Brief for the United States in Opposition — Jones v. United States (No. 558)

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C0 a ah, | eR ILED

MAR 3 1961

JAMES 8. BROWNING. Cler*

‘No. 658

3 he Siren Gan of he United Sintes

Ooroser Term, 1960

" SamuEL G. Jongs, SR., PETITIONER

, 1, a

| Unrrep StaTes OF AMERICA ~*

ON PETITION yor 4 WRIT OF CERTIORARI TO THE UNITED

STATES CQURT OF APPHALS FOR THE FOURTH OIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

Attorneys,

Depurtment of Justice, Washington 25, D.C.

bil My SRY ARS IM 5 ee D.

“agen appr a

CITATIONS

United States v. Johnson, 319 U.S: 503.....--

United States v. Nunan; 236 F. 2d 576, certio-

United States v. Riccardi, 174 F. 2d 883, cer-

tiorari denied, 337 U.S. 941____._______--

Statutes:

Internal Revenué Code of 1939, Sec. 145(b)

Internal Revenue Code of 1954, Sec. 7201 (26

U.S.C. 7201)... - Rot aie hed cok wares

Miscellaneous: -

Federal Rules of Criminal Procedure:

Re hohe ae ceean oe eee

Rule — paves wees eouse rere

585866—-61 (1)

rari denied; 353 U.S. 912......-----------

(26 U.S.C. 1952 ed., Sec. 145(b)) -. 2 ----_-

Ie Sgreme ur of he Wed Sites

| OcToBER TERM, 1960

No. 558

Samvutt G. Jones, Sk., PETITIONER

v.

Unrrep SraTss or AMERICA

ON PETITION FOR A WRIT OF CBRTIORARI TO THE UNITED

; STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

. BRIEF FOR THE UNITED STATES IN OPPOSITION

| 4

_ OPINION BELOW —

The opinion of the Court of Appeals (Pet. la—4a)

is reported at 282 F. 2d 745. 2

| JURISDICTION ~ .

_ The judgment of the Court of Appeals was entered

on October 10, 1960. (Pet. la.) The petitioner was

granted an extension of time in which to file his peti-

tion for certiorari until December 4, 1960: (Pet. 1.)

The petition was filed on December 1, 1960. The juris-:

diction of this Court is invoked under 28 U.S.C. 1254(1).

(1) fe

:

_ QUESTIONS PRESENTED

‘1 Whether petitioner was denied a fair trial ona

charge of tax evasion where the government’s compu-

tation of corporate tax deficiencies included non-

fraudulent adjustments and the trial judge specifically

instructed the jury that the government had not con-

tended that these adjustments ‘‘were in any sense

criminal in nature.”’ 3

2. Whether the trial judge’s other rulings and con-

duct of the trial deprived petitioner of a fair trial.

STATUTES AND RULES INVOLVED .

Internal Revenue Code of 1939:

7 Sec. 145. PENALTIES.

«* e * *

(b) Failure to Collect and Pay Over Taz, or

Attempt to Defeat or Evade Tax.—Any. person -

‘required under this chapter toe collect, account

for, and pay over any tax imposed by this chap-

ter, who willfully fails to collect or truthfully

account for and pay over such tax, and any per-

son who willfuHy attempts in any manner to

evade or defeat any tax imposed by this chap-

ter 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. :

* ie ' «*® Li *

(26 U.S.C. 1952 vA. Sec. 145.)

| —_

Internal Revenue Code of 1954:

SEc. 7201. ATTEMPT TO Evans c OR DEFEAT Tax.

Any person who willfully attempts in any

'- manner to evade or defeat any tax imposed by

this title or the payment thereof shall, in addi- .

tion to other penalties provided by law, be

\guilty of a felony and, upon conviction thereof,

shall be fined not more than $10,000, or im-

prisoned not more than 5 years, or both, to-

_ gether with the costs of prosecution.

(26 U.S.C. 7201.)

Federal Rules of Criminal Procedure:

Rue 30.

IN STRUCTIONS

At the close of the evidence or at such earlier

time during the trial as the court ‘reasonably

directs, any party may file written requests that

‘the court instruct the jury on the law as set

forth in the requests. At the same time copies

of such requests shall be furnished to adverse

parties. The court shall inform counsel of its

proposed action upon the requests prior to their

arguments to the jury, but the court shall in-

struct the jury after the arguments are com-

pleted. No party may assign as error any por-

tion of the charge or omission therefrom unless

he objects thereto before the jury retires to

consider its verdict, stating distinctly the mat-

ter.to which he objects and the grounds of his

objection. Opportunity shall be given to make .. ..

the, objection out of the hearing of the jury.

4.

RULB 32.

_ MARMLESS ERROR AND PLAIN ERROR

. M8 ae as «

(b) Plain Error. Plain errors or defects

affecting substantial rights may be noticed al-

‘though they were not ee to the huts

of the court.

STATEMENT

' Petitioner was indicted in the United States Dis-

trict Court for the Eastern District of Virginia for

a willful attempt to evade his individual income taxes

(Counts I, III, V) and the corporate ineéme taxes of

. the Berkley Machine Works and Foundry Company,’

of which he was president and principal stockholder

(Counts II, IV, VI), for the years 1952, 1953, and

1954, in violation of Section 145(b) of the Internal

Revenue Code of 1939 and Section ‘T201 of the Inter-

-nal Revenue Code of 1954, supra, pp. 2-3, (I R.3-7.)'

The evidence adduced at the ten-day trial before a

jury demonstrated that petitioner had used corporate

funds for the following purposes: to construct two

‘residences in North Carolina (Samjo Manor and the

. Austin House) at a cost of $34,686.28 for labor and

$55,772.39 for materials, or a total of $90,458.67 (II

R. 388-405, 423-424, 458) ; to maintain in large meas-

ure his own rural 290-acre homeplace (Sajo Farms)

‘41 R.” refers to the “Appellant’s Appendix” in the court of

appeals below; “II R.” refers to the “Appendix for Appellee”;

“Tr.” preceded by a volume number refers to the seven volumes

of the reporter's typewritten transcript of the trial, on file with

this Court. :

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whe 5

(II R. 303-330) ; and to pay for such personal items

as rent on his sister’s apartment, tailor-made suits

and haberdashery, and personal household articles

(II R. 20-33, 168-169, 331-344). At petitioner’s di-

rection (II R. 176, 195-196, 213; III Tr. T70-T71),

and following his alteration of some of the corporate

records (II R. 267-272, 398-403, 503-508), the fore-

going personal expenditures were charged to corporate

expense accounts for “freight’’, “foundry” repairs,

~ and “sales promotion” (II R. 303-357) or disguised

as costs of Beykley Manor, a corporate property (II

R. 195, 391-406).’ All of these alleged ‘corporate ex-

_ penditures were expensed on the corporation’s books

and deducted in computing its income tax obligations

for 1952, 1953, and 1954 (Pet. la-2a); none of the

amounts disbursed for petitioner’s own personal bene-

fit was included as income on petitioner’s own per-

sonal returns (II R. 302, 450-469).°

Petitioner was found guilty, and a judgment of con-

viction was entered against him on June 8, 1959. He

was sentenced to concurrent terms of five years on

each count and an aggregate fine of $30,000. The

* As noted by the Court of Appeals (Pet. 2a), “The construc-

tion and operation of a. third residence [other than Samjo

Manor and the Austin House], which the Government conceded

on the trial was used for corporate purposes, and the pur-

chase of certain machinery and capital assets for the corporation

had been expensed on the corporate books and deducted in com-

puting corporate income tax liabilities. The deduction of such

capital items the Government conceded was not fraudulent, but

their capitalization resulted in adjustments which made a sul»

stantial contribution to the overall deficiencies shown in com-

putations which were offered in ev idence by the prosecution and

received without objection.”

* The gavernment’s computation at the trial showed the fol-

6:

court reserved. authority: to modify the sentence or

grant probation within a six-month period after.study

by the Bureau of Prisons. (Pet.5a-Ga.) -s

-. The Court, of .Appeals affirmed the judgment: of

conviction, finding ‘‘no error affecting substantial

rights of the defendant.’’ (Pet. 4a.)

ARGUMENT

1. Petitioner’s chief complaint is that the govern-

ment’s computations of corporate income tax’ defi:

ciencies reflected the capitalization of items which had

been originally expensed (Pet. 20-22) and which were

concededly non-fraudulent (Pet. 2a). But the govern-

ment was required to present the computations in the

form they were offered in order to disentangle the

financial picture of the corporation from that’ of peti-

tioner and to show the correct corporate income and —

tax. Moreover, these computations were not prejudi- ©

‘cial to petitioner.

lowing amounts .of reported and corrected net income and tax

liability (II R. 432-460, 563, 565) :

Reported Corrected

Count | Year

Income Tax Income Tax

Individual: \y

eS _..| 1962 |$15, 651. 61 | $3, 661. 56 |$26, 124 42 | $7, 747.72

SATS Soe 1953 | 15,999.74) 3,779.92 | 24 232.69 -6, 933.74

We aibiteciacna 1954 | 12,946.73 | 2, 498 20 /119 372 46 | 66,819. 4

Corporation: P

REE 1952 | 4,410.94 1,323.28 | 52,048.17 | 22, 904 3

BV cece ..---| 1953 | 29, 818. 16 | 10, 005. 44 | 74, 415. 13 | 40, 836. 41

Wilsiinecaipia 1954 | 29,527.35 | 9, 854 22 | 68,342 93 | 30, 068 32

ee aoa!

The foregoing figures include non-fraud adjustments with respect to the

corporation's ‘“‘corrected”’ figures.

, 7 =

The trial court explicitly admonished the jury—not |

only when the computations were admitted but twice

in the final instructions—that the government did not

contend that the expensing of the ultimately capital-

«ized items involved ‘‘any suggestion or intimation that

that was any criminal act on the part of the defend-

ant’’ {II R. 358-359, 367) or ‘‘were in any sense

eriminal-i#t nature’? (I R. 293, 297). Petitioner’s

counsel himself referred to the items as having ‘‘no

bearing, as the Court has told the jury, on the crimi-

‘nal intent, but only as it affected an understatement

of taxes, of income’”’ (I R. 129.) Contrary to peti-

tioner’s assertion (Pet. 21) that the Court of Appeals

— coneluded, in effect, that ‘there could be no willful

evasion unless the non-fraudulent income was em-

ployed in computing the deficiencies,’’ the fact is that

the court below, in a portion of the opinion which

petitioner fails to quote, stated that the government’s

_. proof of corporate disbursements for petitioner’s per-

sonal purposes—exceeding $10,000 in each of the years

1952 and 1953, and $108,000 in 1954—‘‘clearly did con-

tribute to the corporate deficiencies’”’ and that ‘‘the —

fairness of the trial was not impaired by the absence

of a’ mathematical computation showing the relative

contribution of each type of adjustment, a computa-

tion which the defendant during the trial neither of-

fered nor requested” (Pet. 3a (emphasis added) ).*

‘The court«also pointed out that “[i]f the defendant had

wished ‘at the time of the trial, he could have introduced a com-

putation which would have shown exactly what contribution to

the overall deficiencies had been made by the transactions which

the prosecution claimed. to have been fraudulent and by those

transactions as to which thé prosecution made no such claim.

When the defendant at the trial undertook to offer no such

=

This holding by the Court of Appeals ‘was consonant

with the rule of law in such cases that ‘‘[{i]t is not nec.

_ essary to prove that there was a particular amount of-

tax evaded nor need the, computations be exact in an

accounting sense.’’” United States v. Nunan, 236 F. 2d

576, 586 (C.A. 2d), certiorari denied, 353 U.S. 912;

accord, United States v.. Johnson, 319 U.S. 503, 517.

2. Petitioner’s objections to the District Court’s

conduct of the case are not well grounded and provide

no basis for —_ assertion that he was denied a

fair trial. |

(a) The ‘trial court’s statement that »‘‘[wle, of

course; are not dealing in this case with peanuts”’ was

intended to inform the jury that a prerequisite to con-

viction on the offenses charged was the understatement

of a substantial amount of income. (I R. 167.) Peti-

tioner’s counsel did not object to the court’s explana:

‘ tion; ,on the contrary; satisfied that the allegedly

derogatory term was used in the. context of a ~

_ proper and necessary. explanation as to what consti-

tuted a substantial understatement of income, counsel

advised the court: *‘All right, we will forget about it.”

(1 R. 167-168.) Nor. did counsel take any excepition

to the trial court’s comprehensive final instruction cou-

cerning the meaning of the term ‘‘substantial.’’ (IR.

~ 285-289.)

Similarly, the trial judge’s warning to petitioner

that ‘‘you are not above the law” (II R,/502) was an

computation, and failed to request one of the prosecution, he is

hardly in a position now, on appeal, to complain that the prose

cution did not show ‘with mathematica) precision the tax conse

quence of what was. pay and clearly — to the

jury.” — 2a-3a.)

:

|

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=

9.

appropriate observation when considered in context.

The record shows that petitioner, instead of answer-

ing questions, insisted upon questioning the questioner

(II R. 475, 484, 489, 494, 521) ; volunteered criticisms

(II R. 479, 482, 483, 495, 531) ; repeatedly castigated .

the prosecutor (IT R. 478, 489, 517, 522, 532, 543) ; and

proved himself to be difficult even to his own counsel _

(IR. 188, 192, 204, 209, 211-212, 216; see II R. 473,

520, 531-533). Consequently, the trial judge felt con-

strained to admonish. petitioner repeatedly (I R. 175,

205; II R. 478, 489, 517, 522, 525, 533); even peti-

tioner’s own counsel was forced to request him to

“just answer the question’’ on many occasions during

his awn examination of petitioner (I R. 176, 181, 195):

and duririg cross-examination (II R. 517, 524, 527,

928). Ultimately, the trial. judge was forced to warn

petitioner, out of the presence of the jury, that if

; petitioner persisted in his demeanor he would be held °

in contempt. (II R, 034.) Under the circumstances,

the trial court’s advice to petitioner that he was ‘not

- above the law’’ was certainly appropriate. Indeed,

even petitioner admits that the warning was provoked

because he had responded to questions “in an im-*

prudent manner.” (Pet. 24.)

(>) If petitioner suffered ‘public ridicule,” as he

contends (Pet. i1, 24-25), because of the publicity

attending certain matters arising out of his trial, the

short answer is that they were matters of his own do-

ing. . Thus, the reference to the use of corporaté funds

to purchase suppositories for his ow n use was a neces-

sary, albeit small, part of the government’s evidence

showing that corporate funds had. been improperly

expehded to procure for petitioner many items of a

personal nature, including salad plates, lamp shades, |

a tea and coffee service, a food mixer, juice extractors,

wine glasses, an outdoor grill, an R.F.D. mailbox,

shoes, horseback riding accessories, an oil painting,

diamonds and rubies used: in remodeling jewelry, sport

coats, tailor-made suits, and haberdashery. (II R.

331-344.) Similarly, if it embarrassed petitioner to

have factual newspaper reports of the criticism leveled

at him by the trial court—outside the presence of the

-jury—for using the word “‘nigger’’ (a member of the

Negro race had been on the jury (I R. 215)), that, too, —

was a matter of his own doing. The Court of Appeals

was therefore correct in refusing to permit petitioner

to raise the charges of ridicule as a basis for reversible

.\ . error. 7

eg (c) Finally, prejudicial error cannot be premised

upon isolated words and phrases of the trial court’s in-

structions (see Pet. 17-19) or upon its failure to in |

struct where no instructions had been requested and

none needed (see Pet. 25). Petitioner misreads thie in-

structions that were given; in context, they constitute —

a full statement of the basic and required directions in

a tax evasion case. Counsel made no objection to |

them-at the trial* (VII Tr. 1714), as he’ was required.

- to do by Rule 30, F.R. Crim. P., supra, p. 3. Nor

are the matters comiplained of here ‘‘[p]lain errors

* * * affecting substantial rights,’ for which no ob-

jection is needed to be noticed by the court (Rule

* Petitioner's single exception to the instructions was with re

spect to an issue not urged ‘n his petition. (VII Tr. 1714.)

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| —§2(b), FR. Crim. P., supra, p. 4), rather, they a

cate nothing more than a belated quest for error in a ©

ten-day trial which was carefully conducted.°

CONCLUSION

For the reasons stated, the — for: a writ of

certiorari should be denied.

Respectfully submitted,

ARCHIBALD Cox, |

Solicitor General.

Louis F. OBERDORFER,

Assistant Attorney General.

MEYER RoTHWACKS,

LAWRENCE K. Bal.ry,

Se Attorneys.

Marcy 1961.

* Petitioner alee complains about-several rulings on the admis-

sion of evidence. Thus, he complains (Pet. 11) of admission,

under the “shop book rule,” of the “Bride's Book,” establishing -

receipt by petitioner’s niece. of wedding gifts from petitioner

which had been paid for by the corporation. This admission

could not have prejudiced petitioner’s case, since petitioner ad-

mitted these same facts. (II R. 512-513.) Moreover, it >was

petitioner's own counsel who had requested that the book be

produced as “the best evidenve”. (II Tr. 339.) Similarly, there

is ho merit to petitioner’s complaint (Pet. 3, 11-12) respecting the

use of an agent’s notes to refresh a witness’ recollection, since it

is an elementary -principle that anything which will serve to re-

vive a@ memory can be used for that purpose. U’nited States vy

Riccardi, 174 °F. Ga 885, 888 (CLA, 3d), certiorari denied, 337

US. 941. Finally, there is no merit to petitioner's further com-

plaint (Pet. 3, 12) reepecting testimony on rebutta! about a 1957

conversation (I R..280). This testimony was clearly admissible

on the issue of credibility, since petitioner, while testifying, had

categorically denied that such a conversation had taken place,

- (II R. 530-532.)°

US GOVERNMENT PRINTING OFFICE 1961