Before KALODNER and STALEY, Circuit Judges, and STEWART, District Judge.
Defendant was indicted for wilfully and knowingly attempting to evade a large part of his income taxes for the years 1943, 1944, and 1945, in violation of Section 145(b) of the Internal Revenue Code, 26 U.S.C. § 145(b). After a trial consuming 17 court days, the jury returned a verdict of guilty on all three counts, and defendant has appealed from the judgment and sentence.
During the period covered by the indictment, defendant was the sole owner and proprietor of a large, retail household furnishings store in Scranton, Pa. His former office manager, August W. Tross, was the key government witness. Tross testified in detail regarding the scheme for evasion of taxes evolved by defendant and himself. At the end of 1943 or early in 1944, Tross submitted to defendant a profit and loss statement for the year 1943 and, with it, an estimate of the amount of income taxes due. The defendant then decided the amount of taxes he wanted to pay and directed Tross to work out the mechanics of the plan whereby net income could be conveniently "reduced." The plan was not an unusual one: inventory and sales were understated, purchases were overstated, and certain living expenses of defendant were disguised as business expenses. Defendant's original books of entry were apparently at all times accurate, but false entries were made by Tross on ledger cards which were accessible only to defendant and Tross. False financial statements were prepared by Tross on the basis of the false entries and these statements were turned over to Griffiths, a certified public accountant, who prepared defendant's returns. As a result of these manipulations, defendant paid $39,261 in income and victory taxes for the year 1943 instead of $193,547, the actual amount owed. Substantially the same procedure was followed the next two years. For the year 1944, $87,073 in taxes were evaded and for the year 1945, $93,133. At no time during the period covered by the indictment did Griffiths make an independent audit.
Defendant, testifying on his own behalf, asserted that he had never given Tross instructions to falsify his income and that he had no knowledge whatsoever of Tross' manipulations which had conferred upon him such substantial financial benefits. Bookkeeping was Tross' province and on him defendant had placed complete reliance, we are told. Defendant testified that although he signed his income tax returns, he had never analyzed them, having depended entirely on Tross. But defendant admitted that he was the active head of his business and that he devoted all his energies to it. When asked on cross-examination what reason Tross had for conceiving and carrying out such a plan, defendant's only answer was "I don't know."
Defendant sold his business in March 1946. Early in 1947 Griffiths, about to prepare defendant's income tax return for the year 1946, made repeated unsuccessful attempts to secure a balance sheet and a reconciliation of capital account from defendant and from Tross, who continued to keep defendant's books. Becoming suspicious, Griffiths demanded that defendant and Tross meet with him. Several meetings followed, and finally the books were handed over. Griffiths testified that defendant, upon being confronted with the accusation that the 1944 figures were false, admitted his scheme and offered to pay any fee to keep the matter quiet. The next morning Griffiths reported the matter to a representative of the Bureau of Internal Revenue in Scranton.
There was clearly abundant evidence to support the verdict of the jury. It is defendant's contention, however, that prejudicial errors during the course of the trial necessitate the grant of a new trial.
First, defendant asserts that the trial court committed reversible error in restricting the recross-examination of Tross and the cross-examination of Griffiths. Tross was on the stand for 4 1/2 days. During that time he was cross-examined more than extensively and all avenues were thoroughly explored.*fn1 The restrictions to which defendant objects all occurred near the close of recross-examination. Crossexamination is, of course, a matter of right. Alford v. United States, 1931, 282 U.S. 687, 691-694, 51 S. Ct. 218, 75 L. Ed. 624. The bounds of proper cross-examination, however, must necessarily be within the sound discretion of the trial court. United States v. German-American Vocational League, 3 Cir., 1946, 153 F.2d 860, 865, certiorari denied 329 U.S. 760, 67 S. Ct. 114, 91 L. Ed. 655. This rule can be applied with even greater force to recross-examination. Where new evidence is opened up on redirect examination, the opposing party must be given the right of cross-examination on the new matter, but the privilege of recross-examination as to matters not covered on redirect examination lies within the trial court's discretion. See 6 Wigmore on Evidence § 1897; Faulk v. State, 1933, 47 Ga. App. 804, 171 S.E. 570, 571.
The first restriction of recross-examination of Tross to which defendant objects involved questions relative to attempts made by defendant at a meeting allegedly held April 16, 1947, to have Tross submit to Griffiths the balance sheet, reconciliation of capital account, and other information requested by Griffiths. The events of April 1947, which finally led to the discovery by Griffiths that false financial statements had been submitted to him, were brought out by the prosecution on direct examination, and defense counsel thoroughly cross-examined Tross on this subject. On redirect examination, the matter was not reopened.Whether defense counsel was to be granted the privilege of reopening the subject on recross-examination was a matter within the trial court's discretion, and we do not think it should be disturbed. Moreover, it should be noted that the ruling of the court specifically applied only to two questions asked to which objections were sustained. The ruling was not one excluding a line of questions.See United States v. 3.544 Acres of Land, 3 Cir., 1945, 147 F.2d 596, 601. The trial judge stated that if counsel wanted to develop any particular fact to which government counsel made objection, he would make a specific ruling. But defense counsel did not pursue the matter.
A second restriction on the recross-examination of Tross to which our attention is called occurred when Tross was asked whether he had engaged in manipulating the income tax returns of defendant's predecessors prior to 1939. The record reveals that prior to 1939, the date on which defendant purchased his business, Tross had been in the employ of defendant's predecessors. On direct examination, Tross was interrogated only about the years covered by the indictment (1943, 1944, and 1945). On redirect examination, the prosecution was allowed to question Tross about manipulations between 1939 and 1943.*fn2 In his offer of proof, defense counsel stated that his purpose in developing this evidence was to show that Tross had engaged in manipulating figures for his previous employer without the knowledge of that employer and for the purpose of refuting the inference that Tross had learned to manipulate figures at the request of defendant. In view of the testimony on redirect examination, the court was well within its discretion in sustaining the objection to this question. Even if it were asked on cross-examination, it might well have been excluded as collateral and as a matter of defense. See Moyer v. Aetna Life Insurance Co., 3 Cir., 1942, 126 F.2d 141. We fail to see that knowledge as to where and when Tross learned the art of manipulation could have shed any light on the issue before the jury.*fn3
On the cross-examination of Griffiths, the trial court sustained objections to questions designed to elicit whether the witness was acquainted with the policy of the Treasury Department as to voluntary disclosure of fraud and whether, on the evening of April 22, Griffiths had advised defendant that he could make a voluntary disclosure and escape criminal prosecution. Defendant, on appeal, contends that this restriction was a serious one in that the excluded line of questioning was designed to test the credibility of witness Griffiths. Defendant's argument assumes that Griffiths deserted his client by not advising him about the Treasury policy and by reporting him to the Bureau of Internal Revenue immediately. From this premise, defendant argues that the jury was entitled to consider whether Griffiths was prejudiced in his testimony because he was attempting to justify his conduct. We fail to see how this line of questioning would have shed any more than infinitesimal light on the credibility of Griffiths. Even if we assume that Griffiths deserted his client, a debatable assumption, it is highly speculative whether this past conduct would have colored his testimony either for or against defendant. The exclusion of questions which have at most a slight bearing on bias and credibility does not constitute reversible error. District of Columbia v. Clawans, 1937, 300 U.S. 617, 632, 57 S. Ct. 660, 81 L. Ed. 843. Moreover, the excluded line of testimony represented an attempt to introduce evidence regarding the Treasury Department policy on voluntary disclosure. There was in fact no voluntary disclosure; whether defendant might have made one and thus become the beneficiary of the Treasury Department's self-imposed administrative limitation*fn4 was not proper inquiry. Such evidence was not material and would have served only to confuse the jury.
As a second ground for a new trial, defendant contends that the exclusion of his 1946 tax return constituted prejudicial error. This return was offered by defendant both as a part of his own case and also as a basis for recross-examination of Tross. The 1946 return apparently reveals that defendant overpaid his taxes for that year in the amount of $60,000. By way of explanation, the record indicates that on December 31, 1945, an entry was made on the Furniture Sales Ledger Card whereby furniture sales for that year were reduced by $71,000. This had the effect, of course, of understating income by that amount. In accordance with his usual practice, Tross "restored" the $71,000 on January 1, 1946, by making an entry in the credit column of the 1946 Furniture Sales Ledger Card. If defendant had operated his business through the year 1946 and the manipulations of the previous three years had been continued, this $71,000 item no doubt would have been "removed" from Furniture Sales on December 31, 1946, by an entry of like amount in the debit column. But when defendant's business was sold in March 1947, this $71,000 item continued on the books as a real 1946 transaction and taxes were paid on it. The record is unclear as to whether this was done by Tross intentionally or inadvertently. Defendant contends that the 1946 return was admissible in that it was of probative value on the question of his intent. Moreover, he asserts that if Tross had been cross-examined with respect to the preparation of the return, defendant might have secured some explanation as to Tross' real motive in manipulating the cards without the knowledge of his employer.
If defendant's reason for introducing the 1946 return was merely to show the jury that he was honest in his dealing with the government in 1946 so as to negative intent for the years 1943, 1944, and 1945, then we think the 1946 return was properly excluded as lacking any probative value. See United States v. Shapiro, 2 Cir., 1947, 159 F.2d 890, 891, affirmed 335 U.S. 1, 68 S. Ct. 1375, 92 L. Ed. 1787. If the object, however, was to prove that Tross was a negligent bookkeeper, then this should have been proved by defendant's books and records rather than by the 1946 return, which was a mere computation by a third party, Griffiths, from material Tross submitted. The 1946 return was not relevant for this purpose. The 1946 Furniture Sales Ledger Card was in fact in evidence and clearly showed that the $71,000 item was entered in the credit column as of January 1, 1946, and that there was no subsequent entry "removing" it. Further, the defendant testified on cross-examination that he had overpaid his taxes in 1946. Exclusion of the 1946 return did not constitute prejudicial error.
On July 30, 1948, defendant submitted to the Bureau of Internal Revenue an offer in compromise of his tax liability for 1943, 1944, and 1945.He offered to pay $350,000, in return for a release of "all criminal and/or civil liability" for the years involved.*fn5 The offer contained a statement that the taxpayer was thereby manifesting his desire to "pay the Government every cent due it." The trial judge ruled that all the above evidence was inadmissible. He also denied defendant's request to charge the jury, "If [they] should find that the defendant has always been willing to pay his taxes in any amount, * * * they may consider this circumstance in his favor in determining whether he had wilfully attempted to evade and defeat payment of his income taxes." Both rulings ...