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United States v. Molasky

February 26, 1941

UNITED STATES
v.
MOLASKY, AND FOUR OTHER CASES.



Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; Walter C. Lindley, Judge.

Author: Major

Brfore MAJOR and KERNER, Circuit Judges, and BRIGGLE, DISTRICT Judge.

MAJOR, Circuit Judge.

These are appeals of William Molasky, James M. Ragen, James M. Ragen, Jr., Lester A. Kruse and Arnold W. Kruse, from judgments of conviction entered September 12, 1940. The indictment, upon which they were jointly tried, was returned August 22, 1939, by the regular June term grand jury, which had been authorized to continue for the purpose of completing investigations commenced during the June term. The indictment contained five counts, the first four of which charged these appellants, together with Moses L. Annenberg, Jules Taylor and Herbert S. Kamin, and the Consensus Publishing Company, an Illinois corporation (hereinafter referred to as "Consensus") with wilfully attempting to evade and defeat the Federal tax on the income of Consensus during the years 1933 to 1936, both inclusive,in violation of Section 145(b), Title 26, U.S.C.A. Int. Rev. Code. The fifth count charged the defendants with conspiring to evade and defeat the Federal tax on the income of Consensus for the years 1929 to 1936, both inclusive, in violation of Section 88, Title 18, U.S.C.A.

Prior to trial, the defendants Annenberg, Taylor and Kamin were dismissed as defendants. The case was tried to a jury which returned a verdict finding all of the instant defendants (appellants) guilty on all counts, except Lester A. Kruse, and finding him guilty on the fourth and fifth counts, upon which verdict the Trial Court entered the Judgments now under attack. Previous to the trial, certain preliminary motions and pleas were filed, some applicable to all, and others to only certain of the defendants.

The appeals may be said, in a general way, to involve the alleged errors of the Trial Court in its denial of motions to dismiss the indictment; in its refusal to permit inspection of the Grand Jury minutes and to discharge the oath of secrecy surrounding the proceedings of the Grand Jury, in striking certain of the defendants' pleas in abatement based upon the presence of unauthorized persons before the Grand Jury, in dismissing special immunity pleas in bar; in the admission of evidence; in its denial of motions for directed verdict, for a new trial and in arrest of judgment, and in the court's charge to the jury.

Insofar as a discussion of the indictment is concerned, it would be sufficient to set forth the charge in abbreviated form. In view of the theories advanced by the respective parties, however, as to the merits of the controversy, it appears material to make a substantial statement regarding the charge as alleged. The first count is typical of the first four and charges that the defendants filed a return in 1934 for the taxable year of 1933, and did unlawfully, wilfully and knowingly attempt to evade and defeat a large part, towit, $9678.02 of a tax due to the United States on the income of Consensus, and that the attempt was in the manner following: That Consensus was engaged in the business of printing and selling "Run Down Sheets" to a class of persons known as "Bookmakers"; that it maintained offices in St. Louis, Missouri and cincinnati, Ohio; that William Molasky was the president of the corporation, and that the corporation was required to file an income tax return for the year in question, inasmuch as it had received a gross income of $119,960.96.It alleges that the corporation was entitled to deductions as follows:

Rent on Business Property $562.50

Interest 89.55

Taxes 300.00

Depreciation 1,821.00

Salaries and Wages 12,757.56

Expenses 23,258,55

Total Deductions $38,789.16

and that it derived a net income of $81,171.80, upon which it owed a tax of $13,340.22. It also aggeges that the defendants, knowing the corporation's income to be as above set forth, wilfully attempted to evade and defeat a part of the tax, towit, $9,678.02, and as a means of so wilfully attempting to evade and defeat said tax, they filed a sworn return showing the corporation's gross income to be $119,960.96, and claiming deductions as follows:

Rent on Business Property $562.50

Interest 89.55

Taxes 300.00

Depreciation 1,821.00

Salaries and Wages 12,757.56

Commissions 54,537.65

Other Expenses 23,258.55

Total Deductions $93,326.81

The indictment further alleges that according to the return as filed, a net income of $26,634.15 was shown, with a total tax due and ...


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