Opposition Brief — Goldbaum v. United States

Questions presented ..... 0.6. .ce seers eee eter eee eees

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CITATIONS

Cases:

Beaty v. United States, No. 209 this Term........

Demetree v. United States, 207 F. 2d 892.........

Ecklund v. United States, 159 F. 2d 81..........

Goldstein v. United States, 73 F. 2d 804.........

Lovely v. United States, 169 F. 2d 386...........

Ryan v. United States, 99 F. 2d 864, certiorari de-

nied, 306 U.S. 635 .... cc cece cece e eee eeeeees

United States v. Furlong, 194 F. 2d 1, certiorari de-

mled, BEB U. B. OBB... cccccccescccccccsvesors

United States v. Stoehr, 196 F. 2d 276, certiorari

denied, 344 U.S. 826. .... 06 cc cece cece eee e eens

Statute:

Internal Revenue Code, Sec. 145 (26 U.S.C. 145)..

Miscellaneous:

Federal Rules of Criminal Procedure, Rule 30....

IV Wigmore, Evidence (3d ed., 1940):

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Gnthe Supreme Court of the Wnited States

OcroBer Teno, 1954

No, 215

JACOB STRAUCH, PETITIONER

Vv.

UNITED STaTes OF AMERICA

ALEN STRAUCH, PETITIONER

Vv.

UNITED STATES OF AMERICA

Harry BENJAMIN SHER, PETITIONER

v.

UNIrep STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE SIXTH

CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

Neither the per curiam order of the Court of

Appeals affirming the judgments of the District

Court (Pet. 21-22), nor the memorandum ( Pet.

(1)

2

23-27) and dissenting opinion (Pet. 27-31) on the

petition for rehearing has been reported.

JURISDICTION

The order of the Court of Appeals was entered

April 21, 1954 (Pet. 21-22), and a petition for re-

hearing was denied on June 17, 1954 ( Pet. 23-27).

The petition for certiorari was filed on J uly 15,

1954. The jurisdiction of this Court is invoked

under 28 U.S. C. 1254 (1). See also Rules 37(b)

(2) and 45 (a), Federal Rules of Criminal Pro-

cedure.

QUESTIONS PRESENTED

1. Whether a statement of income, which had

been submitted in an effort to settle civil tax lia-

bilities, was admissible in a prosecution for in-

vasion of income taxes,

2. Whether the trial court erred, as to peti-

tioner Jacob Strauch, in denying a motion to strike

evidence of increases in his net worth.

3. Whether, despite the absence of an objection,

certain language of the trial court’s charge to the

jury, stating the maximum and minimum penal-

ties under the statute and remarking that the Gov-

ernment could not appeal, constituted plain error

requiring a reversal of the convictions.

STATUTE AND RULE INVOLVED

Internal Revenue Code:

Sec. 145, PEeNALTIEs.

* * * ¢ .

—

3

(b) Failure to Collect and Pay Over Taz,

or Atlempl to Defeat or Evade Tax.—Any

person required under this chapter to collect,

account for, and pay over any tax imposed by

this chapter, who willfully fails to colleet or

truthfully account for any pay over such tax,

and any person who willfully attempts in any

manner to evade or defeat any tax impose | by

this chapter or the payment thereof, shall, in

addition to other penalties provided by law, be

guilty of a felony and, upon conviction there-

of, be fined not more than $10,000, or impris-

oned for not more than five years, or both, to-

gether with the costs of prosecution.

* * * * *

(26 U.S. C. 145.)

Federal Rules of Criminal Procedure:

Rute 30. INsrrucrions,

At the close of the evidence or at such ear-

lier time during the trial as the court reason-

SES PSS PT OAM, AL OT a ere

ably directs, any party may file written re- é

quests that the court instruct the jury on the ;

law as set forth in the requests. At the same (

time copies of such requests shall be furnished }

to adverse parties. The court shall inform

counsel of its proposed action upon the re- ;

quests prior to their arguments to the jury, t

but the court shall instruct the jury after the ;

arguments are completed. No party may as- f

vee

+

sign as error any portion of the charge or

omission therefrom unless he objects thereto

‘ore the jury retires to consider its ver-

dict, stating distinctly the matter to which

he objects and the grounds of his objection.

Opportunity shall be given to make the objec-

tion out of the hearing of the jury.

STATEMENT

On April 2, 1951, a three count indictment was

returned in the United States District Court for

the Middle District of Tennessee against petitioner

Jacob Strauch. (R.5-7.) On the same day, indict-

ments in two counts were returned against peti-

tioners Alex Strauch and Harry Benjamin Sher.

(R. 7-10.) These indictments charged Alex Strauch

and Sher with attempts to defeat and evade their

income taxes for the vears 1944 and 1945, and

Jacob Strauch with the same offense for the years

1944, 1945, and 1946, all in violation of Section

145 (b) of the Internal Revenue Code.

The amounts of net income and taxes due

thereon, as reported in the returns and as corrected,

were alleged to be as follows:

Reported Corrected

Income Tax Income Tax

Jacob Strauch

Count | (1944) $ 9,478.94 $2,592.21 $32,012.76 $14,793.29

Count 03 (1065) .......:: ‘ SE ae ee re 25,471.71

Count IIT (1946) 16,922.27 4,905 30 35,000. 36 14,986.47

Alex Strauch

Count [| (1944) $5,208.50 $ 1,061.57 $25,158 30 $10,493.15

Count II (1945) 4,776.50 919.13 18,785.42 6,641.27

Harry Sher

Count 1 (1944) $ 2,727.69 $ 452.00 $19,760 79 $ 7,446.04

Count IT (1945) 2,542 49 410 00 13.935 79 4,420 46

The case was tried from April 20 to April 29,

1953. (R. 72.) At the conclusion of all the evi-

5

dence the jury deliberated one hour and a half and

found petitioners guilty on all counts. (R. 488.)

Alex and Jacob Strauch were fined $5,000 and sen-

tenced to three years imprisonment on each count,

the sentences to run concurrently, while Sher was

fined $5,000 and sentenced to four years imprison-

ment on each count, the sentences to run concur-

rently. (R. 493-494.) Petitioners’ motion for a new

trial was denied on June 19, 1953. (R. 558.) The

Court of Appeals affirmed the decision, (R. 597-

GOD.)

The evidence to support the verdiet may be sum-

marized as follows:

Petitioners were partners in a wholesale jewelry

business during the period here involved, (R. 81-

82, 00, 346-349.) Since they dealt largely in the

black market a great proportion of their busi-

ness Was transacted in currency. (R. 102, 404, 417-

418.) Sales were made to post exchanges and

jewelry stores in the neighborhood of camps and,

according to petitioners, the business was closed

when this market dried up at the end of the war.

CR. 348-350, 364, 372.) Records of purchases and

sales were kept until November 7, 1945, After

that, only purchases were recorded, the last entries

being on August 19, 1946, CR. 88-93, 395-396.) No

income tax returns were ever filed by the partner-

ship. (R. 115.) Both Jacob Strauch and Alex

Strauch also had individual jewelry businesses

of their own (R, 221, 223, 227).

An examination of the books of the partnership

revealed that the distributive shares of each part-

$

a

ee eg 25 AIR a |

6

ner amounted to approximately $19,859 in 1944

and $14,000 in 1945. (R. 204-217.) When con-

fronted with these figures from their own books,

all three partners admitted that they had not re-

ported any of this income, although Alex Strauch

and Sher later stated that they had reported some

of it. (R. 217.) Using the figures shown by the

books the Government demonstrated that the fol-

lowing amounts of net taxable income had been

omitted from the returns of Alex Strauch and

Sher.’ (R. 217-227) :

Alex Strauch Sher

1944 $20,359.80 $17,033.10

1945 14,008.92 11,390.30

In addition to the unreported income appearing

upon the face of the books, there was evidence of

large distributions to the partners which either

did not appear on the books or had been entered as

expenditures. Thus, on January 9, 1945, three

checks to cash were drawn in odd amounts but to-

taling exactly $30,000, They were not entered in

the book recording expenditures, although ae-

cording to the checks and the stubs they repre-

sented payments for merchandise which had been

purchased by the partnership.* The checks were

eished by the partners. (R. 256-259, 400-404.)

' As will be observed, by comparison with the figures in the

indictment (supra, p. 4), the Government proved almost

exactly the amounts alleged.

* Sher, who kept the books, testified that all purchases were

recorded in the books. (R. 351, 417.)

7

There were other similar instances. (R. 389-400.)

There was further evidence as to petitioner Jacob

Strauch who had been indicted for 1946, as well as

1944 and 1945. Jacob Strauch gave the agents

very few of the records of his individual business,

but he told them that all the deposits in his bank

accounts represented receipts from his business.

(R, 227-228, 266-267, 269-270, 272, 296-297, 300,

303-304.) The agents, therefore, subjected the

hank deposits to a careful analysis, the results of

which are not challenged in the present petition,

and determined that Jacob Strauch had failed to

report the following amounts of taxable net in-

comes CR, 229-232, 236-255; see particularly R.

251-255) :

1944 $22,533.82

1945 49,018.91

1946 18,078.09

In addition, the Government made an effort to

show increases in Jacob Strauch’s net worth be-

tween 1940 and 1946, (CR. 103-105, 161-163, 495-

496.) Eventually, the Government had to abandon

this method of proof when it could not properly

account for the years 1940 and 1941. CR. 196-201,

925.) It was made clear to the jury by the dis-

cussion of the court and counsel and by cross-ex-

amination of a Government witness that the net

worth computation would be unsatisfactory if the

* Again, the figures coincide very closely with those alleged

in the indictment, (Supra, p. 4.)

ie Rk ee a Ae a) a

ee te Peete AN AA PN OI, TEIN NPN MAORI SAN KA mH

Rap PRESET y

rN RE OE DONTE ad

Government could not account for all the years in-

volved, and counsel for the defense fully under-

stood that this part of the Government's case had

been abandoned. (R. 105, 111-115, 162-163,

199-200, 325, 549, 556-557.) Although a motion to

strike the net worth evidence was made and de-

nied after the direct examination of the last prose-

cution witness (R. 259-260), the motion was not

renewed when the Governmen* finally rested (R,

323-329) and there was no request by the defense

that the court, in its charge, instruct the jury to

disregard such evidence (IR. 477-478, 488).

ARGUMENT

As must be obvious from the above Statement.

the Government's main proof of unreported part-

nership income, and in fact its main proof in the

case, was derived directly from the very figures

recorded in the partnership books.’ In addition

evidence was presented from which it could he

concluded that a $30,000 distribution of profits in

1945 had been entered in the hooks as expendi-

tures.” (Supra, p.6.) Petitioner Jacob Strauch’s

income from his own individual business was

proved by an analysis of his hank deposits. (Sw-

pra,p.7.) An effort to corroborate this by a com-

putation of the increases in Jacob Strauch’s net

worth was not fully successful and was not pushed.

* See R. 178-179, 199, 234, 259, 325, 556.

* Other instances of this nature, including the one of which

petitioners complain (Pet. 5-6, 12), did not come into evidence

until the cross-examination of petitioner Sher (R. 384-400).

PET OTAET —

(Supra, pp. 7-8.) Petitioners do not challenge the

main proof against the partnership or the main

proof against Jacob Strauch, but the petition

gives the impression (Pet. 5-9, 11, 15) that the

Government's subordinate methods of proof were

all it had.

1. In December 1949, over three vears after the

revenue agents had begun their investigation,” pe-

titioners’ attorneys came to Washington in an at-

tempt to effect a settlement of their civil tax lia-

bilities. CR. 387-389.) They submitted a *Re-

statement of Partnership Income” for the period

from 1945 to 1946, inclusive. CR. 496-498.) The

document was signed by petitioners and contained

the following language (R. 497):

It is the opinion and belief of the under-

signed that a corrected statement of income of

the said partnership is properly reflected in the

exhibit hereto attached, * * * and that taxable

income of the undersigned should he appropri-

ately computed as a result of the said restate-

ment; * * *. [Emphas supplied.]

One of the items was a distribution of profits on

September 3, 1943, in the amount of $3,000, (R.

498, )

During eross-examination of petitioner Sher, the

witness’ attention was directed to an entry in the

hooks showing a payment of $3,000 to the part-

* The investigation was becun in September, 1946 (R. 99,

330, 331).

—

10

ners on September 3, 1943, as traveling expenses,

Sher testified that the entry was correct, and he

was then confronted with the statement submitted

in Washington. (R. 384-393.) The defense duly

objected, and petitioners now contend (Pet. 11-15)

that the statement was an offer in compromise and

that it was erroneously admitted in evidence.

The simple answer is that the statement was

more than an offer in compromise. It was, as the

prosecution argued to the trial judge, a confes-

sion or a statement of fact to support an offer in

compromise, (R. 387, 393, 571-573.) It was a

statement of what petitioners contended were the

true facts, and it was submitted as an offer to pay

what petitioners admitted was actually due.’

It is elementary that any rule excluding offers

in compromise refers to the actual offer, and not

to the admission in evidence of particular facts or

circumstances. IV Wigmore, Evidence (3d ed.,,

1940, See. 1061(¢); see also Section 1048(1)(b).

The case upon which petitioners rely,” and which

likewise was decided by the court below, is not rele-

vant, for there the Government relied on the aec-

tual settlement of a civil case, not the admission

of a fact as an incident to settlement negotiations.

Furthermore, petitioners were well aware that a

special agent had been working on the case for

7 The statement of counsel (R. 387-388) upon which peti-

tioners rely (Pet. 14) was not evidence. Regardless of the

manner in which the statement was prepared, it was signed by

petitioners as properly reflecting their true income. (R. 497.)

* Kellund vy. United States, 159 F. 2d 81.

Pa gee GRE, See Oe POOR COPY

Sar nee -

11

i about two and a half years (R. 201-204), and their

effort to make a payment at this late stage pro-

vided some evidence of an attempt to fend off

criminal proceedings. Cf. United States v. Stoehr,

196 F. 2d 276, 282-283 (C. A. 3d), certiorari de-

nied, 344 U. S. 826.

2. It is urged (Pet. 15-17) that the evidence as

oot

: to the increase in Jacob Strauch’s net worth should

have been stricken. The trial court, holding that

i this evidence was a relevant and corroborative cir-

cumstance, refused to grant a motion to strike made

at the end of the direct testimony of Agent Norris.

(R. 259-260.) The motion was not thereafter re-

newed and no special instruction on the subject was

requested, There is no merit in the present argu-

ment. Petitioners suffered no prejudice even if

the ruling were erroneous.

Alex Strauch and Sher were obviously not af-

fected by evidence of an increase in Jacob Strauch’s

net worth, and the record affirmatively demon-

strates that he himself was not prejudiced thereby.

The net worth evidence would at most have

supported the Government’s analysis of Jacob

Strauch’s bank deposits. It revealed an increase

of approximately $84,000 in his net assets between

May 1940 and November 1946 (R. 103-105, 163,

495), whereas the bank deposits analysis, the va-

lidity of which is unchallenged here, disclosed an

even greater amount of unreported income for the

1944-1946 period alone (supra, p. 7). Moreover,

it must have been clear to the jury, from the dis-

cussions between the court and counsel and the

SAPS EOS EOI PL LITE APT A I 8 IEE

12

cross-examination of Agent Simpson (supra, pp.

7-8), and from the failure of the Government to re-

new its abortive efforts to account for the years 1940

and 1941 (R. 197-201), that the net worth evidence

was an insufficient basis, in itself, upon which to

return a verdict of guilty. No specific charge was

requested, but the jury was instructed at length

on the general subject of circumstantial evidence,

(R. 480-482.) Finally, it would appear that the

prosecutor did not even mention the matter in argu-

ment to the jury, for the trial judge twice made

the statement during proceedings on the new trial

motion, without challenge by the defense, that the

Ciovernment had abandoned the net worth theory.

(R. 549, 557.)

Furthermore, the trial court’s ruling was cor-

rect. As long as the Government's other evidence

established a prima facie case, the jury could weigh

the corroborative effect of the net worth increases,

even though that alone would be an insufficient

basis for conviction. This same issue is pending

before this Court in No, 209, this Term, Beaty v.

United States, on petition for a writ of certiorari,

where the United States also opposed the granting

of the writ. If petitioners had requested a limit-

ing instruction it is quite clear that it would have

been granted.” (R. 557.)

3. During the charge to the jury (R. 478-487)

® The cases upon which petitioners rely (Pet. 16-17) are not

in point since in all of them the Government was forced to rely

almost entirely upon the net worth method to prove unreported

hicone,

a ee

'

|

the trial judge, in explaining the offense alleged in

the indictment, read the last portion of Section

145(b) (supra, pp. 2-3) including the penalty im-

posed. He told the jury that their duties ceased

upon return of the verdict; that the ease would

end if they found petitioners not guilty since the

Government could not appeal; and that it was the

duty of the court to impose sentence if they re-

turned a guilty verdict. Ile then explained the

maximum and minimum sentences which he might

in his discretion impose, but without in any way

committing himself. (R. 485-486.) There was no

objection (R. 488), and the matter was not even

noticed until one of the cireuit judges raised it

during oral argument before the Court of Appeals

(Pet. 27). Petitioners, adopting the argument of

the dissenting judge below, now contend (Pet. 18-

20) that this part of the charge constituted re-

versible error.

We submit that the mere statement of the allow-

able maximum and minimum penalties, buried in

the context of the court’s general charge and with-

out any intimation of prospective severity or leni-

ence, can have had no possible effect upon the jury’s

verdict. The cases upon which petitioners rely

are readily distinguishable. In Demetree v. United

States, 207 F. 2d 892, 895 (C. A. 5th), the jury,

after informing the trial judge that they were

deadlocked, received assurance that the punish-

ment would be lenient. And in Lovely vy. United

States, 169 F, 2d 386, 391 (C, A. 4th), a rape case

in which the jury were at liberty to impose capital

ee

14

punishment, an instruction was given that the de-

fendant would be eligible to parole in fifteen years

if sentenced to life imprisonment.

The trial court’s comment on the non-appeal-

ability of a not guilty verdict is not clearly preju-

dicial to the petitioner. But even if it be subjected

to criticism, still it is not so manifestly erroneous

as to call for a reversal. This is clearly a case

which falls within the prohibition of Rule 30,

(Supra, pp. 3-4.) As the Court of Appeals for the

Seventh Circuit said recently in United States y.

Furlong, 194 F, 2d 1, 3, certiorari denied, 343 U.S.

950:

[Rule 30] is intended to prevent a litigant

from taking advantage, after verdict, of the

giving of an erroneous instruction to which

he failed to call attention in time to afford the

court an opportunity to correct it.

The ‘*plain error’’ rule may not be invoked under

such circumstances as those presented by the pres-

ent record. See Ryan vy. United States, 99 F. 2d

864, 865 (C. A. 8th), certiorari denied, 306 U, S.

635; Goldstein vy. United States, 73 F. 2d 804, 806-

807 (C. A. 9th).

ats

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CONCLUSION

For the foregoing reasons it is respectfully sub-

mitted that the petition for a writ of certiorari

should be denied.

Simon FE. SosBe.orr,

Solicitor General.

H. Brian Ho.Liuanp,

Assistant Attorney General.

Exiis N. SLACK,

Davip L. Luce,

JoserpH M. Howarp,

Davi R. Urpan,

Special Assistants to the

Attorney General.

Aveust, 1954.

a

ERR TEA TILL LE LS IE MEAG LI I IA STOTT LOPE LS 2