122 F. Supp. 518 | E.D. Pa. | 1954
Defendants, father, and son, were charged in two separate indictments, each containing three counts, with wilfully and knowingly attempting to defeat and .evade income taxes alleged to be due the United States of America for the calendar years 1947, 1949 and 1950. The indictments were- laid under Section 145(b) of the Internal Revenue Code, 26 U.S.C. § 145(b). Following pleas of not guilty, the cases were tried together and under date of December 21, 1953, a jury returned verdicts of guilty on all counts as to both defendants. No motions were filed for new trial, but a motion for judgment of acquittal was filed in each case, which motions are before the Court for disposition.
While many witnesses were called on behalf of the Government as to individual transactions involving the- partnership of A. Lindstrom & Son, the substance of the case as presented to the jury involved the testimony of only two witnesses, Mrs. Regina Lindstrom, the daughter-in-law and sister-in-law respectively of the two defendants, and Clement W. Bowen, a Certified Public Accountant. The evidence .disclosed that for many years Mrs. Regina Lindstrom had been bookkeeper for S. A. Lindstrom & Son. The defendants were engaged in business at Lansdowne; Pennsylvania, as structural steel erectors, and they also engaged in the business of construction equipment rental.
The only bank accounts which were incorporated in the books of the company as kept by Mrs. Regina Lindstrom reflected deposits in the Lansdowne National Bank in an account entitled “S. A. Lindstrom & Son”, an account of Samuel A. Lindstrom, Sr., in the same bank, and an account in the Clifton Heights National Bank, Clifton Heights,' Pennsylvania, in the name of S. A.- Lindstrom, which latter account was used solely for the purpose of depositing withholding and social security taxes deducted from payrolls. The evidence disclosed that in addition thereto S. A. Lindstrom, Sr., maintained a personal account with the Corn Exchange National Bank, Philadelphia, Pennsylvania, and one with the Ventnor City National Bank, Ventnor, New Jersey. For many years one Frank Deady had handled the accounting affairs of the Lindstroms and had made up their tax returns. It was the custom of Mrs. Lindstrom to turn over all her books and records ,to Mr. Deady for the purpose of making up tax returns and whatever other necessary information, if any, was supplied to Deady by the Lindstroms. The' returns for the years in question' were prepared by Mr. Deady and his name appears on thé returns. In February of 1951
As to S. Lindstrom & Son (Partnership)
Year Income reported on return Income as established by all records (based on Bowen’s examination)
1947 $25,644.03 (loss) $75,906.00
1949 $34,707.36* $55,613.76
1950 $17,909.74 $48,226.65
Figure taken from individual returns.
As to S. A. Lindstrom, Sr.
Year Net taxable income Tax paid reported on return Net income sub j ect to tax (based on Bowen’s examination) Tax due
1947 $12,822.02 (loss) None $37,577.04 $16,935.28*
1949 $17,353.68 $2,446.98 $23,806.88 $ 5,879.02*
1950 $ 8,059.39 $ 908.08 $20,113.34 $4,811.98*
As to S. A. Lindstrom, Jr.
1947 $12,822.01 (loss) None $33,863.30 $15,932.43*
1949 $17,353.68 $3,291.76 $25,006.88 $ 6,335.00*
1950 $ 8,059.38 $1,148.34 $21,313.31 $ 5,226.94*
The schedules of actual taxable income and the returns filed graphically outline the wide discrepancy between actual taxable income and the amount of such income as reported in the partnership and individual returns for the three years in question. All of the returns filed indicate a net operating profit on the part of the partnership for the three years in question of only $26,973.07. Bowen’s examination revealed net operating profits for the same three years of $179,746.41, a discrepancy of some $152,773.34. Lindstrom, Sr., in his individual returns for the three years reported taxable income of $25,413.07 as against real taxable income as determined by Bowen of $81,497.26, an understatement of $56,084.19. He paid taxes of $3,355.06, whereas, the true tax liability was established at $27,626.28. Lindstrom, Jr., paid taxes of $4,440.10, whereas, the true tax liability was established at $27,484.37. The income as calculated by Bowen for the year 1947, when contrasted with the income shown on_ the return, shows a difference of $101,550.03 for that single year. The understatement of taxable income for 1947 was $75,906, the understatement of taxable income for 1949 was some $20,-000 and the understatement of taxable income for 1950 was some $30,000. Of course, only roughly one-half of that was attributable to each of the defendants.
In passing upon the motions of the two defendants for judgment of acquittal, the only question for the trial judge to determine is whether there is substantial evidence in the record which taken in the light most favorable to the United States would permit the jury to find the defendants guilty beyond a reasonable doubt. Bell v. United States, 4 Cir., 185 F.2d 302, 310. The possibility that a jury may have a reasonable doubt upon the evidence as to the guilt of the defendant is not the criterion which determines the action of the trial judge, Bell v. U. S., supra. Whether there is such substantial evidence can be determined only within the four corners of the entire record. Admittedly, and from the lips of defendants’ own employee and agent, it has been established that there was a very substantial, the term gross might even be applied, understatement of income. That fact as evidence of intent in and of itself is not conclusive, Spies v. United States, 317 U.S. 492, 63 S.Ct. 364, 87 L.Ed. 418; L. Glenn Switzer, v. C. I. R., 20 T.C. 759; Nicholson v. C. I. R., 32 B.T.A. 977, 989. Defendants in their excellent brief have in substance argued that that is not an important factor. I disagree, because in order for the Government to prevail in an income tax evasion there must be proof of a substantial tax liability which has not been satisfied, U. S. v. Schenck, 2 Cir., 126 F.2d 702, certiorari denied Moskowitz v. United States, 316 U.S. 705, 62 S.Ct. 1309, 86 L.Ed. 1773; Tinkoff v. United States, 7 Cir., 86 F.2d 868, 878, certiorari denied 301 U.S. 689, 57 S.Ct. 795, 81 L.Ed. 1346. What then are the other elements from which the jury might conclude beyond a reasonable doubt that in filing these several returns, the defendants were motivated, at least
In sum, we have here a case where the Government has established a large tax deficiency which in its final analysis, as the case was presented, was obtained directly from books, records, checks and checkbooks maintained by the defendants and in the possession of the defendants. We have testimony of what might be charitably characterized as a peculiar system of keeping records which method of keeping records would permit a distortion of true earnings and consequent apparent diminution and concealment of tax liability. We have the picture of two capable businessmen who admittedly dealt in and with substantial sums of money. There was a failure to promptly disclose important bank accounts to their own accountant. Taking all of these factors and facts into consideration I do not feel that the inferences to be drawn from them would not permit a finding by the jury of the presence of the element of a willful and intentional tax evasion motive in the filing of their tax returns. It is for the jury and not for the court to determine from all the facts whether or not the tax evasion motive played a part in the actions of these defendants. The jury has found that it did and after a full and complete charge to which no exception was taken. At the conclusion of the case -it was the opinion of the Court that sufficient facts had been established which would permit the jury to find that the understatement of income was the result of a calculated efr fort on the part of the defendants to defeat and evade their income tax liability. A review of the record has not changed my opinion. It was a jury question, properly submitted, and the verdicts of the jury as rendered will stand.
Note — No partnership return filed in 1949.
Note — The tax liability for the income determined by Bowen was testified to by an Internal Revenue Agent after making allowance for all claimed and other deductions and exemptions allowed by the Internal Revenue Code.