Petition for Writ of Certiorari — Pepersack v. Hall

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Offhice-Supreme Court, U.S.

re FIilED

e APR 24 1963

’

. ef JOHN F. DAVIS, CLERK

é A

.IN THE | “ae

Supreme Curt of. the

United States

OcToBER eh 1962.

No. 1046 :

Fan f “ ef :

METRO M. HOLOVACHKEA,

: Petitioner,

ne |

UNITED 3 STATES OF AMERICA,

Respogdent.

Petition For Writ Of-Certiorari To The

United States Court Of Appeals

~ for The Seventh Circuit

6 RQBERT J DOWNING,

lo >. LaSalle Street,

. Chivage 3,. U1 lineis,

Counsel for Petitroner.

Midwest Law Printing Co. 326 No Michigan Ave thitaes

Telephone Financial 6 398s

; INDEN,

<a s

bee °

Opinions Below ..00000000 ........ ieee

Jurisdiction 2...

Questions Presented

Constitutional Provisions and Statutes Invalved

EROTIOR OT Tile CNG ......-. on sesiaice icy. her Se

Reasons for Granting the Writ 0...

The Trial Court's Unilateral Action In Chang.

ing Petit Jury Panels And Importing Jurors From

Outside @Phe- Vicinage Of The Alleged Offense

_Amounted To A Compulsory Change Of Venue

: And7Establishes Dangerous Precedents Violative

Of The Constitutional Safeguards For \ Fair And

Impartial Trial ..... Seen ecaraiees

OL.

The Constitutional Safeguards For A Fair And

Impartial Trial Were Violated By The Prosecu-—

tion When It Injected The Suggestion Of **Graft.”’

Rackets,’ And ‘Other Unrelated Crimes’’ With-

oyt Supporting Evidence In The Record

> III.

Pa The Opinion Of The Court Of Appeals Reduces

To A Meaningless° Shibboleth The Established

. Standards In Income Tax Evasion Cases On The

* Net Worth-expenditure Technique, Thereby De

priving Petitioner Of Due Process Of Law

“A. Starting point not established —......

B. The Government's expert ‘witness un-

constitutionally invaded the provinee of the —

jury in preparing the Government’s net worth —

Necro sg, Ne Feta ues

(. Current taxable income and likely source

_D. Fraudulent intent was not established

: IV. ;

The Petitioner's Constitutional Rights Were

Violated When The Trial Court, Gagged The Peti-

tioner And Denied Him The Opportunity Of Pre-

senting A Fair Rebuttal To The Government's

EEE OE Apinctescsaciscroer enna ua baetnaeeeae LSet eae

Conclusion ........... Creare oe Pee EU ee SU nr

| Appendix ‘A — Opinion of the United States Court

. Of Appeals for the Sev OO IE ssc ccesn:.

Appendix ** B’? — Judgment of the U nited States Court

of Appeals for the Seventh Cireuit AN resi oeinee eee. :

7 bei teas “or — Constitutional Provisions and Stat- |

Cir bloNs

+ w

Curses: “

Beck vo USS. 9 Cir, 298 F. 2d 622

Blumentield v.U.S..8 Cir, 284 BL 2d 46

Bollenbach vo US, 326 US. 607”

Continental Baking Company v. U. Sy 6. Cir, 281

Bo2d 130 Mpapeeaa » i aac Fen Pde ;

Delaney -v. US 0 Cir. 199K. 2d 107

Dunn v: whee s., 5 Cir. Wir Jie t. .. Sabet Ieee

Ford ve Ul. 555 TLS. SS, reversed, amended with

directions to vacate judgment in 2 Cir, 237) F.

>." ar Ate sree a eeNe Pe,

Ford v. UL S.05 Cir, 210 FL 2d 318 ‘.

Fuller v. Comm. 6 ee ., 313 BF. 2d 75 17.

Glasser ve UL S315 °U S. 60

Grayson v. items 10 Cir, 256 F. : 61 ee

Grubb v. Comm., 6 Cir., Sic l4edt. 4/9/63 (Cunre-

nha, ae ARISEN CEP Ne De aer ees eh re, ae

Gunn v2 Comm, & Cir. 247 F. Od: SI... me

Heidel vo ULS., 6 Cir, 150 F.2d 493 | “a

~ Holland v. tes S.. 348 U.S. 121 |... Ts,

~ Kashat v. Commn., 6 Cir., 220 -F.. bd 282

Kotteakos v. UL S., 328 US. 750. ere

Phillips’ Estate v. ¢ omim., 9 Cir. 46 F. 2a 200...” 14,

Salinger v. Loisel, 265 U.S, 224

Schultz, Bavid Ho. 30 ise IG

Smith v. Jie B48 0. at Nien

Steele ve UL S05 Cir, a9.) P. 20 Ge ..........: Saeeee. a

Thiel v. S@uthern Pacific Ry. Co. 328 U.S. 217

Thomas v. C omm., 1 C ir, 232, F. 2d 320....... 17, 18

Thomas v. C.LR., 6 Cir, 223 F.2d 880”. 17,

U.S. ve Calderon, 548 U.S. 160°.

U.S. v. Johnson, 323 U.S. 273

‘ourt Northérn District of In-

t.. & District

diana ... Ge‘

Miscellancous:

Mertens, Law of Federal Taxation, Vol. 10, Sec.

Rothwacks, Meyer, Chief, Criminal Section, Dept.

é WA, 7a at p. 127 Sd eS gah EASIER po A ee A eee Gecxehbueete ¢

eid eieds spveshaetiaSconiged lors: 8) eR HTN Dy VeadTa

of Justice; "A Payer Submitted at a Symposium |

« of the American Bar Association, Section of Tay-

ation on Tax Fraud Procedures and Law” dated

ge gel 19, 1950 (not an official paper)...

U.S. Bureau of Census, Dept of Commerce ........

Wino (3rd Ed.), Vol. 1, See. : 3g, p. 423 and

Vol. See. 2, (Re eis Ee

W ott s Criminal Evidence, (12th Ed.) Nol. l,

" , See. a 431, SEER inl SIO = achat A

oo ‘ ; ss .

= ¢ s

: rs

—_

<@ Masse aoe Eos. 505° Seerh a : ae

i: S. v. Moran, 2 Cit, 194 F. 2d 623 ei. AO

US. v. Peach iaacses Coal Min. Co., et al, 2 Cir.,

See ee te 26

UL S. v. Ward, 3 Cir, 169 io 2d 460, er DOR Me By)

Watkins v. 0.3%. a Cir.» UST F. a > nt See.

Constitution. and Statutes:

The Fifth Amendment 0... 00 ..4......... 22, 94, 35a

The Sixth Amendment . rh ace sete pee aN 9, 12, dha

e -26-US.C.A, See. 7201 200. anes ieee 4, 35a

28 ULS.CLA. See. Rea eae ree cacsasssbaacs. ROR AN 4

°28: US.C.A,, See. 1865 (a) £0 Raa Th Se See ne DH 12, SSa

Federal Rules of Criminal Proedare: Pat -

dt Saceaieceniescss Kove When aebene ec: 7... 9 12, 36a

nin chill Ae Nate ea cess: re eaeaan 9, 12, 36a:

PO PENI ioe voepssceasticccee SSSR Ree aan 29, 12, {Ga

General Information and Orders per ts

iN THE

Supreme Court of the United States

Ocroper Term, A.D. 1962.

No.

METRO M. HOLOVACHKA,

Petitioner,

a | vs.

4 ?

UNITED STATES OF AMERICA,

Respondent.

Petition For Writ Of Certiorari To The

United States Court Of Appeals

For The Seventh Circuit

~ a ° 2

Ys | . a

Petitioner, Metro M. Holovachka, prays that a writ ot

5 certiorari be issued to review ‘a judgment of the United

States Court of Appeals foi the Seventh Cireuit, enter

ed on February 18, 1963.

a : “2

OPINIONS BELOW. ._

The District’ Court wrote’ no opinion. The opinion ot

the Court of Appeals, attached hereto as Appendix “A”

infra p. la is*reported in 314 F. 2d 345.

> impartial trial.

JURISDICTION.

- Pan

The judgment of the Court. of Xppéals Was entered

February 18, 1963. (Appendix “B" infra p. 38a) Petitions

for rehearing were denied March 28, 1963. The jurisdic-

tion of this Court. . ‘invoked under 28 CLSLC. Section

154(1).

QUESTIONS PRESENTED.

(1)2 Whether the trial court's unilateral action in’

changing the petit jury panels and compelling petitioner

to be tried by an out-of-division jury amounted to a com.

pulsory change of venue, or otherwise resulte@ in a vio-

lation of petitioner’s constitutional right to a fair and

(2) Whether the requirements of due process of- law

were violated ir an income tax evasion case by permitting:

(a) the respondent to accuse the petitioner, a former Lake °

County(Indiana) prosecuting attorney, of recFiving money:

from “Graft’? when in fact no evidence of graft was in tiie

record, and (b) numerous other -prejudicial errors which

occurred threughout the trial? .

(3) Whether the safeguards and standards established

by this Court in income tax evasion cases on the net worth-

expenditure theory, e.g.. in Holland vy. United States, 348

U.S. 121 and related cases, were satisfied, particularly

(but without limitation) as to starting point, burden of

proof, current taxable income, likely souree, corrobora-

tion? . °

> > 4 « —- .j9——

‘ ae

(4) Whether the trial court's action in preventing pe

titloner from on™ hix own theory of defense vie

Fated petitioner constitutionab right of due process ol

law? ‘ é

* 5

CONSTITUTIONAL PROVISIONS AND °

STATUTES INVOLVED.

Sf are. > A pepe wedar OO"

; Ierean

The Fifth Amendment . predires Shen

The Sixth Amendment” : pahsre Shona

26. ULS.CLA,, See. 7201. page ha’

28 ULS.CLA,, See. 1865(a) pate hoa

Mederal Rules of Criminal Procedure |

~ Rule IS rs . pas Oa

Rule 19 3 : page Sha

Rule 21(2) pace Sa

General Information and Orders,

U.S. District Court Northern Di--

triét of Indiana pate va

‘ + ; > d

pa geen :

STATEMENT OF THE CASE.

The petitioner’ was indicted on three counts iinet

ineony tax evasion (26 UWS.CAL. See 72. see intra

App. “on p. doa) for the: veare of 1955, 1956. and sys

Tite soveTninent, at the trial, relied on, * so-called “net

worth-expenditure” techitique to establish ite proof. The

urry fond the petitioner guilfy ds charged. The ‘indict-

ment alleged petitioner had reported an income tay’ li-

ability "of SI1S893.8P for 1955, $10486.75 for 1956 and

FLESOOST for 1957, whereas his correct: tax liability. for

those’ vears Waser S22 D 14, $31,923.01 and $2498.48 ‘re-

‘spectively. The district. court) imposed coneirrent <en-

tenees for three vears on each of the three counts and a

F1O,000 fine on one count.

The indictment Was returned and. trial held in’ the

t nited States District Court for the Northern istrict: of

“Indiana, in Hammond, Indiana. The Northern Distriét of

Indiana is divided (28 U.S.C., Sec? 94) into the Fort Wayne,

4 :

> ° . .

©) The instant indictment was returned January 12, 1962.

, Identical itidictments had been returned on May 12, 1961,

and September 28, 1961, the former for 1955 and 1956, the

latter for 1957, Trial on the 1961 indictments commenced on

November 13, 1961. Petitioner moved to qugsh the petit jury

list on the basis that said jury was not properly drawn pur-

suant to 28 U.S.C., Sections 1861-1869. After 29 jurors were

examined (only 2 excused for cause) -it was obvious the

jurors were obtained only froin ** P.T.A.” lists. The govern-

ment thereupon joined in said motion and the jury was dis-

missed.-Upon re-indictment by a new ‘grand jury, the 1961

indictments were dismissed. ~

wry.

° g

: —j—

: a

South Bond and Qamnond Divisions Che Aistret esur

hag~ provided: rn its “Gi weral futorm tion and (yf

fae Np Cp haa cet) Hht—eattiers—of—artron rot

Hatimond Division arising in the eounties of hake an:

Porter shall be filed? at) Hlamumond, whereas causes ot

action arising im The remmuning @ counties of the lar

tuond Division? Shall be filed: at Lafayette. Court i@ eld

im Elatinend or Latavett? depending, on the ortfim of the

Cys. | ag :

. CR Ae APA APA PEELS ’

J 3

“Pertisuer was bern in’ Gary, Wake. County. tates.

of Tmnuerdint parents from Czechoslovakia. Bxeept te:

Ae . . syd 5 ie \

_ a few years while attending school, petitioner livedk al!

of his S4 wears in Gaty. He pratticed law and was activ

in polities as a Demoecgatein Gary and Lake County

During the indictment vears fe served (elected) as Pros

~ ecutine Attorney of Lake County. As prosecuting attornes

he was not) prohibited “from practise daw nor did tie

represent the county in civil matters.

On danuary 2. 1962. a petit Jury list of 74 porsones.

Fesidents of Lake sand Porter Cadjoining) Counties Wits

drawn for the instunt trial On January. 12, 1962, the

trial court suggested a change of venue to Lutasetse,

‘about TOO qniles from Hammond. Thies sUguestion’ was

‘ objetted to by. petitioner who refused to consent to a

change ‘of venue. . . So

. ,

On January 17, 1962. oyer petitioner's objection, ‘the

trial court on its own motion struck the entire Lake anc’

Porter County panel of January 2. Thereupon petit jurors

were drawn from the South Bend Division and Lafayette

area of the Hammond Division, Speciticallyrexcluding yu

rors from Lake aad Porter Counties, Over objection, pe

titioner was tried #y said jury summoned from outside

* Ss e *

roa, ,

. iP

‘ ; wee s > ome’

the viemity or locality of the alleged offense. The petit

jury was sequestered during the trial

The government’s case is based on its summary on the

“net worth-expenditure technique. Pts expert witness ad

mitted that the only eviderice in the record of income not

reported by. the. petitioner on the 1955-56-57 tax. return.

Was the amount the expert computed on his “net worth”

summary for those vears (Gov. Ex. 186, App. Soap.

The government used December 31, 1951 as its starting

point. According to the government's summary, petitia

ers taxable income not reported for 1955 was SIS T1S.06

196 wae FLL 529402, 1 was FIO SSH :

_ o

Government's E Nhibes, ING ~The Governine nt’s Summary

of the Net Worth and Expenditares” Was prepared by

Speeiak Agent Boyll. Ino preparing said) exhibit he ad

mitted that he had to pass upon and deeidt certain -vi

dentiary issues’ in dispute both in and outside the. ree

ofd, in le ‘termining whether certain items and or INOUNT

should or should not be ineluded on 4iovernirent’s Exhibit

IkG. Petitioner's objection to said exhibit yas denied by

the trial court and completely- disregarded in’ the opin

ion of the Court of Appeals. The disputed items involved .

amounts applicable to the. starting point, as well as the

specifi vears. :

Petitioner attempted to introduce a net worth-expendi-

ture suinmary (Def. Ex. 22). It was, based on his theory

of the evidence as,to the proper treatment in the sum-

mary of $168,541 representing a tax-free return of peti-

tioner’s invystment in special assessment bonds known as

Barrett Bonds. Petitioner's theory was that this amount

Was current non pxable income and as such wae a de-

ductive adjustifent in the summary, ‘This defense was

reeper@tcnud fo\ tha trial eourt The petitioned Wils competed

Toontrodwes goceet Worth tpemedit ares tars bipsed cai!

eeverutnent cone Trctl court's thers vas ote the eruenal

... .

S ysstie ot the qoroper inethod oof Fisting om sag stumiipies

the tas free return of investigent from: the Barrett: Bonds,

This dispute vitaliv affeet~ the question of whether or not

sie

coveriguent’s sthnary is aecurate.

The goverpment established that) petitioner recerved

during the vemrs 1955-1957 the a:neunt of SIOSAT as a fe.

free return oon dus investment in the Barrett Bond-.!

The government's summary fisted? as an asset as of

December 3b for each vear from P52 through IW97 the

het balance, of petitioner's Barrett Bond investment. (ice.

‘etmoney invested minus money returned for each vear).

Petitioner dealt) in Furreney to aevreat extent. Tle ex-

eg plained this Was a habit of his people and al practice

taught him by his parents. The govermment illustrated that

pesitioner hadsaund ney transactions between 192 through

157 in tH mount of S429190. Lowever, on the govern

Inent’s net worth stmimary he was not credited with one

eent of cash oon hand, either at the stars or or at

tiny other Vecieend dimime ‘hat period,

rg. . - ° “—* j . . .

Phe? sovernment” did not offer any evidenee of likely

: ps4 ee . ¢ se

sattvee: did not offer any evidence that its met worth in

ereases Were attributable to current taxable income: did

_ - —— a Son —<

(> Barrett Bonds were issued by the City of Gary in

connection with certain local improvements performedew.

in the city, such as sffeets, curbs, gutters and sewe t

though there was a difference of opinion at the trial be-

teeen the Treasury and Justice Departments, it is agreed

that inthe instantetrial the return of principal is tax-free.

bs)

rnin —S—

not offer any affirmative proof of falsity of petitioner's.

meomne taxcreturns ? and did net offer any evidenersto cor

‘roborate the alleged net worth bulge a® computed on its

~Ulnmary. é

On cross examination of the petitioner, the prosecution

asked Af petitioner received any monex-tnr—“qrattpay-

Ld . .

ments (App. D133). The court admonished the jury, to

disregard the qdiestion but denied petitioner’s motion for

mistrial. . ; /

Other trial ineidents were-claisned by the: petitioner to

e have deprived him of a fair trial.

The trial ronsumed 19 days, 49 witnesses, 177 exhibits

tincluding two net-worth statements, 9 tax returns of the

defendant and a stipulation of 46 pages), appreximately

2700) reported pages of testimony, and instructions res

ported on 38 pages. The sequestered jury deliberated only

+ houre 15 minutes. |

The Court of Appeals affirmed the petitioner's convie-

tion. The petitioner is presently free on hail. The mandate

of the Court of Appeals has been staved pending disposi-

tion of@this petition. |

Pa . @

REASONS FOR GRANTING THE WRIT

THE TRIAL COURT'S UNILATERAL ACTION IN CHANG.

ING PETIT JURY PANELS AND IMPORTING JURORS FROM

UTSIDE THE VICINAGE OF THE ALLEGED OFFENSE

ANGUNTED TO A COMPULSORY CHANGE OF VENUE AND

ESTABLISHES DANGEROUS PRECEDENTS VIOLATIVE 6F

THE ‘CONSTITUTIONAL SAFEGUARDS FOR A FAIR D

IMPARTIAL TRIAL =

The court below departed from the accepted and usual

course of — proceedings by holding vs @LS.0.4

Ps650a) CApp. CO infra p. Sagan be emplowed to tea!

away the right toa trial by ameitap@tial jury guaranteed

by the fh daendgeent to the Lyte: States Constifution

and the rights of a defendant im acetiminal trial unde:

Riles 18. 19 and tha). Ledéral Rules of Grimimnal Poo

dive (X pp. CC" intra pe. Sa).

Petitioner, a life long reside mt of hake Connty, Pndiana

Was tried and convieted In i jury Hinported: froan the

South Bend Dervision and that portion of fhe Hanunetf

Pivision outside of Lake and Porter Counties. By ans

luteral ad hoc order of the trial court, a panel of petit

jurors drawn from Lake and:Porter Counties was stricken

12 days before the trial was to commence. No objections

Had been made toethe jurors from Lake and Porter Coun

ties, The only applieable loeal distriet. court rule is one

of the “General Intormation and Orders? (App. "CO" infra

p. 37a) which states ghat causes of action arising. in ‘he

counties of Lake and Porter shall be filed in’ Hammond.

The rule intends that if the action is’ filed in] Hammond,

—10—-

it shall be tried in Hammond by a jury from Lake and

Porter Counties. The divtriet court in ite announced rea

sony failed to Stipport’ its action. by any statute, decision,

local rule. custom or practice. The Court ot " Appeal cites

5 only the trial court as its authority. E

The gei tl court justified its action on the alleged theors

thyt because petitioner in 1961 objected to 1998-1959 mews

a , : re >

paper stories, therefore petitioner was unable to obtain

in 1962 fair and impartial jurors from Lake and Porter

Counties. Phe Court of Appeals opinion coneluded that

petitioner's reference to 1958 and) 1959 oS.

sthe trial court's action, even though in Beck vf. 5. 2

Cir. JUS BF. 2nd 622 and Delaitey ve UL S21 Cir. 199 F

2d WT at 112. it was held that the she iadicial effeet of

publicity is not a continuing thing. Petitioner also ob-

jected on November 13, 1961 and . January a), 162, to

heWs stories obviously planted by government representa

tives. : . te

z ;

Nowhere in the long record did petitioner at anu tim:

directly or mdirectly suggest to the district court thet

efair and impartial jurors, legally selected, could not bi

olitained from Lake and Porter Counties. In taet peti

tioner maintained he could not receive a fair trial if jurors

from Lake and Porter Counties were exeluded. The ree.

ord contains no showing that any of the January 2 panel

harbored any prejudice against the (Pitioner or were in

any way biased ‘against him. The trial court’s reasons

are a strained, incorrect-twisting of petitioner's motions.

The action establishes a subjective test to be applied by

trial coufts resulting in an@emaseulation of the historic

rights of a defendant to have something to say ahout the

c selection of the jurors. .

dG os

t ° °

On simian 12, 62, prior to etriking the Jamuary 2.

Ol. petit jury panel, the taal court attempted to pet

ide the petitioner to aecept a ehange of venne te Lata

The petitioner objected to any change of venue,

The State of pe ix divided inte two distinctly, total

ly different areas. One is the Calumet Region (Lake and

Porter Counties) the other, the balance of the Atate. Lake

County is highly industrialized, has a large percentage

of immoigrants, and for vears has been politically Demio-

cratic. Its 1960 population (per U.S. Bureau of Censu\,

Department of Commerce) is 512.569. Porter County ix

60270. Their combined population represents approxs-

mately 41 of the entire South Bend and Hammond Divi-

=lons.

Another significant: Bureau of Census statistie is that

11600 in Lake County 11.969 residents were born in

Cvechoslovakia (birth place of defendant's parents) Where

ax in St. Joeeph County (which comprises about Bae oof

the population of-the South Bend Division) only O71 were

horn in said country,

The customs of immigrant parents, their practices with

respect to handling cash, residents with knowledge of

the habits and practices of the citizens of Gary, all

Vital issues in the trial, could be understood and ap

preelated only yy the people from the Calumet Rewion,

especially Like County. i

The grand jury which returned the instant indictment on

danuary 12. 1962, coytained residents from Lake and

Porter Counties. After the trial coureonelfided that fair

and impartial petit jurors could not be obtained from

Lake and Porter Counties, he denied petitioner's motion

to diemiss the indictment, holding, in effeet. that gr: and

7 eS

- a

‘

pal, .

_ ©. , |

“jurors from Lake and Porter Counties “were ‘not biased.

This inconsistency inereasoning was approved by the Court

of Appeals. : | |

Eos

Rules 18, 19 and 21(a), Federal Rules of Crmimal Pro-

codure, clearly require the consent of a defendant for a

change of venue from the division in which the alleged of-

fense was ¢ommitted. Thes® rules are additional eafe-

guards for se¢uring a fair and impartial jury. As Mr. Jus-_

tice Frankfurter said in United States v. Johnson, 3253-

US. 273 at 276, “Questions of venue in criminal cases are

not merely matters of formal legal procedure. They raise

deep issues of public policy in the light of which legisla-

tion must be eonstrued.”

The C@urt of Appeals has sanctioned a practice amount-

ing to 2 compulsory change of venue. There is no real

difference between being compelled to try a case in Lafay-

ette before jurors from Lafayette and being compelled to

try a case at Hammond before jurors from Lafayette and

South Bend. To do either without the consent of a defend-

ant violates the said Rules 18, 19 and 21(a). The court's

action ts in confliet. with Salinger vo Loisel, 265 U.S. 224.

28: U.S.C. Section 1865(a) was not intended by Congress

in any way to abrogate the aforesaid venue privileges of

a defendint. Yet the Court of Appeals’ intepretatigm con

fliets with the rights of a defendant protected by the 6th

Antendment to enjoy a trial by an impartial jury. Other-

wise,.28 U.S.C.A. 1865(a) is unconstitutional in that it

violates rights protected by the 6th Amendment,

: : o , : ’

The effect of the action below is to provide a jury that

ix not a cross-section and is not. representative of a defend-

eant’s community. This action is in direct conflict with the

; F,

principles set forth by this Courtoin Glasser ve PS. ons

- ° ° Pw = ae E E . a

LLS. 60,86; Thilv. Southern Pacific Ry. Co. 328 US. 2M

To appreciate the potential of the instant opinion one

need @nly consider two simple hypothetienis. Ao prominent

Cook County (Hlinois) politician, possibly with the statu

of Chieago’s Maver. on trial in the Northern Distriet ot

Hlinois, astern Dyyision, and the trial judge reaches be

vond Democratic Cook County inte the traditionally Re

publican gine anti-Cook County cotntios of they Western

Division of the Northern District of Hlmois. Or a proms

nent Negro in Lake County, Indiana, where negroes con

stitute approximately 1.56 cof the total population of ©

Lake and Porter Counties can now te tried by jurors im

ported from the Lafawette portion of the Hanuunond Divi

ston Where negroes constitute only OUST. of the total

population. The announced reason~ for said action could

he the same specious, subjective basis asin the instant

case, AD sophisticated, political minded jurist need only

meint tothe ooinion below to accomplish his result, to satis

fy a temptation, and abuse criminal justice.

The court's action of striking the jury panel without

either ao miotion of the petitioner or a coire dire examina

tion on the alleged theory of protecting the petitioner's

constitutional rights is specious and ludierous. This ai

lateral action based on the alleged desire to proteet peti

otioner from adverse uewspaper publicity, confliets with

the requirements for establishing the effect of adverse

publicity in selectifRe a petit jury, see US. vy. Moran, 2 Cir. .

194 F. 2d 623, 625: Blamenfield vo US. 8 Cir. 284 F.2d

46, 00.51. Tf there was any valid basis for dismissing the

petit jury, the court should have also dismissed the grand

jury ‘indictment.

seattle sn

To sequester am imported jury in an incometax cass

Violated: the petitioner’s constitutional rights toa faireand

aparti: il jury. The petivioner was given no opportunity

to determine in the voire dire examination the possible

effect of said action, The effect of this surprising and un

justified action on the jury can never be honestly deter

mined. On the other hand, the jury on the 2ortday of being

‘locked up concluded its jury deliberation at 12:4) 2M.

after only 4+ hours and 15 minutes deliberation. Who can

honestly say that this speedy conclusion to a lengthy

and complicated Frial was not the jury's stampede to uns

shackle itself from this involuntary incarceration !

II.

- >

‘THE CONSTITUTIONAL SAFEGUARDS FOR.A FAIR AND

IMPARTIAL TRIAL WHRE VIOLATED BY THE PROSECU-

TION WHEN IT meager SUGGESTION OF ‘‘GRAFT,’’

‘‘RACKETS,” AND ‘‘O UNRELATED CRIMES’’ WITH-

OUT SUPPORTING EVIDENCE Il THE RECORD.

On cross examination, the prosecutoT asked (App. 1155)

if in 1955, 1956 and T9457 the petitioner received any money

in graft payaients. The prosecutor admitted that there was

no evidehce in the regord to indivate the receipt of “graft”

‘or to show where the net worth “bulges” came from. The

use of the,word “graft™ was a knowing and deliberate at-

tempt to prejudice the jury. ‘The trial court denied peti-

tioner’s motion for mistrial but admonished the jury to

disregard the question. ’

Another purpose of the “graft” question was to suggest

1 “likely source.” In the courts below the, government

ae considerable time in justifying the question, relying

primarily en Ford v. U. S., 2 Cir. 237 F. 2d 57. The Court

KF. | SS, «

--15-

of Appeals’ opinion completely: tenored the opoisonous

“eraft™’ question, its purpose and damning effect. “

“The basis lor the “graft question had no support in the

record even faintly comparable to the use of “graft” in

PT id

Ford vo U. _ ar US. 38 Wherein this court vacatedgthe

judggnent of conviction (2 Cir, 237 F.2d ST) with diree:

tione to dismiss the indictment. It alse confliets with /wrd

v. OS. oo Gir., =10 B22 31S: Dane ve OS. 5 Cin, 307

Prosecuters need have no fear in the future Cexeept

to have the questiow stricken) when they suggest by ques-

“tion that a defendant obtatbhed money from graft, view.

» 7

murde ‘or by pushing he roin toftee abagers. The case below

ean be used hy prosee utore: as authority on this tremen

dously iuport int principle.

The second government witness referred: to the Senate

(eo a Labor-Mandgement (McClellan) Committee as

the “Rackets” committee. The, trial court failed to advise

the jury to disreg rird the improper ‘testimony. Thereafter

the government during thea rial frequently made reference

to the committer under its proper name, The only purpose

of all this action was te produc eaconstant dose of prejue

dice to the jury,.not to establish the essential elements of

the crime charged. :

During the cross examination of the petitioner, the

proweitor suggested through questions that he committed

three alleged Violations of Indiana law. The facet that the

government failed ‘to legally cetablish these allegations

or to establish their mnateriality and-relevancy to the crime

of income tax evasion was inconspquential to the Court,

of Appeals, The govermnent did “not. believe ‘they were

inconsequential. The experienced prosecutor asked the:

. Nee - - ay

- -

+ *»

period 1952 through 1957 that petitioner had curreti¢

16—

question for onlycene purpose, to preyudice the minds of

the: jurors.

The foregoing are the principal illustrations of some of

the prejudice ‘ial acts which, taken together as a whole,

violated the constitutional rights off a defend: int 40 a fair

and impartial trial. Rach aet cannot b@ treated ina Yaeuum:

The action of the imstant case danctioried by the Court

f Appeals conflicts with thre utandards of this Court set

ious in, rapes v. US. BBS US. TAO: Bolle nbach v.

MOS. 326 US: 607, |

at III.

THE OPINION OF THE COURT OF APPEALS REDUCES .

TO A MEANINGLESS SHIBBOLETH THE ESTABLISHED

STANDARDS IN INCOME TAX EVASION CASES ON THE

NET WORTH-EXPENDITURE TECHNIQUE, THEREBY DE-

PRIVING PETITIONER OF DUE PROCESS OF LAW.

A. Starting Point Not Established.

The govermnment's net worth starting point wae Decem-

her 31, 1951. Its computation of petitioner’s net worth was

then $70,321.42. The government's evidence also indicated

that in the late 1940's petitioner had a net worth of between

68 to 78 thousand dollars. >

Two disputed items affecting th® government's starting

point were handled in error by the government. These are:

1 Cash on hand. The government's ewiimary did not

include at the starting point, or for any year, one cent

of cash on hand. The government claimed (a) Tor the

transactions of $842,919; (b) that petitioner had no cash-

on-hand on December 31, 1951; and (¢) that in 1952 he

handled $64,592 in cash (Gov, Ex. 187). Special Agent

Peli —

. Fy

Bovll, the poccTimeNt’s expert Withess, stated mo eashoon

hand was included because petitioner could not speeitficalls

recall (for as long as S years) the amount on’ hand) on

specific dates. This arbitrary action’ squarely confliet-

with Thomas ve CLR 6 Cir, 223 F.2d 85, 88-905 Thon:

v. Comm... Cir. Bae. Pd 520, 524-590: Crane ve Conn *

8 Cir. 247 F.2d 3590, 362-3205; Fuller vo Comm... G Cirg 3h

BL 2d 02-77; Phillips’ Estate v. Comm. 4-Cir., 246 F.2d

200), 21, Bd Genbh vio Comm. 6 Cin, 4/9/63 No. 14744,

(unreported), all of which hold occh an arbitrary ‘ywuess"

by the wovernment as te cash-on-hand is not justified.

j ee x

Ete submitted that the government's facts do violence: ,

to its expert's conelusion. there was ono cash on hand, |

must alse be remembered that the governments surimags

Was presented at the conclusion of its case and inust be

(especiallyein this case) an. integral part of its burden ot

proof,

4 .

The govertment’s error in omitting cash on hand fron "

the starting point and for all vears was actually motivated

hy: the dack of a case. Cash Gn hand at the start would have

materially weakened its case. rs

2 The Lovelace Matter. ‘Viee covernment offergd one

Witness and six- exhibits concerning certain improved red!

estate to establish an asset of petitioner, A tentative net

worth statement prepared by a revenue agent listed this

property as petitioner's asset in T9531 and. 1952.

Boyl testified that he did not include this property as

petitioner’s asset in the government's net worth aacuat eae

because it was his opinion that this was not an asset of

petitioner in TOT and 1952, notwithstanding all of the

government's evidence, The record established the value

of thik asset as of 12/31/51 (starting point) was $11,121.71.

, 0

SR eR,

“This is another illustration of the government's failure

te include known iteins in evidence in-the starting point.

The reason is’ obvious. To do so would increase the net

worth ‘at the starting point and automatically reduce or,

eliminate the so-called unreported) taxable Income.

The govefument’s opening net worth was clearly imac

curate. Thus it) directly conflicts. with the requirement

set by this Court that the opening net worth must be estab

lished ¢by competent evidence with reasonable certainty.

_ Holland ¥, ao S., 3A BES. 121, 132. See also Fuller vi Comm..

6 Cir 3 FL 2 xd 75, We. Thomas v. CLLR. 6 Cir, 225 4. 2d

SO, SO: rome . Ge. 2 Eats a Jb Pd 920, A24-526 -

Phillips Extate ve CLLRS Cir, 246, F.2d 209, 215, 214:

Grubb v. Comm. 6 Cw. 4.9/65 Na. 174 (unreported).

B. The Government’s Expert Witness Unconstitutionally In-

-vaded the Province of the. Jury in tite the Government's -

Net Worth Summary. 4 : Meee

The burden of proof in criminal inebme tax evasion cases

ix still on the government, according to the Holland ease,

p. 138.

In diseliarging it- burden in circumstantial evidence

Ces such, as the net worth-expeanditure tw hyique: the:

governinent. Uses an “expert™ witnes to summarize the

eVidence. This practice is permitted in these complicated

cases on the belief that laymen jurors cannot intelligently

summarize the evidence, See Grayson Vv. Wolliams, 10 Cir.

26 F.2d 61, 63. .

In the instant case, Spec iaPAigent B oyll Was the govern’

nient’s expert. He prepared thfe net worth summary. In

nine instaness, Bovil acted as the “13th juror” while also

testifving as an “erpert.” Three of the nine instances “in

*, e

A ee :

summary afer (1) cash on hand: (2) Lovelace matter

(see pp. 16, 1% herein): and (3) Barrett: Bonds (see pp.

25-27 herein), Mes »

. e

In each of the other six items af the. covermment’ s OVI

dence, Boyll obviously did-not be lieve the evidence. The

sovernment’s net worth summary as.to these nine itepss

was ¢Anputed on the basis

evidentiary issues.-Boyll presented to the jury his opinion

as to the ultumate fact to be decided hy the Jury-gnamely,

‘that all thee fact dispufes which he resolved, and all the

elementary iesues, when evaluated as shown on his sii

mary, establish “unreported taxable income. Phe full ine

pact of this conclusion by the so-called expert in the tinal

stages of triak was left to settle Ike ao shroud) of euilt

over the petitioner. -- : ‘

ve i = a The 2 -

Petitioner's motion-to strike government's summary on,

the basis that it wae Bovis assim ptign, craluation and

conclusion of disputed evidence was denied. As each dis

putecd item was an integral part of the government's eam

mitation, Bovll bad to act as av “3th juror” in order go

J :

decide these crucial evidentiary problewis in favor of the

. t . .

coverninent, The * goveriment, ‘could not risk permitting

. . wae . .

the jury to decide, one by one, each erucial item and then-

compute the final resulfS4n Approving Dove's conduct,

the court's ecaaipres ie in conflict with the acceptable con-

duct ofan “expert” as announced in 0. S.v. Ward, 3 Cir.

160 BF. ad 460, 46:2" 463: Stecle vo US. CLE, De? F.2d.

HIS-GIT ; °

Kaci of the nine crucial evidentiary questions was solely

for the jurv. Yet, by Boyll deciding how to treat them on

the net worgh summary, each question leses its identity

and becomes buried in the final result of the government’s

of Bovll’s decision. of these

0 Y

inmary. It is naive to believe that any jury-—in feur

houre—could consider and evaluate each evidentiary issue,

then adjust the end result (up or down on a summary) by

their own decision. Thus the invasion of thre jury's function

hecomes complete merely by virtue of the nature of the

complicated net worth summary cases.

C. Current Taxable Income and Likely Source.

There was no direct evidence of willfully unreported, «

current taxable Income or of a likely sour@ for 1995. 156

and 1997. In the Hollantwease (p. 437) this Court held that

in net worth cases, thare must be evidence supporting the

inference that the net. worth increases are attributable

to currently taxable income.

This Court recognized that the net worth theory of proce-

. . - . * ..

cution based on etrcumstantial evidence as to guilt is the

chief weapon of a method that is itself only an Approx ima

tion, Halland case at p. 120.

‘The government's theory in the trial-court CApp. 100)

‘Was te plant in the minds of the jury that petitioner's un-

reported meome stemmed trom “gratt.’ Of course, there.

was no such evidence, of any variety, in the record. There-

‘foreéthe government planted the prejudicial “graft” and

“rackets” references at the start and tinish of the trial te

provide: a “likely source.” Before the Court of Appeals

the government suggested that the “bulge” in its net worth

summary could) be inferred) from = “graft™:. therefore

“eraft’’ was the unreported current taxable income and

+ - XS

Mhely soures.

The Court of Appeals avoided the “graft” theor® and

adopted a new concept “sane tarable. source of income”

* .

(emphasis supplied) (Opinion App. Sl ares ‘p. 26a).

; 2

. e . @

53: ©

Then obviously recoenizing the novelty of its assertion.

the ‘Court of Appeals dis@vered @hat the souree wa-

petitionta’s unreported professional income, The govern

nent, of course, never advanced that theary because it

‘theory Was that petitioner was too Iusy as a *Prosecutitie

Strormes” and. anvhew, fever had any practice of tas

jie at the trial the spite lacs 1, conceded that the al

icmeal oe eae :

‘ TE Pepoante ineetie did wof come frome the snare

SOUTEe its ae the petitioners reported imeome

Neither the prosecutor ner the Court pf Appeals ever

; Fd

identified a “souree™ fs ceurrent taxable ineomet whic!

Wits nite ported, -

In Molland gase at pp. 1, Ios, this cougt said:

“Tneremses in net aorth, standing alone. cannot? he

asstmned to Hive attributable te currcutly fa ae Pies

But proof of a Likely seares. fmm wiieh thee furs

Conld reasonably find that the met weerth Oneredse-

sprang is suffielent.” (Maaphasis supplied)

The aforesaid language fits precisely the Instant faet~

The government's case is based ona net worth summary.

computed by an expert who acted asa 1th jurer’ toes

tablish a “bulge ewhich the eovermnent hopes will be

assumed taghe carrently tarable income. This ‘theora eon

Hiets with Thomas v. Comm. 1 Cir, 232 FL 2d and, 526:

tre met ae

RKashat v. Comm.. 6 Cir. 220 F. 2d 282, 285. Also see Mey

tens, lags of Federal Inceme Taxation, Vol. 10. See, 554.

Stay at ])- rhs

It is reeognized that in (7. S. ve Masset, 355 VS. 5th

(affirming 1 Cir. 241 F.2d 895) in affirming the reversal

af a lower court for prejudicial conduct similar to the

instant cas», this Court did say that proof of likely soupee

Was not necessary in every case. This was So, should a//

: ‘

. - —22—

possible sources of non-taxable ingome be negatived. In

the instant case, notwithstanding the assertion of the Court

of Appeals, the record will show with abundant: elarity

that the government or triak court disregarded and arin

trartly rejeeted the evidence. It did not negatives all pos

sible Sources,

in Ford v. U. S8.c 350 US. 38, thix court remanded with

directions to vacate a jadement of conviction and dismis-

the indictment (2 Cir. 237 F.2d 57). This Ford case in

volved the sane ograft” theory and ne likely source as in

the instant case. a

Certainly where there ix no direct evidence of any un-

reported currenfPtaxable income, certainly where there 4-

no evidence of likely source, the Masser opinion cannot

he interpreted t@ further reduce the burden of proof right

fully imposed on the government in this type of eases.

- The foregoing emphatically illustrates the hazards ot

defending a net worth prosecution. This court has recog

nized that net worth prosecution cases arg fraught with

danger: The standards thoaght to have been established

in net worth eases have-not served to safeguard a defend.

ant’s rights guaranteed by the 5th Amendment.

- D. FE ulent Intent Was Not Established.

The government admitted that the only evidenee of un.

reported income was the amount computed on its net worth

summary (Gov. Ex. 186) (App./830). Deduetions claimed

by petitigner on his returns were not disputed. Petitioner

had no concealed bank accounts and reported all interest

and dividends received during the taxable years.

There is no direct evidencegof any act tending to estab-

lish fraudulent intent of oe, Sea for the indictmesr

vears. Likewise, there is no direct evidence that peti-

tioner omitted one cent of reportakke income during the

indictment vears.

The) Court of Appeals stated (Opinion App. tA" infra

p. 26a) ce error defendant conceded: an underreporting of

income of $6106.09 for the vear 1956. This is “another

glaring illustration of a lack of understanding of the net

worth summary technique. ¢

The government's case is based on uncorroborated tm-

ferences of incredifility. The court’s opinion admits that

the government’s case is based solely on inferences. Its

ease is based entirely on its own ‘net worth summarys

There ix ne corroborated independent evidence t@ estab-

lish intent to evade taxes. It therefore violates the warn

ing of this court in the Holland ease at p. 123:

se 9 * bare figures have a’ way of acquiring an

F oevistence of their own, independent of the evidence

which gives rise to them.” :

In Smith vo U.S... 348 U.S. 147>and US. ve Calderon.

348 US. 160 this court held affirmative adinissions of

tax evasion must De corroborated to support aw conviction.

There ix no re of tax agevasion im the

instant case.

IV. ;

THE PETITIONER'S, CONSTITUTIONAL ‘RIGHTS WERE

VIOLATED WHRN THE TRIAL COURT GAGGED THE PETI-

TIONER AND DENIED HIM THE OPPORTUNITY OF PRE-

SENTING A FAIR REBUTTAL TO THE GOVERNMENT'S 13th

JUROR. - :

During the vears 1952 through 1957 petitioner recessed

- . . ,. . .

$18,041.03 ae a tax-free return on his investment in City

of Gary Improvement @ontracts and Barrett Bonds. Fer

? —24—

the vears 1955-56 and 7 the amounts of said tax Pree

funds paid to petitioner were respectively $14,585.48,

$7,007.81 and $1GBS8252. — :

Petitioner’s expert witness offered his net worth com-

putatton, (Def. Ex. 22) which, upon objection of the gov:

ernment, was not admitted. Petitioner's expert theory was

that as petitioner had re-invested. these tax-free funds, it

Was necessary to deduct as non-tarable income the amount

received each year; eg. in the adjustment section of the

<umunary there should he deducted for 1955 the $14, BR348,

ete. This theory is based on the expiguation of so-called

“net worth” ,summaries eet forth in David HW. Schultz, 30

TC 256 at 205, (rev'd for other grounds, 2 Cir., 208 F.2d

927): and ‘3\ Paper Submitted at a Svinposium of the

Ameriean Bar Association, Section of Taxation on Tax

Fraud Procedures and Law” by Meyer Rothwacks, Chief,

Criminal Section, Bepartinent of Justice, dated Septeniber

19, 1950, pp. 13-14 (notoan official expression of the De-

partment). Fhe trial court's refusal to permit this reason.

able theory to be presented to the jury was affirTuedl

by the Court of Appeals which claimed this would be a

double deduction.

We submit the refusal is based on a lack of understand.

ing of this dangerous technique which has been developed

im recent vears and amounts to a violation of the oth

Amendment. The court's action also disregards the basic

law thatthe jury has the exclusive respons sibility of de-

termining the ultimate facts. : Co

The so-called “net worth” summary is a misnomer,

“The technique (“fraught with danger”) has been developed

in an attempt to récenstruet current unreported taxable

income. It must go bevond the pure net worth, Le. aesets

—2)-—

a i

minus Habilities. The teehnique properly emploved) first

determing the ingrease in net worth fora particnlar vear

Then Is add d non-dednetible oN penses. Then is di ducted *

hon-tasable receipts, e.. gifts, imheritanees and won tas

whe ineome, These deductions are necessary, as eaid in the

Nehult> ease, supra, at p. 275, sinee such inerements to the

taxpayer's assets are reflected in the ineréase of His net

worth during the taxable wear, and since thew are nes

fasabl) then must he subtracted in order to. asecrtain AN

favalhl, joe fo ogatecopere « feop th. eats ti ite sf,

The government admitted at the trial petitioner reaegy co

thes) atieunt= of nom-tasable imeomes that these tremuss

Were plowed back inte the other asset. of the petitioner

in tlie Vert reeeived. Pt therein follows ae eget assed

were inereadaed by nen-tasable funds. Th# vovernment’-

theery was that by reducing the running investment in

sald bonds by the amount received eae wear the petitione:

had received the proper adjustment. This theory suppose.

the amount reeeived vanished and did) not) re-appear in

the other assets. Yet it admits the ih-tree funds wer

reinvested and are blinded to the fact that in this danger

ous technique they now are charging petitioper with un

reported taXable income caused by the use of said tax-free

funds. e

The government and the courts belowgelaim, wothowt

authority, petitioner's theory ix net correct because it would

Moduee a “net worth decrease, FT his illustrates a dacek of

understanding of the system. [t also illustrates the system

should not be used as a basis of depriving a pefson—by

conviction—of hie liberty. The end resybmis nof ai net

worth inerease or decrease, It is) supposed to establish

unreported taxable income. The petitioner’s theory (Def

‘

etl

Ex. 22) illustrates he had adequate tax-free funds on hand

during the efitire period. The petitioner's theory will alse

establish there was no current, unreported taxable income

The petitioner was perinifted to introduce a net worth:

summary (Def. Ex. 25) computed on the trial court: and

government's theory,

- It is fundamental that a defe ndant should have the right

to explain away the force of ae rimgnal Clare. To he ‘pr ive

a defendant of the right to make a explanation of the

crime charged is erroneous. The gions court's action con

fliets with, WD ‘atkins vo. U.S... EC ir., IE. 2d 9352, 1535, M4 :

BIE MES ach, Mountamn ( Es sin Co., ct 4% 2 Cir, 161 F.

XT ATG. 478,470: Heidel vo UL S.6 Cir, 190) F.2d 495, 407:

Continental Bakina sania fe ie S.. G Cir. 2i F. 2a

137, 141-145; see also Wigmore, (3rd ny Vol. I, See: 34.

p. 423 and Vol. Tl. See. 239. p. 3872 Wharton’s Crimina

Evidence, (12th Ed.) Vol. L. See. 211, p. 451.

By depriving a defendant of the right of presenting hig

defense (on a transaction in which at the trial there wa-

a difference between the Treasury and Justice Depart

ments (App. 737)) there is now established the shocking

precedent that if a defendart’s theory differs from. the

voverninent, the defense can Ine reqeeted, @.2.. disputes ont

the right to defer income alrgady received but not) yet

earned; is a certain substance a narcotic; difference be

tween ballistic expert~ over a fatal bullet. This is a signif

icant departare from traditional precepts of justice.

When a defendant!s eonviction hangs on the flimes

thread of a technical question as to the right application

of $168,347 tax-free funds when the total unreported tax

able income claimed only equals $71,585, certainly due

BEC ie i:

process of law demands the right to present the defend.

ant’s theory to the jury. In fact, it is submitted the. ques-

tion really goes to whether the government's eummary

(Gov. Ex. 186) is correct, and whether the defyndant’=

if notion for acquittal was erroneously denied.

CONCLUSION.

2 . 4

It is respectfully submitted that the petition for a writ

of certiorari should be granted. es . 5

Respectfully submitted,

ROBERT J. DOWNING,

> 105’S. LaSalle Street,

Chic¢ago 3, Illinois,

2 Attorney for Petitioner.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.