ORR, Circuit Judge.
Appellant stands convicted on four counts of an indictment charging wilful attempts to defeat and evade taxes due and owing from him and his wife for the years 1944 and 1945 in violation of § 145(b) of the Internal Revenue Code, 26 U.S.C.A. § 145(b).
I. Bill of Particulars.
Appellant first contends that the trial court erred in denying his motion for a bill of particulars made pursuant to the provisions of Rule 7(f), Federal Rules of Criminal Procedure.
II. Accessibility of Records.
Appellant asserts that the trial court erred in denying the defense access to certain books, papers and documents in the possession of the Government. The following facts are pertinent to consideration of this contention.
Long prior to the filing of the criminal indictment in April of 1951, appellant knew that the Government was investigating his income tax liability. The Bureau of Internal Revenue issued 90-day letters in 1949 and prior to February of 1950 a federal income tax lien in excess of $800,000 was placed against his property. Numerous conferences were had subsequent to January 11, 1950, with various attorneys and accountants representing appellant in tax matters. Power of attorney was executed by appellant to counsel of record in the present litigation as early as March 10, 1950, for the purpose of representing appellant in tax conferences with the Government. Other attorneys and accountants have represented appellant with the Treasury Department since early in 1949, powers of attorney filed with that department disclose.
During the course of its investigation, the Government acquired voluntarily from third parties certain books, papers and documents pertaining to businesses in which it was alleged that appellant had an interest.
After the filing of the indictment, no request was made by appellant's counsel for examination of the records not previously selected by Semenza until October 22, 1951, more than six months after the filing of the indictment. The Government agreed to allow inspection of these records only on the compliance with certain conditions: a sufficient showing of appellant's interest and consent of the third parties who had originally given the records to the Government.
Appellant first sought a court order on November 14, 1951, when a motion was made to inspect and take copies pursuant to the provisions of Rule 16, Federal Rules of Criminal Procedure.
The District Court properly exercised its discretion in denying these motions. As has been observed, at no time prior to the filing of the indictment was the freedom of appellant to examine the records in the possession of the Government in any way limited. At least three accountants representing appellant did in fact survey the material in question and one accountant was allowed to take all records he thought necessary for the computation of appellant's tax liability.
Subsequent to denial of his motion to inspect and take copies under Rule 16, appellant on November 23, 1951 filed a motion for production and inspection under the provisions of Rule 17(c), Federal Rules of Criminal Procedure.
The case of Bowman Dairy Co. v. United States, 1951, 341 U.S. 214, 71 S.Ct. 675, 95 L.Ed. 879, is not authority for the proposition that the trial court's denial of the motion under Rule 17(c) was an abuse of discretion, as appellant has argued. The Supreme Court in that case held that the trial court had the power to order the Government to produce certain documents. It did not hold that a refusal to grant the motion to produce would have been an abuse of discretion.
We think it important to stress, in considering whether denial of appellant's motions should be upheld, that the purpose of motions of this type is to expedite the proceedings and enable a defendant adequately to prepare his defense. No specific showing has been made by appellant as to how the denial of these sweeping motions calling generally for production of all records in the possession of the Government pertaining to businesses in which it was alleged appellant had an interest prejudiced the defense during the course of the trial. The court stated that appellant's counsel would be given ample opportunity during the trial to examine any document offered by the Government. Only once during the trial did appellant seek the production of particular papers, certain daily poker sheets from the 186 Club, and the request was granted.
We have referred to certain books, papers and documents given voluntarily by third parties to the Government, which were selected by appellant's accountant Semenza prior to the indictment and taken by him to his own office for use in computing appellant's tax liability. These records were given to Semenza upon the condition that he return them to the Bureau of Internal Revenue. Semenza later gave the records to Friedman, another accountant employed by appellant, who in turn gave the records to appellant's counsel. When subpoenaed before the grand jury, and later during the trial, Semenza said he was unable to produce the records because appellant's counsel would not return them to him.
Appellant contends that the trial court's order violated the Fourth and Fifth Amendments to the Constitution of the United States. We do not agree. The records given to Semenza were obtained by the Government from third parties rather than from appellant. Use of such records by the prosecution would not violate appellant's constitutional rights, even were it true that the third parties originally obtained the records from appellant illegally.
The case of People v. Minkowitz, 1917, 220 N.Y. 399, 115 N.E. 987, referred
III. Sufficiency of the Evidence.
The Government's case is based upon the net worth method, the underlying theory of which is that where a person's net worth at the end of a particular year is greater than his net worth at the beginning of that year, and such increment is not attributable to gifts, devises, loans, or other non-income sources, an inference may be drawn that the increase in net worth represents income to the taxpayer. The net worth computations of the Government tended to show that appellant had failed to report taxable income of $31,747.91 in 1944 and $11,747.04 in 1945. No attempt was made by the Government in this case to increase this sum by the amount of appellant's non-deductible expenses during the years in question. The Government not only relied upon numerous documents and the testimony of more than fifty witnesses to establish the increment in appellant's net worth during the years 1944 and 1945, but also extensively investigated possible non-income sources of net worth in order to exclude their effect. The question of the sufficiency of the evidence was raised by appellant's motion for judgment of acquittal made at the close of the case.
The net worth method of computing income may be used only where a taxpayer does not keep books or such books are inadequate in that they do not clearly reflect income. See 26 U.S.C.A. § 41. The jury was so instructed in the present case, and the evidence is sufficient to sustain a finding that appellant's records were inadequate. Ray Weaver, the special agent in charge of the Bureau of Internal Revenue investigation, testified, as an expert, that in his opinion the records of the enterprises in question were not adequately kept. Specific illustrations of such inadequacy were given by Weaver and other witnesses.
Appellant attacks the accuracy of the Government's computation of his starting point net worth, that is, his net worth on December 31, 1943. It was necessary for the Government to establish appellant's net worth at the beginning of the period during which the alleged evasion occurred in order to compare his increment in net worth with the income actually reported by appellant on his and his wife's tax returns. The fundamental question presented is what quantum of evidence must be offered by the Government before a trial court can properly submit the case to the jury. Whether sufficient evidence has been introduced in a given case will of course depend upon the facts of that particular case. In deciding whether the trial court properly denied appellant's motion for judgment of acquittal, the evidence must be taken in the light most favorable to the Government. Gendelman v. United States, 9 Cir., 1951, 191 F.2d 993. Proof of the exact amounts of unreported income is not required. The evidence is sufficient if the jury is justified in finding therefrom, beyond a reasonable doubt, that there has been
In the instant case the Government thoroughly investigated appellant's potential sources of net worth. It was not incumbent upon the prosecution to prove appellant's net worth to a mathematical certainty before the case could be submitted to the jury. As the Fourth Circuit said in Bell v. United States, 1950, 185 F.2d 302, certiorari denied 340 U.S. 930, 71 S.Ct. 492, 95 L.Ed. 671: "An estimate of the taxpayer's net worth as the means of determining his income is resorted to in the absence of accurate records which it is his duty under the statute to make and to preserve, and by its very nature it is an approximation; but it has been held in this and other jurisdictions to be an appropriate method to support a criminal prosecution under the statute * * *." (Emphasis added.) 185 F.2d at page 308. See also Gariepy v. United States, 6 Cir., 1951, 189 F.2d 459; Schuermann v. United States, 8 Cir., 1949, 174 F.2d 397, certiorari denied, 338 U.S. 831, 70 S.Ct. 69, 94 L.Ed. 505.
Reference was made during the trial to a certain safe deposit box in which appellant purported to keep money. Appellant contends that the possibility that substantial funds were kept in the box destroys the validity of the Government's net worth computations, yet appellant did not attempt in any way at the trial to prove that substantial funds were in fact kept in the box. Other evidence introduced at the trial, such as the fact that a judgment of $1800 obtained against appellant in 1938 was not paid until 1945, tended to show that appellant did not have substantial cash at the beginning of 1944. Requests by the Government to examine the contents of the safe deposit box were refused. If a defendant could prevent a case of this type from being submitted to the jury merely by stating he had further assets not taken into consideration by the Government, yet refusing to disclose them, enforcement of the tax evasion provisions of the Internal Revenue Code would be completely frustrated. Skillful concealment cannot be made an invincible barrier to proof. United States v. Johnson, supra, 319 U.S. at page 518, 63 S.Ct. at page 1240. More than mere speculation is required to support a motion for judgment of acquittal. The only affirmative evidence concerning the safe deposit box in question was the testimony of one witness that on December 3, 1943 he placed $17,000 in the box. Were we to assume that this money remained in the box on December 31, 1943, the Government's case would not fall since the net worth computations, including the additional $17,000 as part of opening net worth for 1944, would still show unreported income of $14,747.91 for the year 1944.
Reliance is placed by appellant upon the cases of Bryan v. United States, 5 Cir., 1949, 175 F.2d 223,
It is true, as appellant contends, that proof of increased net worth is only circumstantial evidence of taxable income.
Appellant argues in his reply brief that even if there was sufficient evidence to show a tax deficiency there was no evidence of fraud. A state of mind can seldom be proved by direct evidence but must be inferred from all the circumstances. A wilful intent to evade income taxes may be inferred from such factors as appellant's failure to include a substantial amount of income on his and his wife's tax returns, the failure to keep adequate books which would clearly reflect income, and the concealment of the ownership of property such as a safe deposit box, real estate interests, and business licenses. These factors, all present in the instant case, are but part of a general pattern of conduct engaged in by appellant from which the jury could infer the requisite intent. See Norwitt v. United States, 9 Cir., 1952, 195 F.2d 127, 132.
The Government contended during the trial that certain unincorporated business enterprises of the appellant were to be treated as sole proprietorships for tax purposes, while appellant contended that they were partnerships.
Two further contentions are made by appellant which pertain only to Counts Three and Four, the counts based upon the year 1945.
(1) Appellant asserts that in computing closing net worth for the year 1945 the Government improperly included $15,000 in markers or IOU's as cash of the B-R Smoke Shoppe, one of appellant's enterprises. Regardless of whether such markers should technically be treated as cash or accounts receivable, they were properly included as part of the assets of the business. Appellant can hardly rely upon the fact that the enterprise was engaged in the illegal business of bookmaking, and that therefore, under California law, the markers were unenforceable. It is obvious that appellant accepted markers as a substitute for cash from his customers because
(2) In computing closing net worth for the year 1945 the Government recognized a debt of $100,000 owed by appellant to Gene Schriber as part of the $175,000 purchase price of the Menlo Club. Appellant argues that actually a sum of $125,000 was owing at the end of 1945. His position is supported by the testimony of Schriber and what purports to be a page of the 1947 Menlo Club ledger, this ledger being part of the records given to appellant's accountant Semenza prior to the trial and subsequently impounded with the court clerk by order of the Court during the trial. The Government relies upon a photostat of a page of the 1945 ledger of the Menlo Club, stating that the original was part of the records given to Semenza, that this page was never returned, and that the alleged page of the 1947 ledger upon which appellant relies first made its appearance upon return of the records to the clerk of the court. Appellant seeks to explain the inconsistency in the ledgers by stating that the first payment of $25,000 was returned to appellant so that a check for the same amount could be substituted in order to enable appellant to keep a record of the transaction. It is said that the 1945 ledger is in error in that it treats this transaction as two separate payments. This was a question of fact for the jury; it was resolved against appellant.
IV. Admissibility of Evidence.
Complaint is made to a number of rulings by the trial court in regard to the admission and exclusion of evidence during the course of the trial. Appellant's contentions must be considered in conjunction with the salutary rule that the discretion of the trial court should not be disturbed in such matters unless the accused has been deprived of substantial rights. See Fed. Rules Crim.Proc. rule 52(a). Upon reviewing the alleged errors in the light of the aforesaid principle of law, we cannot say that the District Court erred. See United States v. Johnson, 1943, 319 U.S. 503, 519-520, 63 S.Ct. 1233, 87 L.Ed. 1546.
Witness Agnes Badobinatz was allowed to testify over appellant's objection, that in February of 1947 her husband, now deceased, told her that he was going to repay $5,000 he had borrowed from appellant. Appellant argues that since there was no testimony as to when the obligation was incurred the Government failed to lay a proper foundation for Badobinatz's testimony. Admission of this testimony, however, could not have been in any way prejudicial to appellant since the Government's final computation of appellant's net worth did not include this $5,000 for any of the years in question.
Witness A. V. Brady, an agent of the Bureau of Internal Revenue, testified concerning the investigation of appellant's tax liability and the preparation of the net worth statement upon which the Government's case was based. Appellant objects to Exhibit No. 183, the financial statement prepared by Brady to reflect changes in appellant's net worth during the years 1944-1946, which was admitted in evidence during the witness's testimony. It is urged that there was insufficient evidence to support admission of the statement. We have already held that the Government's evidence was sufficient to take the case itself to the jury. The net worth statement in question was constructed from all the evidence in the case. There was, therefore, sufficient evidentiary basis in the record for admission of the statement. Brady's estimate of appellant's federal income tax liability based upon the net worth computation was also admissible, since he was testifying as an expert witness.
During the trial appellant had sought to prove that at the end of 1946 he owed Robert Jeffress the sum of $50,000. The Court ruled that testimony by Jeffress's wife that in July of 1947 her now deceased husband told her of the debt and that part of it had been repaid was inadmissible. Since the jury was unable to agree in regard to the counts of the indictment pertaining to the year 1946, the propriety of
Appellant also contends that the Court unduly restricted the cross-examination of witnesses Schriber, Weaver and Brady. The trial court may in the exercise of its sound discretion limit the extent of cross-examination. Todorow v. United States, 9 Cir., 1949, 173 F.2d 439, certiorari denied 337 U.S. 925, 69 S.Ct. 1169, 93 L.Ed. 1733; Chevillard v. United States, 9 Cir., 1946, 155 F.2d 929. No abuse of discretion appears.
V. Instructions to the Jury.
Appellant urges that the trial court failed adequately to instruct the jury on the law applicable to the case in that the charge did not contain certain supplementary instructions which had been proposed by appellant.
The instructions of the Court as to the net worth method of proxing tax evasion and the instructions as to the methods of
The jury was also properly instructed as to the test for determining the validity of a partnership for federal income tax purposes. The instruction requested by appellant, requiring the jury to find a valid partnership if certain testimony was believed, unduly emphasized particular phases of the evidence and would violate the rule that the question is one of fact to be decided from all the evidence.
Appellant was not entitled to an instruction as to a possible inference to be drawn from the Government's failure to introduce in evidence all of appellant's business records in its possession. The records were originally prepared by appellant's business associates, were accessible to appellant prior to trial, and were at least surveyed by his accountants subsequent to the commencement of the Government's investigation of appellant's income tax liability. Ae we have previously noted, if any specific records had been thought beneficial to his case, appellant could have requested their production.
VI. Fair Trial.
After the jury had returned its verdict, appellant moved for a new trial. The only new proposition asserted was that appellant had been substantially prejudiced and deprived of a fair trial by reason of certain conduct on the part of the jury, the Court, the prosecuting attorneys, and agents of the Federal Bureau of Investigation. Appellant's counsel averred in a supporting affidavit that the following facts were learned by them subsequent to the verdict of the jury: that in the early stages of the trial one of the jurors had been told by a person unknown to appellant's counsel that the juror could profit by bringing in a verdict favorable to appellant; that the juror thereupon reported this conversation to the trial judge; that the trial judge discussed the matter with the prosecuting attorneys, but did not at any time inform appellant's counsel of the incident; and that the Federal Bureau of Investigation was notified, conducted an investigation, and made a report to the trial judge. It is appellant's contention that the juror to whom the remark had been made would be apprehensive of being suspected of taking a bribe if he voted for a verdict in favor of appellant, and would therefore be prejudiced against appellant. The motion for a new trial requested the opportunity for a hearing to adduce evidence concerning the various conversations among the jurors to whom the remark had been made, the trial court, and agents of the Federal Bureau of Investigation "in order to fully investigate the same to determine to what extent it had any effect upon the jury and was prejudicial to the defendant."
The District Court in denying the motion did, not abuse its broad power to grant or deny motions of this type, since there was a failure on the part of appellant to show prejudice. The very newspaper articles upon which appellant relies, and which were made a part of his motion, disclose that the juror believed the statement had been made to him in jest and only notified the trial judge because of his admonitions not to discuss the case. The judge also believed the statement had not been made seriously, but took the precaution of requesting an investigation by the Federal Bureau of Investigation, which in fact substantiated his belief that the remark had been made in jest. These circumstances do not indicate prejudice to appellant. It is obvious that if in fact an attempt had been made by persons associated with the defense to bribe a juror disclosure of the planned investigation would have greatly decreased the likelihood that such investigation would be successful. Appellant relied solely upon the affidavit of defense counsel stating what counsel had learned through the newspapers. If any jurors had received communications from the trial court or the Federal Bureau of Investigation of a nature which would tend to prejudice them against appellant, or had been subjected to other extraneous influences, such fact could have been appropriately
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"(b) Failure to collect and pay over tax, or attempt to defeat or evade tax. Any person required under this chapter to collect, account for, and pay over any tax imposed by this chapter, who willfully fails to collect or truthfully account for and pay over such tax, and any person who willfully attempts in any manner to evade or defeat any tax imposed by this chapter or the payment thereof, shall, in addition to other penalties provided by law, 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, together with the costs of prosecution."
III. Indictment and Information.
"Rule 7. The Indictment and the Information
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"(f) Bill of Particulars. The court for cause may direct the filing of a bill of particulars. A motion for a bill of particulars may be made only within ten days after arraignment or at such other time before or after arraignment as may be prescribed by rule or order. A bill of particulars may be amended at any time subject to such conditions as justice requires."
"Mr. Campbell: Well, we are in this position, your Honor — as Mr. Golden is aware, the Government's case here is what is termed a net worth case."
IV. Arraignment and Preparation for Trial.
"Rule 16. Discovery and Inspection
"Upon motion of a defendant at any time after the filing of the indictment or information, the court may order the attorney for the government to permit the defendant to inspect and copy or photograph designated books, papers, documents or tangible objects, obtained from or belonging to the defendant or obtained from others by seizure or by process, upon a showing that the items sought may be material to the preparation of his defense and that the request is reasonable. The order shall specify the time, place and manner of making the inspection and of taking the copies or photographs and may prescribe such terms and conditions as are just."
"Q. [By Mr. Campbell] At the time you obtained those records, isn't it a fact you were taken into a room where the records were and told you could have anything you wanted? A. That is true.
"Q. And you were the one who selected these particular records as they were the pertinent records having to do with the matter which you were then investigating, which was the liability of Mr. Remmer? A. That is right.
"Q. They were the only records you considered of any use to you in that connection? A. That's right."
IV. Arraignment and Preparation for Trial.
"Rule 17. Subpoena
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"(c) For Production of Documentary Evidence and of Objects. A subpoena may also command the person to whom it is directed to produce the books, papers, documents or other objects designated therein. The court on motion made promptly may quash or modify the subpoena if compliance would be unreasonable or oppressive. The court may direct that books, papers, documents or objects designated in the subpoena be produced before the court at a time prior to the trial or prior to the time when they are to be offered in evidence and may upon their production permit the books, papers, documents or objects or portions thereof to be inspected by the parties and their attorneys."
IX. Supplementary and Special Proceedings.
"Rule 41. Search and Seizure
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"(e) Motion for Return of Property and to Suppress Evidence. A person aggrieved by an unlawful search and seizure may move the district court for the district in which the property was seized for the return of the property and to suppress for use as evidence anything so obtained on the ground that (1) the property was illegally seized without warrant, or (2) the warrant is insufficient on its face, or (3) the property seized is not that described in the warrant, or (4) there was not probable cause for believing the existence of the grounds on which the warrant was issued, or (5) the warrant was illegally executed. The judge shall receive evidence on any issue of fact necessary to the decision of the motion. If the motion is granted the property shall be restored unless otherwise subject to lawful detention and it shall not be admissible in evidence at any hearing or trial. The motion to suppress evidence may also be made in the district where the trial is to be had. The motion shall be made before trial or hearing unless opportunity therefor did not exist or the defendant was not aware of the grounds for the motion, but the court in its discretion may entertain the motion at the trial or hearing."