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United States v. Harry Britt Brown, JR., A/K/A Harry B. Brown, JR., 411 F.2d 1134, 10th Cir. (1969)
United States v. Harry Britt Brown, JR., A/K/A Harry B. Brown, JR., 411 F.2d 1134, 10th Cir. (1969)
2d 1134
69-2 USTC P 9479
Appellant Brown was convicted after trial to a jury in the District Court for the
District of Kansas on each of three counts of evading income taxes for the years
1959, 1960, and 1961 in violation of 26 U.S.C. 7201 and on each of three
counts of filing false returns for the same years in violation of 26 U.S.C.
7206(1). Through the expedient of omitting a mass of supporting evidentiary
detail, the case against appellant can be simply summarized.
Before, after, and during the subject tax years, Brown was employed by a
Wichita newspaper, the Eagle, as its advertising director or in a similar
capacity. It was stipulated that in 1959 Brown traded advertising space in the
Eagle with numerous local merchants and service companies and personally
received in return merchandise and services of the value of $25,133.66; for
1960, the amount was agreed to be $35,066.98 and for 1961, $8,063.48. Brown
neither reported nor paid tax on these amounts, nor did the Eagle, and the
supporting evidence, viewed in the light most favorable to the government, 1
The substance of Brown's defense to the offenses charged was that he had no
specific or criminal intent to violate the tax laws in his participation of trade
outs with advertisers in the Eagle. He testified that the trade outs were
authorized by his superior, Clyde W. Speer, Executive Vice President and
Treasurer of the Eagle, as a continuing policy and a part of the Eagle's
competitive struggle with its then rival newspaper, the Beacon, to gain national
advertising.2 According to Brown, he had an oral agreement with the Eagle 3
that he would reimburse the newspaper for any merchandise determined by its
auditors to be for his personal benefit and not legitimate business deductions of
the Eagle. He further testified that he furnished the newspaper with monthly
statements of merchandise and services received by him, discussed the
propriety of such with Speer, but did not know how the Eagle kept the trade out
account although he kept no account for himself and had, at times, directed the
credit manager to delete from sales as compared to income, some advertising
sold and paid for with merchandise and service. 4 The appellant's defense was
summarized by the trial court's instruction to the jury thus:
The defendant contends, among other things, that sometime in 1950 he was
placed in charge of the National Advertising Department of the Wichita Eagle
and that Howard Fleeson, who was then on the Board of Directors of the Eagle,
told him that his training for this position was to be put in the hands of Clyde
W. Speer, who was Vice President of the Eagle Company; that in 1952, he
became Classified Advertising Manager at Speer's direction; that Speer directed
him to join organizations and civic clubs, and to do whatever he could to keep
the Wichita Eagle before the public. He contends that in 1954, Clyde Speer
talked with him about trading out advertising accounts of the Eagle and was
told by Speer that he could negotiate trade outs to stimulate business and meet
competition; and that Clyde Speer further told him that if any of the items he
received as trade outs were determined by the auditors to be of a personal
nature to the defendant, then these would have to be paid for by defendant to
the Eagle. The defendant further contends that he agreed with Clyde Speer to
this arrangement. Defendant further contends that he received no goods,
merchandise or service from advertisers in the Wichita Eagle which were not
authorized by his superior, Clyde W. Speer, and that he was ready at all times
to pay for trade outs received by him which were considered to be of a personal
nature. He further contends that both Fleeson and Speer directed him to get a
large home so he could entertain customers and prospective customers for the
Eagle and that he purchased and furnished his mother's home for that purpose.
5
Defendant contends that he was at all times simply following the orders and
directions of his superiors, Speer and Fleeson, in making trade outs in carrying
on the entertainment of Wichita Eagle customers and prospective customers as
a part of its business promotion and that at no time did he ever have reason to
believe or consider, under the circumstances, that the goods, merchandise and
service received by him was taxable income to him. You are interested in this
connection that if defendant, Britt Brown, was receiving the trade outs from the
Eagle's advertising customers, as he did, because he was obeying his employers'
instructions, and that he believed the items he received were not taxable income
to him, then he would not be guilty of the offenses charged and you should
acquit him. The evidence discloses that Howard Fleeson is dead and that Clyde
W. Speer is not physically able to appear as a witness in this trial. This being
so, the testimony of Mr. Brown, of what Mr. Fleeson and Mr. Clyde W. Speer
told him must be received by you with caution and close scrutiny and be
weighed by you in the light of all the testimony and evidence in the case.
As stated in the instruction, Speer was not available as a witness at the trial.
However, in two ex parte investigative proceedings, one in 1962 and again in
1964, the government had taken Speer's sworn oral testimony at great length. In
each proceeding Speer's Testimony corroborated the appellant's trial testimony
in many regards. The transcripts of these proceedings were offered by appellant
as exhibits5 and were rejected by the court on the government's objection of
incompetent hearsay. Appellant asserts such ruling to be prejudicial error. We
agree.
The critical issue to be considered by the jury in this case was not a
determination of the acts done by Brown but whether such acts, largely
admitted, were done with the specific intent to violate sections 7201 and
7206(1), a necessary element of the charges. Holland, supra; McCarty v.
United States, 10 Cir., 409 F.2d 793, 1969; Petersen v. United States, 10 Cir.,
268 F.2d 87. Accordingly, the accused as part of his defense is entitled to wide
latitude in the introduction of evidence which tends to show lack of specific
intent.
Evidence on the question of intent, where that is material, may take a wider
range than is allowed in support of other issues, otherwise there would often be
no means to disclose the purpose of the act charged in which the very gist of
the offense may consist. Hoyer v. United States, 8 Cir., 223 F.2d 134, 139.
9
In recognition of this rule the trial court properly allowed appellant to testify as
to the agreement claimed to have been reached between him and Speer,
including conversations with Speer and other persons. Haigler v. United States,
10 Cir., 172 F.2d 986. Such testimony when directed to probe subjective intent
is not hearsay, Flournoy v. Hewgley, 10 Cir., 234 F.2d 213; Creaghe v. Iowa
Home Mutual Casualty Co., 10 Cir., 323 F.2d 981, but the relevancy of all
evidence remains a question for the trial court's discretion. Speers v. United
States, 10 Cir., 387 F.2d 698, cert. den. 391 U.S. 956, 88 S.Ct. 1864, 20
L.Ed.2d 871; Hayes v. United States, 10 Cir., 227 F.2d 540. In the case at bar
the relevancy of Speer's testimony, especially in view of the court's cautionary
instruction concerning appellant's own testimony concerning the alleged
agreement with Speer, is patent. It should be admitted unless clearly barred as
incompetent hearsay.
10
prosecution that failed to give the jury the opportunity to judge appellant's
credibility in view of the potential trustworthiness of Speer's corroborative
statements.
11
12
The judgment is reversed and the case remanded with directions to grant a new
trial.
Collins v. United States, 10 Cir., 383 F.2d 296; Steiger v. United States, 10 Cir.,
373 F.2d 133; Elbel v. United States, 10 Cir., 364 F.2d 127, cert. den. 385 U.S.
1014, 87 S.Ct. 726, 17 L.Ed.2d 550, reh. den. 386 U.S. 939, 87 S.Ct. 959, 17
L.Ed.2d 812; Van Nattan v. United States, 10 Cir., 357 F.2d 161; Cummings v.
United States, 10 Cir., 289 F.2d 904, cert. den. 368 U.S. 850, 82 S.Ct. 83, 7
L.Ed.2d 48
The theory being that trade outs would act as an incentive to local advertisers to
advertise with the Eagle and that their advertising in turn could be used as
'bellcows' to gain national advertising. At time of trial the Eagle had taken over
the Beacon
A government witness testified that during the subject tax years Speer 'was the
Eagle.'
There is conflicting testimony as to the extent the Eagle kept records of trade
outs; however, no such records were introduced
Rule 8-04 of the preliminary draft of proposed Rules of Evidence for the United
States District Courts (March 1969) suggests:
(a) GENERAL PROVISIONS. A statement is not excluded by the hearsay rule
if its nature and the special circumstances under which it was made offer strong
assurances of accuracy and the declarant is unavailable as a witness.
(b) ILLUSTRATIONS. By way of illustration only, and not by way of
limitation, the following are examples of statements conforming with the
requirements of this rule:
(1) FORMER TESTIMONY. Testimony given as a witness at another hearing
of the same or a different proceeding, or in a deposition taken in compliance
with law in the course of another proceeding, at the instance of or against a
party with an opportunity to develop the testimony by direct, cross, or redirect
examination, with motive and interest similar to those of the party against
whom now offered.