The opinion of the court was delivered by: MORGAN
By an information filed July 9, 1954, the United States charged the defendant, Dominic S. Fago, as President of K & F Packing and Food Corporation, with its principal office in Corfu in the State and Western District of New York, in a six count information with violating Section 2702, sub. (b) Title 26 U.S.C.A.
for willful failure (1) to pay on its quarterly employer's federal withholding tax return and the federal income taxes so withheld from its employees for the period March 31, 1951 to June 30, 1951 inclusive, in the amount of $ 2,816.38. The employer's return was required to be filed on or before July 31, 1951. That Dominic S. Fago, as President, well knowing his duty to make such a return and pay such taxes, did willfully and knowingly fail to pay such taxes in violation of Section 2707(b) of Title 26 U.S.C.; (2) to pay Federal Insurance Contribution Act taxes in the sum of $ 552.29 for the period March 31, 1951 to June 30, 1951, inclusive; (3) to file with the Collector of Internal Revenue an employer's quarterly federal tax return for withheld income taxes from its employees in the sum of $ 1,128.10 for the period June 30, 1951 to September 30, 1951; (4) to file F.I.C.A. tax return in the sum of $ 199.05 for the period June 30, 1951 to September 30, 1951; (5) to file with the Collector of Internal Revenue an employer's quarterly federal tax return for withheld income taxes from its employees in the sum of $ 23.20 for the period September 30, 1951 to December 31, 1951; (6) to file an F.I.C.A. tax return totalling $ 10.50 for the period September 30, 1951 to December 31, 1951
Section 1622(d) Title 26 U.S.C. provides:
'Tax paid by recipient. If the employer, in violation of the provisions of this subchapter, fails to deduct and withhold the tax under this subchapter, and thereafter the tax against which such tax may be credited is paid, the tax so required to be deducted and withheld shall not be collected from the employer; but this subsection shall in no case relieve the employer from liability for any penalties or additions to the tax otherwise applicable in respect of such failure to deduct and withhold.'
Section 1400 Title 26 U.S.C. imposes the rate of tax to be collected on income paid to the individual for Social Security purposes, known as F.I.C.A. taxes.
Section 2707(b) provides:
'Any person required under this subchapter to pay any tax, or required by law or regulations made under authority thereof to make a return, keep any records, or supply any information, for the purposes of the computation, assessment, or collection of any tax imposed by this subchapter who willfully fails to pay such tax, make such returns, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, be fined not more than $ 10,000, or imprisoned for not more than one year, or both, together with the costs of prosecution.' (Emphasis supplied.)
Section 2707(d) provides:
'The term 'person' as used in this section includes an officer or employee of a corporation, or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs.'
Trial was before this court, the defendant having waived his right to a jury trial. Various Internal Revenue Service agents testified that they had conversations with the defendant and other people in order to obtain the necessary payroll records and documents in order to reconstruct the amount of withholding and F.I.C.A. taxes withheld, but not paid over by the K & F Packing and Food Corporation.
The origin of the entire matter apparently had its beginning with government contracts for the canning of meat for the Army and Navy, supposedly obtained by one Anthony Forte. The Hans Daube meat-packing plant was allegedly purchased and additions were constructed when the aforesaid Hans Daube was sojourning on foreign soil. In the interim, the operation in Corfu was divided into the slaughtering of cattle and the construction of an addition. The court was not advised whether the additional construction took place on Daube's land or on adjacent property owned by Louis Christ. Neverthless, the slaughtering of cattle et al. continued for some months. Withholding taxes and also the social security taxes were deducted from wages of employees. Testimony adduced indicated that in its inception, K & F was dominated by defendant, his brother Joseph Fago, Anthony Forte and Lawrence Christ. There were others, but their roles were either in a supervisory or clerical capacity.
The evidence is uncontradicted that K & F Packing and Food Corporation was duly incorporated as shown by Certificate of Incorporation filed with the Secretary of State of the State of New York on March 15, 1951. The original incorporators were Hyman Karnofsky, defendant's trial counsel, and two others. No sworn testimony was adduced that the original incorporators ever resigned, although statements were made to that effect by defendant's trial counsel. The reputed officers of K & F, to wit, Joseph Fago, Eleanor Wolfe Manzella, Lawrence Christ, all testified that they never attended any corporate meeting wherein election of directors or officers took place, no one ever saw the stock book, minute book, bylaws or certificate of incorporation. The seal was admittedly seen by all the above mentioned persons. The trial was lengthy and punctuated with numerous vigorous and extensive objections to the proof offered by the Government. Witnesses were many and the testimony was contradictory and, in many areas of vital dispute, conveniently forgotten.
On July 30, 1951, the K & F filed its second quarterly return signed by Lawrence E. Christ, as Secretary, showing a withholding tax of $ 1258.48 and F.I.C.A. taxes in the sum of $ 344.66 for a total tax of $ 1,603.14 (Exhibit B). The Government computed the total withholding for the second quarter of 1951 to be $ 2816.38, with a credit of $ 1258.48 as above, leaving a balance on the withholding of $ 1,557.90 and total F.I.C.A. taxes in the amount of $ 1,104.58 with a credit of $ 344.66, leaving a balance of $ 759.92. Nevertheless, a special assessment was filed against the defendant, Joseph Fago and Lawrence Christ for withholding and F.I.C.A. taxes for the period April 1, 1951 to June 30, 1951 in the sum of $ 1,603.14 and paid in said amount on August 11, 1953.
Section 405.601 of the Code of Federal Regulation provides that
'(a) Every person required under the provisions of section 1622, I.R.C., to deduct and withhold the taxes or wages shall make a return and pay such tax on or before the last day of the month following the close of each of the ...