Appendix — Harrison v. United States

is)

—1(a)—

Q

U NITED STATES ‘COURT OF APPEALS

For the Eighth Circuit

No. 16,983

E, Paul Black, . .

Appellant,

Appeal from the

United States Dis-

\ trict Court for the

Eastern District of

Missouri.

vs

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‘United States of America,

Appellee. |

[October 30, 1962.| _ |

»

Before Sanborn and Blackmun, Circuit Judges, and

Register, District Judge.

8

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Register, District Judge.’

hie, appellant, E. Paul Black, was charged in a three

count indictment with attempting to evade and defeat in-

come tax due and owing by him and his wife to the

United States of America for the calendar years 1954

’ (Count 1), 1955 (Count 11), and 1956 (Count IIT), by filing

false and fraudulent joint income tax returns, all’ in vio-

lation of Section 7201, :Title.26, U. S.C. The sums*‘involved

in this litigation, as set out in the appellant’s tax returns

and the indictment, are as follows:

g rags

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— 2 (a) —-

Amounts Reported in Tax ° Amounts Alleged in

: Returns Indictment

Income Tax Thereon Income Tax Thereon

Count I ..... 12,780.66 3,062.20 ¢ 29,431.19 9,294.90

(1954) +» ;

Count Il .... 20,880.65 5,740.65 42,999.21 16,266.90

(1955) ° 4

Count 111... 12,428.08 2,974.42 17,917.70 4,659.91

(1956)

Following a trial by jury, appellant was found guilty

son all three counts and sentenced to confinement for a

period of thirty months on each of the three Counts, said

periods of confinement to run concefrently, and in addi-

tion thereto fined a total of $5,000.00. Appellant's appeal

to this ( ‘ourt is from that verdict and sentence,

“The first error assigned is that ‘*‘The Court erred in fail-

- ing to sustain defendant’s motion for a judgment of ac-

quittal filed both at the close of the government's case

and at the close of the entire case because there is no

evidence that the defendant knowingly and willingly (sic)

attempted. to evade paying the taxes due the United

States’, Because appellant has challenged the sufficiency

of the evidence to support the verdict of guilty, we have

carefully examined and considered the entire record, in-

cluding the original transeript of the evidence, The fol-

Jowing principles apply: ;

r ° :

“1. In determining the, sufficiency of the etidence to

support the verdict of the jury, this Court must take that

view of the evidence which is most favorable to the gov-

ernment, and give to the government the benefit of all in-°

ferences which reasonably may be drawn in its favor.

Affronti v. United States, § (ir., 145 F.2d ~ 5, and cases

cited, @

‘2. The burden of demonstrating prejudicial error is

upon the appellant. Marin v. Ellis, 8 .Cir:, 15 F. 2d 321,

322; Metropolitan Life Insurance Co. v. Armstrong, 8 Ce.

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85 F. 2d 187, 195; Kimball Laundry Co. v. United States,

Cir., 166 F. 2d 856, 859."" Myres v. United States, 8 Cir,

174 F. 2d 329, 332. :

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‘We must assume that’all conflicts in the evidence shave

been resolved in fayor of the government and the govern-

ment as the prevailing patty is entitled to the ‘betiefit

of all such favorable: inferences as may reasonably be

drawn from the facts proven.’’ Hoyer v. United States,

Cir., 228 F, 2d 134, 139,

The indictment was returned on Mareh 39, 1961. On

May 23, 1961, the government filed a bill of particulars,

in which it was stated:

“ih, All three counts of the indictment are based on

the omission of specific items of meome from the Defend

ant’s tax weturns and the taking of improper deductions

on those returns. .

a é

= The omitted income is of the following kinds.

- a. Gains from Mitual Funds. Ineome omitted in

fll years, . @ :

b. Gains on sale of lots. Tnecon@® omitted in all

vears.

«. Unreported business receipts from hauling and

excavating work, Income omitted in 1955 and ,1956.

d. Unreported interest income, Tneome omitted in

1956, . es

Py. The improper eomections, consist of fictional pay

ments for rent and, equipment.”

Section 7201 of 26 U. S.-C, provides that * Any person °

who willfully attempts in any smanner to evade or defeat

‘any tax imposed by this title or the payment thereof shall

* * * be guilty of a felony and, upon conviction thereof,

‘shall be * * *** punished as provided by law,

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During the years with which we are here concerned, Black

owned at business in Flat River, Missouri, which consisted

in large part of performing a contract with the St. Joseph

Lead Company to transport chat from its mine dumps to

the mills of the Company for reprocessing. In addition

thereto, appellant engaged in’ excavating work, land ttear-

ing, bulldozing and miscellaneous hauling and work of a

similar ‘nature. In order to perform his contract with

the St. Joseph Lead Company, trucks and drivers were

. * u

_required. Black rented a number of trucks and empleyed

drivers to operate them. In any one twenty-four hour

period approximately 20 to 25 trucks and 40. to 45 drivers

were used if this operation. Truck rental and: driver's

wages werd based upon tonnage hauled. A daily record

of the number of ‘tons of chat hauled by each truek and

driver was kept-by the Company. During 1953 and until

April, 1954, such tonnage report was given weekly by the

Company téjdames Crites, an employee of Black at the

latter’s headquarters near Desloge, Missouri. Each week

(rites computed, froni the tonnage reports, the rental due

each truck owner and the wages due each driver, made

out the checks accordingly, and delivered them to Black,

“—_ signed them and delivered them to the pavees.

During 1953 and 1954 Black also employed an ee ty

ent accountant, Wynne Edmonds, whose offices wéfe in

“Flat River, Missouri. The business records and books of

Black were maintained by Edmonds in the latter’s office.

Crites delivered the tonnage reports and payroll records,

together with the truck rental payment record, to Ed-

monds’ office each week. Informi&jon from these records

was then entered on an employee earning and history rec- -

ord, and the total of the payroll, and allocation, was en-

tered in a journal. During the time Crites was emploved

by Black, Edmonds had nothing to do with computing

the pavroll- / “

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Crites trina his employment with Black in April,

1954. Prior to that time, ‘Crites, Black and Mary Ann

Boyer, an employee of Edmonds, conferred in Edmonds’

office, at which time Black requested Mrs.-Boyer to per-

form the services previously alone by Crites—that is, ac-

cept the fonnage reports, compute the w eckly payroll

therefrom, and draw the checks for signature and distribu-

tion by Black. At this meeting Mrs: Boyer was instructed

in the proper procedure in computing payments for truck

rental and wages. Thereafter Mrs.- Boyer ‘did perform

such service until she left Edmonds’ employ. ig

At the end of each month a profit and loss statement

was prepared, as was a balance sheet (in duplicate) that

reflected the assets and liabilities and the cumulative total

of profit and loss for the year. The’ information neces-

- sary for the preparation of these statements was taken

from the journal and ledger in which had been entered

all payroll information, including truck rental payments.

A duplicate copy of the balance sheet was given to Black.

a

Initial information as to disbursements made by ‘Black

. was secured by Edmonds from check stubs. Each month

- ‘ Pat a

Black delivered the stubs from his personal checkbook to

Edmonds in order that he have the necessary information

for book me The stubs of checks issued for the pay-

roll remained in Edmends’ office. Information as to in-

come came from the bank deposit records and the state-

ments from St. Joseph Lead Company. From time to time

Black gave to Edmonds information, orally, as to items of

‘miseellanous income. All such information as to income

and disbursements was entered _in a journal and lédger,

a

and the’ tax returns for-the years here involved were: pre-

pared from these records.

Prior to April, 1954, when his office ‘‘took over’’ the —

preparation ofthe payroll, Edmonds received fifty dollars

— 6 (4)

per month for his services to Black; subsequent to the

stated: date, Edmonds received ninety dollars per month.

In 1953 Black owned three of the trucks which were

used in performing the contract with St. Joseph Lead

Company. As driver for one of these three trueks, Black

had in his euiploy a Raymond Cy Russell, At that time

(in 1953) Black approached Russell at the chat fields,

and asked Russell if he would **run’’ thes® three trucks

ips. his name, and each week: When he (Russell) would re-

ceive the check for reritat therefor, he would endorse the

same and deliver it to Black. Russell agreed. There-

after, each month until the termination of Russell's em-

ployment in January, 1956, this arrangement was carried

out, although Russell never took fitle to the trucks, never

paid the registration fees thereon, and never received any

part of the rental proceeds therefor. Immediately after

Inakinge the described arfangement with .Russel!, Black

directed ‘rites to issuesthe rental checks for the three

trucks to Russell, and Crites complied. Othe persons

subsequently charged with the preparation of the payroll

continued such practice. The permanent business records

maititained by Edmonds, baat part upon the tonnage.

reports and payroll records, reflected the payment of truck.

rental for the three trucks as‘ having been continuonsly

made to Russell, daring said time.

During alLof the time such truck rental payments were

being made to Russell, Biack maintained a business check-

ing account in each of two local banks. The truck

rental checks made out to Russell, endorsed by him and

handed back to” Black, were not deposited in any bank

account by Black, but were always cashed. W eekly in-

come to Black from this Source averaged $300.00, and con-

tinued until January, 1956.

On May 1, 1954, Mr. and Mrs. Black, accompanied by

Edmonds, visited an investment broker in Farmington.

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Missouri. At that time, an investment account was

opened in the names of Ernest PL and Mrs. J. Irene Black.

Such names were not in the form usually employed by

the defendant and his wife. This account, placed) with

Affiliated Funds of New York and Generai Industries of

Managed Funds, St. Louis, Missouri, was closed on Jan-

uary 9, 1996. Under the investment contract, no dividends

were to be gaaid in cash, but were reimvested. Mr. and Mrs.

Black made weekly investments during the life of this

account of $800.00 in cash. ‘The broker deposited each

weekly payment inca bank in’ Farmington, and drew

checks to-the respective funds to purchase the shares. The

weekly payments of cash were aljnost always made “by

Mrs. Black.

Each quarter Managed Funds, Ine., prepared a voucher

or notice winch snowed the total amount of distribution

or amount duc the individual shareholder. A copy thereof

was mailed\to each shareholder. At the close of. each

*vear, Managed Funds, Inc.. was required to file what is

known as Treasury Form No, 1099 with the Commissioner

of Internal Revenue. A copy of this form was retatned

by Managed Funds, Ine. and two copies were mailed to

each shareholder, This form showed the total amount

of distrilgition made to each shareholder for the vear and

was mailed prior to February 28th of every vear following

the closing of the fiseal vear (which was November 30th).

Form 1099 for the vears 1954, 1955 and, 1956 (Plaintiff's

* Exhibits 22, 28 and 24) from Managed Funds, ‘Tne., to

appellant and Mrs. Black, disclosed annual dividends in

the amounts of $274.82, $1042.47 and $1786.08, respectively.

Of each of these 1954 forms was printed:

“INCOME TAX RETURN REQUIREMENTS

“An income tax return must be filed; on or before

March 15, 1955, with the District Director ofs Internal

Revenue for the district in which the payee lives, if

f,

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the total income reported on this form, when added to

his income from all other sources, amounts to $600 or

more.’’ .

- Similar information was printed on such form for each of

the other years, which was identical except as to the year

during which the return must be filed. Also, Managed

Funds, Ine., prepared annually a schedule of gains and

losses, showing net dividend income and application of the

distributions, to dividend i income or capital gains. A copy

of this was mailed to each shareholder within thirty days

after the end of each fiscal year, and in effect reflects the

percentage of the dividend received by him that is taxable

as ordinary income and the percentage taxable as long-—

term capital gain. At the top of such printed schedule

which is dated December 29, 1954, are the following words,

printed in large type: “Taxability of Dividends Paid

during 1954’’, and at the bottom thereof, are the follow-

ing: ‘‘File this copy with your Federal Income Tax re-

turn’’. Attached thereto is an exact duplicate, except as

to the instruction, which reads: ‘‘Keep this copy for your

records’. Schedules for 1955 and 1956 are identical, ex-

cept as to the years referred to, and such schedules are of

record as Plaintiff's ‘Exhibits 25, 26 and 2

On the form of eit sent by Affiliated

Funds, Inc., to the shareholder following each cash deposit

was a statement as.to tax liability; each time a cash divi-

dend was declared, and each time a capital gain was de-

clared, a report was sent to each stockholder and onmethis

report was a statement as to taxability. Once a year an

annual report was made to each stockholder, in which ref-

erence was made to taxability. It was stipulated that,

under the Affiliated Funds, Inc. contract with Mr. and

Mrs. Bick the dividends and capital gains were as fol-

lows:

—- Dia)

Year Dividends Capital Gains

1954 $ 46.95 $206.99

1955 ; 816.05 carr 6GOS.SS

156” a i fe 45.79

In 1958 and 1999, Mr. Russell James was a Special

Agent for the Intelligence Unit of the Internal Revenue

Service. It was a part of his duties to conduct investiga-

tions as to income tax liabilities. He conducted an in-

vestigation into the income tax affairs of Black for the

riod here involved, which investiga#@on commenced in

the spring of 1958 and was concluded in the fall_ of 1959.

He compared the income of the defendant as reflected on

“the books with the income tax return for each of said

vears, and the books and returns were in agreement.

Truck payment rentals paid to Russell appeared in. the

disbursement journal where they bad been entered orig-

inally, and had been carried over inte the truck rental

column of the journal. The, Agt tal of such truck rentals |

shown paid to Russell in 1954 was $13,944.39. This figure

had been posted in the truck ledger account, and had been

deducted in computing net income, and the 1954) income

tax return was in accord with said books. The books

disclosed the total truck rental payments to Russell for

1955 as $15,579.55, and ;the income tax return for 1955

was in accord therewith. The total truck rental payments

to Russell for 1956, as disclosed by the books, was $451.81,

and this constituted a deduction in the computations ap-

pearing on the return for that yearg, The amount shown

on the books as paid to Russell. for truck rentals each

vear @onstituted a part of the deduction appearing in ue

return for such year under the classification ‘*Rent,

Trucks and Equipment’. These figures are not Peseta

and Black conceded that they were not proper deductions.

Tie government contends that Black knew these dedue-

tions. vere not proper at the time of the execution of the

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respective returns, but that nevertheless. he signed’ each

thereof, knowing it was incorrect, and knowing that-it_un-

derstated his income tax. Black contends that , he did not —

know that the amounts received from Russell as alleged

truck rental were not entered on the books as income,

and believed they had been, believed they were included

in the returns, and that he did not know such returns were

incorrect until after the investigation had-ecommenced.

He contends that he did not interd to evade any part of

his income tax and, hence, that the reqnres ¢lement of

willfulness is not present.

‘*Willfulness ‘involves a specifie intent which must be

proven by independent ewdenge and which cannot be in-’

ferred from the mere understanding of income.’ *’ Hol-

jand et ux. v. United States, 1954, 348 U.S. 121, 139;

Blackwell v. United States. § Cir., 1957, 244 F. 2d 423, 42.

‘The existence of intent, motive or Qi fulness in at

question of fact which may be proved by direct or cireum-

stantial evidence, and * * * evidence on the question of

intent, where that is material, may take a wider range

than is allowed in support of other issues, otherwise there

would often be no means to disclose the purpose of the

act charged in which the, very gist of the offense mav

consist. ** Hoyer v. United States, supra.

It is undisputed that Edmonds prepared the income tax

return for each of the years invelved from the business

books of defendant, and that, after the same was fully pre-

_ pared, Black and his wife went to Edmonds’ office and

signed the same without examining it. The only unusual

features of thé case are that the amount of the purported

truck rentals is not in dispute and concededly was an in-

proper deduction, and the dividends and capital gain:

from the mutual funds are definite and undisputed in

amount ‘and concededly were improperly omitted from the

returns. Knowledge and intent of Binck constitute the

basic fact issue.

—11ia) —

Black was born on Februa® 20, 1918, in Elvins, near

Flat River, Missouri. He attended a country school for

eight years, and the high school in Elvins for two vears.

———~—_He théen worked for a time in a restaurant in Farmington,

. Missouriy thereafter, for a drilling contractor, and then

for the St. Joseph Lead Contam. While employed by

the Lead Company, he werked in the yards, loaded atd-—-——

handled trucks, and learned to use heavy equipment. He

quit this job in 1947 and went into business for himself,

beginning with one piece of heavy equipment. Shortly

thereafter, he entered into a contract with the Lead Com

pany for transporting chat. | As his business expanded

from time to time, Black purchased a substantial amount

of additional equipment, including shovels, trucks, and a

bulldozer, At the time he began his own business, he had

no books or bookkeeper, and in the iatter part of 1947

or early part of) 1948, employed Kdmonds to ++ Sef up? a

set of books for him, and te maintain them. Defendant

contends that, due to his limited education, he knew? noth

ing about books or bookkeeping. Ln his testimony, in re

sponse to the question, Did von ever disetss those book <

With him at the time they ware set up?) Black replied,

No, L never discussed books. | wouldn't know what |

was talking about anyway.’ (Tro po 515), and “Now,

did you ever at any time with Mr. Kdmonds examine vour

books or look at them or see then?

“A. T never did look at them, and | was never told about

-them, and [PF didn’t know anything about looking at them

© when T looked at them, so | was too busy and T didn't

look af thein, TP wouldn't know what te look for’ (Tr. p.

330). Kdinonds continued to work for Blaek until 1957.

Black contends that during all of this time he relied ex.

clusively upon Edrionds to’ keep his books and records |

{except as to the tonnage reports and payroll service per.

formed by Crites during his emplovinent); that he re-

_ ported all income of every kind to him; that he sought and

— 12 (a) —

relied ‘upon his advice on business matters, as he had

faith in him and trusted him; that Edmonds assured him

that everything was taken care of. and the books were cor-

rect; and that he and Mrs. Black signed the returns which

had been prepared by Edmonds, without personal exam-

ination or inspection. "

Black testified in effect that while he was performing

the contract to transport chat for the St. Joseph Lead

Company he was having labor truble due to representa.

tives of the Teamsters Union; that he discussed this mat- .

ter with Edmonds and that they went to the general man-

ager of the Lead Company (a Mr. Murphy) in the early

part of 1953; that Mr. Murphy advised him that ‘‘it would

be a lot better if each man owned their own trucks’? (Tr.

p. 521), and that on the way home he and Edmonds con-

tinued to discuss this matter. Mr. Black testified as fol-

lows:

‘A. Well, on our way back from Bonne Terre to Des-

loge, which is about four or four and a half miles,

‘Wynne’, I told him, I said, ‘I don’t know what to do, I’m

going to have to get rid of those trucks’, and he said,

‘Well, why not take and just-—who’s vour oldest man?’ I

said, ‘Well, R. C. Russell." He said, ‘Why not take and

run them in as if he were owner?’ 2

***Well, I don’t know, we can see him and find out, see

what he thinks.’ He said, ‘That a way, why, it will kind

of ease St. Jo’s mind a little’, when they looked at the

reports, that somebody owned them besides myself.

*Q. Had vou been advised or have any knowledge of

the organizers of the unions checking at the St. Jo Lead

Company to see who the owners

‘A. Yes_J had heard that they could, because they—in

a small te down there like that, they know pretty well

who all owns trucks. :

**Q. IT see. Now, where did vou go with Mr. Edmonds,

and you! |

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“A. We came on from Bonne Terre and went on down

to Desloge chat field. That's where we were hauling our

chat and loading for St. Jo.

“Q. Did vou have a conversation with Mr. Russel?

“AL Yes, we st®pped him. He happened to be working.

1 don’t know whether it was the day shift or evening

shift. Anyway, he was there, and when we asked him.

said, SR... how about running these trucks in vour

name?

“Well” Raymond said, *Well, it's okay by me’, and —

“Q. Did Mr. Edmonds explain to him there at this

meeting in your presence how the payments would be

made, and the things of that kind?

“AL Yes, he did.

“QQ. Now, will you explain that to the jury, please?

‘A. He said, ‘There will be two cheeks made out, one

for you as a driver, and one for vou. the same as if you

owned ‘the truck, although the one that the truck driver,

vou will endorse it and give it back to Paul’, and Ravmond

said, ‘Okay", he would go along and do that. and that’s

what we done.

“(). Now, what happened with that money?

“A. Well, Wynne told me, 1 didn't draw any salary, or

anything, he just told me, he said, ‘You eo ahead and

keep that for vour living and expenses’, so on, like that,

‘as a salary."

“QQ. Did you ask him anything about the money with

respect to taxes or records or things of that kind?

‘A. Tetold him this, T said, ‘That is money that ix due

me, or due my equipment’, and he said, ‘Well’, he said,

‘von don’t have to worry about that’, he said, ‘1 know it

and Tl] put it all on the books, it will all be taken care of."

“QQ. Was anything mentioned about income tax or

taxes! i

‘A. He said it would all be put on vour books and

charged to vou\and taken care of in the taxes, so on, like

that. ‘

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‘*(. And from then on, did you have other discussions |

with him? Was it mentioned any time, casuaily or other-

wise? ce ‘

**A. Well, ves. We had talked about it, Wynne and I,

severgl times, on several occasions, on this vear. T cashed

the checks, went ahead about my business, and he told me

all the time, he said, ‘Well’, he said, ‘I know all about it,

so you ain’t*got nothing to worry about, I'll take care of

it, you just go ahead and do wi job.’ * (Tr. p. 522-524)

Mr. Edmonds testified that all of the payroll and truck

rental information received in ‘his office was entered oii ‘the

books to the best of his information, that monthly a profit

and loss statement was prepared and discussed with Black,

and that; in analyzing the profit and loss statement, the”

truck rentals and the payroll were discussed. Edinonds

also testified that in January, 1955, he prepared Internal

Revenue. Service Form ‘*W-27s**~{statement of eaknings

and taxes withheld for each employee), and Form 1099 —

for each truck owner, and one evening during. the latter

part of January, 1955, at his office, discussed the same in

detail as to rental of each truck and wages of each driver

with Black; that the information contained on said Forms

was taken from the books, and that a similar conversation

oecurred in January, 1956, and January, 1957, as to the

previous year. The testimony of Mr. Russe concerning

the truck rental arrangement was that he was approached

by Mr. Black, who was then alone, and that Mr. Black

personally requested that this arrangement be made and

instructed him concerning the same. Mr. Crites testified

that he began writing’the truck rental checks to Mr.

Russell in {853, on a weekly basis, in aceordance with

directions from .Mr. Black, personally, and that no reason

therefor was stated. It will be recalled that this was long

before Edmonds had anything to do with the tonnage re-

ports and payrolls, and that, when Mr. Crites terminated

his employment and this work was performed by Kd-

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» monds* office, Mrs, Boyer was personally instructed. by

Black and Crites concerning the method of handling the:

> tonnage reports and payroll,

The testimony of Black and Kdmonds is alse squarely in

contlict as to the Omission from the returns wof the divi-

dends and capital gains from the muthal funds. Mr. Black

testified: in part as follows:

“Q. Tsee: Now, Mr. Black, was there ever any discus-

sions With respect to the: iaterest or thfings that vou 4ot

‘ftom this Fund with Mr. Edmonds? nee

“AL Oh, ves, in our home. | : : ,

“OQ. Wonld vou tell what occurred! vi

, ‘TA. Well, he would come—he would come to our office

and say, Well, how's Fands making it! My wife would

save any notice, anything that she got through the mail,

she would save it and Wynne would vo through there,

Mr. Kdmonds go through there and look through all of

them, and he would say, ‘Well, looks-like they're doing

pretty gal.” “He would figure up and tell us how much

they .were } rowing, and—but he said, ‘You'ins don’t have

to pay any tax on any of this here until vou cash the

“money in, because vou're not receiving any money’, and

that was his contention all the way through.

*Q. Did you have more than one _tliserssion with him

with respect to these slips?

S~ AL Ohyo ves, many times, He told us net te worry

about it, that we just didn’t have to do it, until we re.

ceive money fro our investment.

*Q). Did vou ever at any time tell him that vou—hot to

report that on vour tax return?

‘A. No, [never did at any time tell him not to report

anything on my taxes. [| left it all entirely up to him,

because, because me not being a chookkeeper, knowing

anything about books, I Just left everything up to him,

whatever he had on there, that’s what I was sure was

right.’’ (Tr. pp. 539-541)

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A part of Mrs. Black's testimony’ was;

‘*®. Did you ever get any little white pieces of paper

. from the Funds, this deposit that you made?

‘*A. Yes, I. have gotten tax—it said something pertain-

ing to tax, that I would save every letter, anything that

we had. I-would save it and I would ask Mr. Edmonds

and I know of two distinet times, I don’t have the dates

but—I don’t remember dates, but it’s the truth, that he

threw them into the wastebasket, and I would pick them

up and save them, and I would keep hounding him and

hounding him and he would say, ‘It’s all on the books,

it’s all right’, he said, ‘you don’t have to pay on those ©

dividends, or any money that you invest or anything like

that.’ ° .

‘*He says, ‘You don’t have to pay on it until you draw

it out.’ He, said, ‘If it’s twenty years from now.’ That's

the impression that he always left with Paul and I."* (Tr.

pp. 593-594). B

Edmonds testitied that he and Black, had a meeting in

December, 1954, concerning all 1954 reportable income,

and that, at said meeting, ‘‘I said the dividend and cap-

ital gains from mutual funds was taxable income, and that

it must be reported.’’

‘*Q. What, if anything, did Mr. Black state?

‘‘A. He wasn't going to report it.”

Edmonds also testified that he and Black had a confér-

etice at the former’s office the latter part of March, 1955,

eoncerning the return for 1954, and that at such meeting:

‘*T said, ‘Mr. Black, is there any other income that you

might have had that is not reflected on the books?’. Mr.

Black says, ‘There is no other income.’

‘*] said, ‘I know that you have dividend income from

mutual funds and that should be reported a: taxable

. income.’ .

.“*Mr. Black said that he was not going to report it.”’

(Tr. p. 76) Edmonds testified that a Substantially similar

S

\

Jf

—17 (a) —

conversation took place at a conference in Edmonds’ office °

with Black in Mareh, 1956, as to 1955 income, and in

March, 1957, as to 1956 income, and that at each of such

conferences he and Black only were present. Edmonds

also testifiel that the Form 1099s were always sent to

, Black, who received them, and were never turned over to

him (Kdmonds). 7

>

\ is axiomatic that the ¢ redibility of the witnesses and

the ht to be given to the testimony of each thereof

rests Within the sound discretion of the jury. The ex-

planation of Black. whereby he sought to demonstrate his

good faith and honesty in his dealings with the govern-

ment was sharply contradicted by the testimony of Kd.

mond , which, if believed, established knowledge on the

part of Black. of the falsity of tie respective returns, when

made, and from which tlie intent té evade income tax

could be reasonably. deduced,

In this case there, was proof of many circumstances ||

which were relevant to the primary issue of knowledge

and intent. The investment with the mutual funds began

in May, 1954. The amount of the weekly payments was

$100.00, which coincided with the amount of the fictitious

weekly truck rentals. The checks for such rentals were

always cashed, and the payments on accowit of the mutual

funds. were in cash. Mr. Russell terminated his employ-

ment in January, 1956, and the last’ payment into the

mutual funds account was also in January, 1956. “The ar-

rangement which had existed with Mr. Russell was not.

continued with any other driver. This fact Mr. Black

explained by stating that the labor trouble that had given

rise to such arrangement had then ceased, and ‘‘I wanted

to get a crushing plant and we needed all the money ‘we

could get together, to help—you know, pay down, and

kind of get started out in that.’’ (Tr. p. 539). This tes-

timony was inconsistent with the undisputed egidence

>

— 18 (a) —

(admitted by defendant) that in January, 1956, he and

Mrs. Black shad taken a vacation trip to Stockton, Cali-

fornia, to visit relatives, and that, on this trip Black had

- deposited a total of $10,000 in cash’ in two savings and

loan accounts in Stockton—one, for $5,000.00 with the

State Savings & Loan Asserigtitte of said city, and the

other for $5,000.00 with the Stockton Land, Loan and

Building Association, each opened on January 20, 1956,

end from which there was no withdrawal until the ac-

count was closed in January, 1960. Black also testified

that during the years 1954, 1953 and 1956, he cashed

various checks received from business operations, and built

up a cash ‘treserve’’ which ‘‘would run up there

several thousand dollars’? (Tr. p. 583), and kept such

cash at his home, While Black contended that he made

a full disclosure to Edinonds of all business income, and

helieved it was entered on the books, the government's

evidence condusively established that all of such *income

was not so entered, and there is no claim by Black

that Edmonds’ compensation was ever increased beyond

$90.00 per month, or that he did. or could have received |

any benefit for omitting income or making improper de-

ductions, of record. ,

The substantial amount of the omitted truck rentals as

compared to the net income for the respective vears may

ulso have been considered }y the jury to be a ‘significant

’ cireumstance.. The return ford 954 disciosed a taxable in-

vome of $12,780.66; the total of such truck rentals was

$13,944.39. The 1955 returty showed a taxable income of

$20,880.65; the total of such truck rentals for that year

was $15,579.55. “While the improper ‘eduction for truck

rentals constituted ‘the largest part of the claimed tax

evasion, the omitted dividends and capital gains from

the mutual funds were also substantial. The record: herein

is replete with independent substantiation of the existence

of the element of willfulness (all of. which may have, re-

wv

99 ta)

ceived the consideration of the jury). -In this case there

are numerous items of evidence apart from the bare fact

of the filing of incorrect -and false returns that will sup-

port an inference of willtul attempt to evade or defeat

the tax. The arrangement for handling the truck rentals

in such a manner that the books and records ‘which fermed

the basis for the income tax returns would not disclose .

_the recespt by Black of the proceeds of the checks; the

cashing by Black of business checks without making a

record thereof and the retention by him of large amounts

of sueh cash in his home for a ‘‘cash reserve’’: and the

manner in which the investment in mutual funds was han-

dled, constitute the ‘handling of one’s affairs to avoid

making the records usial in transactions of the kind”,

and is *‘conduct, the likely effect df which would be to

islendk or to conceal , from which ‘affirmative willful

attempt may be ‘inferred’. Spies. v. United States, 317

U.S. 492, 499; Gariepy v. United States, 6 Cir. » 200 FY, Xl

252, 258. We believe that a jury issue was presented as

to all the essential elements ‘of the crime charged, and

that the verdict of the jury is supported by substantial

evidence, We deem it unnegessary to consider the other

items of alleged unreported and taxable income.

Appellant asserts that the sentence-was invalid because

the Distriet Court committed prejudicial errors relative to

instructions to the jury. ‘

)

The first such assertion relates to a portion of the trish

court’s instruction dealing with the use of an accountant

in the preparation of tax returns. The portions com-

‘plained of are as follows: ‘Ifthe defendant had some

other person keep his liboks and make out his income tax

returns, did the defendant make all his financial transac-

tions available to that person? If vou find he knowingly

did not, what motive-did the defendant have for withhold-

ing information as to income from the person making out

his income tax return?’’ and

™ ”

¢

Da

— 20 (a) — =

: 5 ‘

‘‘It would present a somewhat startling situation if a

' defendant charged by law with a duty of filing his income

tax return, could sign and cause to be filed a return made

with the intent by the defendant to defraud the govern-

ment and escape punishment by disclaimirig all knowledge

of that which he had sponsored.’’

>

The appellant failed to object to the said instructions

cat the trial. Rule 30, Federal. Rules of Criminal Proce-

dure, 18 U.S. C. A., provides jn part: - ee

‘‘No: party may assign as- error any portion of the

charges or.omission therefrom unless he objects thereto be-

fore the jury retires to consider its verdict, stating dis.

tinctly the matter to which he objects ‘and the grounds of.

. his objection.”’

N+

He seeks, however, to eseape the effect of such failure

by invoking Rule 52 (b), which provides in part: **Plaint

errors or defects affecting substantial rights: may be

noticed although-they were not brought to the attention

of the court.’’

This Court has ‘‘repeatedly held; that the plain error

yule should be applied with caution and should be invoked

only to avoid a miscarriage of justice.’’ Johnson v. United

States, 8 Cir., 291 F. 2d 150, 156. Similar pronouncements

of this Court, as to the noticing of plain error may be

“found in: Page v. United States, 8 Cir., 282 F. 2d 807, 810;

Bell v. United States, 8 Cir., 251 F. 2d 490, 494; Krein-

bring v. United States, 8 Cir., 216 F. 2d 671, 674; Mitchell

v. United States, 8 Cir., 208 F. 2d 854, 858. We are con-

vinced from the’ record that this case presents no occasion

to invoke this rule. }

Appellant asserts that the trial court was guilty of

reversible error by giving the following instruction to the

jury: “The defendant is presumed to be innocent, and -

that presumption continued with him until such a time as —

<

ven — 21 (a) —

you become satisfied from the evidence of his guilt, And

you must be so satisfied bevond a reasonable doubt.’ .

o

_ In support of this contention, appellant relies strongly

upon Lurding v. United States, 6 Cir. 179 F. 2d 419. In

that case the trial court had instructed the jury that ‘‘the

law * * * presumes all persons innocent of. the offense

with which they are charged until such time as the proof

produced by the government establishes their guilt to the

exclusion of a reasonable doubt’’. While that court held

such instruction constituted reversible error and empha-

sized the difficulty of apprehending what interpretation

may be placed by the jury upon the phrase ‘until such

time’’, it is clear the appellate Court read it in connection

with the words which followed, for it said, ‘‘If it carries

to’the mind the connotation that guilt is established at

the conclusion of the ‘government’s proof, then the burden

of proof has been shifted to the defendant. * * * and

‘Such inept phrasing should be zealously guarded against,

unless. accompanied ‘by some instruction that directs a

consideration of all the evidence.” ;

It should be noted that the instruction criticized by ap-

pellant, and quoted above,-is a portion of a paragraph re-

lating primarily to the indictment. The entire para-

graph is: 7 )

= . tt

“IT have read the indictment.to you. This indietneent

constitutes no evidence whatsoever of the. defendant ’s

guilt and is not to be considered by you in that connec:

tion whatever. It ought not in your gitinds create even a

suspicion of guilt upon his part. The indictment’ is

merely the formal charge by which a criminal ease such

as this is brought into this court, and the fact that an

indictment has been returned ought not to be considered

as any evidence @f the guilt of the defendant. Its sole

function is to identify the offense with which the defend-

ant is here charged. The defendant is’ presumed to. be

bed

.*

(

|

innocent, and that presumption continues with him until

such a time as you become satisfied from the evidence of

his guilt, and you must be so satisfied beyond a reason-’

able doubt.’’

Subsequently in“he instructions the jury was adequately

and correctly instructed as to the law concerning the pre-

sumption of innocertee and reasonable doubt. No purpose

‘would be served by quoting such additional instructions

in full, but portions thereof are illustrative: “The defend-

ant is presumed to be innocent and the burden is upon

the government to prove the guilt of the defendant be-

yond a reasonable doubt. The presumption of innocence

“as described is a substantial right which the law affords to

- a defendant, and it follows the defendant throughout this

trial and entitles him to an acquittal at your hands unless

the guilt of such defendant has been proven to your satis-

faction and beyond a reasonable donbt."’ .

‘If upon consideration of all the evidence there. is a

reasonable doubt of the guilt of the defendant remaining.

the accused is entitled to the proof of that doubt by an

acquittal, * * *.’’ “‘The term ‘reasonable doubt’ which I

¢rave just used, has a very definite meaning, and I will tell

you what it means: A reasonable doubt, members of the

jury, is a doubt based on reason,/and which is reasonable

in giew of all the evidence. If, after an impartial com-

parison and consideration of all the evidence, you candidly

can say that vou are not satisfied of the guilt of the de-

fendant, you have a reasonable aan ** *.*

The attention of the jury was thus repeatedly directed

to the necessity of considering all of the evidence, and

was specifically instructed that the presumption of in-

nocence ‘follows the defendant throughout this trial’’.

These subsequent instructions and the one to which appel-

lant | objects,, must be considered together, as a whole. -

From such consideration we are satisfied that the criticized

“a

. = — 23(a) —

°

© |

instruction was not prejudicial to the appellant, and that

the jury was fairle charged,

See and compare: United States v. Senior, 7 Cir, 274

F. 2d 613, 616. | eee

Appellant insists that the * instruction ‘regarding the

effect of evidence of good characte? Was insufficient and

prejudicial. This instruction was as follows:

‘*Evidence has come into this case of the previous repu-

tation of the defendant—good reputation. If vou should

find to your reasonable satisfaction that the rej utation

of the defendant, before the arising of the facts upon

which the present charge was based, was good, then vou

are to consider such fact, together with all the other

facts and circumstances of the case, because the produc-

tion of such proof goes to the matter of reasonable doubt.

It is admitted for the reason that the law decrees that a

man of previously good reputation bs Jess likely to commit

a crime. than.one of bad reputation. But if all the evi-

dence in the case, including that which’ has been given

on the matter of previous good reputation, convinces vou

«

of defendant’s guilt beyond a reasonable doubt, then his

previously good reputation cannot excuse, or mitigate, or

palliate his guilt to any extent whatsoever."’ Appellant’s

objection thereto is “that it does Mot tell the jury that .

the reputation alone can .ereate the reasonable doubt, a

reasonable doubt sufficient to permit the acquittal of the

‘defendant. In other words, that alone could create a

reasonable doubt’’. His contention is based upon Rdging-

ton v. United States, 164 U.S. 361, 17 Supreme Court 72

41 L. ed. 468, wherein the Supreme Court of the United

States stated:

4

**.* * the decided weight of authority nowéis that good

character, when considered in connection with the other

evidence in the case, may generate. a reasonable doubt.

*

1D af

itn =

The circumstances may be such that an established repu-

tation for good character, if it is relevant to the issue,

-would Alone create a reasonable doubt, although without

it the other evidence would be convineing.’* Appellant's

interpretation of Edgington is (that therein the Supreme

Court laid down the rule that when a defendant offers

evidence of good character the jury .must be instructed

that character testimony may be such that it alone may

create a reasonable doubt, although without it the other

evidence would be convincing, and that failure to give

such. instruction constitutes reversible error. ] ising on

Edgington, the Court® of Appeals for the Seventh and

Tenth Circuits have adopted such a rule. However, this

Court is one of a majority whose interpretation is to the

contrary. In Peterson v. United States, 10 (ir., 268 F. 2d

87, at page 89 (footnote 3.), that Court stated:

“3. The rule that character evidence alone may create

a reasonable doubt is recognized in the 7th and 10th cir-

cuits. (Cases cited). The rule is rejected in the 2nd, 3rd, _

4th, 5th, 6th, 8th, 9th, and D. C. cireuits. (Cases cited).”*

In Peterson, supra, in a special conev-ring opinion,

Murrah, J., after a careful discussion of the conflicting

views, expresses agreement with the majority view. and

- states that (p. 90), ‘‘I should not hesitate to recede from

our previous pronouncements. "’

In Sunderland v. United States, 8 (ir.,-19 F. 2d 203. 215,

this Court said:

»‘'The authorities are conflicting on the question whether

a defendant in whose behalf evidence of good characte:

has been introduced is entitled to an instruction: in the

exact words used in the opinion in the Edgington case,

viz: ‘The circumstances may be such that an established

reputation for good character * * * would alone create a&

reasonable doubt, although without it the ‘other evidence

— (a) —

would be convincing.’ * * * This court is committed te

the negative view.’ r)

Nothing is said by the Supreme Court in Michelson v.

_ Unite States, 335 U.S. 469 (wherein, at-page 476, Edging-

ton is discussed ) which we interpret as being inconsistent

with our interpretation of Edgington ; as expressed in Sun.

derland, or which would cause us to Fevede from our posi-

tion taken therein.

Under the cireumstances of this ease. we are of the

opinion that appellant was not entitled to. the requested

instruction, and that the instruction given was adequate

and correct. |

The final instruction complained of is as follows:

wich ‘heh a defendant in a case of this kind takes the

stand—which he has a perfect right to do he is subjected

to all the obligations of a witness, and his testimony is

to be treated like the testiniony of any @ther witness:

that is to say, it will be for vou to say, rer wimnbering the

matter of his testimony, and the manner in which he gave

it, his eross-examination, and gverything else in the case,

whether or not he told the truth. Then, again, it is for

you to remember—vou have a perfect right to ilo so, ane

it is vour duty te do so—the very vital interest the ile

fendant has in the outeome of this case.

‘Now, this does not mean, and [ do not mean to imply

that whenever a man is‘ accused of a crime and takes the

stand in behalf of himself, that he will naturally commit

verjury; but. of course, as a defendant places himself as

_ perjury

u- witness upon the witness stand, he stands like STAY

other witness,

‘*But, his interest, or bias, or anything else that may

affect his testimony, is a matter which, of course, vou as

jurors should consider. Therefore, 1 say to von, in con-

e

ment. ‘as the facts in this case warrant and justify

— % (aj) — ‘

sidering the testimony of the defendant, you are to con-

sider the very vitalinterest which he has at stake in this

case,"*

A similar instruction was carefully considered and sus-

tained by this Court in Foldy v. United Statés, § Cir., 2”)

F. 24 562, cert. den, 368 U.S. 888.

However. appellant contends that Poley is inapplicable

because of the disparity in the evidence of the two cases,

and because the criticized charge herein ‘‘is made more

prejudicial by portions of two other charges which bear

tlireetly upon it.”’

One of the ‘“‘two other charges’’ r@ferred to is a not

unusuaily worded instruction relating to the credibility

of the witnesses and the weight to be given their testi-

mony: Ineluded therein is the instruction that ** In weigh-

ing and reconciling the testimony, you should look to

* * * the lack of interest, or interest, of any witness in

the case " * * to the reasonableness or unreasonableness

‘of the testimony of the witness; to its probability or im-

probability, and whether the witness has made contradic-

tory statements -or not, about’ material matters involved

in this case; and having thus carefully considered all the

matters, you must fix the weight and value of each and

every Witness and of the evidenee as a wh ole.*’ and,

ole you should conelude that a witness has wilfully

testified falsély ‘to some material matter in the case, you

should consider that in determining the credibility of the

rest of such witness’ testimony, as well’ as the part which

you feel*to have been wilfully false.

‘*} do not mean to say to you that any witness has wil-

- fully testified falsely to any material matter in this ease.

| give you the rule that you may tse it in your good judg-

oe ee

— 27 (a) —

The remaining ‘‘other chafge’’ is that which related to

the use of an accountant in the preparation of income tax

returns, and which has hereinbefore been considered.

The basic contention of appeliant as we understand it

is that the criticized instruction was directed specifically

to the appellant's testimony and was prejudic ‘ial in that

it pointed ‘‘the finger of suspicion at him as being more -

likely to testify falsely and commit perjury than’ would

Edmonds’; that the charge relating to the credibility of

_the witnesase and weight to be given their testimony was

intended to apply, and did-apply, to all witnesses ginclud-

ing Edmonds) except appellant;-that the jury in effect

was charged to use a different standard as to Black's

testimony from that to be applied to. the testimony of

Edmonds: (the testimony of these two men having been in

sharp. ‘coufliet) ; and that the use of the word ‘perjury’

was suggestive of the possibility of the defendant having

perjured himself on the witness stand and may have

planted in the minds of the jurors a suspicion that the

trial court thought the defendant had or might have per.

jured bimself.

In general we believe tis Court's observations in Foley,

supra, are applicable, wherein this Court said: “It has

long been recognized that while a court ‘is not at liberty

to charge the jury directly or indirectly that the defend.

ant is to be disbelieved because he is defendant,’ an in-

struction may properly point out the defendant's special

interest ‘in the case.’’; and ‘‘Neither are we persuaded that

the trial court's reference to perjury constituted error.”’

While the testimony of Black and that of Edmonds Was

squarely in conflict on material issues, the detenfiiimtion

by the jury as to which was entitled to credit was not

necessarily the determinative factor in arriving at the

verdict. Portions of Russell’s testimony were not in ae.

cord with that of Black. Numerous items of circumstan-

—Pitep<. “

tial evidence were presented to the jury upon which a

reasonable inference of willfulness on the part of Black

(the vital fact issue) might have been based. The record

included portions of Black’s testimony’ which the jury

\ might, with justification, have considered inconsistent.

. We consider the argument that such instruction, con-

sidered jointly with other portions of the charge pointed

out by appellant, allowed the jury to apply different stand-

ards in measuring the testinfony of Black and of Edmonds,

respectively, is without merit.

Though the instruction to which objection is here made

does relate specifically to the appellant, it should be noted

that the trial court charged therein that ‘this (defend-

ant’s) testimony is-to be treated like the testimony of any

other witness * * *°.”’

In the general instruction the jury was charged ‘to

‘‘look to * * * the lack of interest, pr interest, of any wit-

ness in the case * * *.’? It is clear that this included

both Edmonds and Black.

It is apparent that, in sustaining a similar instruction,

this Court in Foley did so in the light of the facts of that

ease. Considering the facts and circumstances of this

ease, we arrive at thé same conclusion. However, this

conclusion is limited to the record before us, and is not

to be construed as an approval of such instruction or as

an indication that it merits being considered in the cate-

wory of a standardized instruction for all cases of’a sim-

ilar nature.

For the reasons hereinbefore stated, the judgment of

the District Court is

Affirmed. ”

—~ 2% (ay-—

JUDGMENT.

-

United States Court of Appeals

For thes Kighth @irenit.

No. 16,983, September ‘Term, | Tung.

K. Paul Black, iy

Appellant,

va,

United States of America,

%.

* Appeal frets the United States District Court for the”

Mastern Distrset of Missouri.

This Cause came on to be heard on the record from the

United States District Court for the Eastern Distriet ot

Missouri, and’ was. argued by counsel,

On Consideration Whereof, it: id: now here ordered ane

adjudged by this Court, that the judgment and sentenes

of the said District Court. in this cause, be, and the sine

is hereby, aflirmed. ; °

~~

And it is further Ordered by this Court that the defend

ant in the said District Court, E. Paul Black. do surrénder

himself to the custody of the United States Marshak for

the Kastern District of Missouri, if not now in e ustody, in

execution of the judgment and’ sentence Imposed upon

, him, within thirty davs from and after the date of fling

of the mandate of this Court in the District € ourt,

October ta, Tage

Kutered in accordance with opinion:

Robert’ «. Tucker, « :

(Clerk, U.S. Colttrt of Appe: nls

for the Kiehth Cirenit.