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UNITED STATES v. BRIDELL

January 5, 1960

UNITED STATES OF AMERICA, PLAINTIFF,
v.
ALBERT M. BRIDELL AND AMERICAN CARBON PAPER CORPORATION, DEFENDANTS.



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 salesman education.

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 tenants.

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 by Carbon.

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, 1951.

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 properties.
  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, Pars. 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, Par. 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 stated:

    "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.:

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 ...

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