The opinion of the court was delivered by: Campbell, Chief Judge.
This consolidated cause, consisting of Case No. 58 CR 475 and Case No.
59 CR 157, having come on for trial upon the stipulations, testimony and
exhibits of the parties, is presently before me for disposition. Cause
No. 58 CR 475 is an indictment consisting of two counts, the first of
which I dismissed November 20, 1958. The second and remaining count
charges that defendant Albert M. Bridell "did willfully and knowingly
attempt to evade and defeat a large part of the income tax due and owing
by him and his wife to the United States of America for the calendar year
1952 by filing a * * * false and fraudulent income tax return * * * in
violation of Section 145(b) of the Internal Revenue Code of 1939; to be
found in Title 26 U.S.C. § 145 (b)."
Cause No. 59 CR 157 is an indictment consisting of six counts, the
first five of which charge the defendant, Albert M. Bridell, with
willfully and knowingly attempting to evade and defeat income tax due and
owing the United States for the years 1953, 1954, 1955, 1956, and 1957,
respectively, by filing false and fraudulent returns for those years in
violation of Section 145(b) as to 1953, and in violation of Section 7201
of the Internal Revenue Code of 1954; Title 26 U.S.C. § 7201, as to
the remaining years. The sixth count charges a conspiracy between
defendant Bridell, defendant American Carbon Corporation and Robert J.
Blauner to attempt to evade and defeat income tax due and owing the
United States by Bridell and his wife from April 4, 1949, up to and
including June 13, 1958, in violation of Title 18 U.S.C. § 371.
It appears from the evidence that defendant, Albert M. Bridell, after
practicing law for a year, entered the continuous form printing business
in 1935 and in 1936, joined the newly formed American Lithofold
Corporation (hereinafter referred to as "Lithofold") of St. Louis,
Missouri, as a salesman.
In 1937 he was sent by that corporation to Chicago, Illinois, where he
has since remained. He is presently vice president of Lithofold and is
also in charge of its advertising program, promotional efforts and
In 1943, defendant, American Carbon Corporation (hereinafter referred
to as "Carbon"), an Illinois corporation, was formed for the purpose of
manufacturing carbon paper, inked ribbons and items related thereto and
more specifically, for the manufacture of "one-time carbon paper" to be
sold and supplied to Lithofold.
Since its inception, defendant, Bridell, has been president, a director
and shareholder of Carbon. Bridell's father-in-law, R. J. Blauner, was
vice-president of Lithofold when Carbon was incorporated, and is
presently president and treasurer. R. J. Blauner, since its
incorporation, has been treasurer, a director and shareholder of Carbon.
Since September 15, 1945, no person unrelated to the Bridell or Blauner
families has acquired, owned or held any of the capital stock of Carbon.
Nor has any unrelated person to the Bridells or Blauners served as a
director. Since 1947, the majority of the capital stock of Lithofold has
been held by the Bridells, Blauners and Carbon. From 1944 through 1957,
the percentage of sales by Carbon to Lithofold out of total sales ranged
between 96 per cent in 1944 to 28 per cent in 1957.
In 1946, R. J. Blauner purchased a home in Highland Park, Illinois,
named "Tara" at his wife's suggestion and in which they lived, until
October, 1950. Later the word "Tara" was and is currently used as a trade
name for Carbon. In 1948, Bridell and his wife sold their Wilmette home
and moved to "Tara" where they have since resided with their
children. On April 6, 1949, "Tara" was conveyed to the Bridells as joint
During December of 1946, one, Virlon Furrow, began working at "Tara" as
caretaker and maintenance man and was paid personally by Blauner for that
month. On December 30, 1946, he made application for employment with
Carbon and was subsequently placed, at Bridell's direction, upon the
Carbon payroll. Furrow continued working exclusively at "Tara" until his
death, February 17, 1958. During this entire period his wages were paid
One, Frank Carretta, was employed as an outside laborer at "Tara" from
June 11, 1951, until April 10, 1952. One, Pat Kline, was employed at
"Tara" as an outside laborer from May 16, 1951, until November 1, 1951.
One, Morris Nygaard, employed by Carbon from November 24, 1950, until
April 17, 1952, also did some work at "Tara." One, Ellarea McKinney, was
employed as a cook and housekeeper at "Tara" from January 2, 1951, until
December 20, 1951. One, Elfreda Peters, was employed as a cook and
housekeeper at "Tara" from December 1, 1951, until April 15, 1952. All
the above-named persons received wages from Carbon during the respective
periods of their employment.
On or about January 3, 1951, R. J. Blauner leased a furnished residence
at 9301 Collins Avenue, Miami Beach, Florida, on behalf of Carbon, for a
period extending to May 1, 1951, for a rental of $6,000, which was charged
to Carbon as a sales promotion expense at the direction of Blauner.
The Bridells and Blauners, among others, stayed at 9301 Collins Avenue
for varying periods during the leasehold. On or about March 7, 1951, R.
J. Blauner entered into a contract on behalf of Carbon to buy a house and
grounds, later known as "Presque Rio," located at 708 Royal Plaza, Fort
Lauderdale, Florida, for $90,000. The sale was completed on April 27,
In April of 1951, R. J. Blauner bought a yacht, paid for by Carbon,
which was later renamed "Tara." Until its sale in July, 1955, many people
were entertained at "Presque Rio" and on the yacht.
Carbon furnished the investment capital for the acquisition of these
properties and assumed the indebtedness for their unpaid balance. During
the years in question, Carbon paid for: maintenance and repairs;
interest; legal and audit fees; capital improvements; administrative
expenses; telephone expenses; real estate, personal property and
franchise taxes; insurance; wages paid to Fort Lauderdale house
servants, and the yacht captain; interest and finance charges on the
yacht; stationary expenses; and depreciation expenses on both
From 1949 through 1954, Bridell prepared the individual income tax
returns on behalf of himself and his wife. Their later individual returns
were prepared by Carbon auditors, Ernst & Ernst. No reference was made
upon the individual returns of the Bridells as to the employment of Virlon
Furrow until their 1957 return was filed in June of 1958 containing a
statement to the effect that wages paid Furrow were not considered as
income to the Bridells, but as a business expense to Carbon and properly
deductible by Carbon, as such. Prior to the 1956 Carbon corporate income
tax return which listed Furrow's wages as a "promotional expense" at
"Tara," there was no mention in Carbon corporate returns as to Furrow's
employment at "Tara." The 1957 Carbon corporate return listed wages paid
to Furrow under "cost of goods sold."
After a series of investigations by revenue agents and special agents
of the Internal Revenue Service extending over a period of years, the
first of the two indictments here involved was returned against Bridell
in July, 1958. In regard to the substantive counts of the two
indictments, it is clear, in view of Stipulation, Part I, ¶¶ 13, 14,
16 and 18, as well as Government's Exhibit 61, that the alleged
additional net income to Mr. Bridell and his wife, as alleged in Count II
of Cause No. 58 CR 475, during the
year 1952, is made up of the actual wages paid to Virlon Furrow, Morris
Nygaard, Frank Carretta and Elfreda Peters by American Carbon Corporation
during that year.
Likewise, in view of Stipulation, Part I, ¶ 13, and Government's
Exhibit 61, the additional income charged in Cause No. 59 CR 157, as to
Count I for the year 1953, Count II for the year 1954, Count III for the
year 1955, Count IV for the year 1956, and Count V for the year 1957, is
made up of the actual wages paid to Virlon Furrow by American Carbon
Corporation during those years. The conspiracy count relates not only to
the employment of Furrow and others who worked at "Tara" and who were
paid wages by Carbon, but extends to the use of the herein described
Florida property as well. It alleges eleven overt acts.
Section 145(b) of the Internal Revenue Code of 1939, Title
26 U.S.C. § 145 (b) provides:
"Any person required under this chapter to
collect, account for, and pay over any tax imposed
by this chapter, who willfully fails to collect or
truthfully account for and pay over such tax, and
any person who willfully attempts in any manner to
evade or defeat any tax imposed by this chapter or
the payment thereof, shall, in addition to other
penalties provided by law, be guilty of a felony
and, upon conviction thereof, be fined * * * or
imprisoned * * *"
Section 7201 of the Internal Revenue of 1954 provides:
"Any person who willfully attempts in any manner
to evade or defeat any tax imposed by this title or
the payment thereof shall, in addition to other
penalties provided by law, be guilty of a felony
and, upon conviction thereof, shall be fined * * *
or imprisoned * * *."
Title 18 U.S.C. § 371 provides:
"If two or more persons conspire either to commit
any offense against the United States, or to defraud
the United States, or any agency thereof in any
manner or for any purpose, and one or more of such
persons do any act to effect the object of the
conspiracy, each shall be fined * * * or imprisoned
* * *."
As pointed out by the Supreme Court of the United States in Spies v.
United States, 317 U.S. 492, at pages 496, and 497, 63 S.Ct. 364, at
pages 366-367, 87 L.Ed. 418, Section 145(b), provided the climax of a
variety of sanctions existing at that time to insure payment of tax.
Likewise today, Section 7201, a derivative section from Section 145(b),
provides the climax of a variety of sanctions to insure payment of tax.
From a casual reading of Sections 145(b) and 7201, it is obvious that
the phrases "willfully attempts" and, "in any manner," do not lend
themselves to rigid definition. As to the meaning of the word "willful,"
much has been written. In United States v. Murdock, 290 U.S. 389, at
pages 395, 396, 54 S.Ct. 223, at page 226, 78 L.Ed. 381, the Supreme Court
"The revenue acts command the citizen, where
required by law or regulations, to pay the tax, to
make a return, to keep records, and to supply
information for computation, assessment, or
collection of the tax. He whose conduct is defined
as criminal is one who `willfully' fails to pay the
tax, to make a return, to keep the required
records, or to supply the needed information.
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."
In Spies v. United States, the supreme Court stated at pages 497, and
498 of 317 U.S., at page 367, of 63 S.Ct.:
"The difference between willful failure to pay a
tax when due, which is made a misdemeanor, and
attempt to defeat and evade one, which is made a
felony, is not easy to detect or define. Both must
be willful, and willful, as we have said, is a word
of many meanings, its construction often being
influenced by its context. * * * It may well mean
something more as applied to nonpayment of a tax
than when applied to failure to make a return. Mere
voluntary and purposeful, as distinguished from
accidental, omission to make a timely return might
meet the test of willfulness. But in view of our
traditional aversion to imprisonment for debt, we
would not without the clearest manifestation of
Congressional intent assume that mere knowing and
intentional default in payment of a tax where there
had been no willful failure to disclose the
liability, is intended to constitute a criminal
offense of any degree. We would expect willfulness
in such a case to include some element of evil
motive and want of justification in view of all the
financial circumstances of the taxpayer."
In Holland v. United States, 348 U.S. 121, at page 139, 75 S.Ct. 127, at
page 137, 99 L.Ed. 731, the Supreme Court stated:
"A final element necessary for conviction is
willfulness. The petitioners contend that
willfulness `involves a specific intent which must
be proven by independent evidence and which cannot
be inferred from the mere understatement of income.'
This is a fair statement of the rule. Here,
however, there was evidence of a consistent pattern
of under reporting large amounts of income, and of
the failure on petitioners' part to include all of
their income in their books and records. Since, on
proper submission, the jury could have found that
these acts supported an inference of willfulness,
their verdict must stand."
In United States v. Glascott, 7 Cir., 216 F.2d 487, at page 490, Judge
Schnackenberg of our Court of Appeals stated:
"The key word in this statute is `wilful.' It is
an essential ingredient of the crime. Wilful is
distinguished from accidental. Under this statute
that which is wilful is an actual, intentional
wrongdoing with the purpose of evading the tax. It
is not established by negligence, however gross.
Wilfulness is a subjective state in most instances.
This subjective state, of course, may be shown to
exist by various statements and conduct."
In regard to the word "attempt," the Supreme Court in Spies v. United
States, supra, 317 U.S. at pages 498, 499, 63 S.Ct. at page 368, stated:
"It is not necessary to involve this subject with the complexities of
the common-law `attempt.' The attempt made criminal by this statute does
not consist of conduct that would culminate in a more serious crime but
for some impossibility of completion or interruption or frustration. This
is an independent crime, complete in its most serious form when the
attempt is complete, and nothing is added to its criminality by success
or consummation, as would be the& case, say, of attempted murder.
Although the attempt succeed in evading tax, there is no criminal offense
of that kind, and the prosecution can be only for the attempt. We think
that in employing the terminology of attempt to embrace the gravest of
offenses against the revenues, Congress intended some willful commission
in addition to the willful omissions that make up the list of
misdemeanors. Willful but ...