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United States v. Nunan

decided: September 6, 1956.


Author: Medina

Before MEDINA, HINCKS and WATERMAN, Circuit Judges.

MEDINA, Circuit Judge.

This is an appeal by Joseph D. Nunan, Jr. from a judgment of conviction entered upon the verdict of a jury finding him guilty of income tax evasion, in violation of Section 145(b) of the Internal Revenue Code of 1939, 26 U.S.C. ยง 145 (b), on each of five counts covering the calendar years 1946 to and including 1950. Appellant was sentenced to five years imprisonment on each of the five counts, the sentences to run concurrently, and a fine of $3,000 on each of the five counts was imposed.

We are urged to reverse and dismiss the indictment or remand for a new trial. The points may be briefly summarized: (1) that there was insufficient evidence to establish the commission of the crime charged and that it was error to deny appellant's motion for a directed verdict; (2) that the motion to strike certain evidence of a long and continuous series of bank deposits in currency and payments to brokerage houses and others in currency should have been granted, because there was no basis for a finding that any of this cash constituted taxable income and because of the alleged prejudicial character of such proof; (3) that appellant was deprived of a fair trial by a variety of rulings admitting and excluding evidence, by allegedly erroneous instructions to the jury and refusals to charge as requested and by additional miscellaneous rulings of one kind and another; (4) that the summation of the prosecutor was inflammatory, irrelevant and improper; and (5) that it was error to deny appellant's motions to quash the indictment, to permit an inspection of the Grand Jury minutes and to suppress certain evidence. These points are proliferated and subdivided into so many separate contentions as to make it a tedious and profitless task to attempt further enumeration.

The validity of each of appellant's points depends as usual upon the factual background disclosed by the record, which at first blush seems extremely complicated and confusing. This seeming confusion, however, as we shall see, is due in no small measure to the fact that both sides leaned heavily on pretrial statements made by appellant to the United States Attorney or to his assistants and to the Grand Jury, he having elected not to testify in his own defense at the trial. These various statements by appellant abound with inconsistencies, contradictions and ambiguities. Moreover, the large number of appellate court opinions of recent vintage in tax evasion cases have furnished a variety of labels or categories; and the zeal of counsel to fix one or another of these labels on the case, or to squeeze it into one or another of these so-called categories, has created the illusion that the basically simple issues are complicated and difficult of resolution.

Sufficiency of the Evidence.

Appellant is a lawyer who, in addition to his law practice, served as a member of the New York State Legislature from 1930 to 1940. He functioned as Collector of Internal Revenue in Brooklyn, New York, from 1941 to 1944, when he became Commissioner of Internal Revenue in Washington, D.C., serving in that capacity until June 30, 1947. He had been a member of one law firm in New York City for some time, and, after June 30, 1947, became a member of another law firm in Washington.

On February 2, 1951, by H. Res. 78, a Sub-committee of the House of Representatives was set up to "Investigate the Administration of the Internal Revenue Laws." Not long after this, and on June 27, 1951, appellant filed amended joint returns for himself and wife for the calendar years 1949 and 1950.In October, 1951, two Revenue Agents were assigned to do a special examination of appellant.

It soon developed that appellant had no checkbooks or cancelled checks for years prior to 1951. He said he had no personal books or records such as a taxpayer keeps and is required by law to keep in order to substantiate the data set forth in his income tax returns and facilitate verification by those charged with the duty of checking the various items. Moreover, he employed no accountant or other person to assist him but made out his returns himself and no other person has knowledge of the basis for the various amounts stated therein, except such as are mere reproductions of figures supplied by brokerage houses or the bookkeepers of his law firms. Schedules and details plainly required by the printed instructions on the returns were completely disregarded and omitted.Appellant's special knowledge of the tax laws which might have been inferred from his law practice and his experience as Collector of Internal Revenue and as Commissioner of Internal Revenue, with general superintendence over the collection of all taxes and the preparation of the regulations, blanks and forms, was said to be non-existent. He denied that he was a tax expert and said he became a federal revenue officer only by "the chance of politics." He is portrayed in his brief and in his various statements as a sort of political lawyer and business getter. And when the investigating Revenue Agents pointed out the difficulties caused by his lack of any sort of personal records and asked him for a net worth statement, he refused to give it.

So the investigation proceeded and it was discovered that a large number of items of income had been entirely omitted from his returns for the years 1946-1950. Some of these items were small, others were far from negligible in amount. In addition, a close examination of the bank ledgers disclosed a surprising number of deposits by appellant and his wife in currency. These were periodic and continuous, over the years covered by the indictment. The following is the list of such deposits in the year 1946:

March 9 $300.00

March 29 300.00

April 29 460.00

April 29 200.00

April 30 500.00

May 15 500.00

May 20 550.00

August 23 750.00

August 30 700.00

August 30 750.00

September 5 860.00

September 23 800.00

September 23 500.00

September 30 500.00

October 15 500.00

October 15 550.00

November 7 500.00

November 15 250.00

December 9 900.00

December 12 600.00

December 16 750.00

Total $11,720.00

When appellant bought some stock in 1946 he handed over to the brokerage house one hundred and sixty $100 bills and fourteen $50 bills. A further single payment of $11,253 in currency was made in the same year.

The amount paid to one dress shop during the prosecution years was $29,500; and of this amount $12,014.86 was paid in currency.

The cash deposits and expenditures during these years totalled $98,092.86; and for the years 1945 through 1950, the Revenue Agents unearthed $160,000 of deposits and expenditures in excess of appellant's reported net income.

Appellant's explanation defies credulity. The ledger sheets of his bank for the years prior to 1937 had been destroyed, so that no evidence was available to show what his balance was in the early thirties or at any time prior to 1937. He knew that safe deposit records showed that he rented a $10 box at the Chemical Safe Deposit Company on July 1, 1935. He said in substance that he had $170,000 in his bank account in March of 1933; that, fearful of the failure of the bank, and during the next two years, he made cash withdrawals in amounts ranging between $2,000 and $5,000, and put the cash in a metal box which was kept on a shelf in the bedroom in his home; that most of this was his wife's money, that he regarded the contents of the box as belonging to them both, and that she had a key; that in 1935 he decided to put the money in a safe deposit box, which was rented for the purpose; that from July, 1935 to the end of 1944 most of the cash was kept in this safe deposit box; and that, finally, he decided to put the money back in the bank, which he did piecemeal and that these piecemeal deposits made periodically over the years 1946 to 1950, which the government claims constituted taxable income, were not income at all but the same old $170,000 fund he started with, less whatever had been expended in the meantime. This is the substance. There were countless variations as he was questioned by the United States Attorney or his assistants, or by the Foreman or by one of the Grand Jurors. The amount withdrawn from the Irving Trust Company was $100,000 or $150,000 or $125,000.The amount he left on deposit in his personal checking account, despite his fears, was $10,000 or $25,000 or $12,000. There were similar variations in his recollection of the amount of cash he kept in the safe in his law office, the amount kept at home, the amount in the metal box in the bedroom closet, and so on.

Naturally, the Revenue Agents and the prosecuting officers questioned appellant closely, especially after this belated and fantastic explanation was finally forthcoming. And appellant's pre-trial statements were supplemented by his wife's testimony at the trial. She had inherited a substantial sum from a rich uncle and an additional amount from her father.She said she had turned these funds over to appellant prior to 1932. It also appeared that appellant had made the practice over the years of turning his salary checks, as a legislator and as Collector and Commissioner, into cash; and he made other claims of accumulations of cash. We need not follow in detail the testimony of the Revenue Agent who described at the trial the course of the extensive investigation into each and every item in so far as estate and corporate and other documents and records and interviews with persons able to throw some light on real estate transfers, mortgages, and other matters, might reveal the true state of affairs. Suffice it to say that the net result, on the record as a whole, was evidence amply sufficient to warrant a finding by the jury that there never was any such fund of $170,000 or anything approximating such a sum in appellant's possession in the late twenties or early thirties.

Another phase of the government's proof was a meticulous checking of all available items in order to arrive at an approximate figure representing the amount of appellant's taxable income. This was an arduous task, as it has proved to be in many other income tax evasion cases where the absence of records and the handling of large amounts of currency have made it impossible to do more than demonstrate that the taxable income involved greatly exceeded the amounts shown in the returns. The jury was evidently satisfied that the investigation was conducted in good faith and that appellant was given the ...

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