Petition for Writ of Certiorari — Norwitt v. United States
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4 WAT LU 1952
CHARLES ELMORE CROPLEY
CU atx
In the Supreme Court a
OF THE
United States
WY
Ocroser Term, 1951
No. Al 5 7
i‘
Pavut C. Norwrrt,
Petitioner,
vs. ,
Unstrep States oF AMERICA,
Respondent.
PETITION FOR WRIT OF CERTIORARI
to the United States Court of Appeals for
the Ninth Circuit
. AND
BRIEF IN SUPPORT THEREOF
Leo R. FrrepMan,
935 Russ Building, San Francisco 4, California,
Attorney for Petitioner.
Pusnau-Waiee Printing Co., 8a Francisco, CaLivoRnisa
Subject Index
Page
Petition for writ of certiorari ..................cc00000-.. 1
The indictment, sentence, ete. .................0000005.. 2
Statement of the case presenting the questions involved... ... 3
(a) Preliminary and explanatory facts ................. 3
(b) Evidence relating to the preparation and filing of
the corporate return (Count 1) .................... 6
(ce) Evidence relating to the existence and condition of
books and records of Norwitt and the corporation.... 11
(d) Evidence relating to the preparation and filing of the
amended returns for 1942 and 1943 (Counts 2 and 3) 15
(e) Evidence relating to the Government’s computation of
petitioner’s taxable income ........................ 26
Jurisdictional statement ..................0.cccececcceen. 31
1. Jurisdiction of the court .......................... 31
2. The decision and judgment of the Court of Appeals 31
3. Basis upon which it is contended the Supreme Court
has jurisdiction and cases in support thereof........ 31
wae SR PD 8 ka seca ceke 34
Points relied upon for the issuance of a writ of certiorari... 35
Brief in support of petition for writ of certiorari.......... 41
The opinions and judgments of the courts below.......... 41
PD suk vdenkccnnch baad cudicvesckbaabiecds chee 42
seznee rte soap ob ke. TOOT Dae RABE oo 42
Specification of errors relied upon ........................ 42
GE | binancbiveccdkecesrescksdeoushcnsciea 44
I. The Court of Appeals erred in holding that where a
person files a fraudulent income tax return for a
particular year and thereafter files a false amended
return for the same year, the filing of such amended
return constitutes a new and separate violation of 18
Bd AEs at an 44
II.
Il.
IV.
Sussecr Inpex
Page
The Court of Appeals erred in holding that petitioner
could not ‘ely on the correctness of the amended re-
turns as ;repared by his accountant, and that the
evidence etablished wilfulness and intent to defraud
The opinid of the Court of Appeals is in error in
holding tht falsity of the corporate return and the
two amenéd returns was established by evidence that
amounted ‘© no more than mere speculation, assump-
tion, surmS¢ and conjecture .......................
The Cour of Appeals erred in limiting its scope of
review wiTe insufficiency of the evidence is involved
and in holing that there was proof that the corporate
return ha been filed by petitioner or under his au-
thority ee ee ee eee ft? ee eee en
The Cour °f Appeals is in error in holding that it is
still the #le of law that a judgment will not be re-
versed were a defendant is charged with two or
more offéSes and the evidence supports the convic-
tion on ¢¥ One count and the sentence imposed does
not excee that which might lawfully be imposed on
52
59
63
Table of Authorities Cited
Cases Pages
Abrams v. United States, 250 U.S. 616, 63 L.Ed. ee 64
Adams v. Woods, 2 Cranch 336, 2 L.Ed. 297.......... 48
Boles v. United States (4th Cir.), 73 Fed. iB, Ser 32
Cave v. United States (8th Cir.), 159 Fed. (2d) 464...... 32, 46
Dept. of Treasury v. Ingram-Richardson Mfg. Co., 313 U.S.
Fr CO A ene eee 32, 33
Federal! Trade Comm. v. Raladam Co., 316 US. 149, 96
gg EE OE EI Re: 31
Fiswick v. United States, 329 U.S. 211.......... 34, 35, 38, 44, 70
Garrison v. United States (5th_Cir.), 163 Fed. (2d) 874... 60
Gompers v. United States, 233 U.S. 604, 58 L.Ed. 1115.... 50
Guzik v. United States (7th Cir.), 54 Fed. (2d) 618...... 32
Hargrove v. United States (5th Cir.), 67 Fed. (2d) 820.... 54
In re Rothrock, 16 Cal. (2d) 449, 106 Pac. (2d) 907...... 71
International Ry. Co. vy. Davidson, 257 U.S. 506, 66 L.Ed.
PO SAE 0 CUM Watts scaeg OSU a sag ar Cico 31
Leach v. Board of Dental Examiners, 87 Cal. App. 207, 262
sgh ge ee TOTO a eta see 68
Levy v. United States, 271 Fed. 942.000.0000. 51
Lurding v. United States (6th Cir.), 179 Fed. (2d) 419... .33, 54
Myres v. United States (8th Cir.), 174 F. (2d) 329........ 46
Pendergast v. United States, 317 U.S. 412, 87 L.Ed. 369.. 50
Pennsylvania R. Co. v. Chamberlain, 288 U.S. 333, 77 L.Ed.
Reese v. Smith, 9 Cal. (2d) 324, 70 Pac. (2d) 983........ 67
Towbin v. United States, 93 Fed. (2d) 861................ 60
TaBLE OF AuTHoriTIEs CITED
Pages
United States v. Cole (DC-Cal.), 90 Fed. Supp. 147........ 46, 47
United States v. Irvine, 98 U.S. 450, 25 L.Ed. 193......... 49
United States v. Johnson, 123 Fed. (2d) 111 and United
States v. Johnson, 319 U.S. 508 .................... 32, 45, 59
United States v. Smith, 13 Fed. (2d) 923................. 51
United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 84
ME SE dec cette nien sch bsseeeuoseencuncsteoo 64
Worcester County Trust Co. v. Riley, 302 U.S. 292, 82
Es SE nix 00 a cbdcveubscicaduakineedouecccsccncen, 31
Yoffee v. United States (1st Cir.), 153 Fed. (2d) 570.... 62
OP We EE avn sedsacc patna tacarenncaakinesas 43, 44, 46
26 U.S.C. Sec. 145b; Internal Revenue Code, Sec. 145b....
GEbbbSUORNESTARS baw kebah eno erin. 32, 33, 34, 35, 36, 46, 48, 51
CCHS HSHSSHEHSEHSHHSHESHEEHOSHO SHEESH OE EEHHO SES ECEEEEE®S
g
In the Supreme Court
United States
Ocroser Term, 1951
No.
See
Pauw C. Noewrrr, :
Petitioner,
Vs.
Unrrep States or AMERICA,
Respondent. }
PETITION FOR WRIT OF CERTIORARI
to the United States Court of Appeals for
the Ninth Circuit.
To the Honorable Fred M. Vinson, Chief Justice of the
United States, and to the Honorable Associate Jus-
tices of the Supreme Court of the United States:
The petition of Paul C. Norwitt for a writ of certiorari
to the United States Court of Appeals for the Ninth Cir-
cuit respectfully shows:
2 y
THE INDICTMENT, SENTENCE, ETC.
Petitioner was indicted (R. 3-6) for three violations of
attempting to evade income taxes. (26 U.S.C. 145b.)
Count 1, charged that on June 23, 1945, petitioner who
was the President of the General Refrigerator Corpora-
tion, attempted to defeat and evade a large part of the
tax due and owing by said corporation for the fiscal year
ending July 31, 1941, by filing and causing to be filed
with the Collector of Internal Revenue, a false and
fraudulent return alleging that the net income of the cor-
poration for said year was the sum of $317.05 and the
tax due thereon was $47.08, whereas the net income for
said year was the sum of $9905.68 upon which there was
a tax due of $2990.24.
Count 2, charged that on June 23, 1945, petitioner, who
during the year 1942 was married, did attempt to defeat
and evade a large part of the income tax due by him and
his wife for the calendar year 1942 by filing with the
Collector of Internal Revenue a false and fraudulent in-
come tax return, wherein it was stated that their net
income for said year was $11,540.74 and the tax due
thereon was $2731.48, whereas their joint income for said
year was $30,808.76 and the tax due thereon was $12,-
744.37.
Count 3, charged that on June 23, 1945, petitioner, who
during 1943 was a married man, attempted to defeat and
evade a large part of the income and victory tax due and
owing by him and his wife for the calendar year 1943 by
filing with the Collector of Internal Revenue a false and
fraudulent joint return wherein it was stated that their
net income for said year was $23,081.04 and the tax due
thereon was $11,760.88, whereas their joint income was
$46,805.43 and the tax due thereon was $24,010.50.
After trial by jury petitioner was convicted on all three
counts and sentenced to a year’s imprisonment on each
count, sentences to run concurrently, and to pay a fine of
$10,000 and ‘costs.
At the conclusion of all the evidence petitioner moved
the Court for judgments of acquittal (R. 8) which mo-
tions were denied. A motion for a new trial was made
and denied. (R. 10-11.)
STATEMENT OF THE CASE PRESENTING
THE QUESTIONS INVOLVED.
(8) Preliminary and explanatory facts.
Paul C. Norwitt was a married man. From 1937 to 1941
he was president of the General Refrigerator Corporation,
a corporation engaged in the purchase and sale of used
refrigerators; after July 31, 1941, he personally acquired
the assets and all capital stock of the corporation and
conducted its business as a sole proprietorship. Until
December, 1944, Mareo Norwitt was Vice President and
Barney Norwitt, Secretary-Treasurer of the Corporation.
On December 30, 1944, Paul, Marco and Barney Norwitt
resigned as officers of the Corporation (R. 482), and some-
time prior to December 1944, all the stock of said corpo-
‘Although counts 2 and 3 charged the filing of income tax re-
turns in the year 1945, these returns in reality were amended
returns. Original returns for the years 1942 and 1943 had been
filed within the time required by law.
4
ration had been transferred to The Mission Company, a
corporation. (R. 482.) On December 30, 1944, V. D. Dardi,
J. C. Ernst and Frank Morrill were ele:ted officers and
directors of the General Refrigerator Corporation in the
place of the three Norwitts who had resigned (R. 483),
and the attorney for the Refrigerator Corporation was
directed to turn over all books and records to the attorney
for The Mission Company. (R. 483.)
On June 23, 1945, there was allegedly filed, as a delin-
quent return, an income tax return for the General Re-
frigerator Corporation for the fiscal year ending July 31,
1941. (R. 24-25.) The return had been prepared in 1941.
It was signed by Paul C. Norwitt as President and by
Marco Norwitt as Vice President. This return was actu-
ally prepared in 1941 (R. 452) though neither acknow!l-
edged nor filed until 1945 and at a time when neither Paul
nor Marco Norwitt were officers, directors or stockholders
in the corporation.
On April 15, 1943, Paul C. and Freda Norwitt filed
their joint income tax return for the year 1942 (Govern-
ment’s Exhibit 2) and on June 23, 1945, they filed their
amended return for 1942 (Government’s Exhibit 2), to-
gether with delinquent returns for 1939, 1940 and 1941.
On March 15, 1944, Paul and Freda Norwitt filed their
original joint income tax return for the vear 1943 (Gov-
ernment’s Exhibit 3) and on June 23, 1945, filed their
amended return for the vear 1943. (Government’s Ex-
hibit 3.) Counts 2 and 3 of the Indictment are based on
the amended returns filed in 1945 for the years 1942 and
1943.
- al
In 1943, a fire occurred in appellant’s place of business,
partially destroying some and making illegible other of
appellant’s books and records. (R. 202.)
Appellant conceded that the two original, individual in-
come tax returns filed in 1943 and 1944 by Paul and Freda
Norwitt were inaccurate and understated the taxable in-
come; but appellant was not on trial for having filed these
returns.
Early in 1945, appellant, being desirous of correcting
the inaccurate individual returns filed in 1943 and 1944
and to file returns for 1939, 1940 and 1941, employed
Nathan Spivock, a certified public accountant, to figure
out and make amended returns for the vears °42 and °43
and to file delinquent returns for the preceding 3 vears.
Spivock, being unable to make a full and correct return
based on the partially destroyed records of appellant.
after conferences with the Internal Revenue agents, de-
cided to make such returns on a net worth basis. He took
all of appellant’s assets as of December 31, 1944, as ap-
pellant’s net worth on the latter date: he then started
appellant out as of January 1, 1939, with no assets or net
worth at all and then, after conferences with the Internal
Revenue agents, allocated the net worth as of December.
1944, over the preceding vears, adding thereto for each
year a sum for living expenses for such vear. A draft
for each vear was prepared and submitted to the Internal
Revenue agents and the Internal Revenue agents had re-
turns corresponding thereto typed in the offices of the
Internal Revenue Department and sent down to appellant
for his and his wife’s signatures.
ee OEP ERR IR SII LOL EE IE I IE IS TPO et ETE ET NS
The theory of the Government (R. 20-22) was to the
effect that appellant had falsely represented that all his
records had been destroyed and had concealed a great
mass of sales tags showing sales of refrigerators, etc.,
which were not included in his reported income; that he
had concealed these sales not only from the Government
but from his own accountant. The Government also relied
on the computations of Agent Bobadilla to establish that
the reported income for the years in question was too low.
(b) Evidence relating to the preparation and filing of the cor-
porate return. (Count 1.)
There was produced in evidence as Government’s Ex-
hibit 1 (R. 24-25) an income tax return for the General
Refrigerator Corporation for the fiscal year ending July
31, 1941. The return bears the signatures of Paul C. Nor-
witt as President and Marco Norwitt as Vice-President
of the corporation. This return was prepared by a public
accountant named William McIntosh in the year 1941 (R.
357-8), who testified that after preparing the return he
executed it as the person who prepared the same and
turned it over to petitioner. (R. 360.) MeIntosh further
testified that he had a faint recollection of petitioner
signing the return when he turned it over to him in 1941
and recalled making a statement to petitioner that he
thought petitioner should sign the same before a notary.
(R. 452.) The corporate return bears a filing mark as
having been filed with the Internal Revenue Department
on June 23, 1945, more than four years after it was pre-
pared by the accountant and the signatures of Paul and
Marco Norwitt as President and Vice-President bear the
Aap 1 REE ARE OE a? a
7
acknowledgment as of June 25, 1945 and as having been
sworn to before Richard E. Korn, a Deputy Collector of
Internal Revenue. Korn, when called as a witness by
the Government, testified that although his signature ap-
peared on the return, he didn’t remember putting his
signature there; didn’t remember the name of the corpo-
ration and didn’t know if two names appeared thereon
when he ‘‘juratted’’ it and didn’t recall when or where
it was signed, or who appeared before him. (R. 378-9.)
In February of 1945, Adolph Washauer, Division Chief,
General Investigation Section, Bureau of Internal Reve-
nue, wrote a letter to one Arthur Shapro (who was attor-
ney for petitioner and the General Refrigerator Corpora-
tion in matters other than taxes), requesting that Mr.
Shapro show to him certain books and records of the
corporation. (R. 430.) As a result of this letter, Mr.
Washauer, accompanied by his assistant, Ralph Mohr,
called at the office of Mr. Shapro and the various parties
to this meeting testified as follows:
Adolph Washauer testified that he called at Mr. Sha-
pro’s office early in May of 1945;? that Shapro brought
forward a file containing the minutes and certain papers
relating to the corporation and among those papers was
the corporate return for the year ending July 31, 1941
(R. 292); that he called Shapro’s attention to the fact
that this return was subscribed and sworn to on October
1, 1941 by Charles E. White, one of his Deputies (R. 294) ;
that Shapro said: ‘‘ Well, we forgot to file’’ and that was
2This meeting actually took place in February of 1945 as is evi-
denced by the letter written by Washauer to Shapro (R. 430), and
by Washauer'’s own records. (R. 317-318.)
) Ty
all that was said and Shapro turned this return over to
him and he took it along with some minutes and by-laws
of the corporation (R. 294-5); that when Shapro produced
the papers, including the return, that he, Washauer, said
it was delinquent as it had never been filed; that Mr.
Shapro then said nothing; that Shapro gave him the re-
turn; that there was no discussion why it had not been
filed; that Shapro gave him the return as part of the
records he had (R. 335); that the return was given to
him for filing by Mr. Shapro but he didn’t file it until
June 23rd (R. 305) because it was not properly sworn to;
that the proper officers of the corporation didn’t sign the
return in 1941; that it was signed by the proper officers
on June 25, 1945. (R. 305-6.)
Ralph Mohr, called by the United States, testified that
he had no recollection of seeing the corporate return prior
to the month of June, 1945 (R. 491); that he was present
at the meeting held in Shapro’s office in the early part
of February, 1945 where Shapro presented them with cer-
tain records and permitted the use of a room where they
could examine those records; that he was quite sure there
was no income tax return among the records he examined.
(R. 492.)
Arthur P. Shapro, called as the only witness on behalf
of petitioner, testified that the corporate return for the
Refrigerator Corporation for the year ending July, 1941
was never in his possession from January to June of
1945, nor at any other time; that he never delivered that
document to Mr. Washauer or to any other person con-
nected with the Government and that he didn’t tell Mr.
any of his assistants or deputies or anyone
y should file that document; that the docu-
Washauer orver in his possession (R. 423-4); that in the
else that therbruary, 1945 he accompanied petitioner to
ment was nev the Collector and went into Mr. Boland’s
month of FelField Deputy with the Collector of Internal
the office of \at Mr. Boland, Mr. Mohr and Mr. Wash-
office (Chief Fesent; that Boland asked him if he knew
Revenue); tha@ration had not filed some tax returns; that
auer were préeoland he had nothing to do with the corpo-
why the corpoie years he mentioned; that Mr. Boland
he told Mr. Bem income tax return and Boland said it was
ration for thé return for the corporation which they had
showed him ansome of the records for the corporation and
an income tax t been filed with the Collector’s Office; that
found among ste knew nothing about it; that he had never
which had not tax return or tax matters for either Mr.
Shapro said hehe corporation (R. 426); that Mr. Boland
handled any tpapers on his desk and he opened one of the
Norwitt or théook out the income tax return form which
had a lot of p@ing on it; that he, Shapro, never examined
folders and tovause he had never handled any income tax
had some typireturns for Norwitt or the corporation (R.
the form becar received a letter dated February 12, 1945
matters or refVashauer requesting the minutes, by-laws,
428): that he k certificate book and stock ledger, ete. of
from Mr. Wa.on and the documents and records evidencing
charter, stock bulk assets from the corporation (R. 431) ;
the corporatiomg the letter Mr. Washauer and Mr. Mohr
the sale of bunim; that he made available to them the books
that following of the corporation; that they took them into
ealled upon him
and records of
10
the outer office; that Washauer came back and asked if
they could have certain of the records to be photostated
and copied, which they did (R. 432); that there was no
income tax returns executed or unexecuted turned over
to Washauer and Mohr or in Shapro’s possession.
John J. Boland, called by the United States, testified
that he recalled a meeting in his office in February, 1945
at which Norwitt, Shapro, Mohr and Washauer were pres-
ent (R. 484-85); that at that meeting he asked Mr. Sha-
pro what records of the General Refrigerator Corporation
he could make available for examination and Shapro said
he would make some records available (R. 485); that he
didn’t recall any other conversation; that he didn’t recall
any conversation about any income tax return (R. 486);
that he didn’t recall seeing the delinquent tax return for
the General Refrigerator Corporation or any similar re-
turn at that meeting (R. 487); that he didn’t have much
recollection about the meeting and didn’t recall much else
other than discussing the availability of record. (R. 487.)
At the conclusion of all the evidence, petitioner moved
for a judgment of acquittal as to count one on the fol-
lowing grounds: (a) That there was no evidence to estab-
lish that the return was filed by or under the authority
of petitioner; (b) That under a pertinent decision of
the Court of Appeals the return constituted no return at
all, in that it was not signed by the persons required by
law to sign it; (ce) That at the timé the return was al-
legedly acknowledged by petitioner and his brother, they
11
were no longer officers of or connected with the corpora-
tion; and (d) That there was no proof that the return
allegedly filed was false or untrue.
The trial Court denied the motion. The same points
were raised on appeal and the Court of Appeals errone-
ously decided each of said points against petitioner.
(c) Evidence relating to the existence and condition of books and
records of Norwitt and the corporation.
Adolph Washauer, Division Chief, I.R.D., testified for
the Government as follows: In February, 1945, Mr. Mohr
and I went to the office of the General Refrigerator Cor-
poration to look for Mr. Norwitt, but we were advised
he had sold his place and that Dardi & Co. had taken over
the General Refrigerator Corporation (R. 287-8); the ac-
countant there said, ‘‘ Well, here are some of their books.’’
There were about half a dozen books on a table. I did
not take the books with me because Mr. Norwitt was not
present. (R. 288.) We went to see Mr. Norwitt at his
place of business, the National Liquor Store, in April,
1945. We asked him if he were able to obtain his books
of the General Refrigerator Corporation and his individ-
ual business records. He stated that all the records were
burned in two fires. (R. 289.) A few days later Mr. Spivock
appeared in our office and said that Mr. Norwitt told him
all his records were burned and that he (Spivock) would
have to work it out on a basis of net worth. (R. 292.) In
my various conversations with Norwitt and Spivock, I
was told that all the books and records had been de-
stroyed. I didn’t discuss at any time with Norwitt or
Spivock that I knew there were books of Mr. Norwitt’s
12
out at the old
Street. (R. 313.’ General Refrigerator place on Mission
Nathan Spivc
ment as follows°”’ the C.P.A., testified for the Govern-
“Q. I x
to assist yo° Did you ask Mr. Norwitt for records
and 19437 | in preparing amended returns for 1942
A. Yes, °
ever is need@ @8ked for necessary papers and what-
Q. And éd to make a proper return.
for that pur!d he provide you with adequate records
A. No, ose? 3
these were here were some records available and
Q. Whatome not available.
A. Well, records were available?
ten t hk at this date I wouldn’t know and at that
inadequate ’t make a list of it. I knew they were
and if ther’? prepare 100 per cent proper returns
it is—the r 8 82Y information missing whatsoever
ih on rdsu wouldn’t be correct, using the par-
Q. Doy
available?
S. Be - t don’t, specifically.
ae you inspect the records which were avail-
A. ti I looked at the records.
, Q. How much time would you say you spent look-
ing at then
: A. It is hard to say. I spent sufficient time—put
it this way. | spent sufficient time to satisfy myself
that @ PrO}er return could not be prepared from the
records Vs ilable.
yu remember any of the records that were
Q. Now gid Mr. Norwitt express to you why there
were not Cymplete records available?
13
A. Yes, he stated there was a fire in 1943. In fact,
I had seen some of the records which were spoiled
by the water damage. The ink had run on some of
the sheets and you couldn’t read the writing any
more. Must have been washable ink. Other records
were singed and partially burned.”’ (R. 197-8.)
Q. There was a discussion of the basis on which
the income should be computed?
A. Yes, I discussed the matter with the deputy
collectors and told them of the condition of the
records and that it was almost physically impossible
to make a proper return, also the element of time
and money, cost of doing. * * *”’ (R. 202.)8
Thomas W. Cleary, Special Agent I.R.D., testified for
the Government that in November, 1945, he went to the
General Refrigerator Corporation’s offices; that Norwitt
was no longer there, having been out for a year or more;
that he saw quite a pile of records, cancelled checks and
sales invoices there of the General Refrigerator Corpora-
tion (R. 139-140) ; that a few days later, accompanied by
3 men from the deputy collector’s office he went back and
took the records, etc., away. (R. 141.)
8Mr. Spivock testified that the collectors were in quite a rush to
get the returns completed ; that they said they were anxious to have
it rapidly ‘‘In fact, wanted it so rapidly they typed it themselves. ’’
(R. 231.)
Mr. Washauer testified that he told Spivock that their (the Gov-
ernment’s) fiscal year ended June 30, 1945: that they wished to
put those assessments on before their fiscal year ended ; that they
would have to cut their week to about June 25 in order that their
report would arrive in Washington about August 1; that as
Spivock said his office was too busy to type the returns before the
25th, that the collector’s office would type the returns as an ae-
commodation to both sides. (R. 307-8.)
14
I also found some additional sales invoices off the
garage at 32 Crescent Avenue. (R. 143.) I learned that
the State Board of Equalization had been making an
investigation and procured from that Board journals and
sales ledger sheets for the last 3 months of 1943 and
records for 1944. (R. 146.) In October of 1947, Mr. Nor-
witt came to see me in response to a letter I sent him
and I asked him for the rest of his books. He said he
would bring them in and he did so the next week. (R.
147.) The records I then had, there were some missing
parts. One I was concerned particularly with, the sales
register for 1942 was missing for the whole year. (R.
147.) There were ledger sheets for ’41, ’42 and °43, except
a part of 1942 and 1943 was reconstructed from the
journal. (R. 148.)
**Q. Now, you also made some reference to some
records being reconstructed. What did you mean by
that?
A. There was a part of the sales ledger for either
42 or °43 missing which I put in the amounts I
thought should be there, tied it in with the (original)
returns and figures found from other sources.
Q. So you reconstructed that part?
A. Yes, I did.’’ (R. 179.)
a os =
A. I had a cash receipts register when it recorded
cash sales.
Q. I see. Was any part of that missing?
A. I didn’t inquire too closely. I really can’t say.
It was my impression that parts of all the records
were missing, certain parts, but I don’t know.” (R.
178-9.)
15
Lastly, Mr. Clearly sums up his whole testimony and the
case as follows: ‘‘I can’t be sure of anything in this
particular case. I am not sure of anything, bat——”’ (R.
185.)
(d) Evidence relating to the preparation and filing of the
amended returns for 1942 and 1943. (Counts Two and Three.)
In February of 1945 the Internal Revenue Department
requested that petitioner furnish a statement as to his
net worth condition at the end of 1944. (R. 290, 427.)
This was prepared by Mr. Spivock, the C.P.A., and filed
in May of 1945. This statement showed Norwitt’s net
worth as of December 31, 1944 to be $57,360.40 including
assets in the sum of $112.50 (R. 212) and a savings
account in the San Francisco Bank of $1466.99. (R. 213.)
The evidence established that this net worth statement
was only incorrect in one particular, that the U. S. Bonds
should have been $225 instead of $112.50. (R. 213-4, 241.)
Nathan Spivock, called as a witness on behalf of the
Government, testified:
I did work for Norwitt in 1945 to prepare his 1944
income tax returns. Mr. Stephenson was in my employ
and he handled most of the details.
The original return of Paul C. Norwitt for the year
1944 now shown me is the return to which I have refer-
ence. This was filed May 15, 1945. We needed some addi-
tional information. We ascertained that there was some
missing information, particularly of rents, and we needed
depreciation figures, so we asked for the prior years’
returns. I believe they were supplied. (R. 193.)
16
When I inspected those returns, I discovered that no
rents had been reported in the returns. I reported that
to Mr. Norwitt. He didn’t give me any instructions. I
made the suggestions that the returns be amended and
corrected. (R. 194.)
In order to prepare the amended returns for 1942 and
1943, we had discussions with the deputy collector’s office.
(R. 199.)
We ultimately used the net worth method. At the first
discussion at the collector’s office, I am almost sure
Mr. Washauer was present, but I wouldn’t be positive.
We had several such discussions; I do not know over
how long a period of time such discussions took place,
maybe a month or two months, leading up to the filing
of the amended returns. (R. 200.)
The main subject of the discussions with Washauer
and Ralph Mohr and Mr. Stephenson was the best way
to get this thing straightened out. The collector’s office
asked for a financial statement. That was the starting
point, and from there on it came out that they wanted
the prior returns, so we informed them that we had
started already on the ’42 and ’43. They asked what
about the 39, 40 and ’41? So I inquired of Mr. Norwitt
whether he had filed any. He said he thought he had,
but the collector’s office said they had no record. I told
deputy collectors of the condition of the records and that
it was almost physically impossible (R. 201) to make
@ proper return, also the element of time and money and
the cost of doing so. So we discussed it back and forth
and we finally agreed to use the net worth method and
file the returns that way.
17
First of all, we had the necessary information to pre-
pare the 1944 tax return. There were books and records
on that, so we prepared separate returns for that year
upon the basis of books and records which were avail-
able. For the other returns, since it was impossible to
prepare a 100% proper return, we decided on the net
worth basis. So we determined to use December 31,
1944, net worth inasmuch as that was the end of the year
closest to the time this increase Started. I believe we
started with January 1, 1939. (R. 202.) Defendant’s Ex-
hibit A for identification indicates very plainly that the
years from 1939 to 1943 were involved. That is the orig-
inal of the typewritten Statement which is attached to
each of these returns that were later prepared by Mr.
Stephenson and myself. We didn’t file the returns. We
prepared them. (R. 203.) The note on top of the state-
ment says: ‘‘To be attached to 1939, 1940, 1941, 1942 and
1943 returns. The amounts shown as other income repre-
sents estimated living costs and is added pursuant to an
informal understanding of the Office of Collector of In-
ternal Revenue. The amount in item 8 of the 1941 return
and the additional amount added to item 9 of the amended
1942 return represents the difference between (1) the
taxpayer’s net worth as of December 31, 1944, and (2) the
amount of income reported on the 1944 and 1942 returns
and the amended 1943 return. This is in accordance with
an informal understanding with the Office of Collector of
Internal Revenue. It is not possible to obtain exact
figures or details, because the taxpayer’s records were
destroyed by fire in 1943.’ (R. 204.)
18
We had quite a few discussions and I informed the
collector’s office that I would throw the smallest amounts
in the earlier years and the biggest amounts in the later
years, which would be the most probable answer, instead
of dividing it equally between all the years. Part of this
net worth increase was spread through all years involved,
1939 to 1943, inclusive. (R. 205.)
The computation involves consideration of living ex-
penses for a net worth computation, that is the adjust-
ment on account of the net worth basis. We had infor-
mation as of the end of the period. We did not have
information as of the beginning. We assumed the begin-
ning of zero, which would be detrimental to the taxpayer
if he had anything at all. He would have paid that much
less. We assumed January 1, 1939, as the point of time.
(R. 208.)
The ending point of my net worth period was Decem-
ber 31, 1944. I personally obtained everything possible
as to Mr. and Mrs. Norwitt’s assets and liabilities. (R.
209.)
I deducted certain living expenses in preparing these
returns. I asked Mr. Norwitt what his living expenses
were for these years. He gave me certain figures, the
amounts of which I don’t remember at present. I brought
them back to the Deputy Collectors and showed them
the figures. I also pointed out certain details making
up the figures. For example, his rent in 1939 was $23.00
a month. He had later bought a home and his total pay-
ments for interest, principal, taxes and insurance were
$54.00 a month. He had one life insurance policy on
which he paid $87.00 a year less approximately $25.00
—— |
19
what they call dividends a year. That period was 1939
to 1943, inclusive. I took those figures to the Deputy
Collectors’ office and I believe we finally raised them
and the final figures were used in the amended returns.
(R. 216.)
I had no knowledge of any large group of invoices in
1932, or other items which had been unrecorded. If I had
known of such invoices, 1 would still have used the net
worth method (R. 218), because some of the documents
and records were missing. Without all the records, you
cannot make a proper return.
I might state there appears to be an overcharge over
the net worth system of about $10,000. I told Mr.
Stephenson what to do and he made the allocations and
apparently a $10,000 error crept in in favor of the Gov-
ernment. Using the net worth basis, the total income
to be reported from 1939 to 1944 should have been in
round numbers $70,000. In computing Mr. Norwitt’s net
worth as of January 1, 1939, I started him at zero. For
the purpose of my computation, he had no property nor
assets of any kind on that day. He did have some-
thing. He had stock of the General Refrigerator Cor-
poration, which was a corporation at that time. I don’t
know the value. It wasn’t too much. (R. 225.) It might
have been worth $3,000, or something like that. That
is just my guess. I don’t think he had any property
but I don’t know. It is my estimate that he had at least
$3,000 that I know of at that time.
Assuming that the net worth as figured out in the
statement of $57,360.40 was correct, and it started from
cuacienieeee SPRL ETL SNIPE EPRI ce is
zero, actually that figure was approximately $3,000 in
favor of the Government again. I explained that to the
deputy. I stated I would weigh heavily against Mr. Nor-
witt and in favor of the Government because he did not
have complete records. The original returns of 1939,
1940, 1941, 1942 and 1943, the ones that were filed in
1945, were typed up in the office of the Collector of
Internal Revenue. (R 226.)
None of these were typed in my office. The collector
typed the returns, retained them, brought them to the
taxpayer and had the taxpayer sign them, and then of
course the collector, after they were signed, still retained
them. (R. 228.)
My testimony is that, taking this as the ending net
worth to be accounted for and assuming zero starting
point, at some point prior to this, the increase in net
worth which is reported here by the excess of assets
over liabilities was spread back through several of these
returns for several years. I believe that if we will read
the second paragraph carefully it does substantiate what
has actually been done and that a $10,000 error has crept
in there somehow. (R. 233.)
The salaries that he received from the corporation
were taken up in the returns and that was in addition
to the increase in the net worth plus the living expenses.
Those salaries were erroneously included. I did not
ascertain what his net worth was at the beginning of
1941. I don’t know what it is now. We didn’t make
any attempt to because we used the beginning of ’39
as being zero and he didn’t have much. (R. 236.)
—_ raw eet 4.45 ch ee S&S cob £ bebe
EE nn a ee
21
Harry Stephenson, the accountant employed by Spivock,
sstified for the Government as follows:
I found evidence Mr. Norwitt had some rental income
rom these properties. When I checked the original re-
urns for 1942 and 1943, I did not find any rental income
eported. For that reason, I undertook the preparation
f amended returns. I advised him it would be the best
hing to do, to get them amended and get out of trouble.
Ar. Norwitt told me he had been engaged in a business
snown as the General Refrigerator Corporation. I asked
iim for records of that business and his reply was that
they had been burned in a fire. (R. 35.)
In looking over my working papers T found where
there were some unrecorded sales added into the returns.
I believe it was 1943, but it might also have been 1942.
I mean, it may have been both years. I can’t recall. The
papers now handed me are the working papers in the
ease of Mr. Norwitt. I did not prepare all of them, but
substantially all of them. (R. 36.)
All the field work, I believe, was done hy me. Looking
at those papers, there is a schedule of unrecorded sales
which was not in the papers the last time I looked at
them. That refreshes my recollection as to the year in
which I say additional sales were reported on the amended
return. It was 1943. The amount that was added to the
amount originally reported as sales was a total of $9,180.
It represents 51 refrigerators which were sold. (R. 37.)
To the best of my recollection, 1 obtained the informa-
tion that appears on that working sheet from Mr. Nor-
witt, but I can’t be positive; after six years I can’t be
positive. In preparing the amended return, I added this
amount of refrigerator sales which had not been reported
in the original return. (R. 38.)
I was present at at least one conference with the col-
lector’s office. I don’t recall when that took place. (R. 55.)
It was in June I believe, it was naturally prior to June
23, 1945, the filing date which those returns bear. Mr.
Washauer, who testified here this morning, was present
at that conference, and I believe Mr. Mohr. I can’t recall
what was said at the conference, but the purpose of the
conference was to arrive at figures for his living expenses
which would be satisfactory to the Government. There
was some discussion about the amount of the estimated
living expenses. We had to arrive at an amount which
we felt would be satisfactory to the Government. As I
recall it, we talked about so much per month. (R. 56.)
The amended returns or delinquent returns for the
years 1941, 1942 and 1943 were prepared without refer-
ence to the original returns. So far as I know, they
were prepared for the purpose of representing to the
Government the full taxable income for those years.
These amended returns were prepared upon the basis
that the original returns were not correct and in pre-
paring the returns for 1941, 1942 and 1943 the net worth
system of computation was used. In using that system,
I computed the unaccountable difference between his
reported income, or the income as I was able (R. 66) to
determine it, and the net worth figure at the end of the
period, and that was done, so far as my office or I was
concerned, for the purpose of representing to the Gov-
ernment the entire taxable income.
Zashauer testified for the Government as fol-
ril Mr. Spivock appeared and asked to discuss
Adolph Washat- Mohr and I were present on behalf of the
lows: In April MOffice; Mr. Spivock said Norwitt had told him
the case, Mr. Mords were burned so he, Spivock, would have
Collector’s office; Out on a net worth basis (R. 292); later
all his records w22" to work on a net worth statement and
to work it out '@t the minutes of the corporation as well as
Spivock began gate) return be turned over to him (R. 295);
he asked that theet worth papers were being resubmitted for
the (corporate) p®. Spivock brought back the corporate return
when the net wollt. Spivock, Mr. Roder and I had a meeting
our attention, Spi 1945 in the Collector’s office—we discussed
(R. 296); Mr. gprth statement (R. 296-7); our next meetings
on June 4, 1945 pivock were on June 12 and 13, 1945 at which
the net worth sté?- Mohr and I were present. We had another
with Mr. Spivock:! June 22 at which meeting amended returns
meetings Mr. MopHtted by the accountant. No representative of
meeting on June °F suggested the use of a net worth statement
were submitted b: °UF meetings; that suggestion was made by
the Collector vit (R. 297); no one in the Collector’s office
at any of our mgreement with Norwitt or Spivock that returns
Mr. Spivock (R. ™ the net worth basis would be accepted as
made any agreeme 299)-
prepared on the ie witness produced his appointment book show-
correct (R. 299). lowing appointments with Mr. Spivock relative
(Here the witne: and the General Refrigeration Corp.:
ing the following w 6, 1945; June 4, 5, 6, 12, 13, 22, 23. (R. 317-
to Norwitt and th
February 6, 1940t tell Mr. Spivock he could use a 1944 net
318).) ement. I made no suggestion whatsoever. That
I did not tell |
worth statement. |
—y
24
was his business. He is the accountant. He had power
of attorney, he didn’t tell me anything. He said he would
prepare a net worth statement for a certain period. That
is all he told me. I didn’t say nothing. (sic.) That is his
prerogative to do whatever he pleases. It is my business
to help the taxpayer. You know the accountant. He is
a CPA. He is capable of handling himself. I don’t know
of any request being made up to the time of June 23,
1945 of Mr. Spivock or Mr. Norwitt for a net worth
statement as of the end of each year 1941, 1942, 1943 or
1944, (R. 325.)
The only discussion Mr. Spivock had with us was about
living expenses. I am stating for the record, that you can
draw up a net worth statement including living expenses
as part of the net worth. (R. 326.)
About all that was discussed was about living expenses.
Nothing was discussed as to how the figures had been
arrived at. Nothing was discussed as to what this man’s
net worth was at the end of any year. That was a sworn
statement. We didn’t have to discuss it at all. (R. 327.)
The sum and substance of my testimony is that Mr.
Spivock came in and all I did was listen. I haven’t much
recollection of what was said. The matter was under
investigation. I accepted it. The Bureau accepts any-
thing a taxpayer or a taxpayer’s representative submits
to the Bureau of Internal Revenue while the matter is
still under investigation. We must accept anything. The
purpose of the conference was not at all to see what
should be filed. Mr. Spivock called on me to submit a net
worth statement and the increase in net worth. (R. 328.)
- —
25
The purpose of the conference with Mr. Spivock from
the time I got the financial statement until June 22, 1945
was that Mr. Spivock, the accountant for the taxpayer,
wished to file amended returns on the basis of net worth
increase. No discussion was necessary and we accepted as
the taxpayer or taxpayer’s accountant presents it for the
Bureau of Internal Revenue. He could probably have
done that without talking to me about it. If he didn’t
file with us, we would ask him to bring that information
in. When he brought it in, he showed me what I call
his working sheets. The topic came up of his living exr-
penses. He suggested a lower figure. I felt it was too
low, then he raised the figure to a higher figure. That
is his prerogative. (R. 329.) There was no rejection. We
thought it was too low, so he raised it. (R. 330.) When
he came in on the 22nd, he had the returns all written
out in pencil. I didn’t look at the figures at all. I don’t
think any figures were discussed at all. I don’t think he
discussed with me the net worth Statement that had been
filed back in May. Mr. Mohr was present on the 22nd. |
think that Mr. Spivock did all the talking. I accepted
the returns. (R. 331.) I think all these returns were taken
down by Gus Roder to be signed. I didn’t see the returns
at all when they were taken down to Mr. Norwitt.
Gustave C. Roder called as a witness by the Govern-
ment testified that he was a deputy collector of internal
revenue; that he took the delinquent returns for 1939,
1940 and 1941 and the amended returns for 1942 and 1943
down to Mr. Norwitt’s office and Mr. Norwitt signed them
in his presence (R. 348); that Mr. Washauer handed him
the returns on June 22nd and that he, Roder, typed them
up from the hand-written returns (R. 349); that after
typing up the returns he made an appointment with Mr.
Norwitt by telephone and then went to Mr. Norwitt’s
office and that Mr. Norwitt’s wife was present and signed
the returns where her signature was necessary. (R. 350.)
When he made the appointment with Norwitt over the
telephone ‘‘I said that I had a few returns which re-
quired his signature which were brought in by his ac-
countant, and that I would appreciate it if he were pres-
ent, together Possibly with his wife, so that they could
sign their sigf@tures on the return. Q. Yes. First you
identified yourself to him, told him who you were? A.
Oh, yes, absolvtely.’’ (R. 352.)
When I car’® to Mr. Norwitt’s office he just signed the
returns. I was there about ten or fifteen minutes. (R. 353.)
(Here the wit?@SS was shown the returns for 1939, 1941,
1942 and 1943 and his attention called to the fact that in
each instance the signature of Freda Norwitt was signed
by Paul C. Norwitt and so appears on the returns [R.
353-5]); that though there were requirements as to who
should sign rhe returns ‘‘we wouldn’t be very specific
about that”, we would assume the correct signature was
354.) I stood right there while the returns
igned but I had no right to question Mr.
355.)
on there. (R.
were being s
Norwitt. (R. .
‘ela’ to the Government’s computation of peti-
(e) Evidence ety Sao . :
tioner’sta>
. > did the Government attempt to prove the
At no time
a, : amended returns that were filed on the net
falsity of the . .
. The Government’s entire proof was confined
worth basis.
hat the original returns filed for the years
to proving tl
Z —_
1942 and 1943 were false, a fact that had been conceded
by petitioner.
From the beginning of the trial, petitioner objected to
any proof that was directed to the falsity of the original
returns filed, asserting that defendant was not on trial
for having filed such original returns. (R. 104.) At the
end of the Government’s case, appellant moved to strike
out all of the testimony given by the Government’s wit-
nesses Bobadilla and Cleary, dealing with the false char-
acter of the original returns. (R. 467-469.) This motion
was denied.
William Bobadilla, a deputy collector, testified for the
Government that he had added up the sales tags which
were found in the Mission Street premises and in the
garage, and found that they showed sales for the year
1942 less sales tax, of $9699.28 (R. 120); that the sales
tags for the year 1943 totalled, less sales tax, $42,986.43
(R. 122), plus $239 (R. 123); that he had been able to
secure a lot of Norwitt’s personal cancelled checks (R.
123), most of which were made out to cash and bore no
endorsement (R. 124); that he went ahead and scheduled
all of those checks which appeared to him as being per-
sonal, as the personal withdrawals and expenditures of
petitioner (R. 124); that the checks so scheduled by him
for Norwitt’s personal expenses were as follows: For
1941, $3054.52, for 1942, $12,884.74 and for 1943, $15,-
565.45 (R. 124-5); that he allotted all these checks to
Norwitt’s personal living expenses because they were all
written to cash and as he had no records to verify it
“I presumed they were personal withdrawals’? (R. 244,
245); that he charged them against Mr. Norwitt because
it appeared to him that he went in and took some cash
and cashed these checks and then redeposited the checks;
that he assumed that Norwitt had taken this money in
cash and then deposited the check in the bank (R. 249) ;
that he didn’t assume that he had also made a deposit
to cover the amount of these checks (R. 249); that he
assumed Mr. Norwitt may have taken that cash: that
there was a possibility he may have paid it out of cash
and put in the checks as it is written (R. 250); that he
didn’t adopt the assumption that the money had been
paid out on account of business and the check then de-
posited, although that was possible; that he didn’t adopt
that theory but adopted the theory against Mr. Norwitt.
(R. 250.)
On cross-examination Bobadilla identified a series of
checks which he said he had allotted to the personal
living expenses of Norwitt for the year 1942 (R. 248.
257) and checks he had so allotted for the vear 1941
(R. 261-273) and the checks he charged to personal ex-
penses for the year 1943. ( 267-275.)
Petitioner then intraduced in evidence the check regis-
ter from January to November, 1941 (R. 471) and the
check register from January to September, 1943. (R. 471.)
There was no check register for 1942. Petitioner then
read into the record from said check registers the entries
therein showing the purpose for which the checks in 1941
and 1943 had been issued, the same being the checks that
Bobadilla had assumed were for Norwitt’s personal ex-
penses. (R. 473-479.) The check register disclosed that
of the checks Bobadilla had assumed for Norwitt’s living
expenses for the year 1941, that $2324.65 thereof was paid
g
out for business expenses such has payroll, labor, ete., and
that for the year 1943, $2022.77 had been paid out for like
purposes; that for the year 1942, although there was no
check register for this year, the checks corresponding with
those which in the year 1943 were expended for business
expense, totalled $1612.43.
Thomas W. Cleary, Special Agent, Internal Revenue
Department, testified for the Government that he added
up the sales tags or invoices found at the Mission Street
office and at the Crescent Avenue address and found that
for the fiscal year ending July, 1941 there were sales
totalling $9026.32 which were not included in the cor-
porate return (R. 159-161); that for the year 1942 the
total amount of sales slips which bore no posting was
$22,455.45 including sales tax of $624.85 (R. 164): that
he arrived at these figures by comparing the sales tags
with the sales ledgers (R. 155); that as to the corporate
return he found*that the sales reported on that return
coincided with the amounts shown in the ledger and the
sales register (R. 157); that for the year 1943 the sales
reported on the original return coincided with the sales
shown in the business ledger (R. 157); that he had no
sales register for the year 1942 (R. 157); that the sales
tags which were recorded in the sales register and ledger
seemed to have check marks on them and others had no
check marks; that for the year 1942 they found a group
of tags that had no check marks on them; that he based
the fact that certain sales were not registered in the sales
register or other books on the absence of check marks on
the sales tag, although there were tags with check marks
on them that had not been entered in the books for the
32
County Trust Co. v. Riey, 302 U.S. 292, 82 L. ed. 268:
International Ry. Co. v. Davidson, 257 US. 506, 66 L. ed.
341; Federal Trade Comm. v. Raladam Co., 316 U.S. 149,
96 L. ed. 1336.
(b) The decision of the lower Court holding that
where one has violated Sec. 145b of the Internal Revenue
Code by filing a false and fraudulent income tax return
for a particular taxable vear and thereafter files one or
more false amended returns for the same year, the filing
of each such amended return constitutes a new and
separate violation of said section is in direct conflict with
decisions from other circuits, such as the cases of United
States v. Johnson, 123 Fed. (2d) 111, 119; Care v. United
States (Sth Cir.), 159 Fed. (2d) 464: Guzik v. United
States (7th Cir.), 54 Fed. (2d) 618, 619, and Boles v.
United States (4th Cir.), 73 Fed. (2d) 772, 774. Under
such circumstances, this Court has jurisdiction on cer-
tiorart to review the action of the lower Court. (Dept. of
Treasury v. Ingram-Richardson Mfg. Co., 313 U.S. 252,
85 L. ed. 1313.)
(c) The decision of the Court of Appeals holding that
where a taxpayer files an income tax return and there-
after files an amended income tax return for the same
taxable year, proof of the falsity of the original tax
return constitutes proof of the falsity of the amended tax
return is in direct conflict with the decision from the 7th
Circuit in the case of United States vr. Johnson, 123 Fed.
(2d) 111. Under such cireumstances, this Court has jur-
isdiction to review the action of the lower Court on
certiorari. (Dept. of Treasury v. Inaram-Richardson Mfoa.
Co., supra; Rule 38 of the Supreme Court, Par. 5b.)
a
33
(d) The holding of the Court of Appeals that under
the facts in this case petitioner was not entitled to rely
on the income computed by his accountant, is in direct
conflict with the decision in the case of Lurding v. United
States (6th Cir.), 179 Fed. (2d) 419, 429 and under such
circumstances this Court has jurisdiction to review the
matter on certiorari. (Dept. of T reasury v. Ingram-
Richardson Mfq. Co., supra, Rule 38 of the Supreme
Court.)
(e) The decision of the Court of Appeals upholds the
conviction of a defendant on the testimony of Govern.
ment’s witnesses that amounts to no more than specula-
tion, assumption, surmise and conjecture. This rule is in
direct conflict with comparable decisions of this Court in
which jurisdiction was exercised to review and correct
such error. Pennsylvania R. Co. v. Chamberlin, 288 US.
333, 344.
(f) The decision of the Court of Appeals that one can
be guilty of Violating See. 145b of the ‘Internal Revenue
Code because a corporate income tax return bears the
Signature of the defendant without any proof that the
same was filed by or under the authority of such defend-
ant, presents a new and novel rule of evidence that has
not been announced or passed upon by the Supreme
Court. In such case this Court has jurisdiction to review
the matter involved. (See eases cited under Subpar. (a)
above.)
(g) The holding of the Court of Appeals, that in a
criminal prosecution where defendant is charged and
found guilty of two or more offenses the judgment wil]
Eee
30
year 1943 and he also found sales tags with no check
marks on them which had been entered in the books. (R.
180.)
Augustus B. Brady, technical advisor in the Penal
Division in the chief counsel’s office in the Treasury De-
partment, testified to a computation he made of the cor-
rect income of appellant for the years 1942 and 1943 (R.
409) and produced a mimeographed sheet five pages in
length of his computations. These computations were
made prior to trial (R. 410) and were based upon the
testimony thereafter to be given by Mr. Bobadilla and
were made for the purpose of showing that the original
returns filed were false. Brady in making his computa-
tions took certain figures as being correct from the orig-
inal returns. (R. 455, 460, 461.) Brady further testifies:
‘*T didn’t compute the amended returns’’. (R. 464.) Brady
further testified that he made no computation to figure
what the tax due the United States would have amounted
to based on the net worth basis. (R. 466.) In other words,
all of Brady’s testimony and all his computations were
solely for the purpose of showing that the original re-
turns were false. This has been admitted at all times.
In the trial Court and Court of Appeals, petitioner
contended as to counts two and three of the indictment
as follows: (a) That there was no competent evidence
to establish the falsity of either amended return; (b)
That there was no competent evidence to establish that
appellant filed either amended return for the purpose of
defeating or evading the tax; that on the contrary, the
evidence established that said returns were filed in reli-
te aieeintenateriantie ie
31
ance upon the work of the certified public accountant with
the consent, approval, collaboration and request of the
Internal Revenue Officers; (c) That the filing of the
amended returns did not constitute a violation of Sec.
145b of the Internal Rvenue Code as false original returns
for the same years had been filed by appellant and said
section can only be violated once for each taxable year.
These contentions of petitioner were erroneously held
by both the trial and Appellate Court to be without merit.
-_-_e
JURISDICTIONAL STATEMENT.
1. Jurisdiction of the Court.
The jurisdiction of this Court is invoked under Title 28
U.S.C. see. 1254(1).
2. The decision and judgment of the Court of Appeals.
The decision and judgment of the Court of Appeals was
rendered on March 12, 1952. (R. 506, 527.)
Petition for rehearing denied on April 14, 1952. (R,
528.)
8. Basis upon which it is contended the Supreme Court has
jurisdiction and cases in support thereof.
(a) The Court of Appeals’ decision, that a person can
be guilty of two or more separate violations of Sec. 145b
of the Internal Revenue Code for the same taxable year,
is a decision on an important question of federal law
which has not been but which should be settled by the
Supreme Court. In such case this Court. has jurisdiction
to review the question involved as was held in Worcester
34
not be reversed if the evidence sustains the conviction
on any one count and the sentences imposed do not exceed
that which might lawfully be imposed on any single count,
is no longer the law and in conflict with the decision of
this Court in Fiswick v. United States, 329 U.S. 211,
wherein the Court exercised its jurisdiction on certiorari.
In view of the language of this Court in the Fiswick case,
this entire question should be reconsidered by this Court
as it constitutes an important question of Federal law.
THE QUESTIONS PRESENTED.
The questions presented and raised by this petition are
as follows:
1. Where a person files a false and fraudulent income
tax return in violation of Sec. 145b of the Internal Rev-
enue Code and thereafter and for the same taxable year
files one or more false amended returns, does the filing
of each such amended return constitute a new and
separate violation of said Sec. 145b?
2. Where a person files a false and fraudulent income
tax return in violation of Sec. 145b of the Internal Rev-
enue Code and thereafter files an amended return for the
same year, does mere proof of the falsity of the original
income tax return constitute proof that the amended re-
turn is false and fraudulent?
3. Where a taxpayer employs an accountant to prepare
his income tax return and makes available to the account-
ant, all books and records that he has and makes full dis-
closure to the accountant of his assets and liabilities, is
—
35
not such person entitled to rely upon the accuracy of the
return prepared by his accountant despite the fact that
the taxpayer may have lied to Internal Rvenue Agents as
to the existence of his books and records?
4. In a prosecution for violating Sec. 145b of the In-
ternal Revenue Code wherein it is necessary that the Gov-
ernment prove unreported taxable income, can a convic-
tion be sustained where the evidence as to such unre-
ported taxable income amounts to no more than mere
speculation, surmise and conjecture on the part of the
Government’s witnesses?
5. Where one who has been an officer of a corporation
is charged with filing a false income tax return on behalf
of such corporation, can his conviction be sustained where
there is no proof that the return was filed by him or
under his authority?
6. In view of the language of this Court in Fiswick rv.
United States, 329 U.S. 211, does it still continue to be
the rule that where a defendant is charged with two or
more offenses, the judgment will not be reversed if the
evidence sustains the conviction on any one count and
the sentences imposed do not exceed that which might
lawfully be imposed on a single count?
POINTS RELIED UPON FOR THE ISSUANCE OF
A WRIT OF CERTIORARI.
The Writ of Certiorari prayed for herein should issue
for each and all of the following reasons:
36
1, The Court of Appeals has announced the rule that
for any one taxable year a taxpayer can be guilty of a
hundred violations of Sec. 145b of the Internal Revenue
Code. Thus, the Court of Appeals has held that if one
has violated this section by filing a false and fraudulent
income tax return, he can thereafter again violate this
section for the same taxable year by filing false amended
returns or by in any other manner attempting to evade
the income tax for such year. By so holding the Court
of Appeals has done away with the statute of limitations
relative to such offense and has in effect held that the
initial violation of the section can be repeated day after
day and long after the statute of limitations has run as to
the initial violation. This presents a new and important
question of Federal law. It has never been passed upon
by this Supreme Court and should be passed upon for all
future guidance.
2. For many years it has been the law that when a
taxpayer honestly employs an accountant to prepare his
income tax return and makes available to such accountant,
all his books and records and such other information as
is required and the accountant prepares such return and
it is filed, the taxpayer has a right to rely on the return
as prepared by his accountant and such facts negative
any criminal intent on the part of the taxpayer. The
decision of the Court of Appeals herein lays down a
contrary rule and announces that the taxpayer is not
entitled to rely on his accountant’s activities if at some
other time and place and to persons other than his ac-
countant he lied about his books and records, his assets,
income and liabilities. This rule should not be allowed
SEE Eee
37
to stand and the qi
of this Court, id and the question merits the earnest consideration
; Court.
3. It has alwa:
for income tax evat has always been the law that in prosecutions
of proving to a mio™me tax evasion, the Government bears the burden
doubt that the defing to a moral certainty and beyond a reasonable
he didn’t report jnthat the defendant acquired taxable income which
of Appeals herein’ t report in his return, The decision of the Court
of such unreported®#!s herein lays down the rule that the existence
the testimony of “reported taxable income can be established by
give their assumptidmony of Government’s witnesses who merely
existence of such wT assumption, surmise and speculation as to the
the Court of Appe? °f such unreported income. Such holding of
accepted and usual 't of Appeals is a marked departure from the
conflict with the pre: 8294 usual course of judicial proceedings, is in
of the rule that provith the presumption of innocence and destructive
yond a reasonable dule that proof of a defendant's guilt must be be-
herein warrants this®@Sonable doubt. The holding of the lower Court
its decision re-estg@Trants this Court in reviewing the same and by
criminal cases. sion re-establishing the rules of evidence in
4. The Court of SSS
that an income taxe Court of Appeals has held that the mere fact
taxpayer is found ir income tax return bearing the signature of a
Revenue, constitutes is found in the files of the Collector of Internal
or under the author Constitutes proof that such return was filed by
a new and novel d the authority of the taxpayer. This constitutes -
in criminal cases and novel departure from the rules of evidence
Court. ial cases and should be reviewed by the Supreme
5. The Court of
where a defendant ie Court of Appeals has relied upon the rule that
more offenses, the defendant is charged and found guilty of two or
enses, the judgment will not be reversed if the
EE
TE
38
evidence sustains the conviction on any one count and the
sentences imposed do not exceed that which might law-
fully be imposed on any single count. In view of the lan-
guage of this Court in Fiswick v. United States, 329 U.S.
211, the present validity of this rule should be re-examined
and if such rule be not abrogated, it should at least be
restricted in its operation to convictions that do not fall
within the class discussed in the Fiswick case. Where a
man is convicted of several offenses and only one of such
offenses finds support in the evidence, the stigma and
extra-judicial penalties that will attend the man through
the balance of his life as the result of his erroneous con-
viction on the remaining charges, is a matter that merits
the further consideration of this Court. The necessity
for a reconsideration of this rule is amplified in our sup-
porting brief.
Wherefore, petitioner respectfully submits that this
Honorable Court issue a Writ of Certiorari to the United
States Court of Appeals for the Ninth Circuit, to the
end that the questions involved may be fully presented
and argued and justice done in the premises.
Dated, San Francisco, California,
May 6, 1952.
Respectfully submitted,
Leo R. FrrepMan,
Attorney for Petitioner.
CERTIFICATE oF CouNnsEL
I hereby certify that I am a member of the bar of the
Supreme Court of the United States and that I am coun-
sel for the petitioner in the above entitled cause and that,
in my judgment, the foregoing petition is well founded
in point of law as well as in fact and that said petition
is not interposed for delay.
Dated, San Francisco, California,
May 6, 1952.
Leo R. FriepMan,
Attorney for Petitioner.
In the Supreme Court
OF THE
United States
Ocroser Term, 1951
No.
__
5
Pau C. Norwrrt,
Petitioner,
vs.
Unrtep States or AMERICA,
Respondent. ;
BRIEF IN SUPPORT OF
PETITION FOR WRIT OF CERTIORARI.
THE OPINIONS AND JUDGMENTS OF THE
COURTS BELOW.
The judgment of the trial Court was rendered and filed
on April 10, 1951. (R. 12-14.)
The decision of the Court of Appeals was rendered and
filed on March 12, 1952. (R. 506.)
The judgment of the Court of Appeals was entered on
_ March 12, 1952. (R. 527.)
, Petition for rehearing denied on April 14, 1952. (R.
- 528.)
42
JURISDICTION.
The jurisdiction of this Court is invoked under Title 28
U.S.C., Section 1254(1).
The basis on which it is contended this Court has jur-
isdiction and cases in support thereof are fully set forth
in the foregoing petition at page 31 thereof.
STATEMENT OF THE CASE.
Petitioner was indicted (R. 3-6) for three violations of
attempting to evade income taxes (26 U.S.C. 145b; Sec.
145b, Internal Revenue Code). Count 1 charged that
petitioner, as president of the General Refrigerator Cor-
poration, in 1945 filed a false and fraudulent income tax
return for said corporation for the fiscal year ending July
31, 1941. Counts 2 and 3 charged that petitioner, a mar-
ried man, in 1945 filed false and fraudulent joint returns
for the years 1942 and 1943. (While the indictment
charged the filing of such joint returns, in fact the returns
involved in counts 2 and 3 were amended returns, the
petitioner having filed in 1942 and 1943 respectively origi-
nal joint income tax returns.)
A full statement of the case is set forth in the fore-
going petition at pages 4 to 31.
SPECIFICATION OF ERRORS RELIED UPON.
1. The opinion of the Court of Appeals is in error in
holding that where a person files a false and fraudulent
income tax return for a particular taxable year and there-
43
after files a false amended return for the same taxable
year, the filing of such amended return constitutes a new
and separate violation of 18 U.S.C. see. 145b.
2. The opinion of the Court of Appeals is in error in
holding that there can be two or more violations of said
Section 145b by the same person for the same taxable
year, involving the same taxes and the same income.
3. The opinion of the Court of Appeals is in error in
holding that it is no defense to a charge of attempting to
evade income taxes, by filing an alleged false return,
where the taxpayer has employed a certified accountant
to whom he has made full disclosure of all available books
and records and his assets and liabilities and the return
is honestly prepared by such accountant on a net worth
basis, merely because the taxpayer had theretofore lied
to the income tax officials by stating that all his books
and records had been destroyed.
4. The opinion of the Court of Appeals is in error
in holding that a person can be convicted for filing alleged
false and fraudulent income tax returns, where the proof
offered of unreported income amounts to no more than
mere speculation, assumption, surmise and conjecture.
9. The opinion of the Court of Appeals is in error in
holding that one can be guilty of filing a false and fraudu-
lent income tax return on behalf of a corporation, where
there is no proof that the return, though signed by de-
fendant, was ever filed by him or under his authority,
thus misconstruing the scope of review where insufficiency
of the evidence is in issue.
6. The opinion of the Court of Appeals is in error in
holding as still the law the rule that where a defendant
46
‘‘The crime denounced by §145(b) of wilfully at-
tempting to defeat or evade the tax is complete when
the taxpayer wilfully and knowingly files a false
and fraudulent return with intent to defeat or evade
any part of the tax due the United States. Guzik v.
United States, 7th Cir. 54 F.(2d) 618, 619, Certiorari
denied 285 U.S. 545, 52 S.Ct. 395, 76 L.Ed. 937;
Bowles v. United States, 4th Cir. 73 F.(2d) 772, 774.’’
Cave v. United States, (8th Cir.) 159 F. (2d) 464;
Myres v. United States, (8th Cir.) 174 F. (2d) 329,
335.
In the case of United States v. Cole, (DC-Cal.) 90 Fed.
Supp. 147, defendant was charged with violating the pro-
visions of Sec. 145b and the district judge granted a
motion for judgment of acquittal. He first quoted from
the language of the Cave case above set forth and then
at p. 154 states:
‘*By the same token if the criminal act is not com-
mitted at that time, we cannot take a subsequent act
and retroject it to the time of filing and charge it as
criminal,
‘‘If a criminal act is established as of a definite
date, a criminal or fraudulent act committed later
may bear on the intent and be admissible, but we
cannot base criminality solely upon something that
was done after the return has been made, unless it
is of a character to show conclusively the existence
of the criminal purpose at the earlier date. (See
U.S. v. Renee Icecream Co., Third Cireuit 1947, 160
Fed.(2d) 353 and 357.)’’
In the instant case, for each of the years 1942 and 1943
petitioner and his wife, within the time required by law,
——
47
had filed original income tax returns for such years. It
was not until the year 1945 that the amended returns for
1942 and 1943 were filed. As the offense of violating Sec.
145b is not a continuing offense and as such crime is
completed when a false and fraudulent return is filed, it
must follow that any act done thereafter relating to such
years cannot constitute an attempt to evade the tax for
such years. Such attempt had been completed and a de-
fendant can only be tried and convicted once for such
offense: as said in the Cole case, supra, any act done
after the completion of the offense can only bear upon
the intent with which the act was done constituting the
offense.
If the law were not as above stated, the bar of the
statute of limitations could never become operative as to
any particular year. Furthermore, appellant could never
avail himself of the plea of once in jeopardy if the law
were other than as stated. Let us assume that petitioner
had been tried and convicted for filing a false and fraud-
ulent original return for the year 1942, can he again be
tried and convicted for filing an amended return in 1945
for the same year of 1942? Would not appellant, under
such circumstances, have committed but one crime for
which he was tried and punished? We believe the answers
to these questions are obvious.
Let us assume a different set of facts. Assuming that
the defendant was tried and convicted for filing a false
and fraudulent return in 1942 and thereafter, in order
to avoid the payment of a just tax for such vear, he
secreted his assets in the year 1943 and again secreted
them in 1944 and in 1945 transferred them from one
BI ORS ETAL LOSES EP. ILS SEIN: OEE NRG ET eR
44
is charged with two or more offenses the judgment will
not be reversed as to any such offense if the evidence
sustains the conviction on any one count and the sentence
imposed does not exceed that which might lawfully be
imposed on such single count, despite the language of
this Court in the ease of Fiswick v. United States, 329
US. 211.
ARGUMENT.
I. THE COURT OF APPEALS ERRED IN HOLDING THAT
WHERE A PERSON FILES A FRAUDULENT INCOME TAX
RETURN FOR A PARTICULAR YEAR AND THEREAFTER
FILES A FALSE AMENDED RETURN FOR THE SAME YEAR,
THE FILING OF SUCH AMENDED RETURN CONSTITUTES A
NEW AND SEPARATE VIOLATION OF 18 U.S.C. SECTION 145b.
On April 15, 1943 petitioner and his wife filed their
joint income tax return for the year 1942 (R. 24) and
on June 23, 1945 they filed their amended return for 1942
(R. 25). On March 15, 1944 they filed their original in-
come tax return for the vear 1943 (R. 24) and on June 23,
1945 they filed their amended return for said year 1943.
(R. 25.) Counts Two and Three of the indictment are
based on the falsity of the amended returns filed in 1945
for the years 1942 and 1943.
Petitioner conceded that the original joint returns were
false and understated the taxable income and the Govern-
ment established the falsity of the original returns.
Petitioner contended that when he filed the original
joint returns for the years 1942 and 1943. This consti-
tuted a violation of Sec. 145b; that a violation of said
section was not a continuing offense and could only be
a
45
committed once for any taxable year and from this
premise contended that the filing of the amended returns,
even though they were false (which is not admitted), did
not constitute a new and separate offense.
The Court of Appeals ruled to the contrary (R. 520-
522) and held that there could be several separate offenses
by the same person in attempting to evade the tax on
his income for one taxable year. Thus, the Court of
Appeals in effect held: (a) that a person for one taxable
year and involving the same income could be guilty of
365 separate offenses: (b) that the statute of limitations
never ran against an attempt to evade an income tax; and
(c) that the defense of jeopardy was not available to one
who had been tried and convicted of filing a false income
tax return and thereafter filed a false amended return for
the same year.
An attempt to evade a tax and the payment thereof is
not a continuing offense. While there may be such a
crime in each year for which an income tax is due, once
the attempt has been consummated by the filing of a
false and fraudulent return in any particular year, the
offense has been completed for that year and nothing
done thereafter to carry out the initial unlawful purpose
for such year can constitute a new offense. Such is the
holding in United States v. Johnson, 123 Fed. (2d) 111,
119. (Overruled on other grounds in United States v.
Johnson, 319 U.S. 503.)
It has been the invariable holding of our Courts that
where one files a false and fraudulent return as a wilful
attempt to evade the tax or payment thereof the crime is
complete upon the filing of such return.
7
48 |
State to another and placed them in a safe deposit box
under a fictitious name. Would each of these acts con-
stitute a new and distinct crime? We think not. Under
the law, a violation of Sec. 145b can only take place once
for any particular taxable year.
As stated above, any holding to the contrary would
render nugatory the statute of limitations.
We call attention to two early decisions of our Supreme
Court which have been cited and followed with approval
down to the present time.
In the case of Adams v. Woods, 2 Cranch 336, 2 L.Ed.
297, an action had been brought to recover a penalty of,
$2,000.00 under an Act of Congress prohibiting the carry-
ing on of the slave trade from the United States to any
foreign country. The defendant claimed that more than
two years (the Statute of Limitations) had elapsed from
the time of his carrying on said slave trade. The Gov-
ernment argued (1) that it was not a criminal action
and therefore not governed by the limitation of criminal
actions and (2) that the non-payment of the penalty was
a continuous offense against which the statute did not
run. Chief Justice Marshall delivered the opinion of the
Court and held first, that as it was to recover a criminal
penalty, it was a criminal action. The Court then stated:
‘*In expounding this law, it deserves some con-
sideration, that if it does not limit actions of debt
for penalties, those actions might, in many cases, be
brought at any distance of time. This would be
utterly repugnant to the genius of our laws. In a
country where not even treason can he prosecuted
after a lapse of three years, it could scarcely be sup-
49
posed that an individual would remain forever liable
to a pecuniary forfeiture.’’
Earlier in the decision, the Chief Justice stated as fol-
lows:
‘Almost every fine or forfeiture under a penal
statute, may be recovered by an action of debt as
well as by information; and to declare that the in-
formation was barred while the action of debt was
left without limitation, would be to attribute a ca-
priciousness on this subject to the legislature, which
could not be accounted for; and to declare that the
law did not apply to cases on which an action of
debt is maintainable, would be to overrule express
words, and to give the statute almost the same con-
struction which it would receive if one distinct mem-
ber of the sentence was expunged from it. In this
particular case, the statute which creates the for-
feiture does not prescribe the mode of demanding it;
consequently, either debt or information would lie.
It would be singular if the one remedy should be
barred and the other left unrestrained.’’
In United States v. Irvine, 98 U.S. 450, 25 L.Ed. 193,
the defendant was charged as the agent and attorney of
Mrs. Berkeley with wrongfully withholding from her a
pension in the sum of $500. The facts showed that in
December of 1870 Mrs. Berkeley had demanded her
money and that the defendant had refused to pay her and
had never paid her up to the filing of the indictment in
1875. The defendant pleaded the two year statute of
limitations. In holding that the two year statute applied,
the Court said:
line of reasoning pursued in the cases of Gompers v.
United States, 233 U.S. 604, 58 L.Ed. 1115 and Pender-
gast v. United States, 317 U.S. 412, 87 L.Ed. 369.
returns in 1945 did not constitute a new and distinct
‘‘But whatever this may be which constitutes the
criminal act of withholding, it is a thing which must
be capable of proof to a jury, and which, when it
once exists, renders the party liable to indictment.
There is in this but one offense. When it is com-
mitted, the party is guilty and is subject to criminal
prosecution, and from that time, also, the Statute
of Limitations applicable to the offense begins to
run.
It is unreasonable to hold that twenty years after
this he can be indicted for wrongfully withholding
the money, and be put to prove his innocence after
his receipt is lost, and perhaps the pensioner is dead;
but the fact of his receipt of the money is matter
of record in the pension office.
He pleads the statute of two years, a statute which
was made for such a case as this; but the reply is:
You received the money. You have continued to
withhold it these twenty years; every year, every
month, every day, was a withholding, within the
meaning of the statute.
We do not so construe the Act. Whenever the act
or series of acts necessary to constitute a criminal
withholding of the money have transpired, the crime
is complete, and from that day the Statute of Limi-
tations begins to run against the prosecution.’’
The above authorities have been cited and the same
For the foregoing reasons the filing of the amended
51
crime. The evidenc
established the falsite evidence contended for by the Government
of the amended retd the falsity of the original returns. The filing
we do not admit) coended returns, if false and fraudulent (a fact
pose of enjoying the admit) could only have been filed for the pur-
the original return \Jjoying the benefit of the crime committed when
If guilty of any c% return was filed.
guilty of the offensy of any crime or crimes at all, appellant was
filed the original reithe offense denounced by Sec. 145b when he
was then completed jriginal returns for 1942 and 1943. The crime
his could constitute -ompleted for each of such years and no act of
such years. constitute a second violation of the section for
The Court of App:
by drawing an anahrt of Appeals attempts to uphold its decision
hypothetical set of ip an analogy between the facts at bar and a
successful attempts a] set of facts of where a man makes 366 un-
United States, corre attempts to assassinate the President of the
man would be guiltates, correctly holding that in such instance the
these hypothetical {) be guilty of 366 separate crimes. However,
of the case at bar. othetical facts do not coincide with the facts
Appeals, each atteme at bar. In the case assumed by the Court of
attempted was not ,»-p attempt was unsuccessful in that the crime
filing of the origine was not completed. In the instant case, the
pleted the offense dhe original false and fraudulent returns com-
man had succeeded offense denounced by Sec. 145b. Thus, if the
first attempt, an attsucceeded in assassinating the President on his
stitute acrime. it an attempt to again kill him would not con-
Lastly, the Court:rime.
v. United States, 2744. Court of Appeals relies on the case of Levy
13 Fed. (2d) 923. Isrates, 271 Fed. 942 and United States v. Smith,
tion raised, disews54) 993, In neither of these cases was the ques-
d, discussed or decided that the offense was
——
complete on the filing of the original return. The only
question raised was that a person could not be convicted
for filing a fraudulent return marked ‘‘amended’”’ as the
law did not provide for any such thing as an amended
return.
We submit that the question involved is of paramount
importance and should be decided by this Court. Sec.
145b prescribes a crime that can only be committed once
for any particular income during any particular year.
Il. THE COURT OF APPEALS ERRED IN HOLDING THAT PETI-
TIONER COULD NOT RELY ON THE CORRECTNESS OF THE
AMENDED RETURNS AS PREPARED BY HIS ACCOUNTANT,
AND THAT THE EVIDENCE ESTABLISHED WILFULNESS
AND INTENT TO DEFRAUD.
The Court of Appeals held ‘‘that Norwitt was not
entitled to rely on the income computed by his accountant
when he withheld from him the information whence that
income could have been correctly determined.’’ (R. 519.)
This holding is contrary to the record and to the law.
While it is true that there is evidence given by the Gov-
ernment’s witnesses Washauer (R. 289) and Stephenson
(R. 35) that Norwitt told these parties that all of his
records had been destroyed by fire, there is no evidence
in the record that he so mis-informed his accountant,
Spivock. The record is just the contrary and establishes
that the accountant had made available to him, all of the
existing books and records of Norwitt and the corpora-
tion.
The question involved is not whether Norwitt lied to
the Internal Revenue Agents as to the existence of books
a :
and records, but is whether Norwitt made such books
and records available to his accountant.
Nathan Spivock, the accountant employed by Norwitt
to prepare the income tax returns, called as a Government
witness, testified that Norwitt made available to him such
books and records; that the same were inadequate to
prepare a 100% proper return; that he examined the
records and satisfied himself that a proper return could
not be prepared because they did not contain all of the
necessary information; that some of the records were
spoiled by water damage, the ink had run and you
couldn’t read the writing; that other parts of the records
were singed and partially burned (R. 198); that if he
had had any knowledge of a large group of invoices which
had been unrecorded, he would still have made the returns
on the net worth basis because without all of the records
& proper return could not have been made. (R. 218-19.)
The lower Court’s holding that Norwitt was not entitled
to rely on the amended returns prepared on a net worth
basis because he had withheld certain books and records
from his accountant is thus refuted by the Government’s
own witness. There is no question but what there had
been a fire; there is no question that some of the records
were destroyed and others illegible. There was no evi-
dence to refute Spivock’s testimony that without a com-
plete legible set of records, a proper return could not be
made on either a receipt and disbursement basis or an
accrual basis. The recognized procedure in such cases is
to make a return on a net worth basis.
There is no contention that any assets were withheld
from Spivock or the Government in the computation of
Norwitt’s net worth. Under the circumstances set forth
in our “‘Statement of the Case’’ and as summarized here-
after, Norwitt had the absolute right and was correct in
relying on the computations made by his accountant and
in signing the returns that were presented to him by an
agent of the Internal Revenue Department.
In addition to proof that income tax returns were er-
roneous in not correctly reflecting the taxable income,
there must be proof by the Government that the returns
were filed ‘‘wilfully’’. To establish this latter element,
the Government must prove knowledge of the falsity of
the return and that it was filed with the specific intent
to defraud the Government. (Lurding v. United States
(6th Cir), 179 Fed. (2d) 419, 422; Hargrove v. United
States (5th Cir.) 67 Fed. (2d) 820, 823.) Where a tax-
payer employs a certified public accountant to make out
his income tax return and he signs the same believing
that it is a true and correct representation of his taxable
income, he is not guilty of any crime if the return is in-
accurate or contains an understatement of his taxable
income. (Lurding v. United States (6th Cir.), 179 Fed.
(2d) 419, 421.)
The evidence in this case firmly establishes that the
amended returns filed for the years 1942 and 1943 were
prepared by a certified public accountant after successive
conferences with representatives of the Internal Revenue
Department and were brought to Norwitt for his signa-
ture by a Deputy Collector of Internal Revenue; that
Norwitt had every right to believe that the figures con-
tained in the returns were correct and had been approved
=
not only by his own accountant, but by the Internal Rev-
enue Department. The facts are as follows:
Nathan Spivock, a Government witness, testified: ‘that
in order to prepare the amended returns for 1942 and
1943 he had discussions with Deputy Collectors (R. 199),
as a result of which the net worth method was used. The
discussions covered a month or two. (R. 200.) The
main subject discussed with Washauer and Mohr was the
best way to get the thing straightened out. The Collec-
tor’s Office asked for a financial statement and also re-
quested prior returns for 1939, 1940 and 1941. Spivock
told the Deputy Collectors of the condition of the records
and that it was almost physically impossible to make a
proper return due to the condition of the records and the
element of time. The matter was discussed back and
forth with the Revenue Agents and it was finally agreed
to use the net worth method. (R. 201.)
Spivock further testified that he examined the books
and records of Norwitt and of the General Refrigerator
Corporation; that some were missing; that the ink had
Tun on some; that you couldn’t read the writing on
others; that some were singed and partially burned: that
he discussed this matter with the Deputy Collectors (R.
202); that it was impossible to prepare correct returns
if any of the records were inaccurate or missing; that it
was decided to use December 31, 1944 for determining
Norwitt’s net worth at that date and to start with zero
as of January 1, 1939 (R. 202); that in discussions with
the Collector’s Office, Spivock advised the Collectors that
they would allocate the net worth over the years from
1939 to 1944 putting the smallest amounts of the alloca-
55
tions in the earlier years and the biggest amounts in the
later years (R. 205); that he personally obtained every-
thing possible as to Norwitt’s assets and liabilities in pre-
paring the net worth statement (R. 209); that he figured
out Norwitt’s estimated living expenses (giving the basis
therefor) and took the figures to the Deputy Collector’s
Office and raised them and the final figures were used in
the amended returns.
Harry Stephenson, the accountant in the employ of Mr.
Spivock, testified that in the course of his work he found
a schedule of unrecorded sales which had not been in-
cluded in the original returns. (R. 36.) There were also
some sales of refrigerators which were sold and had
not been included (R. 37); that the information about the
unrecorded sales of refrigerators and the other unre-
corded sales came to him from Mr. Norwitt (R. 38); that
he was present at a conference in the Collector’s Office
in June; that Mr. Washauer and Mr. Mohr were present.
The purpose of the conference was to arrive at figures for
Norwitt’s living expenses which would be satisfactory to
the Government and there was a discussion about the
amount of the estimated living expenses (R. 55-6); that
the returns for the years 1941, 1942 and 1943 were pre-
pared without reference to the original returns and for
the purpose of representing to the Government the full
taxable income for those years; that the amended returns
were prepared upon the basis that the original returns
were not correct. (R. 66.) The net worth system of com-
putation was used for the purpose of representing to the
Government the entire taxable income. (R. 67.)
4g 57
Adolph Washauer testified that the suggestion of a net
worth statement came from Mr. Spivock. (R. 297.) He
testified to meetings with Mr. Spivock on February 6th
and June 4th, 5th, 6th, 12th, 13th, 22nd and 23rd of 1945
(R. 317-18) ; that he made no suggestion to Spivock that a
1944 net worth statement be used (despite the fact that
it was his office that demanded such statement) (R. 325);
that there were discussions with Spivock about living ex-
penses (R. 326) ; that the purpose of the conferences with
Spivock from the time Washauer got the financial state-
ment until June 22nd was that Mr. Spivock wished to file
amended returns for the taxpayer on the basis of net
worth increase (R. 329); that when the topic came up of
Norwitt’s living expenses Spivock suggested a lower
figure; I felt it was too low; then he raised the figure to
a higher figure. (R. 329.) We thought it was too low
so he raised it. (R. 330.)
Washauer further testified that all the returns were
typed in his office and were taken down by his deputy,
Mr. Roder, to Norwitt for Norwitt’s signature. (R. 332.)
Gustave C. Roder called as a witness by the Govern-
ment testified that he was a deputy collector of internal
revenue; that he took the delinquent returns for 1939,
1940 and 1941 and the amended returns for 1942 and
1943 down to Mr. Norwitt’s office and Mr. Norwitt signed
them in his presence (R. 348) ; that Mr. Washauer handed
him the returns on June 22nd and that he, Roder, typed
them up from the handwritten returns (R. 349); that
after typing up the returns he made an appointment with
Mr. Norwitt by telephone and then went to Mr. Norwitt’s
office and that Mr. Norwitt’s wife was present and signed
taxable income for the years involved. Evidence in this
regard which amounted to no more than surmise, assump-
tion, suspicion or conjecture was wholly insufficient to
sustain the Government’s burden of proof. (Garrison r.
United States (5th Cir.), 163 Fed. (2d) 874; Towbin rv.
United States, 93 Fed. (2d) 861.)
Without discussing the facts, the lower Court has as-
sumed that, based upon some method of computation
other than the net worth method, the Government estab-
lished unreported taxable income for the years 1941, 1942
and 1943. There was no competent evidence to establish
such fact. The facts which the Government advanced as
showing the understatement of income are set forth on
page 21 of its brief filed in the lower Court as follows:
‘“*By competent and wholly uncontroverted evi-
dence, the Government proved the appellant’s true
net income for the year 1942 to have been $31,586.76.
This evidence is summarized on pages 2 and 3 of
Government Exhibit 31, as compiled from the testi-
mony of Thomas W. Cleary (R. 138, et seq.); Ger-
aldine Peterson (R. 99, et seq.); Bernard Chirar (R.
105, et seq.); William F. Bobadilla (R. 115, et seq.) :
and Richard Stewart (R. 361, et seq.). This factual
exposition of true net income in the amount of
$31,586.76 need only be compared with the net in-
come reported on the amended return for ine vea>
1942 in the amount of $11,540.74 (Government's Ex.
2), or an approximate understatement of $20,000.00.
By a like method of proof and from the iestimony
of William F. Bobadilla (R. 115, et seq., 235 et seq.);
Robert B. Hatfield (R. 113, et sey.): and bernard
Shirar (R. 105, et seq.), as compiled on pages 4 and
5 of Government’s Exhibit 31, the Government con-
61
clusively proved appellant’s net income for the vear
1943 to have been $32,822.63, whereas on the amended
return the net income was stated to be $28,081.04.
(Government’s Ex. 3.)’’
A mere inspection of the record discloses that the
foregoing computation is without support in the evidence.
Where appellee refers to ‘‘true net income’’ the figures
are referring to ‘‘gross income’’ and not taxable income.
William F. Bobadilla testified as to having added up
certain sales tags which were found in the Mission Street
premises and at Crescent Avenue. (R. 119-122.)
Bobadilla further testified that he didn’t have complete
books from which to make any computation; that he had
the sales register for one or two years (R. 117); and that
he didn’t have a complete set of records to check against;
that he had sales tags and checks and that there was not
sufficient bills or records to make an audit or to verifu
anything. (R. 246-7.)
Thomas W. Cleary testified that of all the records he
eventually acquired, there were some missing parts, par-
ticularly the sales register for 1942 (R. 147); that part of
the ledger sheets for the years 1942 and 1943 had been
reconstructed. (R. 148.) He further testified that, in add-
ing up the sales tags which had been found, for the vear
1941 he found sales totaling $9026.32 that had not been
recorded in the sales register (R. 161): that for the vear
1942 he found a total of $21,830.60 which bore no post-
ing reference to that vear. (R. 164.) He further testified
that he had no sales register for the year 1942 but that he
assumed, because certain tags had checkmarks on them
Le RMT IND
oe
the returns where her signature was necessary. (R. 350.)
When he made the appointment with Norwitt over the
telephone ‘‘I said that I had a few returns which re-
quired his signature which were brought in by his ac-
countant, and that I would appreciate it if he were pres-
ent, together possibly with his wife, so that they could
sign their signatures on the return. ‘Q. Yes. First you
identified yourself to him, told him who were were? A.
Oh, yes, absolutely.’ ’’ (R. 352.)
When I came to Mr. Norwitt’s office he just signed the
returns. I was there about ten or fifteen minutes. (R.
353.) (Here the witness was shown the returns for 1939,
1941, 1942 and 1943 and his attention called to the fact
that in each instance the signature of Freda Norwitt
was signed by Paul C. Norwitt and so appears on the
returns (R. 353-5), that though there were requirements
as to who should sign the returns ‘‘we wouldn’t be very
specific about that ’’; that we would assume the correct
signature was on there. (R. 354.) I stood right there
while the returns were being signed but I had no right
to question Mr. Norwitt. (R. 355.)
From the foregoing it is apparent that Mr. Norwitt
signed the returns under the direction of Mr. Roder;
that Roder identified himself as being connected with the
Collector’s Office of Internal Revenue; that he, the deputy,
had the returns in his possession; that they had been
prepared by Mr. Norwitt’s accountant and that within ten
or fifteen minutes from the time Roder entered Norwitt’s
place of business, Roder left with all the returns signed.
There were eight returns, one each for Paul Norwitt and
Freda Norwitt for the years 1939, 1940 and 1941 and
-
59
joint returns for the years 1942 and 1943. Clearly, Mr.
Norwitt had no opportunity to examine the figures on
these eight returns but, being brought in by a Collector of
Internal Revenue under the circumstances narrated above
and Norwitt having employed a certified public accountant
to prepare these returns, he could not do otherwise than
believe that they were true and correct and had been ap-
proved both as to form and fact by the Internal Revenue
officers.
Under the authorities cited above, there was a total
failure of proof on the part of the Government to estab-
lish any ‘‘wilfulness’’ or intent to defraud on the part of
Norwitt.
Ii. THE OPINION OF THE COURT OF APPEALS IS IN ERROR
IN HOLDING THAT FALSITY OF THE CORPORATE RETURN
AND THE TWO AMENDED RETURNS WAS ESTABLISHED
BY EVIDENCE THAT AMOUNTED TO NO MORE THAN
MERE SPECULATION, ASSUMPTION, SURMISE AND CON-
JECTURE.
The greater part of the Government’s case consisted
of proof directed to the falsity of the original returns
filed for the years 1942 and 1943; that these returns were
inaccurate and understated the taxable income was always
admitted by petitioner. Admission or proof that the
original returns were false and fraudulent could not estab-
lish the falsity of the amended returns. (See United
States v. Johnson (7th Cir.), 123 Fed. (2d) 111.)
The burden was on the Government to establish to a
moral certainty and beyond a reasonable doubt that each
of the returns involved in the indictment understated the
—
e
and others did not, that those without checkmarks repre-
sented sales that had neither been recorded nor reported.
(R. 157, 158.)
Cleary further testified that he found sales tags with
check marks on them that had not been entered in the
books and he also found sales tags with no check marks
on them which had been entered in the books. (R. 180.)
Bobadilla further testified that in going over checks
issued by the General Refrigerator Corporation and Nor-
witt’s personal cancelled checks, he allotted to Norwitt’s
personal living expenses, great numbers of those checks
which appeared to him as being the personal withdrawals
and expenditures of petitioner (R. 124) and which he
therefore allotted to Norwitt’s personal living expenses
(R. 244, 245); that he assumed that Norwitt had taken
the money in cash and deposited the check in the bank
(R. 249); that although there was a possibility that the
money had been paid out in cash and the check drawn
therefor and put in the bank (R. 250), he didn’t adopt
that assumption but adopted the theory against Mr. Nor-
witt. (R. 250.)
Mere proof of gross income does not establish net tax-
able income. Bobadilla testified there was not enough
material to verify or audit any of the invoices or bills
payable by the General Refrigerator Corporation. (R.
247.)
Mere proof of sales and the price thereof is insufficient
to establish net taxable income. (Yoffee v. United States
(Ist Cir.) 153 Fed. (2d) 570, 576.)
63
It necessarily follows that the figures relied upon as
establishing net taxable income were the mere assump-
tions, surmises and speculations of the Government’s wit-
nesses.
“Leaving out of consideration, then, the inference
relied upon, the case for respondent is left without
any substantial support in the evidence, and a verdict
in her favor would have rested upon mere speculation
and conjecture. This, of course, is inadmissible. ’’
Pennsylvania R. Co. v. Chamberlain, 288 U.S. 333,
344, 77 L.Ed. 819, 825.
The Court of Appeals in upholding the convictions has
ignored the presumption of innocence, disregarded the
law that places the burden of proof beyond reasonable
doubt upon the Government and has held that a convic-
tion can be sustained on evidence that amounts to no
more than speculation, surmise and conjecture.
-—_—_———
IV. THE COURT OF APPEALS ERRED IN LIMITING ITS SCOPE
OF REVIEW WHERE INSUFFICIENCY OF THE EVIDENCE
IS INVOLVED AND IN HOLDING THAT THERE WAS PROOF
THAT THE CORPORATE RETURN HAD BEEN FILED BY
PETITIONER OR UNDER HIS AUTHORITY.
At the conclusion of all the evidence in the case, peti-
tioner moved for judgments of acquittal, which motions
were denied. (R. 8.) The motions were made on the
grounds of insufficiency of the evidence to support each
or any count of the indictment. The same questions were
raised on appeal.
This Court has oft announced the law that under the
foregoing circumstances:
64
**A question of law is thus presented, which calls
for an examination of the record, not for the purpose
of weighing conflicting testimony, but only to deter-
mine whether there was some evidence, competent and
substantial, before the jury, fairly tending to sustain
the verdict.’’
Abrams v. United States, 250 U.S. 616, 619, 63 L.Ed.
1173, 1177.
United States v. Socony-Vacuum Oil Co., 310 U.S.
150, 254, 84 L.Ed. 1129, 1184.
The Court of Appeals has ignored the foregoing rule
by holding that there was sufficient evidence to support
the conviction on count one even though there was no
competent or substantial evidence to establish that the
corporate return was ever filed by or under the direction
of petitioner. The Court of Appeals has picked out one
statement made by the Government’s witness Washauer
that the corporate return ‘‘was given to him by Shapro
for filing’’ (R. 509) as being sufficient to establish the
fact.
The evidence relative to the filing of the corporate
return is correctly summarized as follows:
Adolph Washauer testified that in early 1945 he went
to the office of Mr. Shapro, attorney for petitioner, to
receive certain papers relative to the corporation; that
Shapro gave him certain papers among which was the
corporate return for the year 1941 (R. 292); that he
called Shapro’s attention to the fact that the return was
sworn to on October 1, 1941 and that Shapro said: ‘‘ Well,
we forgot to file’’ and that was all that was said (R.
65
294-5); that wher
no discussion as ® Shapro gave him the return there was
gave him the retto why it had not been filed; that Shapro
355); that the rturn as part of the records he had (R.
Shapro but he dreturn was given to him for filing by
305) because it widn’t file it until the following June (R.
Arthur Shapro™*™ t properly sworn to. (R. 305.)
come tax returns’ testified that he never handled any in-
tion (R. 426); tf OT matters for Norwitt or the corpora-
of Mr. Boland oft he first saw the return in the office
told him the eat! the Internal Revenue Department who
records of the ec@@ had been found among some of the
with the Collect poration and that it had not been filed
never had that or’s Office (R. 426); that he, Shapro,
and never delivé®t¥™™ OF any return in his possession
dee end neve pred it to Mr. Washauer or to anyone
should file the acold Washauer or anyone else that they
veument. (R. 423, 424.)
Ralph Mohr, \
oa who accompanied Mr. Washauer to Mr.
Shapro’s office, t . s
: estified that he was present when Shapro
delivered the cor ;
‘porate papers to Washauer and to him:
that he examine the papers and there was no income
tax return ameng thom
John J. Bolang called to refute Shapro’s testimony, did
not deny that th
2 return was in his possession but merely
stated that he hog no recollection about any conversation
about any incom, 4, . return (R. 486) and did not recall
seeing = deling nent tax return for the corporation at
the meeting witl, Shapro. (R. 487.) He further testified
that he did not pave very much recollection about the
meeting at all. (R. 487.)
66
We therefore have a situation where the evidence of
Washauer is itself contradictory, he stating that the re-
turn was given to him for filing; that it was merely given
to him as part of the records that Shapro had; that noth-
ing was said by Shapro about the return as to why it had
not been filed when he delivered the papers to him, ete.
Shapro also testified that he never had the corporate
return and never gave it to anyone for filing.
As we have pointed out above, the circumstances sur-
rounding the signing of the returns are most peculiar.
The eight individual returns were typed in the Internal
Revenue Department’s office and by one of its agents.
They were brought to Mr. Norwitt for signature by Mr.
Roder, an Internal Revenue Agent, and were signed by
Norwitt in front of Roder who made no protest when
Norwitt signed the returns that should have been signed
by Mrs. Norwitt. It is extremely probable that the cor-
porate return was among the returns presented to Nor-
witt for signing by Roder because Ralph Mohr of the
Internal Revenue Department testified that the first time
he saw the corporate return was on the daily reports he
checked for Mr. Roder. It was on the daily copy of June
23, 1945 (R. 491); that a deputy who is collecting soime-
one’s income tax return at the end of the day or the
following day makes a report of that day’s activities
and attaches it to the returns that were involved in those
activities. (R. 493.) It must be remembered that it was
Mr. Roder who made the report referred to by Deputy
Mohr and that it was Roder who took the income tax
returns to Norwitt for his signature.
67
A mere scintilla of evidence is insufficient to sustain
the burden of proof. ( Pennsylvania R. Co. v. Chamberlin,
288 U.S. 333, 343.)
Thus we find Mr. Washauer testifying in various man-
ners as to the return; that it was given to him for filing ;
that it wasn’t given to him for filing; that he received it
in February; that it wasn’t filed until June, ete.
Where a witness testifies in two manners relative to a
particular transaction—that a certain thing did happen
and that a certain thing did not happen—such evidence
is wholly insufficient to Support any claim on the part of
the party who bears the burden of proof. The rule is
correctly set forth by the Supreme Court of California in
the case of Reese v. Smith, 9 Cal. (2d) 324, 328, 70 Pac.
(2d) 933, as follows:
“‘In that connection it should be noted that upon
the issues raised by the pleadings, the plaintiff was
bound to assume the burden of proof and in the end
prevail by a preponderance of the evidence. If the
existence of an essential fact upon which a party
relies is left in doubt or uncertainty, the party upon
whom the burden rests to establish that fact should
suffer, and not his adversary. (Patterson v. San
Francisco ete. Ry. Co., 147 Cal. 178 [81 Pac. 531].)
A judgment cannot be based on guesses or conjec-
tures. (Puckhaber v. Southern Pac. Co., 132 Cal. 363
[64 Pac. 480].) And, also ‘A finding of fact must
be an inference drawn from evidence rather than on
a mere speculation as to probabilities without evi-
dence. A majority of chances never can suffice alone
to establish a proposition of fact, since the slightest
real evidence would outweigh all contrary probabil-
ities. (23 Cor. Jur., sec. 1750, p. 18.)’”’
68
See also:
Leach v. toard of Dental Exammers, 87 Cal. App.
207, 26 Pac. 61.
The Supreme Yourt of the United States has announced
the rule as folloys:
must be arrived at that the Government failed to sustain
“We, theefore, have a case belonging to that class
of cases whre proven facts give equal support to
each of twoinconsistent inferences; in which event,
neither of hem being established, judgment, as a
matter of lay, must go against the party upon whom
rests the neessity of sustaining one of these infer-
ences a8 aginst the other, before he is entitled to
recover. (Cting cases.)
The rule + succinctly stated in Smith v. First Nat.
Bank, 99 Mas. 605, 611, 612, 97 Am. Dec. 59, quoted
in the Des foines Nat. Bank case (C.C.A. 8th) 145
Fed. 273, stra:
“There beng several inferences deducible from the
facts which appear, and equally consistent with all
those facts, he plaintiff has not maintained the prop-
osition upor which alone he would be entitled to re-
cover. Thee is strictly no evidence to warrant a
jury in findng that the loss was occasioned by negli-
gence and iot by theft. When the evidence tends
equally to ustain either of two inconsistent propo-
sitions, neiher of them can be said to have been
established by legitimate proof. A verdict in favor
of the part; bound to maintain one of those proposi-
tions again the other is necessarily wrong.’ ”’
Penn. R.Co. v. Chamberlain, 288 U.S. 333, 339-
340, 77L.Ed. 819, 823.
Applying the ‘oregoing rules to the facts, the conclusion
its burden of proof as to the filing of the corporate
return. In fact, all of the evidence preponderated in
favor of the view that the return was never filed by
Norwitt or under his authority. The mere statement of
Washauer that the return was given to him for filing is
ridiculous. Washauer testified that the return was not
executed by the proper officers; that he received it in
February and did not file it or cause it to be filed until
late in June without giving any adequate explanation for
the long delay.
We submit there was no substantial or competent evi-
dence to support the Government’s contention that the
corporate return was filed by Norwitt or under his author-
ity and that the Court of Appeals has erred in not apply-
ing the foregoing rules and in holding that there was
substantial and competent evidence to establish such fact.
V. THE COURT OF APPEALS IS IN ERROR IN HOLDING THAT
IT I8 STILL THE RULE OF LAW THAT A JUDGMENT WILL
NOT BE REVERSED WHERE A DEFENDANT IS CHARGED
WITH TWO OR MORE OFFENSES AND THE EVIDENCE
SUPPORTS THE CONVICTION ON ANY ONE COUNT AND
THE SENTENCE IMPOSED DOES NOT EXCEED THAT WHICH
MIGHT LAWFULLY BE IMPOSED ON SUCH SINGLE COUNT.
The Court of Appeals, apparently realizing that as to
some counts of the indictment its holding that the evi-
dence was sufficient was subject to question, has relied
upon the rule that a Court need not consider the suf-
ficiency of the evidence introduced as to all counts of an
indictment since the sentence imposed did not exceed that
which might lawfully have been imposed under any single
70
count, and that the judgment must be affirmed if the
evidence is sufficient to sustain any one of the counts.
(R. 524.)
We realize that this rule has been many times an-
nounced by this Court but we believe, under the language
of this Court in Fiswick v. United States, 329 U.S. 211,
220, that the rule should no longer prevail. In the Fiswick
case, Fiswick was sentenced to eighteen months and had
served this time when his case came before the Supreme
Court where it was argued that the matter had become
moot. This Court held to the contrary on the ground
that certain penalties and disabilities attached to the sen-
tence and that Fiswick was entitled to have these removed
even though he had served his time.
In the instant case, Norwitt has been convicted of three
felonies. These convictions deprive him of certain civil
rights and lay him open to impeachment for having been
convicted of three felonies and operate to deprive him of
his rights to procure licenses to operate businesses (he
being presently engaged in the business of selling wines
and liquors which require licenses), ete.
A man may be convicted of three or four offenses all
charged in the same indictment, three of which involve
moral turpitude and one of which does not. The offenses
involving moral turpitude may not have found support in
the evidence but the conviction on all four offenses would
be upheld under the foregoing rule if the evidence sup-
ported and the sentence imposed did not exceed that which
might lawfully be imposed on the count that did not
involve moral turpitude. Of course, a great distinction
oe
71
exists between these two classes of offenses. Offenses
involving moral turpitude carry with them great stigma
and deprivation of rights, while offenses not involving
moral turpitude fall into a different category. Thus, in
California, a lawyer or doctor may be convicted of a
felony and, if it does not involve moral turpitude, can
retain his professional license. If the offense does involve
moral turpitude the conviction carries with it a loss of
such professional license. (In Re Rothrock, 16 Cal. (2d)
449, 106 P. (2d) 907.)
We therefore submit that the rule so oft announced by
this Court requires reconsideration. No man should be
required to go through life bearing the stigma and penal-
ties of several convictions of a felony where as a matter
of law and fact, he has only been guilty of one offense.
Dated, San Francisco, California,
May 6, 1952.
Respectfully submitted,
Leo R. FriepMan,
Attorney for Petitioner.
INDEX
Opinions below
Jurisdiction .....
Questions presented
Statute involved
Statement ........ ; ae oo asks
Argument............ oF canes
Conclusion 5 de ar ee pau
CITATIONS
Cases:
Abrams v. United States, 250 U. S. 616
Borgia v. United States, 78 F. 2d 550, certiorari denied,
296 U. S. 615
Fiswick v. U nited States, 329 U.S. 211
bs Se ae ee aed
Glasser v. United States, 315 U. S. 60
Henderson v. United States, 143 F. 2d 681
Hirabayashi v. United States, 320 U.S. 81
Levy v. United States, 271 Fed. 942
Morrissey v. U a States, 67 F. 2d 267, certiorari de-
nied, 293 U. S. 566
Pasadena Senant Laboratories v. United States, 169
F. 2d 375
Pinkerton v. United States, 328 U. S. 640
Spies v. United States, 317 U.S. p-
United States v. Hall, 52 F. Supp. 796
United States v. Smith, 13 F. 2d 923
Statute:
Internal Revenue Code, Sec. 145 sinth U.S.C. 1946 ed.,
See. 145)
a)
8
NeOwWNNH
~
a
,
Inthe Supreme Court of the Waited States
Octoser Term, 1951
No. 761
Paut C. Norwitt, PeTiTioneR
Vv.
Unirep States of AMERICA
ON PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE NINTH
CIRCUIT
BRIEF FOR THE UNITED STATES IN OPPOSITION
OPINIONS BELOW
The Distriet Court rendered no opinion. The
opinion of the Court of Appeals (R. 506-526) is
reported at 195 F. 2d 127.
JURISDICTION
The judgment of the Court of Appeals was en-
tered on March 12, 1952. (R. 527.) The petition
for rehearing was denied on April 14, 1952. (R.
528.) The petition for a writ of certiorari was
filed on May 10, 1952. The jurisdiction of this
(1)
2
Court is invoked under the provisions of 28 U.S.C.,
1254(1). See also Rules 37 (b)(2) and 45(a) of
the Federal Rules of Criminal Procedure.
QUESTIONS PRESENTED
1. Whether, after an admittedly false return
has been filed, the additional filing of a false and
fraudulent amended return constitutes an attempt
to defeat and evade a tax under Section 145(b)
of the Internal Revenue Code.
2. Whether the evidence was sufficient to sustain
the verdict.
3. Whether, after a finding of guilty on a three-
count indictment, a general sentence not exceed-
ing the sentence which might have been imposed
on each count should be upheld if the evidence sus-
tains conviction on any one count.
STATUTE INVOLVED
Internal Revenue Code:
Sec. 145. PEeNALTIEs.
(b) Failure to Collect and Pay Over Taz,
or Attempt to Defeat or Evade Tax.—Any per-
son required under this chapter to collect, ac-
count for, and pay over any tax imposed by
this chapter, who willfully fails to collect or
truthfully account for and pay over such tax,
and any person who willfully attempts in any
manner to evade or defeat any tax imposed by
this chapter or the payment thereof, shall, in
a |
additic! to other penalties provided by law, be
guilty { a felony and, upon conviction thereof,
be fine: 20t more than $10,000, or imprisoned
for noj™ore than five years, or both, together
with ti ©oS8ts of prosecution.
* 7 * 7
(26 U>C- 145.)
STATEMENT
Petition? 5 indicted on August 16, 1950, in
the Di strie Ot for the Northern District of Cal-
tia a hree counts. Count one charged that
ni “ilfully attempted to defeat and evade
petitioner of the taxes due and owing by the Gen-
a large Par ator Corporation for the fiscal year
eral Refrig, 1941, by filing and causing to be filed
ended July fraudulent tax return wherein he al-
a false @Mhe net income of the corporation was
leged that that the tax due thereon was $47.08,
$317.05 aD, net income of the corporation was
whereas tl), which the tax due was $2,990.24.
$9,905.68 1
(R. 3-4) o charged that petitioner wilfully at-
Count tevade and defeat a large part of the
tempted te due and owing by him and his wife
income tax 1949 by filing a false and fraudulent
for the yeie tax return wherein he stated that
joint ineohet income for the calendar year was
their jointnd that the tax due thereon was $2,-
$11,540.74 eas their joint net income for that year
731.48, whé.76 and the tax due was $12,744.37.
was $30,8(
(R. 4-5.)
a
4
Count three charged that petitioner wilfully at-
tempted to evade and defeat a large part of the in-
come and victory tax due and owing by him and
his wife for the year 1943 by filing and causing to
be filed a false and fraudulent joint income and
victory tax return wherein he stated that their
joint net income for the calendar year was $28,-
081.04 and that the tax due thereon was $11,760.88,
whereas their joint net income for that year was
$46,805.43 and the tax due was $24,010.50. (R.5-6.)
The court below found that the tax return of the
General Refrigerator Corporation, which forms
the basis of the first count in the indictment, was
prepared in 1941 by William McIntosh, a public
accountant, and turned over by him to the peti-
tioner. (R.360.) The corporate return was signed
by the petitioner, as president, and by Marco Nor-
witt, the petitioner’s brother, as vice president.
(R. 509.) The return, although prepared in 1941,
was not filed until June 23, 1945. (R. 509.) It
was first submitted to Adolph Washauer, Division
Chief of the Office of the Collector of Internal Rev-
enue at San Francisco, California, in May, 1945, by
Arthur P. Shapro, attorney for petitioner. At the
time the petitioner’s attorney, Arthur P. Shapro,
first submitted the 1941 corporate return to Mr.
Washauer, he said: ‘“‘Well, we forgot to file.’
Sometime later, Nathan Spivock, the petitioner’s
accountant, borrowed the return, but later returned
it. (R. 508-509.) Arthur P. Shapro had given the
return to Adolph Washauer for filing. (R. 509.)
a
5
Although the return was filed on June 23, 1945, the
jurat is dated June 25, 1945. (R. 509.)
The tax returns, which form the basis for counts
two and three, were both filed on June 23, 1945.
These were amended returns. Original returns
had been filed for the calendar years 1942 and 1943
on April 15, 1943, and March 15, 1944, respectively.
(R. 509-510.)
The evidence produced by the Government
showed that the amended returns were prepared
under the following circumstances: In the spring
of 1945, prior to March 15th, the petitioner em-
ployed Nathan Spivock to prepare the petitioner’s
and his wife’s income tax returns for 1944. Harry
J. Stephenson, an employee of NatHan Spivock,
handled most of the details. In the course of his
work Mr. Stephenson learned that certain rental
- income had been omitted from the original returns
filed for 1942 and 1943 and recommended that
amended returns be filed for those years. Mr.
Stephenson also learned that the petitioner had
engaged in business as the General Refrigerator
Corporation and requested the records of that
venture. The petitioner advised Mr. Stephenson
that the records had been destroyed by fire. (R.
510-511.) Nathan Spivock was also advised by pe-
tioner that part of his records were destroyed by
fire. (R.198.) In the absence of records the peti-
tioner’s amended returns for 1942 and 1943 were
prepared by use of the net worth method of ac-
counting. (R. 199-215.) Mr. Spivock obtained the
net worth information from the petitioner after
6
explaining to tae petitioner the necessity of obtain-
ing complete end accurate information. (R. 43-
44.) From th: information supplied by the peti-
tioner, Mr. Stephenson prepared the amended re-
turns which were filed for 1942 and 1943. (R. 39,
42.) Each of the amended returns contained the
following statement: ‘‘It is not possible to obtain
exact figures or details because the taxpayer’s rec-
ords were destroyed by fire in 1943.’ (R. 512.)
The petitioner also advised Adolph Washauer and
Ralphe Mohr that all of his records, the refrigera-
tor company’s as well as his own, had been burned.
(R. 511.)
The Government produced evidence that all of
the petitioner's records had not been destroyed by
fire. Early in February, 1945, Adolph Washauer
and his assistant, Ralphe Mohr, visited the peti-
tioner’s former place of business and had exhibited
to them five or six corporate books belonging to the
old company. In November, 1945, Special Agent
Thomas W. Cleary visited the former offices of
petitioner and saw “‘a pile of records, canceled -
checks, sales invoices.’ Shortly thereafter, the
special agent, together with Deputy Collector Wil-
liam F. Bobadilla, Robert Farrell and Ralphe
Mohr, again visited the petitioner’s former office
and obtained the records. The records consisted of
correspondence, purchase invoices, a few balance
sheets and accountant’s balance sheets. During
this last visit R. W. Pfeiffer, manager of the new
company, advised that he had called the petitioner
several times but tha the petitioner had not come
a 7
to pick up the records. (R. 512-513.) Subse-
quently, in March, 1946, Special Agent Cleary un-
earthed four cardboard boxes of sales slips in the
basement of a residence at 32 Crescent Avenue,
San Francisco, California. (R. 142-143.) This
residence had formerly been occupied by the peti-
tioner. (R. 51-52.) Thereafter, in October, 1947,
the petitioner, at the request of Special Agent
Cleary, submitted the rest of his books. (R. 513.)
The sales invoices found by the special agent repre-
sented sales made by the petitioner during the
three years involved in this case and which were
not posted to the petitioner’s sales register. (R.
513.) A large majority of these sales invoices were
in the handwriting of the petitioner. (R. 395,
401.) The records disclosed that credit sales had
been posted to the sales register and that all of
the larger cash sales, «uch as those found in the
invoices located at 32 Crescent Avenue, were not
posted at all. (R. 155.) Additional testimony
was adduced to the effect that sales had been made
by the petitioner for which there were neither sales
tags nor book recordation. (R. 513.)
By use of the records obtained during the inves-
tigation, the Government was able to reconstruct
the petitioner’s corrected income. The Govern-
ment’s computation of income of the General Re-
frigerator Corporation for the fiscal year ended
July 31, 1941, and the personal income of the peti-
tioner, which were not recorded in his books and
records but which were reflected by the sales in-
voices and other evidence, far exceeded the income
| q
reported in the corporate return and the original
and amended returns for the calendar years 1942
and 1943. The evidence showed a tax deficiency by
the corporation for the fiscal year ended July 31,
1941, in the sum of $2,943.16 and a tax deficiency of
$10,486.54 and $3,173.85 with respect to the returns
filed for the calendar years 1942 and 1943, respec-
tively. (R. 412-422.)
A motion for acquittal was made at the close of
the case and was denied. (R. 8.) A verdict of
guilty was returned as to each count by the jury on
March 30, 1951. (R. 8-9.) A motion for new trial
was denied on April 10, 1951. (R.11.) The court
sentenced the petitioner to imprisonment for a pe-
riod of one year on each count, to run concurrently,
and imposed a fine of $10,000 and costs of $796.12.
(R. 11-12.)
On appeal the judgment was affirmed. (R. 527.)
ARGUMENT
1. In effect, petitioner contends with respect to
Counts 2 and 3 that since he filed inaccurate orig-
inal returns he cannot be charged with wilful at-
tempted evasion based on the filing of false and
fraudulent amended returns. The gist of the crime
of tax evasion is the wilful attempt to evade and
defeat. The attempt may be committed, in the
language of the statute, ‘‘in any manner’’. The
petitioner was charged with having attempted to
evade tax by the filing of false and fraudulent re-
turns. The fact that these returns were not the first
ones filed by petitioner is immaterial. An offense
rT
with respect to the original returns filed for the cal-
endar years 1942 and 1943 was not in issue. The is-
sue before the jury was whether the petitioner had
filed false and fraudulent amended returns in his
attempt to evade tax. Such acts constituted a proper
basis for an evasion charge. In Levy v. United
States, 271 Fed. 942, 943 (C.A. 3d) the court said:
9
While amended or corrected income tax re-
turns may not be prescribed by the statute,
they are nevertheless allowed and received by
the Treasury Department in the administra-
tion of the Income Tax Law, and on such re-
turns taxes are assessed by the Commissioner
of Internal Revenue. When so assessed, these
are the taxes which under the law are charged
against and collected from the taxable.
See also United States v. Smith, 13 F. 2d 923
(W.D. La.), and United States v. Hall, 52 F. Supp.
796 (D. Conn.).
2. As noted above, the means of attempted eva-
sion was the filing of false and fraudulent returns.
There was persuasive evidence of understatement
of net income and consequent tax deficiencies.’
‘For example, the Government proved that the records
maintained by the petitioner did not contain all sales: that
sales invoices, the majority of which were in the handwriting
of petitioner and had been secreted in a former residence of
the petitioner, had not been made a matter of record; that the
petitioner had available or under his control adequate records
from which proper returns could have been made; that the
petitioner falsely advised his accountants and the Government
representatives that his records had been destroyed by fire;
that the petitioner concealed from his accountants the exist-
ence of his records; that the petitioner failed to make a com-
plete disclosure of his books and records to his accountants
12
stands convicted are identical. The possible loss
of civil rights would be the same whether he were
convicted on one count, two, or three.
CONCLUSION
The decision of the court below is plainly correct
and presents no conflict. The petition for a writ
of certiorari should be denied.
Respectfully submitted,
Pur B. PERLMAN,
Solicitor General.
E.uis N. SLack,
Acting Assistant Attorney General.
MEYER ROTHWACKS,
ARTHUR B. CUNNINGHAM,
Special Assistants to the Attorney General.
JUNE, 1952.
W uv. &. GOVERNMERT PRINTING OFFICE. 1982 neces = 808
_
’ CERTIOR
_ ee eee
ws
Sey
10
From all of the circumstances in the case, the jury
was entitled to draw an inference of wilfulness
and was not foreclosed by petitioner’s alleged re-
liance on his accountants in view of the evidence
that he withheld vital information from them.
Spies v. United States, 317 U. 8. 492, 499.
Petitioner particularly urges that the evidence
was insufficient to establish that he filed or caused
to be filed a false and fraudulent return for the
corporation, as charged in count one of the indict-
ment.? Although the facts surrounding the execu-
tion and filing of this return are far from clear,
there was ample testimony from which the jury
could find that petitioner did file or cause the
fraudulent corporate return to be filed.’
and knew that in the absence of records the accountants
determined his income by the net worth method of accounting,
which net worth information was supplied the accountants
by petitioner.
2 In the court below, petitioner argued that the fact that he
was no longer an officer of the corporation at the date the
corporate return was filed absolved him of responsibility.
Apparently he no longer relies on that argument in this Court.
In any event, the Court found that the evidence indicated
that petitioner had in fact sworn to the returns in 1945 when
they were filed, so that he purported to act for the corporation
at that time and, moreover, he had a transferee’s interest in
the corporation tax (R. 515-516).
3 William McIntosh testified that he had been employed
by the petitioner in 1941 to prepare the tax return for the
General Refrigerator Corporation for the fiscal year ended
July 31, 1941 (R. 357), and that he prepared the return and
delivered it to the petitioner. (R. 360.) Adolph Washauer
testified that Arthur P. Shapro, the petitioner’s attorney,
submitted the return to him (Washauer) in May, 1945, for
filing. (R. 295.) He testified further, that Nathan Spivock,
the petitioner's accountant, asked that the return be turned
back to him for assistance in preparing the amended returns;
that this was done and that he resubmitted the return; that the
11
The verdict of the jury must be sustained if there
is substantial evidence, taking the view most fa-
vorable to the Government, to support it. Glasser
v. United States, 315 U. 8. 60; Henderson v. United
States, 143 F. 2d 681, 682 (C. A. 9th): Pasadena
Research Laboratories v. United States, 169 F. 2d
375 (C. A. 9th) ; Borgia v. United States, 78 F. 2d
550 (C. A. 9th), certiorari denied, 296 U. 8. 615;
Morrissey v. United States, 67 F. 2d 267 (C. A.
9th), certiorari denied, 293 U. S. 566.
3. The basis of petitioner’s objection to the gen-
eral sentence is not clear, since the court below
found that the evidence adduced at the trial was
sufficient to sustain the verdict with respect to each
of the three counts. Moreover, the sentence im-
posed did not exceed that which might have been
imposed with respect to any single count. The
judgment in this case should be affirmed, therefore,
even if the evidence was insufficient to convict as to
one or two counts. Abrams v. United States, 250
U. S. 616; Pinkerton v. United States, 328 U.S.
640, 642; Hirabayashi v. United States, 320 U.S.
81, 85. The case of Fiswick v. United States, 329
U. S. 211, relied upon by petitioner, is inapposite.
It is no authority for the novel proposition ad-
vanced that conviction on all three counts here may
deprive petitioner of certain civil rights if he is
guilty with respect to only one count. (Pet. Br.
69-71.) The felonies of which the petitioner now
corporate @ urn was filed on June 23, 1945 (R. 295-296) ;
that the corporate return was given to him (Washauer) for fil-
ing by Arthur P. Shapro. (R. 305.)
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.