Opposition Brief — Engle v. united States

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OCTOBER TERM, 1972

No. 72-18

JOHN R. ENGLE, PETITIONER

Uv.

UNITED STATES OF AMERICA _

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE EIGHTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINION BELOW

The opinion of the court of appeals (Pet. App. 1-8)

is reported at 458 F.2d 1017.

JURISDICTION

The judgment of the court of appeals was entered

on May 2, 1972 (Pet. App. 1). On May 24, 1972,

Mr, Justice Blackmun extended the time for filing a

petition for a writ of certiorari to and including July

(1)

1, 1972, and the petition was filed on that date. The

jurisdiction of this Court is invoked under 28 U.S.C.

1254(1).

QUESTIONS PRESENTED

1. Whether there was a fatal variance between the

proof and the offense charged in the indictment.

2. Whether the use of the term “kickback” by a

government witness resulted in the denial of a fair

trial. :

8. Whether evidence concerning oral statements

given by petitioner to a special agent of the Internal

Revenue Service in a non-coercive and non-custodial

interview should have been suppressed because the

agent did not give full Miranda warnings concerning

petitioner’s constitutional rights.

STATUTE INVOLVED

Internal Revenue Code of 1954 (26 U.S.C.):

Sec. 7206. FRAUD AND FALSE STATEMENTS.

Any person who—

(1) Declarations under penalties of perjury.—

Willfully makes and subscribes any return,

statement, or other document, which contains

or is verified by a written declaration that it

is made under the penalties of perjury, and which

he does not believe to be true and correct as

to every material matter; or

* * * e £

shall be guilty of a felony * * *°.

8

STATEMENT

A three-count indictment (Pet, App. 18-14) charged

that petitioner had willfully and knowingly filed joint

federal income tax returns for the years 1965, 1966

and 1967 which he did not believe to be true, in vio-

lation of Section 7206(1) of the Internal Revenue

Code of 1954 (26 U.S.C.), in that the return re-

ported as “total income” an amount less than his

actual total income. A jury convicted petitioner on

all counts (Pet.-App. 1), and the court of appeals

afirmed (Pet. App. 1-8).

The evidence was in substance as follows: Peti-

tioner, during the years involved, was president of

a corporation (Steak N’ Shake) which operated about

75 drive-in restaurants, about 20 of which were in

the St. Louis, Missouri area. In the latter restaurants,

the corporation permitted American Cigarette Vend-

ing Company (“American Vending”) to maintain

cigarette vending machines in return for monthly

payments, duly recorded on the books of both com-

panies, at the rate of about three cents for each

package of cigarettes sold. During these years peti-

tioner personally received payments from American

Vending each month in the form of cash in an en-

velope. These payments, during the years here in-

volved, were at the rate of one and one-half cents for

each package of cigarettes sold, and amounted to

$3,897.48 in 1965, $4,400.09 in 1966, and $2,119 in

1967—amounts which were precisely the same as

the amounts alleged in the indictment as understate-

4

ments of income (Pet. App. 2-8, 13-14; R. 144-145),

Petitioner conceded that none of the payments thus re-

ceived were reported on his income tax returns, (R.

212-218; Pet. App. 3.) The returns were prepared by

Mr. Roark, who was treasurer of Steak ’N Shake,

but petitioner did not inform Mr. Roark of the pay-

ments because “I didn’t think it was any of his bus-

iness” (R. 189).

Petitioner testified that, although he kept no rec-

ords (R. 148), he spent all the payments in buying

dinners and drinks and otherwise entertaining the

employees of Steak N’ Shake and that he was not

reimbursed for these expenditures (R. 137-188). He

had an expense account and received monthly reim-

bursements from the corporation of about $14,000

per year (R. 194-200). These reimbursed expenses

included dinners and drinks for the corporation’s em-

‘ployees (R. 210-212). Petitioner testified, however,

that he obtained reimbursement only when he entered

an expenditure in his expense book (R. 174).

Petitioner testified that this use of cash received

from American Vending began in the early 1950’s,

when the previous president of the corporation (Gus

Belt) told him that he (petitioner) was spending more

than he was being reimbursed and should have “part

of the sales from the cigarettes” (R. 144). Mr.

O’Shea, of American Vending, agreed to make the

payments (R. 144). The alleged purpose of this ar-

rangement was to prevent a certain Mr. Smith, now

deceased, from knowing the full extent of the enter-

1“R” refers to the anpendix filed in the court of appeals.

5

tainment expenses, although they were, in petitioner’s

opinion, for the good of the company (R. 187-142).

Mr. Belt was the founder of the company and, together |

with his family, was the majority stockholder; Mr.

Smith was a minority stockholder (R. 192). Roark,

the treasurer, never questioned any of petitioner’s ex-

pense accounts and always paid the amounts involved

(R. 218-219).

Steak ’N Shake had gross sales of $22,000,000 in

1970, including $9,000,000 in the St. Louis area

(R. 193-194). Before Mr. O’Shea died in 1958, peti-

tioned picked up the cash payments at a tavern (R.

73, 148-149). Later, after Mrs. Cronin became presi-

dent of American Vending, petitioner went to her

place of business and told her that he wanted “a

cent and a half a pack on the commission on the

cigarettes” (R. 56-58). She acquiesced (R. 58).

ARGUMENT

1. Petitioner’s contention (Pet. 7-14) that there

was a fatal variance between the indictment and the

proof is based on petitioner’s unwarranted assump-

tion that the references in the indictment to an under-

statement of “total income” (Pet. App. 13-14), are

to page one, line 9, of each return, where total income,

for computation purposes, has a more restricted mean-

ing than in its ordinary sense. At page one, line 9,

“total income” is a figure comprised of, inter alia,

wages, salary, and “other income” (R. 324, 327, 330;

Pet. App. 9). The “other income” can be a net figure

brought forward from elsewhere in the return, thus

excluding income required to be listed elsewhere on

the form. Thus, a taxpayer might have business in-

come or miscellaneous income, required to be reported —

elsewhere, which might be completely offset by allow-

able business expenses, leaving nothing to be brought

forward to page one and thus not being shown on page

one, line 9.

The flaw in petitioner’s contention, as the court of

appeals observed (Pet. App. 4), is that the indictment

makes no reference to page one, line 9. The ordinary

meaning of “total income” is the same as total re-

ceipts or gross income, which includes income against

which other deductions are claimed. The fact that

“total income” may have a different meaning on page

one of the return does not demonstrate that petitioner

was misled as to what this quite simple indictment

charged, i.e., that we had knowingly failed to re-

port some of his income. Cf. Berger v. United States,

295 U.S. 78, 82.

If petitioner had any doubt as to what items com-

prised the alleged understatement of total income, he

could have had the matter clarified by requesting a

bill of particulars. In fact, petitioner knew exactly

what the government’s proof would be, since he had

discussed with Special Agent Lewis the fact that he

had received the cash payments in question but had

not reported them in his income tax returns (R.

110-111).

Furthermore, petitioner never challenged the suffi-

ciency of the indictment until after the trial. “An

indictment will be construed liberally in favor of its

7

sufficiency where objection to it is first made after

verdict or judgment.” United States v. Norman, 391

F.2d 212, 213 (C.A. 6), certiorari denied, 390 U.S.

1014. “Upon a proceeding after verdict at least, no

prejudice being shown, it is enough that the necessary

facts appear in any form, or by fair construction can

be found within the terms of the indictment.” Hagner

v. United States, 285 U.S, 427, 433.

Petitioner contends (Pet. 13-14) that he was de-

prived of the “defense” (Pet, 13) of showing that

he used all the money in question in the form of

allowable business expenses. It is no defense to a

charge under Section 7206(1) to prove that, although

petitioner failed to report his receipts from American

Vending, he would have owed no greater tax if he

had done so, because he could have offset the receipts

with allowable expenses which he also failed to claim.

See Gaunt v. United States, 184 F.2d 284, 288 (C.A.

1), certiorari denied, 340 U.S. 917; Siravo v. United

States, 377 F.2d 469, 472-473 (C.A. 1). Cf. Sansone

v. United States, 380 U.S. 343, 252, involving identi-

cal considerations under Section 7207 of the Code

where, as here, an underpayment of tax or an intent

to defeat a tax is not an element of the offense.”

2. Petitioner argues (Pet. 14-15) that he was

denied a fair trial because of Special Agent Lewis’

use of the word “kickback” (R. 114) in testifying

before the jury. As the court of appeals suggested

* The reason for this rule is that where nothing is reported,

the Commissioner is not even apprised of the need to verify

or to investigate.

(Pet. App. 6), that term aptly described the cash

payments here involved, and its use was inconsequen-

tial in any event, since the jury knew the undisputed

facts concerning the payments. Furthermore, any pos-

sible prejudice to petitioner’s case was cured by the

trial court’s prompt instruction striking the answer

and directing the jury to disregard it. (R. 117.)

3. Petitioner contends (Pet. 15-16) that his state

ments when he was interviewed by Special Agent

Lewis (R. 110-112) should have been suppressed,

either because the warnings required by Miranda v.

Arizona, 384 U.S. 436, were not given or because the

agent allegedly did not give the type of warning re-

quired by Internal Revenue Service directives (Pet.

App. 25-26). The agent informed petitioner as re

quired by the directives (Pet. App. 25-26) that it

was his function to investigate criminal tax fraud

(R. 108-109). Since the occasion was the agents “in-

itial contact” with petitioner he fully satisfied the

directive (Pet. App. 25). As to Miranda warnings,

the other courts of appeals have held that no Miranda

warning is required in a case such as this where

the taxpayer has not been deprived of his freedom

of action in any significant way. This Court has

consistently refused to grant certiorari on this issue.’

2 In United States v. Dickerson, 413 F. 2d 1111 (C.A. 7)

the Seventh Circuit required that special agents of the In-

ternal Revenue Service give Miranda warnings at the outset

of any investigation despite the absence of any form of cus-

9

CONCLUSION

For the foregoing reasons, the petition for a writ

of certiorari should be denied.

Respectfully submitted.

Aucust 1972.

tody, because the taxpayer might be unaware of the possible

criminal implication of the inquiry. The other circuits have

held to the contrary. E.g., United States v. White, 417 F. 2d

89 (C.A. 2), certiorari denied, 397 U.S. 912; United States v.

Jaskiewiez, 433 F. 2d 415, 417-420 (C.A. 3), certiorari denied,

400 U.S. 1021; United States v. Prudden, 424 F. 2d 1021, 1025-

1031 (C.A. 5), certiorari denied, 400 U.S. 831; United States

Vv. Mariani, 422 F. 2d 150, 153-154 (C.A. 6), certiorari denied,

399 U.S. 910; United States v. MacLeod, 436 F. 2d 947 (C.A.

8), certiorari denied, 402 U.S. 907. Moreover, in the present

case the agent did make known that it was his function to in-

vestigate criminal tax fraud.

D ©. &. sovessecer perenes orrce, 1972