# Petition — Allen v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_1261%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1976 - **Citation:** 423 U.S. 1072 ## Text LF ofa m MICHAEL RODAK, JR., CLERK ESOT I ASAE In the Supreme Court of the United States October Term, 1975 No. A- 267 . JAMES L. ALLEN, Petitioner, vs. UNITED STATES OF AMERICA, PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT James L. Allen Post Office Box 8380 Canton, Ohio 44711 (216) 452-6411 la Propria Persons (i) Page TABLE OF CONTENTS OPINIONS BELOW ececes eoeeeoeeeeneeneeneeee#eee l JUMESDEGESOMecceceeeeeeeeeseeeeeeeeees l QUESTIONS PRESENTED .ccveeecceccevees 2 CONSTITUTIONAL PROVISIONS AND STATUTES INVCLVED .ecccccceveecvesese 4 STATEMENT eoeeeveeeeeeneeneneeneerteeevneeeeeeee 6 ARGUMENT eoeeeoeeeeenreenrteenepe#enseeeeeeeneeeneee ee 9g CONCLUSION eeeneveeeteeeeeenreeeeeeeeeee 46 TABLE OF CONTENTS OF APPENDIX APPENDIX A Gpinion of United States Court of Appeals for the Sixth Circuit ... la APPENDIX B Extension of Time in Which to File Petition for Writ of Ceortiorari coccccceocceccsceseseee§ |B APPENDIX C Portion of Audit Technique Handbook for Internal Revenue AGENTS coccccccccccccccsccseccscscsee IC APPENDIX D Memorandum of Agent of Initial Interview ceccccccccccccscccesere Id caw wes Papal SBD ae ED tg BPE a NA. ORE SE San A MABEL. | napa mee Fm * (ii) TABLE OF CITATIONS Cases: Alderman Ve U.Se, 394 US l6Sccccceercssoan Avery v. \la. 308 U.S. 444, 446 60 S.Ct. 321,322 84 L.Ed.377 (1940) eeeererefeneee#ee#ke#*ee#8#e#8eeee#e#e *eeee 38 Baines ve U.S. 426 F 2d 833 (5th Cife 1970)... oeeweeeee oeeveeeeee 26 Beasley v. U.S., 491 F 2d 687 (1974) oeeeveeeeeeevreeereeeeeevneeeeeeeeaeeenee 33-38-39 Beckwith v. U.S. U.S. ; S.Ct. U.S.S.Ct. #74-1243 Cert granted 6/16/75 ...seee 12-14017-18-42 Boyd v. U.S. 116 U.S. 616, 6 S.Ct. 924, 1886 cccccccccccee ee - 13 Calif. v. Green 399 U.S. 149 (1970). 30 Dennis v. U.S., 384 U.S. 855 (1966) eee eevee eeeeee oeeeoeeeeeeeeeeee ee 23-25 -31 Dutton v. Evans, 400 U.S.74 (1970).... 30 Erckman v. U.S., 40 L~-Ed 2 115,117.... 24 Flemister v. U.S., 260 F 2d 513 (5th Cir. 1958) e*e@eeneeeee#e#ee#ee#ee####e##e#e## @ 26 Glasser v. U.S. 315 U.S. 60, 62 S.Ci, . 457, 86 L.Ed 680 (1942)....ceeeeee 38 Green v. U.S. 411 F 2 588 (10th Cir)... 14 Holland v. U.S., 348 U.S. 121 27,43 (iii) Cases, continued: Page Jencks v. U.S., 353 U.S. 567, 77 SeGt. ee 32 Mathis v. U.S., 391 U.S.1, 20 L. Ed 2d 381, 88 * Tr Tre rerrrrerrye 14 McMann v. Richardson, 397 U.S. 759, 90 S.Ct. 1441, 25 L.Ed 763 (1970).. 39 Miranda v. Arizona 384 U.S. 436....passim : Olender v. U.S., 210 F 2d 795 (9th Cir. EEE EEE 30 Orozco v. Texas, 394 U.S. 324 ..c.e22- 14 Powell v. Alabama 287 U.S. 45 53 S. Ct. SS 77 LeBS 196 (ISSA) ecccccccce 3B Steele v. U.S., 222 F 2d 628 (5th Cir. 1955) *oeereeenveeeeneeneeeeeneeee 27 U.S. v. Ball, 428 F 2d 26 (6th Cir. 1970) eoeeeeene@ensee#e#e#e#neee#ee*ee#ee#ee#e#ee#eee#eee#e#*#e##ee 21 U.S. v. Burke, 279 F 2d 1082 (7th Cir. 1971) oeeeoeeee eee e ee ee eee 22 U.S. v.- Clancy, 365 U.S. 312, 316 (1960) *eeneesr+e#ee#e#e#eetensee#te#ee#e#seetereterekeeese#e#ee#ee#e#ee#e« 23 U.S. v. Dickerson, 413 F 2d 1111 (7th EE SL LEI IOP OE OO ETE TE 15,17 U.S. ve Fox, 403 F 2d 97, 100 (2nd Cir) eeeeeeneteeenrteeneteneeeeeneene4eeee 14 (iiii) Cases, continued: Page U.S. v. Marra, 481 F 2d 1196, 1203 (6th C 1973) Cert. denied 414 U.S. Dit btn tb Onen nb bone 6s oO we 10 U.S. v. Miller, 261 F Supp 442 (D.Del) eoeeeteeeeeeeveeeeseeeeneeeeteeoeeeeee 14 U.S. ve. Mullings, 364 F 2d 173, 175 (2nd Cir.) eeeeteneeeerteerete#skteeteeerteeenenee#eee#e 14 Mie A ne nt, ee Nb de Tl oe wae OR Ee te U.S. v. Murdock (1933) 290 U.S. 389, 78 L Ed (Adv. 225) 54 S.Ct. 223.... 45 U.S. v. O'Connor, 237 F 2d (2d Cir. (1955) eoeeeee3xscegeieeeeeteereeeeee#e#etee*e#e#ee#e#e 26 eH reek ee em ae. U.S. ve. O'Connor, 273 F 2d 358 (2d Cir. | Perrrrrrrrrr Trt | U.S. v. Prince, 264 F 2d 850 ; (3rd Cir. 1959) *oeeteeeeeneeeese*eeee#ee#es 22 U.S. ve. Robinson, 142 U.S. Appd C 43, 439 F 2d 553 eoeeeeretree#ef28steneeeneeneeee#s? 14 U.S. v. Turzyanski, 268 F Supp. 847 (N.D.1I11) oeeeew ewe evw eevee e ee eeeaeeeeeee 15 White v. Ragen, 324 U.S. 760, 65 S.Ct. 978, 89 L Ed 1348 1) eer 39 | | (iiiii) Page Constitutional Provisions: Constitution of the United States Amendment [Viccccccceccscessssecese & Amendment Vi cccccccccccccscccccccce &@ Amendment VI ccccoccccccseccssescese 2 Amendment ZIV cccccccccececsesesece AF Miscellaneous: 28 United States Code Sec. 1254 (1)....1 18 U.S.C. Sec. 3900 .ccccccccee 21,25,3) Amer. Jur. 2d DESK BOOK III........-- 3l Internal Rev. Manual 4231, Audit Division Audit Technique Hand- book for I.R. AgentS weswcneseseee 8 Internal Revenue Manual 9900 Handbook for Intelligence Agents Intelligence Div... cesccceeseeee Byll Rules of U.S. District Court, Northern Dist. of Ohio, Crim. Rule 3 C ccccccccccceccceceee SI Ne ll nt et NE ane aR TOE. AGS ite ~ Me eeaetee Hla oe St — | re) a a a ee ee ee ee - - tee See > me A me en ee MS OI Re l In The SUPREME COURT OF THE UNITED STATES October Term 1975 No. James L. Allen, | Petitioner Ve United States of America, Respondent. PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR. THE SIXTH CIRCUIT OPINION BELOW The opinion of the Court of Appeals has not yet been officially reported and is printed in the Appendix hereto as Appendix A. JURISDICTION The judgment of the Court of Appeals was entered on September 2, 1975. (Appendix A) The jurisdiction of this Court is invoked under 28 USC Sec 1254(1). . An Order Extending Time to File Pe- tition for Writ of Certiorari, signed by Mr. Justice Stewart and dated September 26, 1975, extended the time to file this petition to and including November l, 1975 (Appendix B-Order and letter for- warding same). QUESTIONS PRESENTED le. Whether the trial court's denial of petitioner's Motion to Suppress certain evidence effectively deprived petitioner of his rights under the Fourth, Fifth, and the Sixth Amendments to the United States Constitution. 2. Whether the United States District Court denied petitioner his inalienable right to a fair trial when it denied his Motion for Continuance after an affirma- tive showing that his most knowledgeable attorney had suffered a severe illness and at the time of the trial was in the process of recuperation. 3. Whether the trial court committed reversible error when it denied to this petitioner the referral report of Inter- nal Revenue Service Agent Tracy and the Criminal Reference Report of Special Agent Pope pursuant to 18 USC Section 3500 for use in cross-examination of those witnesses. 4. Whether the Trial Court committed reversible error when it admitted into evidence, and sent into the deliberation room, Government's Exhibit 31 and other charts and summaries prepared by the Government. ; : j 7 i : ‘ iu Pe ee eee ue fe 5. Whether the Trial Court committed reversible error when it allowed into evi- dence hearsay testimony of Internal Revenue Service with regard to the accounts re- ceivable leads submitted by this petitioner. 6. Whether the Trial Court committed reversible error when it did not dismiss the indictment or in the alternative strike the testimony of Special Agent Pope when it was disclosed that his testimony had been selectively not recorded along with the testimony of other witnesses before the same Grand Jury. 7. Whether it comports with established procedure, and whether petitioner was de- nied a fair trial, when one Government wit- ness, testifying as an expert witness, was permitted to challenge the credibility of another Government witness, testifying favorably for the petitioner, in the pres- ence of the jury. 8. Whether this petitioner was denied his Constitutional right to a fair trial and to the effective assistance of counsel when his defense counsel interposed no de- fense despite considerable documentary evidence and oral testimony being avail- able. All of which was submitted to the United States Court of Appeals in the form of documents and sworn affidavits and which the Sixth Circuit Court of Appeals refused to consider. . 9. Whether petitioner was denied the effective assistance of counsel guaranteed by the United States Constitution by the intimidatory and coercive acts of the Internal Revenue Service, which had an active interest in the case; particularly when such acts were directed against de- fense counsel during the very course of the trial. 10. Whether petitioner's conduct durirj all pre-indictment phases of the investi- gation preclude any charge of "Wilfully and Knowingly" committing any criminal offense. CONSTITUTIONAL PROVISIONS AND STATUTES INVOLVED Fourth Amendment: "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures shall not be violated.” Fifth Amendment: "No person .. . Shall be compelled in any criminal case to be a witness. against himself, nor be deprived of life, liberty or property without due process of law. ee ™ Sixth Amendment: "In all criminal prosecutions, the ac- cused shall enjoy the right... to be confronted with the: witnesses against him - « » and to have the assistance of counsel for his defense." 18 U.S.C. Sec. 3500: DEMANDS FOR PRODUCTION OF STATEMENTS AND REPORTS OF WITNESSES. — oe et ee Die AOR MORI Pet fuer Date es Be) unre oo as a . aban States, 210 F. 2d 795 (9th Cir. 1954) a conviction was reversed due to the admission of hearsay evidence. An Inter- nal Revenue agent testified that he spoke to persons and that his determina- tion was that certain withdrawals were not gifts to the taxpayer. The appellate court held that this testimony was inad- missible hearsay and reversed the convic-= tion. The testimony in Qlender, supra, 15 not far removed from the agents’ testimony in the instant case. In California ve Green, 399 U.S. 149 (1970) it was held: "The admission of the testimony of the agents also worked a denial of the right of confrontation. A defendant has the inalienable right to cross-examine witnesses where it is necessary to provide the trier of fact with a satisfactory basis for evaluating the truth of the testi- mony. SEE ALSO: Dutton V. Evans, 400 U.S. 74 (1970) QUESTION VI The indictment in this case was re- turned on January 10, 1973. On January 15, 1973 the District Court established, 31 as a matter of rule, the necessity of recording all Grand Jury testimony. For months prior to the effective date of the rule, the Department of Justice was aware of Crim. Rule 3 C of the U. S. District Court, Northern District of Ohio. Following the direct examination of Pope, the special agent in the instant case, defense counsel moved for the pro- duction of his testimony before the Grand Jury pursuant to Title 18, Section 3500. Government counsel then disclosed to the court, at the bench, that a transcript of the agent's testimony before the Grand Jury did not exist! His testimony was not recorded as was that of all other wit- nesses before the Grand Jury. The failure to keep a record of the Grand Jury testi- mony in regard to Agent Pope therefore necessitated a departure from Supreme Court Decisions establishing 2 defendant's right to examine Grand Jury minutes and to use such minutes for impeachment pur- poses. See, e.g. Dennis v. United States, 384 U.S. 855 (1965). The selective recording of witnesses' Grand Jury testimony in this case, and particularly the non-recording of Special Agent Pope's testimony served to deprive this petitioner of the use of that testi- mony for purposes of cross-cxamination. It is this petitioner's firm position that the United States Attorney, rather than placing reliance on the fact that the indictment was returned on January 10, 1973, and the Court Rule requiring the re- cording of all testimony was not effective 32 until Jonuary 15, 1973, should, in the inierest of justice, cxplain to this Honorable Court the reason for the selec- tive non-recording of the special egent's testimony before the Grand Jury. "The interest of the United States in . criminal prosecution is not that it shall win a case, but that justice shall be done." Jencks v. United States, 353 US 567, 77 S Ct. 1007. QUESTION VII At trial transcript page 1105, Adele Kihlken was called to testify as an ex- pert witness for the Government. Ms. Kihlken was permitted to remain in the cour* room throughout the trial. Government witness Pagnotia testified favorably for the petitioner's cause. Expert witness Kihlken was permitted to challenge the credibility of Government witness Poagnott2. “hile being asked by defense counsel if she had taken into consideration the testimony of witness Pagnot-c in her figures she was tes*ify- ina to, Ms. Kihlken responded: "Mr. Pagnotto identificd purported peyments. The payments are not in evidence. And Mr. Pagnotta's testi- mony somewho* lacked credibility.” (At this point, the tricl judge advised the expert witness that the “purported poyments” were indecd in evidence being 33 Defense E hibits B through L, a total of eleven (11) photocopies of money orders sent to petitioner by witness Pagnotta.) The Sixth Circuit could find no error for the reason that the challenge to wit- ness Pagnotta's credibility by Government witness Kihlken occurred while under cross- examination by defenee counsel. No where in said trial transcript is it to be found that defense counsel invited the challenge to witness Pagnotta's credibility from witness Kihlken. t - QUESTION VIII "Defense counsel must perform at least as well as a lawyer with ordi- nary training and skill in the criminal law and must conscientiously protect his client's interest, unde- flected by conflicting considerations, and defense counsel must investigate all apparently substantial defenses THIOL to the defendant and must assert them in a proper and timel manner. U.S.C. COTUR 6". Beasley v. United States, 491 F. 2d 687 Cis7a} ~ (Emphasis added) In this case, defense counsel never looked at any record or document in this | petitioner's possession nor did defense counsel ever contact a defense witness from a list provided months earlier from which.could have and would have formed the basis of affirmative defense. It is unquestionable that defense counsel was 34 relying heavily on his Motion for Con- tinuance being granted, and when it was denied he was totally unprepared for trial. This petitioner was advised by Attorney Lebit (incapacitated during trial) that there would be meetings prior to trial ® discuss the defense and during the trial at lunch and after adjournment for the day. (Letters and telephone transcripts support this contention). None of these meetings ever took place, although the trial lasted from February ah 1974 to March 14, 1974. However, this petitioner asserts, even during the trial he tried to apprise counsel of the fact that petitioner was in possession of records and documents which would dispute allegations pro- jected by the United S ates Attorney. It should also be noted he did not consult with the possible defense witnes- ses who accompanied petitioner to the . Court House to testify in his behalf. He had no knowledge as.+o what any of the __ witnesses would have testified. — Further, the Government. subpoenaed : four witnesses who were accounts receiv- ables prior to 1967. Two of the witnesses were called and testified ina fashion favorable to this petitioner. Whereupon the Government decided not to call the other two. Counsel made no effort to consult with these witnesses who did not Lestify to determine whether their test- imony would also be favorable. 35 The only inference to be drawn from the abandonment of the witnesses by the Government is that the testimony of said witnesses would have also been fa- vorable to this petitioner. These same witnesses were among those who were to be called for the defense to testify as to petitioner's accounts receivable prior to 1967. Contradicting the testimony of both the revenue agent and the special agent that “because petitioner was not in business prior to 1967 he could not have had any accounts receivable". At the close of the Government's pres- entation, defense counsel suggested to this petitioner that he should rest de- fense, in his opinion the Government had not proved its case. Petitioner and his wife asked that counsel submit a Motion for Judgment of Acquittal if he felt this were true. Petitioner further informed counsel that in no way would he agree to resting without submitting a defense if the court denied the Motion for Acquit- tal. (There exist sworn affidavits of bystander witnesses who were present dur- ing the conversation.) This request was refused. It was then requested that he ask for an early adjournment (it was then approximately 3 or 3:30 P.M.) so they would have time to think about it. This request was also refused. Upon returning to the bench, defense counsel did make such a motion at a side- bar conference, it was denied by the court, counsel did not inform the petitioner of this but immediately rested the defense. 36 In AMERICAN JURISPRUDENCE 2d DESK BOOK III. Document No. 91, CANONS OF PROFESSIONAL ETHICS OF THE AMERICAN BAR ASSOCIATION (15) it is said: "The lawyer owes "entire devotion to the interest of the client, warm. zeal in the maintenance and defense of his rights and the exertion of his utmost learning and ability", to the end that nothing be taken or be withheld from him, save by the rules of law, legally applied. (Emphasis supplied) “In the judicial’ forum the client is entitled to the benefit of any and every rem- edy and defense that is authorized by the law of the land, and he may expect his lawyer to assert every such remedy or defense." Withheld from this petitioner was the fact that he had made and the court de- nied the Motion for Acquittal. The first notice that petitioner had was in reading the transcript of the trial. The Record, itself, lends a strong in- ference to the proposition that counsel offered no defense because he had other plans for the time required to offer it. The record reflects that on Monday, March 19, 1974 a Morion for Extension of Deadline for Filing of Motion for New Trial, was filed by Attorney Niki Schwartz, who termed himself “Counsel for Defendant", in which it was shown that Attorney Rota- __ tori, petitioner's trial counsel, would be out of the city for the balance of the month of March. 37 The Sixth Circuit Court of Appeals refused to consider certain evidence con- tained in petitioner's appendages to his Brief on Appeal for the reason that such evidence was not part of the record be- low and would, therefore, improperly “enlarge the record". The fact being that part of the evidence was a part of the record submitted by the United States Attorney, himself, appearing in the sub- poenaed microfilm. The claim that this petitioner was not properly represented by counsel is not an unsupported claim made solely by this petitioner. As_a matter of fact, the claim was made by Mr. Rotatori himself. In his Memorandum in Support of a New Trial filed with the District Court sub- sequent to petitioner's conviction, At- torney Rotatori argued to the District Court: "The denial of the Motion (Continu- ance) thereby requiring defendant to proceed to trial without the assistance of the tax and accounting expert who had worked with defendant's counsel in prep- aration and presentation to the Govern- ment of a net, worth statement, denied the defendant the effective assistance of — counsel.” ‘(Emphasis added) Remembering that said Memorandum was” filed subsequent to the conviction, Attorney Rotatori goes on the record him- self as admitting that he ineffectually represented this petitioner. 38 39 This Honorable Court speaking in involved, the Glasser court over- Powell _v. Alabama, 287 U.S. 45, 53 S.Ct. turned = conviction of a defendant whose 55, 77 L. Ed. 158 (1932), through Mr. attorney was retained by co-defendant Justice Sutherland stated: with a potentially inconsistent défense. "The Sixth Amendment guarantees that The Sixth Circuit, continuing in Beas- a criminal defendant shall enjoy the ley, said: | right “to have the Assistance of Counsel for his defense." This guar- "The right to have the assistance of antee was interpreted to mean the counsel is too fundamental and abso- effective assistance of ‘counsel.” lute to allow courts to indulge in nice calculations as to the amount The Sixth Circuit in BEASLEY, supra, : of prejudice arising from its denial. said: ois , | 315 U.S. at 76, 62 S.Ct. at 467". 3 Oe | (SEE ALSO: White v. Ragen, 324 U.S. "(Eight yeers-leter,--sperking throuh 760, 65 S.Ct. 978, 89 L. Ed. 1348 Justice Black,-the-€ourt-hretd that---—- > (1948) "The Constitution's guarantee of as- sistance of counsel cannot be satis-. | "Most recently, in McMann v. Richard- fied by mere formal appointment." | son, 397 U.S.759, 90 S. Ct. 1441, 25 Avery v. Alabama, 308 U.S. 444, 446, | L. Ed. 763 (1970) the Supreme Court 60 S.Ct. 321, 322, 84 L Ed 377 (1940). stated that "It has been recognized Resting its holding on the Fourteenth | that the right to counsel is the Amendment, since a state defendant was right to the effective assistance of involved, the court held that the counsel". Continuing: "({I)f the right trial court's denial of a continuance requested by appointed counsel had not deprived the defendant of the effec- tive assistance of counsel. On the fact of the case, "His appointed coun- Sel..eehave performed their ‘full duty intelligently -and- well’-".-308-U.Ss-at — 450, 60 S. Ct. at 324. In Glasser vi ---- United States, 315 U.S. 60, 62 S.Ct. 457, 86 L. Ed 680 (1942) the court enforced the implication of Avery that an inadequate performance by counsel would render a conviction void. Basing its holding on the Sixth Amend- ment, since a federal defendant was to counsel guaranteed by the Constitu- tion is to serve its purpose, defend- ants cannot be left to the mercies of incompetent counsel...." The Sixth Circuit held in Beasley, supra, to wit: "(3-5) We hold that the assistance of counsel required under the Sixth Amend- ment is counsel reasonably likely to render and rendering reasonably effec- tive assistance. It is a violation 40 of this standard for defense counsel to deprive a criminal defendant of a substantial defense by his own in- - effectiveness or incompetence. Petitioner has carefully documented numerous instances wherein defense coun- Sel permitted extremely erroneous and prejudicial testimony to enter the record without challenge. Petitioner hereby requests permission tio forward the "ppendages" to this court. QUESTION. Ix During the course of this trial, de- fense counsel notified the triel court, to-wit: . MR. ROTATORI: Your Honor, before the’ jury is called in I want to bring some- thing to the court's attention. THE COURT: Certainly. MR. ROTATORI: Saturday morning I re- ccived in the mail, Your Honor, a notifie-e cation that my tax return is going to be audited. I feel that it is not coinci- dentel that I received this notification during the course of this trial. The only other time I was audited was in the course of United States v. D'Alessio, 2>neother criminal tax fraud case which I tried before this court. And, I can't -help, -Your’Honor, but feel that this involves, really, an attempt ace ANS ate tai AEA ee hes = cons waned 41 by governmental agency to interfere with the right to counsel and to, in effcct, attempt to deny a defendant to effective counsel. (SEE: EIGHTH ISSUE)...."I should add that in the D'Alessio matter it was not only mysclf that was subject to audit, but it was my expert Mr. Ricci who was also audited and received noti- fication the very same date.” Petitioner knows of no good reason to burden this Honorable Court with a long dissertation on the why's and whercfore's of the Internal Revenue Service's determination that an audit would be made of defense counsel's re- turn at the very moment that he was defending this petitioner. Producing proof positive to the effect that the audit was determined for the reason that said defense counsel was defending this petitioner would be impossible to do. However, when taken in context with the previous notic2 of audit, under similar circumstances it would be safe to state tnat there are persons in prisons at this very minutc convicted on weaker circumstantial evidence than is presen- ted here. Petitioner feels it would be disposi- tive of the entire issue if the United States Attorney would inform this Honor- able Court as to whether the audit was cancelled when defense counsel offered no defense whatsoever. It should be noted that the Sixth Circuit made no comment on this issue at all. 42 As stated in BECKWITH, supra: "In the light of this nation's recent experience with an admin- istration's compiling "enemies lists" and utilizing the Internal Revenue Service to "harass" citi- zens for other non-tax-related reasons, this case clearly in- volves a question of exceptional importance meriting consideration by this court". QUESTION X The file compiled on this cause will reflect a total cooperation by this peti- tioner with the requests and demands of Government agents who gsve no MIRANDA Warning. No record, no file and no doce ument wos withheld from the investigating agent who was “turned loose" in petitione- or's office even to the extent of Agent Trocy being totally alone. Further, on April 15, 1971 petitioner agreed to the extension of the Statute of Limitation to June 30, 1971 believing that if any deficiency were found in his returns said deficiency would be corrected with further payment. Subsequently, on June 25, 1971 peti- tioner aaqreed to yet a further extension of the Statute of Limitation believing it his duty te cooperate with Government 2genise Again, on September 2, 1971 petitioner signed yet another form 872 extending the Statute of Limitation a third time. + ote nae wee 43 ‘All such agreements to the Statute of Limitation predicated upon the last para- graph of a letter received by petitioner ~ from the District Director of the Inter- nal Revenue Service, dated January ll, 1971, stating: "By extending the limitation period, you will have time, if you choose to present your views at conferences at district and regional levels if we propose adjustments you do not agree to." In addition to above, and never being warned of his rights under MIRANDA, peti- _tioner was assured that "nothing would come of it". Said assurances made to him by Internal Revenue Agent Tracy. Petitioner strongly urges this Honor- able Court to take into serious consid-. eration the fact that these were the first ' two years he was in business, with the business “dropped into his lap", so to speak. Within a ninety day period the only two major publishing companies both discontinued their field sales organiza- tions = Cowles Sept. 1966; Curtis Dec. '66. Both were employers of petitioner. Neither he nor his wife had any formal training in bookkeeping or other record keeping and certainly not net worth. In Holland vy, United States, 346 U.S. 121, this Hoflorable Court warned: ~ "Nevertheless careful study indicates _ that it (net worth method) is so a4 fraught with danger for the inno- cont that courts must scrutinize its use." 348 U.S. at 125. Attorney-Accountant Hubert Howes testi- fied at trial that petitioner was 1M a new business and it was a rather "chaot- ic" period for him and he didn't even know if the business would last. This petitioner would urge this court to consider the fact that at no time did he deny that because of the state of his records, best described by Attorney- Accountant as “chaotic*, a tax liability might exist.: (It should be noted that all returns filed by this petitioner prior to his entry into business were found by the Internal Revenue Service to be in "excellent order". Further supporting this petitioner's claim of complete cooperation with Govern- ment agents is the letter written by petitioner to Special Agent Pope, which accompanied documents requested by the special agent in which petitioner ad- vised the special agent: "Should there be organizations that are not included here that you want, I will be most happy to pull the file if you will give me the organ- ization city and checks in question, or my files are available, as -they were for Mr. Tracy, for your viewing or phorécopying.” (Emphasis added) 45 Petitioner would assert that a show- ing of good character and integrity is a basic element in the positive defense to a charge of wilfully and knowingly committing a crime. Although petitioner had a plethora of witnesses to testify to his integrity and his excellent character, he was precluded the use of said witnesses by his counsel inter- posing no defense. This petitioner would respectfully direct this Honorable Court's attention to the language used by this Honorable United States v. Murdock, (1933) Court in 290 U.S. 389, 78 L Ed. (Adv. 225), $4 §. Ct. 223, wherein: the Court said: "Congress did not intend that a per- son, by reason of a bona fide mis- understanding as to his liability for the tax, as to his duty to make a return, or as _ to the adequacy of his records he maintained, should become a criminal by his mere failure to measure up to the prescribed standards of conduct. And the re- gQuirement that the omission in these instances must be wilful, to be crim- inal, is persuasive that the same element is essential to the offense of failing to supply information." 46é CONCLUSION WHEREFORE, it is submitted that this Court should gran*+ this petition and issue a wri: of certiorari to the United States Court of Appeals for the Sixth Circuit. Respectfully submitted, James L. Allen P.O. Box 8380 Canton, Ohio 44711 In propria persona November 1, 1975 Appendix A No. 74-1959 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT Untrep STaTEes OF AMERICA, Plaintiff-Appellee,,; ApPEAw from the ‘a United States District Court for the North- James L, ALLEN, ern District of Ohio. Defendant-Appellant. Decided and Filed September 2, 1975. Before Weicx, McCree and Mien, Circuit Judges. Weick, Circuit Judge. Allen has appealed from his judg- ment of conviction entered upon a jury verdict of guilty on two counts of an indictment charging him with willfully at- tempting to evade income taxes for the years 1967 and 1968 in violation of 26 U.S.C. $7201. He was sentenced to two, five year concurrent terms of imprisonment, the first six months of which were to be served in a jail-type institution and he was placed on probation for the balance of the sentence. He was fined $2,500 on each count or a total of $5,000. Count I of his indictment was dismissed. Although he was represented in the District Court by two retained trial lawyers, his brief in this court, as well as his oral argument, were pro se. At the trial, the government used the net worth and expendi- tures’ method of proof. Its evidence tended to prove that although Allen and his wife, in joint income tax returns, 2 United States v. Allen No. 74-1959 reported a taxable income of $11,225.56 for 1967 and $16,580.- 79 for 1968, their net worth increased $18,402.37 during 1967 and an additional $35,436.96 during 1968. The Allens’ actual taxable income was computed to be $26,415.68 for 1967 and $44,036.54 for 1968. A technical adjustment, adjusting the 1968 income $10,000 downward to $34,036.54, was made to allow for an error discovered in one of the adding machine ~ tapes used in preparation of the 1968 return. This adjustment allowed in full the deduction claimed by Allen in his original return. Allen had been employed, prior to 1967, by various maga- zine circulating companies supervising the activities of maga- zine salesmen. Late in 1966 Allen started his own business, calling it National Organization Sales. He was a subfranchisee under a regional franchisee in the magazine subscription sales busi- ness. He acted as a clearinghouse for salesmen and others, who were independent contractors, and processed subscriptions to various publishers. Revenue Agent Tracy described Mr. Allen’s business: Mr. Allen explained to me that most of his sales were through a sponsor, and these sponsors usually consisted of VFW posts or volunteer fire departments or organiza- tions similar to these. The sales campaign would be in a given locale, where they would advertise a sales campaign and explain that they were benefiting the sponsor, and the sponsor would take the proceeds they made, the profits, and use this money either for their organization or to buy hospital equipment. And he explained to me that the hospital equipment was free for public use and this was part of the campaign, to build up good will and so forth. This was publicized and the people that were sold subscrip- tions hopefully were aware of this fact, which would in- duce their sales. Appendix A | Appendix A No. 74-1959 United States v. Allen 3 The sponsoring organization would receive 8 percent of the gross sales for the campaign. Allen admits that the volume of his business in 1967 totalled $596,087.30 and $711,988.14 for the year 1968. National Organization Sales was operated primarily out of an office in the basement of the Allen home. During the years in question, the business records were kept in a single entry system, which Revenue Agent Tracy, who was assigned to perform a field audit of the taxpayers described as “unique.” Tracy testified: To summarize my opinion, in areas where I felt he should have records he didn’t have records; in other areas I felt he had too many records. It was not possible to make an accurate accounting of all of Allen’s income. The Allens’ tax returns for 1967 and 1968, and for many years prior to that time, were prepared by Hubert Howes, an attorney, and his wife, Shirley Howes, a certified public accountant. The returns were prepared primarily on the basis of information furnished by Allen. Mrs. Howes testified that in January, 1968 Allen discussed with her the advisability of setting up a bookkeeping system. Mrs. Howes finally set up such a system in 1970 for Allen. One of the theories of the case presented to the jury by the defense in argument was that Allen simply was inadequate to the task of starting and running his own business and keeping the records for that busi- ness. In other words, the defense argued that if some income was not reported, it was the result of the inadequate records, and not the result of a wilful attempt to evade income taxes. The defense also attacked the accuracy of the government's opening and closing net worth figures. Much of the prosecution’s evidence concerning willfulness was presented through the testimony of Internal Revenue Agent, James Tracy. Agent Tracy testified concerning his audit of the returns Appendix A 4 United States v. Allen No. 74-1950 and investigation of the Allens’ income. Tracy was assigned to conduct a field audit of the Allens’ 1967 return on No- vember 14, 1969. He visited the office in the basement of the Allen home many times from December 11, 1969 through April 15, 1970. He decided to audit both 1967 and 1968 income tax returns. Tracy's testimony was important in establishing the accuracy of the net worth computations. He also testified that Allen at first denied and, later in the investigation, admitted re- ceiving reimbursement for expenses from the Veterans of Foreign Wars for which expenses he had taken deductions in his returns. During 1967 and 1968, Allen served as junior vice command- er, senior vice commander and commander of the Ohio Vet- erans of Foreign Wars. Such payments by the Veterans of Foreign Wars could have been a source of unreported income and the initial denial of such payments was strong evidence of willfulness. Tracy also testified that Allen denied making a profit on hospital equipment which sponsoring organizations order in lieu of receiving cash for sponsoring a sales cam- paign. Other evidence in the case tended to show that Allen did make a profit on the sale of such equipment. Again, the profit could be a source of unreported income and the de- nial would be evidence of willfulness in the evasion of income tax. I Allen contends that the District Judge committed prejudicial error in denying his motion for continuance which was sought because of the illness of one of his attorneys, Edward Lebit. The motion asserted that Mr. Lebit, a former employee of the Internal Revnue Service, was primarily responsible for the accounting and tax aspects of the case and was to testify as an expert for the defense and to serve as co-counsel. The mo- tion further recited that it would be a month before Mr. Appendix A No. 74-1959 United States v. Allen 5 Lebit would be well enough to even have business visitors. Trial counsel wished to discuss the case with Mr. Lebit before deciding whether to employ substitute counsel. The motion did not indicate how much of a continuance would be neces- sary. The government opposed the motion on the grounds that trial counsel, Robert J. Rotatori, had been connected with the | case since March 20, 1973, which was over ten months prior to the filing of the motion for continuance; that the defense possessed the government'’s tentative net worth schedule and almost all documents which would be introduced at trial; that the case had previously been continued several times at Allen's request, and that there was no showing why attorneys as- sociated with Mr. Lebit, who also were former employees of the Internal Revenue Service, would be unavailable to re- place him in the fifteen days remaining before trial. Mr. Rotatori was present for the status call of the case on March 20, 1973 and signed the motion and order for discovery. He represented Allen at the hearing on the motion to suppress. He had sought and obtained several continyances. The case had been assigned for trial on a standby basis on May 1, 1973 but the trial did not commence until February 25, 1974. The record discloses that Allen’s defense was ably conducted by Mr. Rotatori. In addition, Allen was represented at the trial by Edward Kleinman who served as associate counsel. Mr. Kleinman was a former employee of the Internal Revenue Service and had assisted Mr. Lebit during various pretrial matters. He was familiar with the case and was available to assist Mr. Rotatori or any technical matters. The grant or denial of a continuance is within the sound discretion of the trial judge and will be disturbed on appeal only where there has been a clear abuse of discretion. United States v. Ploeger, 428 F2d 1204 (6th Cir. 1970). In our opinion, there was no abuse of discretion in the denial of the motion under the circumstances as presented to the trial judge. Giaca- Appendix A | 6 United States v. Allen No. 74-1958 lone v. Lucas, 445 F2d 1238 (6th Cir. 1971), cert. denied 405 U.S. 922 (1972). II Allen further contends that the District Court erred in de- nying his motion to suppress statements made by him to rep- resentatives of the Internal Revenue Service, and for return of all documents obtained from him or his accountant. He claims that he was entitled to the Miranda warnings. Miranda v. Arizona, 384 U.S. 436 (1966). The Allens were not in custody and the Miranda warnings, in our opinion, were not required. United States v. Carter, 462 F2d 1252 (6th Cir. 1972), cert. denied 409 U.S. 984; United States v. Stribling, 437 F2d 765, 771 (6th Cir. 1971), cert. denied 402 U.S. 973. In the absence of a clear showing that the taxpayer has been tricked or deceived by the government agents into pro- viding incriminating information, the documents and state- ments obtained by the Internal Revenue agents are admissible United States v. Marra, 481 F2d 1196, 1203 (6th Cir. 1973), cert. denied 414 U.S. 1004. The District Court’s factual find- ings that there was no such showing are supported by sub- stantial evidence and are not clearly erroneous. Ill Allen’s next contention is that the District Court erred in permitting Internal Revenue agents to testify, over objection, that they investigated certain accounts receivable “leads” furnished to the government by Allen and that they were un- ab.e to verify the amounts set out on the accounts receivable list. Since Allen computed his income by the accrual method, accounts receivable in existence prior to the opening net worth date would constitute a possible source of non-taxable in- come with respect to the tax years in question. The government is required to investigate leads reasonably susceptible of be- Appendix A No. 74-1959 United. States v. Ailen 7 ing checked concerning possible sources of non-taxable income. Holland v. United States, 348 U.S. 121, 135-136 (1954). The defense objection was made on the theory that the testimony was hearsay. An agent’s testimony that he was unable to verify the account receivable amount allegedly due from a named person as the result of his investigation is not hearsay. The agent is simply stating the result of his in- vestigation. He is not recounting the out-of-court statement of the person who allegedly owes the account. The agent must testify concerning his inability to verify the amount if he is to negate the possible source of non-taxable income, or, in other words, the validity of the “lead.” IV Allen further contends that the District Court erred in al- lowing the prosecution to impeach one of its witnesses, Daniel Pagnotta, by the use of his prior inconsistent statements. This court has already rejected “as unsound and illogical the mile that prohibits a party from impeaching a witness whom he calls.” United States v. Bryant, 461 F2d 912, 918 (6th Cir. 1972). Allen also contends that the government’s expert summary witness, Adele Kihlken, improperly commented upon the credi- bility of Mr. Pagnotta’s testimony. The statement complained of was made in answer to a question by defense counsel as to why Mr. Pagnotta’s testimony was not reflected in the ac- counts receivable figures. The witness explained that she had to accept one figure or another for her summary. She further explained that she understood Mr. Pagnotta’s testimony to be that he made payments to Allen during the period in ques- tion, but yet the amount of his debt to Allen remained the same. Trial counsel brought out in further cross-examination that Mrs. Kihlken’s understanding of Mr. Pagnotta’s testimony may have been wrong. It is important to note, however, that on redirect examination Mrs. Kihlken testified concerning Appendix A 8 United States v. Allen No. 74-1958 the effect including the payments testified to by Mr. Pag- notta would have on the net worth summary. All of the facts were before the jury for the jury’s resolution. We find no error in this contention. V We find no error in the court's failing to record the tes- timony of Special Agent Pope before the Grand Jury. United States v. Battisti, 486 F2d 961 (6th Cir. 1973). The court did not err in admitting the summary prepared by the government's expert witness as it was based on facts established by evidence in the record. United States v. Bar- tone, 400 F2d 459 (6th Cir. 1968), cert. denied 393 U.S. 1027 (1969). VI During IRS Agent Tracy’s direct testimony, the defense moved the court for an order requiring the government to pro- duce his Referral Report, which is the form used for referring the case to the Intelligence Division and his Revenue Agent's Report. The defense did not ask for the production of Special Agent Pope’s criminal Reference Report. It was the claim of the defense that both these Reports of Agent Tracy were statements required to be produced under the Jencks Act, 18 U.S.C. § 3500. Attached to the Referral Report were six schedules con- taining net worth computations which were the basis for the Report. The District Court ordered the government to pro- duce the schedules but not the Report itself which he conclud- ed was merely an inter-departmental communication and not producible. Thus, with the exception of the two page Report itself and one preliminary computation which did not relate to Agent Tracy's testimony, the defense was given everything in the Report. The court also ruled that the Revenue Agent's Report was not producible. The Report consisted merely Appendix A No. 74-1959 United States v. Allen fe) of net worth schedules of use in computing Allen’s income tax liability for civil purposes. It is dated a year after the date of the Referral Report. Both Reports were sealed and transmitted to this court. The defense offered in evidence the schedules attached to Agent Tracy’s Referral Report and a few other exhibits and then rested at the close of the government’s case in chief without offering any evidence except the schedules and other exhibits. There was extensive cross-examination of Agent Tracy con- cerning his net worth computations and also of Adele Kihlken, the government’s expert who testified concerning the summary which she prepared. As previously stated, the defense did not even move for the production of Special Agent Pope’s Criminal Reference Report. It is our opinion that even though the entire reports could have been considered producible under the Jencks Act, the failure to order production was harmless error. United States v. Ball, 428 F2d 26 (6th Cir. 1970). VII The government was not required to prove the exact amount of Allen’s income for the tax years in question. It was re- quired to prove beyond a reasonable doubt that Allen’s tax returns contained a substantial understatement of income for the years in question and that the understatement was willful for the purpose of attempting to evade the payment of his income taxes. United States v. Johnson, 319 U.S. 503 (1943). The jury could take into account that by his own admission the volume of Allen’s business for 1967 was $596,087.30 and $711,988.14 for the year 1968; that with this large volume of business for the two years in question, Allen did not keep adequate records so that the amount of his income could be accurately ascertained; that he took deductions for expenses on his income tax returns notwithstanding the fact that he had received reimbursement for the expenses from VFW and Appendix A 10 United States v. Allen No. 74-1959 that he did not report profits he made on the sale of hos- pital equipment to his sponsors. We also note Allen’s claim that he was not adequately rep- resented by counsel at his trial which the record shows is without merit. We are of the opinion that the jury’s verdict is supported by: substantial evidence and ‘hat no prejudicial error inter- vened. Allen has submitted as an appendage to his brief, two volumes of material not contained in the record. The record cannot be enlarged in this manner and we cannot consider the material. United States v. Collins, 349 F2d 296, 298 (6th Cir. 1965); United States v. Young, 301 F2d 298 (6th Cir. 1962). We have considered other alleged errors claimed in Allen's brief which in our opinion have no merit and do not need to be discussed. Affirmed. 1 -B SUPREME COURT OF THE UNITED STATES OFFICE OF THE CLERK WASHINGTON, D.C. 20543 September 26, 1975 Mr. James L. Allen Box 8380 Canton, Ohio 44711 Re: James L. Allen v. United States No. A=j267 ‘Dear Mr. Allens: Your application for an extension of time in which to file a petition for -writ of certiorari in the above-entitled case has been presented to Mr. Justice Stewart, who on September 25, 1975, signed an order extending your'time to and “including Novem- ber 1, 1975. A copy of the Justice's order is enclosed. ~ Very truly 'yours,: MICHAEL RODAK, Jr.,Clerk odds. drat Sn a sailiies By . Francis J. Lorson Deputy Clerk dam Enclosure : ccs: The Solicitor General of the United States Clerk, United States Court of Appeals (74-1959) for the Sixth Circuit Cincinnati, Ohio 45202 2-B SUPREME COURT OF THE UNITED STATES No. A=-267 JAMES L. ALLEN, Petitionei Ve ' UNITED STATES ORDER EXTENDING. TIME TO FILE PETITION FOR WRIT OF CERTIORARI rant UPON CONSIDERATION of the application of, petitioner, it is ordered that the time . for filing a. petition for writ of certior- ari in the above-entitled cause be, and the same is. hereby, extended to and in- cluding November 1, 1975. {s/ Potter Stewart '. Associate Justice of the Supreme Court of the United States Dated this 25th 5 oe ee ee ee day of September, WDTS6e> iat - wi 1-C AUDIT TECHNIQUE HANDBOOK FOR INTERNAL REVENUE AGENTS Audit Division IRM 423) 921 Initial Interview * (1) One of the most important phases of any investigation is the initial inter- view with the taxpayer. This is especi- ally true when the records are inade- quate, non-existent, or there is reason to believe that they are false. This first interview offers the examiner oppor- tunities to obtain information which may not be forthcoming at a later date, (2) This interview should be exploited to its utmost, for'the information se- cured may save many days of work in the future. Encourage the taxpayer to dis- cuss himself, family, ‘business, hobbies, ‘financial history, and his sources of in- come of himself and other members of his family. The revenue agent, however, ' Should not make the taxpayer feel subjec- ted to a formal interrogation. He should try to make as many pertinent determina- tions as possible by guiding the inter- view rather than‘ by direct questions. (3) The revenue agent at this phase of the examination should attempt to se- cure from his conversation with the tax- Payer sufficient facts to evaluate.the Over-all financial picture of the taxpay- er, his’ approximate mode of living, his life insurance program, investments, unv « 2c ual expenditures, as well as gifts, loans, inheritances and other nontaxable receipts received by him. The examining officer should then be in a position to see if the taxable income reported bears a plausible relationship to the taxpayer's net worth and manner of living. (4) If the desired information can- not be secured from a casual interview with the taxpayer, the examining agent should prepare a series of questions to ask. Except in unusual circumstances he Should develop the case as. much as possi- ble from information and data furnished by the taxpayer rather than from an out- Side source, normally a much more time- consuming job. ae (5) The following paragraphs contain some suggested approaches to use if there are inadequate records present, or if the taxpayer is uncooperative and there is reason to believe that fraud is involved. (a) Secure information as to the taxpayer's dependents and family, and de- termine the status of the family as to age, degree of support and their names and addresses. This information will not only assist the examiner in the determi- nation of the allowable exemptions and dependents in the computation of the tax, but will aid the agent, in determining the cost of living of the taxpayer resulting from family size, dependents outside the household, unusual expenditures for chil- dren who may be in college, camp, etc. eo ee ae ow 3-C (b) Secure information as to the taxpayer's bank accounts and those of his immediate family and, if possible, the ledger sheets and cancelled checks of all accounts. If the checks and ledger sheets are not available, the examining officer should be sure to secure the locations and the names of these accounts. Partic- ular emphasis should be placed on bank accounts which are not normally a part of the business records, since unreported receipts may have been deposited in the @ non-business bank accounts. A more de- tailed discussion on the’ analysis of bank accounts appears at 940. (c) Determine the taxpayer's secur- ity holdings including both stocks and bonds, taxable or nontaxable, governmental or commercial. The agent should ascertain the dates acquired, dates sold, costs, selling price, where acquired, where sold. Such information may not only develop specific items of capital gains, interest and dividend income, but may disclose cash purchases which are not accounted for by reported income and sales proceeds invested in previously undisclosed assets. (d) Obtain a listing of the tax- payer's real estate holdings similar to the manner in (c) above from public rec- ords and escrow statements with the same purposes in mind. Also,’ questions about the taxpayer's personal residence may give indications that he is spending for this item more than could be justified by the size of the income reported. 4-C (e) Determine the extent of the taxpayer's currency accumulations. Most taxpayers will not have @ record of amounts as of particular dates. In many instances, the agent's entire case may hinge upon the correct determination of this one item alone. It is most important that the examiner word any questions in such a manner as to leave little doubt as to what was’ asked. If it appears that the examination will depend on this item, ‘it may be necessary to secure an affidavit from the taxpayer or have a witness to corroborate the answer given. Some typ- ical questions which may be asked about currency accumulations to develop this in- formation are as follows: | dali 1.- Has it! been your practice, or the practice of your wife or children to accu- mulate cash on hand? This includes un- deposited*‘cash atvall locations such as st your home, at your place of business, in a safety deposit box or in the possession of some third party. This does not include funds which’ are‘'on deposit in a financial or savings and loan establishment, the amount of which is a matter of: record. ‘2. Would you ever have had cash on hand to exceed $100.00? To exceed $500.00? To exceed $1,000.00? To exceed $5,000.00? 3. When? “ . 4. For what purpose did‘'you have thet cash on hand? = *°%"** 2S | 9+ How much cash on hand do you have at the present time? In this manner the 5-C desired information may be secured by in- direct means rather than by a direct re- quest as to what was on hand as of a par- ticular date. In 932 @ discussion is presented on methods of verification of taxpayer's contentions about cash on hand at the beginning of the period under ex- amination. (f) Secure information about the _ taxpayer's accounts, loans and notes re- ceivable. This is especially significant when the taxpayer is required to report on the accrual basis. Since this infor- mation, in many instances, is most diffi- cult and time consuming to secure from third parties, the examining officer should secure for analysis any records, workpapers or other data which will assist in the determination of these items. (9g) Secure information on inven- tories, by whom they were prepared, the method used in the determination and any workpapers used in the computations. (h) Obtain a list of the taxpayer's equipment, showing dates of acquisition and disposition, costs, selling prices, suppliers, purchasers, trade-ins, whether financed or paid for without borrowed funds. : (i) Make a list of other assets, both business and personal, securing dates of purchase, costs, dates of sale, selling prices, names of purchasers or suppliers. (j) Secure information regarding bank loans, personal loans, accounts pay- 6-C able and other borrowed funds of the tax- payer. Information received may help to explain asset acquisitions or indicate undisclosed income being used to reduce the taxpayer's liabilities. In checking bank loans and other loans, ascertain if collateral is involved. This may lead ‘to the discovery of hidden assets. The item of business accounts payable is especially significant when the taxpayer is required to report on the accrual basis anc since this item may be difficult. to secure from third parties, any records, workpapers or ather data which will assist in this determination should be secured. (k) Secure information regarding depreciation rates and methods of compu- tation, and also develop facts as to de- pletion, if applicable. Since deprecia- tion and depletion cause a reduction in taxable income without an outlay of cash, this should not be overlooked in the con- sideration of the taxpayer's overall financial picture. (1) Obtain information about the taxpayer's living expenses. Many indiv- idual items may be included under this broad category. The example below will assist the agent in the determination of this item; however at the initial inter- view it may be expedient to break down these expenditures on the basis of fixed and variable expenses. The fixed ex- penses which will normally repeat year to year without too much variance will. include food, minimum clothing expense, rent or mortgage payments, life and other 7< personal insurance payments and a certain amount of other living costs. The deter- mination of the living expenses by this breakdown may disclose to the examining agent tax possibilities in other years besides the year or years assigned for examination. (MT 4231-15 (1-13-69) IR MANUAL * Sec. 900 is entitled "Examination of Ret@rns - Inadequate Records" 1-D MEMORANDUM OF INTERVIEW December 11, 1969 Place: 2646 Orchard Park Dr. NW, Canton, Ohio 44718 In re: James L. and Marie D. Allen Income Tax 1040 for 1967 Persons Present: James L. Allen, Taxpayer Marie D. Allen, Taxpayer James L. Tracy, Internal Revenue Agent At the beginning of the examination Mr. and Mrs. Allen were interviewed. Mr. Allen provided the answers to questions. At times he checked with Mrs. Allen or con- Sulted records. He was told to answer questions to the best of his ability where he was uncertain of a date or an exact fact. Mr. Allen said he and Mrs. Allen were both 45 years of age. He also said they have been married 25 years and have one child, Dewitt. He said their son has been away attending Notre Dame University, in his freshman year, since September of 1969. Mr. Allen said he attended college approx- imately two years. He said his wife at- tended college about one half year. He also said she had one bookkeeping course. Mr. Allen said he has been in the magazine selling business since he was a boy in Kansas City, Missouri. Mr. Allen said he Started in the business full time in 1947 and has never been in any other business. 2-D Mr. Allen said Mrs. Allen has never been employed since their marriage. Mr. Allen scid he is a veteran and active in the VFW. Mr. Allen said he considers himself a suc- cessful salesman and supervisor in selling magazines door to door. He claims this is in spite of over-all declining success in the business. He said his sales have been mostly in conjunction with VFW post and volunteer fire departments. He said these organizations are sponsors and have allowed him to build up a reputable name. Mr. Allen said they never work with schools as sponsors. Mr.e Allen said that as an employee he worked his way up to supervisor of the eastern half of the United States. He mentioned Look, Cowles Publishing Company. Curtis Circulation Company and National Organization Service, Inc., as previous employers. He claimed he survived a series of mergers and re-organizations un- til 1966 when the publishers terminated this phase of the business. Mr. Allen claimed that he and other fellow employees, without jobs, decided to set up an organ- ization with existing sales personnel in the field. Mr. Allen claimed he became a self-employed franchise manager in the new organization which clears approximately 30 publications with Curtis Circulation Com- pany. Mr. Allen said he is like a clearing house for men in the field. Mr. Allen said he consults Attorney Hubert Howes in regard to records, books and tax returns due. He also said Mr. Howes has 3=-D prepared his returns since at least 1954. Mr. Allen said Mr. Howes keeps his depre- ciation records, but all other books and records are retained at his office. Mr. Allen said he receives reports for sales orders from supervisors and managers in the field. He explained that the reports are recapped weekly for his records. Mr. Allen said his supervisors and managers are not employees. They are independent contractors. He said he discussed this with Attorney Howes. He also said he has no control over them.. He said he files forms 1099 and 1096. He claimed he does not reimburse the men for expenses or give them an allowance. Mr. Allen said he and Mrs. Allen have five Savings accounts and five checking accounts. He said all of them are with the Harter Bank & Trust Company of Canton, Ohio. Mr. Allen said three of the checking accounts are used for business. They are: Master Account #6074057 Office Account #6087019 Organization A/C#6069975 Mr. Allen said both he and Mrs. Allen have personal checking accounts. They are: Mr. Allen A/C #5000599 Mrs. Allen A/C #5074339 Mr. Allen said he uses his account for in- Surance and personal checks. He said his wife uses her account for home and personal expenses. Mr. Allen soid three of his savings accounts are used for business. He soid they 2re as follows: Sponsors A/C #15633-08 Bad Checks A/C #14722 Managers A/C #16319 Mr. Allen said money in the above savings eccounts is not his. He holds money for sponsors, supervisors and managers until reports are finalized. He claims that he puts money into savings accounts while he is holding it and collects the interest which he reports. He also said only the interest belongs to him. Mr. Allen said the other savings accounts are personal as follows: Joint #9292-01 Mrs. Allen #04-1334-02 Mr. Allen said his son has a savings account which had not been used for several years. He said it is account #9552 at The Harter Bank & Trust Company. Mr. Allen said he and Mrs. Allen had a mortgage at Citizens Savings Association of Canton. He said it was account # C-64700 and paid off during 1967. Mr. Allen checked his balance at 1-]1-67 and said it was $3,763.34. He said his payments were $75.0 per month, but on August 14, 1967 he paid it off with a payment of $3,358.83. Mr. Allen said they do not have a safe de- posit box. He also said except for their residence, they do not own real estate 5 =D property. Mr. Allen said they have never owned investment securities of any type including stocks and bonds. Mr. Allen said he has no income in addi- tion to his interest income and business income. This agent asked him about his House of Jamar business reported on his return. Mr. Allen said that he and his wife were interested in that business for 2 very short time. He said they investi- gated it and purchased an initial inven- tory of products such as cosmetics, paper napkins and similar items for local sales distribution. Mr. Allen said they discon- tinued this business after only a few sales due to the time required in his magazine business. He said the stock was consumed by Mrs. Allen, given away as gifts to friends or still on hand and available for their personal consumption at home. He “said they did not consider their investment a loss. He said early in 1967 they decided to discontinue all sales of these items. Mr. Allen said he did not receive any tax free income such as disability pensions. He said he did not receive reimbursements for any of his expenses from the publishers Or anyone else since he went into business and his employment was discontinued. Mr. Allen said they have never received any gifts or inheritances in 1967 or any other year. Mr. Allen said he has no time for recreation or hobbies. He claims he used to be a very good golfer, but he has not had time for it in recent years. S/ James L. Tracy --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_1261%3A1. Public record. Not legal advice.