HULL v. UNITED STATES

GEWIN, Circuit Judge.

The appellant Hull, a Certified Public Accountant, was found guilty by a jury in the U.S. District Court for the Southern District of Texas of the charges contained in Counts 8 through 15 relating to false income tax returns alleged to have been prepared by him. Counts 1 through 4 relate to alleged false income tax returns of the OTM Corporation, and as to these counts the jury was unable to agree upon a verdict. Counts 5 through 7 had to do with alleged false income tax returns of Burleigh Sanford, Sales Manager for the OTM Corporation, and the jury acquitted Hull on the Sanford counts. We do not question the sufficiency of the evidence to support the verdict of guilty as found by the jury, but we reverse because of errors committed during the trial.

The counts under which Hull was convicted charged that he did willfully and knowingly "* * * aid and assist in, and counsel, procure and advise" in the preparation and presentation to the District Director of Internal Revenue of false and fraudulent income tax returns of 3 salesmen in violation of Title 26 U.S.C.A. § 7206(2). The salesmen were employees of the above mentioned corporation. Hull was a minor stockholder and was also Secretary. The corporation paid the salesmen involved, namely, Brown, Lahrmann and Holsomback, a fixed salary plus an amount equal to 1% of their gross sales; and in some instances there was an additional allowance for automobile mileage. The unreported commission sometimes exceeded the stated salary of the salesmen. There was testimony to the effect that the commission was paid to the salesmen to defray expenses in their selling endeavors and their efforts to promote sales. The record clearly demonstrates that all of the commission paid to salesmen was not used for such purposes. The salesmen were required to file a statement with the company relating to the amount of commissions each salesman was entitled to receive. All three salesmen admitted that their actual expenses did not equal the amount of the 1% commission. No accurate records were kept of expenses actually incurred. Each salesman asserted that he relied on the advice of the appellant Hull to the effect that it was not necessary to report the commissions. It is also evident from the record that the failure to report the commissions was a deliberate and considered conclusion, and often formed the basis of separate discussions between the salesmen involved and the appellant Hull. The practice was continued over a period of 3 or 4 years. The salesmen admitted that they considered the commission as extra compensation for services rendered; that a substantial portion of sums so received had not been expended for expenses incurred. There is ample evidence that the salesmen continued to make inquiry about reporting the commissions and questioned the accountant's advice that it was not necessary to report the same. There is no evidence that any of the salesmen sought counsel or advice from any other source. Unquestionably, the salesmen knew they were receiving income which was not reported in their respective returns.

Hull contends that the counts under which he was convicted are insufficient because they fail to state the amount of income which was not reported, resulting in an absence of essential facts upon which to base a conclusion that the returns were false as to "a material matter". We disagree with the appellant and hold the counts involved to be sufficient. Gaunt v. United States, 1 Cir., 1950, 184 F.2d 284. We further conclude that there is no merit in Hull's contention that the trial court erred in failing to charge the jury that a showing of a tax deficiency is a prerequisite to conviction.

There are 11 specifications of error. Some of them contain no merit, but we have concluded that there was error in the refusal of the trial court to instruct the jury as to the law applicable to the testimony of accomplices. We do not approve the written charge requested by the appellant as a correct statement of law on the subject, but that charge together with the objections of the defendant clearly and forcefully brought the question to the attention of the trial court. There was objection to the court's failure to charge on the subject. Of importance also is the fact that the court stated to the jury the court's opinion that the Government's case under the corporation counts was not nearly so strong as it was under the remaining counts having to do with income tax returns of the various salesmen. Further, after the jury had deliberated for approximately an hour and a half, it returned to the courtroom and the foreman requested the court to restate its instructions to the jury as to the first 4 counts of the indictment, which were the counts relating to the OTM Corporation. Not only did the court have its oral charge re-read as to the first 4 counts, but the statement quoted in the margin referring to the counts involving the salesmen was read again to the jury. At this point, counsel for the appellant again called to the attention of the court the fact that it had refused to charge the jury as to accomplice testimony; and repeated appellant's objection to the emphasis of the court on the importance of the testimony of the salesmen. The jury was left with the emphasis naturally attendant upon the second reading of the charge.

As stated in our recent case of Dunn v. United States, 5 Cir., 1963, 318 F.2d 89, the better and safer practice is for counsel to submit a written request for instructions in accordance with Rule 30 F.R.Crim.P. As there pointed out however, oral requests are sufficient if the court is clearly informed of the point involved. In the instant case the subject was brought to the court's attention by the requested charge, and by 2 separate and distinct objections on the part of the defendant pointing out the failure of the court to charge on the matter of accomplice testimony. One of the salesmen, Sanford, who appeared as a Government witness against Hull, was criminally prosecuted, entered a plea of guilty, and received a sentence in Federal court in Houston, Texas, under an indictment charging tax evasion, which charge arose out of, or at least related to substantially the same subject matter as that involved here. At the time of trial the other 3 salesmen, Lahrmann, Brown and Holsomback, had agreed to a 50% fraud penalty arising out of the very transactions for which Hull was being prosecuted. As pointed out in Dunn and in Phelps v. United States, 5 Cir. 1958, 252 F.2d 49, the existence of reversible error in a given case depends on the circumstances of that case and the conduct of the trial as a whole. In our view there was convincing evidence that the salesmen were accomplices with Hull; but to say the least, there was ample evidence from which the jury could have drawn a valid conclusion that they were accomplices. We conclude that the jury should have had an opportunity to decide whether the salesmen who testified were accomplices, and then to weigh carefully the credibility of their testimony after receiving a proper cautionary instruction. Ward v. United States, 5 Cir. 1961, 296 F.2d 898. We reject the argument of the Government that the court's charge on credibility was sufficient in this case, where the record so clearly demonstrates the necessity of a charge on accomplice testimony. We do not criticize the charge as to its sufficiency on the subject of credibility, but a charge as to credibility should not be taken as a substitute for an accomplice charge.

Prior to the trial, the Internal Revenue Service had audited the income tax returns of salesmen Brown, Holsomback and Lahrmann, certain adjustments were made, and the evidence shows that there were additions to the tax and fraud penalties were imposed. Indeed, the salesmen stated on the witness stand that their returns were false and in effect stated that they were aware of the fact that all income received by them was not included in the return. The tone of such testimony was to lay the blame on Hull. A careful reading of the record however, clearly demonstrates that each of the salesmen repeatedly engaged in discussions with Hull showing a consciousness of omissions of income, and questioned the advice they claimed Hull had given to them. They did not voluntarily amend their returns prior to investigation by Internal Revenue Service, nor did they seek the advice of any other person. The salesmen acquiesced in the adjustments mentioned and accepted the reports of the Internal Revenue Agents as a substantially correct statement of their income.

The appellant issued a subpoena duces tecum to each of the salesmen requesting them to bring these reports to the trial. The reports were brought, but when the appellant Hull demanded to see them, the trial court refused to require the reports to be delivered in accordance with the subpoena, and left it to each salesman as to whether he desired to deliver such reports voluntarily. The court stated in open court that he did not see the relevancy of such reports. No question of self-incrimination or other objection was made and so far as we can determine, none was involved. The reports were not delivered solely because, as one witness stated: "I don't see any point in taking up more time." At that point the court stated: "I don't believe I do, either." To say the least, the salesmen were hostile to Hull. As pointed out by the court in its oral charge, the testimony of the salesmen was strong and direct against Hull. Any statement by them or conduct on their part which contradicted the testimony being given from the witness stand was vital and important. The evidence involved tended to contradict what the witnesses were stating. One of the chief issues in the case was whether the salesmen had fully informed the appellant Hull of all income received. One of the salesmen, Brown, admitted on the stand for example, that he never did mention to Hull a substantial item of income received by him from a source not related to his business as salesman. It is clear to us that the salesmen should have been required to produce the reports in response to the subpoena in order to permit an examination of them; and if they were competent and relevant evidence, as is indicated, the defendant should have been permitted to use the same in cross-examination the witnesses who testified against him, all under the careful scrutiny and supervision of the trial court. Gordon v. United States, (1953) 344 U.S. 414, 73 S.Ct. 369, 97 L.Ed. 447.

The appellant Hull specifies errors for failure to permit him to examine certain reports and documents in the possession of revenue agents who testified at the trial in violation of the Jencks Act, 18 U.S.C.A. § 3500. The record with reference to this phase of the case is thoroughly muddled and confused. It is obvious that the defendant was permitted to examine some of the documents requested, but it cannot be determined with accuracy which ones he was permitted to examine and which ones were withheld. In order to avoid confusion upon retrial of the case, the proceedings should be conducted in such manner that the record will eliminate the confusion as to the materials taken from the prosecutor's file which were given or shown to defendant's counsel; which ones were admitted into evidence, and which documents were withheld. This direction applies to all documents which may be involved. United States v. Bernard, 7 Cir. 1961, 287 F.2d 715; United States v. Cardillo, 2 Cir. 1936, 316 F.2d 606; Palermo v. United States, 1959, 360 U.S. 343, 79 S.Ct. 1217, 3 L.Ed.2d 1287; Campbell v. United States, 1963, 373 U.S. 478, 83 S.Ct. 1356, 10 L.Ed.2d 501.

We do not approve the following argument of the prosecuting attorney:

"You have the opportunity, right now, to stop what this man has been doing. Counsel stated the Government had brought fifteen counts so that we would make this man look bad. Let me state right now, it could have been forty-five counts. Every act he did violates several different laws. That indictment could contain forty-five different counts. How many other things are wrong with the books and records out there no one knows."

Neither do we approve the following argument of defense counsel to which the prosecuting attorney was making response:

"* * * A lot of times, they throw things, a lot of items like that at a person, hoping that the jury will get one on one side and one on the other, and they will have a compromise and say, `Let's find him guilty on one or two counts.'"

Both arguments are improper and are of like kind. Dunn v. United States, 5 Cir. 1962, 307 F.2d 883.

Reversed and remanded for proceedings not inconsistent herewith.