, Scott purchased a stamp collection from Malden Jones, a retired news reporter living in Springfield, Illinois. He paid for this collection with a check for $650 and $1,950 in cash. At trial, Scott argued that the cash came from the paycheck he received on May 3, 1972. The evidence showed, however, that he deposited to his bank accounts, or directly invested, every paycheck he received in 1972. He deposited his paycheck of April 26, 1972, on May 3 or 4, 1972, to his account at Illinois National Bank in Springfield, Illinois. Gov't Ex. US-106A. The evidence also showed that in December, 1972, Scott paid for a $950 diamond ring in cash. Gov't Ex. US-156; E-16. 20 Many of Scott's ordinary living expenses, such as rent and clothing, were not included in the government's net worth analysis because they could not be documented. For example, although 1972 was an election year, there were no records of Scott's expenditures for clothing. Nor could any rent payments be traced, although the evidence suggested that Scott was living in the Outer Drive East apartment belonging to Leonard Golan. No expenditures for gifts for friends or family could be traced, nor could the government find any records indicating that Scott spent any money on his two children in addition to his monthly child support payments. 10 Finally, the government could trace no expenditures for household goods or services, personal entertainment, or personal care items. The jury could properly have concluded that Scott incurred some expenses for these items which would have added to Scott's net worth increase and expenditures, beyond what the government proved. 21 The only daily living expense the government included in its net worth calculations was food. Although the government was unable to document any of Scott's food expenditures, his state travel vouchers provided a basis for projecting such expenses. These state travel vouchers indicated that in 1972, Scott spent an average of $8.47 per day on food and drink for each of the 83 days he submitted vouchers. The government then applied this average meal cost to the 283 non-vouchered days for a total projected non-reimbursed food cost of $2,397.01. This amount was then added to the government's net worth schedule. Of course, anything Scott spent on food over that amount would have further increased his net worth and thus the amount of unreported income.