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Reichert v. Commissioner of Internal Revenue.

June 9, 1954


Author: Schnackenberg

Before MAJOR, Chief Judge, and DUFFY and SCHNACKENBERG, Circuit Judges.


This case is brought to this court by the petition of taxpayer, Manson L. Reichert, asking for a review of decisions of the United States Tax Court entered June 18, 1953, and involves income taxes and fraud penalties assessed against him for the years 1943 through 1946. Jurisdiction was conferred on this court by section 1141(a) of the Internal Revenue Code, as amended June 25, 1948, and May 24, 1949, 26 U.S.C.A.ยง 1141(a). By its orders the Tax Court determined deficiencies in income tax payments and fraud penalties amounting to $11,204.15.

Taxpayer became the chairman of the Republican County Central Committee of Vanderburgh County, Indiana, in May, 1942, and in November, 1942, he was elected mayor of the city of Evansville. He held these positions in the taxable years 1943 through 1947. 1944 and 1946 were campaign years. One of taxpayer's duties as county chairman was to solicit campaign funds. In accordance with the method of operation of the Republican Party contracts were entered into between the Republican United Finance Committee of Indiana and the Republican County Central Committee of Vanderburgh County whereby funds collected by the county committee were to be remitted to the United Finance Committee, with a report of the names of the contributors. Receipts were issued to each contributor by the treasurer of the United Finance Committee. Of the total, 65% was to be returned to the county committee and 35% was to be allocated to the state committee. The Tax Court decided that a part of the contributions collected by taxpayer he did not remit to the state committee and he was therefore subject to an income tax thereon.

Taxpayer procured the appointment by the secretary of state of Benjamin H. Bartlett as manager of the motor vehicle license bureau branch office in Evansville. Bartlett agreed with taxpayer to put the latter's daughter, Maybelle, on his payroll at a salary of $3600 a year. She was placed on the payroll, did very little work, and the Tax Court found that what was paid to her, with the exception of $100 for each of the years 1943, 1944 and 1945, was paid to taxpayer for the assistance he had given in procuring Bartlett's appointment and was income to taxpayer.

The Tax Court also found that fraud had been proved.

When cases Nos. 23495 and 29928 came on for hearing before the Tax Court, they were consolidated for hearing on the motion of taxpayer's attorney, who thereupon immediately presented and filed written motions signed and sworn to by taxpayer under date of October 29, 1951. The motions are identical and are referred to in the record and herein as the motion to suppress evidence.

In substance the motion alleged that the pending cases were based and founded upon and sprang directly from what it described as the illegal and unlawful disclosure and delivery by the prosecuting attorney of Vanderburgh County, Indiana, to the representatives of the Intelligence Unit of the Bureau of Internal Revenue of the United States Government, of a transcript of the testimony of witnesses who had appeared before the Vanderburgh County grand jury. The motion further alleges that the charges contained in both cases were the direct result of hearings held before representatives of the United States government and that "all of the testimony and information then before said government agents and in their sole and exclusive possession and control was the testimony of witnesses that had appeared before the Vanderburgh County, Indiana, grand jury, * * transscribed * * and delivered by * * the prosecuting attorney * * to the government agents" as aforesaid. The motion further sets forth several questions by special agent Shryer directed to taxpayer and another witness in which Shryer refers to testimony given by witnesses before the grand jury. Typical is the following question:

"Mr. Reichert, in the proceedings of last year under state laws to obtain indictments against you, various individuals testified under oath before the Vanderburgh County Grand Jury, as to payment to you of sums of money. In May '44, Benjamin H. Bartlett stated that just prior to the primary election that year he turned over to you the sum of $10,300. Did you receive that money?"

The motion charged that everything learned by the government representatives concerning the alleged income tax liability of taxpayer was "learned illegally and unlawfully and in violation of the constitutional guarantees of said" taxpayer and, "specifically, in violation of the Fifth Amendment to the Constitution of the United States and of the Due Process of Law provision of the Fourteenth Amendment" thereto, and that the prosecuting attorney turned the grand jury testimony over to the Bureau of Internal Revenue and "thereby disclosed the secrets of the Grand Jury room without an order of any court and without judicial sanction, and that in so doing violence was done to the Fifth Amendment to the Constitution and the Due Process Clause of the Fourteenth Amendment."

The motion contained a prayer reading:

"* * * prays that all evidence and properties of any kind or nature, including all of the testimony herein specifically set out and alleged, and testimony not herein set out and alleged, so learned by the agents of the Intelligence Unit, Bureau of Internal Revenue, Treasury Department of the United States, and any and all Grand Jury testimony of the Vanderburgh County, Indiana, Grand Jury, and all statements made by this affiant or by any other witness appearing before said agents, whether said statements be written or oral, may be quashed and suppressed, and that all property of whatsoever kind and nature, and documents, memoranda, books and all other property, and any statements, whether oral or written, already procured by said agents, be suppressed * * *".

Although no counter-affidavit or motion was presented by the government, taxpayer asked permission to introduce evidence to support the allegations of the motion and expressed a wish to do this before the case was tried on the merits.The court refused to permit this course of procedure to be followed and indicated that it would take the motion under advisement and rule on it when the evidence was before it, suggesting that objection be made as the evidence of the government was offered. The trial proceeded, but taxpayer made no objections to evidence on the grounds set up in the motion to suppress. At the close of the trial the court asked taxpayer's counsel if he then proposed to offer evidence on the matter set forth in the motion. At that time taxpayer's counsel indicated that he was relying on the matter set forth in the motion only. It is contended by taxpayer in this court that the questions raised by the motion to suppress should have been determined in advance of the trial of the principal case. He relies upon Weeks v. United States, 232 U.S. 383, 34 S. Ct. 341, 58 L. Ed. 652, and other cases. However that may be, we find it unnecessary to decide that question of practice.

1. Taxpayer relies upon the following provisions of the Indiana statutes, Burns' Indiana ...

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