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 [96-2 USTC ¶50,616] United States of America , Plaintiff-Appellee, Cross-Appellant v. Jerry B. Kraig, Defendant-Appellant, Cross-Appellee

(CA-6), U.S. Court of Appeals, 6th Circuit, 95-3734/3771, 11/8/96, 99 F3d 1361, Affirming an unreported District Court decision

[Code Secs. 7201 and 7206 ]

Conviction: Conspiracy: Fraudulent concealment of assets: Indictment.--The indictment of an attorney who was convicted of helping a client fraudulently conceal his assets through foreign shell corporations was proper. The attorney was charged with conspiracy under the defraud portion of 18 USC Sec. 371 rather than the offense portion of that statute because he was involved in a long-standing and wide-ranging scheme to deceive the IRS and no provision of the Internal Revenue Code covered the totality and scope of the conspiracy. Moreover, the indictment gave the attorney adequate notice of the conduct constituting the charges against him.

[Code Sec. 7201 ]

Conviction: Conspiracy: Fraudulent concealment of assets: Jury trial.--The evidence presented at the trial of an attorney who was convicted of helping a client fraudulently conceal his assets was sufficient to support the attorney's jury conviction. The record contained both direct evidence of his knowledge of the conspiracy and circumstantial evidence arising from his ongoing involvement in sham transactions over a period of several years. The attorney's profession did not make him subject to a different standard than nonlawyers.

[Code Sec. 7201 ]

Conviction: Conspiracy: Fraudulent concealment of assets: United States Sentencing Guidelines: Enhancement: Base offense level: Downward departure: Upward adjustment.--The trial court's enhancement of an attorney's base offense level by three levels pursuant to the United States Sentencing Guidelines (USSG) section 3B1.1(b) for his role as a manager of a conspiracy through which his client fraudulently concealed assets was proper. The attorney's base offense level was properly calculated under USSG sections 2T1.1 and 2T1.3, and the trial court's tax loss valuation was not clearly erroneous. The trial court did not abuse its discretion by failing to grant the attorney's request for a downward departure based on the "atypical" nature of the case. The IRS was not entitled to an upward adjustment of two levels pursuant to the USSG for use of "sophisticated means" in evading tax because the attorney's personal involvement with the shell corporations used to conceal the assets was minimal. Moreover, the trial court's grant of a downward adjustment for acceptance of responsibility was proper.

James R. Wooley, Assistant United States Attorney, Craig S. Morford, Cleveland , Ohio 44114-2600 , for plaintiff-appellee/cross-appellant. H.L. Sirkin, Marc D. Mezibov, Laura A. Abrams, Sirkin, Pinales, Mezibov & Schwartz, 105 W. Fourth St., Cincinnati, Ohio 45202, for defendant-appellant/cross-appellee.

Before: MERRITT and COLE, Circuit Judges; ECHOLS, District Judge. ^*

MERRITT, Circuit Judge:

Defendant Jerry Kraig, a lawyer, was convicted by a jury of a single count of conspiracy in assisting to conceal assets of Reuben Sturman (not a defendant herein) from the Internal Revenue Service, thereby preventing the ascertainment, computation and collection of taxes in violation of 18 U.S.C. §371 . Defendant was sentenced to 30 months in prison. He appeals his conviction and sentence. The government cross-appeals the sentence. We affirm both the conviction and the sentence.

I.

In the years before the advent of the conspiracy at issue here, Reuben Sturman was a nationwide manufacturer, distributer and marketer of adult entertainment material throughout the United States . In 1985, Sturman was indicted on 16 counts of tax evasion and related offenses. Sturman was convicted of all charges in 1989 in one of the largest tax evasion cases in the history of the IRS and his conviction was affirmed by this Court. United States v. Sturman, 951 F.2d 1466 (6th Cir. 1991), cert. denied, 504 U.S. 985 (1992).

The Defendant herein, Jerry Kraig, was Sturman's lawyer. Kraig was convicted of helping Sturman fraudulently conceal his assets, mainly real estate, through foreign "shell" corporations. Three other persons were also indicted with Kraig, as well as unnamed coconspirators. One of the coconspirators pled guilty and the other two went to trial separately from Kraig. This appeal concerns only Defendant Jerry Kraig.

Kraig was a lawyer with a small personal injury and criminal practice in Cleveland , Ohio . In 1982, Sturman hired Kraig to do First Amendment work for him relating to Sturman's business. As a result, Kraig moved part of his law offices into Sturman's headquarters in Cleveland .

In 1984, Kraig referred Sturman to Rob ert Garfield, another Cleveland lawyer and a close personal friend of Kraig's, to do tax and estate planning work for Sturman. Kraig testified that he believed Sturman wanted to establish a trust from various real estate holdings for the benefit of Sturman's children. Kraig served as Garfield 's contact with the Sturman organization. Garfield Tr. at 88-89, Joint Appendix at 353-54. ¹

In 1986, Kraig, on behalf of Sturman, retained the services of a Panamanian law firm for the purpose of forming a corporation named Gemstone Realty Corporation. The lawyer whom he contacted was named Horatio Alfaro, one of the codefendants herein. During 1986, Kraig provided the necessary information to Alfaro to set up the corporation. Kraig instructed the Panamanian firm to send the Gemstone stock to a Swiss attorney to hold on behalf of Sturman. Offshore bank accounts, to which Sturman had access, were also opened in Gemstone's name. The coconspirators attempted to hide Sturman's ownership by making it appear as though Gemstone was owned by a foreign trust controlled by a Swiss citizen instead of by Sturman. Gov't Ex. 57, J.A. at 224. Kraig was the contact person between Sturman and the Panamanian law firm and Kraig received and reviewed the invoices sent by the Panamanian firm for the work it was doing relating to Gemstone. Ginsberg Tr. at 205, J.A at 403.

In advising Sturman about estate planning, Garfield initially suggested a domestic trust and not a foreign trust because a foreign entity could easily hide assets. In 1986, however, Sturman told Garfield to transfer properties to Gemstone. The transfers were to be made without disclosing Sturman's ownership of the properties. Garfield resigned in 1986 when he learned that the IRS had begun to investigate Sturman in 1985. He testified that he suspected that the project for which he had been hired might be a tax evasion plan. Garfield Tr. at 90-91, J.A. at 355-56. Garfield also testified that he advised Kraig to resign also so he would not get caught up in Sturman's "net."

Garfield testified that he doesn't remember if he ever talked to Kraig about the specifics of Sturman's relationship to Gemstone but states that he "probably" did. Garfield Tr. at 94-95, J.A. at 259-60. Garfield also testified that he did express his general concerns about Sturman to Kraig. Garfield Tr. at 94, 124, J.A. at 359, 371. Furthermore, Garfield sent memos to Kraig describing some of the problems relating to the Gemstone transfers. ( Garfield Tr. at 96, J.A. at 361) Garfield testified that after he resigned, Kraig told him that the files on the asset transfer project were to be assigned to another Cleveland lawyer named Marvin Ginsberg, a codefendant in this case. Ginsberg later pled guilty to the conspiracy charge and testified against his codefendants.

Ginsberg testified that when he was arranging the property transfers, Kraig was the person to whom he turned when he needed information about Gemstone. Kraig went over all the transactions concerning Gemstone with Ginsberg. See, e.g., Ginsberg Tr. at 207, 217-18, 220-22, J.A. at 405, 415-16, 418-20. In 1988, Ginsberg began working directly with Horatio Alfaro, the Panamanian lawyer, to make the transfers and not always going through Kraig.

As to ownership of the trust, Ginsberg testified that at a March 1989 meeting he attended with Kraig, he learned that there was no trust and that Reuben Sturman was the beneficial owner of Gemstone. Ginsberg Tr. at 194-95, J.A. at 392-93. Kraig contends that he always believed there was a legitimate trust and that it was not beneficially owned by Sturman. Ginsberg testified to facts from which a jury could legitimately infer that Kraig must have known that there was no trust because Kraig also attended the same meeting where Ginsberg discovered there was no trust. Id.

In addition to hiding the assets from his real estate holdings through Gemstone, Sturman also sold his adult bookstores and attempted to hide the income from these sales. The evidence also supports the inference that Sturman sold the bookstores after his indictment so that, in the event he was convicted, the IRS would not discover and attach his property in order to pay the taxes owed.

The government showed that Kraig also took part in this portion of the conspiracy. For example, in 1988, Kraig prepared a contract indicating that one of Sturman's employees, John Bordone, was purchasing adult bookstores from Eduardo Stockali, one of the coconspirators in this action. In fact, Sturman, not Stockali, owned the stores. Bordone made installment payments on the stores he had purchased. Bordone testified that he sent the checks, which were made out to Stockali, to Kraig in Cleveland . Kraig forwarded the checks to Stockali for deposit in one of the Swiss offshore accounts set up on behalf of Sturman by the Panamanian law firm. Kraig accepted these payments from Bordone between 1988 and 1991. Bordone Tr. at 49-69, J.A. at 239-59.

In 1990, after Sturman was convicted, the IRS entered a large tax assessment against Sturman and proceeded to try to collect the amount through levies and liens on Sturman's properties, including Gemstone. Sturman, through the coconspirators in this case, including Kraig, hired two Cleveland lawyers, Frank DeSantis and Jim Scott, to file lawsuits against the United States to challenge the tax levies and for wrongful prosecution. The new lawyers said they would only take the case if it could be demonstrated that Sturman was not the beneficial owner of Gemstone. Ginsberg Tr. at 241-45, J.A. at 435-43. Kraig testified that he told the new lawyers that he thought the trust was owned by Sturman for the benefit of Sturman's children but "he wasn't sure." DeSantis Tr. 336, 366, J.A. at 267, 297. One of the lawyers testified at trial that Kraig "assured" him that Sturman was not the owner. DeSantis Tr. 336-43, 406-07, J.A. at 267-74, 302-03. In 1991, Kraig met with Ginsberg and Horatio Alfaro, the Panamanian lawyer and a coconspirator in this case, to decide what information about Gemstone to turn over to the newly-hired lawyers for purposes of the suit against the United States .

Kraig prepared a memorandum for Sturman advising him that to prevail in a wrongful levy action against the IRS, he would need to show that someone else owned Gemstone or to show that Gemstone is fully owned by an irrevocable trust. As mentioned above, Ginsberg testified that Kraig had known since at least a 1989 meeting that both Ginsberg and Kraig attended with Sturman that Gemstone was not owned by a trust. Ginsberg Tr. at 256-64, J.A. at 454-62. Ginsberg ultimately drafted a false affidavit stating that a Swiss citizen named Thomas Kummer was the owner of Gemstone and that Sturman had no ownership interest in Gemstone. Ginsberg Tr. at 253, J.A at 451; Gov't Ex. 64, J.A. at 234. This affidavit was presented to the IRS by the new lawyers as proof that Sturman did not own Gemstone. The new lawyers, however, went to Switzerland to meet with the alleged owner of the trust and discovered that Sturman was in fact the beneficial owner of Gemstone. The new lawyers resigned. Ginsberg Tr. 180, DeSantis Tr. at 361-62, J.A. at 328, 292-93.

Kraig was tried separately from his codefendants and was convicted by a jury in April 1995. He was sentenced after a hearing to 30 months in jail, three years supervisory release and a $10,000 fine.

II.

A. The Conviction

1. Motion to Dismiss the Indictment

Kraig first contends that the indictment should have been dismissed. The indictment charged Kraig with conspiracy pursuant to 18 U.S.C. §371 , which states:

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....

Section 371 prohibits two kinds of conspiracies: (1) conspiracies to commit a specific offense against the United States and (2) conspiracies to defraud the United States . In order to charge a violation under section 371 , the government must show that the defendant conspired to commit one or more substantive offenses against the United States or that the defendant conspired to defraud the government in any manner for any purpose.

Kraig was charged under the defraud portion of the statute. The indictment under which Kraig was charged states that he

did unlawfully, knowingly and willfully conspire, combine, confederate and agree [with other named and unnamed defendants] to defraud the United States of America by hampering, hindering, impeding, impairing, obstructing and defeating the lawful functions of the [IRS] in the ascertainment, computation and collection of income taxes [in violation of 18 U.S.C. §371 ].

Indictment at ¶1, J.A. at 18-19. Relying on United States v. Minarik [90-1 USTC ¶50,085 ], 875 F.2d 1186 (6th Cir. 1989), Kraig contends that at most he could be convicted under the "offense" clause of Section 371 because the evidence demonstrated only that he had conspired to commit a violation of 26 U.S.C. §7206(4) by concealing assets upon which the IRS may impose a levy for taxes owed. That statute criminalizes the removal or concealment of any good, commodity or property upon which levy is authorized with intent to evade or defeat assessment or collection of any tax.

Minarik held that conspiracy to commit an offense against the United States and conspiracy to defraud the United States under section 371 are two separate crimes and the government must allege and prove violation of one clause or the other. Specifically, Minarik held that a defendant must be charged with a conspiracy to commit an offense against the government and not a conspiracy to defraud if there is a specific statute describing the conduct involved in the alleged conspiracy. [90-1 USTC ¶50,085 ], 875 F.2d at 1193-94.

In Minarik, one of the defendants had been issued a tax assessment. The defendant responded that she did not owe the tax. The defendant then arranged to sell a house she owned and received the payment by seven installment checks of less than $5,000 each. When she tried to cash the checks, the bank contacted the IRS and she was arrested for violating the Bank Secrecy Act which requires the filing of a report with the IRS for any transaction over $10,000. The defendant was charged under section 371 for conspiring to defraud the government by concealing from the government the nature of and income from a business. The indictment did not make clear what function of the government the defendants were impeding.

The defendant in Minarik properly could have been charged under §7206(4) of the Internal Revenue Code, which, as described above, makes it a felony to conceal any goods or commodities on which a tax or levy has been imposed. The Minarik Court , therefore, found that the facts proved a conspiracy under the "offense" clause of §371 for violating §7206(4) not the "defraud" clause as the indictment indicated and therefore dismissed the indictment. Minarik explained that the purpose of the "defraud" section of §371 "was to reach conduct not covered elsewhere in the criminal code" and should not be used when a specific provision covers that conduct. [90-1 USTC ¶50,085 ], 875 F.2d at 1194.

Minarik was concerned with whether the indictment adequately notified defendants of the charges against them, thereby prejudicing defendants ability to prepare for trial. The government changed its theory of the case throughout the proceeding. This Court found that the prosecution used the defraud clause in a way that caused "great confusion about the conduct claimed to be illegal." Id. at 1196. Minarik states that "prosecutors and courts are required to determine and acknowledge exactly what the alleged crime is. They may not allow the facts to define the crime through hindsight after the case is over." Id.

At least two later Sixth Circuit cases have distinguished Minarik: United States v. Sturman, 951 F.2d 1466 (6th Cir. 1991), cert. denied, 504 U.S. 985 (1992) and United States v. Mohney [91-2 USTC ¶50,568 ], 949 F.2d 899 (6th Cir. 1991), cert. denied, 504 U.S. 910 (1992). These cases discuss Minarik extensively and distinguish Minarik on its facts. See also United States v. Hurley, 957 F.2d 1, 3-4 (1st Cir.), cert. denied, 506 U.S. 817 (1992); United States v. Notch [91-2 USTC ¶50,470 ], 939 F.2d 895, 900-01 (10th Cir. 1991); United States v. Bilzerian, 926 F.2d 1285, 1302 (2d Cir.), cert. denied, 502 U.S. 813 (1991) (indictment under defraud clause proper where conduct broader than specific statutory provision).

In both Sturman and Mohney, the Court found that the conduct at issue satisfied the defraud clause of section 371 . The conspiracies in these two cases, unlike Minarik, violated numerous tax statutes--not just one. The indictment in this case is identical to the indictment in the Sturman case. The conduct alleged in the indictment, if proven, violates more than one specific statute. The broad nature of the conspiracy distinguishes this case from Minarik.

Kraig contends, as did the defendants in Minarik, that §7206(2) and (4) of the Internal Revenue Code cover the conduct for which Kraig was indicted and that at most he should have been charged under the "offense" clause of section 371 and not the "defraud" clause. Kraig contends that the government's theory presented at trial related solely to Kraig's concealment of Sturman's assets in order to defeat the tax liability imposed in 1990 and the government did not attempt to prove that Kraig had impeded the "ascertainment or computation" of taxes prior to the time the levy was imposed against Sturman.

The facts presented in this case are more analogous to those in Sturman and Mohney than Minarik. First, unlike Minarik, an indictment under the "defraud" clause of section 371 is proper here because the conduct undertaken by Kraig is broader than that encompassed solely by section 7206 . Charging a defendant under the "defraud" clause of section 371 is appropriate when the conspiracy alleges violation of more than one statute. In Minarik, the conspiracy had the narrow objective of concealment of assets upon which the IRS was empowered to levy and arose from a single event--the sale of a house. That conduct was explicitly proscribed by 28 U.S.C. §7206(4) . In contrast, the government in this case alleges that Kraig and his coconspirators participated in a long-standing and wide-ranging scheme to deceive the IRS regarding the amount and source of Sturman's assets, including allegations of improper conduct prior to the levy of the tax liability against Sturman. No provision of the tax code covers the totality and scope of the conspiracy. The government contends that the members of the Sturman conspiracy violated several tax statutes including 26 U.S.C. §7201 (evasion of assessment and payment of taxes), 26 U.S.C. §7204 (concealing assets subject to levy), 26 U.S.C. §7206 (concealment of assets after levy of tax) and 18 U.S.C. §1001 (providing false information to the IRS). The indictment charged that the conspirators here, including Kraig, used nominees, sham transactions and others means of obstruction to keep the IRS from "ascertaining, computing and collecting" Sturman's taxes. Only the defraud clause can adequately cover all the aspects of the conspiracy in this case.

Second, unlike the indictment in Minarik, the indictment here gave Kraig adequate notice of the conduct constituting the charges against him. In Minarik, the indictment did not make clear what function of the Treasury Department the defendants were impeding and the government changed its theory of the case throughout the indictment process and trial. We concluded that the defendants properly could have been charged under 28 U.S.C. §7206(4) and therefore could not be charged under the defraud clause but convicted on evidence that supports the offense clause. When a statute closely describes the conduct that the defendant is accused of violating, we reasoned that requiring the indictment to charge the defendant with conspiracy to commit the specific crime reduces the uncertainty in the case.

Furthermore, unlike Minarik, the government did not shift its theory between the "offense" an "defraud" clauses of section 371 . The government consistently has maintained that Kraig and the other coconspirators sought to deceive the IRS through an elaborate set up of offshore bank accounts and shell corporations.

Accordingly, because the conduct alleged in the indictment fits within the "defraud" section of section 371 and the indictment gave adequate notice of the charges against Kraig, the District Court did not err in denying the motion to dismiss the indictment.

2. Sufficiency of the Evidence

Kraig next asserts that the evidence is insufficient to support his jury conviction. The record, however, contains both direct evidence of Kraig's knowledge of the conspiracy and circumstantial evidence arising from Kraig's ongoing involvement in sham transactions over a number of years.

Evidence is sufficient to uphold a jury conviction if after viewing the evidence in the light most favorable to the government and drawing all inferences in the government's favor, a reasonable juror could find that each element of the offense has been established beyond a reasonable doubt. United States v. Taylor , 13 F.3d 986, 991 (6th Cir. 1994).

When attempting to prove an individual's participation in a conspiracy, the government must first establish that a conspiracy existed. The essential elements of a conspiracy are: (1) the conspiracy described in the indictment was wilfully formed, and was existing at or about the time alleged; (2) that the accused willfully became a member of the conspiracy; (3) that one of the conspirators thereafter knowingly committed at least one overt act charged in the indictment at or about the time and place alleged; and (4) that such overt act was knowingly done in furtherance of some object or purpose of the conspiracy as charged. United States v. Sturman, 951 F.2d at 1474 (citations omitted).

Kraig contends that the government failed to prove that he intentionally joined or participated in a conspiracy to defraud the IRS. Kraig also seems to contend that lawyers are held to a different standard when evaluating their participation in a conspiracy. Kraig states: "the actions of a lawyer in representing his/her client can only create an inference that the attorney was connected to and a willing participant in a conspiracy if the evidence establishes that the attorney 'understood that [his/her] facially proper undertakings were part of [an illegal scheme.]' " Appellant's brief at 19 (citing United States v. Klein, 19 F.3d 20 (6th Cir. 1994) (unpublished)). Klein holds that this understanding can only be inferred if the evidence establishes that (1) the lawyer's involvement in the operation of the illegal enterprise was so pervasive that his knowledge of its illegal nature was reasonably certain or (2) he misrepresented or actively concealed facts about the illegal enterprise. Klein, slip op. at 7-8 (the "sheer number" of transactions with which Klein was involved gave rise to an inference that Klein knowingly and wilfully participated in the conspiracy to defraud). Kraig contends that he meets neither of the Klein criteria.

First, to the extent that Kraig maintains that lawyers should be held to a different standard from nonlawyers, we disagree. The cases cited by Kraig do not establish any different standard for lawyers when reviewing their participation in a conspiracy. Second, as detailed below, it appears from the evidence that Kraig meets both criteria set out in the cases on which he relies. Kraig's involvement in Sturman's operation was "so pervasive that [his] knowledge of its illegal nature was reasonably certain" and Kraig "misrepresented or actively concealed facts" about Sturman's activities.

Ample evidence was submitted at trial from which the jury could have convicted Kraig. The most harmful testimony came from Ginsberg. As to pre-levy conduct, Ginsberg testified that in 1988, well before the tax levy against Sturman, Ginsberg turned to Kraig for "information, advice and help in dealing with Gemstone in general." Ginsberg Tr. at 207, J.A. at 405. Ginsberg testified that Kraig was "the person that knew most of the details about Gemstone. [Kraig] gave me all the information, all the files, and he had been involved in many of the transactions that had come to me in the files. ... [H]e was Reuben's attorney and close friend and he could get things done and he could tell me who to deal with and just provide me with information to help me." Id. Ginsberg further testified that "[Kraig] had given me outlines of which properties were to be purchased [by Gemstone], how they were to be purchased, where the money was to come from .... " Ginsberg Tr, at 216, J.A at 414. In 1989, about the time the levy was assessed, Ginsberg sent a memo to Kraig and others outlining how he planned to transfer different properties into Gemstone's name. Gov't Ex. 30, J.A. at 207.

After the tax levy was assessed, evidence demonstrates that Kraig participated in keeping the IRS from discovering who actually owned Gemstone. Ginsberg testified that at least by March 1989 Kraig knew that Gemstone was actually owned by Sturman and not by a trust. Ginsberg Tr. at 240, J.A at 439. Kraig and Ginsberg then lied to the lawyers they had hired to file a wrongful levy action against the United States on Sturman's behalf when they told the lawyers that a Swiss citizen named Kummer owned the trust and manufactured a false affidavit so stating. Ginsberg Tr. at 235, 253-54, J.A. at 433, 451-52.

Other testimony showed that Kraig was involved in concealing assets from stores Sturman sold. Kraig was involved in drafting the sales contracts to make it look like Eduardo Stockali was the seller. Checks made out to Stockali were sent to Kraig who sent them to Stockali in Switzerland . Stockali then deposited the checks in offshore bank accounts. Kraig sent copies of the checks to Sturman so Sturman could keep track of how much was being deposited in the offshore accounts. Ginsberg Tr. at 265, J.A. at 463; Bordone Tr. at 60-61, J.A. at 250-51.

Other activities between 1985 and 1993 also should have alerted Kraig that his actions on behalf of Sturman were illegal. Sturman's offices were raided by the IRS in 1985 while Kraig was a tenant in the space. Later in 1985, Sturman was indicted in a 16-count conspiracy for tax fraud. Several lawyers and accountants quit representing Sturman and told Kraig why they were leaving and advised him to leave too. The evidence shows that Kraig knew that Sturman owed taxes and conspired to deprive the government of the information it needed to ascertain and collect those taxes, as well as concealing assets.

Therefore, the record indicates that the jury reasonably could have inferred from the evidence that Kraig knew of the conspiracy, willfully joined the conspiracy and participated in fulfilling the objectives of the conspiracy both before and after the assessment of the tax levy against Sturman. Kraig's conviction under the defraud clause of 18 U.S.C. §371 is supported by adequate evidence.

B. Sentencing

1. Kraig's Role in the Offense

The District Court enhanced Kraig's base offense level by three levels for his role as a "manager" in the conspiracy. Kraig challenges this enhancement because he contends that the evidence does not show that he in any way controlled or supervised any of the other coconspirators.

U.S.S.G. §3B1.1(b) provides a three-level enhancement if the defendant is a "manager or supervisor" of criminal activity that involves five or more participants or is otherwise extensive. Contrary to Kraig's assertion, the precedents in our Court hold that the evidence need not show that Kraig was the manager or supervisor of five other persons, but rather that he had a managerial or supervisory role in illegal conduct involving five or more persons. See, e.g., United States v. Dean, 969 F.2d 187, 197 (6th Cir. 1992), cert. denied, 507 U.S. 1033 (1993) (guidelines require five participants, not five subordinates to defendant).

The criminal activity here clearly involved more than five participants. The indictment here names four participants and by including Reuben Sturman, not named in the indictment at issue here but clearly a participant in the conspiracy, the total is at least five. Moreover, there is evidence that many more people were involved in the conspiracy. See Memorandum Opinion Regarding Sentencing at 4-5, J.A. at 52-53.

As to Kraig's role in the conspiracy, the evidence supports the finding that he recruited lawyers and accountants to participate in the scheme. He recruited attorney Rob ert Garfield to consolidate various real estate holdings of Sturman's into one entity that became Gemstone. Kraig contacted the Panamanian law firm that formed Gemstone. The testimony also demonstrates that Kraig provided information about Sturman's various holdings to the numerous accountants and lawyers working for Sturman and it was to Kraig that these persons turned for information regarding Gemstone. Given this ample evidence, it was within the District Court's discretion to enhance Kraig's base offense level by three levels.

2. Calculation of Kraig's Base Offense Level

a. Which Subsection to Use

Kraig's base offense level was established pursuant to U.S.S.G. §2T1.9, Conspiracy to Impair, Impede or Defeat Tax. Kraig does not contest the correctness of using this guideline, but contends that the wrong subsection of the guideline was used in determining his base offense level. Subsection (a) provides that the greater of (1) the base offense level for section 2T1.1 or section 2T1.3, whichever is applicable depending on the underlying conduct, or (2) base offense level 10 should be applied. Section 2T1.1, Tax Evasion, and section 2T1.3, Fraud and False Statements Under Penalty of Perjury, provide that the base offense level for these crimes is to be determined by applying the tax tables contained in section 2T4.1.

The District Court determined that section 2T1.9(a)(1) applied and therefore looked to section 2T1.1 and section 2T1.3 as directed. The District Court determined that either section 2T1.1 or section 2T1.3 could be applied in this case and because they both use the tax table in the same way, as a practical matter, therefore, it was not necessary to determine which section applied. Both sections 2T1.1 and 2T1.3 direct the user to establish the "tax loss" caused by the conduct and to then look to the tax loss table in section 2T4.1 to determine the base offense level. Kraig contends that because there was no "tax loss" as defined in the sections 2T1.1 and 2T1.3 and his offense is not similar to either of the tax offenses covered by sections 2T1.1 or 2T1.3, the District Court should have defaulted to section 2T1.9(a)(2) and imposed a base offense level of 10.

We do not agree with Kraig's interpretation. The plain language of section 2T1.9 states that the applicable statutory provision is 18 U.S.C §371 . Application Note 2 provides that the base offense level should come from sections 2T1.1 or 2T1.3, whichever is most applicable, if the base offense level is more than 10. As the base offense level applicable here under either section is greater than 10, the plain language of the guideline directs that one of these two sections is to be used. The case law is in agreement. See, e.g., United States v. Moore, 997 F.2d 55, 60 (5th Cir. 1993); United States v. Hunt, 25 F.3d 1092 (D.C. Cir. 1994).

b. Calculating the Tax Loss

Kraig asserts that if this Court determines that the tax loss table under §2T4.1 does apply to determine his base offense level, the District Court's calculation of the tax loss here was based on improper valuations of the properties involved. Kraig maintains that the tax loss did not exceed $1,500,000 and that the base offense level, therefore, should have been 17. We do not agree. The trial court conservatively estimated the tax loss at between $1,500,000 and $2,500,000 for a base offense level of 18.

In assessing the amount of tax loss, the district court is to make a "reasonable estimate" of the amount of the loss that defendant intended to inflict, not the actual amount of the government's loss. United States v. Moore , 997 F.2d at 55. See also Sentencing Memorandum at 3, J.A. at 51.

The trial court estimated the value of four properties in arriving at the estimated amount that the conspiracy attempted to conceal from the government to be in excess of $1,500,000 but less than $2,500,000. This is a conservative estimate and is supported by the evidence. The trial court purposely omitted including the value of two properties where it found the amounts more tentative. Sentencing Memorandum Opinion at 4, J.A. at 52. The District Court's loss valuation is not clear error and is affirmed.

3. Downward Departure

Kraig also contends that the trial court abused its discretion by failing to grant his request for a downward departure based on the "atypical" nature of the case. Because the sentence imposed by the trial court is within the guideline range, the sentence is not appealable on this basis unless it appears that the trial court was not aware of its discretion to depart downward. The trial court specifically stated that "[t]he Court has considered and rejected the suggestion" that a downward departure is appropriate. Sentencing Memorandum at 6, J.A. at 54. Moreover, the reasons given by Kraig to warrant departure are not that unusual. Kraig focuses mainly on the fact that he is an attorney who was zealously representing his client and was blinded to that client's improper conduct because he believed that the government was "out to get" his client due to the nature of his business.

4. Government's Cross-Appeal

a. Enhancement for Use of "Sophisticated Means"

The sentencing guidelines allow an upward adjustment of two levels for use of "sophisticated means" in a tax evasion case. U.S.S.G. §2T1.1(b)(2). A determination of whether conduct constitutes "sophisticated means" is a question of fact for the District Court's and is reviewed for clear error. Although the conspiracy at issue here was complex, the sophisticated means enhancement requires the sentencing court to look at the actions taken by the individual. A defendant involved in a complex or repetitive tax conspiracy is not automatically given a sophisticated means enhancement if his or her personal involvement did not constitute sophisticated means.

Kraig did not personally open the Swiss bank accounts or set up the shell corporations--this was the work of the Panamanian law firm. While the evidence demonstrates that Kraig undoubtedly knew of their existence and function in the conspiracy, his personal involvement with them was minimal.

A close question is presented as to Kraig's personal use of sophisticated means. Although we might have reached a different conclusion than the District Court, we must "accept the findings of fact of the district court unless they are clearly erroneous and shall give deference to the district court's application of the guidelines to the facts." 18 U.S.C. §3742(e). We would violate this admonition were we to substitute our judgment on this issue.

b. Acceptance of Responsibility

U.S.S.G. §3E1.1 provides for a two-level reduction in the offense level if the defendant clearly demonstrates affirmative acceptance of personal responsibility for his criminal conduct. The trial court granted Kraig's request for a downward adjustment for acceptance of responsibility, made for the first time at the sentencing hearing, after listening to Kraig's statement at the sentencing hearing. The government argues on cross-appeal that granting the request was in error both because it was not timely made and because the facts do not warrant the departure. The government points out that Kraig maintained his innocence, before, during and after trial, and only partially accepted responsibility after his conviction.

Conviction by trial does not automatically preclude a defendant from consideration for a reduction based on acceptance of responsibility. In certain circumstances a defendant may clearly demonstrate an acceptance of responsibility even though he exercises his right to trial. In granting the request, the District Court recognized that it was a "close call" and acknowledged that he had not encountered a case quite like this one before. The District Court seemed to rely primarily on the points that (1) Kraig was a lawyer with an unblemished record up to that point, (2) his conduct resulted from Kraig's zealous advocacy on behalf of Sturman in his adult entertainment business and (3) Kraig believed that the government was "out to get" Sturman any way it could to stop his adult entertainment business.

The standard of review here is whether the finding was clearly erroneous. While we recognize that other sentencing courts may have come to a different conclusion regarding this matter, acceptance of responsibility is uniquely within the province of the District Court and we do not find clear error. U.S.S.G. §3E1.1, comment. (n.5); United States v. Fleener, 900 F.2d 914, 917 (6th Cir. 1990) (grant of reduction for acceptance of responsibility affirmed even though defendant put government to its burden at trial).

Furthermore, we give deference to the sentencing judge in determining acceptance of responsibility, particularly where the sentencing judge also presided over the entire trial, as the judge did here. The District Court was in the best position to gauge Kraig's state of mind and to assess his credibility and this Court will not lightly overturn that finding.

For the foregoing reasons, the judgment of the District Court is affirmed.

^* The Honorable Rob ert L. Echols, United States , District Judge for the Middle District of Tennessee, sitting by designation.

¹ References to the Joint Appendix filed in this case hereinafter will be referred to a "J.A. at --."

 

 

[62-2 USTC ¶9731]H. A. Lott, Lee Blocker and Lorn D. Frazier, Appellants v. United States of America , Appellee

(CA-5), U. S. Court of Appeals, 5th Circuit, No. 17888, 309 F2d 115, 9/25/62, Affirming unreported District Court decision

[1954 Code Sec. 7201 and similar 1939 Code Sec. 145(b)]

Tax evasion: Means of evasion not stated: Defects in indictment: Conspiracy charge: Defenses.--An indictment charging the defendants with attempting to evade and defeat income taxes of a corporation was sufficient, though framed in the statutory words, since it is not necessary that the indictment state the means of attempted evasion or specific details, or to charge that any of the defendants actually filed the false return, where the indictment charged them with "mailing or causing to be mailed." The count charging a conspiracy to evade the corporation's taxes for the years in which the substantive offenses were alleged to have been committed was also sufficient. Other defenses based on alleged procedural errors were held to be without merit.

C. W. Wellen, John H. Crooker, 8th Floor, Bank of the Southwest Bldg., Denman Moody, W. V. Ballew, Jr., Joe S. Moss, Esperson Bldg., C. Anthony Friloux, Jr., Houston, Tex., for appellant. Joseph M. Howard, Department of Justice, Washington 25, D. C., Myron M. Sheinfield, Assistant United States Attorney, Houston, Tex., for appellee.

Before TUTTLE, Chief Judge, POPE ¹ and GEWIN, Circuit Judges.

GEWIN, Circuit Judge:

The three appellants and two others were charged in a five count indictment with attempting to evade and defeat income taxes of a named corporation. The first four counts are substantive and relate to the years 1951, 1952, 1953 and 1954 respectively. The fifth count charged a conspiracy to evade and defeat the same corporation's income tax for the years 1951 to 1954 inclusive. After entering pleas of not guilty, and after careful and cautious consideration by the court, each of the appellants was permitted to withdraw his plea of not guilty and enter a plea of nolo contendere. Following the pronouncement of sentence and the entry of formal written judgments, motions in arrest of judgment were filed by each appellant. The motions were denied and thereupon the appellants appealed.

Sentencing of the appellants was deferred after they were allowed to enter pleas of nolo contendere. The Government strongly objected to the nolo contendere pleas. During the period of deferment, the trial judge who had accepted the nolo contendere pleas presided over a lengthy trial of the defendants Farnsworth, the two others who had been jointly indicted with the appellants. One of the two was acquitted and the jury was unable to agree on a verdict as to the other. Thereafter, on June 19, 1959, the same trial judge sentenced the appellants. The appellant Blocker was sentenced to 3 years to be served; and appellants Frazier and Lott were each sentenced to 2 years to be served, under each count, the sentences to run concurrently. Each appellant was fined the total sum of $20,000.00. The appellants owned a total of 7% of the stock of the company. Blocker was Treasurer and both Frazier and Lott were Vice Presidents.

Although their contentions are separately presented, the alleged errors relied on by Blocker and those relied on by Lott and Erazier are essentially the same and may be summarized as follows:

1. The indictment is insufficient.

2. Delay in sentencing resulted in a denial of due process.

3. The court was without jurisdiction to impose sentences on the pleas of nolo contendere after hearing the evidence presented at the trial of the other two jointly indicted defendants.

4. Defects in the formal written judgment of the court.

We will deal with each of these contentions separately. As part of the history of this case, reference is made to Lott, et al. v. U. S., 5 Cir., 1960, [60-2 USTC ¶9542] 280 F. 2d 24, [61-2 USTC ¶9504] 367 U. S. 421, 6 L. Ed. 2d 940, 81 S. Ct. 1563 (1961).

I. The Indictment

It is contended that the indictment does not apprise the appellants of "the nature and cause of the accusation" within the meaning of the Sixth Amendment to the United States Constitution and does not charge all the basic elements of the offense of attempting to evade and defeat corporate income taxes. The first 4 counts are substantive and are essentially the same except as to the amounts therein mentioned and the years involved. Each of these counts relates to a separate year. The fifth count charges conspiracy and relates to all of the years involved. While it is admitted that the indictment is framed in the words of the statute, it is contended that the statute is so vague that the appellants cannot determine the nature of the charge against them with sufficient certainty to enable them to make a defense or to avoid further prosecution for the same offense.

It is true that offenses must be accurately described in an indictment; and if necessary to do so, the allegations must be expanded beyond the words of the statute in order to embrace all the ingredients necessary to the offense. U. S. v. Cruikshank, 92 U. S. 542, 23 L. Ed. 588 (1876); Babb v. U. S. , 5 Cir., 1955, 218 F. 2d 538; U. S. v. Debrow, 5 Cir., 1953, 203 F. 2d 699.

As examples of the contention made, the appellants cite U. S. v. Strauss, 5 Cir., 1960, 285 F. 2d 953, holding that in a prosecution against a corporate officer for alleged fraudulent transfer of corporate property in contemplation of bankruptcy, the indictment was defective because it did not set forth ". . . a plain, concise and definite statement of the offense . . .", failed to identify the property, and from aught appearing the transfer was made in the usual and regular conduct of the business; and Clay v. U. S., 5 Cir., 1955, [55-1 USTC ¶49,074] 218 F. 2d 483, in which it was held that an allegation of liability for tax coupled with a failure to pay was insufficient to constitute a felony violation, because there must be some affirmative act on the part of the defendant showing an attempt to evade the tax. The court observed that all that was alleged was that the defendants were engaged in the business of accepting wagers without having paid the occupational tax, which was only a conclusion unsupported by allegations of facts showing a willful attempt to evade, and therefore the indictment was insufficient.

[Means of Attempted Evasion Need Not Be Stated]

The Clay case, supra, was discussed by this court in the later case of Reynolds v. U. S., 5 Cir., 1955, [55-2 USTC ¶49,146] 225 F. 2d 123:

"That indictment (Clay) alleged the quo modo, it charged the attempt to evade the occupational tax 'by engaging in the business of accepting wagers . . . without having paid said occupational tax . . .'. On the other hand the indictment in the present case pleads the offense substantially in the language of the statute, which is an approved mode of pleading with the single exception of an instance where the words of the statute do not contain all the essential elements of the offense. That exception can have no application here unless it be held that Spies v. United States [43-1 USTC ¶9243], 317 U. S. 492 [infra] added a substantive element to those contained in the statute defining a similar offense; and that is not true for the Spies case simply construed the statutory language, 'wilfully attempts in any manner to evade and defeat any tax . . .'. Indeed, in income tax cases, it has been stated that an indictment need not specify the means whereby the defendant attempted to evade and defeat the tax. Information as to the particular means employed may be obtained by a bill a particulars."

Also U. S. v. Simmons, 96 U. S. 360, 24 L. Ed. 819 (1878) in effect held that it was not necessary to state in the indictment the particular means by which the United States was defrauded of the tax.

The defendant is entitled to a formal statement of the grounds upon which he is charged, but the Government is not held to such strictness of averments as might defeat the ends of justice. As there observed:

"Such intent may, however, be manifested by so many acts upon the part of the accused, covering such a long period of time, as to render it difficult, if not wholly impracticable, to aver, with any degree of certainty, all the essential facts from which it may be fairly inferred."

A similar question arose in Capone v. U. S., 7 Cir., 1932, [3 USTC ¶885] 56 F. 2d 927, and the court concluded:

"But is is contended by appellant that the indictment should have specified the means by which he attempted to evade or defeat the payment of the tax. Neither the Cruikshank Case nor any other case which we have been able to find supports this contention. In the Cruikshank case it was stated that all rights are not guaranteed by the Federal Constitution, and that therefore, as a matter of law, a charge of conspiracy to defeat a citizen's constitutional right must show that the right threatened is one conferred by the Constitution. In other words, if a certain right is excepted in the definition of the crime, facts must be pleaded to avoid the exception.

"But in the instant case there are no exceptions, for the statute says that every attempt to evade or defeat the payment of income tax is a violation of law. What was a question of law in the Cruikshank case, by reason of existing exceptions, is in the instant case a question of fact for the jury because of the absence of exceptions."

[Specific Details Unnecessary]

The indictment in the instant case goes further than merely charging the offense in the words of the statute. It expressly alleges various means by which the appellants attempted to evade the taxes such as falsifying invoices, concealing assets and diverting income. We cannot agree with the appellants that the means alleged are not adequate because of a failure to state in specific detail how these actions could result in underpayment of taxes of the corporation. Spies v. U. S. [43-1 USTC ¶9243], 317 U. S. 492, 87 L. Ed. 418 (1943) discusses the statute involved and points out distinctions between subsection (a) and (b) of §145; subsection (a) being a misdemeanor and subsection (b) a felony:

"Willful but passive neglect of the statutory duty may constitute the lesser offense, but to combine it with a willful and positive attempt to evade the tax in any manner or to defeat it by any means lifts the offense to the degree of felony.

". . . By way of illustration and not by way of limitation, we would think affirmative willful attempt may be inferred from conduct such as keeping a double set of books, making false entries or alterations, or false invoices or documents, destruction of books or records, concealment of assets or covering up sources of income, handling of one's affairs to avoid making the records usual in transactions of the kind, and and conduct, the likely effect of which would be to mislead or to conceal."

Appellants contend that the indictment is deficient in failing to show that there was an understatement of the tax or a tax deficiency, citing Lawn v. U. S. [58-1 USTC ¶9189], 355 U. S. 339 and Small v. U. S., 1 Cir., 1958, [58-2 USTC ¶9553] 255 F. 2d 604. Count one alleges that the net income of the corporation for the calendar year 1951 according to the tax return filed was the sum of $399,135.98 and that the amount of tax due thereon was the sum of $194,482.66; whereas, the defendants then and there well knew that the net income of the corporation for the calendar year 1951 was $763,699.62 upon which the corporation owed the United States a total tax of $482,278.96 in violation of §145(b) of the Internal Revenue Code of 1939. The other substantive counts contain essentially the same type of allegations for each of the years involved, but of course the figures are different for each year. A reading of the indictment indicates no absence of the elements complained about, and alleges the requisite knowledge and intent required. U. S. v. Johnson [43-1 USTC ¶9470], 319 U. S. 503, 87 L. Ed. 1546; Cave v. U. S., 8 Cir., 1947 [47-1 USTC ¶9171], 159 F. 2d 464.

[Filing of False Returns]

Another defect is claimed to be that the indictment is defective in failing to charge that any of the appellants filed the return. Benham v. U. S., 5 Cir., 1954 [54-2 USTC ¶9574], 215 F. 2d 472, concluded that proof of filing the return was necessary to the completion of the offense denounced under the facts of that case. There, the defendant was charged with attempting to defeat and evade the tax of his wife "by filing or causing to be filed" a false return on her behalf. Appellants take the point that the allegation of "mailing and causing to be mailed", does not satisfy this requirment. This question is dealt with in Imholte v. U. S., 8 Cir., 1955 [55-2 USTC ¶9727], 226 F. 2d 585, in which the defendant was convicted of aiding and abetting an attempt by the President of the corporation of which the defendant was General Sales Manager, to defeat and evade a large part of the income taxes owed by the corporation. It was held that the indictment was sufficient even though it failed to allege that the defendant had anything to do with filing the return, the substantive offense being the willful attempt to evade and defeat the payment of the tax. In U. S. v. Albanese, 2 Cir., 1955 [55-1 USTC ¶9494], 224 F. 2d 879, the indictment alleged in part as follows: ". . . preparing, causing to be prepared and causing to be mailed in the Southern District of New York, thereby filing and causing to be filed with Commissioner of Internal Revenue in Albany a false and fraudulent return." It was there contended that since the returns were filed in Albany , the indictment should be dismissed, because the venue was in the Southern District of New York. The court held that the actual filing was not an essential allegation and stated:

"The defendant's entire course of conduct in the Southern District of New York from preparing false records to the mailing of false returns, came within the ambit of the 'attempts' statute and venue was proper."

The crime denounced by 26 U. S. C. A. §145(b) is an attempt in any manner to defeat or evade any tax. We conclude that the allegations in the indictment here under consideration in the language ". . . mailing or causing to be mailed . . ." is sufficient. United States v. Johnson [43-1 USTC ¶9470], 319 U. S. 503, 87 L. Ed. 1546 (1943). It is not necessary to prove that each defendant took hold of the envelopes containing the returns and helped place them in the post office when mailed.

[Conspiracy Count]

Finally, appellants assert that the conspiracy count fails to charge the basic elements of the substantive offense. U. S. v. Strauss, 5 Cir., 1960, 283 F. 2d 155. It is contended that the indictment here constitutes a mere statement of a conclusion of the pleader that acts done in connection with the conspiracy were in violation of the statute; and that the facts alleged fail to support the charge. Wong Tai v. U. S., 273 U. S. 77, 71 L. Ed. 545 (1927) concludes that an indictment charging a conspiracy to commit a crime need not allege with technical precision all the elements assential to the commission of the offense, which is the object of the conspiracy, or to state such object with the details required to an indictment charging the substantive offense. To the same effect is Braverman v. U. S. [42-2 USTC ¶9731], 317 U. S. 49, 87 L. Ed. 23 (1942), wherein it is succinctly stated:

"A conspiracy is not the commission of the crime which it contemplates and neither violates nor "arises under' the statute whose violation is its object." (citing cases)

As pointed out in Jelke v. U. S., 7 Cir., 1918, 255 Fed. 264, an indictment for conspiracy is sufficient if it follows the language of the statute and contains a sufficient statement of an overt act or overt acts, except where the object of the conspiracy is lawful but the means unlawful.

The appellants urge upon us the holding on the recent case of U. S. v. Goldberg, (D. C. E. D. Pa., 1962) [62-2 USTC ¶9638] F. Supp. --. In that case, the district judge held that there cannot be a single conspiracy to evade and defeat income taxes pertaining to two separate taxable years, ". . . because of the criminal intent necessary for the substantive offense of attempted tax evasion, we conclude that a single conspiracy embracing two separate taxable years is impossible." The court then concludes as follows:

"It follows that persons can conspire to evade a tax only if they are fully aware of the existence of a tax obligation to the Government which they seek to conceal. Since income taxes become due and payable on an annual basis, it seems manifest that persons cannot at one and the same time conspire to evade more than one year's taxes."

It is claimed that the Goldberg case presented a question of first impression.

We cannot accept the reasoning in the Goldberg case nor the fact that it presents a question of first impression. All cases are distinguishable on the facts, but the case of U. S. v. Johnson, et al., 7 Cir., 1941, [41-2 USTC ¶9677] 123 F. 2d 111, 123 (reversed on other grounds [43-1 USTC ¶9470] 319 U. S. 503, 87 L. Ed. 1546 (1943)) had under consideration the same principles involved here. In Johnson, the fifth count of the indictment charged all of the defendants with a conspiracy extending from January 1, 1936 for the years 1936, 1937, 1938 and 1939 inclusive, to defraud the United States of income taxes due from Johnson. The court held the indictment good. It is interesting to note that the lower court held the first four counts defective as being inconsistent and duplicitous. They were considered inconsistent because the offense against Johnson was charged as of March 15th of each year; whereas, the co-defendants "as aiders and abettors" were charged with an offense which extended over a longer period. The counts were considered duplicitous by the Court of Appeals because it was alleged that the co-defendants aided and abetted Johnson both before and after March 15th of the relevant year. Accordingly, the court concluded that the co-defendants were charged in the same count as accessories before and after the fact. In reversing the Court of Appeals, ([43-1 USTC ¶9470] 319 U. S. 503, 87 L. Ed. 1546) the Supreme Court held:

"In short, the Circuit Court of Appeals read the substantive counts as though they charged Johnson merely with the filing of false returns on March 15th. That may only be a misdemeanor under §145(a) of the Internal Revenue Code, but that is not the offense with which Johnson was charged. He was charged with a felony made so by §145(b), the much more comprehensive violation of attempting 'in any manner to defeat and evade' the payment of an income tax. The false return filed on March 15th was only the aspect of what was a process of tax evasion. And all who contributed consciously to furthering that illicit enterprise aided and abetted its commission and thereby, under §332 of the Criminal Code, became principals in the common enterprise. Therefore, non-participation in merely one phase of Johnson's attempted evasion, namely, the filing of a false return on March 15th, is in itself irrelevant, and it is equally irrelevant, that the aid which the co-defendants gave Johnson continued after March 15th as well as preceded it. The crime of each of the first four counts is the wilful attempt to evade the payment of what was due to the revenue. All who participated in that attempt were contributors to the illicit enterprise. There was only one offense in each count, and all who shared in its execution have equal responsibility before the law, whatever may have been the different roles of leadership and subordination among themselves. There is neither inconsistency nor duplicity in these four counts and the demurrers to them were properly overruled."

Although revenue laws were not involved in Frankfort Distilleries, Inc. v. U. S., 10 Cir., 1944, 144 F. 2d 824, 832 (reversed on other grounds and conviction in district court sustained, 324 U. S. 293, 89 L. Ed. 951 (1945)), the principles of law relating to conspiracy are correctly stated in our judgment:

"The several acts and means of making the conspiracy effective are related acts which enter into the crime, but still the single crime is that of combining and conspiring together to restrain interstate trade and commerce, or to monopolize such trade and commerce. Duplicity in an indictment means the charging of two or more separate and distinct offenses in one count, not the charging of a single offense into which several related acts enter as ways and means of accomplishing the purpose. Braverman v. United States [42-2 USTC ¶9731], 317 U. S. 49, 63 S. Ct. 99, 87 L. Ed. 23; United States v. New York Great Atlantic & Pacific Tea Co., supra."

We conclude that the conspiracy indictment in this case is not subject to the attack made upon it.

II. Denial of Due Process

Appellants complain that the delay in sentencing was unreasonable in the circumstances of this case and resulted in depriving them of due process of law. Two of the appellants entered pleas of nolo contendere on March 17 and the other on March 20, 1959. Two other defendants jointly indicted with the appellants (Farnsworth) entered pleas of not guilty. Appellants were called for sentencing on June 19, 1959. The delay in sentencing was occasioned by the Farnsworth trial before the same judge. One of the Farnsworths was acquitted and there was a hung jury as to the other.

Appellants rely on Townsend v. Burke, 334 U. S. 736, 92 L. Ed. 1690 (1948), which reversed the sentence of a state court as being inconsistent with due process. In Townsend, the defendant was held virtually incommunicado for a period of 40 hours after his arrest, during which time he was constantly and vigorously interrogated. He did not have the advice of counsel and when the trial court imposed sentence, it relied upon a record of various crimes allegedly committed by the defendant, all of which had either been dismissed or the defendant had been found not guilty. The court was misled as to the facts. In Pollard v. U. S., 352 U. S. 354, 1 L. Ed. 2d 393 (1957), the defendant was given probation in absentia and two years later was apprehended for violation of his probation. Sentence was then passed on his previous plea of guilty. It was there pointed out that whether delay in completing the prosecution amounts to an unconstitutional deprivation of rights, depends on the circumstances in each case. The delay must not be oppressive or calculated to deny substantial rights to the defendant.

The present rule 32(a) F. R. Crim. P., which provides that sentence should be given without unreasonable delay, is a restatement of the previously existing procedure. See Rule 1 of Criminal Appeals Rules 1933, 292 U. S. 661, 78 L. Ed. 1513. Berkowitz v. U. S., 8 Cir., 1937, 90 F. 2d 881, concluded that the above mentioned rule of the Supreme Court requiring sentence without delay, was not adopted for the benefit or protection of the accused and therefore he cannot complain that the sentence shall not begin until 30 days from the date of its pronouncement. 28 U. S. C. A., Rule 1 following §723(a). See also Pratt v. U. S., C.C.A. D. C., 1939, 102 F. 2d 275 holding failure to impose sentence during term in which conviction was had does not defeat jurisdiction to sentence at a later term; Miller v. Aderhold, 288 U. S. 206, 210-12, holding that delay in imposing sentence, regardless of the length of delay, does not deprive the trial court of jurisdiction, where the defendant raises no objection; Miner v. U. S., 3 Cir., 1917, 244 Fed. 422, concluding that the rule requiring prompt sentences does not change the law relative to jurisdiction, but was adopted to expedite criminal cases; Bankey v. Sanford, (D.C. N.D. Ga., 1947) 74 F. Supp. 756, deciding that after a plea of guilty, it is discretionary with the court as to when sentence should be imposed; U. S. v. Provo, 17 F. R. D. 183 (1955) and cases cited in footnote, holding that a right to a speedy trial may be waived and is waived unless demanded by the accused.

As stated in Pollard, the delay involved must be considered in the light of the circumstances surrounding the case. In the case at bar, it is stated in the final reply brief for all of the appellants, although admittedly not shown by the record, that counsel for Appellant Lott, when considering a change of plea from not guilty to nolo contendere, requested the court to sentence Lott prior to the trial of the two defendants who pled not guilty. The brief further states, "It is also true that the trial judge refused to grant this request." While we do not purport to decide this case on matters not of record; even if we did, it is apparent that Appellant Lott proceeded to tender his plea of nolo contendere notwithstanding the refusal of the trial judge to grant his request for early sentence.

We see no impropriety, indiscretion, injury or denial of any rights whatever by the delay of approximately 90 days between the time the pleas were entered and sentence pronounced. Before the pleas were entered, the court acted with great caution and all that transpired was in the presence of the appellants and their learned counsel. Notwithstanding this fact, the court was careful to inquire of the appellants individually as to whether each had separately decided to enter the plea voluntarily and made certain that the plea was not prompted by any promises which had been made. The court warned the parties of the seriousness of the charge and explained to each appellant that the charge was willful tax evasion. They were warned not to expect leniency and that the sentence might be five years confinement in addition to a large fine. Over the objection of the Government, the court accepted the pleas, and directed a pre-sentence investigation "for sentence at conclusion of entire case." When the appellants were called for sentencing, no motion or request for permission to withdraw the pleas was made and the tenor of their statements was approval of their former decision to enter the plea and a confession of their improper conduct. Appellate courts must assume, in the absence of anything in the record to the contrary, that delay in pronouncing sentence was for a lawful purpose in the orderly process of handling the case. Indeed, the record here does not require any inference or presumption, because the record clearly shows, without question, that the delay was proper, lawful and completely justified in the circumstances of this case.

III. Loss of Jurisdiction Under Pleas of Nolo Contendere

Appellants have much to say about their pleas of nolo contendere and the meaning which it carries. The definition which they seem to prefer is that "nolo contendere is a mere statement of one's unwillingness to contest and no more." Mickler v. Fahs, 5 Cir., 1957, [57-1 USTC ¶9598] 243 F. 2d 515, 517; Piassick v. United States, 5 Cir., 1958, 253 F. 2d 658. It is admitted that there may be an adjudication of guilt in the sense that judgment of conviction may be entered on a plea of nolo contendere. For the purposes of this case, we have no trouble with the insistence of the appellants. Reasoning further, they complain that "conviction on a plea of nolo contendere" does not permit the court to receive or consider evidence in the case before the court, or any other related case, "from which it will independently determine the extent of the defendant's guilt or culpability as a basis for imposing sentence or punishment"; and that such a plea "operates to preclude judicial inquiry as to all matters of fact arising under the allegations contained in the indictment." ² From the position thus taken, the appellants then conclude, or at least strongly intimate, that the court considered all of the evidence presented during the Farnsworth trial in deciding upon the sentence to be given these appellants. They indicate that the court should have made some limiting statement as to the evidence it had heard during the Farnsworth trial. In view of the fact that there was some mention of the Farnsworth trial at the time sentence was passed, it is concluded that the appellants were tried in absentia. Pressing further, it is contended that the plea of nolo contendere was thereby rejected and the court lost jurisdiction of the case to enter a judgment of conviction and to sentence the appellants.

We are unable to follow this reasoning process. The record is somewhat to the contrary. We find no improper statements by the court in the record and nothing to indicate that the court demonstrated any impropriety or gave consideration to any improper facts at the time sentence was imposed. ³

[Consideration of Facts in Trial of Other Defendants]

In this aspect of the case the insistence of the appellants is clearly erroneous. The shoe is on the other foot. The court gave every consideration requested by the appellants. In the first place, the court was not bound to accept the pleas of nolo contendere, especially in view of the objection by the Government. At the time the plea was entered, the appellants were warned in great detail and after ordering a presentencing investigation, in effect stated that sentence would be imposed at the conclusion of the entire case. Counsel for the Government made slight reference to the Farnsworth trial and did not cross-examine the appellants' character witnesses. The court imposed no limitation on any of the appellants as to the number of character witnesses offered, and permitted full statements by both counsel and appellants. Two of the appellants made statements to the court. As a matter of fact, reference made by counsel for the appellants to the Farnsworth trial is far more extensive than any reference made by the court or counsel for the Government. As to this contention, we cannot better state our conclusion now than to quote from the decision of this court when the case was here on another question (280 F. 2d 24, 28-29):

"In considering the contention of the appellants that they were sentenced upon a determination of guilt based upon the evidence at the trial of the other defendants rather than upon their pleas of nolo contendere, a look at the record becomes desirable. What happened is this; during the proceedings for sentencing the court heard statements of counsel for the appellants seeking mitigation of punishment. In these statements references were frequent to matters which transpired at the trial of the other defendants. It was brought out that counsel for the appellants had a representative at the trial, taking notes, and reporting to counsel so that they knew, in the words of one of the attorneys 'exactly what was testified, in substance.' Two of the three appellants made statements on behalf of themselves. Character witnesses numbering five, seven, and five, for the respective appellants, testified. At the conclusion of the hearing the court stated, 'I have found each guilty of the felonies as contained in the grand jury indictment.' Then followed an oral pronouncement by the court of the sentences. This hearing was on June 19, 1959. On June 22, 1959, the court entered, as to each appellant, a formal judgment and commitment. From them we quote:

"It is adjudged that the defendant has been convicted upon his plea of nolo contendere of the offense of * * * and the Court having asked the defendant whether he has anything to say why judgment should not be pronounced, and no sufficient cause to the contrary being shown or appearing to the Court, It is adjudged that the defendant is guilty as charged and convicted.

We need not consider whether the judgment was the oral pronouncement of sentence or the formal writing. Cf. Pollard v. United States, 352 U. S., 354, 77 S. Ct. 481, 1 L. Ed. 2d 303; United States v. Hark, 320 U. S. 531, 64 S. Ct. 359, 88 L. Ed. 290; Patterson v. United States, 5th Cir. 1950, 183 F. 2d 687; Spriggs v. United States [65-1 USTC ¶9397], 9th Cir. 1955, 225 F. 2d 865. In neither the oral sentence nor the formal judgment does it appear that the determination of guilt is based upon the trial of the other defendants. Any such conclusion is negatived by recital in the formal judgment that 'the defendant has been convicted upon his plea of nolo contendere.' We see no merit in this contention of the appellants."

IV. The Judgment of the Court

At the conclusion of the statements and evidence offered by the appellants, the court made the following oral pronouncement: "I have found each guilty of the felonies as contained in the Grand Jury indictment." In its formal written judgment, the court refers to the offenses as ". . . the offenses of filing false and fraudulent income tax returns . . ." and ". . . conspiracy to file false and fraudulent income tax returns." Immediately following these statements by the court in the formal written judgments is the specific statement that the appellants had violated the felony provisions relating to willfully attempted evasion--§145(b) 1939 Code and §7201 1954 Code. The judgments make no specific reference to §145(a) of the 1939 Code and §§ 7203 and 7207 of the 1954 Code, which are the misdemeanor sections. Based on the misuse of language in the characterization of the offenses in the formal written judgments, the appellants insist that they were convicted of misdemeanors, but given sentences as provided in the felony sections. It is clear to us that the record clearly demonstrates that the intent of the district judge was to sentence appellants for the felonies for which they had been indicted. Such was the oral pronouncement of the court and regardless of the characterization of the offenses, the judgments show they were convicted of violating the felony sections as charged in the indictment. The error is almost self-correcting and it is certainly nothing more than a clerical error. This clerical error properly may be called to the attention of the trial judge, if the appellants desire to do so, under the provisions of F. R. Crim, P. No. 36, ⁴ which authorizes the correction of such errors by the sentencing court at any time. Costello v. United States, 252 F. 2d 750, 751 (C. A. 5th); Tseung Chu v. Cornell, 247 F. 2d 929, 932 (C. A. 9th); Ex parte Sherwood, 177 F. Supp. 411, 413 ( Ore. ), certiorari denied, 363 U. S. 851.

As a matter of fact, under the provisions of Rule 35, the court may correct an illegal sentence at any time; and may reduce the sentence within 60 days after receipt by the court of a mandate issued upon affirmance of judgment or dismissal of the appeal. Needless to say, the reduction of a valid sentence after affirmance is within the discretion of the trial court. Substantial time has elapsed since the appellants were sentenced. No doubt, the distinguished trial judge has given consideration to the sentences imposed. Considerations based on compassion and mercy are to be determined by the trial court.

As stated by this court in Benham v. U. S., (1954) [54-2 USTC ¶9574], 215 F. 2d 472:

"Each case stands upon its own peculiar facts and circumstances as to whether a defendant has been afforded a fair trial."

We have carefully reviewed the record and the numerous briefs filed in this case. We are convinced that all of the appellants were accorded every legal consideration to which they were entitled. We understand their disappointment, but the sentences received are not the maximum. Commendably, counsel for the appellants, in the highest traditions of advocacy, loyalty to the interest of their clients, and with a firm determination to press every conceivable point, have done everything possible for these appellants. The record not only shows that competent attention and advice were given to each appellant, but under the careful guidance of the court when the pleas were entered, and at the session of the court when sentences were pronounced, each appellant individually approved all action taken with full knowledge of the possible consequences.

The judgment is AFFIRMED.

¹ Of the Ninth Circuit, sitting by designation.

² Quotations from first reply brief of Appellant Lott. Although different language is used, essentially the same contention is made by all of the appellants.

³ The following excerpts are from the record:

"Court: Does the Government have anything to say to the Court at this time before I call on the defendants to tell me whatever they want to say or their lawyers or friends want to tell me in their behalf?

"Mr. Schwartz: Your Honor, I believe the Court has heard the facts tried following these gentlemen's pleas.

"If it please the Court, at the conclusion of the defendant's statements if there are any matters which are called upon for an answer, we would respectfully request permission to answer them then, but we think there is no other statement called for in the case.

"The Court: I will not say that I will at this time.

I will call the first on the docket, Mr. Blocker first, and then Mr. Lott and Frazier." (Tr. pp. 488-9)

* * *

"Mr. Crooker: Your Honor, you have been good enough not to limit our number of witnesses. You said you would listen as long as we put them on.

"The Court: Until exhaustion.

"Mr. Crooker: I want to be fair. I have a couple more, but aside from strictly character witnesses I want to use Mr. Brigman on a few brief facts independent of character, and I believe I am going to forego the others, but unless Your Honor wants to question them I shall not offer them.

"The Court: It is your own ruling." (Tr. pp. 502-3)

Following is from statement to the court by Appellant Blocker:

"I have made some mistakes in these matters, and as I say for some time now I have recognized that fully, and I want to make that very clear to Your Honor that I do recognize it. Looking back over what went on, I am sorry that when things were presented in an improper manner that I didn't just leave the services of the company and find employment elsewhere, but hindsight is--it just a matter of hindsight, and it is hard to lean on that at this time.

"I will say this, today, and as far as anything in the future is concerned, I would definitely leave the services of a company before I would ever do anything, if called upon, in an improper manner.

"I am not attempting at this time in any way to whitewash what I have done in the past. For quite a long time now I have been tortured more, much more, than could possibly be done by what would be done in a Court. I own up to any improprieties that may have been permitted to exist.

"The Court: Is there any doubt in your mind about that, you used the word 'might'?

"Mr. Blocker: There is no doubt at all, Your Honor. I didn't intend to use that word.

"There are improprieties that exist.

"There is one other thing that occurs to me that you might wonder about, why if I had objection to accounting irregularities, as I pointed out, why would I have let some amount of work be done by the company out at my house in 1951, which I did at that time." (Tr. pp. 521-2)

* * *

"I would like to say though that I filed a plea of nolo contendere with the effect of throwing myself on the mercy of the Court, and what I have said here today is to reaffirm that, and I have not regretted what I have done.

"The Court: You mean the irregularity part or the nolo plea?

"Mr. Blocker: That I have not regretted filing the nolo plea, Your Honor." (Tr. p. 523)

Mr. Crooker (of counsel) speaking to the Court:

"Mr. Crooker: I wanted to say something, but I hadn't expected the occasion to arise so quickly. What I wanted to say, Your Honor, is two or three things about the matter.

"I wanted to remark to Your Honor what you doubtless know without my suggesting it to you or reminding you of it, that any man who enters a plea of nolo contendere, there are wonderful advantages to it. If I were doing it today I would do just exactly that, I would advise these clients of ours to do precisely what they did, and knowing that I am going to say about it is intended to not take anything from exactly what they did here in open Court. They are standing by it and so am I.

"I make that remark, although don't think it is necessary to do it, but when a trial goes on in the absence of any man, even though it was set up that way himself, and with his lawyer, too, but it goes on and we do not know what was brought out--

"The Court: Right on that point, counsel, didn't you have this young man present every day and every hour taking down notes?

"Mr. Crooker: Yes, I have everything, a daily report and everything that I had. That is not what I was going to suggest. I know what exactly was testified, in substance. He is not a shorthand reporter. We didn't buy a copy of it. We did buy one witness, I think, but we have a daily report." (Tr. pp. 524-5)

Following, is statement to the Court by Appellant Lott:

"Mr. Moody: Your Honor, Mr. Lott would like to address the Court.

"Mr. Lott: Judge, I realize that I have made a great mistake and that I should have had the courage to have gotten out in 1953 when some of the younger fellows did.

"The Court: That could be the first statement of remorse or repentance that I have heard during these last eleven weeks. Maybe I did hear, but I don't remember. Go ahead.

"Mr Lott: I had worked for Farnsworth & Chambers Company and Farnsworth originally all of my life, and frankly I didn't know anything else.

"I realize that I made a great mistake and I shall never recover from it, and I shall never make a mistake again." (Tr. pp. 531-2)

Mr. Moody (of counsel) speaking to the Court:

"I will be brief as possible, and I will not go over a rehash of the evidence that the Court sat through for nine weeks and heard. Certainly our pleading nolo did not contribute to the length of the trial, and we had hoped this thing would be over sooner, but it was not." (Tr. p. 533)

Mr. Ballew (of counsel) speaking to the Court:

"This man has made some great mistakes while at the company. He has not tried to deny them. He feels that it has been a bitter shame on his family.

"I have every confidence that this man has learned a rather bitter lesson.

"Let me say by way of mitigation, when we got into this criminal aspect of his life, it was in August of 1957 and we did not see this dark cloud coming at any time until the day before. He insisted upon taking to Mr. Gromatzky. At that time I think I was the one lawyer in the firm most closely associated with Mr. Lott, and it was I that went to Dallas to see the Internal Revenue Service on his behalf and later went to Washington D. C." (Tr. pp. 539-40)

* * *

"I personally know that this man made a bad decision back in '52 and '53. He is ashamed of what he did then, and he is regretful that he didn't get out of the company like Frank Glass did not Louis Spaw." . . . (Tr. p. 541)

Dr. E. H. Westmoreland, a witness called on behalf of Lott speaking to the Court:

"The Witness: I would like to say that every member of our congregation would come here as a witness in his behalf, and they would say he is one of the cleanest Christian men we have ever known.

"The Court: But none of them were present during the ten weeks of testimony, were they?

"The Witness: Not that I know of, sir." (Tr. pp. 550-1)

⁴ "Rule 36. Clerical Mistakes. Clerical mistakes in judgments, orders or other part of the record and errors in the record arising from oversight or omission may be corrected by the court at any time and after such notice, if any, as the court orders."

 

 

[55-1 USTC ¶9494] United States of America , Appellee v. Philip Albanese and Rosario Albanese, Defendants, Philip Albanese, Defendant-Appellant

(CA-2), In the United States Court of Appeals for the Second Circuit, Nos. 273, 274. October Term 1954, Docket Nos. 23426, 23427, 224 F2d 879, June 2, 1955

Appeal from judgments of the United States District Court for the Southern District of New York.

[1939 Code Sec. 3748--similar to 1954 Code Sec. 6531]

Criminal prosecutions: Statute of limitations.--The trial judge properly ruled that a charge of alleged conspiracy to violate 18 U. S. C. Sec. 371 was barred by the three-year statute of limitations, but that a charge of alleged conspiracy to violate 1939 Code Sec. 145(b) was not barred because of the special six-year limitations period. The judge also properly ruled that the indictment need not be dismissed and re-submitted to the jury merely to delete the reference to the inapplicable statute, since the latter should be regarded as surplusage.

[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201]

Criminal prosecution: Venue: Returns prepared in one district and filed in another.--The District Court properly ruled that venue was in the court of the district in which taxpayer's act of preparing false records and mailing false returns took place, as such conduct came within the ambit of 1939 Code Sec. 145(b) forbidding an "attempt in any manner to evade or defeat any tax." The actual act of filing was not an essential element of the offense.

[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201]

Criminal prosecution: Failure to sign returns: Effort to introduce memorandum: Correct copy of bill of particulars.--In affirming the jury's finding that taxpayer was guilty of attempting to evade federal income taxes and of conspiring to evade federal taxes and to file false statements, the appellate court held that it was of no import that taxpayer did not personally sign any of the returns filed in his name, since there was sufficient evidence to show that he caused the false returns to be filed. Also, there was no error in the trial court's rulings denying the government's motions to introduce a memorandum made in connection with a meeting between government agents and taxpayer. A slight variance between the bill of particulars and the proof offered at the trial was not prejudicial, where taxpayer had been given a correct copy of the bill.

J. Edward Lumbard , United States Attorney for the Southern District of New York (Peter M. Brown, of counsel), for appellee. Archibald Palmer, for appellant.

Before CLARK, FRANK and STALEY, Circuit Judges.

Appellant was tried by a jury, and found guilty, upon two indictments, consolidated for trial, charging wilful attempts to evade federal income taxes in 1947-1950 and conspiracy to commit said offenses and to file false statements. A co-defendant, Rosario Albanese, was named by the indictments as an aider and abettor, and tried together with the appellant, but the jury disagreed as to his guilt. Judge Bicks entered judgments of conviction on both counts. Appellant has appealed.

FRANK, Circuit Judge:

1. Viewing the facts, as we must, on appeal, most favorably to the prosecution, the evidence showed the following: Philip Albanese was the owner of a profitable truck-loading business at several piers along the Manhattan waterfront. He operated behind a paper wall of false and fictitious records to disguise his own financial interests. The two truckers of fruits and vegetables, who were his sole customers, paid appellant's fees to a collection agency which, in turn, paid cash to Albanese or his agents. The collection agency maintained no records and those records which they supplied to Albanese were destroyed. Ostensible owners of the business, as listed on identification papers required by government agencies, were Rosario Albanese for a part of the period covered by the indictment and Rocco Guarino during much of the remainder of the period. Actually neither was owner and, during a part of the period for which Guarino was listed as one, he had no connection whatever with the business. The real owner at all times was Philip Albanese who, however, was listed during most of the period in question on the payroll records as a dock worker. The prosecution introduced many details of the various unorthodox business practices which disguised the extent of the profits and the identity of the owner.

Tax returns for Philip Albanese were prepared by G. Joseph Moscarella, an accountant, on the basis of false information supplied to him by Albanese's agents. The information, and therefore the returns, considerably understated Albanese's income. For three of the four tax years in question, the tax returns were signed with Albanese's name by the accountant, and in the fourth year signed in Albanese's name by Rosario Albanese, who stood trial with him. There was ample evidence that appellant knew of, and directed, all of these activities.

2. Appellant moved, before Judge Goddard, to dismiss Count I of this second indictment which charged a conspiracy to violate 28 U. S. C. Section 145(b) and 18 U. S. C. Sec. 371, as barred by the statute of limitations. Judge Goddard held the alleged conspiracy to violate 18 U. S. C. Section 371 barred by the three-year period applicable to crimes enumerated by the criminal code, but held the alleged conspiracy to violate 26 U. S. C. Section 145(b) not barred because governed by the special six-year limitation statute applicable to certain crimes arising under the Internal Revenue laws. United States v. Albanese 123 Fed. Supp. 732 [54-2 USTC ¶9647]. The judge concluded that the indictment need not be dismissed and re-submitted to the jury merely to delete the reference to the statute now inapplicable, since the reference should be regarded as surplusage and ignored. We think this ruling proper. Prussian v. United States , 282 U. S. 675. See also United States v. Hutchison, 312 U. S. 219, 229; Pruett v. United States, 3 Fed. (2d) 353 (C. A. 9); Ford v. United States , 273 U. S. 593, 602.

3. Before trial, the defendants made a motion to dismiss two counts of the indictment for improper venue, which Judge Kaufman denied. United States v. Albanese, 117 Fed. Supp. 736 [54-1 USTC ¶9178]. The counts, dealing with different years, alleged that the defendants knowingly attempted to evade a part of the taxes owed to the government by preparing, causing to be prepared, and causing to be mailed in the Southern District of New York, and by filing and causing to be filed with the Collector of Internal Revenue in Albany, a false and fraudulent return. The appellant contends that, since the returns were filed in Albany , proper venue is in the Northern District of New York. But the crime specified by 26 U. S. C. Section 145(b) is an "attempt in any manner to evade or defeat any tax." The actual act of filing is not an essential element of the offense. The defendant's entire course of conduct in the Southern District of New York, from preparing false records to the mailing of false returns, came within the ambit of the "attempts" statute, and venue was thus proper.

4. It is of no import that Albanese did not personally sign any of the returns filed in his name. Both direct and circumstantial evidence, viewed favorably to the government, show that he caused the false returns to be filed. Treasury Agent Dugan testified that Albanese had admitted to him that the returns were his, and that he had given permission to the others to sign them for him. Quite apart from the filing, Albanese pursued a line of conduct--listing himself as an "employee" on the records of the business, causing false statements to be sent to government agencies, permitting the destruction of usual business records, etc.--which the jury might reasonably have inferred a violation of 26 U. S. C. Section 145(b). See Spies v. United States, 317 U. S. 492, 499 [43-1 USTC ¶9243].

5. The appellant challenges various rulings in regard to Government Exhibit 37, a contemporaneous memorandum of Treasury Agent Dugan made in connection with a meeting between Dugan, the appellant and his attorney. After Dugan had given contradictory evidence of the date of the meeting, the memorandum, marked by the prosecution for identification, was shown to Dugan to refresh his recollection. When the prosecution then sought to introduce the memorandum in evidence, the defense objected on the ground that it was being offered to corroborate the government's own witness, and this objection was sustained. Again when the attorney who had been present at the conference testified on behalf of the defense, the prosecution, during cross-examination showed the paper to the witness, despite some protest from the defendant, and inquired whether it refreshed his recollection. The witness responded that his recollection required no refreshment. The government then again sought to introduce it in evidence, the defense again objected, and the court again sustained the objection. In none of these rulings was there any error or any prejudice.

6. A slight variance, between the bill of particulars and the proof proffered at the trial, was not prejudicial. Nor is there substance to the assertion of variance between the bill of particulars furnished appellant and the bill furnished the court, since the record shows that, whatever discrepancy there may have been, appellant and his attorneys had a correct copy of the bill. Other alleged errors are similarly insubstantial and do not merit discussion.

Affirmed.

 

 

[54-1 USTC ¶9105]Ernest Michael Schino and Martin M. Hartmann, Appellants v. United States of America , Appellee

(CA-9), In the United States Court of Appeals for the Ninth Circuit, No. 13,375, 209 F2d 67, December 2, 1953

Appeals from the United States District Court for the Northern District of California, Southern Division.

Fraud: Prosecution: Sufficiency of indictment.--An indictment charging conspiracy to defraud the United States is sufficient, whether or not such unlawful object was attained, where it gives the gist of the offense of conspiracy, the agreement to commit an unlawful act, and the means by which the agreement was to be achieved. It is not necessary to state with particularity the time, place, circumstances, etc., in stating the manner and means of effecting the object of the conspiracy.

Fraud: Trial: Denial of bill of particulars.--The trial court's action on an application for a bill of particulars is discretionary. Hence, where the defendants at no stage in the proceedings were taken by surprise, made no claim to the contrary, and their substantial rights were not in any way prejudiced by the denial of a motion for bills of particulars, there was no abuse by the court of its discretion.

Fraud: Trial: Refusal of continuance.--Where a motion to postpone trial was based on grounds of adverse comments in newspaper articles referred to in the briefs but not put in evidence, denial of the continuance was not prejudicial error. U. S. v. Moran, (CA-2) 194 Fed. (2d) 623, followed. Delaney v. U. S. , (CA-1) 199 Fed. (2d) 107, distinguished.

Fraud: Prosecution: Prosecutor's argument to jury.--An argument by the prosecuting attorney to the jury which is based upon the evidence or upon reasonable inferences therefrom, or which, even though otherwise improper, is in reply to such argument as made by defendant's counsel, is proper.

Fraud: Jury trial: Sufficiency of evidence.--The evidence was sufficient to support the verdict of guilty where it was such that a juror could reasonably conclude that the evidence would exclude every reasonable hypothesis but that of guilt. It is an invalid theory, at least on motion for judgment of acquittal, that in a circumstantial evidence case a conviction cannot be supported if the evidence is as consistent with innocence as with guilt.

Fraud: Jury trial: Exclusion of evidence.--Certain evidence which the jury was instructed to disregard was contended on appeal to have been prejudicial to the defendants. However, the subject of prejudicial effect of such exclusion was not even remotely suggested at any time during the trial, and no motion on this account was made for a mistrial at the close of the case. Under these circumstances, it was a case where an error of admission of irrelevant evidence was cured by instruction to the jury to disregard it. Objections to evidence admitted were found to be without merit in the light of the rule that in a conspiracy case wide latitude is allowed in presenting evidence, whereby it is within the discretion of the trial court to admit evidence which even remotely tends to establish the conspiracy charged.

Fraud: Trial: Instructions to jury: Definition of "conspiracy".--There was no error of failing to properly instruct the jury on the meaning of the term "conspiracy" where, in essence, the jury was told by the trial court that the term as applied in this case meant two or more persons acting pursuant to an agreement to impair, obstruct, or defeat the lawful function of the United States Government by dishonest means.

A. J. Zirpoli, and C. Harold Underwood, San Francisco , Calif. , for appellant Schino. Morgan V. Spicer and H. R. Whiting, San Francisco , Calif. , for appellant Hartmann. M. Mitchell Bourquin, Special Assistant to United States Attorney, Thomas W. Martin, Assistant United States Attorney, San Francisco, Calif., for appellee.

Before DENMAN, Chief Judge, and ORR and POPE, Circuit Judges.

DENMAN, Chief Judge:

This is an appeal by two of three defendants from a judgment convicting them of conspiring to defraud the government by impairing its process of collecting and assessing federal taxes.

The parties have assigned many errors of the trial court for this appeal. These may be summarized as follows: (1) Sufficiency of the indictment; (2) denial of request for a bill of particulars; (3) refusal of a continuance because of the approaching pendency of hearings before the King Subcommittee which might have bearing on many matters involved in the trial; (4) improper remarks of prosecuting attorney in argument to jury; (5) sufficiency of the evidence to support the verdict; (6) admissibility of evidence as to similar transactions; and (7) instructions to the jury.

The essence of the scheme, as developed by the government's evidence, is as follows: Gertrude Jenkins, a convicted abortionist, was in tax difficulties. She contacted appellant Hartmann who told her that he could get it "fixed" for $5,000 so that she would not be criminally or civilly prosecuted. Hartmann contacted defendant Mooney (not an appellant), Chief Field Deputy of the Collector of Internal Revenue for the State of Nevada, and asked him if he could "fix" appellant Schino, Chief Field Deputy of the Collector of Internal Revenue for the First District of California. The answer was affirmative. Mooney later took Hartmann to meet Schino. Schino was, as he had done in other cases, to compel his subordinates in the San Francisco office to tamper with and suppress the assessment and penalty against Mrs. Jenkins. In exchange, Mrs. Jenkins was to pay $5,000, and did pay it, for worthless shares of stock in the Mountain City Consolidated Copper Co., a corporation controlled by Mooney. Schino and Hartmann were to share in this $5,000. The failure of the scheme was not the fault of the conspirators, but rather resulted because of a contemporaneous investigation of the Internal Revenue Bureau then under way.

(A) The Indictment:

The indictment charges appellants and one Patrick Mooney--

". . . did . . . conspire together, and with Gertrude Jenkins, also known as Ann Scott, and with others to said Grand Jury unknown, with the intent and purpose to defraud the United States in the exercise of its governmental powers by impairing, obstructing and interfering with the lawful function of a Department of the United States, to-wit, the Bureau of Internal Revenue of the Treasury Department, by attempting corruptly to influence and prevent said Bureau of Internal Revenue from proceeding civilly against said Gertrude Jenkins and prosecuting her criminally for income taxes due, owing and unpaid by her to the United States in the sum of $45,000.00, approximately, for the calendar tax years of 1944 and 1945; . . ."

Appellants admit there was an overt act but attack the indictment in that it does not state the essential facts constituting the offense charged, but merely the legal conclusions of the pleader. The indictment is not defective in that regard. It charges that the appellants "conspired" (i.e., "agreed") to defraud the government (unlawful object) by attempting corruptly to influence and prevent the Bureau of Internal Revenue from proceeding against Gertrude Jenkins (the means). This indictment gives the gist of the offense of conspiracy, the agreement to commit an unlawful act and the means by which that agreement was to be achieved. United States v. Falcone, 311 U. S. 205, 210. "The particularity of time, place, circumstances, causes, etc., in stating the manner and means of effecting the object of the conspiracy for which [appellants] contend, is not essential to an indictment." Glasser v. United States , 315 U. S. 60, 66.

Appellant Hartmann argues that the prosecuting of either civil or criminal actions against taxpayers is not a function of the Bureau of Internal Revenue but rather is a function of the Department of Justice. 28 U. S. C. §502. It is argued that since the indictment charged interference with a function not attributable to the department indicated, no crime has been charged. The short answer to this contention is that no suit regarding taxes can be commenced unless the Commissioner of Internal Revenue, the head of the Bureau, authorizes it. 26 U. S. C. §3740. Thus, if influence is successfully brought to bear upon the Commissioner through his underlings, a suit will be prevented.

Hartmann then argues that even if prosecution of suits be a function of the Bureau, there is no allegation that the Bureau intended so to prosecute or that the parties knew of such intention if it existed, so that the indictment is defective. This contention is also without merit. The indictment is sufficient if it alleges that an unlawful object was sought, whether or not such unlawful object was attained. United States v. Manton, 107 Fed. (2d) 834 (Cir. 2), cert. den., 309 U. S. 664.

(B) Denial of the Bill of Particulars:

Appellants moved for bills of particulars which were denied. In testing the validity of this denial, it must be borne in mind that the trial court's action on a bill of particulars is discretionary and should not be disturbed, in the absence of an abuse of that discretion. Wong Tai v. United States , 273 U. S. 77, 82; Himmelfarb v. United States , 175 Fed. (2d) 924, 935 (Cir. 9) [49-1 USTC ¶9313].

Appellant Schino's attorney, in making an objection to the admission of evidence, stated that he did so "partly on my understanding of what the facts will be"; and further stated "the indictment in this case specifically outlines the nature of the conspiracy." As stated by the district court in its opinion below: ". . . in a trial lasting three weeks, the defendants had ample opportunity, in the event that they were taken by surprise, to ask for a continuance, so that they might prepare to meet the unexpected evidence. No such continuance, however, was requested. As a matter of fact, the defendants at no stage of the proceedings were taken by surprise, nor do they now make such a claim." Where the record thus shows that the defendants were not taken by surprise in the progress of the trial or that their substantial rights have not been prejudiced in any way by the denial of the bill of particulars, there has been no abuse of discretion. Wong Tai v. United States, supra.

(C) Refusal of Continuance of the Date for Trial.

A motion was made on January 24, 1952, to postpone the trial in this cause which was scheduled to commence on February 11, 1952. The ground of the motion was that the Subcommittee on the Administration of the Internal Revenue Laws of the Ways and Means Committee of the House of Representatives of the United States , popularly known as the King Subcommittee, was scheduled to commence hearings on February 4, 1952, on the operations of the San Francisco offices of the Internal Revenue Bureau. Because two of the defendants were officers of the Bureau and because the King Subcommittee intended to investigate, according to newspaper reports, the Mountain City Consolidated Copper Company of Nevada, a concern which allegedly was controlled by Bureau officials who sold its worthless stock at high prices to persons for whom they had done favors, appellant Schino sought the continuance, in which motion appellant Hartmann joined. This continuance was denied.

Appellants assert that the denial of the continuance was highly prejudicial error. They refer not only to the facts above asserted, but also seek to have the court take judicial notice of widespread newspaper and radio coverage relating to the local Bureau "scandals," not contained in the record. Principal reliance is placed upon the case of Delaney v. United States, 199 Fed. (2d) 107 (Cir. 1). In that case, it was held prejudicial error for the court to proceed to trial where prior thereto the King Subcommittee had heard evidence relating to Delaney's affairs which ranged far beyond the scope of the indictment and was highly damaging. These hearings resulted in widespread national publicity adverse to Delaney which extended up to and beyond the time of trial. The court found in detail the mass of newspaper comment and held that by the release prior to trial of such adverse publicity by a branch of the United States (albeit not the prosecuting branch), the United States, as the party plaintiff, "must accept the consequences that the judicial department, charged with the duty of assuring the defendant a fair trial before an impartial jury, may find it necessary to postpone the trial until by lapse of time the danger of the prejudice may reasonably be thought to have been substantially removed." 199 Fed. (2d) at 114.

In their argument here, attempting to show prejudice or the lack thereof, all parties have alleged facts concerning alleged newspaper comment outside the record. Both appellants cited the denial of the continuance of the date of trial as a ground for a new trial, but the argument on the motion was not reported and the district judge did not refer to this contention in his ruling on the motion. Appellants contend that the state of the record is such that the affidavit of Schino's counsel, joined in by Hartmann, being untraversed, must be accepted as true. The only report of a newspaper comment shown by the record is an excerpt from an article appearing in the San Francisco Examiner of January 5, 1952, of which no complaint was made in appellants' briefs. Instead, the briefs refer to several newspaper articles not put in evidence, of which we cannot take notice.

In this state of the record, the comment of Chief Judge Swan, writing for the court, in United States v. Moran, 194 Fed. (2d) 623, at 625 (Cir. 2), is apropos. "Neither the Committee's reports nor the newspapers' comments on it are in the record, so that we cannot judge whether they supplied any basis for counsel's apprehension." Compare Delaney v. United States , supra, where the motion for a continuance was based upon an "affidavit with accompanying exhibits" showing in detail the adverse newspaper comment. 199 Fed. (2d) at 111, 112.

(D) Prosecutor's Argument to Jury:

In his closing argument to the jury, the prosecuting attorney made the following statement:

"Let me say this to you on the matter: You've got to think about this, this is your business just as much as it is mine, and I am beginning to think it is a good deal of the business of all of us to get started sometime to get into this mess, and the longer you put it off the worse it is going to get. If those poor little people up in that revenue office up there that you saw march in front of you in the court room and confess they were pushed around by this man--

"Mr. Zirpoli: I think that is an improper plea.

"Mr. Bourquin: I don't think it is.

"Mr. Zirpoli: I think it is.

"The Court: Proceed.

"Mr. Zirpoli: All right.

"Mr. Bourquin: If those poor people like the Christopherson girl, poor little Wulff, and poor McGowan, and the rest of them [lower echelon employees under Schino] will see that you ladies and gentlemen, out in the open under no obligation to these people, not afraid of these characters, if they are going to find you will wink at this thing and put it aside, they are going to lose all hope, they are not going to rehabilitate themselves, and you are not going to be fair with them to do that. This isn't your work, but it isn't my work any more than it is yours, this work, and you know that I never prosecuted a criminal case, I spent my time for ten years defending the Government in cases, but I regard this as a defense of the Government and the people and to defend those little people that have been pushed around by bullies thinking the department is run for themselves and for their own ends; Mooney for his stock, and Schino for his family, or whatever he wants, and Hartmann for stock, or anything else. You have got to make it, look at, to take notice of those things, you've got to fight those things as you heard in this Court if you are going to expect it to stop.

"Now, I make that--I leave the case with you in that vein. I am very serious about it. I will extend to you now my appreciation for the patience you have shown in standing here talking to you longer than I assured you I would in the first place, and I leave the case and the determination of it to your good judgment."

Appellant Schino contends that this impassioned appeal to public responsibility in a period of great national and local concern was plainly unwarranted and clearly injurious, since it denied the accused the safeguard of a fair trial and constituted reversible error.

Appellant is again relying upon the publicity background of the trial without having in the record anything to bear out the alleged prejudicial publicity. The prejudicial character of this argument to the jury must be determined from the record itself, a court of appeals may not take cognizance of evidence not in the record as transmitted from the district court. Pacific R. R. v. Ketchum, 101 U. S. 289; Siano v. Helvering, 79 Fed. (2d) 444, 446 (Cir. 3); Axelrod v. Osage Oil & Refining Co. , 29 Fed. (2d) 712, 716 (Cir. 8).

This criticized argument of the government had some reference to the evidence in the case. There was evidence tending to show that on occasions Schino had used the power of his position to compel his subordinates to suppress the assessment of taxes and penalties against favored taxpayers. It was made in reply to the argument of Schino's counsel in which he tried to picture Schino as an officer of the Bureau who was doing his duty and who was not involved in any wrongdoing, and thus invited a rebuttal argument of this nature. An argument to the jury which is based upon the evidence or upon reasonable inferences therefrom, or which, even though otherwise improper, is in reply to such an argument as made by Schino's counsel, is proper. Ochoa v. United States , 167 Fed. (2d) 341, 345 (Cir. 9); Springer v. United States , 148 Fed. (2d) 411, 414 (Cir. 9).

(E) The Sufficiency of the Evidence:

Appellants each assert that, as to himself, the evidence is insufficient to support the verdict. In determining this question, we must consider the evidence in the light most favorable to the government. Glasser v. United States , 315 U. S. 60, 68; Woodard Laboratories v. United States , 198 Fed. (2d) 995 (Cir. 9). Viewed in this light, the state of the evidence is such that a juror's reasonable mind "could find that the evidence excludes every reasonable hypothesis but that of guilt." In such a situation, the case must be submitted to the jury, and their decision is final. Remmer v. United States , 205 Fed. (2d) 277, 287-288 (Cir. 9), and cases cited. The theory upon which appellants rely, that in a circumstantial evidence case a conviction cannot be supported if the evidence is as consistent with innocence as with guilt, has been laid to rest in this circuit by the Remmer case, at least where, as here, the question arises on a motion for a judgment of acquittal.

(F) The Contention That Excluded Evidence Nevertheless So Prejudiced the Jury That the Case Should Be Reversed.

In an offer of proof, the prosecution claimed that it intended to show by the testimony of one Dorothy Pennington, Henry Rob inson, and Lila Campbell, that appellant Schino had bragged to Dorothy Pennington's former husband that he had saved her a lot of money by manipulations within the Bureau. The court permitted the prosecution to put Mrs. Pennington on the stand because the offer of proof tended to show that her evidence would tend to prove that Schino corruptly attempted to influence and prevent the Bureau from proceeding civilly or criminally against another taxpayer. The evidence which was put in showed that Dorothy Pennington had obtained a favorable tax settlement without having been prosecuted and tended to establish that Schino had bragged that he had done her a favor. However, the court after colloquy with counsel found that the actions shown to have been committed by Schino were just as compatible with innocence and fair and proper dealing as they could be with illegal or criminal dealing.

On the morning following this testimony when it was fresh in the jury's mind and as soon as the jury assembled the court gave its following instruction to disregard the testimony of these three witnesses:

"The Court: Now, ladies and gentlemen of the Jury: There has been heretofore admitted in evidence certain testimony of three witnesses, namely Lila Campbell, Henry Rob inson and Dorothy Pennington. And you will recall that those witnesses testified to their acquaintance with the defendant Schino and to the tax affairs of the Saf-T-Step Company. It is the Court's belief and conclusion that the testimony of those three witnesses in its entirety is of no materiality in this case, and I have granted a motion to strike the testimony of those three witness[es]. The testimony of Lila Campbell, Henry Rob inson and Dorothy Pennington is stricken in toto, and you ladies and gentlemen are to entirely disregard that testimony that is stricken and you are to treat it as if you had never heard it. It has no place and no factor in this case."

The excluded evidence came after the bulk of the prosecution's case was in and the instruction came after the prosecution's case was concluded. To a jury of ordinary competence it was made clear that they were to disregard it.

Furthermore, coming at the end of the government's case, the defendants could have moved immediately for a mistrial on the ground that despite the granting of the motion to exclude the testimony, its effect was so prejudicial that the jury could not fairly consider the other evidence offered. Instead, the defendants accepted the excluded evidence as not of a character to warrant a mistrial and confined themselves solely to a motion for a directed verdict on the claimed insufficiency of the evidence and of the indictment. Thus even had the excluded evidence been thought prejudicial, the failure to move for a new trial caused the time and effort of the court, counsel, and witnesses of the seven days from the presentation of this evidence to the bringing in of the verdict.

Thereafter, no motion for a mistrial was made at the close of the case, nor indeed was the subject of the prejudicial effect of the excluded evidence even remotely suggested at any time during the trial. Clearly the attorneys for the defense when trial keen to any adverse effect did not regard the excluded evidence as prejudicial and treating its presentation and exclusion as within Rule 52(a), Fed. R. Crim. P.

"Rule 52. Harmless Error and Plain Error

"(a) Harmless Error. Any error, defect, irregularity or various which does not affect substantial rights shall be disregarded."

Obviously, there was no such overwhelming prejudice that it should be considered at any stage of the proceedings as in Kotteakos v. United States, 328 U. S. 750, where in fact the court's errors were objected to at the trial.

The judge properly thought so when with the "after look of a Monday morning quarterback" the prejudice was first mentioned in the denied motion for a new trial. It is a clear case where the error of admission of irrelevant evidence is cured by an instruction to the jury to disregard it. Metzler v. United States , 64 Fed. (2d) 203 (Cir. 9); Cavness v. United States , 187 Fed. (2d) 719, 722 (Cir. 9), cert. den., 341 U. S. 719. To hold otherwise would overrule these cases to the confusion of all the circuit's trial judges.

This conclusion is further supported by the authorities of other circuits. The failure to move for a mistrial and the allowance of the week's further proceeding amounts to a waiver of the afterthought contention as was held by the Sixth Circuit in Carter v. Tennessee, 18 Fed. (2d) 850, 853 (Cir. 6), as follows:

"The general rule is clearly that such 'improper argument of a prosecutor is no ground for reversal, where the jury is explicitly directed to disregard it.' Rob ilio v. United States , 291 Fed. 975, 986 (C. C. A. 6). See, also, Copeland v. United States, 55 App. D. C. 106, 2 Fed. (2d) 637. And where, as here, it must be assumed that the court did reprove counsel and properly instruct the jury at the time, such prejudice as was not thereby removed, or could not be removed by such instruction, was, we think, waived by the failure of the defendant to move for a mistrial. He should not thereafter be permitted to apparently consent to the continuance of the trial, which could presumably be discontinued only upon his motion after the jury had been sworn and he once placed in jeopardy, thus taking his chance of a favorable verdict, and if the verdict be 'guilty' then assert it was founded to a material extent upon misconduct of opposing counsel. Cf. Levin v. United States , 5 Fed. (2d) 598, 602 (C. C. A. 9) [on waiver of even constitutional rights]."

In this that court follows this holding in Billiter v. United States, 23 Fed. (2d) 678, 679 (Cir. 6) and in Pharr v. United States , 48 Fed. (2d) 767, 770 (Cir. 6).

The Sixth Circuit did not overrule these prior decisions in Pierce v. United States, 86 Fed. (2d) 949, (Cir. 6), 13 Fed. Supp. 301, a case of overwhelming prejudice as in the Kotteakos case, where instead of respecting the court's rulings the prosecution continued repeatedly to ignore it, as stated at page 952:

"Conveying to the jury by improper questions the suggestion that defendant Pierce had been tried in the federal courts of Alabama; that he could not obtain credit in his home town of Huntsville, Ala., or procure reputable witnesses who resided there to testify to his good character; that United States Senator Bankhead of Alabama, after interviewing Senator McKellar of Tennessee, could not be procured as a character witness for defendant Pierce; that Pierce had transferred property to his wife and son in fraud of creditors; that he had been frequently detained and investigated by law enforcement officials; and that he was under indictment in the state courts of Mississippi and was a fugitive from justice of that state."

Other circuits hold the same as to the waiver of such error by failing to move for a mistrial. See Webb v. United States , 191 Fed. (2d) 512, 516 (Cir. 10); McGuinn v. United States , 191 Fed. (2d) 477, 479 (D. C. Cir.); Jamerson v. United States , 66 Fed. (2d) 569, 572 (Cir. 7); Gerard v. United States , 61 Fed. (2d) 872, 875 (Cir. 7).

The case is entirely different from that of United States v. Sansone, 206 Fed. (2d) 86, 88 (Cir. 2). There strenuous motions were made to exclude or strike repeated prejudicial statements of the prosecution and the trial court instead of granting them, as here, denied them after which, for a week, the government's case was put in with the jury instructed the evidence was not prejudicial. At the end of that week, the trial court reconsidered its decision and ordered the evidence stricken from the record and instructed the jury to disregard it. The defendants interposed what the court of appeals termed a "motion for a new trial" at this point. This motion, made during the course of the trial, was in fact and effect a motion for a mistrial, and preserved the issue for consideration by the court of appeals.

Nor is it like our case of Wolcher v. United States, 200 Fed. (2d) 492, 499 (Cir. 9) [52-2 USTC ¶9547]. There, unlike the instant case with no error claimed in the trial, there were six errors of the trial court stated in detail in the opinion and other errors committed, the cumulative effect of all of which was held sufficient to prejudice the jury.

The government introduced evidence relating to the so-called "Par Soap Company deal." This evidence tended to show that Schino had brought pressure to bear upon his subordinates to juggle the Bureau's books so that it would appear that the Par Soap Co. had paid its taxes on time. This evidence was clearly admissible to show common intent or design on the part of Schino, especially in view of the fact that the transaction occurred a short time prior to the Jenkins transaction. Henderson v. United States , 143 Fed. (2d) 681, 683 (Cir. 9).

Appellants' other objections to evidence admitted have been examined and found to be without merit. It should be borne in mind that in a conspiracy case wide latitude is allowed in presenting evidence and it is within the discretion of the trial court to admit evidence which even remotely tends to establish the conspiracy charged. Nye and Nissen v. United States , 168 Fed. (2d) 846, 857 (Cir. 9), aff'd, 336 U. S. 613.

(G) Instructions to the Jury:

Appellant Hartmann asserts that the court erred in failing properly to instruct the jury on the meaning of the term "conspiracy." Although no exception was taken to the instructions, see Rule 30, Federal Rules of Criminal Procedure, the failure of the court to give an instruction on an essential point of law is plain error which may be noticed under Rule 52(b), Federal Rules of Criminal Procedure. Samuel v. United States , 169 Fed. (2d) 787, 793 (Cir. 9).

The instruction given told the jury, in essence, that the term "conspiracy" as applied to this case meant two or more persons acting pursuant to an agreement to impair, obstruct, or defeat the lawful function of the United States Government by dishonest means. Hartmann has not pointed out in what respect this definition is insufficient, and we can find none.

In addition to the specifications of error discussed above, both parties have assigned the failure of the court to grant their motions for a new trial. Inasmuch as these motions were based on the above specifications of error, there is nothing left to consider concerning the denial of the new trial.

The judgments are affirmed.