Before GOODRICH, STALEY and HASTIE, Circuit Judges.
This is an appeal from a judgment of the United States District Court for the Western District of Pennsylvania convicting Joseph Frank of violation of Section 145(b) of the Internal Revenue Code of 1939, 26 U.S.C.A. § 145(b).
The first point raised by the appellant is his claim that his constitutional rights under Amendments Four and Five were violated. On behalf of Frank it is urged that papers, books and records belonging to him were turned over to revenue agents by reason of their fraudulent representation to him concerning the nature of the examination they were making or about to make. Taxpayer says that he was led to believe that a routine audit was to be made and if he had known there was a special agent also assigned to his case he would not have given up his papers without advice of counsel. Cf. Gouled v. United States, 1921, 255 U.S. 298, 41 S. Ct. 261, 65 L. Ed. 647.
He also brings to our attention certain instructions which were given to the revenue agents concerning investigation of a so-called "racket group" case which this was. These instructions were as follows:
"When the agent has completed the preliminary background on his taxpayer, he should then contact the taxpayer, informing him that a routine examination of his tax return is being made for the year, and that an appointment would be desirable. The taxpayer may then inform the agent that he has an accountant who has prepared the return. Your authority is then complete to contact the accountant. It is advisable to review the accountant's work papers used in the preparation of the tax return. However, this should not be the basis of closing the investigation as the accountant has used the information supplied by the taxpayer and it may not be complete in divulging all the income, nor will it have all the records necessary in verification of deductions or business expenditures.
"Be cautious and alert and cultivate the confidence of the taxpayer without tipping your hand as he may cooperate to some degree with you, but if he finds out that you are on his trail as an 'R' sleuth, he may clam up, and from then on your job will be much more tedious and a lot of harder work is ahead of you."
We agree with the appellant that the tone of these instructions is greatly to be deplored. We think they can be easily misunderstood by an agent to urge him to get over the line into fraudulent conduct in an effort to capture a tax evader. They are not the kind of instructions which tend to foster good relations between a government and its citizen taxpayers even though some taxpayers may have strayed from the path of accuracy.
The defendant's point about this matter, however, has been thoroughly litigated before. There was, before trial, a motion under Rule 41(e), Federal Rules of Criminal Procedure, 18 U.S.C.A., for the return of property and to suppress evidence. There was a hearing upon this motion, a very thorough hearing. The district judge overruled the motion and filed a memorandum opinion setting out why, in his opinion, the evidence failed to sustain the contention that fraud was practiced by the government agents. D.C.W.D.Pa. 1956, 151 F.Supp. 864.
Again at the close of the trial the judge charged the jury, at the defendant's request, that:
"Any such evidence, including papers, business books, records, bank records, and cancelled checks, as well as oral and written admissions obtained by the defendant by fraud, force, persuasion, misrepresentation, trickery, or deceit of the Government agents, if any, should not be considered against this defendant."
The jury's finding of guilty necessarily involved a finding in agreement with that of the court at the preliminary hearing on the motion.
The appellant therefore must demonstrate that there was no reasonable basis to sustain the conclusion of both the judge and the jury. It is quite clear that he cannot do this. The agents testified they did describe the investigation as "routine" but denied that they ever told the taxpayer they were merely conducting an investigation to determine routine civil tax liability. See the thoughtful discussion by Judge Soper in Turner v. United States, 4 Cir., 222 F.2d 926, certiorari denied, 1955, 350 U.S. 831, 76 S. Ct. 65, 100 L. Ed. 742. Every investigation is, in a sense, routine at the start because the agents cannot know until they get into a given case what sort of liability will grow out of their investigation. We have recently held that the agent is not required to warn the defendant that he did not have to give any information that might be used against him in a criminal proceeding. United States v. Burdick, 3 Cir., 1954, 214 F.2d 768, remanded, 348 U.S. 905, 75 S. Ct. 311, 99 L. Ed. 710, affirmed on remand, 3 Cir., 221 F.2d 932, certiorari denied, 1955, 350 U.S. 831, 76 S. Ct. 65, 100 L. Ed. 742. Under the statutes the government has authority to examine books, papers and records (see Int.Rev.Code of 1954, § 7602, 26 U.S.C.A. § 7602; Int.Rev.Code of 1939, § 3614, 26 U.S.C.A. § 3614), and we do not think any taxpayer considers an audit by a revenue agent to be a call for purely social purposes. The individual conclusions of the judge and the jury are well supported.
An income tax deficiency for the year 1948 only was involved. The government proved its case by the "bank deposit expenditure method" and for corroboration used the "net worth method." Each has become standard in income tax prosecutions. And each is, obviously, a method of proving an offense by circumstantial evidence. All the points which defendant raises in this Court were discussed by the district judge in his opinion following motion for new trial in the district court. See D.C.W.D.Pa. 1956, 151 F.Supp. 866. We need not repeat the detailed statement made in that opinion showing the careful allowances made by the revenue authorities in order not to charge the defendant with a greated ...