Before BIGGS, Chief Judge, KALODNER, Circuit Judge, and WRIGHT, District Judge.
The appellant, Harry J. Alker, Jr., an attorney, was convicted of willfully attempting to defeat and evade the income tax by filing a false and fraudulent return for each of the taxable years 1947, 1948, 1949 and 1950 pursuant to 26 U.S.C.A. § 145 (b). The several years constituted separate counts in the indictment. Confinement for one year and a day and imposition of a $10,000 fine were decreed on each of the first three counts; the periods of imprisonment to run concurrently. On count four, appellant was sentenced to three years imprisonment to run consecutively with the sentence imposed on counts one, two and three. Execution on the fourth count was suspended and appellant was placed on probation for three years provided that within the first year bona fide efforts are made to conclude all matters involving tax liabilities between himself and the United States. This appeal followed.
The grounds urged for a new trial are set forth below:
1. The evidence was insufficient to support the verdict.
2. Defendant's motions for the withdrawal of a juror because of the improper cross-examination of one of his character witnesses should have been granted.
3. Defendant was prejudiced by the trial judge's failure to charge as requested.
4. Defendant was prejudiced by the trial judge's erroneous rulings on the admission of evidence;
(a) The trial judge erred in admitting the opinion testimony concerning the value of the Freihofer stock.
(b) The trial judge erred in admitting evidence concerning defendant's failure to file an income tax return for 1946, a year prior to the years covered by the indictment.
5. Defendant was deprived of a fair trial because of the denial of his motion for continuance.
The contentions will be considered seriatim.
Section 145 (b) of the 1939 Internal Revenue Code in pertinent part states:*fn1
"* * * any person who willfully attempts in any manner to evade or defeat any tax imposed by this chapter or the payment thereof, shall, in addition to other penalties provided by law, be guilty of a felony and upon conviction thereof be fined not more than $10,000, or imprisoned for not more than five years, or both, together with the costs of prosecution."
Proof that a taxpayer had net income greater than the amount disclosed in his return requiring the payment of a tax substantially in excess of that reported coupled with independent evidence that the understatement was willful is a violation of the denominated provision.*fn2
The Government sought to sustain its burden of showing that appellant had net income greater than the amount reported by evidence of specific items of revenue purportedly received in the examination period. Appellant concedes, as he must, that the proof adduced would have enabled the triers to conclude that he had significantly understated his net income and correspondent tax liability for each of the indictment years.*fn3 The question presented is whether certain documents were sufficiently corroborated within the purview of Smith v. United States.*fn4 There the Supreme Court adopted for income tax prosecutions, the general rule that an accused cannot be convicted on his own uncorroborated confession. The opinion extended the doctrine to admissions at least where the statement is made after the fact to an official charged with investigating the possibility of wrongdoing, and the statement embraces an element vital to the Government's case.*fn5 Reference to the instant trial record is indicated to determine the exact application of the declared principles.
At the commencement of proceedings the Government introduced appellant's returns for 1947, 1948, 1949 and 1950 which disclosed the following data:*fn6
1949 $14,975.77 $3,643.11
The prosecution then proceeded to reconstruct appellant's true income for the period. Income from three principal sources was revealed: Professional fees; dividends and interest; directors' fees.
The dividend/interest figure was substantiated by testimony from representatives of the various corporations whose stocks and/or bonds were registered in the name of appellant. Cancelled checks were produced by these witnesses disclosing that the instruments were payable and endorsed by appellant.
The evidence concerning directors' fees consisted primarily of testimony by duly designated officials from the corporations of which appellant was a director coupled with production of cancelled checks payable and endorsed by appellant. Entries transcribed from appellant's books established the remaining fees emanating from this source.
The largest item of unreported income involved earnings from appellant's thriving law practice. These sums were substantiated in part by direct testimony of clients which was documented where possible. In addition, transcriptions from appellant's books by revenue agents were submitted. Further, the Government relied on certain statements and schedules prepared by appellant or his accountant compiled for purposes of audit during administration of the Hurst and Freihofer estates. It is noted that the last mentioned documents were rendered by appellant in his capacity as executor of the estates. Finally, cancelled checks signed by appellant as executor of the Hurst and Freihofer estates which were submitted by him to Federal and State auditors of the estates were introduced.
From the previously noted evidence the Government summarized and presented what it deemed a fair representation of appellant's income for the crucial period. A qualified Revenue Agent prepared and submitted this resume to the triers.*fn7 In relevant part it disclosed the following:*fn8
Year Reported Corrected Additional
1947 ($11,238.54) $79,450.88 $90,689.42
1948 ($10,204.29) $46,968.85 $57,173.14
1949 $14,975.77 $20,171.37 $5,195.60
1950 ($27,512.02) $161,224.77 $188,736.79
TOTALS ($33,979.08) $307,815.87 $341,794.95
Year Reported Corrected Additional
1947 0 $46,131.71 $46,131.71
1948 0 $20,900.71 $20,900.71
1949 $3,643.11 $5,888.57 $2,245.46
1950 0 $109,720.69 $109,720.69
TOTALS $3,643.11 $182,641.68 $178,998.57
Appellant does not challenge the Government's proof elicited pertinent to the dividend, interest and director fee sources. The sole contention herein relevant is that certain documents introduced with respect to professional fees were admissions requiring corroboration which was lacking. Appellant urges that if the questioned exhibits be discarded the evidence is insufficient to sustain a finding that his net income was understated for 1947, 1948, 1949 and 1950.*fn9 The contested exhibits are Government's G-44, 71, 77, 78, 94, 95, 96, 97, 100 and 101. To properly delineate the issues the contents of these documents will be briefly set forth:
Exhibit G-44 consists of 24 checks drawn on the estate of Winfred S. Hurst and payable to Harry J. Alker, Jr., (the drawer of the checks was Harry J. Alker, Jr., Executor of the estate of Winfred S. Hurst). The earliest of the 24 is dated January 20, 1950; the last October 12, 1950. They range in amount from $500 to $7,000 and total $90,206.49. The checks were submitted by appellant to the Internal Revenue Service in connection with the audit of estate tax return in the Hurst estate wherein the appellant was executor and attorney. Revenue Agent Gurbarg, who received the checks testified that defendant related they were in payment of a fee for services to the decedent during his lifetime, his executor's commission and his fee as attorney for the estate. These checks were furnished to substantiate particular deductions for debts and administration expenses claimed upon the estate tax return. G-44 was admitted without objection.
Exhibit G-71 comprises the original notes of testimony transcribed at a hearing on May 14, 1951 by Frank Rogers Donahue, Esq., the auditor of the estate of William Freihofer, pursuant to the direction of the Philadelphia Orphans' Court by whom the auditor was duly appointed. Harry J. Alker was both executor and counsel for the Freihofer estate. At the May 14 hearing Alker submitted in his official capacity, at the auditor's request, a list of expenses paid by him from the estate denominated attorney's fees. The statement was prepared from the records of the estate by Rhoads, appellant's accountant and bookkeeper. It disclosed numerous payments to Hall, Bruce & Alker, Attorneys, aggregating $92,100 for 1947, $32,600 for 1948 and $148,000 for 1949. Mr. Donahue personally testified and identified G-71.
With reference to the information set forth in the exhibit A. D. Bruce, Esq., testified that he was associated with Alker during the years 1947, 1948 and 1949 and that he received for his services relating to the Freihofer estate $5,000 in 1947 and $10,000 in 1949. He identified exhibit D-3, a check dated July 19, 1949 for $10,000 which he stated represented the 1949 payment.
Edwin Hall, II Esq., testified he had been associated with Alker from 1947 through 1950, and that his fees from the Freihofer estate were $5,000 in 1947, $500 in 1948 and $30,000 in 1949.
G-77 is a statement of administrative expenses for the years 1947 and 1948 in the estate of William Freihofer voluntarily presented by Alker to auditors of the Internal Revenue Service. It lists certain legal fees paid to Alker as counsel and claimed by him in his executor capacity as deductions from the gross estate. The Revenue Service representatives were interested in the Freihofer estate tax return and the record is void of any evidence that they were investigating the subject matter of the present prosecution.
Accompanying G-77 was G-78 consisting of 8 cancelled checks drawn on the Freihofer estate and payable to Alker submitted by appellant to the Federal auditors of the estate to substantiate G-77.
G-94 and G-95 are transcripts prepared from appellant's fee ledger and cash book by agent Segal for the years 1947 and 1948. The transcriptions were made with appellant's consent in his law office. G-94 discloses that in 1947 Alker received fees of $97,122.44, and commissions of $4,928.84 totaling $102,051.28 less $3,585 paid to other attorneys. G-95 shows for 1948 total legal fees, directors' fees and commissions of $117,988.24, dividends of $2,181.68 and fees paid to other lawyers of $14,397.09.
G-96 is a list prepared by appellant's accountant, Rhoads, and submitted by defendant to former Revenue Agent, Mednick, during the course of the latter's investigation. The list purports to contain data concerning appellant's legal fees, directors' fees, commissions, rental income and payments made to other lawyers for 1949. It reflects total income of $239,457.22 and payments to other lawyers of $101,490; among which there appears a payment of $6,000 to David Griffith.
G-97 is a schedule prepared by appellant's accountant, Rhoads, and submitted by appellant to former agent Mednick, during the course of the latter's investigation. The list purports to show defendant's legal fees and payments made to other lawyers for 1950. It indicates legal fees of $60,253.46 and payments to other lawyers of $11,811.25.
G-100 is a transcript of defendant's fee ledger prepared by former Revenue Agent Mednick, during the course of his investigation. It lists all fees and commissions in excess of $500 which had been entered in the fee ledger and some fees and commissions that were less than the stated amount. Also listed were payments to other lawyers appearing in the fee ledger. The transcript pertains to 1947 and 1948 and discloses total fees and commissions of $97,373.63 for 1947, less payments to other lawyers of $2,335 and total fees and commissions of $88,433.50 for 1948, less payments to other lawyers of $14,522.09.
G-101 consists of entries copied by agent Mednick from appellant's 1946 fee account which divulged fees received in January, 1947 of $3,000.
The court is unable to subscribe to appellant's view that all of the aforementioned documents are admissions and therefore subject to the strict legal rules pronounced by the Supreme Court.*fn10 The 24 cancelled checks comprising G-44 drawn on the estate of Winfred Hurst and payable to Harry J. Alker, Jr., totaling $90,206.49 represent the best evidence available in reconstructing appellant's 1950 income. Not even an appropriate assertion of privilege could have foreclosed their introduction into evidence.*fn11 Likewise, G-78 consisting of 8 cancelled checks drawn on the Freihofer estate and payable to Alker cannot properly be characterized as statements of the accused. To deny the triers access to these instruments unless independently substantiated could hardly be deemed more than a device calculated to impede the efficient administration of justice. The considerations enunciated by Mr. Justice Clark in support of the corroboration rule are manifestly inapplicable to G-44 and G-78.*fn12
G-71 although unable to claim the sanctity accorded G-44 and G-78 is similarly not susceptible to appellant's characterization. The portion of the document particularly relevant is the schedule of fees and expenses incurred by the Freihofer estate during the course of its administration. The information submitted by Rhoads, appellant's accountant, was prepared from the records of the estate, a distinct entity.*fn13 The schedule was not limited to sums paid to appellant's law firm but included all expenditures within the denominated classification for the years 1932-1949.*fn14 Cancelled checks of the estate formed an essential source of Rhoads' report.*fn15 Against this background it would seem that the schedule restricted to payments during the indictment years is a form of direct evidence similar to the testimony elicited from the parade of Government witnesses concerning payments to the appellant.
The record is replete with materials tending to substantiate the accuracy of G-71. The schedules are directly traceable with minor exceptions into appellant's office bank statements and duplicate deposit slips.*fn16 In addition, all but two cancelled checks comprising G-78 are accounted for in G-71. The two not disclosed on the schedule ...