Petition for Writ of Certiorari — McFee v. United States

7) * FILED

MAY 2 7 1955

IN THE

Supreme Court of the United States

Ocrosper TERM, 1954

Austin F. MoF x, Petitioner,

v.

Untrep States or America, Respondent,

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Expen MoF'arianp,

618 Southern Bldg.,

Washington 5, D. C.,

Counsel for Petitioner.

I ESTO ARISE

Press or Byron S. Avams, Wasuincton, D. C.

INDEX

Page

Opinions Below .....-..+.+eeeeee eee eeeee seer eseeees 1

Jurisdiction 2.6.6... cee cece e ee cee e eee ee cece eens 2

Questions Presented for Review ..........++++++++: 2

Statute Relied On .........ce cee cece ee eeeeeeeeees +

Statement .........- na Pesiewsh cvodwes ebb eeniae ewes 4

The ‘‘Likely Source’? ..........seeeeeeeeeeeeeees 5

Opening Net Worth ..........seeeeeeeeeeeeeeees 7

Further Brrors ........cccces cc cecccccecwccces 10

Reasons for Allowance of the Writ..........++eee+s li

1.The Government Did Not Establish A Likely

Source of Unreported Currently Taxable Income 11

9. The Government Did Not Establish, With Reason-

able Certainty, an Opening Net Worth .......... 15

(a) The Government Agents Failed to Track

Down the Lead as to the Existence of the

$114,000 Item ....... cece eee e cece eee eeee 17

(b) There is no Substantial independent Evi-

dence Corroborating Appellant’s Alleged

Statement that the $114,000 Item Repre-

sented a Turnover ..........-eeeeeeeeeeees 20

(c) The Government’s Investigation of Peti-

tioner’s Financial History Prior to 1942 Was

Wholly Inadequate ...........-.0++++eeee 21

3. The Trial Court Erred in Its Comment and in Its

Instructions or Charges to the Jury .........--- 22

4. Further Clarification of the Practical Application

of the Principles Announced in Holland v. United

States Is Needed ........... cece eeee eee eeeeeee 25

NE a ugg Se Rw CROSS eRe S POR EU PES ereS 29

li Index Continued

Appendix: App. Page

Casges Crrep

Bernard Bloch vy. United States, —— F. (2d) —~—

(No. 14266, 9 Cir. Apr. 11, 1955..................

Friedberg v. United States, 348 U. 8S. 142, 75 S. Ct.

138, EN is eo sw ones Sei ahek | 25, 27, 28

Holland v. United States, 348 U. S. 121, 75 S. Ct. 127,

cee 4 | EOE eee eee ee: 5, 11, 13, 14, 15, 17,

19, 22, 23, 24, 25, 26, 28

Opper v. United States, 348 U. S. —, 75 S. Ct. 158,

nee Oe are et 20, 21

Smith v. United States, 348 U. §. 147, 75 S. Ct. 194,

MME a oN LA cick sicsd cack, 19, 20, 21, 26, 27, 28

United States v. Calderon, 348 U. S. 160, 75 S. Ct. 186,

oe ES See nae 26, 27, 28

United States v. Lawrence L. Rice (E. D. Va., Jan. 14,

1955), —— F. Supp. —,, 55-1 USTC 9274........ 12

Wardlaw v. United States (5 Cir.), 203 F. (2d) 884. .24, 25

Statutes Crrep

United States Code, Title 26, Section BEE Siwhs ois 4

United States Code, Title 28, Sec. BOER esa vs baa 2

NN a ko 2

Rule 37(c) of the Rules of Criminal Procedure for the

United States District Courts ...................

IN THE

Supreme Court of the Anited States

Octroser Term, 1954

No.

Austin F. McF rr, Petitioner,

Vv.

Untrep States or America, Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Petitioner prays that a writ of certiorari issue to review

the judgment of the United States Court of Appeals for

the Ninth Cireuit, which, upon remand by this Court for

futher consideration, affirmed his conviction for violation

of section 145(b) of Title 26, United States Code.

OPINIONS BELOW

The per curiam opinion of the Court of Appeals is not

yet reported. It is set forth in the appendix hereto p. 1.

24, 1953, is set forth at page 444 of the printed record

rior opinion of the Court of Appeals, entered Juiy

2

filed with this Court in No. 15, October Term, 1954, and is

reported at 206 F’. (2d) 872.

JURISDICTION

The judgment of the Court of Appeals was dated and

entered April 29, 1955. The jurisdiction of this Court is

invoked under sections 1254(1) and 2101(d) of Title 28,

United States Code and Rule 37(c) of the Rules of Criminal

Procedure for the United States District Courts, and Rule

22(2) Rules of the Supreme Court of the United States.

QUESTIONS PRESENTED FOR REVIEW

1. Did the Government establish petitioner’s business

as a ‘‘likely source’’ of unreported income where the

business operations in question were carried on entirely

by employees in five different loeations in four widely

separated cities, and where all collections of money from

such business were made and deposited in bank by en-

ployees and duly recorded by them in the books of account,

and such books were carefully reconciled by other em-

ployees and thereafter by an expert accountant who in-

cluded such amounts in petitioner’s income tax returns,

and where there was no evidence showing or tending to

show that petitioner received, or had the opportunity to

receive, or had any other means of access to any of the

proceeds or assets of such business prior to due recorda-

tion thereof on the books of account?

(a) Where there was no evidence from which a jury

could reasonably find that petitioner’s alleged net worth

increase came from a source capable of producing un-

reported taxable income, can it be assumed that such net

worth increase was attributable to taxable income?

(b) Where the suspected source of petitioner’s alleged

unreported increase in net worth was a business carried

on entirely by employees, and where the petitioner could

not have obtained unrecorded income from such source

3

without collusion with one or more employees, and where

there is no evidence from which a jury could reasonably

find that there was any such collusion and where the evi-

dence affirmatively shows that there was none, can it be

said that the Government established such business as be-

ing a ‘‘likely source’’ of unreported income?

2. Did the Government establish, with reasonable cer-

tainty, an opening net worth?

(a) Was the Government’s investigation of petitioner’s

prior financial history adequate where it made no investiga-

tion whatever of the period prior to 1935, nor of the period

1936-1941, inclusive, except to determine his reported net

taxable income for such period, without allowance for or

investigation of gross income or non-taxable income such as

capital gains, depreciation, or collection of prior accounts

receivable during such period, or of other capital assets

on hand during said period?

(b) Was the Government’s failure to include as an asset

any portion of an item of $114,000 known to exist in 1943

erroneous?

3. Was the Government’s investigation inadequate in

that it failed to track down a ‘‘lead’’ with respect to the

$114,000 item which, if investigated and included in peti-

tioner’s opening net worth, would have accounted for more

than petitioner’s entire alleged net worth increase for the

first year of the indictment period?

4. Where the inclusion or non-inclusion of the proceeds

of the $114,000 item was a vital element in the establish-

ment of an opening net worth, and where such proceeds

were not included because the investigating agents said

that petitioner had told them the $114,000 item represented

the sum total of a ‘‘turnover’’, was it necessary to

require the Government to introduce substantial independ-

ent evidence which would tend to establish the trustworth-

iness cf the alleged statement?

4

5. Where the Government did not establish a likely

source of unreported taxable income, was in incumbent

upon the accused not only to establish that the suspected

source was not a likely source, but also to demonstrate

to a mathematical certainty, by the production of temporary

records, that his witnesses on this issue had told the

truth?

(a) Was it error for the trial court to tell the jury

that they were entitled to draw an adverse inference from

the failure of the accused to thus verify the truth of the

testimony of his witnesses who had stated that all income

from the suspected source had been truthfully recorded?

6. Was the charge of the trial court on the subject of

presumptive intent prejudicially erroneous?

STATUTE RELIED ON

The statute under which petitioner was prosecuted reads

as follows:

Section 145(b), Title 26, United States Code:

‘‘Any person * * * who willfully attempts in any

manner to evade or defeat any tax imposed by this

chapter or the payment thereof, shall, in addition to

other penalties provided by law, be guilty of a felony

and upon conviction thereof, be fined not more than

$10,000, or imprisoned for not more than five years,

or both, together with the costs of prosecution.”’

STATEMENT

Petitioner was convicted in the United States District

Court for the District of Idaho, upon an indictment under

section 145(b) of the Internal Revenue Code (1939),

26 USC 145(b), charging that petitioner willfully and

knowingly attempted to defeat and evade income taxes

for the years 1945 and 1946. On appeal the United States

Court of Appeals for the Ninth Circuit affirmed 206 F.

(2d) 872. Petition for certiorari was granted and the case

—"

5

remanded for consideration in the light of Holland v.

United States, 75 S. Ct. 127, and three other related cases

(75 8. Ct. 311). The United States Court of Appeals again

affirmed, per curiam (p. 1, Appendix post).

The Government’s case was premised upon the theory

that petitioner’s net worth increased during the prosecu-

tion period years (1945 and 1946) in amounts of $79,911.23

and $69,769.76, respectively, in excess of his reported tax-

able income, and that such increases were attributable to

taxable income.

The “Likely Source”

Petitioner lived at Wallace, Idaho. The suspected source

of the alleged unreported income was petitioner’s coin ma-

chine business operated under the name of North Idaho

Sales Company. The main office of the Company was

located at Wallace, Idaho, with branch offices at Coeur

d‘ Alene, some 51 miles west, and at Lewiston, Idaho, some

175 miles southwest of Wallace. The coin machines, con-

sisting of phonograph machines, vending machines, pin-

ball machines, and slot machines, were placed in various

locations in or centered around these three cities.

Collections were made entirely by employees, each of

whom testified. A summary of the testimony with record

references is set forth in the appendix hereto p. 1 post.

Petitioner himself never made any collections. Each col-

lector had a specifie collection route. He alone had the

keys to the various coin boxes along his route. There

were no master or duplicate keys. If a key was lost the

lock had to be drilled. Petitioner did not have a key. Each

collector was provided with a collection book. Each book

was serially numbered and charged to the collector. The

pages of each book were numbered in triplicate sets. The

collector would visit each location unlock the coin box of

each machine, take out the cash, count it in the presence

of the location owner, record it in the collection books in

triplicate and turn over one-half to the location owner,

as the latter’s share. The location owner would sign the

6

collection page sheet as a receipt and would receive a car-

bon copy. All collections were turned in to the cashier or

bookkeeper of the nearest company office who would verify

the cash against the collection books, record the figures on a

daily report record, deposit the cash in bank, and trans-

mit the duplicate deposit slips and the daily report and

the collection book to the main office at Wallace. There

the collection book was again checked by the bookkeeper

at Wallace, balanced against the bank deposits and entered

in the Company’s permanent books of account.

The books of account were turned over monthly to an

independent expert (R. 62) accountant at Wallace who

verified their accuracy and entered them in a general ledger

which he kept.

During the first six months of the year 1945, petitioner

also operated three taverns, one at Athol, Idaho, one at

Coeur d’Alene, known as the Foresters Club and one at

Lewiston, Idaho, also known as the Foresters Club. The

tavern at Athol was sold in the summer of 1945 and the

one at Coeur d’Alene was sold a month or two later. The

one at Lewiston was operated throughout the prosecution

period years. These taverns likewise were operated solely

by employees, one of whom was the manager. All sales

were rung up on the cash register, the cash was balanced

daily against the register tape and recorded on a daily re-

port sheet with the cash register tape attached, and the

cash was banked by employees. The daily report and

duplicate deposit slips were sent to the main office at Wal-

lace, checked and balanced by the bookkeeper, and entered

in the permanent books of account, and at monthly inter-

vals were verified by the expert accountant at Wallace and

entered in the general ledger kept by him. The expert ac-

countant, called as a witness for the Government, testified

that he prepared petitioner’s tax returns, that such re-

turns correctly reflected the income shown by the books of

of account (R. 69, 76), and that petitioner could not have

withdrawn money from the Company without due recorda-

tion thereof on the books of account (R. 76, 71).

7

A summary of the testimony of the tavern managers

and the bookkeepers is set forth, with record references,

in the appendix p. 4 post.

There is no evidence in the case in conflict with the fore-

going facts. The Government agent testified that he had

no knowledge as to the source of the alleged unreported

income (R. 242). He merely assumed that it was income

because he did not know where it came from (R. 250-254).

Opening Net Worth:

In making their investigation for the purpose of setting

up an opening net worth, the Government Agents’ exami-

nation extended back to the year 1942 (R. 280). During

the course of their investigation Agent Rice said they came

across an item which he referred to as an ‘‘item at issue

related to 1943’’. ‘‘* * * it was somewhere around $114,000

e* #9) (R. 263).

In 1943, due to war restrictions, aleoholic beverages were

in short supply. In order to supply his own taverns and

various other tavern owners where his coin machines were

located, petitioner and one R. E. McDonnell (or McDonald

—ef. R. 113 and R. 307) purchased approximately $114,000

worth of liquor from Herman Pastor in St. Paul, Minne-

sota in 1943 (R. 163, 307, 324). The transaction was handled

through McDonnell who had a State liquor warehouse stamp

or license (R. 307). The original payment to Pastor made

in July 1943 was about $70,000 (R. 313). Additional pay-

ments of $23,340 and $26,600 were paid to Pastor. Of this

total petitioner advanced $109,940. All payments were in

eash (R. 288). The first shipment of 475 cases was re-

ceived by petitioner on August 6, 1943 (R. 311) and accord-

ing to the Government, petitioner was reimbursed therefor

by the North Idaho Sales Company check for $25,300 issued

on that date (R. 318). This was not taken into account as

an asset (R. 287).

After four shipments had been received, petitioner paid

for and received seven additional shipments the last deliv-

8

ery being about December 29, 1944. The account was closed

out October 6, 1945.

From time to time as needed the liquor was turned over

at cost plus expenses to various tavern owners, but chiefly

to petitioner’s Foresters Clubs at Lewiston and Coeur

d’Alene, and petitioner was reimbursed from time to time

from these sources for his original cash outlay. The retail

sales were reflected in the gross sales of petitioner’s tav-

erns and duly included in gross income. Petitioner made

no further investment in this operation other than his

original $109,940. By the end of 1944 he had received in

cash $62,338.81, $2,500 of which was banked. In 1945 he

received $14,323.65 additional cash, he paid $7,400 to the

bank on his note and he paid $3,000 to Sonduck all from

this source. His net cash receipts from this source was

$87,062.46.

The entire transaction showing investment, the source

and disposition of each case of liquor from each shipment

and each payment to petitioner is shown in the 73 page

account, a photostat of which is on file with the Clerk

of this Court.

The Government Agents discussed this item with peti-

tioner (R. 288) who said he believed all profits were re-

flected on the Foresters Clubs books of account. They

were. But petitioner’s acquisition of the liquor from

Pastor was handled as a personal transaction and was not

reflected on the Company books. He used his separate cash

therefor, and was subsequently reimbursed after the liquor

was delivered.

When the Government Agent made up petitioner’s open-

ing net worth statement for January 1, 1945, he omitted all

assets derived from this $114,000 item which existed in

1943, because he said they did not show up on the books of

the North Idaho Sales Company. The Government Agent

said he ‘‘followed the books”? and he gave no credit for

this item in his opening net worth computation (R. 288).

The purchases of liquor from petitioner by the Foresters

9

Clubs was shown on the books of account of those two

clubs, but those books, kept by Emasio, were entirely sepa-

rate from the North Idaho Sales Company books (R. 75).

The agent sought to justify his position by stating (1)

that they had evidence of from 5 to 7 loads coming from

the east and (2) that petitioner had told them it was a

‘*turnover’’ (R. 288). Being a ‘‘turnover’’ he included

none of it.

The cash available to petitioner on January 1, 1945, from

this source alone was $86,528.59.* This was more than

enough to completely exonerate petitioner for the year

1945, and leave a balance of $6,617.36.

$71,172.64 thereof was received by petitioner from the

Foresters clubs during 1943, 1944 and 1945. These pay-

ments for inventory were reflected on the books of account

of those clubs. These books of account were in the pos-

session of Emasio (R. 75) who was a Government witness.

There is no evidence that the agents examined these books

to trace down this item of $114,000. Lucile Dolan, mana-

ger of the Coeur d’Alene office of the Company during the

period of investigation was familiar with these purchases

of inventory from petitioner (R. 364, 367-368). She

checked out the inventory and verified the payments to pe-

titioner. There is no evidence that she was interviewed

by the agents concerning this transaction. R. E. MeDon-

nell was the man who actually handled the entire $114,000

transaction in 1943 (R. 307). The Government agents knew

McDonnell was involved in the transaction, because the

Government called him as a witness to testify concerning

OPA fines growing out of it. Yet the Government pro-

duced no evidence showing that it had interviewed McDon-

nell concerning it. There is no evidence showing that this

item was adequately investigated. If it was investigated,

the information, favorable to the petitioner, was discarded

or suppressed.

* See affidavit of John N. Newland to which the photostat of the

account of the ‘‘$114,000 item’”’ is attached.

10

Further Errors:

In addition to the failure of the Government to include

the $86,528.59 available from the $114,000 item, the Gov-

ernment Agents made the following errors in their net

worth computation.

1. They failed to take into account as an

asset, the $25,300 which was paid to peti-

tioner on August 6, 1943, by North Idaho

Sales Company in reimbursement to him

of his cost for the first shipment of liquor

(R. 318). $25,300

2. They included as income $10,000 in cash

paid to J. A. Allen to purchase stock (R.

140-142, 244). This payment was not in-

come. It was made with money borrowed

from John H. Mahoney (See Appendix p.

7, post) $10,000

3. They included as income a cashiers check

of $3,000 payable to Walter T. Murphy

(R. 91-92, 116, 244, Ex. 18). Murphy was

attorney for Iva Ensign who sold a tavern

to O. M. Gunderson. Gunderson borrowed

the money from North Idaho Sales Com-

pany who bought the cashiers check with

its own check to the bank. See Appendix

p. 8 post for photostat of checks. $ 3,000

4. The Government Agents failed to include

as assets $32,484.33 representing a savings

account in petitioner ’s name and an account

receivable (see affidavit of John N. New-

land, supra) $32,484.33

These errors, together with the $6,617.36 excess from 1945,

total $77,401.69 which is more than enough to exonerate

petitioner for the year 1946.

11

REASONS FOR ALLOWANCE OF THE WRIT

1. The Government Did Not Establish a Likely Source of

Unreported Currently Taxable Income

The decision of the Court of Appeals is in conflict with

the decision of this Court in Holland vy. United States, 348

U. S. 121, 75 S. Ct. 127, 136, — L. Ed. —, in that

there is no evidence in this case from which a jury or 4

court could reasonably infer that the alleged net worth

increase came from a probable or likely source capable

of producing current income.

In Holland v. United States, supra, 75 8. Ct. at p. 136,

this Court said:

‘© * * * Increases in net worth, standing alone, cannot

be assumed to be attributable to currently taxable

income. But proof of a likely source, from which

the jury could reasonably find that the net worth in-

creases sprang, is sufficient.’’

Government Agent Olsen said they included the unex-

plained net worth increase as taxable income but that they

did not know where it came from (R. 242, 244, 250-251).

They merely assumed that it was current income.

The suspected source of the alleged net worth increase

was petitioner’s coin machine business. The Government’s

ease was premised upon that theory. But there is no

evidence from which a jury or court could reasonably find

that petitioner received or had the opportunity to receive

as much as one penny of unreported income from such

source, or from any other source, during the prosecution

period.

The testimony of the Government Agents Olsen and

Rice contains not one word tending to show any source.

The only Government witness remotely touching on the

point was Masterson (R. 203, et seq.). He was a colleetor

working for petitioner out of Wallace. His testimony is

summarized in the Appendix, p. 2 post. There is nothing

in his testimony showing or tending to show that peti-

——

12

tioner received or had access to or had the opportunity

to receive, any amount of unrecorded collections. The

testimony of petitioner’s witnesses Bergland (R. 295),

Sherman (R. 334), Fields (R. 347), Parsons (R. 355),

Whitaker (R. 300), Dellyea (R. 325), Dolan (R. 360) and

Poska (R. 399), summarized at p. 2 et seq. in the

Appendix, shows that petitioner himself never made any

collections (R. 348). He did not have a key to the machines

(R. 299, 357). There was no master key (R. 299). No col-

lections were ever turned over to him (R. 298, 350, 357).

They were all collected, deposited in bank, verified and

entered in the permanent books of account by employees,

and included in petitioner’s returns.

Petitioner’s operations were carried on in 5 different

locations in three widely separated cities. Petitioner is

an older person, having been in business some 15 or 20

years prior to 1985 (R. 281). It is reasonable that his

business would be carried on by employees.

According to the testimony of the various Government

witnesses petitioner spent $54,000 between January 26 and

June 27, 1945, almost entirely in currency. He loaned

$37,500 to Sonduck between those dates (R. 169-170),

$5,000 to Arnold (R. 144) and paid $11,500 to the Dan

Mac Lease partnership (R. 161-162); and between June

27th and December 31, 1945, he spent $25,000 more in

currency. For 1946 he is alleged to have spent $74,000

more, all of which was included as unreported income.

lt would have been utterly impossible for a taxpayer

whose business operations were carried on solely by em-

ployees, and whose books of account were kept solely

hy employees, and whese collections and banking was han-

dled solely by employees to withhold or obtain such sizeable

amounts continuously and repeatedly throughout a two

year period without someone somewhere learning about it

and without leaving a single trace of evider-e concerning it.

In this ease, as was held in United States v. Lawrence L.

Rice (E. D. Va., January 14, 1955), — F. Supp. —

’

—

13

55-1 USTC 9274, where the accused could not have obtained

unrecorded income without the knowledge and connivance

of employees, and where there was no suggestion of any

such knowledge or connivance, there was a failure to show

a likely or probable source of unreported income.

This Court has indicated that in net worth cases, the

trial court and appellate courts should be alert to the rea-

sonable inferences available both for and against the

accused. Holland v. United States, supra, 75 8. Ct. at

page 132. Up to the present time no court has been alert

to the inferences ‘‘for’’ this accused.

There was substantial direct evidence of the existence

of cash on hand (R. 394-395, 332, 304, 307). Yet the Gov-

ernment Agents completely omitted cash on hand as an

opening net worth asset (App. p. 10 post).

Is it not more reasonable to infer that petitioner had

substantial cash assets on hand at the beginning of 1945

than it is to conjecture that in some unknown and mysteri-

ous manner petitioner was able to obtain $150,000 in nickels

and dimes and quarters out of coin machines and to convert

it into currency without any employee or anyone else

knowing about it? Had there been any such practice, the

Government Agents surely would have discovered some

trace of it.

Or if it must be assumed that petitioner had the ability

to obtain unrecorded income surreptitiously, did he not

have the same ability in 1942, 1943 and 1944 when the same

business was operated in the same manner? The business

prospered during those years.

The petitioner was convicted on mere suspicion. There

was no evidence of any action taken by him or course of

conduct during the prosecution period inconsistent with

his complete innocence of the offense charged.

The Government could not and did not show a likely

source of currently taxable unreported income because

there was no such source. The actual source, subsequently

diseussed herein, was primarily from the proceeds of the

**$114,000 item’’ which existed in 1943.

14

The Government’s failure to show a ‘‘likely source’’

had the practical effect of shifting the burden of proof

to the petitioner, for when the trial court denied his motion

for judgment of acquittal, it became necessary for him

to establish that the suspected source was not a likely

source.

This, we submit, was contrary to this Court’s pronounce-

ment in Holland v. United States, supra, 75 8S. Ct. at p.

137, to the effect that the Government has the burden of

proof to establish beyond a reasonable doubt each element

of the offense charged.

Petitioner assumed the burden and affirmatively estab-

lished by his witnesses referred to above (see also appendix

p. 1 post) the utter impossibility of the suspected source

being the actual source of the alleged net worth increase.

But the trial court made the burden doubly onerous by

its comment to the jury to the effect that petitioner should

have produced his temporary collection book records (which

his witness Poska had testified had been turned over to

him only after verification and recordation in the perma-

nent books of account—R. 399) in order to demonstrate

to a mathematical certainty that his witnesses had told

the truth (R. 417).

In other words under this Court’s pronouncement in

Holland v. United States, supra, 75 8. Ct. at pp. 136, 137,

the Government, which has the burden of proof, may sus-

- tain its burden by merely showing a ‘‘likely source’’ but

under the charge of the trial court, the defendant’s proofs

negativing the existence of a likely source, must at the risk

of an adverse inference be established to a mathematical

certainty.

The Government did not establish a ‘‘likely source’’ of

the alleged net worth increase attributable to currently

taxable income. In this respect the decision of the Court

of Appeals affirming the judgment of the trial court is in

conflict with the decision of this Court in Holland v. United

States, supra.

—

15

2. The Government Did Not Establish, With Reasonable

Certainty, an Opening Net Worth

The decision of the Court of Appeals is in conflict with

the decision of this Court in Holland v. United States,

supra, 75 8. Ct. at p. 134, in that, in the present case, the

Government did not establish with reasonable certainty,

an opening net worth.

There is no question but that the Government Agents

erred in not including any part of the proceeds of the

‘*$114,000 item’’ in their opening net worth computation.

Under any theory, even under the ‘‘turnover’’ theory

adopted by the Government, at least the original down

payment part of this amount should have been included.

The exact amount which should have been included as an

asset in the opening net worth computation is shown in

the photostat of the 73 page account of this transaction

on file with this Court. The account of this transaction

ties in so accurately with the bank records and other evi-

dence in this case, that its authenticity is beyond question.

For example petitioner’s loan record at the Idaho First

National Bank, admitted as Government Exhibit No. 16,

and reproduced at page 11 post, shows the following

bank payments, al! of which were charged against peti-

tioner as taxable income namely,

Feb. 5, 1945 $1,400

Mar. 1, 1945 1,500

Mar. 19, 1945 1,000

Apr. 10, 1945 1,000

May 14, 1945 2,500

Total $7,400

16

The ‘‘eash account’? portion of the ‘$114,000 item”

account on file with this Court shows the following:

1945

2/5 Banked $1,40

3/1 Banked 1,5

3/19 Banked 1,000

4/10 Banked 1,000

5/14 Banked— Note

in full 2,5

Total $7,400

The two independent sets of records, one kept by the

bank and the other kept by petitioner, tie in together

perfeetly.

The same ‘‘cash account’’ also shows $2,000 to J. Son-

duck on June 9, 1945, and $1,000 on July 23, 1945. These

payments tie in with the Government’s proofs of the loans

to Senduck (R. 169-170), based on the records of Sonduck

& Sehwenk Lumber Company.

These items could not and did not represent income.

Their source is traceable directly to this capital asset or

‘‘eash’’ account which was not an income account.

The complete omission of these assets growing out of

the ‘*$114,000 item’’ was erroneous. This omitted source

alone was more than sufficient to completely exonerate peti-

tioner for 1945.

The real problem, however, is whether the state of the

record is such as to justify the failure of the Government

Agents to inelude this item or its proceeds as an asset in

their opening net worth computation. If the agents were

justified in their omission then it might be said that the

burden of going forward with the evidence on this issue

shifted to the defendant.

_————

17

(s) The Government Agente Failed to Track Down the Lead as to

the Existence of the $114,000 Item

This Court indicated in Holland v. United States, supra,

75 8. Ct, at p. 135 that the Government Agents using

the net worth method should use reasonable diligence to

track down leads as to the existence of substantial assets.

In the present case the Government Agent Rice said

(R. 263):

«« * * * also another item at issne related to 1943.

We could not account for something in excess of

$100,000.00 which had been made for merchandise, as

I recall the figure it was somewhere around $114,000.00

but I am not certain of that exact amount. Mr. McFee

explained at that time that the money for the mer-

chandise could be accounted for he believed through

the Foresters Club at Lewiston and Coeur d’Alene.’’

On cross examination Rice testified that petitioner told

him this item could probably be accounted for on the

Foresters Club books, that it related to the purchase of

whiskey, and that the #114,000 represented a total sum

of a turnover (R. 288). Rice said they nad evidence of

from 5 to 7 loads coming from the east.

(1) The amount paid to petitioner by the Foresters

Club at Lewiston for its liquor inventory was $18,461.21

in 1943, $2,546 in 1944, and $6,915.95 in 1945, a total of

$27,923.14. The amount paid to petitioner by the Foresters

Club at Coeur d’Alene for its liquor inventory was $20,137

in 1943, $18,985 in 1944 and $4,127.50 in 1945, a total of

$43,249.50, all in reimbursement of petitioner’s original

investment. The portions of the account marked ‘‘For-

esters of America, Lewiston, Idaho’’ and ‘‘Foresters of

America Coeur d’Alene’’ on file with this Court show these

payments in detail.

These items totalling $71,172.64 had to be on the For-

esters Club’s books of account because they were items

of cost to these clubs. Otherwise their net sales and net

18

taxable income would have been overstated by $71,172.64

over the three year period involved.

The revenue agents knew the items represented liquor

inventory to the Foresters Clubs. All they had to do to

verify the existence of this substantial asset was to exam-

ine the Foresters Clubs records of inventory purchases for

these years all of which were under investigation. The

agents had access to these accounts and records (R. 75).

If they had needed additional information or verification

they could have interviewed Lucile Dolan, who was the

manager of the Coeur d’Alene office of the North Idaho

Sales Company during the entire period of this liquor

transaction, and was still there when the Government

Agents conducted their investigation (R. 360, 367). She

was familiar with these purchases of inventory from peti-

tioner (R. 364, 367-368). She checked out the inventory

and verified the payments to petitioner (R. 368).

Or they could have interviewed the managers of these

clubs, Whitaker (R. 300) and Delyea (R. 325).

R. E. McDonnell was the man who actually handled the

entire liquor transaction in 1943 (R. 307). The Government

Agents knew this, for McDonnell was called as a Govern-

ment witness to establish the payment of the O.P.A. fines

growing out of the same transaction (R. 113).

Here was an item sufficient to completely exonerate

petitioner for the year 1945 and probably for 1946 also in

view of other substantial demonstrable errors. Petitioner

told them exactly where they could have traced at least

$71,172.64 thereof. Yet there is not one word of evidence

in the Government’s proofs showing that they attempted

to run down this important lead except that agent Rice said

they had evidence of from 5 to 7 loads or shipments coming

from the east, that the money was all paid in cash and

that petitioner told them it was a turnover (R. 288).

The information about 5 to 7 loads is at most a neutral

element. There necessarily would have been several loads

if the entire amount of the ‘‘$114,000 item’’ had been paid

19

ina lump sum. The original $109,940 investment actually

required 5 loads as shown by the account of the transaction

on file with this Court.

Moreover, even under the ‘‘turnover’’ theory the origi-

nal payment constituted an asset completely ignored by

the Government Agents.

In Holland vy. United States, supra, 75 S. Ct. at p. 135,

this Court said:

‘** * * When the Government fails to show an in-

vestigation into the validity of such leads, the trial

judge may consider them as true and the Government’s

case insufficient to go to the jury. This should aid in

forestalling unjust prosecutions, and have the practical

advantage of eliminating the dilemma, especially seri-

ous in this type of case, of the aceused’s being forced

by the risk of an adverse verdict to come forward

to substantiate leads which he had previously furnished

the Government. It is a procedure entirely consistent

with the position long espoused by the Government,

that its duty is not to convict but to see that justice

is done.’’

It is inconceivable that the Government Agents did not

take these simple investigative steps. But if they did,

they suppressed this information favorable to the peti-

tioner in order to bring about a conviction.

This case falls squarely within the letter and spirit of

the above quoted precept of this Court. Petitioner submits

that this is an additional reason for granting the writ, for

the decision of the Court of Appeals is not in accordance

therewith.

(b) There is no Substantial Independent Evidence Corroborating

Appellant's Alleged Statement that the $114,000 Item Repre-

sented a Turnover

In speaking of the necessity of corroboration of state-

ments of the accused by independent evidence, this Court

said, in Smith v. United States, 348 U. S. 147, 75 8. Ct.

194, 199, — L. Ed. —:

20

‘It is the practical relation of the statement to the

Government’s case which is crucial, not its theoretical

relation to the definition of the offense.’’

In the present case the entire $114,000 represented an

asset unless it was a ‘‘turnover’’, which is surely a prac-

tical relationship.

In Smith v. United States, supra, 75 8. Ct. at page 199,

this Court also said:

‘All elements of the offense must be established by

independent evidence or corroborated admissions.’

The establishment of the opening net worth was a vital

element in the proof of the offense.

In Opper v. United States, 348 U. 8S. —, 75 8. Ct. 158,

164, — L. Ed. —, this Court, speaking of corroboration,

said:

‘(Tt is necessary, therefore, to require the Government

to introduce substantial independent evidence which

would tend to establish the trustworthiness of the

statement.”’

In the present case the only evidence supporting the

‘“tarnover’’ theory produced by the Government was

Agent Rice’s statement (1) that they had evidence of from

5 to 7 shipments or loads and (2) that petitioner told them

the $114,000 item represented a ‘‘turnover.’’ As pointed

out above, the ‘‘5 to 7 loads’’ is a neutral element. It is

entirely consistent with a lump sum payment, for such a

large payment of necessity would require several shipments.

This crucial element of proof therefore rested primarily

on petitioner’s alleged ‘‘turnover’’ statement. It is e@X-

tremely doubtful if petitioner ever made such a statement,

for it was not true. The turnover came about only after

$89,533 worth of whiskey paid for in the original payments,

had been shipped and received.

The only other evidence on the point was that of Me-

Donnell, a witness produced by petitioner. He testified

3

—

21

that the $114,000 was a lump sum amount of which peti-

tioner advanced $102,700 to him (R. 307, 324), and that

his first purchase from this fund was a $70,000 payment in

St. Paul (R. 310) in July 1943.

There was no independent corroboration of the alleged

‘‘turnover’’ statement of the petitioner. Petitioner sub-

mits that this is an additional reason for granting the

writ, for the decision of the Court of Appeals ignoring this

important requirement, is in conflict with the above quoted

precepts of this Court announced in Opper v. United States,

supra, and Smith v, United States, supra.

(c) The Government's Investigation of Petitioner's Financial History

Prior to 1942 Was Wholly Inadequate

Petitioner contends that $75,000 of the amount comprising

his cash fund on hand in 1943 can be traced to his sub-

stantial business activities extending back for a score of

years prior to 1935. This period prior to 1935 not investi-

gated by the Government Agents at all, because, they said,

“That was hearsay.’’ (R. 281)

The only evidence of petitioner’s financial history from

1936 through 1941 was the amount of his annually reported

net taxable income. No tax returns or books of account

were produced for this period; there was no evidence of

gross income, or of non-taxable capital gains, or of depre-

ciation (which must have been substantial in view of the

nature of his business and which represented a non-taxable

return of cash). There was no investigation of his assets

on hand during this period. There was no evidence of any

financial embarrassment or financial shortage during this

period. On the contrary, it was a period of prosperity.

From 1936 through 1944 petitioner’s reported net taxable

income totaled $342,178.98 (R. 274).

The Government Agents merely assumed that his

reported net taxable income represented his net worth for

this six-year period, a violent assumption obviously errone-

ous. For example in the year 1945 petitioner with a net

22

taxable income of $25,163 realized a total of $31,007 of

non-taxable cash or amounts receivable, not reflected in

net taxable income, resulting from the non-taxable portion

of capital gains, and the non-taxable return of capital—

non-taxed because it represented a return of cost or other

basis. All such practical and realistic considerations as

depreciation, capital gains, and returns of capital common

to petitioner’s business, were ignored by the Government

Agents for the entire period prior to 1942, in setting up

their opening net-worth computation.

Thus we have a situation where petitioner’s sustantial

financial history prior to 1935 was completely ignored, the

investigation of his financial history between 1936 and

1942 was wholly inadequate and was demonstrably errone-

ous, and for the period 1942-1944 an item of $114,000 was

arbitrarily discarded in toto. The government’s opening

net worth computation was clearly erroneous, and its

accuracy was not established with reasonable certainty,

as required by this Court in Holland v. United States,

supra,

3. The Trial Court Erred in Its Comment and in Its

Instructions or Charges to the Jury

(1) The trial court made the following comment to the

jury (R. 417):

“TI don’t want to comment on the evidence but

there is one outstanding matter that you are left in

the dark about, I don’t intend to make any inference

about it, as the evidence here is solely for you. But

where are the tickets that should show the receipts

and division of the money taken from the slot machines

or the years 1945 and 1946. There was only one of

these books of tickets introduced in evidence by the

defense. None of the witnesses bookkeeper, manager

or other witnesses for the defense produced these

tickets and all said they had no knowledge of these

tickets. The tickets were traced to the possession of

defendant McFee. It seems to the Court that if the

tickets balanced with the bank account that it would

23

have been an easy matter for the defense to produce

the tickets if they have not been destroyed. Why

were they not produced to show the receipts of the

slot machines for these years.’’

The comment was excepted to (R. 424). The court then

told the jury that they, and not he, were the judges of

the inference to be drawn from petitioner’s failure to

produce the temporary collection-book records referred to.

The court’s comment was particularly unwarranted and

prejudicial.

Prior to being turned over to petitioner the collection

book records had been checked, verified as to accuracy,

balanced against bank deposits, and entered in the perma-

nent books of account (R. 399). Government witness,

Masterson (R. 204) and petitioner’s witnesses Bergland

(R. 295), Sherman (R. 334), Fields (R. 347), Parsons (R.

355), Whitaker (R. 300), Dellyea (R. 325), Dolan (R. 360),

and Poska (R. 399) had definitely established the method

of operation of petitioner’s business solely by employees,

and the meticulous care taken in verifying all collections

against bank deposits, and in recording such collections in

the permanent books of account. (See Appendix p. 2 post

showing a summary of this evidence). The court told the

jury, in effect, that despite all of such testimony, the peti-

tioner could have demonstrated the truth of such testimony

to a mathematical certainty if he had produced the collection

books; and that petitioner’s failure to do so was an ‘‘out-

standing’’ circumstance from which they were entitled to

draw an adverse inference.

This evidence related solely to the issue as to the existence

of a ‘‘likely source’’ of income. The Government, which

has the burden of proof, may sustain its burden merely

by showing a ‘‘likely source’’ of unreported taxable income.

Holland v. United States, supra, 75 S. Ct. at p. 136. It is

not required to show the actual source. Much less is it

required, at the risk of an adverse inference if it does

not do so, to demonstrate to a mathematical certainty that

24

its witnesses were telling the truth. Holland v. United

States, supra, at p. 137. But under the trial court’s com-

ment to the jury, the accused in this case was required

not only to establish the absence of a likely source, but he

was required also to establish to a mathematical certainty

that his witnesses, who had testified under oath, had told

the truth.

Both trial and appellate courts should be alert to the

reasonable inferences both for and against the accused.

Holland v. United States, supra, 75 S. Ct. at p. 132. Both

the trial court and the appellate court in this case have

been alert to the inferences for the Government and against

the accused; but the converse is not true.

The comment of the trial court was highly prejudicial.

Its action and that of the appellate court in approving

such action, is contrary to the precepts of this Court stated

in Holland v. United States, supra, referred to above.

(2) The trial court instructed or charged the jury as

follows (R. 419):

‘“The presumption is that a person intends the natu-

ral consequences of his acts, and the natural presump-

tion would be if a person consciously, knowingly or

intentionally did not report all his taxable income for

the years 1945 and 1946 and thereby the government

was cheated or defrauded of taxes, that he intended

to defeat the tax.

‘*Bona fide mistakes should not be treated as false

returns or as a willful attempt to evade the payment of

income tax; however, the duty to file the return is

personal and it cannot be delegated, and no man who

is able to read and write and has the mentality to

understand business transactions and who signs a tax

return should be allowed to escape the responsibility

of good faith and ordinary diligence as to the correct-

ness of the return which he signs, whether prepared by

himself or somebody else.’’

The foregoing charges clearly incorporate the theory of

presumptive intent. In Wardlaw v. United States (5 Cir.),

25

203 F. (2d) 884, a similar charge, almost identical in

wording with the first paragraph quoted above was held to

warrant reversal.

There was no exception to this charge in the present

ease. But in the recent case of Bernard Bloch v. United

States, — F. (2d) — (No. 14,266, decided by the Court

of Appeals for the Ninth Circuit on April 11, 1955), the

appellate court, of its own motion, and without exception

thereto having been made, noticed the error and held that

substantially the same instruction or charge was preju-

dicially erroneous, and reversed the conviction. This

question was raised in the Court of Appeals in this case.

Petitioner submits that the prejudicial comment to the

jury and the erroneous charge to the jury, referred to

above, provide additional reason for the allowance of

the writ.

4. Further Clarification of the Practical Application of the

Principles Announced in Holland v. United States Is

Needed

In Holland v. United States, supra, this Court announced

certain precepts and admonitions concerning the use of

the net worth method in criminal prosecutions. In that

and the associated cases, the convictions were sustained

because the proofs conformed thereto. This Court has

not decided any case where a conviction resulted from a

failure to observe and apply those standards. This is

such a case. If the teachings of Holland v. Unitted States

may be disregarded arbitrarily or by misinterpretation by

the lower courts, the danger of unjust convictions is not

minimized, and the administration of justice in this com-

paratively broad field of application becomes a matter of

personal interpretation rather than one of general con-

formance to the applicable principles announced by this

Court. The decision of the Court of Appeals in this case

evidences a need for further clarification.

This case is distinguishable from Holland v. United

States, supra; Friedberg v. United States, 348 U. 8. 142,

26

75 S. Ct. 138, — L. Ed. —; Smith v. United States, 348

U. 8S. 147, 75 S. Ct. 194, L. Ed. —, and United States

v. Calderon, 348 U. S. 160, 75 S. Ct. 186, — L. Ed. —,

in the following specific particulars:

In the Holland case the books of account were shown

to be erroneous (75 S. Ct. p. 136). In the present case

there was not a single error of any kind shown on the

books of account. The books were kept by employees and

verified by an expert accountant (R. 62) who prepared the

iax returns and testified that the returns correctly reflected

the books of account (R. 69) and that the records were

carefully checked by him and reconciled with the bank

deposits (R. 65, 66, 68, 75, 80).

In the Holland case there was ‘‘evidence of a con-

sistent pattern of under reporting large amounts of income

and of failure on the petitioner’s part to include all of

their income in their books and records (idem. p. 137). In

the present case there is no such evidence. Petitioner even

overpaid his 1944 income tax (R. 290). Petitioner did not

have anything to do with the books of account. Everything

was handled by employees who took meticulous care to

record all transactions.

In the Holland case the Hollands claimed they had a

hoard of over $100,000 in $100 bills. But the Government

showed that subsequent to the claimed time of existence

of the hoard the taxpayers endured a series of privations

which negatived the existence of such a hoard. They lost

their cafe business, accumulated $35,000 in debts which

were never paid, lost their household furniture because

of an unpaid balance of $92.20, suffered a default judgment

for $506.66, were forced to separate for eight years be

cause it was to their economic advantage, and that Mrs.

Holland had to support herself and their son by working,

that improvements in the hotel during the proseention pée-

riod were paid in installments (idem. p. 134).

In the present case there was some evidence of privation

in 1935, but there was a remarkable degree of financial

27

success thereafter. Up to 1945 petitioner had reported

over $342,000 in income. Petitioner contends that he had

cash on hand of at least $102,700 in July 1943 (R. 307).

There is no evidence that shows or even tends to show that

he endured any privations after 1935 or that he had any

unpaid debts or judgments against him or that he did any-

thing that he reasonably would not have done if he had

actually had that amount of cash.

The evidence in the present case does not contain any of

the many elements which were relied upon in the Holland

ease as indicating a ‘‘likely source’’ of unreported income

daring the prosecution period.

In the Friedberg v. United States, supra, 75 8. Ct. 138,

the issue of a ‘‘likely source’’ was not discussed. But the

Government did show in that case that during a long

period of years priov to 1941, during which time Friedberg

elaimed to have accumulated $60,000 in cash, he too experi-

enced a continuous and repeated series of privations and

financial reverses.

In the present case subsequent to his short period of

cash shortage in 1935 petitioner enjoyed phenomenal suc-

cess financially. He endured no privations subsequent to

1935 or subsequent to 1943 when he claimed the existence

of his cash fund.

Smith v. United States, supra, 75 S. Ct. 194, involved

primarily the question of corroboration of admissions. The

aceused himself bad given the Government’a signed net

worth statement which admitted his understatement of

taxable income. There was no net worth statement given

by the petitioner in the present case.

United States v. Calderon, supra, 75 S. Ct. 186, the

primary question was one of corroboration. Calderon

had given the Government agents a net worth statement,

which, in effect, admitted the existence of currently unre-

ported taxable income. This Court pointed out that

Caideron’s own testimony, claiming a larger amount of

eash on hand at the beginning of prosecution period still

28

was not sufficient to account for the unreported income

for even the first prosecution year (idem. at p. 190).

In the Calderon case the records were shown to be in-

complete, the coin machine receipt books were not num-

bered, some receipt books appeared to be lost or misplaced

prior to recordation, and apparently Calderon had access

to the proceeds of the machines prior to their recordation

(idem. at p. 189).

In the present case every receipt book was numbered,

all collections were made by employees, all cash collected

was checked and balanced agains{ the receipt books by

employees, and deposited in bank and recorded on the

books of account by employees. The books of account were

accurately and correctly kept and audited and none of

the receipt books were lost or destroyed prior to recordation

on the books of account. The evidence also affirmatively

shows that no amounts were turned over to petitioner prior

to their recordation in the permanent books of account.

In the Calderon case this Court, also pointed out that

proof that the taxpayer was impoverished in 1935 was too

remote to substantiate the opening net worth statement

absent adequate proof of taxpayer’s financial circum-

stances in the intervening years (idem. p. 188).

In the present case the proof of impoverishment also

related back to 1935. As pointed out above, the Govern-

ment’s proofs concerning petitioner’s finances during the

intervening years was deficient in several important re-

spects, and the evidence produced showed a highly suc-

cessful intervening financial history.

The important elements relied upon to sustain the con-

victions in the Holland, Friedberg, Smith and Calderon

cases, supra, are absent in the present case. This case

presents an opportunity for clarification of its prior deci-

sions which would be helpful in the administration of

justice.

29

CONCLUSION

For the foregoing reasons petitioner respectfully submits

that this petition for writ of certiorari should be granted.

Evpen MoF'ar.anp,

Counsel for Petitioner.

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APPENDIX

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

No. 13,482

Apr. 29, 1955

Austin F. McF zr, Appellant,

vs.

Unrrep States or America, Appellee,

Appeal from the United States District Court for

the District of Idaho, Northern Division.

Before Maruews, Heary and Orr, Circuit Judges,

PER CURIAM.

As required by the Supreme Court’s order of January

10, 1955, 348 U.S. 905, we have considered this case in the

light of Holland v. United States, 348 U.S. 121; Friedberg

v. United States, 348 U.S. 142; Smith v. United States,

348 U.S. 147; and United States v. Calderon, 348 U.S. 160,

and have concluded that our decision of August 24, 1953,

206 F. 2d 872, was correct. The District Court judgment

is, therefore, again affirmed.

_(Endorsed:) Per Curiam Opinion. Filed Apr. 29, 1955.

Paul P. O’Brien, Clerk.

Summary of Evidence as to a “Likely Source”

Government Agent Olsen testified that the source of the

“unexplained expenditures’? was unknown (R. 242, 244).

He admitted that they could have come from prior cash on

hand (R. 254) or from prior earnings except that the

agents had not located any such source (R. 250, 253). They

assumed, because they did not know the source that it

was taxable income. Agent Olsen testified (R. 250):

2

**Q. When you testified that the expenditures in

1945 and 1946 were in excess of the income—of the

reported income, you implied that those expenditures

were paid out of taxable income?

‘*A, That is correct.’’

Government witness, Masterson was the appellant’s coin

machine collector for the Wallace district (R. 210) which

included Shoshone County in Idaho and Avery in Montana

(R. 204). The collectors used collection books showing

each location, the total amount collected, and the amount

turned over to the proprietor of the location—which was

50 per cent (R. 205). The pages in the books were in

triplicate. Each book was numbered and each page was

numbered, and each set of triplicate pages bore the same

page number (R. 209). The proprietor of the location

signed the original page verifying the total ‘‘take’’ and

his ‘‘split’. The top copy was kept by the collector

together with the second copy—which was a carbon copy.

The third copy—also a carbon copy was given to the

location owner (R. 205-208). The collector deposited the

collections in bank with the book number noted on the

deposit slip (R. 210). The deposit slip would have to

balance with the collections shown on the book (R. 210).

The books and the duplicate bank deposit slips were turned

over to the bookkeerer in the company office (R. 206). The

bookkeeper checked the books against the bank deposit

slips and reconciled them with the books of account and

after they had been completely checked turned them over

to appellant (R. 398-399). There was no showing that

appellant had access to or ever collected or received one

penny of coin machine collections prior to their deposit

in bank and recordation on the books of account. It was

all done by employees.

The remaining witnesses on this point were called by the

appellant.

Edward Bergland was the coin machine collector at

Lewiston, Montana (R. 195). His testimony was similar

3

to that of Masterson. He had the keys for all machines

(R. 296). The location owner was always present when

the collections were made and verified the correctness by

his signature (R. 296). The collections were rechecked

against the collection books, balanced with the cash and

turned over to the company bookkeeper in Lewiston, who

made the deposit in bank (R. 297). No money was ever

turned over to appellant (R. 298). Appellant did not have

a key to these machines (R. 299), and there was no master

key.

Leonard Sherman’s testimony was similar. He had been

the manager of the Coeur d’Alene office of the North Idaho

Sales Company for the past ten years (R. 334) and he

made the coin machine collections for the Coeur d’Alene

area (R. 334). The collection book. verified by the locatio.:

owner, was brought back to the branch office at Coeur

d’Alene, turned over to the office girl, checked and verified

as to accuracy by both of them and banked by the office

girl (R. 335-336). The coin machines included phonographs,

pinball machines and slot machines (R. 346, 352).

Richard Fields was a route supervisor at Wallace, who

supervised the purchase and records for the phonographs,

suppoles and other equipment. He also made coin machine

collections (R. 347). His testimony was similar to that

of the other collectors. All of his collections were balanced

against the collection books and he deposited the collections

in bank to the credit of the North Idaho Sales Company

(R. 348-349). He had the keys to the machines most of

the time (R. 348). Appellant never made any collections

(R. 348). No collections were ever turned over to appel-

lant (R. 350). Appellant had no ‘*personal’’ machines

(R. 353).

Charles Parsons was a collector out of Lewiston, Idaho,

throughout 1945 and 1946 (R. 355). His testimony was

similar to that of the other collectors. All collections were

turned over to the company office girl, counted, checked

against the collection books, and deposited in bank by her