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UNITED STATES v. MELILLO

November 1, 1967

United States of America, Plaintiff
v.
Nicholas Melillo, Defendant


Weinstein, District Judge.


The opinion of the court was delivered by: WEINSTEIN

WEINSTEIN, District Judge:

Charged with wilfully attempting to evade the payment of income taxes (26 U.S.C. ยง 7201), defendant was tried before a jury. After both sides rested, the Court determined that while a reasonable juror could conclude that it was more probable than not that the defendant had filed his tax returns with knowledge that they were false, such a juror would have a reasonable doubt on this issue. The question posed is whether, under such circumstances, the Court should grant a motion for judgment of acquittal.

 Facts

 Defendant, a laborer, began a garbage and rubbish collection service in his own name in the late 1940's. His first four Brooklyn customers, referred to by him as "stops", were "donated" by a relative, one Gallo.

 The new entrepreneur worked from early morning until late at night on a truck loading heavy barrels of refuse and as he drove about he kept his eyes open for new stops. His father answered telephones and helped with truck repairs. His married sister kept the books. Service was reliable. The business prospered.

 Central to the success of the business was defendant's mother, a matriarch of the old school. (The defendant, a bachelor nearing fifty, lived in her one-family attached home and received a weekly allowance from her.) Shortly after World War II she became depressed. One of her sons had been killed in battle and other relatives had died. A psychiatrist suggested that she be kept occupied and the idea of a business was seized upon by the family partly because of its therapeutic value. She helped answer the business telephone from home, sent out the bills and scanned the papers for word of new refuse-creating ventures that could be solicited by her son.

 Trucks and new stops were purchased from money advanced by the mother. She used some dozen substantial bank accounts in her name, individually and as co-owner. These assets were said by her to have come from cash received from her father and other relatives.

 The mother also hired an "accountant" to help with the books. He was without formal training in this country and his main vocation was as a customer's man in a brokerage office. Experts for both the government and the defense agreed that the accounting techniques used were not satisfactory. For example, tens of thousands of dollars in income each year from major customers, including Fort Totten Army Base in Brooklyn, were deposited directly in the mother's many bank accounts, by-passing the business records completely. This income was not reflected in the tax returns prepared by the accountant. Cash, claimed to have amounted to more than twenty thousand dollars each year, was used to "purchase stops". The recipients of these disbursements were not shown on the books and defendant refused on and off the witness stand to tell who any of them were.

 Whether the mother followed the accountant's directions - as she testified - or he hers - as appears possible from her forceful personality - is impossible to determine. He died a natural death after the government began its tax investigation. Some of the papers relating to the business perished with him.

 The crucial issue in the case was whether the defendant filed his returns with knowledge that they were false. The government conceded that defendant's name was signed to the business returns by some one else. (The mother testified that she did it.) To support the conclusion that defendant was aware that false returns were filed it relies upon the inferences naturally arising from the facts that defendant was a high school graduate, that the family was closely knit and would be likely to talk about the business's fiscal affairs, and that he is being paid $15,000 a year by an association of rubbish cartmen to take care of its members' problems with labor and others - a position which appears to require some acumen.

 Defendant's evidence indicated that if there was a crime, the wrong person had been charged with it. When he needed money to buy trucks or stops, the defendant, according to the testimony of mother and son, went to her and got it without making inquiry as to source. Although the mother regularly served defendant his supper, the occasion furnished no opportunity to talk of financial matters. As she described it, during the years in question he came home tired from working on the truck, ate his supper in silence, and went to his room to sleep in preparation for the morrow's hard labor.

 Both mother and son testified that he had not dealt at all with the accountant and had not seen or had any notion of the books or of the tax returns. The mother testified that only she and her daughter talked to the accountant. This testimony was partially confirmed by that of the government investigators who had to obtain details from the accountant rather than from the defendant.

 Whatever uncertainty may have existed as to whether there could be a reasonable doubt about defendant's knowledge was dispelled by the government. It rigorously cross-examined the business's recently retained Certified Public Accountant - a man of conceded reputation and skill, whose direct testimony tracked that of government experts. He had been called by the defense to show the inadequacy of the books previously kept by the business in an effort to demonstrate that the deceased accountant's advice had been bad. Pressed by the Assistant United States Attorney, he testified that the prior accountant had declared that all of his dealings were with the mother and sister. The record reads as follows:

 
Q. You didn't ask Mr. Melillo [the defendant] during the entire indictment years, when he is being tried for right now, '57, '59, if he discussed these books and records with Mr. Lo ...

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