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UNITED STATES v. ETTORRE

January 10, 1975

UNITED STATES OF AMERICA
v.
FRANCIS J. ETTORRE



The opinion of the court was delivered by: DITTER

 The defendant was charged with willfully failing to file personal and corporate income tax returns for a three year period in violation of 26 U.S.C. § 7203. After a two-day trial without a jury I found defendant guilty on all six counts of the information. Before me are his post-trial motions. *fn1"

 Francis J. Ettorre, during the years in question, 1969, 1970, and 1971, was a certified public accountant with a substantial private practice. In 1968, 1969, and 1970, he was also part owner of Panett Computer Service Corporation and was responsible for its accounting work and the preparation of its tax returns. As the fortunes of the company waned, Ettorre assumed more and more responsibility for its operation. Not only did he extend substantial funds to Panett, but also spent a great deal of time juggling creditors and attempting to obtain new business. Finally the company failed.

 Mr. Ettorre explained that he did not file his personal tax returns because he was too busy with all the worries and problems he had at Panett (N.T. 179). Although he knew he would have to get around to it, would have to complete them, he just disregarded the corporate tax returns (N.T. 173-74). He did not file his personal returns for 1970 and 1971 because they depended upon the return for 1969 being done -- and that was still not completed (N.T. 179, 181). He also admitted that he knew of the obligation to file his tax returns by April 15 of the following year -- or at the end of whatever extension had been granted (N.T. 180).

 In determining the defendant had acted willfully, I concluded that he knew of the time requirements for the filing of tax returns but for the years involved had deliberately failed to comply. I further held, however, that Ettorre did not intend to defraud the Government and always intended to file the returns at some undetermined time in the future.

 The principal issue before me is whether my interpretation of the word "willfully" as used in this section of the Code, 26 U.S.C. § 7203, is correct. I adopted the explanation found in United States v. Litman, 246 F.2d 206, 208-09 (3d Cir. 1957), where it was held that willfulness existed when a taxpayer intended not to fulfill the obligation of timely filing of which he was well aware. Citing Spies v. United States, 317 U.S. 492, 496, 63 S. Ct. 364, 367, 87 L. Ed. 418 (1943), Judge Hastie stated that punctuality is important to the fiscal system and there are sanctions to assure punctual as well as faithful performance of the duty to file tax returns.

 Defendant, relying on United States v. Bishop, 412 U.S. 346, 93 S. Ct. 2008, 36 L. Ed. 2d 941 (1973), argues that the Government must prove beyond a reasonable doubt that he had a "bad purpose" and "evil motive" in order to find him willful. The Supreme Court in Bishop simply held that "willfully" had the same meaning in both felony and misdemeanor sections of the tax statutes. In discussing a specific definition of the word, Justice Blackmun states:

 
the word "willfully" in these statutes generally connotes a voluntary, intentional violation of a known legal duty. It has formulated the requirement of willfulness as "bad faith or evil intent," Murdock, 290 U.S. at 398, 54 S. Ct. at 226, . . .

 United States v. Bishop, supra 412 U.S. at 360, 93 S. Ct. at 2017. Defendant contends that this language required the court to find bad faith or evil motive before convicting him.

 A close reading of Bishop and United States v. Murdock, 290 U.S. 389, 54 S. Ct. 223, 78 L. Ed. 381 (1933), fails to support defendant's position. Both cases make clear that the purpose of the Court's emphasis on bad faith and evil motive was to distinguish a criminal violation of the tax statutes from mere negligence or honest misunderstanding. Justice Roberts points out in Murdock, supra at 396, 54 S. Ct. at 226, that:

 
Congress did not intend that a person, by reason of a bona fide misunderstanding as to his liability for the tax, as to his duty to make a return, or as to the adequacy of the records he maintained, should become a criminal by his mere failure to measure up to the prescribed standard of conduct.

 This distinction between negligence or misunderstanding on the one hand, and intentional criminal violation on the other, is the essence of Justice Blackmun's statement in Bishop. After citing Spies v. United States, supra 317 U.S. at 496, 63 S. Ct. at 367, he reiterates the proposition that innocent errors or frank differences were not intended by Congress to be the basis of criminal prosecution:

 
The Court's consistent interpretation of the word "willfully" to require an element of mens rea implements the persuasive intent of Congress to construct penalties that separate the purposeful tax violation from ...

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