The opinion of the court was delivered by: ZAVATT
The defendant was tried by the court, without a jury, pursuant to a stipulation in writing signed by the defendant, his attorney and the United States Attorney, dated and approved by the court September 16, 1968. Rule 23(a) of the Federal Rules of Criminal Procedure. The five count information charged the defendant with five violations of 26 U.S.C. § 7203, i.e., his knowing and willful failure to make an income tax return to the District Director of Internal Revenue for the Internal Revenue District of New York, at Brooklyn, New York, within this District or to any other proper officer of the United States for the calendar years 1959 (Count One), 1960 (Count Two), 1961 (Count Three), 1962 (Count Four) and 1963 (Count Five) - the defendant having been a resident of Flushing, within this District during all of the times mentioned in the Information - although he received during those calendar years gross income of $26,295.82, $20,840.49, $20,538.40, $21,347.90 and $19,040.70, respectively.
The defendant stipulated, at the opening of the trial, that he earned most, if not all, of "his earnings in this country"; that he received "apparent gross income" during each of the years 1959 through 1963 in the sums stated in the Information and that he "failed timely to file returns of his income for the years mentioned in Counts 1, 2, 3, 4 and 5 of the information." During the trial he admitted having received gross income during the said years, as follows: 1959-$13,110; 1960-$19,525.83; 1961-$21,249.33; 1962-$20,491.13 and 1963-$20,437.17.
The court finds that (1) during all of the times stated in the Information, the defendant resided at Flushing, New York; (2) the defendant received gross income during each of the years 1959, 1960, 1961, 1962 and 1963 at least in the sums admitted by the defendant during the trial; (3) that the defendant was required to file income tax returns for each of said calendar years on or before April 15th of each succeeding year; (4) that the defendant failed to so file; (5) that, in fact, he has never filed an income tax return for any of the five years stated in the Information.
There remains only the question as to whether his failure to so file for each of said years was willful and knowing or whether it was due to ignorance, error, mistake or excusable negligence.
The defendant, now 52 years of age, received a degree of Bachelor of Science in Commerce from the University of Georgia in 1937. The required courses for this degree included Corporate Finance and a basic course in accounting. Upon his graduation, he joined his father in the metal business and remained in that business from approximately 1938 to 1954. Then he became a commission sales agent and in 1958 was placed in charge of the Domestic Department of Ufinindo, a department which sold automotive tubings, plumbing fixtures, etc., and compensated at a percentage of the profits earned by that department. This was a part-time job. He ceased this association in February 1960 but continued to receive commissions in 1961 and 1962 on material which he had purchased for Ufinindo prior to February 1960, which was sold by Ufinindo after the defendant ceased his association with that company. While defendant was associated with Ufinindo and in March 1958, the defendant and two other persons formed Gregory Sales, in which defendant was an equal partner and to which he devoted only part of his time. Gregory Sales was merely a sales organization which located material (including copper tubing and pipes) at various places, including Ufinindo, for those who wished to purchase the same. The defendant was the expert on copper tubing who advised the partnership as to the quantities of copper tubing available and at what price. Ufinindo did business with Gregory Sales while the defendant was associated with Ufinindo but ceased so doing business in February 1960.
In 1960, the defendant entered into a five year contract with Winter, Wolff and Co. (Winter, Wolff), dated January 14, 1960, under which he was to receive 40% of all net profits on copper and brass business he procured for the company, with a monthly drawing account of $1,250. The defendant was the sales manager of the nonferrous department of the Company. His duties included locating and purchasing nonferrous products throughout the country which the Company then sold to its customers. The Company had the right to cancel the agreement if the defendant failed to earn the amount of his drawings for two "subsequent six month periods." This agreement was cancelled by the Company on June 13, 1962 pursuant to this provision. But a new arrangement was continued to December 31, 1962, under which, in determining the 40% of profits to which defendant would be entitled for the year 1962, the losses of 1961 would be taken into account so that, in effect, the years 1961 and 1962 would "be considered jointly in regard to payments of 40% of profits to you." For the period January 1 to May 31, 1963, the arrangement reverted to the terms of the original agreement. Nowhere in any of these agreements and arrangements was there a provision that the defendant was obliged to refund to the Company the excess, if any, of drawings over commissions earned. During 1960 through 1963 another person was in charge of the State Metals Department. In 1963 that Department suffered a loss; the man in charge was fired and the defendant put in charge under a new agreement dated February 21, 1964. Pursuant thereto, the defendant was engaged "as an independent representative, to supervise and sell for its State Metals Department" at 30% of the profits of that Department; the defendant was entitled to receive "as advances" $20,000 per year payable in equal monthly installments; he was obliged to reimburse the Company for a $30,000 loss as of February 1, 1964, which the Company carried forward, "out of his share insofar as it may exceed $20,000 in any one year." This agreement was to remain in effect for one year and thereafter, unless terminated by either party by notice on or after December 31, 1964. The defendant is still associated with Winter, Wolff and the department he manages (deemed essential by Winter, Wolff) is earning a good profit.
The defendant received from Gregory Sales in 1959, as compensation for services and interest, the sum of $2,015.19 and a copy of the partnership information return prepared by the accountant for that partnership.
During the same year, he received from Ufinindo as commissions the sum of $18,775.14 in the form of eleven checks to his order.
During 1960, the defendant received from Ufinindo, as compensation for services, the sum of $6,255.43 in the form of four checks to his order. One check, in the sum of $3,000 was endorsed to the order of North Shore Motor Sales Corp. for the purchase of Oldsmobile No. 407206519. Two checks totaling $3,000 were endorsed for deposit to the account which the defendant had opened in the name of his infant son, Jeffrey, with the Manufacturers Hanover Trust Company, Main Street, Flushing, Long Island, New York, toward the end of 1958 or in early 1959 when Jeffrey was 18 years of age. It is noted that this son started to attend the University of Syracuse in 1958 where he continued in attendance through 1959; worked at the Tyler Camp for Boys in Wayne County, Pennsylvania, during the summer of 1959; worked for Winter, Wolff during the summer of 1960; transferred to the University of Pennsylvania from which he graduated in 1962 and is presently in the employ of Winter, Wolff.
During the same year 1960, the defendant received from Winter, Wolff eleven checks of $1,250 each (totaling $13,750) as advances against commissions, all of which were deposited in the said account which the defendant had opened in the name of his son Jeffrey.
Pursuant to his agreement with Winter, Wolff the defendant received in 1961 five checks totaling $20,000 as advances against commissions, all of which were deposited in the same account which ...