Before McLAUGHLIN, KALODNER and STALEY, Circuit Judges.
This is an appeal from a conviction for income tax evasion under Section 145(b) of the Internal Revenue Code, 26 U.S.C. § 145 (b).*fn1
The appeal is directed at specific instructions in the trial court's charge to the jury and a statement in the charge which the defendant asserts was particularly prejudicial to him.Before discussing the errors complained of a brief statement of the factual background is in order.
The defendant, Leo Link, was tried on a four-count indictment charging him with filing false and fraudulent income tax returns for 1946, 1947, 1948 and 1949. He was found guilty on all four counts and sentenced to jail for four years and fined $10,000 and costs.
The evidence adduced at the trial established that the defendant engaged in "bookmaking" activities under the name of J. W. Donaldson using the facilities of the Western Union Telegraph Company. The methods pursued were as follows: Bettors wired money orders to the defendant with instructions to bet on their choices at various race tracks; when the bettors won they were paid via Western Union money orders; when horses were "scratched" (failed to start) refunds were made by money orders or by check on a Hudson County bank.It is perhaps needless to add that the defendant did not actually place the bets at the various race tracks but "booked" them himself.
The government offered in evidence books and records of the defendant and the Western Union which clearly proved the scope and nature of the defendant's operations.Moreover currency in the amount of $127,000 was found in a safe in the home of defendant's mother-in-law with whom he lived. He claimed that $102,000 of the money belonged to the mother-in-law and that only $25,000 belonged to a mysterious principal for whom he worked on a fee basis - 25 cents on each bet placed.
Government witnesses submitted calculations, based on testimony of Western Union employees and available records, fixing defendant's gross receipts for the four taxable years involved at approximately $1,063,000 and his net income at approximately $257,000. In its calculations the government allowed deductions in the amount of some $800,000 - amounts paid to winners and refunds on "scratches". It also allowed an additional $6,000 comprised largely of defendant's standard deductions allowable by law.
The crux of defendant's contention at the trial was that he was merely the "front" through whom the "bookmaking" operations were carried on; that he merely retained a commission of 25 cents on each bet and that he had reported his entire income in his tax returns and paid the tax due thereon.*fn2
Three questions are raised by the defendant on this appeal.We will dispose of them in the order presented.
The defendant first urges the trial court erred in its instructions on burden of proof. The trial judge in his instructions to the jury charged that: "* * * the burden is upon the defendant to prove that he had other deductions and lawful expenses not shown in his return." This instruction, the defendant urges, was erroneous. We do not agree. The government by its testimony established unreported income and allowed deductions claimed by defendant and other deductions that it could calculate without his assistance. It is well-settled that "Evidence of unexplained funds or property in the hands of a taxpayer establishes a prima facie case of understatement of income" and that "It is then incumbent on the defendant to overcome the logical inferences to be drawn from the facts proved." United States v. Hornstein, 7 Cir., 1949, 176 F.2d 217, 220. In Gariepy v. United States, 6 Cir., 1951, 189 F.2d 459, 463, it was held that "* * * the government is not required to prove a negative * * *". Here too, the government is not required to prove the negative, i. e. that the defendant did not have any other deductions. Other deductions, if there were any, could have easily been established by the defendant. By its proof the government established its prima facie case, and the burden of going ahead with the evidence of additional expenses which equalled or exceeded gross income was on the defendant. Cf. United States v. Venuto, 3 Cir., 1950, 182 F.2d 519.
The defendant also complains that the trial judge erred in his instructions as to the rule of reasonable doubt. ...