DRIVER, District Judge.
Tony Legatos and John Glynn were indicted April 4, 1951. The first count of the indictment charged that defendants attempted to defeat and evade a large part of Legatos' income tax for the year 1944 by understating the partnership and business receipts of Legatos and, in the case of Legatos, by filing a false and fraudulent income tax return in which the amount of his net income was substantially understated, all in violation of Title 26, U.S.C. § 145(b). The second and third counts were similiar to the first count in all respects except that, they charged attempted evasion of Legatos' income taxes for the years 1945 and 1946, respectively.
The trial began May 18, 1953, and was concluded June 27, of the same year.
During the period covered by the indictment, appellant Legatos, a resident of Sacramento, owned numerous restaurants, bars and taverns in that city and
Appellant Legatos asserts nine specifications of error. We group and rephrase them as follows:
Appellant Glynn adopts all of Legatos' specifications of error and advances several of his own. They present, principally, the contention that, the evidence is not sufficient to support the verdict as to Glynn. We shall first discuss Legatos' specifications and then consider the contention urged by Glynn.
(1) The Indictment.
Prior to trial, Legatos moved to dismiss the indictment, and for a bill of particulars, and the motions were denied. He complains that he was not reasonably and fairly informed of the nature of the charges, or of the methods which the Government proposed to use to establish them. The indictment was in the form commonly used in tax prosecutions. The first count, which we take as typical, alleged that Legatos attempted to defeat and evade a large part of his income tax for the year 1944 by understating his partnership and business receipts and by filing a false and fraudulent tax return wherein he stated his net income to be $40,449.26, and that the amount of tax due and owing thereon was the sum of $20,903.47, whereas, as he well knew, his net income for that year, computed on the community property basis, was the sum of $71,607.75, upon which net income he owed the United States an income tax of $45,150.51. The count sufficiently stated the essential facts constituting the offense charged.
(2) Voluntary Disclosure.
Legatos contends that he was immune from prosecution because of his voluntary disclosure of the understatement of his income and tax liability in compliance with an announced policy of the United States Treasury Department, which had not at that time been withdrawn.
On May 2, 1947, Special Agent Hubbard of the Bureau of Internal Revenue was assigned to investigate the Legatos case. On May 6, he interviewed Blanas (partner of Legatos and Glynn in Vallejo enterprises as stated above) and took a sworn statement from him on May 14. June 5, Legatos, on advice of an attorney, employed accountant Swigard, and on June 9, Swigard called on Bakkan and offered to cooperate with him fully and to furnish him detailed information of Legatos' financial affairs. June 13, Hubbard asked Glynn for books and records of the Vallejo establishments
From the foregoing recital, it is apparent that the voluntary disclosure made by Legatos on July 9, came long after investigation was under way, and was insufficient to afford him immunity from prosecution.
(3) Testimony of Witness Blanas.
Legatos, in partnership with Glynn and Blanas, operated the States Club in Vallejo. Blanas, a witness for the Government, testified, over objection, regarding a conversation with Legatos in that establishment sometime during the year 1945. Blanas testified they discussed how they could get rid of the brandy and rum "that wasn't moving fast"; that Blanas said he would refill the bottles a few at a time and get rid of them; and that Legatos told him to be very careful and not to fill too many. The Court admitted the testimony for the limited purpose of showing "the connection of Mr. Legatos with the Club." It is now argued that, since it was not disputed that Legatos, as one of three partners, was part owner of the club, the testimony was not material to any contested issue and was prejudicial in that it tended to show commission by Legatos of an offense not charged in the indictment. Legatos did not question his being a partner in the States Club, it is true, but he did strenuously contend that he was not criminally liable for his partners' acts in connection with its operation in the absence of a showing of personal participation or knowledge on his part. Legatos' residence and main office were in Sacramento.
(4) Testimony of Witness Hubbard.
Beltran C. Hubbard, an agent of the Bureau of Internal Revenue, testified at length as an expert witness for the Government concerning the books and records which Glynn had given him, and with reference to numerous tapes from the adding machines in Hambers Cafe, the Casa Blanca, and the States Club. The purport of his testimony was that the tapes had been cut and manipulated so that they did not show all of the receipts taken in through the machines. He voiced the conclusion that other receipts had been withheld from the books. It was the position of the Government that, since Legatos was a partner of Glynn and Blanas and they were shown to have been acting in concert, Hubbard's testimony was admissible against both Legatos and Glynn. The Court, however, rejected that theory and in the presence of the jury ruled that the testimony would be admitted only against Glynn, but remarked that the Government could again offer it against Legatos or move to have it apply to him later on in the trial. With some few exceptions, all of the evidence, both oral and documentary, offered by Hubbard was admitted on that basis. A considerable volume of other evidence was admitted as to Legatos only and, after both sides had rested, government counsel moved that all of the evidence be considered admitted against both defendants. The Court heard the argument of counsel and denied the motion in the absence of the jury. Legatos now complains that, the Court did not make it sufficiently clear to the jury that Hubbard's testimony for the most part was to be considered only against Glynn. In view of the large number of instances throughout the protracted trial in which evidence was admitted against one defendant and not against the other, and the number of documents and the volume of testimony involved, it would have been a Herculean, if not an impossible task, for the trial judge to give the jury detailed instructions as to just what evidence was to be considered against which defendant. During argument to the jury by Government counsel, when Legatos' attorney made the objection that, testimony of Blanas admitted only as to Glynn was being improperly applied to Legatos, the Court interrupted the argument to give the jurors a cautionary instruction to the effect that they should consider against each defendant only the evidence admitted as to that defendant.
(5) Sufficiency of Evidence on Net Worth Basis.
In his brief, Legatos argues that the evidence was not sufficient to warrant submission of a net worth case
(6) The Court's Instructions to the Jury.
Legatos specifies as error the Court's omission to give his requested instruction that, in using the net worth method the Government had the burden of proving beyond a reasonable doubt the wealth of Legatos at the starting point of the net worth period. The Court in its instructions explained the net worth method and stated the circumstances in which it properly could be employed. The Court further fully and correctly instructed the jury as to the elements constituting the crime charged and informed the jury that the Government had the burden of proving every element of the crime beyond a reasonable doubt. It was not necessary for the Court to repeat his instructions as to the Government's burden of proof in explaining the methods of proof open to the Government. Here, particularly, there was no call for such emphasis in view of the fact that the wealth of Legatos at the starting point which the Government used was in accordance with the amended tax returns filed by Legatos and sworn to be correct both by him and by his accountant.
Legatos also complains of the following instruction which the Court gave to the jury:
The contention that the instruction was prejudicially erroneous is based principally upon Morissette v. United States, 342 U.S. 246, 72 S.Ct. 240, 96 L. Ed. 288, and Wardlaw v. United States, 5 Cir., 203 F.2d 884. The instruction held to be erroneous in the latter case was as follows:
The Court reasoned that the intent, which is an element of the offense, is not inherent in the act itself but is a specific intent involving "bad purpose and evil motive". Wardlaw v. United States had
In the Morissette case the defendant picked up some spent bomb casings on a government practice bombing range and was convicted of theft of government property. His defense was that he believed the casings had been abandoned and that he did not intend to steal them. The trial court in effect rejected the proffered defense and instructed the jury [342 U.S. 246, 72 S.Ct. 243]:
Defendant's counsel contended that the taking must have been with a felonious intent, but the trial court ruled, "That is presumed by his own act". A considerable portion of the Supreme Court's opinion is taken up with a discussion of the question whether specific intent was an essential element of the offense charged. Having reached the conclusion that it was, the Court observed that the case was tried on the theory that "if criminal intent were essential its presence (a) should be decided by the court (b) as a presumption of law, apparently conclusive, (c) predicated upon the isolated act of taking rather than upon all the circumstances." The Court regarded each of the three assumptions, (a), (b), and (c), as erroneous. Where intent of the accused is an ingredient of the crime charged, it said, its existence is a question of fact which must be submitted to the jury, and the question may not be withdrawn or prejudged by instruction that the law raises a presumption of intent from an act. And a presumption which would permit but not require the jury to assume intent from an isolated fact, would prejudge a conclusion which the jury should reach of its own volition. The essence of the Morissette case, then, is that, the existence of criminal intent is a question of fact to be determined by the jury from all the attendant circumstances, and the jury should not be instructed that such intent must or may be presumed as a matter of law from an isolated fact.
On April 11, 1955, after the instant case was submitted, this Court decided Bloch v. United States, 221 F.2d 786. Based upon the authority of the Wardlaw and Morissette cases, it held that the giving of the following instruction constituted plain error which the court should notice on its own motion under Rule 52(b) of the Federal Rules of Criminal Procedure:
There the instruction in which the trial court defined the term "wilfully"
On the other hand, in Bateman v. United States, 9 Cir., 212 F.2d 61, 69, this Court came to the conclusion that an instruction in a tax evasion case that "`the law presumes that every man intends the natural and probable consequences of his own voluntary acts'" was not prejudicially erroneous for the reason that, considered as a whole the trial court's instructions on intent "correctly stated the law, were plain and understandable, and left no room for doubt in the minds of the jurors."
We think the same reasoning may be applied to the instant case. In the first place, directly contrary to the trial court's position in the Morissette case, here the judge instructed the jury that, "The question whether, under the indictment, there existed an intent to defraud the government of the United States is solely a question of fact to be determined by the jury." The jury was also told that intent was an essential element of the crime; that it was to be determined by the jury from consideration of all the facts and circumstances in evidence; and that guilty knowledge and "specific wrongful intent" on the part of the taxpayer to evade payment of the tax must be established.
It is our conclusion that, considered as a whole the Court's instructions on intent and wilfulness clearly and correctly
Sufficiency of the Evidence as to Glynn.
No conspiracy between the defendants was charged in the indictment and the District Court consistently ruled that concert of action between them was not established by the evidence. During the protracted trial, evidence was admitted on a separate, individual basis, and only evidence with which a defendant was shown to be connected was admitted against that defendant. Glynn rested at the conclusion of the Government's case in chief and the Court ruled that all evidence thereafter introduced, including the testimony of Legatos and his other witnesses was not admitted as to Glynn. The only evidence received against Glynn was the testimony of Blanas and Hubbard, which covered the operation and disposition of the receipts of the Vallejo establishments, and the partnership tax returns. The original and amended tax returns of Legatos, the net worth evidence, and other evidence that Legatos understated his income in his income tax returns, are not in evidence at all so far as Glynn is concerned. He is accused and convicted of wilfully attempting to defeat and evade a large part of the income tax due and owing by Legatos to the United States for the calendar years 1945 (second count) and 1946 (third count), but there is no supporting evidence which properly may be considered against him that Legatos had any taxable net income in 1945 or 1946; or that Legatos in either of those years owed any Federal income tax. So far as the evidence against Glynn is concerned, Legatos may have filed returns in 1945 and 1946 in which he correctly reported his income and made timely payment of all of his tax due and owing to the United States. Glynn's conviction cannot stand without substantial evidence that he had the criminal intent stressed as essential in the Wardlaw and Bloch cases, to evade or defeat the payment of income tax which Legatos was obligated to pay the United States. The Government had the burden of proving that some income tax was due from Legatos for the years involved.
Appellee argues that the evidence is sufficient to support Glynn's conviction as an aider and abettor of an attempt to evade Legatos' income tax. That may have been the theory on which Glynn's case was submitted to the jury as the trial court gave an instruction to the effect that, persons who knowingly and with criminal intent aid and abet in the commission of an act constituting an offense, or who advise and encourage its commission, are regarded in law as principals and are equally guilty with those who directly and actively commit the offense. The evidence was not sufficient, however, to support conviction of Glynn as an aider and abettor. To justify conviction on that basis, it must appear that the offense charged was committed by someone other than Glynn. If no crime has been committed, no one can be convicted as an aider and abettor.
There is no evidence admitted against Glynn that Legatos attempted to evade payment of his income tax.
Affirmed as to Legatos and reversed as to Glynn.
"Wilfully in the statute, which makes a willful attempt to evade taxes a crime, refers to the state of mind in which the act of evasion was done. It includes several states of mind, any one of which may be the willfulness to make up the crime.
"Willfulness includes doing an act with a bad purpose. It includes doing an act without a justifiable excuse. It includes doing an act without ground for believing that the act is lawful. It also includes doing an act with a careless disregard for whether or not one has the right so to act."
"Intent is an essential element in the perpetration of the offenses charged against the defendants in the indictment. Intent may be shown by proof of facts and circumstances from which it may be reasonably and satisfactorily inferred. In determining whether a defendant had such intent, you should take into consideration all the facts and circumstances in evidence, the acts and conduct of such defendant, and his motives, if any, disclosed by the testimony, for doing or not doing the act or acts charged in the indictment as shown by the evidence; and if from all the facts and circumstances in the evidence there is no other reasonable conclusion than that he is guilty, you should so find.
"One of the essential elements of the proof of attempt to evade income tax or the payment thereof is knowledge on the part of the taxpayer of the existence of the obligation; that is, of the tax due and a specific wrongful intent to evade the payment thereof. If you find from all the evidence that the defendant Legatos did not have actual knowledge of the existence of an obligation on his part to pay any income tax in addition to the income tax reported by him in his original income tax returns, and that said defendant did not have a specific wrongful intent to evade such obligation, then you should find the defendant Legatos not guilty.
"Fraud is an actual intentional wrong-doing and the intent required is a specific mental determination or purpose to evade a tax known or believed to be owing. Before you can convict the defendant Legatos, you must find from the evidence beyond a reasonable doubt that any income tax return involved in this indictment was not only false and fraudulent, but that by such false and fraudulent return said defendant committed an actual, intentional wrong-doing and that the filing of said return was with the intent on his part to evade a tax owing or believed to be owing to the United States.
"The word `wilful' when used in a criminal statute generally means an act done with a bad purpose, but the word is also employed to characterize a thing done without ground for believing it is lawful, or conduct marked by disregard whether one has the right so to act.
"The word `wilfully,' as used in this Statute, means more then [sic] intentionally or voluntarily, and includes an evil motive or bad purpose, so that evidence of an actual bona fide misconception of the law, such as would negative knowledge of the existence of the obligation would, if believed by the jury, justify a verdict for a defendant. It is for the jury to say whether a defendant had the requisite criminal intent, that is whether he wilfully and knowingly attempted to defeat and evade the income tax."