Petition — Giacalone v. United States

Court, U.S

FILED §

JUN 16 1978

IN THE |

SUPREME COURT OF THE UNITED $TATESeo5:x se CLERK

OCTOBER TERM, 1977

No. C7 “1 ¢ e. 2

ANTHONY J. GIACALONE,

Petitioner,

Ve

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT

OF APPEALS FOR THE

SIXTH CIRCUIT

JOSEPH F, DILLON

Counsel for Petitioner

Raymond, Fletcher, Dillon &

Titcomb, P. C.

400 Renaissance Center,

Suite 2370

Detroit, Michigan 48243

Opinions Below ....

Jurisdiction. .....

Questions Presented .

Statute Involved....

Statement of the Case

Conclusion

Appendix A,

Appendix B.

Reasons for Granting the Writ

Opinion of the Court of Appeals

Order by the Court of Appeals

Page

41

ce oo ee dade. Oe

ee

ii

CITATIONS

Cases

Blackwell v. United States, 244 F. 2d

423 (8th Cir. 1957), cert. denied,

Se 8. Rag ne

Corbert v. United States, 238 F. 2d

557 (9th Cir. 1956), cert. denied,

a ee ee

Friedberg v. United States,

348 U.S. 142 (1954) ae ee. € 8&8 @& we ¢é

Furnish v. C.LR., 262 F. 2d 727

(9th Cir. 1958)

Gray v. L.J. Navy Trucking Company,

475 F. 2d 545 (6th Cir. 1973)

. * . *

Harten v. Loffler, 212 U.S. 397 (1909) .

Holland v. United States,

348 U. ie. 121 (1954) * - . . 7 > . 7 .

McGarry v. United States, 388 F. 2d

X 862 (lst Cir. 1967), cert. denied,

394 U.S. 921 (1969) ,-, > SS & 8 6 €

McMillian v. United States, 363 F.2d

a Ge aes Oe fc cee cee ee

Phillip's Estate v. Comm.,

246 F.2d 209 (5th Cir. 1957).....

Steele v. United States, 222 F.2d

628 (5th Cir. 1955), cert. denied,

a or re Sere. « os bh 8 8

Page

laa a a

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ee ne ae

a eg

heou™

ree

7,8, 15,19

ek ee ee

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7,9, 10,

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“oe

——

Pn warm dn

eave.

Page

Taglianetti v. United States, 398 F.2d

558 (Ist Cir. 1968), aff'd 394 U.S.

EE EE Oe eee

Taylor v. B. Heller & Co.,

364 F. 2d 608 (6th Cir. 1966)........ 14

Thomas v. Ccomm.,

232 F. 2d 520 (Ist Cir. 1956) ...... 9,10

United States v. Altruda,

224 F. 2d 935 (2nd Cir. 1955) ...... . 13

United States v. Costello, 221 F, 2d

668 (2nd Cir. 1955), aff'd 350

EL ee

United States v. Goichman, 407 F. Supp.

980 (E.D. Pa. 1976), aff'd 547 F. 2d

778 (3rd Cir. 1976)... oe - =- & & © € 6

United States v. Johnson,

319 U.S. 503 (1943) eS Oe oe ee oe oe oe 6

United States v. Logan,

414 F, 2d 230 (6th Cir. 1969). ....., 12

United States v. Moody, 339 F. 2d

161 (6th Cir. 1964), cert. denied,

386 U.S. TE 2. = « 6 64 6 6 9,13

iv

; Page

Statutes

28 U.S.C. §1254(1) . * . . . > . . . >. * . . 2

28 U.S.C. §7201 we oe © «ee ££. ee eS ae 3

Miscellaneous

1977 Annual Report of the Commissioner

of Internal Revenue ...++e+++e«¢ee-e- 18,19

ss vielen

Cr ere |

_ IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1977

No,

ANTHONY J. GIACALONE,

Petitioner,

Vv.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT

OF APPEALS FOR THE

SIXTH CIRCUIT

Anthony J. Giacalone, the petitioner herein,

prays that a writ of certiorari issue to review the

judgment of the United States Court of Appeals

for the Sixth Circuit entered in the above case on

April 7, 1978.

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> Te. 8 —s —

AA a Ns en Pe GO

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6)

OPINIONS BELOW

The opinion of the United States Court of

Appeals for the Sixth Circuit is reprinted in

Appendix A, and while not yet officially reported,

it is unoffically reported in 41 Am. Fed. Tax R.2d

(PH) 78-1247 (6th Cir. April 7, 1978). The order

of the Court of Appeals denying a Petition for Re-

hearing is reprinted in Appendix B. No opinion

was rendered by the District Court for the Eastern

District of Michigan.

JURISDICTION

The judgment of the United States Court of

Appeals for the Sixth Circuit was entered on

April 7, 1978. A timely petition for a rehearing

en banc was denied on May 19, 1978, and this

petition for certiorari was filed within thirty days

of that date. This Court's jurisdiction is invoked

under 28 U.S.C. §1254(1).

QUESTIONS PRESENTED

In prosecuting the petitioner for criminal in-

come tax evasion, the respondent chose to employ

as its method of proof, the alternative method of

recomputing income known as the increase in net

worth plus non-deductible expenditures method.

For the opening year and for each of the prosecu-

tion years, the amourt of cash on hand was repre-

sented by, not a numerical figure but rather, a

"dash", Also the assets and expenditures of the

petitioner's wife were included in what the

respondent described as a "joint" net worth compu-

tation. However, the wifewas not prosecuted.

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3

The questions presented are:

1. Whether the government can,consistent with

its burden of establishing with reasonable

certainty the Opening net worth in a criminal

tax fraud case, use something other than

precise figures.

2. Whether the government can, in a net worth

criminal tax fraud case against a husband

alone, include in the net worth computation

the independent assets and expenditures of

the wife.

STATUTE INVOLVED

The involved statute is 26U.S.C. §7201,

which reads as follows:

Any person who willfully attempts in

any manner to evade or defeat any tax

imposed by this title or the payment

thereof shall, inaddition to other penalties

provided by law, be guilty of a felony and,

upon conviction thereof, shall be fined

not more than $10, 000, or imprisoned

not more than 5 years, or both, together

with the costs of prosecution.

STATEMENT OF THE CASE

The petitioner was indicted on four counts of

income tax evasion and was convicted by a jury

on the first three counts dealing with the years

1968 through 1970. It was a "net worth plus non-

deductible expenditures" case,

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On testifying with respect to the entry ofcash

on hand, the respondent's expert "summary" wit-

ness, with respect to the alternative methods of

recomputing income, testified that there had been

testimony to the effect that the petitioner kept

cash on hand and that he paid bills in cash. (R.

1060 and 1063). However on preparing his state-

ment entitled "Computation of Income by the Net

Worth Plus Non-deductible Expenditures Method",

the same witness did not use a figure with respect

to cash on hand.

For each of the opening net worth computa-

tions, ‘cash on hand" was represented by a "dash"!

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the use of dashes:

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A "dash" as defined, over objection, by the sum-

mary witness ". . . doesn't mean zero. A dash

means that the cash position has been determined

to be uniform. " (R. 1060). The summary witness

further declared that the "dash" had a mathematical

significance. He declared: "It's equivalent to X."

(R. 2168). Then, upon being asked by the trial court

what he meant by "X", he admitted that it was an

unknown. (R. 2169).

Furthermore, the net worth statement pre-

pared by the respondent was not restricted to the

petitioner. Rather, pursuant to the admissions of

not only the government's summary witness, but

government counsel as well, the statement includ-

ed the assets and expenditures of both the petition-

er and his wife. (R. 1062;1065-1073;1085; 1115;

2042-2079). The wife was not a party to the case.

On appeal, the Court of Appeals affirmed.

The Court held that it was permissible to use an

admitted unknown, that is, a "dash", in the open-

ing net worth for each year. As justification for

such a holding, the Court first cited this Court's

decision in United States v. Johnson, 319 U.S.

503 (1943), which in fact is not applicable. Second,

the Court declared that the use of a "dash", an

unknown, was no different than the use of zeros

as approved in United States v. Goichman, 407

F. Supp. 980 (E. D. Pa, 1976), aff'd, 547 F. 2d 778

(3d Cir. 1976).

With respect to the question of whether the

assets and expenditures of a wife must be re-

moved from a net worth computation when the

husband alone is on trial, the Court answered in

the affirmative. However, the Court then went on

and found that the petitioner's wife did not have

ah ew ms.

Atti is ee

an independent net worth of her own. On doing so,

it substituted its opinion for that of the trial court

which had declared that it was the government's

position that the petitioner's wife did have an in-

dependent net worth and that the net worth before

it was a combined jaint net worth statement.

(R. 1115).

The trial court's declaration was founded

upon the government's repeated statements that

the wife did have her own net worth and expendi-

tures and that they were being included in the

joint net worth computation of her and her husband.

(R. 2042-2079; 1062; 1065-1073;1085;1115 and see

2094-2095). In short, the government proceeded

throu ghout the trial upon the mistaken belief that

a joint net worth statement" was permissible

under the law.

REASONS FOR GRANT ING THE WRIT

I

The decision below should be reviewed be-

cause it erroneously interprets this Court's

directive set out in Holland v. United States, 348

U.S. 121 (1954) so as to rewrite the law on the

government's burden in a criminal net worth tax

fraud case and to greatly increase the chances for

error upon the utilization of the "net worth method'

of recomputing income in a criminal tax fraud

case. The decision is also in conflict with de-

cisions rendered by other Circuit Courts, i.e.,

Taglianetti v. United States, 398 F.2d 558 (1st

Cir. 1968), aff'd, 394 U.S. 316 (1969) and

Phillip's Estate v. Commissioner, 246 F.2d 209

(5th Cir. 1957).

ets tos

In the Holland decision, this Court decreed at

page G2 that in criminal net worth tax cases ". . .

an essential condition. . . is the establishment,

with reasonable certainty, of an opening net worth

.... Further, the Court observed that:

The importance of accuracy in this

figure is immediately apparent. as the

correctness of the result depends en-

tirely upon the inclusion in this sum of

all assets on hand at the outset.

Adhering to those directives, the First Circuit in

the Tanglianetti case declared that:

In a typical net worth case, as Holland,

precise figures would have to be

attached to opening and closirg net

worth positions for each of the tax-

able years to provide a basis for the

critical subtraction. (Emphasis add-

ed.) 398 F. 2d at 565.

On the other hand, the Sixth Circuit has now

declared that not even a figure, precise or other-

wise, has to be used with respect to the item of

"cash on hand". The conflict is apparent.

It is to be noted that the Sixth Circuit de-

clared that an unknown, a "dash", could be used

in a case where the proofs would support a find-

ing that a significant amount was not involved and

where the item was treated as a constant through-

out the prosecution period.

Applying that belief to this case,the Sixth Cir-

cuit admitted that the respondent's summary wit-

ness had assumed that the amount of cash on hand

had remained constant. (1) The assumption was re-

quired since there was no evidentiary basis for the

declaration. Tne basis he purportedly relied upon

established th existence of cash but not that it re-

mained const nt. (R. 1060-1061).

The Court's acceptance of the assumption by the

respondent's summary witness causes another con-

flict to arise, this time with the Fifth Circuit. ‘2)

There, in the case of Phillip's Estate v. Commis-

sioner, 246 F.2d 209 (5th Cir. 1957), the govern-

(1) By accepting, as it were, the testimony of the

respondent's summary witness as to the definition

of the "dash" and that it had remained constant

throughout the indictment period,the Circuit Court

was in conflict with the Ninth Circuit Court's de-

cision in Corbert v. United States, 238 F.2d 557

(1956), cert. denied, 352 U.S. 990 (1957). The

sole permissible function of a net worth summary

witness is to testify to those matters which have

been made a part of the court's record. His role

does not and cannot extend to factual analysis and/

or interpretation or to the rendering of an opinion

therefrom. United States v. Moody, 339 F.2d 161

(6th Cir. 1964), cert. denied, 386 U.S, 10u3 (1967);

Blackwell v. United States, 244 F. 2d 423 (8th Cir.

1957), cert. denied, 355 U,S. 838 (1957), and

Steele v. United States, 222 F.2d 628 (5th Cir.

1955), cert. denied, 355 U_S. 828 (1957). Since his

role was so extended with the approval of the Cir-

cuit Court, the conflict is clear.

(2) See also: Thomas vy. Commissioner, 232

F. 2d 520, 526 (lst Cir. 1956).

10

ment attempted the same ruse that time by "pro-

claiming" that there had not been any significant

change with respect to cash on hand. In rejecting

outright that proposition, the Fifth Circuit declared

at 214, that:

If the Commissioner can Overcome the in-

herent difficulties of the net worth technique,

Holland v. United States, supra, by a mere

pronouncement that as to any itemin the

net worth statement there is no showing that

it had significantly changed from alpha to

omega, ''***there would seem to be no rea-

son as a general proposition, why similar

guesses should not be made as to each of

the constituent elements comprising the

taxpayers' net worth. Under these circum-

stances, the entirenet worth technique be-

comes nothing but an elaborate accounting

sham lending a semblance of system and

logic to a determination of deficiency which

could have no greater validity than the

original guesswork which it was based. "’

Thomas v. Commissioner, 1 Cir. 232 F. 2d

520, 526.

It is also to be noted that in discussingthecritical

need of establishing the openingnet worth, the court

again in the Phillip's Estate case, at page 213 noted that

. « « the amount of cash available and on

hand at the opening assumes considerable

importance. Certainly does it where the

evidence, as here, on the record demon-

strated that theprofitable business came

from cash received, disbursed and held.

(Emphasis added. )

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~~

11

Since other circuits have not tolerated such an

absence of proof in civil net worth tax cases, the

far lesser standard of proof accepted by the Sixth

Circuit in this criminal case makes the conflict

clear.

The evidence relied upon by the Court for the

assertion that a significant amount of cash on hand

was not involved was the respondent's flawed cash

analysis. ‘3) It purported to show that for a period

prior to the first prosecution year, the petitioner

and his wife had spent approximately $81, 000. 00

more than was available to them. Since "excess

expenditures" had been proven and since that is

not possible, there had to be an explanation, as

admitted by the respondent's summary witness.

(R. 1110-1111. )

One explanation is that on October 17, 1951, the

defendant had $381, 000. 00 in the safe deposit box

which he discussed with Revenue Agent Sullivan.

This explanation is bolstered by the testimony of

Jack W. Giacalone that his father had $300, 000. 00

in cash on hand as of December 31, 1967, the last

day of the cash analysis. Another explanation is

that he had non-taxable sources of income during

the cash analysis period. Still another explanation

is that he had obtained loans and spent those funds.

(R. 1111).

(3) The cash analysis was defective since the

Opening point of October 17, 1951, was not complete.

The Court, in its opinion, overlooked the fact that

Revenue Agent Sullivan did not ask the defendant on

that date whether the listed assets were all of his

assets and furthermore, failed to ask the defendant

what he had in his safe deposit box. (R. 495).

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12

Finally, as brought out by government counsel,

another explanation could be that this alleged

gambler had been involved in that activity before

the indictment period and obtained additional un-

reported funds in that manner. (R. 2233). This

possibility was bolstered by the testimony of

Revenue Agent Bangela. He testified, over objec-

tion, that for the period of 1964 through 1967 —

all pre-indictment years — he had computed that

the defendant had additional income over and above

the amounts reported on the tax returns for those

years. (R. 907-908). (4) Assuming his figures to be

accurate, they alone would eliminate the negative

cash figure of $81,000.00 and create a possible

cash on hand figure of $221, 373.21. (R. 1114). The

effect on the government's cash analysis is obvious,

it is destroyed. See: McGarry v. United States,

388 F. 2d 862 (Ist Cir. 1967), cert. denied, 394

U.S. 921 (1969).

The only thing the cash analysis does is establish

that there must be an explanation for the "negative

cash position" of $81,000.00. Moreover, it cannot

be used as a basis for maintaining that the amount

of cash on hand remained constant during the entire

indictment period. There is absolutely no logical

bridge from a negative cash position to that next

stép in the government's hypothesis, that is, that

the cash on hand remained constant. Accordingly,

(4) The general receipt into evidence of the

agent's computation of an understatement for a

period including non-indictment years was revers-

ible error. United States v. Logan, 414 F. 2d 230

(6th Cir. 1969), and McMillian v. United States,

363 F.2d 165 (5th Cir. 1966).

13

there was a failure to establish the opening net

worth for the last three years, as well as the first

year of the indictment period.

The Court further erred by confusing the af-

firmative assertion that an individual has no cash

on hand with the use of a dash symbolizing an un-

known amount of cash. In the cited case of

Friedberg v. United States, 348 U.S, 142 (1954),

the government did not include any cash because

there was no evidence of cash. In contrast, in this

case, the summary witness said the defendant hai

eae | but nevertheless did not give him credit for

any. 5) Accordingly, this isnot a Friedberg situa-

tion.

This is not a case where the petitioner ques-

tioned whether there was sufficient evidence for

the jury to reach this or that conclusion. Rather,

the petitioner's primary position is that by using

an unknown in each of the four net worth computa-

tions,the respondent failed as a matter of lawto sus-

tain its burden. For example, assuming that there

was sufficient evidence for the jury to conclude that

the defendant did not have $300, 000. 00 in cash on

December 31, 1967, as testified to by his son, the

jury was still faced with the fact that the govern-

ment's net worth contained an unknown for each

(5) As a result, reversible error occurred.

See: United States v. Moody, supra, and United

States v. Altruda, 224 F, 2d 935 (2nd Cir. 1955).

14

of the years in question. (6)

The fact that one cannot compute taxable in-

come from the government's net worth statement

was established indirectly by government counsel

upon questioning the defendant's summary witness,

Mr. Vern Hansen. On asking him to make certain

computations, the government did not ask him to

use "the dash", but rather asked him to use zeros.

It was required since Mr. Hansen had already

testified that computations using the dash could not

be made since it had been defined in this case by

the government's summary witness as "an unknown”.

(R. 1386-1387 and 1060). In any event, reversible

error occurred when the prosecuting attorney had

the defendant's summary witness assume a fact

not in evidence, that is, the defendant had no cash

on hand. Harten v. Loffler, 212 U.S. 397, 405

(1909); Gray v. L. J, Navy [rucking Company,

475 F, 2d 545, 550 (6th Cir. 1973), and Taylor v.

B. Heller & Co., 364 F. 2d 608, 612-613 (6th

Cir. 1966).

«s) For the same reason, it is immaterial that the

Circuit Court erroneously stated that: (1) the de-

fendant argued that the numerous cash purchases

proved the existence of cash, and (2) the source

of the $300, 000. 00 cash hoard was the defendants

father. Opinion, page 5. In fact, the defendant

relied upon: the admission by the government's

summary witness that there was cash on hand; the

testimony of Jack W. Giacalone, and other evi-

dence to prove the existence of the cash. He also

never argued that the $300, 000. 00 came from his

father alone and no witness testified to that effect.

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15

Furthermore, had the government used zeros

in this case, it would have had to defend them and

the evidence available would have shown that the

assertion that there was no cash on hand was in

error. The government cannot avoid evidential

problems and sustain its burden of proof by the

pronouncement of a position. Phillip's Estate v.

Comm., supra. As the Court noted, the use of a

dash avoids the untenable assumption that a gambler

could operate without any cash. It also alleviates

the government's burden with respect to proving the

amount of cash on hand and that is where the error

lies. The conflict between this decision and

Holland v. United States is clear.

II

In this case, the Circuit Court agreed that the

assets and expenditures of a wife could not be

included in a net worth computation in a criminal

prosecution solely against the husband. Then,

however, it substituted its judgment for that of

the trial court and declared that the petitioner's

wife did not have an independent net worth of her

own. It was error to do so and having done so, a

conflict arose. Furnish v, C.I.R., 262 F.2d 727

(9th Cir. 1958).

It was also necessary for the Circuit Court to

ignore all of the government's statements to the

effect that it was proceeding under the theory that

a joint net worth was permissible under the law.

The fact that the government effectively communi-

cated its theory to the trial judge is quite clear

from his following statement:

16

There is no question of that (that a joint net

worth was involved) in the Court's mind,

and I am sure, in the jury's mind, that this

is a joint net worth of Mr. and Mrs.

Giacalone. This has been -- we have had

hundreds and hundreds of exhibits indicating

that so that should not be an issue as to

whether or not this is the position of the

Government. (R. 1115).

It was much too late to say, as the Circuit Court

did in its opinion, that the jury did not have to be-

lieve that some of the expenditures were made

from Mrs. Giacalone's separate estate or that it

was proper for the government to treat Mrs.

Giacalone's expenditures as having been made with

her husband's money. In light of the government's

trial theory, it made no effort to trace the proven

expenditures to the defendant's funds, as opposed to

his wife's, or to isolate his assets from those ofhis

wife. As a result, there was a failure of proof, and

the government's net worth statement should never

have been received into evidence. See: United States

v. Costello, 221 F. 2d 668, 672 (2nd Cir. 1955),

aff'd, 350 U.S. 359 (1956), (7)

(7) Since some of the jury instructions condoned

the use of a joint net worth and expenditures state-

ment in this case, reversible error occurred when

they were given. Also, since the requested jury

instructions, dealing with the need to segregatethe

wife's assets and expenditures from those of her

husband, were refused and not given, reversible

error again occurred.

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17

In summary, these conflicts justify the grant of

certiorari to review the Judgment below.

Ill

In addition to the need to resolve the noted con-

flicts, the decision below raises significant and

recurring problems with respect to the ability to

defend against a charge of income tax evasion when

the respondent chooses, as its method of proof, the

"net worth" method of recomputing income.

With the Sixth Circuit's noted stamp ofapproval,

it appears obvious that the gambit of using a "dash"

with respect to "cash on hand"’in a net worth com-

putation will proliferate. Why should the respondent

ever again use a figure for cash. By avoiding the

use Of a figure, it never has to defend the item.

The weakest point of a net worth case, from the

respondent's viewpoint, has now been rendered

inviolate.

Moreover, why should the respondent limit the

usz of a "dash" for the single item of "cash". What

is there, in light of the judgment below, to prevent

the respondent from using it for several or for

any item it might find troublesome in a particular

net worth case. Has not the decision below literally

Opened the flood gates. It was this fear that caused

the Fifth Circuit in the Phillip's Estate case, at page

214, to reject outright a similar attempt bythe

government. If one assumes any Other position than

the one adopted by the Fifth Circuit, it will in fact

be impossible to draw the line.

Another significant and recurring problem

created by the decision below with respect to

—_

18

attempting to defend a gainst a net worth case deals

with the role of the respondent's summary witness.

In this case, it was critical to the government's

case that its summary witness be permitted to dis-

cuss before the jury his factual analysis and/or

interpretations and then to render an opinion there-

from. He did so when he asserted that the amount

of cash on hand remained constant throughout the

prosecution period.

Without that utterance, it would have been all

tcoclear that there had been a failure of proof with

respect to the item of "cash on hand" for the net

worth computations after the initial one. (8) How-

ever, as presented previously, there was no evi-

dence of record tosupport that "gratuitous" declara-

tion. Accordingly, the breath of the permissible

scope of a summary witness in a net worth case

has been so broadened as to eliminate all boundaries.

Surely, this is not the exercise of "great care and

restraint", In fact, the coupling of the permission

to use a "dash" and the allowance of the summary

witness to render unsupported opinions renders the

defense to a net worth case impossible. In sucha

case, the net worth method is truely an elaborate

accounting sham.

The fact that there are recurring problems is

manifested by the number of criminal tax fraud

prosecutions brought each year. According to the

1977 Anmal Report of the Commissioner of Internal

(8) As noted previously, the respondent's cash

analysis was insu fficient to sustain its burden of

proof with respect to the opening net worth compu-

tation and specifically, in regard to the item of

"cash on hand".

Ae

19

Revenue, for the fiscal year ending September 30,

1977, there were 1,641 criminal tax fraud cases

terminated. Since, as this Court noted in the

Holland decision, the net worth method has be-

come the "first shot in the government's battle

for revenue”, it would appear that many ofthem

were net worth cases.

CONCLUSION

For the reasons set forth above, it is respect-

fully submitted that this petition for a writ of

certiorari should be granted.

JOSEPH F, DILLON

Counsel for Petitioner

Raymond, Fletcher,

Dillon & Titcomb, P.C.

400 Renaissance Center,

Suite 2370

Detroit, Michigan 48243

APPENDIX A.

OPINION OF THE COURT OF APPEALS

No. 77-5074

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

UnrrTep STATES OF AMERICA,

APPEAL from the

Plaintif-Appellee,| 1) nited States District

v. | Court for the Eastern

ANTHONY J. GIACALONE, ae 4 Michigan,

Defendant- Appellant. outhern Vivision.

Decided and Filed April 7, 1978.

Before: ‘Liveny, Encex and Menrarrrt, Circuit Judges.

Lrvery, Circuit Judge. The defendant appeals his jury

conviction for income tax evasion. The indictment charged

violation of 26 U.S.C. §7201' with respect to taxes due for

the years 1968, 1969, 1970 and 1971. The jury returned guilty

verdicts for the first three years but found the defendant not

guilty with respect to 1971.

The defendant filed joint.income tax returns with his wife

and paid the taxes which the returns indicated were due. The

government charged that the defendant understated his tax-

able income by substantial amounts in each of the indictment

years. The government’s evidence consisted primarily of a

187201. Attempt to evade or defeat tax

Any person who willfully attempts in any manner to evade or de-

feat any tax imposed by this title or the payment thereof shall, in

addition to other penalties provided by law, be guilty of a felony and,

upon conviction thereof, shall be fined not more than $10,000, or

imprisoned not more than 5 years, or both, together with the

costs of prosecution.

21

United States v. Giacalone No. 77-5074

recomputation of the defendant’s taxable income by “the net

worth plus nondeductible expenditures method.” (Gor-2rnment

summary witness Robert Campbell, Tr. 9635). Under this

method the government seeks to compute taxable income by

determining a taxpayer's net worth (excess of assets at cost

over liabilities ) at the end of each year plus his nondeductible

expenditures during the year. The difference between this

figure and the net worth at the beginning of the year is treated

as the taxable income received during the year. The govern-

ment must show that it has ruled out the existence of non-

taxable funds as the source of expenditures or increases in

net worth. See United States v. Taglianetti, 398 F.2d 558, 562

(1st Cir. 1968), aff'd, 399 U.S. 316 (1969); United States v.

Goichman, 407 F. Supp. 980, 986 (E.D. Pa), affd, 547 F.2d

778 (3d Cir. 1976). The net worth method was approved by

the Supreme Court for use in income tax prosecutions in

Holland v. United States, 348 U.S. 121 (1954), and in three

other cases decided the same day: Friedberg v. United States,

348 U.S. 142; Smith v. United States, 348 U.S. 147; United

States v. Calderon, 348 U.S. 160. .

The defendant raises numerous issues on appeal. We will

discuss separately those which appear to be the most sub-

stantial.

22

No. 77-5074 United States v. Giacalone

SUFFICIENCY OF THE EVIDENCE

A. Accuracy of the Opening Net Worth Figure

The defendant has contended throughout that the govern-

ment’s evidence was not sufficient to sustain the verdict

because it failed to establish the “opening net worth” with

sufficient certainty. In Holland the Supreme Court wrote that

“an essential condition in cases of this type is the establish-

ment, with reasonable certainty, of an opening net worth, to

serve as a starting point from which to calculate future in-

creases in the taxpayer's assets.” 348 U.S. at 132. A net worth

statement prepared by government agents was received in

evidence as exhibit #3517. The itemization of the defendant's

opening net worth — i.e., net worth on December 31, 1967, the

last day before commencement of the indictment years — on

the government's statement contained no dollar amount for

cash, “Cash” was shown as an item, but was represented by a

dash, and this representation was repeated for each year

through 1971. Page 1 of exhibit #3517, reproduced below,

shows the use of dashes:

23

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Atanixa |

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or“ wer" 166 tz°rty' los 62°008"¢S¥ = OO" 998" P29 Ce ciz*9zz

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To'ectlirr ec oec" Ize 99° 86°97 cc 6tt' ero “U°7er'sie

Corse Boooe’sT 0° O0RST 0090S iT 00 *9uL"T

00°000*» 00°000"4 00°000"¥ 00°005°C 00° 000°S

00°08t‘C 00° oeT'¢ ov'ost'’ oo out'C 00°066°T

61° ¥96°92 1e°s9e°92 “i 1 99"92 (e°soe"9z eC" S6s* 92

ce°ecoCe ccOzc "Oz CC OzL "02 00°O1e*¥t (s "690" It

so°eso"ooT)§=—s_s S99" aS 9" Te $9°es9"le $9°es9" ls $9°es9"le

OS "S76" Ze" se"c99" ico Io" SSC’ ees 96°S8S 679 eC "968° 16Z

70° S6z'se Si°ziv'o7z ZU°zL0* 92 se°rcz'sz Teele tc

es CI" Sez a1 6rt's 80°900°6 zo" aco'cs Cr'ort'et

Ctene't 00 "oEc’¢ 00 “O(c *¢ 00°009°2 00 °cos*¢

Wi/ic/et Omit /zt 697ic7et g9/ic/zt w9/iC7et

69/tc/zt

GOULU STUNLIAGMdxd FWILINGIG-NON SAI

MW140M LIN JHL AW Mil 40 wollvinDwd

FNOTVIVID ANON LAY

refs “ON

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stupyspuany py qeenoy

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@3uN0 Ie yueYy

puey vo #4244)

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$14SS¥

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24

No. 77-5074 United States v. Giacalone

The defendant argues that since the dashes added nothing

to the totals they must be treated as zeros. He points out that

the government’s evidence showed numerous cash purchases

by the defendant and his wife, thus proving the existence of

cash. Since no cash was shown on the statement, it cannot

reflect accurately or with “reasonable certainty” the opening

net worth figure for each year, he contends. This argument is

fallacious. The entire thrust of the case was that the cash

expenditures in each of the prosecution years were made from

current taxable income received in that year, not from cash

on hand at the beginning of the year. The government wit-

ness Campbell conceded that the defendant possessed some

cash, but testified that the dashes represented an unknown,

presumably constant amount and were similar to “x” in an

algebraic equation. The defendant is a “professional gambler”

(appellant’s reply brief, pp. 4 & 42). Campbell testified that

the net worth statement assumed the existence of a “bankroll”

of cash which remained approximately the same throughout

the period covered. However, he asserted that as a constant

it did not affect the accuracy of the net worth statement.

The defendant presented evidence that he had $300,000 in

cash on December 31, 1967 and that this fund was consumed

at the rate of $50,000 per year thereafter. According to de-

fendant’s computations these funds approximately accounted

for his increased net worth year by year. In anticipation of

this defense the government presented a detailed analysis of

the financial transactions of the defendant and his wife from

October 17, 1951 through December 31, 1967. The analysis

purported to show that during this 16-year period the Giaca-

lones had spent approximately $81,000 more than was available

to them according to their income tax returns. October 17,

1951 was chosen as the starting point for the cash analysis

because the defendant gave a statement to an agent of the

Internal Revenue Service on that date in which he detailed all

his assets and liabilities. The government argues that this

evidence of a negative cash position on December 31, 1967 was

25

United States v. Giacalone No. 77-5074

sufficient to justify the jury in finding that no cash hoard of

$300,000 existed, as claimed by the defendant, and was suf-

ficient to support the omission of any cash other than the

unknown quantity representing the gambler’s bankroll, shown

by dashes, from the net worth statement.

Because of the danger of miscarriage of justice inherent

in net worth prosecutions, we review each such case with

great care. See Holland v. United States, supra, 348 U.S. at

129. The burden of proof is no different than in any other

criminal case — the government must prove all material ele-

ments of the offense beyond a reasonable doubt. However,

in these cases the evidence of guilt is largely circumstantial,

and the net worth method is, at best, only an approximation.

As an added measure of protection the government is required

to demonstrate that it has investigated the existence of

sources of net worth other than unrepored taxable income. As

the Supreme Court said in Holland,“ .. . the cogency of its

proof depends upon its effective negation of reasonable ex-

planations by the taxpayer inconsistent with guilt.” 348 U.S. at

135. Evidence which carefully traces the financial history of

a defendant and discloses expenditures in excess of reported

resources in the period immediately preceding the indictment

years is sufficient to support a finding that there was no cash

hoard. Friedberg v. United States, supra, 348 U.S. at 144.

The defendant did not claim that he had nontaxable sources

of income during the indictment years. Instead, he relied

upon witnesses who testified that the $300,000 cash hoard

came from the defendant’s father prior to that time. The gov-

ernment presented proof that the father had serious financial

problems during the period it was claimed the gift money

wes being accumulated and that he left no probate estate. The

evidence was clearly sufficient to support an inference that

the defendant's father was not the source of funds which ex-

plain the increased net worth and expenditures of the de-

fendant and his wife. See McGarry v. United States, 388 F.2d

862 (Ist Cir. 1967), cert. denied, 394 U.S. 921 (1969).

26

No. 77-5074 United States v. Giacalone

Though we have found no case precisely on point we con-

clude that the use of dashes did not invalidate the net worth

statement. The Supreme Court held in United States v. John-

son, 319 U.S. 503, 517 (1943), that the government is not

requi sd to produce proof of the exact amount of unreported

income of a large-scale gambler. The nature of the activities

of a professional gambler virtually precludes such precision.

The effect of using the dashes is no different from the use of

zeros approved in United States v. Goichman, supra. It avoids

the untenable assumption that a professional gambler could

operate without any cash. The recognition of a cash bankroll

treated as a constant, together with proof which would sup-

port a finding that no significant cash hoard existed, was

a sufficient accounting for cash in the opening net worth

computation.

B. Use of a Joint Net Worth Statement

The defendant also claims that the evidence was insufficient

because the government used a joint net worth statement for

the defendant and his wife. The defendant and his wife filed

joint returns for the four years covered by the indictment and

Mrs. Giacalone’s occupation was listed on the returns as

“housekeeper.”. The accountant who prepared the returns

testified that all the information and figures for the returns

were supplied by the defendant. Though the defendant pre-

sented evidence that his wife had a separate estate, or net

worth, the government produced Social Security records which

indicated that Mrs. Giacalone had no earned income between

1937 and 1971. Furthermore, the government proof traced

a number of nondeductible expenditures by the wife to funds

furnished by defendant. The jury was not required to believe

the evidence that some of the expenditures were made from

the separate estate of defendant's wife.

The district court did not commit error in holding that the

use of a joint net worth statement was sufficient under the

facts of this case. By filing joint returns the defendant and

27

United States v. Giacalone No. 77-5074

his wife recognized a single taxable unit. Robert A. Coerver,

36 T.C. 252 (1961), aff'd per curiam, 297 F.2d 837 (3d Cir.

1962); Furnish v. C.1.R., 262 F.2d 727 (9th Cir. 1968); cf. 8A

Mertens Law or Feperat Income Taxation § 47.10 (rev.

1971). The evidence was impressive that the defendant

personally controlled and handled the finances, and he alone

was charged with attempting to evade taxes owed by the tax-

able unit. Although Mrs. Giacalone was not charged with the

criminal offense, her financial transactions were intertwined

with those of her husband. As in United States v. Costello, 221

F.2d 668, 674 (2d Cir. 1955), affd, 350 U.S. 359 (1956), the

evidence was sufficient to permit the government to treat

expenditures by Mrs. Giacalone as having been made with

her husband’s money.

On the entire record we conclude that there was sufficient

evidence to support the jury's verdict of income tax evasion

for the years 1968, 1969 and 1970. Holland v. United States,

supra; United States v. Newman, 468 F.2d 791 (5th Cir. 1972),

cert. denied, 411 U.S. 905 (1973); McGarry v. United States,

supra; United States v. Costello, supra; United States v. Goich-

man, supra. When the government shows by competent evi-

dence an increase in set worth together with nondeductible ex-

penditures and identifies a “likely source” of unreported in-

come — in this case, gambling — it has carried its burden of

proof. United States v. Costello, supra, 221 F.2d at 672. The

jury could infer willfulness from the evidence of a consistent

pattern of understatement of income and proof which negated

the existence of non-taxable sources of increased net worth.

UNFAVORABLE PUBLICITY

A. Pre-trial Publicity

The defendant also urges reversal on the ground that his

trial was tainted by a “saturation” of unfavorable pre-trial

publicity in newspaper articles and television broadcasts in

the Detroit area, and on several occasions, in the national

28

No. 77-5074 United States v. Giacalone

media. Though little of the publicity related to the case which

was to be tried, defendant argues that it placed him in a bad

light with the jury. Particularly objectionable, he maintains,

were news accounts linking him with the disappearance of

James Hoffa, an event which occurred approximately ten

weeks before the commencement of the tax evasion trial. One

month before the scheduled trial the district court denied a

motion for a 120-day continuance based in part on extensive

publicity. The defendant did not make a motion for change

of venue.

Two weeks before the trial date the defendant submitted a

list of six proposed voir dire questions for the prospective

jurors which were related to adverse publicity. At a pre-trial

hearing on the eve of the trial the District Judge stated that

after asking certain questions he would “invite questions” from

counsel for the defendant and the prosecution “as it relates to

the voir dire examination of the jury panel.” The court advised

defense counsel that it declined to use four of the proposed

voir dire questions because they related to matters of law and

‘contained statements that should properly be incorporated in

the final instructions to the jury. Before the trial began on

October 7, 1975 counsel again moved for a continuance, stating

that the TODAY show that morning had carried a report on

the Hoffa case which discussed a book containing references to

the defendant. In denying the motion for continuance the

court advised counsel for the defendant, “. . . what we will

have to do, if your client was referred to this morning on the

TODAY show, in the last chapter of the book on Hoffa, per-

haps during the voir dire you can help the court in terms

of asking that question, whether or not any of the prospective

jurors saw the TODAY show and the reference to your client

Mr. Giacalone.”

The court conducted a preliminary voir dire examination.

Addressing the entire array Judge Keith inquired as to pre-trial

publicity as follows:

29

United States v. Giacalone No. 77-5074

THE COURT: Now, does any prospective juror have

any personal knowledge or information about or concern-

ing the offense with which the defendant Anthony J.

Giacalone, also known as Tony Giacalone, is charged in

the indictment which the court has heretofore read to

you — do you have any personal knowledge or do you

know anything about it at all?

(no response )

Now, do any of you prospective jurors have any per-

sonal knowledge or information about or concerning the

defendant Anthony J. Giacalone — do you know anything

about him — have you heard anything about Tony Giaca-

lone at all?

MALE JUROR: Read his name in the newspapers.

ANOTHER JUROR: I have, too. On TV. I have

watched.

THE COURT: How many of you have read his

name in the newspaper and have heard something about

him on television, would you raise your right hand?

(show of hands)

THE COURT: That is everyone of you.

Now, do any of you, and I am speaking to all 12 of

you, by reason of what you have read or heard in the

newspapers or on television or on the radio believe that

you could not be absolutely fair and impartial as it

relates to this defendant, listen to the testimony that

comes from the witness stand and look at the witnesses

that testify and be guided by their testimony and the

law as the court will subsequently charge you as it re-

lates to this case — now, do any of you have such

prejudice that it would be impossible for you to give this

defendant the type of impartial trial that is guaranteed

him by the 6th Amendment to the Constitution and

clothe him and cloak him with the presumption of in-

nocence that he has presently?

- eet TENA SERGE

30

No. 77-5074 United States v. Giacalone

Now, do you think that you cannot be fair and impar-

tial, if so, raise your hand.

(pause, evidently no hands raised )

Now, if you should unconsciously or unwittingly have

any opinion, could you set aside that, without any

reservation, and decide this case solely by the evidence

that comes from the witness stand during the course of

this trial?

Shortly thereafter the court asked all prospective jurors if any

had seen the TODAY show that morning and received no

response. After selection of jurors began each prospective

juror was asked by the court if he or she had heard of the de-

fendant. Every venireman acknowledged having heard of

the defendant from television or newspaper accounts, and all

answered that this recognition would not prevent them from

being fair and impartial.in the case. Following questioning by

the court, counsel for both sides were given an opportunity

to question each prospective juror. Counsel for the defendant

asked a number of them if they could put out of their minds

the things they had read or heard about the defendant and

. give him the benefit of the presumption of innocence. Each

pexson so questioned answered in the affirmative. One pro-

spective juror started to make some reference to the de-

fendant’s reputation and was interrupted by defendant’s coun-

- sel. Shortly thereafter this person was excused for cause at

the request of the defendant.

During voir dire counsel for the defendant never suggested

to the court that he wished to pursue the matter of pre-trial

publicity beyond the questions which were asked. The defen-

dant did not request an opportunity to question prospective

jurors individually out of the presence of one another. In

view of the questions which were actually asked and the

responses received, we find nothing in the district court’s re-

fusal to ask the si: voir dire questions submitted by the de-

fendant which made it impossible to probe the prospective

31

United States v. Giacalone No. 77-5074

jurors properly on the effect of pre-trial publicity. There was

no abuse of discretion in declining to use the questions offered

by the defendant and no denial of an opportunity to conduct

an appropriate voir dire. The record does not support the

defendant's contention that he was prevented from conducting

a meaningful voir dire. On the contrary, it is clear that de-

fense counsel chose not to avail themselves of opportunities

for further questioning.

B. Publicity During the Trial

In a related matter the defendant contends that he was

prejudiced by continued unfavorable media publicity which

appeared during the trial. The defendant brought to the

court’s attention the fact that a radio news program and a

newspaper article had reported the testimony of a govern-

ment witness during the trial. These accounts added inform-

ation which the jury had not heard in court that implied some

connection between the defendant and James Hoffa. The

defendant moved that the testimony of the witness be stricken

“for prejudice.” No request was made to question the jury on

whether any of them had heard the newscast or read the

article.

Another occurrence during the trial also involved the Hoffa

association. Defense counsel advised the court that the Justice

Department had released a status report on an investigation

into the disappearance of James Hoffa and that local media

outlets had given wide publicity to the report. This occurred

approximately one week before the present case went to the

jury. No particular action was requested by the defendant.

There is no record of any other discussion of publicity during

the trial.

After the verdict the defendant made a motion to allow the

questioning of jurors “concerning their exposure to any evi-

dence not of record, such as news releases, publications, and

articles mentioned above . . ..”. The motion referred to a

32

No. 77-5074 United States v. Giacalone

number of articles and broadcasts and copies of many articles

were appended to it.

The district court admonished the jury daily throughout the

trial not to read about the case or listen to broadcasts con-

cerning it, or to discuss the case with anyone. After giving the

jury this admonition at the end of the first day’s proceedings

the court invited the attorneys to “speak to any of these

points.” Counsel for the defendant did not speak. There is no.

indication in the record that any juror violated the court's

instructions.

In Rizzo v. United States, 304 F.2d 810, 815 (8th Cir.),

cert. denied sub nom. Nafie v. United States, 371 U.S. 890

(1962), the court cited many holdings to the effect that

“[w]here a jury has been clearly admonished not to read news-

paper accounts of the trial in which they are serving as jurors,

it is not to be presumed that they violated that adinonition.”

See also Estes v. United States, 335 F.2d 609, 615 (5th Cir.

1964), cert. denied, 379 U.S. 964 (1965). Since the defendant

did not seek to question the jurors during the trial while the

allegedly prejudicial publicity was currently appearing, there

was no abuse of discretion in denying the request to question

them after the trial was over, in the absence of some showing

of violation of the court’s clear instruction. See United States

v. Brumbaugh, 471 F.2d 1128, 1130-31 (6th Cir.) (McCree,

J., concurring), cert. denied, 412 U.S. 918 (1973).

There was a great deal of publicity concerning the de-

fendant both before and during the trial. The District Judge

took pains to see that the jury considered only the evidence

presented in court in deciding the case. Defense counsel were

not restricted in their attempts to determine whether any

prospective jurors had been influenced by pre-trial publicity.

When publicity during the trial was brought to the district

court’s attention the defendant made no attempt to establish

contamination of the jury. Widespread publicity about a de-

fendant is not enough, standing alone, to require reversal of a

33

United States v. Giacalone No. 77-5074

conviction. This is particularly true when the publicity is

largely unrelated to the trial which is imminent or in progress.

There was no showing of actual taint in this case and none will

be presumed. The fact that the defendant was subjected to

considerable notoriety, whether justly so or not, does not

render the courts of the United States incapable of providing

him with a fair trial. United States v. Medlin, 353 F.2d 789,

792 (6th Cir. 1965), cert. denied, 384 U.S. 973 (1966).

THE JURY INSTRUCTIONS

The defendant contends that the district court erred in

failing to give requested instructions which were based on the

evidence. In this court the defendant argues that the district

court failed to instruct on his theory of the case. This argu-

ment was not made to the District Judge, nor was the decision

in United States v. Garner, 529 F.2d 962 (6th Cir.), cert.

denied sub nom. Brown v. United States, 426 U.S. 922 (1976),

cited to him. In Garner we held that it is reversible error for

a trial judge to refuse to present adequately a defendant's

theory in a criminal case. In the present case the defendant

offered a large number of separate instructions, each of which

embodied some defense theory. Many of the proposed in-

structions were abstract statements of legal principles which

probably would have only confused the jury, since they had no

clear application to the evidence presented. Though the sub-

stance of many of the offered instructions was included in the

court’s charge, it declined to give them as offered.

After all the evidence was in, the court held an eight-hour

session with counsel devoted entirely to the matter of jury in-

structions. The trial judge presented his proposed instructions

and counsel commented on them seriatim. A number of

changes were made in the instructions during this conference.

After the court’s proposed instructions had been considered

and the court had riled on various objections, counsel were

permitted to make further objections “to what the court has

34

No. 77-5074 United States v. Giacalone

not given.” Counsel for the defendant then objected to the

court's refusal to give nineteen tendered instructions. The

court again declined to give the offered instructions. No dis-

cussion of the substance of these offered instructions occurred

at this time. Instead, a defense attorney merely referred to

each of the nineteen by the “title” which he had previously

assigne:] to it.

Among the instructions offered by the defendant and refused

by the court was the following:

AGENCY

An agent is one who has the authority to act on behalf

of another; called his principal, to transact what the prin-

cipal may do, and to render an account of his activity to

his principai. Stephenson v. Golden, 279 Mich. 710, 276

N.W. 849 (1937), on rehearing of 279 Mich. 493, 272

N.W. 881 (1937). It is not necessary that the principal

be disclosed to the third party fhat the agent is trans-

acting business with. In such a case, the prin al is

legally referred to as undisclosed principal. Dodge v

Blood, 299 Mich. 364, 300 N.W. 121 (1941).

The expenses incurred by the agent in the performance

of handling his principal's affairs are attributable to the

principal, and rot the defendant. McKinnon and Mooney

v. Fireman’s Fund Indemnity Co., 288 F.2d 189 (6th Cir.

1961); Bibb v. Allen, 149 U.S. 481 (1893).

Whereupon if you find that Mr. Anthony J. Giacalone

was acting as an agent for others such as his brother, Vito

Giacalone, then such expenses he incurred are attribut-

able to those other parties and not to Anthony J. Giaca-

lone.

Furthermore, if you find that Mr. Anthony J. Giacalone

paid bills for others such as his brother and son and on

doing so used their money then such disbursements are

theirs and cannot be charged or attributed to Anthony J.

United States v. Giacalone No. 77-5074

Giacalone. McKinnon and Mooney v. Fireman's Fund

Indemnity Co., supra; Bibb v. Allen, supra.

The jury was not concerned with the Michigan law of agency,

and the district court properly declined to give the instruction

as offered. However, the final paragraph of the proposed in-

struction related directly to testimony by defense witnesses

that Anthony Giacalone was spending their money rather

than his own in a number of instances where the gov-

ernment had attributed the expenditures to Giacalone as non-

deductible items.

On several occasions during the trial the court acknowledged

to defense counsel, in the presence of the jury, its under-

standing that the defendant claimed some of the expenditures

charged to him by the government actually were made with

other peoples’ money and that some of the payments were

made by persons other than the defendant.? No limitations

ment has taken. The government has taken the position that

this lady who was in charge out there received a certain amount

of ent, Anthony Giacalone. It’s your

took the money ‘this lady he was taki it as an agent of his

who owned the t well. The Court knows your

(Transcript, page 12,150)

Giacalone, Mr. Anthony Giacalone brought it in.

It is your position that Mr. Anthony Giacolone did not own

the boat well and that he was acting as an agent for his brother

money.

t is a question of fact t has to be determined by the jury.

Now, if the Court has misstated your position or missta the

nm, please correct the Court and we will

today

by the Giacalone brothers.

(Transcript, pages 12,303-04)

36

No. 77-5074 "United States v. Giacalone

were placed upon the defendant's attempts to prove this claim.

During closing argument defense counsel was permitted to

argue at length that various expenditures involved funds of

other persons for whom the defendant acted in some agency

capacity. In the court’s instructions the jury was directed to

acquit the defendant if it found that the government had

failed to establish the joint net worth of the defendant and his

wife at the beginning of each of the indictment years or if it

found that the evidence failed to reflect increased net worth

and nondeductible expenditures substantially in excess of the

income reported in each of the years; or if it had a reasonable

_ doubt that any of these elements had been proven. Immedi-

ately following this portion of the charge the jury was in-

structed as follows:

On the other hand, if the evidence in the case does

establish beyond a reasonable doubt the maximum pos-

sible amount of Mr. and Mrs. Giancalone’s net worth as

of the beginning of the calendar years 1968, 1969, 1970

and 1971, and further establishes beyond a reasonable

doubt that funds reflected in any increased net worth,

plus nondeductible expenditures during such years sub-

stantially exceed the income reported on the tax returns,

you should then proceed to determine whether the evi-

dence in the case also establishes beyond a reasonable

doubt that such additional funds represented taxable in-

come on which Anthony J. Giacalone willfully attempted

to evade or defeat the tax as charged in the indictment.

(emphasis added).

We believe from reading the entire charge that it is clear the

jury was instructed that only those expenditures of funds con-

stituting taxable income of Mr. and Mrs. Giacalone could be

considered ‘in determining whether the government had

sustained its burden of proving the defendant guilty beyond a

reasonable doubt. The court’s instructions limited the jury’s

consideration of expenditures to those which represented tax-

37

. United States v. Giacalone No. 77-5074

able income of Mr. and Mrs. Giacalone. The instruction

offered by the defendant was merely a converse statement —

that the jury could not consider disbursements made by the

defendant for other people, using their money. The jury was

instructed to consider all the evidence in the case. This re-

quired it to take into account the testimony of defense

witnesses that expenditures attributed by the government to

unreported income of the defendant actually were made from

other sources. Since the instrictions previously quoted per-

mitted consideration only of expenditures of taxable income of

the taxpayers, the entire charge required the jury to con-

sider the defendant's claim in reaching its verdict. See United

States v. Herron, 551 F.2d 1073 (6th Cir. 1977).

The instructions fully explained the net worth method as

required by Holland and made it clear that the government

had the burden of proving each element of the offense charged

beyond a reasonable doubt. Read as a whole, the jury charge

properly submitted the factual issues in the case. Other ar- |

guments made by the defendant concerning the instructions

do not require discussion.

DUE PROCESS ISSUES

The deferdant also seeks reversal on the ground that various

actions of the prosecution violated his due process rights. It

is charged particularly that the prosecution repeatedly brought

to the jury’s attention the fact that the defendant exercised his

Fifth Amendment right to remain silent. The defendant did

not testify and his silence when charged with income tax

evasion was not disclosed to the jury by cross-examining him,

as was done in Doyle v. Ohio, 426 U.S. 610 (1976), and

Minor v. Black, 527 F.2d 1 (6th Cir. 1975), cert. denied, 427

U.S. 904 (1976). Rather, several government witnesses testified

that defendant’s accountants and counsel failed to furnish cer-

tain requested information. No one testified for the defense that

the requested information was withheld in the exercise of

No. 77-5074 United States v. Giacalone

defendant's Fifth Amendment right to remain silent. In fact,

the accountant testified that certain information was given to

government agents in an attempt to assist them. In a net

worth case the government is required to show that it has

made a reasonable attempt to investigate any leads furnished

by the taxpayer which suggest non-taxable sources of funds.

It was not error to permit the prosecution to show that no

such leads were furnished. An examination of the trial tran- .

script reveals no effort by the government to create an infer-

ence of guilt from the silence of the defendant.

The other claims of due process violations relate to alleged

failure by the government to disclose exculpatory evidence,

prosecutorial misconduct and the reception of evidence of un-

supported prior understatements of income by the defendant.

An examination of the record relating to these charges fails

to support the claim that defendant was denied a fair trial.

The trial lasted approximately seven months. It doubtless was

not a perfect trial. However, there is no basis for a claim that

the defendant was denied fundamental fairness. It was a

hard-fought case, but there was no overreaching by the prose-

cution, and the presiding judge permitted the lawyers to “try

- their case” without undue interference by the court, while

retaining control of the proceedings and guarding the rights

of both parties.

THE WIRETAP ISSUE

In the early 1960's the government conducted a series of

warrantless wiretaps at a Detroit business establishment owned

by the defendant. Prior to trial the defendant made a motion

under Rule 16, Fed. R. Crim. P., for disclosure of all the

transcripts of the tapes made during this surveillance. Several

deliveries of transcripts were made by government counsel,

and at the time of the last delivery the prosecutor advised the

court that the last of the transcripts of interceptions had been

disclosed. The transcripts covered only 1963 and 1964. After

United States v. Giacalone No. 77-5074

the trial had ended a series of articles appeared in a Detroit

newspaper which stated that the interceptions had taken place

from 1961 to 1964 and that a much larger volume of inter-

cepted material existed than had been delivered to the de-

fendant.

The defendant made a motion for rehearing on his prev-

iously denied motion for a new trial. He also sought an

evidentiary hearing to take the testimony of three reporters

who had worked on the series of articles. The defendant main-

tains it was an abuse of discretion to deny these motions. An

affidavit filed by counsel for the defendant in support of the

motions did not establish that pre-1963 tapes existed. Rather,

it disclosed that one of the newspaper reporters had told de-

fense counsel that “to the best of his knowledge” the informa-

tion in the articles was accurate and that he had seen tran-

scripts which were bulkier than those received by the de-

fendant from the government. He also said he was uncertain

whether he had read ariy transcripts of 1961 or 1962 intercep-

tions. The affidavit quoted another reporter who was involved

in preparing the series as saying his information had come

from a “reliable source.” A government attorney stated in open

court that to the best of his knowledge the defendant had

" received all the transcripts.

The evidence of the existence of undisclosed wiretap evi-

dence was not sufficient to require a post-trial hearing. Even

if such materials existed at one time the district court was

justified in concluding that the government did not fail to

disclose them in violation of its Rule 16 order. There was

nothing in the affidavit of defense counsel which indicated

that tapes or transcripts of 1961-1962 interceptions were in

existence at the time the Rule 16 motions were made or that

information from such interceptions formed any part of the

government’s case in this prosecution. The district court did

not abuse its discretion in denying the motions to rehear

the motion for new trial and to conduct an evidentiary hearing

with respect to the newspaper accounts of pre-1963 electronic

eh Ye eee

>~- - Qe

40

No. 77-5074 United States v. Giacalone

surveillance. See United States v. Aiuppa, 440 F.2d 893, 895

(10th Cir.), cert denied, 404 U.S. 871 (1971).

The judgment of the district court is affirmed.

41

APPENDIX B.

ORDER BY THE COURT OF APPEALS

NO. 77-5074

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

ED 9, 19

UNITED STATES OF AMERICA vue ey , Sm

)

Plaintiff-Appellee )

ve ) ORDER

ANTHONY J. GIACALONE )

Defendant- Appellant

BEFORE: LIVELY, ENGELand MERRITT, Circuit Judges.

The defendant-appellant has filed a petition for

rehearing with suggestion that it be heard by the

court en banc. No judge in regular active service

on the court having requested rehearing en banc,

the petition has been referred to the panel which

heard the appeal.

Upon consideration the court concludes that all

issues addressed in the petition for rehearing were

fully considered and decided upon original submis-

sion and decision of the case.

The petition for rehearing is denied.

ENTERED BY ORDER OF

THE COU RT

/s/ John P. Hehman

Clerk