Offenses by Officers & Employees of U.S. Page1

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7214- Offenses by U.S. Employees: Offenses by Officers and Employees of the United States

 Part 1

   

[80-2 USTC ¶9481]F. W. Standefer, Petitioner v. United States

Supreme Court of the United States, No. 79-383, 444 US 1011, 6/9/80 , Affirming CA-3, 79-2 USTC ¶9533

On Writ of Certiorari to the United States Court of Appeals for the Third Circuit.

[Code Sec. 7214 and 18 USC §2]

Crimes: Offenses by IRS agents: Aiders and abettors: Acquittal of principal: Effect.--A corporate official was properly convicted of aiding and abetting an IRS agent in receiving compensation other than that permitted by law. The fact that the IRS agent had been acquitted of accepting such compensation was irrelevant because Congress, in enacting penalty provisions for aiders and abettors, did not intend that the acquittal of a principal would, under federal criminal law, necessarily exonerate such aider and abettor. Nor was the government estopped from relitigating the issue of the guilt of the IRS agent which was decided against the government at the IRS agent's trial. The doctrine of nonmutual estoppel was not applicable in a criminal case of this type.

Syllabus

Petitioner was indicted for, inter alia, aiding and abetting a named Internal Revenue Service agent in accepting unlawful compensation, in violation of 26 U. S. C. §7214(a)(2) and 18 U. S. C. §2, which provides that whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal. Prior to the indictment, the IRS agent was acquitted of certain of the §7214(a)(2) violations which petitioner was accused of aiding and abetting. Petitioner moved to dismiss his indictment as to aiding and abetting these violations on the ground that since the agent had been acquitted of such violations, petitioner could not be convicted of aiding and abetting them. The District Court denied the motion, and after trial petitioner was convicted. The Court of Appeals affirmed.

Held: A defendant accused of aiding and abetting in the commission of a federal offense may properly be convicted despite the prior acquittal of the alleged actual perpetrator of the offense. Pp. 4-15.

(a) Read against its common-law background, 18 U. S. C. §2 evinces a clear congressional intent to permit such a conviction. The section gives general effect to what had always been the common-law rule for second-degree principals (principals who were actually or constructively present at the scene of the crime and aided and abetted its commission) and for all misdemeanants. The legislative history of §2 confirms this understanding. With the enactment of §2, all participants in conduct violating a federal criminal statute are "principals," and as such they are punishable for their criminal conduct, the fate of other participants being irrelevant. Pp. 5-10.

(b) The Government is not barred, under the doctrine of nonmutual collateral estoppel, from relitigating the issue of whether the IRS agent accepted unlawful compensation. Application of that doctrine is not appropriate here. In a criminal case, the Government is often without the kind of "full and fair opportunity to litigate" that is a prerequisite of estoppel. The application of collateral estoppel in criminal cases is also complicated by rules of evidence and exclusion unique to criminal law. Finally, in this case the important federal interest in the enforcement of the criminal law outweighs the economy concerns undergirding the collateral estoppel doctrine. Pp. 11-15. [79-2 USTC ¶9533] 610 F. 2d, affirmed.

BURGER, C. J., delivered the opinion for a unanimous Court.

MR. CHIEF JUSTICE BURGER delivered the opinion of the Court.

We granted certiorari in this case to decide whether a defendant accused of aiding and abetting in the commission of a federal offense may be convicted after the named principal has been acquited of that offense.

I. In June 1977, petitioner Standefer was indicted on four counts of making gifts to a public official, in violation of 18 U. S. C. §201(f), and on five counts of aiding and abetting a revenue official in accepting compensation in addition to that authorized by law, in violation of 26 U. S. C. §7214(a)(2) and 18 U. S. C. §(2). ¹ The indictment charged that petitioner, as head of Gulf Oil Company's tax department, had authorized payments for five vacation trips to Cyril Niederberger, who then was the Internal Revenue Service agent in charge of the audits of Gulf's federal income tax returns. ² Specifically, the indictment alleged that Gulf, on petitioner's authorization, had paid for vacations for Niederberger in Pompano Beach (July 1971), Miami (January 1973), Absecon (August-September 1973), Pebble Beach (April 1974), and Las Vegas (June 1974). The four counts under 18 U. S. C. §201(f) related to the Miami, Absecon, Pebble Beach, and Las Vegas vacations; the five counts under 26 U. S. C. §7214(a)(2) and 18 U. S. C. §2 were one for each vacation. ³

Prior to the filing of this indictment, Niederberger was separately charged in a 10-count indictment--two counts for each of the five vacations--with violating 18 U. S. C. §201(g) and 26 U. S. C. §7214(a)(2). ⁴ In February 1977, Niederberger was tried on these charges. He was convicted on four counts of violating §201(g) in connection with the vacations in Miami , Absecon, Pebble Beach , and the Las Vegas and of two counts of violating §7215(a)(2) for the Pebble Beach and Las Vegas trips. He was acquitted on the §201(g) count involving the Pompano Beach trip and on the three counts under §7214(a)(2) charging him with accepting payments from Gulf for trips to Pompano Beach , Miami , and Absecon. ⁵

In July 1977, following Niederberger's trial and before the trial in his own case commenced, petitioner moved to dismiss the counts under §7214(a)(2) and 18 U. S. C. §(2) which charged him with aiding and abetting Niederberger in connection with the Pompane Beach, Miami, and Absecon vacations. Petitioner argued that because Niederberger, the only named principal, had been acquitted of accepting unlawful compensation as to those vacations he could not be convicted of aiding and abetting in the commission of those offenses. The District Court denied the motion.

Petitioner's case then proceeded to trial on all nine counts. At trial, petitioner admitted authorizing payment for all five vacation trips, but testified that the trips were purely social and not designed to influence Niederberger in the performance of his official duties. The jury returned guilty verdicts on all nine counts. ⁶ Petitioner was sentenced to concurrent terms of six months' imprisonment followed by two years' probation; he was fined a total of $18,000-$2,000 on each count.

Petitioner appealed his convictions to the Court of Appeals for the Third Circuit claiming, inter alia, that he could not be convicted of aiding and abetting a principal, Niederberger, when that principal had been acquitted of the charged offense. By a divided vote, the Court of Appeals, sitting en banc, rejected that contention. [79-2 USTC ¶9533] 610 F. 2d 1076 (1979). It concluded that "the outcome of Niederberger's prosecution has no effect on [petitioner's] convictions." Id., at 1078.

Because the question presented is one of importance to the administration of criminal justice on which the Courts of Appeals are in conflict, we granted certiorari. ⁷ We affirm.

II. Petitioner makes two main arguments: first, that Congress in enacting 18 U. S. C. §2 did not intend to authorize prosecution of an aider and abettor after the principal has been acquitted of the offense charged; second, that even if §2 permits such a prosecution, the government should be barred from relitigating the issue of whether Niederberger accepted unlawful compensation in connection with the Pompano Beach, Miami, and Absecon vacations. ⁸ The first contention relies largely on the common law as it prevailed before the enactment of 18 U. S. C. §2. The second rests on the contemporary doctrine of nonmutual collateral estoppel.

A. At common law, the subject of principals and accessories was riddled with "intricate" distinctions. 2 J. Stephen, History of the Criminal Law of England 231 (1883). In felony cases, parties to a crime were divided into four distinct categories: (1) principals in the first degree who actually perpetrated the offense; (2) principals in the second degree who were actually or constructively present at the scene of the crime and aided or abetted its commission; (3) accessories before the fact who aided or abetted the crime, but were not present at its commission; and (4) accessories after the fact who rendered assistance after the crime was complete. See W. LaFave & A. Scott, Criminal Law §63 (1972); 4 W. Blackstone, Commentaries on the Laws of England, 33 (1765); Perkins, Parties to Crime, 89 U. Pa. L. Rev. 581 (1941). By contrast, misdemeanor cases "d[id] not admit of accessaries [sic] either before or after the fact," United States v. Hartwell, 26 F. Cas. 196, 199 (1869); instead, all parties to a misdemeanor, whatever their roles, were principals. United States v. Dotterweich, 320 U. S. 277, 281 (1943); C. Torcia, 1 Wharton's Criminal Law, §33 (1978).

Because at early common law all parties to a felony received the death penalty, certain procedural rules developed tending to shield accessories from punishment. See W. LaFave & A. Scott, at 499. Among them was one of special relevance to this case: the rule that an accessory could not be convicted without the prior conviction of the principal offender. See 1 M. Hale, Pleas of the Crown, 623-624 (1847). Under this rule, the principal's flight, death, or acquittal barred prosecution of the accessory. And if the principal were pardoned or his conviction reversed on appeal, the accessory's conviction could not stand. In every way, "an accessory follow[ed], like a shadow, his principal." I J. Bishop, Criminal Law §666 (8th ed. 1892).

This procedural bar applied only to the prosecution of accessories in felony cases. In misdemeanor cases, where all participants were deemed principals, a prior acquittal of the actual perpetrator did not prevent the subsequent conviction of a person who rendered assistance. R. Humphreys and Turner, 3 All Eng. L. Rep. 689 (1965); R. v. Burton, 13 Cox, C. C. 71, 75 (1875). And in felony cases a principal in the second degree could be convicted notwithstanding the prior acquittal of the first-degree principal. King v. Taylor and Shaw, 168 Eng. Rep. 283 (1785); R. v. Wallis, 91 Eng. Rep. 294 (1703); Brown v. State, 28 Georgia 199 (1859); State v. Whitt, 113 N. C. 716, 18 S. E. 715 (1897). Not surprisingly, considerable effort was expended in defining the categories--in determining, for instance, when a person was "constructively present" so as to be a second-degree principal. 4 Blackstone Commentaries on the Laws of England 34 (1765). In the process, justice all too frequently was defeated.

To overcome these judge-made rules, statutes were enacted in England and in the United States. In 1848 the Parliament enacted a statute providing that an accessory before the fact could be "indicted, tried, convicted, and punished in all respects as if he were a principal felon." 11 & 12 Vic. ch. 46. s. 1 (emphasis added). As interpreted, the statute permitted an accessory to be convicted "although the principal be acquitted." R. v. Hughes, Bell's Crown Cases 242, 248 (1860). Several state legislatures followed suit. ⁹ In 1899, Congress joined this growing reform movement with the enactment of a general penal code for Alaska which "abrogated" the common-law distinctions and provided that "all persons concerned in the commission of a felony . . . must be indicted, tried, and punished as principals, as in the case of a misdemeanor. Act of Mar. 3, 1899, ch. 429, §§ 184-187, 30 Stat. 1282 (emphasis added). In 1901 Congress enacted a similar provision for the District of Columbia. ¹⁰

The enactment of 18 U. S. C. §2 in 1909 was part and parcel of this same reform movement. The language of the statute, as enacted, unmistakably demonstrates the point:

"Whoever directly commits any act constituting an offense defined in any law of the United States, or aids, abets, counsels, commands, induces or procures its commission, is a principal." Act of March 4, 19 09, ch. 321, 35 Stat. 1152 (emphasis added). ¹¹

The statute "abolishe[d] the distinction between principals and accessories and [made] them all principals." Hammer v. United States 271 U. S. 620, 628 (1926). Read against its common-law background, the provision evinces a clear intent to permit the conviction of accessories to federal criminal offenses despite the prior acquittal of the actual perpetrator of the offense. It gives general effect to what had always been the rule for second-degree principals and for all misdemeanants.

The legislative history of §2 confirms the understanding. The provision was recommended by the Commission to Revise and Codify the Criminal and Penal Laws of the United States as "in accordance with the policy of recent legislation" by which "those whose relations to a crime would be that of accessories before the fact according to the common law are made principals." Final Report of the Commission to Revise and Codify the Laws of the United States 118-119 (1906). The Commission's recommendation was adopted without change. The House and Senate Committee reports, in identical language, stated its intended effect:

"The committee has deemed it wise to make those who are accessories before the fact at common-law principal offenders, thereby permitting their indictment and conviction for a substantive offense. At common law an accessory can not be tried without his consent before the conviction or outlawry of the principal except where the principal and accessory are tried together; if the principal could not be found or if he had been indicted and refused to plead, had been pardoned or died before conviction, the accessory could not be tried at all. This change of the existing law renders these obstacles to justice impossible." S. Rep. No. 10, 60th Cong., 1st Sess., Pt. 1, at 13 (1908); H. R. Rep. No. 2, 6th Cong., 1st Sess., at 13 (1908). ¹²

And on the floor of the House of Representatives, Representative Moon, the chairman of the joint select committee, put the point simply: "[we] have abolished the existing arbitrary distinctions between felonies and misdemeanors." 42 Cong. Rec. 585 (1908).

This history plainly rebuts petitioner's contention that §2 was not intended to authorize conviction of an aider and abettor after the principal had been acquitted of the offense charged. ¹³ With the enactment of that section, all participants in conduct violating a federal criminal statute are "principals." As such, they are punishable for their criminal conduct; the fate of other participants is irrelevant. ¹⁴

B. The doctrine of nonmutual collateral estoppel was unknown to the common law and to the Congress when it enacted §2 in 1909. ¹⁵ It emerged in a civil case in 1942, Bernhard v. Bank of America Nat. Trust & Savings Assn., 19 Cal. 2d 807, 112 P. 2d 892. This Court first applied the doctrine in Blonder-Tongue v. University Foundation, 402 U. S. 313 (1971). There, we held that a determination of patent invalidity in a prior infringement action was entitled to preclusive effect against the patentee in subsequent litigation against a different defendant. Just this past Term we again applied the doctrine--this time "offensively"--to hold that a defendant who had had a "full and fair" opportunity to litigate issues of fact in a civil proceeding initiated by the Securities and Exchange Commission could be estopped from religitating those issues in a subsequent action brought by a private plaintiff. Parklane Hosiery Co. v. Shore, 439 U. S. 322 (1979). In both cases, application of nonmutual estoppel promoted judicial economy and conserved private resources without unfairness to the litigant against whom estoppel was invoked.

Here, petitioner urges us to apply nonmutual estoppel against the government; specifically he argues that the government should be barred from relitigating Niederberger's guilt under §7214(a)(2) in connection with the vacation trips to Pompani Beach, Miami, and Absecon. That issue, he notes, was an element of his offense which was determined adversely to the government at Niederberger's trial. ¹⁶

This, however, is a criminal case, presenting considerations different from those in Blonder-Tongue or Parklane Hosiery. First, in a criminal case, the government is often without the kind of "full and fair opportunity to litigate" that is a prerequisite of estoppel. Several aspects of our criminal law make this so: the prosecution's discovery rights in criminal cases are limited, both by rules of court and constitutional privileges; it is prohibited from being granted a directed verdict or from obtaining a judgment notwithstanding the verdict no matter how clear the evidence in support of guilt, compare Fed. Rule Civ. Proc. 50; it can not secure a new trial on the ground that an acquittal was plainly contrary to the weight of the evidence, compare Fed. Rule Civ. Proc. 59; and it can not secure appellate review where a defendant has been acquitted. See United States v. Ball, 163 U. S. 662, 671 (1896).

The absence of these remedial procedures in criminal cases permits juries to acquit out of compassion or compromise or because of "their assumption of a power which they had no right to exercise, but which they were disposed through lenity." Dunn v. United States, 284 U. S. 390, 393 (1932). See generally H. Kalven & H. Zeisel, The American Jury, 193-347 (1966). ¹⁷ It is of course true that verdicts induced by passion and prejudice are not unknown in civil suits. But in civil cases, post-trial motions and appellate review provide an aggrieved litigant a remedy; in a criminal case the government has no similar avenue to correct errors. Under contemporary principles of collateral estoppel, this factor strongly militates against giving an acquittal preclusive effect. See Restatement (Second) of Judgments §68.1 (Ten. Draft No. 3, May 1976) (denying preclusive effect to an unreviewable judgment). ¹⁸

The application of nonmutual estoppel in criminal cases is also complicated by the existence of rules of evidence and exclusion unique to our criminal law. It is frequently true in criminal cases that evidence inadmissible against one defendant is admissible against another. The Exclusionary Rule, for example, may bar the government from introducing evidence against one defendant because that evidence was obtained in violation of his constitutional rights. And the suppression of that evidence may result in an acquittal. The same evidence, however, may be admissible against other parties to the crime "whose rights were [not] violated." Alderman v. United States, 394 U. S. 165, 171-172 (1969). Accord, Rakas v. Illinois, 439 U. S. 128, 134 (1978). In such circumstances, where evidentiary rules prevent the Government from presenting all its proof in the first case, application of nonmutual estoppel would be plainly unwarranted. ¹⁹

It is argued that this concern could be met on a case-by-case basis by conducting a pretrial hearing to determine whether any such evidentiary ruling had deprived the Government of an opportunity to present its case fully the first time around. That process, however, could prove protracted and burdensome. Under such a scheme, the Government presumably would be entitled to seek review of any adverse evidentiary ruling rendered in the first proceeding and of any aspect of the jury charge in that case that worked to its detriment. Nothing short of that would insure that its opportunity to litigate had been "full and fair." If so, the "pre-trial hearing" would fast become a substitute for appellate review, and the very purpose of litigation economy that estoppel is designed to promote would be frustrated.

Finally, this case involves an ingredient not present in either Blonder-Tongue or Parklane Hosiery: the important federal interest in the enforcement of the criminal law. Blonder-Tongue and Parkland Hosiery were disputes over private rights between private litigants. In such cases, no significant harm flows from enforcing a rule that affords a litigant only one full and fair opportunity to litigate an issue, and there is no sound reason for burdening the courts with repetitive litigation.

That is not so here. The Court of Appeals opinion put the point well:

"[T]he purpose of a criminal court is not to provide a forum for the ascertainment of private rights. Rather it is to vindicate the public interest in the enforcement of the criminal law while at the same time safeguarding the rights of the individual defendant. The public interest in the accuracy and justice of criminal results is greater than the concern for judicial economy professed in civil cases and we are thus inclined to reject, at least as a general matter, a rule that would spread the effect of an erroneous acquittal to all those who participated in a particular transaction. To plead crowded dockets as an excuse for not trying criminal defendants is in our view neither in the best interests of the courts, nor the public." 610 F. 2d at 1093.

In short, this criminal case involves "completing policy considerations" that outweigh the economy concerns that undergird the estoppel doctrine. See Restatement (Second) of Judgments §68.1(e) and comments thereto; cf. Commissioner v. Sunnen [48-1 USTC ¶9230], 333 U. S. 591 (1948).

III. In denying preclusive effect to Niederberger's acquittal, we do not deviate from the sound teaching that "justice must satisfy the appearance of justice." Offutt v. United States, 348 U. S. 11, 14 (1954). This case does no more than manifest the simple, if discomforting, reality that "different juries [may] reach different results under any criminal statute. That is one of the consequences of our jury system." Roth v. United States, 354 U. S. 476, 492 (1957). While symmetry of results may be intellectually satisfying, it is not required. See Hamling v. United States, 418 U. S. 87, 101 (1974).

Here, petitioner received a fair trial at which the Government bore the burden of proving beyond reasonable doubt that Niederberger violated 26 U. S. C. §7214(a)(2) and that petitioner aided and abetted him in that venture. He was entitled to no less--and to no more.

The judgment of the Court of Appeals is

Affirmed.

¹ 18 U. S. C. §201(f) provides, in relevant part, as follows:

"Whoever, otherwise than as provided by law for the proper discharge of official duty, directly or indirectly gives, offers or promises anything of value to any public official . . . for or because of any official act performed or to be performed by such public official . . . [is guilty of an offense]."

26 U. S. C. §7214(a)(2) punishes:

"Any officer or employee of the United States acting in connection with any revenue law of the United States . . . who knowingly demands other or greater sums than are authorized by law, or receives any fee, compensation, or reward, except as by law prescribed, for the performance of any duty."

18 U. S. C. §2 provides in relevant part:

"Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal."

² The indictment also named Gulf Oil Corporation and Joseph Fitzgerald, a manager in Gulf's tax department, as defendants. Gulf pleaded guilty and Fitzgerald nolo contendere to all nine counts.

³ It appears that the statute of limitations had run on any violation of 18 U. S. C. §201(f) in connection with the Pompano Beach vacation.

⁴ 18 U. S. C. §201(g) punishes:

"Whoever, being a public official . . ., otherwise than as provided by law for the proper discharge of official duty, directly or indirectly asks, demands, exacts, solicits, seeks, accepts, receives, or agrees to receive anything of value for himself for or because of any official act performed or to be performed by him."

⁵ Niederberger was sentenced to six months' imprisonment followed by a five-year period of probation, and he was fined $5,000. His convictions were affirmed by the Court of Appeals. United States v. Niederberger, 580 F. 2d 63 (CA-3 1978).

⁶ The jury was instructed that in order to render a guilty verdict on the §7214(a) counts it must determine (1) that Niederberger knowingly "received a fee, compensation or reward except as prescribed by law . . . for the performance . . . of any duty" and (2) that petitioner "willfully aided and abetted [him]." App. 52a-56a.

⁷ The Courts of Appeals for the Fifth Circuit, the Ninth Circuit, and the District of Columbia have reached the same conclusion as the Third Circuit. See United States v. Musgrave, 483 F. 2d 327, 331-332 (CA-5 1973); United States v. Azadian, 436 F. 2d 81 (CA-9 1971); Perkins v. United States, 315 F. 2d 120, 122 (CA-9 1963); Gray v. United States, 104 U. S. App. D. C. 153, 260 F. 2d 483 (1958). The Court of Appeals for the Fourth Circuit has taken the contrary view that "where the only potential principal has been acquitted, no crime has been established and the conviction of an aider and abettor cannot be sustained." United States v. Shuford, 454 F. 2d 772, 779 (1971). Accord, United States v. Prince, 430 F. 2d 1325 (CA-4 1970). See also n. 11, infra.

⁸ Petitioner also challenges the instructions to the jury on criminal intent. We agree with the Court of Appeals that the instructions were correct.

⁹ By 1909, when §2 was enacted, 13 states had enacted legislation providing that the acquittal of the actual perpetrator was not a bar to the conviction of one charged with giving him aid. See Cal. Stat. ch. 99, §§ 11-12 (1850) (see People v. Bearss, 10 Cal. 68-70 (1858)); Del. Laws (Rev. Code) §§ 2919-2921 (1852); Iowa Rev. Code §4314 (1882) (see State v. Lee, 91 Iowa 499, 501-502, 60 N. W. 119, 120 (1894); Kan. Gen. Stat. §5180 (1889) (see State v. Bogue, 52 Kan. 79, 86-87, 34 P. 410, 412 (1893); Ky. Stat. §1128 (1903) (see Commonwealth v. Hicks, 118 Ky. 637, 642, 82 S. W. 265, 266 (1904); Miss. Code §1026 (1906) (see Fleming v. State, 142 Miss. 872, 880-881, 108 S. 143, 144-145 (1926)); Mont. Codes Ann. (Penal Code) §1854 (1895); N. Y. Penal Code §29 (1895) (see People v. Kief, 126 N. Y. 661, 663-664, 27 N. E. 556, 557 (1891)); N. D. Rev. Codes §8060 (1895); Okla. Stat. §5523 (1890); S. D. Ann. Stat. §8250 (1899); Utah Comp. Laws §4752 (1907); Wash. Code of Proc. §1189 (1891) (see State v. Gifford, 19 Wash. 464, 467-468, 53 P. 709, 710 (1898)).

Since then, at least 21 other states have enacted legislation with that effect. See 1977 Ala. Laws, Act. No. 607, §425; Ariz. Rev. Stat. Ann. §13-304-1 (1978); Ark. Stat. Ann. §41-304 (1977); Colo. Rev. Stat. §18-1-605 (1973) (see Robert v. People, 103 Colo. 250, 87 P. 2d 251 (1938)); Conn. Gen. Stat. §53a-9 (1979); Fla. Stat. §777.011 (1976) (see Butts v. State, 286 So. 2d 28 (1973)); Ga. Code §26-802 (1978); Ill. Rev. Stat. ch. 38 §5-3 (1972); Ind. Code §35-41-2-4 (1979); La. Rev. Stat. Ann. §14.24 (West) (1974) (see State v. McAllister, 366 S. 2d 1340 (1978)); Me. Rev. Stat. Ann., Tit. 17-A §57; Mich. Comp. Laws §767.39 (1968) (People v. Smith, 271 Mich. 553, 260 N. W. 911 (1935)); Mo. Rev. Stat. §562.046 (1978); Neb. Rev. Stat. §28-206 (Cum. Supp. 1978) (State v. Rice, 188 Neb. R. 728, 199 N. W. 2d 480 (1972)); N. H. Rev. Stat. Ann. §626.8 (1974); N. J. Stat. Ann. §2C:2-6 (West 1979); N. M. Stat. Ann. §30-1-13 (1978); Penn. Cons. Stat. 18 §306 (Cum. Supp. 1979); S. C. Code §16-1-50 (State v. Massey, 229 S. E. 2d 332 (1976)); Tex. Code Ann. §77.03 (1973); Wis. Stat. §39.05 (1958).

Eleven other states have enacted statutes that modify the common-law rule; these statutes have not been authoritatively construed on whether an accessory can be prosecuted after his principal's acquittal. See Haw. Rev. Stat. §702-225 (1976); Idaho Code §19-1431 (1979); Mass. Gen. Laws Ann. ch. 274 §3 (1970); Minn. Stat. §609.05 (1964); Nev. Rev. Stat. §195.040 (1979); Ohio Rev. Code Ann. §2923.03 (1979); Okla Stat., Tit. 21 §172 (1971); Ore. Rev. Stat. §161.160 (1979); Vt. Stat. Ann. Tit. 13 §3 (1974); Va. Code §18.2-21 (1975); W. Va. Code §61-11-7 (1977); Wyo. Stat. §6-1-7114 (1977).

Only four states--Maryland, North Carolina, Rhode Island, and Tennessee--clearly retain the common-law bar. See State v. Wood, 284 Md. 189, 396 A. 2d 1041 (1978); State v. Jones, 101 N. C. 719, 8 S. E. 147 (1888) (interpreting N. C. Gen. Stat. §14-15 (1969)); R. I. Gen. Laws §11-1-3 (1956); Pierce v. State, 130 Tenn. 24, 168 S. W. 851 (1914).

The Model Penal Code provides that an accomplice may be convicted "though the person claimed to have committed the offense . . . has been acquitted." §2.06(7) and see comments Tentative Draft No. 1, May 1953, at 38-39.

¹⁰ The provision is still in effect; it provides that all persons "aiding or abetting the principal offender, shall be charged as principals, not as accessories, the intent of this section being that as to all accessories before the fact the law heretofore applicable in cases of misdemeanor only shall apply to all crimes. . . ." Act of March 3, 19 01, ch. 854, Section 908, 31 Stat. 1337; D. C. Code §22-105 (1976) (emphasis added).

¹¹ In 1951 the words "is a principal" were added to read "is punishable as a principal." That change was designed to eliminate all doubt that in the case of offenses whose prohibition are directed at members of specified classes (e.g., federal employees) a person who is not himself a member of that class may nonetheless be punished as a principal if he induces a person in that class to violate the prohibition. See S. Rep. No. 1020, 82d Cong., 1st Sess., 7-8 (1951). The change was fully consistent with congressional intent to treat accessories before the fact as principals and to abolish the common-law procedural bar. Indeed, by the time of the 1951 re-enactment, the circuit courts that had addressed the question had concluded that §2 authorizes conviction of an aider and abettor notwithstanding the prior acquittal of the perpetrator of the offense. See United States v. Klass, 166 F. 2d 373, 380 (CA3 1948); Von Patzoll v. United States, 163 F. 2d 216 (CA10 1946); Kelly v. United States, 258 F. 392, 402 (CA6 1919); Rooney v. United States, 203 F. 928, 931-932 (CA9 1913). Congress manifested no intent to disturb this interpretation. See Lorillard v. Pons, 434 U. S. 575, 580 (1978).

¹² Petitioner emphasizes the fact that the committee report fails to mention the common-law rule that the prior acquittal of a principal barred conviction of an accessory, and argues accordingly that Congress did not view that rule as an "obstacle to justice." The Court of Appeals correctly rejected this argument, being unwilling to "apply the canon of statutory interpretation . . . expressio unius, exclusio alterius . . . to the language employed in a committee report." 610 F. 2d, at 1084 (emphasis added). We agree. Petitioner's argument would permit an omission in the legislative history to nullify the plain meaning of a statute. The language of §2 abolishes the common-law categories and treats all parties as principals. It is not necessary for Congress in its committee reports to identify all of the "weeds" which are being excised from the garden.

¹³ It bears mention that even prior to 1909 petitioner would not have prevailed in his attempt to bar prosecution on the §7214(a)(2) counts. As the government notes, the version of 26 U. S. C. §7214 then in effect defined the offense to be a misdemeanor. See R. S. 3169 (1878). Hence, the prior acquittal of his principal would not have barred petitioner's prosecution. And because petitioner accompanied Niederberger on four of five trips and therefore was "present" at the scene of the crime, see Tr. 1018-1020, 1024-1927, 1034-1036, 1096, he could have been convicted at common law for those crimes even if the offense had been designated a felony.

¹⁴ Nothing in Shuttlesworth v. Birmingham, 373 U. S. 262 (1963), relied on by petitioner, is to the contrary. There, petitioner had been convicted of aiding and abetting others to violate a city trespass ordinance which subsequently was declared constitutionally invalid. See Gober v. Birmingham, 373 U. S. 374 (1963). Shuttlesworth's case merely applied the rule that "there can be no conviction for aiding and abetting someone do an innocent act." Id., at 265. Here, by contrast, the government proved in petitioner's case that Niederberger had violated §7214(a)(2) in connection with each of the five trips. See n. 6, supra.

¹⁵ In 1912 in Bigelow v. Old Dominion Copper Co., 225 U. S. 111, 127, this Court stated that it was "a principle of general elementary law that the estoppel of a judgment must be mutual." See also Stone v. Farmers Bank, 174 U. S. 409 (1899); Keokuk & W. R. Co. v. Missouri, 152 U. S. 301, 317 (1894); Litchfield v. Goodnow, 123 U. S. 549, 552 (1887).

¹⁶ Petitioner does not contend that the Constitution prevents the government from prosecuting him on the three §7214(a)(2) counts as to which Niederberger was acquitted. Nothing in the Double Jeopardy Clause or the Due Process Clause forecloses putting petitioner trial as an aider and abettor simply because another jury has determined that his principal was not guilty of the offenses charged. Compare Ashe v. Swenson, 397 U. S. 436 (1970).

¹⁷ Niederberger's case demonstrates the point. As to the Absecon and Miami vacations, the jury convicted Niederberger of receiving something of value "because of any official act performed . . . by him," 18 U. S. C. §201(g), but acquitted him of receiving "any fee, compensation, or reward . . . for the performance of any duty," 26 U. S. C. §7214(a)(2). No explanation has been offered for these seemingly irreconcilable determinations. This inconsistency is reason, in itself, for not giving preclusive effect to the acquittals on the Absecon and Miami counts. See Restatement (Second) Judgments, §88(4). See also 610 F. 2d, at 1112 (Gibbons, J., concurring in part and dissenting in part); Harary v. Blumenthal [77-2 USTC ¶9472], 555 F. 2d 1113, 1116-1117 (CA-2 1977).

¹⁸ This is not to suggest that the availability of appellate review is always an essential predicate of estoppel. See Johnson Co. v. Wharton, 152 U. S. 252 (1894); see generally 1B Moore's Federal Practice ¶0.416[5]. The estoppel doctrine, however, is premised upon an underlying confidence that the result achieved in the initial litigation was substantially correct. In the absence of appellate review, or of similar procedures, such confidence is often unwarranted.

¹⁹ Indeed, as the Court of Appeals observed, to give the first case preclusive effect would undermine the Alderman rule by affording a defendant whose rights were not violated the benefits of suppression. See 610 F. 2d, at 1094, n. 51.

 

 

 

 

 

[56-1 USTC ¶9347]United States of America v. Ernest T. Waldin

In the United States District Court for the Eastern District of Pennsylvania, Criminal Nos. 18412, 18512, 138 FSupp 791, February 16, 19 56

[1939 Code Secs. 145(b) and 4047(e)(4)--corresponding to 1954 Code Secs. 7201 and 7214(a)(4)]

Indictment of former deputy collector for conspiracy: Sufficiency.--Defendant, who was a deputy collector of internal revenue when the tax liability of a certain taxpayer was under investigation, was indicted on charges that he represented to that taxpayer that criminal prosecution of the latter was imminent, and that defendant's influence within the Internal Revenue Service was such that he could straighten out the taxpayer's difficulties by securing termination of the investigation and reduction of the tax if defendant and certain unnamed associates were paid $20,000, which amount, the indictment charges, was received by defendant from the taxpayer. The defendant challenges the sufficiency of the indictment as not alleging an overt act to effect the object of the claimed conspiracy, and also alleges that the charge of violation of 1939 Code Sec. 4047(e)(4) (conspiracy by an internal revenue officer or agent with any other person to defraud the United States) was insufficient by reason of its failure to allege that the defendant was acting under the authority of a revenue law, since he had not disclosed to the taxpayer that he was an internal revenue officer. The court holds that seven overt acts were charged, that they were related to the evasion or defeat of taxes and the defrauding of the United States, and that the fact that defendant did not make his capacity as an agent known to the taxpayer and that the alleged act was committed outside of the zone to which he was assigned is of little significance. It denies the motion to dismiss the indictment.

W. Wilson White, United States Attorney, Alan J. Swotes, Assistant United States Attorney, Philadelphia, Pa., for plaintiff. Benjamin R. Donolow, Philadelphia, Pa., for defendant.

Opinion

LORD, District Judge:

This action is before the Court on Defendant's Motion to Dismiss Indictments 18412 and 18512.

[Indictment of Deputy Collector]

The defendant was indicted on June 1, 19 55 under indictment number 18412, with violation of 18 U. S. C. A. §371 and 26 U. S. C. A. §145(b). Subsequent to this, on September 20, 19 55, a superseding indictment (indictment 18512) was returned by the grand jury. This latter indictment contained all the charges included in the former one; however, it also contained another offense, to wit, violation of 26 U. S. C. A. §4047(e)(4).

Because of the overlapping of the two indictments and in the interests of brevity, I shall consider only indictment 18512 and the disposition accorded it will control both.

Indictment 18512 charges that the defendant was a Deputy Collector of Internal Revenue when the tax liability of one Francesco Mogavero was under investigation. Further, that defendant conspired with unknown persons to put Mogavero in fear of criminal prosecution and that defendant represented to Mogavero that their influence within the Internal Revenue was such that they could straighten out his difficulties by Mogavero paying defendant and his unknown associates $20,000.

The requisite overt acts charged in the indictment consisted of statements by both defendant and others to Mogavero that they could use their influence to procure termination of the investigation of his affairs and his tax liability reduced; demands by both defendant and another for the sum of $20,000 and finally receipt by defendant of that sum from Mogavero.

[Sufficiency of Indictment]

The issues raised by the briefs are:

1. Must an indictment charging a defendant with conspiracy in violation of 18 U. S. C. A. §371, 26 U. S. C. A. §145(b) and 26 U. S. C. A. §4047(e)(4) allege an overt act to effect the object of said conspiracy?

2. Are the present indictments insufficient for failure to allege such an act?

3. Is indictment 18512 insufficient to charge a violation of 26 U. S. C. A. §4047(e)(4) by reason of its failure to allege that the defendant was acting under the authority of a revenue law?

I will consider the issues in that order.

[Conspiracy]

The pertinent portions of 18 U. S. C. A. §371 read as follows:

"§371. Conspiracy to commit offense or to defraud United 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 of such persons do any act to effect the object of the conspiracy, . . .." (Italics supplied)

The legislative history of this statute was discussed by this Court in United States v. Tanz, Criminal No. 18458 (1955), and need not be repeated here. Suffice to say that section 371 is a general conspiracy statute and is applicable to any one who in any manner attempts to commit any offense against the United States.

It is expressly stated in section 371 that to have an actionable violation in the form of a conspiracy there must be an overt act in furtherance of the conspiracy thereby giving effect to the object of the conspiracy.

Title 26 U. S. C. A. §145(b) invokes a penalty upon any individual who wilfully attempts in any manner to evade or defeat any tax. The pertinent portion of this section reads:

"§145. Penalties

. . .

"(b) Failure to collect and pay over tax, or attempt to defeat or evade tax. Any person required under this chapter to collect, account for, and pay over any tax imposed by this chapter, who willfully fails to collect or truthfully account for and pay over such tax, and any person who willfully attempts in any manner to evade or defeat any tax imposed by this chapter or the payment thereof, shall, in addition to other penalties provided by law, . . ." (Italics supplied)

It is apparent that the wording and phrasing of this section is similar to that used in the general conspiracy statute, section 371. However, one difference should be noted. Title 18 U. S. C. A. §371 finds its birth in the criminal code whereas 26 U. S. C. A. §145(b) arises by virtue of the internal revenue code. It is too well settled to warrant citation of authority for the proposition that statutes imposing criminal liability are to be strictly construed. With this principle in mind, I am, by the very clear and express provisions of both sections, obliged to conclude that each section is applicable in its scope to any person who in any manner attempts to evade or defeat by fraud or otherwise taxes due the government.

[Statute of Limitations]

The defendant has raised a question as to the applicable period of limitation. Section 3748 of 26 U. S. C. A. covers violations of the internal revenue laws of the United States and, in pertinent part, states:

"§3748. Periods of limitation

"(a) Criminal prosecutions. No person shall be prosecuted, tried, or punished, for any of the various offenses arising under the internal revenue laws of the United States unless the indictment is found or the information instituted within three years next after the commission of the offense, except that the period of limitation shall be six years--

"(1) for offenses involving the defrauding or attempting to defraud the United States or any agency thereof, whether by conspiracy or not, and in any manner,

"(2) for the offense of willfully attempting in any manner to evade or defeat any tax or the payment thereof, and

. . .

"For offenses arising under section 37 of the Criminal Code, March 4, 19 09, 35 Stat. 1096 (U. S. C., Title 18, §88), where the object of the conspiracy is to attempt in any manner to evade or defeat any tax or the payment thereof, the period of limitation shall also be six years. . . ."

Defendant agrees that the proper period of limitation is six years with respect to 18 U. S. C. A. §371. However, he urges that for the six-year period to apply to 26 U. S. C. A. §145(b) an act must be shown on the part of the defendant to effect the object of the conspiracy. This contention brings into consideration the second issue and the prerequisite overt acts necessary to sustain a violation of 18 U. S. C. A. §371 (the general conspiracy statute), as well as the applicable period of limitation to be applied to 26 U. S. C. A. §145(b).

[Overt Act]

It is not questioned that an overt act is a vital element when grounded in a general conspiracy statute as in the instant case. Nor is it disputed that a mere conspiracy, without an overt act done in pursuance thereof, is not criminally punishable. Hyde v. United States, 225 U. S. 347, 359 (1911). However, the overt act need not be of itself a criminal act and still less need it constitute the very crime that is the object of the conspiracy. United States v. Holte, 236 U. S. 140, 144 (1914). Even though the conspiracy be fully formed, it may fail in its object and the contemplated crime may never be consummated, yet the conspiracy is none the less punishable. Williamson v. United States, 207 U. S. 425, 447 (1907).

It is submitted by the defendant that no such overt act is stated in either indictment and therefore the indictments fail to state facts sufficient to constitute an offense against the United States. The indictment alleges seven overt acts. The first act alleged that the defendant and one of his co-conspirators informed the taxpayer's attorney that a contemplated indictment against his client could be suppressed by certain persons providing Mogavero "put up" what money they would ask. The second alleged act was that defendant informed Mogavero that he has a "contact" who could "straighten out" Mogavero's tax affairs. Thirdly, that defendant and one of his co-conspirators informed Mogavero that he was in a lot of trouble, and was going to be indicted, but that it could all be "taken care of" and his tax liability reduced, if he would pay the sum of $20,000. The fourth, fifth and sixth acts consisted of the defendant's demand for the money. The seventh and final act charged was that defendant received from Mogavero the sum of $20,000, and at that time promised Mogavero that there would be no indictment and that his tax liability would be "cut down".

The defendant earnestly contends that "not one act of all of the seven alleged to have been committed bears the slightest relevancy to the evasion or defeat of any tax or the defrauding of the United States." With this I cannot agree. It is my opinion that the acts alleged are sufficient to support a charge of conspiring to defeat or defraud the United States of tax monies. In the instant case each act was a logical and necessary step in the carrying through of a carefully formulated scheme. The very first overt act alleged, i. e., defendant calling Mogavero's attorney and informing him of the contemplated indictment of Mogavero, is of such a nature that without it there could never be an achievement of the object of the conspiracy. This is not to say that the overt act must be in and of itself of such a character as to be an integral part of the conspiracy and that the failure of it would cause collapse of the planned object. United States v. Holte, supra. Indeed, the act itself may be lawful and of no particular significance by itself, yet if it be directed toward a desired object which is unlawful, it is punishable. By the second act, the defendant let it be known to the taxpayer directly that defendant could suppress the contemplated indictment if he, Mogavero, "put up" money. The third act was the demand for a stipulated sum, to wit, $20,000. The fourth, fifth and sixth acts flowed freely in the current of this scheme, they being the actual demands for the monies for the services rendered by the defendant and his co-conspirators. Finally the curtain fell on the last act, and defendant was "paid off". To say these acts are meaningless and there is not the slightest connection alluded to between the alleged extortion from Mogavero and a United States loss of tax revenue or departmental corruption is to spread the cloak of immunity over those whose intent is clearly manifested.

The defendant cites numerous cases in support of his contention, none of which is the case at bar. He relies upon Hyde v. United States, 225 U. S. 347 (1911) in support of his position that an overt act is necessary to complete the offense. There is no disagreement with this principle. However, it is worthy of note that the court said in the Hyde case (p. 360):

". . . The action of the latter was to be induced or influenced; and this might be through deception, it might be through fraud, or it might be through innocent agents and acts of themselves having no illegality, but effectually causing and moving official action to the consummation of the end designed and contemplated. Overt acts of all these kinds were charged. The bribery and deception of the officers, the intervention of attorneys and the seemingly harmless mailing of information and directions all are charged and all had some relation to the scheme devised and were steps to its accomplishment. . . ."

This case involved an action brought under section 5440 of the Revised Statutes which is the predecessor of the statute presently before the court.

The defendant urges that since there is no allegation that any of the departments of the government, or its agents, were contacted officially, unofficially, legally or illegally, no crime has been made out against the United States and therefore the overt acts alleged are of no import. The Statute in question (18 U. S. C. A. §371) clearly states "If two or more persons conspire . . . in any manner or for any purpose . . . [to] do any act to effect the object of the conspiracy . . ." The conspiracy coupled with the overt act to defraud the United States is the crime, and it is not a requisite element that overtures be made to the government or any agency or department thereof. This conclusion is clear from a reading of the statute. It is further supported by the case of Heskett v. United States, 58 Fed. (2d) 897 (9th Cir. 1932) when the court said (p. 902):

"To sustain the conspiracy count, it was necessary for the government to prove only that the accused entered into an agreement so to represent themselves, and that, in furtherance of that agreement, they committed one of the overt acts charged in the indictment. . . ."

The final issue to be decided is the sufficiency of the indictment charging violation of 26 U. S. C. A. §4047(e)(4) by reason of its failure to allege that defendant was acting under the authority of a revenue law. This involves an interpretation of the Statute.

The defendant is indicted as an officer and employee of the Internal Revenue Department. However, the defendant asserts that the charged violation is improper because defendant did not represent himself as a Revenue Officer and that the victim did not know he was a Revenue Officer. Therefore, he argues, he was acting outside his department and in the capacity of a private citizen and cannot be indicted for violation of section 4047(e)(4). As authority for this, defendant cites United States v. Gerdel 103 Fed. Supp. 635, 637 (E. D. Mo. 1952) [52-1 USTC ¶9337]. This is clearly distinguishable from the instant case. In the Gerdel case the charged violation was of section 4047(e)(2), whereas the violation under question is of section 4047(e)(4). These two sections are independent of each other and constitute different illegal acts. The facts in the Gerdel case are simple. The defendant there merely prepared income tax returns for taxpayers at their homes in the evening for a fee. The court said that even though "the defendant had a 'duty' to assist taxpayers and prepare income tax returns under regulations or directive at the Collector's office, does not establish conclusively the duty followed him wherever he went after leaving his place of employment."

But this is not our case, for the acts of Gerdel did not consist of a fraudulent scheme to defeat or defraud the United States of tax monies due.

The pertinent portions of the act under construction (26 U. S. C. A. §4047(e)(4)) read:

"(e) Every officer or agent appointed and acting under the authority of any revenue law of the United States--

. . .

"(4) Who conspires or colludes with any other person to defraud the United States; or"

To sustain defendant's contention that the fraudulent act must be done under the authority of his office would be to unduly restrict the scope of the statute. The statute is descriptive only. An agent or officer of the Internal Revenue Department occupies a position of utmost fidelity and loyalty to the government and as a necessary consequence to this is vested with access to records and knowledge not available to the taxpayer in general. It is because of this that Congress enacted section 4047 and provided therein a greater penalty when an officer or agent breaches his responsibility to insure that his duties be performed with utmost faithfulness and loyalty.

At the time defendant communicated with taxpayer he was in fact a revenue agent and is alleged to have conspired to defraud the United States. The mere fact that defendant did not make his capacity as an agent known to the taxpayer and the act was committed outside of the "zone" to which he was assigned is of little significance. The important fact is that at all the times alleged he was employed by the Internal Revenue Service. If the court should adhere to defendant's interpretation of the statute, it would result in the strained conclusion that only if defendant made his capacity as an agent known to the taxpayer, and further, committed the questionable acts only within the "zone" assigned could he be charged with violation of section 4047(e)(4). With this I cannot agree.

The defendant was before this Court on other charges involving the same offense. The Court dismissed the indictment. United States v. Waldin, No. 15625, July 23, 19 51. At that time the government charged violation of section 4047(e)(10). Judge Ganey stated in construing section 4047(e)(10):

"Since the defendant in the instant case had no authority to compromise, adjust or settle the taxpayer's alleged violation of law, he cannot be indicted under this statute. This conclusion is reached with extreme reluctance, . . ." (Italics supplied)

In the case at bar, in addition to the other Statutes hereinbefore recited, the defendant is charged with violation of section 4047(e)(4) which is for conspiracy and is a different offense than that ruled upon by Judge Ganey. I therefore conclude his ruling is not controlling here.

It is my opinion that the indictments as stated are sufficient in all respects and therefore the defendant's Motion to Dismiss is DENIED.

 

 

 

[57-1 USTC ¶9672]United States of America v. Ernest T. Waldin

U. S. District Court, East. Dist. Pa., Criminal No. 18512, 149 FSupp 912, 4/9/57

[1939 Code Sec. 4047--similar to 1954 Code Sec. 7214]

Conspiracy by revenue officer to "fix" criminal income tax case.--The defendant was found guilty on a charge of conspiring to defraud the United States by pretending to "fix" a criminal case against a taxpayer while the defendant was a Deputy Collector of Internal Revenue. In denying the motion for a new trial, the court held that it was not necessary to a conviction under 1939 Code Sec. 4047(e)(4) that the defendant be acting in his official capacity under authority of the revenue laws, but only that he be a revenue official. There was ample evidence of a conspiracy to corrupt unidentified employees of the United States as well as the defendant. A prior proceeding, in which a jury had found the defendant guilty of the substantive offense of demanding and accepting money to "fix" a tax case, but in which the defendant's motion of acquittal had been granted on the ground that he had no authority to compromise or settle the taxpayer's alleged violation of the law, did not bar a prosecution for a conspiracy to commit the substantive offense.

W. Wilson White, United States Attorney, Alan J. Swotes, Assistant United States Attorney, Philadelphia, Pa., for plaintiff. Benjamin R. Donolow, Philadelphia, Pa., for defendant.

Opinion

GRIM, District Judge:

The defendant in this case has been charged with conspiracy to defraud the United States in that as a Zone Deputy Collector of Internal Revenue he conspired to obtain and did obtain money from a taxpayer by "fixing" or pretending to "fix" an income tax case against the taxpayer. Defendant was found guilty in a jury trial and has filed motions for new trial and for judgment of acquittal.

In view of the verdict against the defendant the facts may be stated as follows: In the early part of 1949 Dr. Francesco Mogavero's income tax liability was being investigated by the Internal Revenue Service. Dr. Mogavero retained the services of Albert S. Herskowitz as his attorney in these income tax problems. Herskowitz communicated with the Internal Revenue Bureau several times in an effort to get the facts in the case, but was unsuccessful. Because of his inability to get the facts from the Bureau Herskowitz got in touch with an old friend of his, Ernest T. Waldin, the defendant, who was a Zone Deputy Collector of Internal Revenue. As a Zone Deputy Collector, defendant had only limited powers related to the collection of taxes. He had no power or discretion to determine how much tax was due or how much would be accepted in any case. The zone or area to which he was assigned did not include the places where Dr. Mogavero lived or had his office. Defendant had no authority to make an income tax collection from Dr. Mogavero.

Some time after Herskowitz got in touch with defendant, the defendant called him on the telephone and told him that one McDougal wished to speak to him about the Mogavero income tax problem. McDougal came on the line and after Herskowitz had spoken to him (McDougal), the defendant again took over the telephone. Herskowitz then told defendant that McDougal had said that in order to avoid a criminal prosecution Dr. Mogavero would have to "put up" $20,000. When Herskowitz said this defendant replied that it wasn't for him, it was for McDougal: ". . . it was for . . . these other guys." When Herskowitz asked, "What other guys?" defendant said, "The fellows that are going to take care of this thing."

Later defendant called Herskowitz on the telephone and told Herskowitz that he (the defendant) ". . . was going to be or had been in touch with Dr. Mogavero, pressing him to accept this proposition of putting up $20,000 to avoid this tax prosecution." During this telephone conversation with Herskowitz defendant said also, "I want to do something for Mogavero. He came over and took care of my mother for me, and I like him . . . but I tried to set this thing up for these other people and . . . this is the only way out in this matter." Later, to avoid a criminal prosecution and as a result of defendant's suggestion, Dr. Mogavero handed defendant a package containing $20,000 in cash and said to defendant: "Well, here is the $20,000. Now, what do I get for it? . . . How do I know the whole thing isn't a fake? . . . How do I know I won't be indicted anyhow?" To this defendant answered, "Don't worry . . . everything will be taken care of and you can forget about the indictment. Those others wouldn't double-cross me."

The indictment charged that "Ernest T. Waldin, the defendant herein, and divers other persons whose true identity is . . . unknown, co-conspirators but not named as defendants herein because their names are unknown . . ., did wilfully, knowingly, unlawfully and feloniously conspire with each other to commit offenses against the United States, to wit: . . . to defraud the United States (a) of and concerning its right to have its governmental function of administrating the Internal Revenue Laws . . . free from corruption, partiality, improper influence, bribery and dishonesty."

Defendant was indicted under an Act of Congress (26 U. S. C. A. former Sec. 4047) which provided ¹:

"Every officer or agent appointed and acting under the authority of any revenue law of the United States . . . (4) Who conspires or colludes with any other person to defraud the United States . . . shall be fined . . ."

[Act Not Done Under Authority of Office]

A revenue official, defendant contends, who engages in a conspiracy to obtain money from a taxpayer by "fixing" or attempting to "fix" his criminal income tax case cannot be guilty under this statute because, he contends, in doing this he is not "acting under the authority of any revenue law of the United States." He contends that if he engaged in such a conspiracy he then acted in his individual capacity and beyond the authority of any revenue law. The government, however, contends that the mere fact that defendant was a Zone Deputy Collector of Internal Revenue was enough to satisfy this requirement of the statute.

The opposing contentions in reference to this question were presented to Judge Lord of this court in an argument on a motion to dismiss this indictment. Judge Lord upheld the contention of the government, denied the motion to dismiss the indictment and as to this question established the law of the case, saying:

"To sustain defendant's contention that the fraudulent act must be done under the authority of his office would be to unduly restrict the scope of the statute. The statute is descriptive only. An agent or officer of the Internal Revenue Department occupies a position of utmost fidelity and loyalty to the government and as a necessary consequence to this is vested with access to records and knowledge not available to the taxpayer in general. . . . At the time defendant communicated with taxpayer he was in fact a revenue agent and is alleged to have conspired to defraud the United States. The mere fact that defendant did not make his capacity as an agent known to the taxpayer and the act was committed outside of the 'zone' to which he was assigned is of little significance. The important fact is that at all times alleged he was employed by the Internal Revenue Service. If the court should adhere to defendant's interpretation of the statute, it would result in the strained conclusion that only if defendant made his capacity as an agent known to the taxpayer, and further, committed the questionable acts only within the 'zone' assigned could he be charged with violation of section 4047(a)(4). With this I cannot agree." U. S. v. Waldin, (E. D. Pa. 1956) 138 Fed. Supp. 791 at page 796 [56-1 USTC ¶9347].

[Criminal Code Provisions]

The indictment charged that the defendant violated not only the conspiracy provision of the Revenue Code, 26 U. S. C. former Sec. 4047, but also the conspiracy provision of the Criminal Code:

"If two or more persons conspire . . . 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 . . ." 18 U. S. C. A. Sec. 371.

In his charge to the jury the trial judge defined the word conspiracy and said:

"A conspiracy is an agreement by two or more people to commit a crime in concert attended by an act of one or more of the conspirators to effect the object of the conspiracy."

In defining the word conspiracy in this manner the trial judge used the general definition of a conspiracy taken from the Criminal Code provision. Since that provision requires an overt act by a conspirator to complete the crime while the Revenue Code provision does not, the charge to the jury gave defendant an advantage to which, perhaps, he was not entitled. By finding the defendant guilty, however, after the charge which stated that an overt act was essential to the crime of conspiracy, the jury apparently found that he had committed at least one overt act: most likely that he had received the $20,000 payment.

The United States government is entitled to the honest and uncorrupted services of its agents and employees, and when a person conspires to corrupt an agent or employee of the government he thereby conspires to defraud the United States. Hammerschmidt v. U. S., 265 U. S. 182 (1942), Glasser v. U. S., 315 U. S. 60 (1942), U. S. v. Manton, 107 Fed. (2d) 834, (2d Cir. 1939), U. S. v. Witt, 215 Fed. (2d) 580 (2d Cir. 1954) [54-2 USTC ¶9582], U. S. v. Griffin, 176 Fed. (2d) 727 (3d Cir. 1949). There was ample evidence that an object of the conspiracy was to corrupt both unidentified agents or employees and the defendant himself.

[Acquittal of Substantive Crime]

In a previous case in this court defendant was charged with and convicted of a violation of subsection (10) of 26 U. S. C. A. former Sec. 4047 ² in accepting illegally the $20,000 which apparently the jury in the present case also found that he accepted. The trial judge in the previous case granted judgment of acquittal, U. S. v. Waldin, 139 Fed. Supp. 156 (E. D. Pa. 1951) [56-2 USTC ¶9646]. That acquittal, however, does not protect defendant from a conviction in the present case. In the present case defendant is charged with a conspiracy rather than a substantive crime and an acquittal on a charge of a substantive crime does not preclude a prosecution of a conspiracy to commit the same substantive crime. Pinkerton v. U. S., 328 U. S. 640 (1946), Sealfon v. U. S., 332 U. S. 575 (1948), U. S. v. DeAngelo, 138 Fed. (2d) 466 (3d Cir. 1943).

It should be pointed out that the crime of accepting money illegally (the charge in the previous case) is not the same thing as defrauding the United States as is charged in the present case. Perhaps if the defendant had been acquitted in the first case the question of fact of whether or not defendant received the $20,000 payment would be res judicata and he could not be faced again with a charge involving this question of fact. This problem is not before me, however, since the defendant was found guilty in the previous case and at no time, either by the jury or the judge, was it found as a fact that defendant did not receive the $20,000 which in both cases he was charged with accepting.

Defendant's motions for a new trial and for judgment of acquittal will be denied.

¹ The statute was amended in 1954, 26 U. S. C. A. Sec. 7214(a).

² Every officer or agent appointed and acting under the authority of any revenue law of the United States . . . (10) Who demands, or accepts, or attempts to collect, directly or indirectly, as payment or gift, or otherwise, any sum of money or other thing of value for the compromise, adjustment, or settlement of any charge or complaint for any violation or alleged violation of law, except as expressly authorized by law so to do . . . shall be fined . . ." See amended provision, 26 U. S. C. A. Sec. 7214(a).

 

 

 

[58-1 USTC ¶9283]United States of America v. Ernest T. Waldin, Appellant

(CA-3), U. S. Court of Appeals, 3rd Circuit, No. 12,276, 253 F2d 551, 2/14/58, Affirming the decision of the District Court, 57-1 USTC ¶9672, 149 F. Supp. 912

Crimes: Conspiracy by revenue officer to "fix" criminal income tax case.--The defendant, a former deputy collector for the Bureau of Internal Revenue, was convicted of conspiracy to defraud the United States under 1939 Code Sec. 4047(e)(4). Held, it was not necessary for conviction under clause (4) of 1939 Code Sec. 4047 that the defendant have official authority to start or stop a prosecution for income tax evasion or do anything affecting a particular taxpayer's account. It was sufficient that he was in fact a revenue officer and participated in an unlawful project concerning an internal revenue matter. Held further, no error was made in admitting evidence of the $20,000 payment to the defendant by the taxpayer, nor was there any basis for finding entrapment. Judgment denying new trial affirmed. One dissent.

Benjamin R. Donolow, Kenneth Cooper, 1127 Land Title Bldg., Philadelphia 10, Pa., for appellant. Alan J. Swotes, Assistant United States Attorney, U. S. Court House, Philadelphia 7, Pa., for appellee.

Before GOODRICH, MCLAUGHLIN and HASTIE, Circuit Judges.

Opinion of the Court

GOODRICH, Circuit Judge:

This is an appeal by a defendant who was convicted of violating §4047(e)(4) of the Internal Revenue Code of 1939. The most important question raised is whether on the facts proved in the case for the government a verdict of guilty under this subsection can be sustained.

The defendant, at the time of the acts charged against him, was a deputy collector for the Bureau of Internal Revenue. His business was to collect unpaid taxes owed by taxpayers in the zone in Philadelphia to which he was assigned. By virtue of his position he had no authority to compromise or settle claims, nor did he have any authority to have anything to do with the accounts of taxpayers who resided outside his district. The proof adduced by the government against the defendant was that he conspired with persons unknown to induce a taxpayer, named Dr. Mogavero, to pay $20,000 in cash to the defendant and others in order to forestall the prosecution for income tax evasion which the doctor was given to understand was to be brought against him. Dr. Mogavero did not live in the district where defendant operated. It was not shown that either defendant or any of the persons alleged to be involved in the conspiracy had any authority to settle cases, stop prosecutions or furnish other of the alleged protective devices that the doctor was offered. But the evidence presented could lead to the conclusion that an object of the conspiracy was improperly to influence government officials who did have the capacity to do these things, and that at the very least the defendant himself was corrupted as a result of the illegal agreement. There was testimony, also, which the jury could believe, that the conspiracy reached the place where $20,000 in cash was actually put by the doctor into the defendant's hands just before the latter was apprehended.

On these facts may the conviction of the defendant be sustained? Section 4047(e) lists ten "unlawful acts of revenue officers or agents." They differ in description and it is a dangerous generalization to say that the same rules apply to all of them. ¹ For instance, clause (1) describes, as a subject for punishment, an agent "who is guilty of any extortion or willful oppression under color of law." Clause (3) penalizes an officer "who willfully neglects to perform any of the duties enjoined on him by law."

Clause (4) is the one here concerned. The opening words of §4047(e) describe the persons to whom (e) is applicable. The words are: "Every officer or agent appointed and acting under the authority of any revenue law of the United States . . ." The words of clause (4), with which we are involved here, are: "Who conspires or colludes with any other person to defraud the United States . . ." Then follow other provisions, with the penalty of fine and imprisonment specified in the closing lines of the section.

[Question to Be Determined]

That a conspiracy to stop prosecution for tax violation and to corrupt government employees is a conspiracy to defraud the United States we think no one would doubt. But can a revenue agent who has no official authority to start or stop a prosecution or, as a matter of fact, to do anything affecting a particular taxpayer's account, violate the section when he does what the jury could have found the defendant did here in concert with strangers totally outside the service? We think that it is enough that a defendant who is in fact a revenue officer shows his own corruption or intent to corrupt the service by participating in an unlawful project which concerns an internal revenue matter.

A similar argument is made that, notwithstanding actual authority, in order to give the phrase "officer or agent appointed or acting under the authority of any revenue law" full effect, it should be interpreted to mean that the agent at least must purport to act as a revenue officer at the time he enters into the conspiracy. To this there are two answers. One is that even without the appellant's gloss the words themselves are not two ways of saying the same thing. A man may be appointed and not be acting either because he has not qualified or because he is away on sick leave or something of the kind. The other answer is that when the Congress meant to require that the revenue officer be acting under purported authority or color of authority it said so as it did in clause (1) which deals with extortion.

[Former Prosecutions]

The point here involved is not settled by authority. Judge Ganey, when this defendant was prosecuted under clause (10) of the section, thought that under this clause for an agent to be convicted he must have had authority, or at least color of authority, "to compromise, adjust or settle the taxpayer's violation or alleged violation of law." United States v. Waldin, 139 Fed. Supp. 156, 158 (E. D. Pa. 1951) [56-2 USTC ¶9646]. But the conduct described in that particular clause (10) is much more definite and narrow than the conduct proscribed in the clause which we are now considering.

Judge Lord, in an opinion rendered upon a motion to dismiss earlier in these proceedings, (138 Fed. Supp. 791, 795-96 (E. D. Pa. 1956) [56-1 USTC ¶9347]), thought that the clause involved here was applicable to an agent whether he pretended to act in his capacity as agent or not and whether he made known his authority or purported authority to the taxpayer.

We think Judge Lord was right in holding this particular part of §4047 applicable to a revenue agent who does the forbidden things. It is quite clear that subsection (e) of 4047 has to do with conduct forbidden to revenue officers and agents. It purports to impose sanctions for a departure from standards of conduct applicable to their offices. It covers quite a number of types of forbidden conduct. When the lawmakers wanted to put the requirement that the person act under color of office in order to commit the offense they said so. In other clauses the very nature of the forbidden conduct would involve a representation at least on the part of the agent that he was acting in his official capacity. This was Judge Ganey's case in the prosecution under clause (10).

But we think that the language describing conspiracy as forbidden conduct does not require any such qualifications and we do not think we should put it into the statute.

The point just discussed was squarely raised by counsel for the defendant in a requested instruction which said:

"If you find beyond a reasonable doubt that there was in existence a conspiracy and that the defendant was one of the conspirators, you must find that any acts of the defendant were done while he was acting under the authority of his office before you can find the defendant guilty as charged of violation of 26 U. S. C. A. Section 4047(e)(4), and also you must find the defendant entered into the conspiracy while acting under the color of authority of his office."

Judge Grim, who tried the case, denied this request and in denying defendant's motion for a new trial relied upon what Judge Lord had decided in denying the motion to dismiss, 149 Fed. Supp. 912 (E. D. Pa. 1957) [57-1 USTC ¶9672].

We agree with Judges Lord and Grim so far as clause (4) is concerned. The view we take makes it immaterial whether Dr. Mogavero believed or did not believe that the defendant was an agent of the department acting within his authority, was an agent of the department acting outside his authority, or was an agent at all. It is sufficient that the defendant was in fact a revenue agent at the time of what the jury found was the misconduct.

[Other Errors Alleged]

The defendant makes a further contention that error was committed when the judge did not strike out evidence relating to the payment of the $20,000. When the defendant was tried under clause (10) before Judge Ganey, the money which was used in the transaction and a list of the serial numbers on the bills were in court and presented in evidence. In the meantime, the money had been returned to Dr. Mogavero and the list of serial numbers on the bills had been lost. Now defendant urges that if the money itself was not produced evidence concerning it should have been refused or stricken out.

At the trial there was testimony from three government agents about this money. They described going to the bank with Dr. Mogavero and getting the money, checking the amounts, making a list of the serial numbers, wrapping the currency in paper and giving the package to the doctor just a short time before the doctor handed it to the defendant. This testimony, it should be emphasized, came from the very persons who had done all these things with the money.

The only basis on which defendant's motion could be sustained is to allege that there is such a thing as a best evidence rule that requires in every law suit the best possible evidence to prove a given point. There is no such rule and all the modern authorities say so. The confusion got into the law when Baron Gilbert back in 1726 made some incautious statements broad enough to be the basis for misunderstanding of what "the best evidence rule" is The rule itself is properly confined to writings and is so understood by all the well considered authorities. ² It may well have been that had the money and the list been produced the testimony might have been stronger, although the jury found it strong enough. There was no error by the trial judge in this.

The defendant also complained of the refusal of the judge to give a requested instruction on entrapment. There are two answers to this objection. One is that any suggestion of entrapment on the evidence is so thin as to be almost fanciful. Another answer is that the instruction was phrased in terms which took the entrapment question out of the hands of the jury on an insufficient basis of fact. There is nothing to the entrapment point.

The judgment of the district court will be affirmed.

¹ As was done in United States v. Gerdel, 103 Fed. Supp. 635 (E. D. Mo. 1952) [52-1 USTC ¶9337].

² McCormick, Evidence §§ 195, 196 (1954); 4 Wigmore, Evidence §§ 1174(1), 1179-85 (3d ed. 1940).

[Dissenting Opinion]

HASTIE, Circuit Judge, dissenting:

I dissent because, in my view, correct application of the doctrine of res judicata to the circumstances of this prosecution requires that an acquittal be directed.

The wrongdoing charged was a scheme to mulct a delinquent taxpayer under pretense of protecting him from governmental action, in the course of which appellant, a deputy collector of the Bureau of Internal Revenue, is said to have solicited and accepted money from the taxpayer. This occurred in 1949. From year to year, from 1950 to 1955, the government obtained a series of five separate indictments in a persistent effort to punish appellant for this misconduct.

Appellant was first indicted, tried and convicted in 1950 on a charge of accepting money to compromise a complaint of violation of law. But, for reasons to be discussed later, the trial judge thereafter granted a defense motion for judgment of acquittal. The same transaction was the basis of a second indictment in 1952 for illegally accepting compensation, and a third indictment of rather similar tenor a year later. These indictments were dismissed in 1953 and 1954. The fourth indictment to be based on this transaction, this time for conspiracy to defeat income taxes, was handed down in 1955. Later in 1955 a fifth indictment initiated the present prosecution for conspiracy to defraud the United States. A jury found the accused guilty as charged. The court then considered and denied a defense motion for judgment of acquittal which urged that the specific ruling upon which the 1950 acquittal had been based was conclusive and required acquittal in this subsequent prosecution.

This brings us to the identification of the specific matter which was so decided in the first prosecution as to require an acquittal, but was relitigated and decided against the accused as an essential element of the crime charged in the present case. That question is, whether, in the 1949 transaction which was the common evidentiary basis of both prosecutions, the accused was "acting under the authority of any revenue law of the United States." It was common to both prosecutions because the successive indictments were based on clauses (10) and (4), respectively, of the same subsection, §4047(e), of the Internal Revenue Code of 1939, which reads as follows:

"(e) Other unlawful acts of revenue officers or agents. Every officer or agent appointed and acting under the authority of any revenue law of the United States--

. . .

"(4) Who conspires or colludes with any other person to defraud the United States; or

. . .

"(10) Who demands, or accepts, or attempts to collect, directly or indirectly, as payment or gift, or otherwise, any sum of money or other thing of value for the compromise, adjustment, or settlement of any charge or complaint for any violation or alleged violation of law, except as expressly authorized by law so to do--

shall be dismissed from office, shall be fined not less than $1,000 nor more than $5,000, and be imprisoned not less than six months nor more than three years."

It will be observed that while offenses under clause (4) and clause (10) are different crimes, they, like all other offenses under §4047(e), have a common element, namely, the requirement, so stated at the beginning of the subsection as to qualify all of its clauses, that the offender must be an "officer or agent appointed and acting under the authority of any revenue law of the United States." When the existence of this prerequisite status or relationship was challenged on the motion for acquittal after the guilty verdict in the first prosecution, the trial judge wrote an opinion explicitly stating the ground upon which he was directing an acquittal. He said:

"[T]he defendant contends that before an agent of the Bureau of Internal Revenue can be found guilty under Sec. 4047(e)(10) of the Internal Revenue Code, the government must prove that at the time the agent demanded or accepted the money he must be acting under the authority of the revenue laws. Against the motion, the attorney for the government argues that the agent need not be acting under the authority of law at the critical time in order to convict him. In other words, he maintains that the words: 'and acting under the authority of any revenue law of the United States' in the Code means 'and during his appointment'. We cannot agree. The words of the section are plain. Before an agent can be convicted under it, he must have authority, or at least color of authority, to compromise, adjust or settle the taxpayer's violation or alleged violation of law." United States v. Waldin, 1951, 139 Fed. Supp. 156, 158 [56-2 USTC ¶9646].

Thus, the accused was acquitted on the specific ground that in the 1949 transaction he was not "acting under the authority of any revenue law of the United States."

Six years later, when the same factual picture of this individual's role and status in that transaction was shown as an essential part of the government's case in the present prosecution, the accused urged the earlier ruling in his favor on the same point as a ground for acquittal. The court, a different judge sitting, again considered the matter on its merits and, disagreeing with the earlier ruling, sanctioned a conviction. The court said:

"In a previous case in this court defendant was charged with and convicted of a violation of subsection (10) of 26 U. S. C. A. former Sec. 4047 in accepting illegally the $20,000 which apparently the jury in the present case also found that he accepted. The trial judge in the previous case granted judgment of acquittal, U. S. v. Waldin, D. C. E. D. 1951, 139 Fed. Supp. 156 [56-2 USTC ¶9646]. That acquittal, however, does not protect defendant from a conviction in the present case. In the present case defendant is charged with a conspiracy rather than a substantive crime and an acquittal on a charge of a substantive crime does not preclude a prosecution of a conspiracy to commit the same substantive crime." United States v. Waldin, 1957, 149 Fed. Supp. 912, 915 [57-1 USTC ¶9672].

[Issue Determined by Res Judicata]

The quoted language also seems essentially the position of the majority on this appeal. Its error, as I see it, is in treating a res judicata problem as if it were one of double jeopardy. The fact that the two contradictory rulings of the district court were made in prosecutions for different offenses, albeit based upon the same transaction, has force in preventing the second conviction from offending the constitutional guarantee against twice being put in jeopardy for the same offense. But the reach of res judicata in criminal cases is greater. Even though the successive prosecutions be for different crimes, a ruling favorable to the accused on the facts or the legal significance of a particular transaction in the one prosecution is conclusive in his favor on the same question concerning the same transaction in the second prosecution. See 2 FREEMAN, JUDGMENTS, 5th ed. 1925, §648; DANGEL, CRIMINAL LAW, 1951, §187; Lugar, Criminal Law, Double Jeopardy and Res Judicata, 1954, 39 IOWA L. REV. 317.

The courts have repeatedly stated this doctrine of res judicata in criminal cases. There is the plain statement in Frank v. Mangum, 1915, 237 U. S. 309, 334, that, in criminal cases as well as civil, "a question of fact or law distinctly put in issue and directly determined by a court of competent jurisdiction cannot afterwards be disputed between the same parties." So, a ruling, whether right or wrong, that a particular short statute of limitations has barred prosecution for certain misconduct, is res judicata. United States v. Oppenheimer, 1916, 242 U. S. 85. True, the well known recent application of res judicata to a prosecution in Sealfon v. United States, 1948, 332 U. S. 575, involved an issue of fact. But the burden of the opinion is that res judicata applies to any issue actually decided, without any suggestion that it matters whether the litigants have contested a law point or a matter of evidence. So too, in this circuit, I understand the announced and considered rule to be broadly against the relitigation in a second prosecution of issues or matters of whatever sort actually decided in favor of the accused in an earlier prosecution. United States v. De Angelo, 3d Cir. 1943, 138 Fed. (2d) 466; United States v. McConnell, E. D. Pa. 1926, 10 Fed. (2d) 977.

The prosecution, recognizing that it is in difficulty on this score, urges in its brief that so much of the judicially stated and repeatedly restated rule as applies to adjudication which has turned on a point of law is dictum in the cases and, therefore, that we should treat this question as one of first impression. ¹ Of course, what is ordinarily called a ruling of law on an issue of criminal liability is not a pronouncement of doctrine at large, but a decision as to the legal significance of what happened on a given occasion. And whether the actual dispute concerns the operative facts or the legal rule applicable to them, or both, res judicata, if applicable at all, comprehends the particular matter decided; in this case that the accused did not act under authority of any revenue law in the 1949 transaction. It does not matter whether the controversial factor which determined this ruling was the court's evaluation of the evidence or its interpretation of the controlling language of the statute. The important thing is that the court ruled that an essential element of the crime, as stated in the statute, had not been established. The existence of that same element of criminality may not later be proved against the accused to subject him to liability for another offense charged on the basis of the same transaction.

We should not be distressed that this rule may occasionally, perhaps this time, permit a wrongdoer to escape punishment. For it is the deliberate choice of our open society to forego easy and sure convictions of crime--such as the police state can guarantee--in order that the never absent risk of unduly harassing or otherwise oppressive action by government may be minimized. We should rather be concerned that judges not relax the procedural safeguards of our system whatever the record may suggest as to the demerits of the accused.

¹ This is what the government argues:

"The government concedes that it is unquestionably the law that the prosecution may be prohibited by the doctrine of res judicata from proving facts which were conclusively determined adversely to the prosecution by the verdict of the jury in a previous trial for a different offense arising out of the same transaction. We are not prepared, however, to admit that the same rule is applicable with respect to questions of law decided by the Court in an earlier proceeding. We are familiar with dicta in a long line of cases beginning with Frank v. Mangum, supra, which say that res judicata is applicable to questions of fact and law in criminal cases. However, we have been unable to find one case in which the doctrine was the basis for a holding establishing conclusiveness of a decision on a legal issue by the Court in a previous trial for a different offense. We therefore respectfully submit that the question is one of first impression and should be treated as such by this Court." Appellee's Brief, pp. 24-25.

 

 

 

[58-1 USTC ¶9417]United States of America v. Ernest T. Waldin, Appellant

(CA-3), U. S. Court of Appeals, 3rd Circuit, No. 12,276, 253 F2d 551, 4/9/58, Rehearing of judgment aff'g District Court decision, reported at 58-1 USTC ¶9283, denied

Crimes: Conspiracy by revenue officer to stop criminal prosecution for income tax tax evasion: Statute of limitations: Offenses committed before enactment of 1954 Code.--The defendant, a former deputy collector for the Bureau of Internal Revenue, was convicted of conspiracy to defraud the United States in violation of 1939 Code Sec. 4047(e)(4), in that he attempted to forestall prosecution for income tax evasion against a certain taxpayer. On this petition to the appellate court for a rehearing of its decision affirming a judgment of the district court denying a new trial, the defendant, for the first time, claimed that the five-year statute of limitations, provided for by amendment to 1939 Code Sec. 3748(a), on August 16, 19 54, barred this prosecution. Held, aside from the fact that this objection came too late, the amendment in question was intended to increase the statute of limitations in Sec. 3748(a), from three to five years, but not to decrease the limit for offenses of this nature already covered by the six-year limitation period in Sec. 3748(a)(1). Rehearing denied.

Three dissents.

Benjamin R. Donolow, 1127 Land Title Bldg., Jacob Kossman, 1325 Spruce St., Philadelphia, Pa., for appellant. Harold K. Wood, United States Attorney, 4042 U. S. Court House, Philadelphia 7, Pa., for appellee.

Before BIGGS, Chief Judge, and MARIS, GOODRICH, MCLAUGHLIN, KALODNER, STALEY and HASTIE, Circuit Judges.

Opinion of the Court

PER CURIAM:

In a petition for rehearing the defendant raises for the first time the point that the statute of limitations bars this prosecution. There is good authority which holds that this objection comes too late when presented at this stage. Forthoffer v. Swope, 103 Fed. (2d) 707 (9th Cir. 1939); Pruett v. United States, 3 Fed. (2d) 353 (9th Cir. 1925); cf. United States v. Franklin, 188 Fed. (2d) 182 (7th Cir. 1951).

Regardless of timeliness, however, we think the contention has no merit. 26 U. S. C. A. §3748 provides:

"(a) CRIMINAL PROSECUTIONS. No person shall be prosecuted, tried, or punished, for any of the various offenses arising under the internal revenue laws of the United States unless the indictment is found or the information instituted within three years next after the commission of the offense, except that the period of limitation shall be six years--

"(1) for offenses involving the defrauding or attempting to defraud the United States or any agency thereof, whether by conspiracy or not, and in any manner,"

Paragraph (1) covers the charge here involved as the opinion of the court, filed February 14, 19 58 [58-1 USTC ¶9283], shows.

In accord with our conclusion is United States v. Witt, 215 Fed. (2d) 580 (2d Cir. 1954) [54-2 USTC ¶9582], which the defendant believes to be wrong but which we think is right. Grunewald v. United States, 353 U. S. 391 (1957), cited to us, was a prosecution under 18 U. S. C. §371, and is not in point here.

The final question is whether §201 of the Miscellaneous Title to the Internal Revenue Code of 1954, 68A Stat. 929 decreased the period applicable to violations of 26 U. S. C. A. §4047(e)(4) from six to five years. We think not. We agree with the Government that the purpose was to increase the period of limitations from three to five years in certain instances, but not to decrease the limit as to those offenses which were already covered by the six-year limitation period. This is borne out by such legislative history as there is upon the point. See 100 Cong. Rec. 9490-92, 12532-34 (1954); H. R. Rep. No. 2543, at 86, 3 U. S. Cong. & Adm. News, 83d Cong., 2d Sess. 5438 (1954).

The petition for rehearing is hereby denied.

BIGGS, Chief Judge, dissenting: The indictment charged the defendant-appellant with a conspiracy to violate Section 4047(e)(4), Title 26, U. S. C. A. ¹ It was alleged that the conspiracy continued with the defendant-appellant as a party thereto up to and including October 7, 19 49. The indictment was returned on September 20, 19 55; therefore more than five and one-half years elapsed between the commission of the offense and the return of the indictment.

[Statute of Limitations]

Section 3748, ² 26 U. S. C. A. was amended on August 16, 19 54 by Section 201(a), 68A. Stat. 929, to read as follows:

"(a) Criminal Prosecutions. No person shall be prosecuted, tried, or punished, for any of the various offenses arising under the internal revenue laws of the United States unless the indictment is found or the information instituted within three years next after the commission of the offense, except that the period of limitation shall be five years for offenses enumerated in section 4047(e) (relating to unlawful acts of revenue officers or agents) and except that the period of limitation shall be six years-- [Italics added.]

"(1) for offenses involving the defrauding or attempting to defraud the United States or any agency thereof, whether by conspiracy or not, and in any manner.

. . . .

"(b) Scope of Limitations. Subsection (a) of this section shall apply to offenses whenever committed; except that it shall not apply to offenses the prosecution of which was barred before June 6, 19 32."

[Purpose of Amendment]

The per curiam opinion of this court concludes that the purpose of this amending section was to increase the period of limitations for those Section 4047(e) violations which had a three year period to five years, but was not intended to decrease the six year limitation period applicable to Section 4047(e)(4) violation to five years. The language of the Section as amended states, however, that the period of limitations shall be five years for Section 4047(e) violations, which include, of course, Section 4047(e)(4) violations. The face of the statute is unambiguous. The conclusion is that the applicable period of limitations should be deemed to be five years in the case at bar. Caminetti v. United States, 242 U. S. 470, 485 (1916); United States v. Mock, 143 Fed. Supp. 661, 664 (N. D. Cal. 1956).

[Waiver of Defense]

The per curiam opinion, however, goes one step further and concludes that even if the applicable statute of limitations were five years, a defense based on the statute of limitations was waived by the defendant-appellant because he failed to plead or assert it specifically in bar. But statutes of limitations applicable to criminal offenses differ from statutes of limitations in civil actions. In civil actions statutes of limitations are deemed to be mere statutes of repose. In criminal actions statutes of limitations bar prosecution. Wharton, Criminal Evidence §21; Dangel, Criminal Law §107. It follows that the protection afforded by a criminal statute of limitations goes to the defendant's liability as a matter of substantive law. United States v. Oppenheimer, 242 U. S. 85 (1916); Hassel v. Mathues, 27 Fed. (2d) 137 (E. D. Pa. 1928). The burden of proving affirmatively that the crime was committed within a period not proscribed by the applicable statute of limitations is on the United States. Az Din v. United States, 232 Fed. (2d) 283, 287 (9 Cir. 1956); United States v. Schneiderman, 106 Fed. Supp. 892 (S. D. Cal. 1952). Accordingly, the authorities are clear that the statute of limitations need not be specifically pleaded, but is put in issue, in criminal cases, by a plea of not guilty. United States v. Brown, Case No. 14,665, 24 Fed. Cases page 1263; United States v. White, Fed. Case No. 16,676, 28 Fed. Cases page 562; United States v. Cook, 84 U. S. 168 (1813); Forthoffer v. Swope, 103 Fed. (2d) 707 (9 Cir. 1939); Housel and Walker, Defending and Prosecuting Federal Criminal Cases §348. These authorities are applicable since the defendant-appellant entered a plea of not guilty on January 6, 19 56. The view that the charge of the indictment is barred by the statute of limitations is therefore a clearly supportable one.

As to the issue of res judicata, a most important one, the views stated in Judge Hastie's dissent to the original opinion of this court filed February 14, 19 58, seem unanswerable.

For the foregoing reasons I am of the opinion that the case should be reheard before the court en banc.

I am authorized to state that Judge Kalodner and Judge Hastie join in this dissent.

¹ The indictment also charged the defendant-appellant with other violations but those charges were not pressed and the court below restricted its charge to the conspiracy to violate Section 4047(e)(4), Title 26, U. S. C. A. This court is concerned therefore with the charge of the indictment last designated.

² The section as originally enacted and quoted in the per curiam opinion was:

"(a) Criminal Prosecutions. No person shall be prosecuted, tried, or punished, for any of the various offenses arising under the internal revenue laws of the United States unless the indictment is found or the information instituted within three years next after the commission of the offense, except that the period of limitation shall be six years--

"(1) for offenses involving the defrauding or attempting to defraud the United States or any agency thereof, whether by conspiracy or not, and in any manner,"

 

 

 

 

[56-2 USTC ¶9646]United States of America v. Ernest T. Waldin

U. S. District Court, East. Dist. Pa., No. 15625, 139 FSupp 156, 7/23/51

[1939 Code Sec. 4047(e)(10)--similar to 1954 Code Sec. 7214(b)(9)]

Indictment of former deputy collector: Sufficiency.--An indictment under 1939 Code Sec. 4047(e)(10) against an individual who was a deputy collector of internal revenue when the alleged offense was committed was defective because he was not empowered by law to compromise, adjust, or settle taxes, but only to collect them and to check book accounts, and then only in his own zone. Therefore, the jury erred in finding him guilty under that section, where he took money from a doctor in a collection zone not his own with the prmise that the doctor would be free from prosecution. Motion for judgment of acquittal is granted. [This is the 1951 case referred to in the 1956 case involving the same individual, 56-1 USTC ¶9347, after a new indictment on a conspiracy charge.--CCH.]

Gerald A. Gleeson, James P. McCormack, Philadelphia, Pa., for plaintiff. Benjamin R. Donolow, Philadelphia, Pa., for defendant.

Opinion

GANEY, District Judge:

Section 4047(e)(10) of the Internal Revenue Code, Title 26, U. S. C., provides: "Every officer or agent appointed and acting under the authority of any revenue law of the United States--

* * *

"Who demands or accepts, or attempts to collect, directly or indirectly, as payment or gift or otherwise, any sum of money . . . for the compromise, adjustment or settlement of any charge or complaint for any violation or alleged violation of law except as expressly authorized by law so to do--shall be dismissed from office, shall be fined not less than $1,000 nor more than $5,000, and be imprisoned not less than six months nor more than three years".

In a single count, the defendant was indicted under this section for both demanding of, and accepting from Francesco Mogavero, $20,000 as payment for the settlement of an alleged violation of law. He was tried before a jury and found guilty. He has filed a motion for judgment of acquittal and asks, in the alternative, for a new trial.

The facts, looked upon in the light most favorable to the government, are as follows: In the early part of 1949, Francesco Mogavero, a medical doctor, was under investigation by agents of the Bureau of Internal Revenue concerning his income tax returns. From unreliable sources, he was led to believe that he was in serious trouble. His attorney attempted, without success, to ascertain if the Bureau of Internal Revenue believed that there was a discrepancy in his returns, and if so, its extent, and also if there was any belief that fraud was involved on the part of the taxpayer. The attorney therefore called upon the defendant, a zone deputy collector of the Bureau, to see if the latter could obtain the desired information. In the latter part of April of 1949, he introduced the defendant to the doctor at his office located at 1930 Chestnut Street, Philadelphia. The purpose of this meeting was to have the defendant assure the doctor of the falsity of a telegram, shown to him by a third party, purporting to be from the United States Attorney in Washington, D. C., and indicating that he was to be indicted for income tax evasion. Although the attorney advised him that he was not to be paid for his services, the defendant stated that he would try to get the information.

In August of that year, in a telephone conversation with the attorney, the defendant confirmed the story related by a person named "McDougal" that the only way out was to have the doctor pay a certain "group" $20,000, otherwise the doctor would be indicted for income tax fraud, and his name would be "spread all over the paper". The attorney emphatically relied that he would advise his client not to pay any money to "them".

On September 13, 19 49, the defendant went to the doctor's office at 1930 Chestnut Street, and told him that he now had the right connections, but it would cost him money. For the latter reason, he advised the doctor to drop his present attorney. He then told the doctor that a person by the name of "Bill" would telephone him at his South Fifteenth Street office the following morning.

The next day, the defendant went to the doctor's office on South Fifteenth Street and while he and the doctor were waiting for "Bill's" call, he told the doctor that his income tax affairs were in serious condition but "the group" will quash the indictment and show him the amount which he must pay on his prior income tax returns. When the telephone rang, the doctor answered it. The call was for the defendant. He therefore handed the telephone to the defendant. After a short time, the defendant in turn handed the telphone to the doctor and said: "This is Bill". When the doctor completed his telephone conversation, he told the defendant that "Bill" wanted $20,000 in cash. Since the doctor appeared doubtful whether he would pay the money, the defendant said that he would telephone him in the evening to ascertain if he would comply with the demand. He advised the doctor, in the meantime, to call the authorities of the hospital with which he was professionally connected. On the same day the hospital authorities referred him to Walter B. Gibbons, Esquire, a prominent Philadelphia attorney.

At 7 P. M. of the same day, the defendant telephoned the doctor to learn of his decision. The doctor told him that he would pay "them" $15,000 instead of $20,000. The defendnat replied: "As far as I am concerned, I want no part of this, but I will talk to Bill to find out whether they will take $15,000 or not". Twenty minutes later the defendant called the doctor and told him that "Bill" had to talk it over with "the group", that he could not give him any information until "Bill" had conferred with "the group", and that he would telephone him at a later date.

Subsequently an associate of Walter B. Gibbons, Esquire, introduced the doctor to Alfred W. Fleming, special agent in charge of the Philadelphia division of the Intelligence Unit of the Bureau of Internal Revenue, and special agent Edward A. Hill. After the doctor had told then what had transpired, the agents requested him to follow the defendant's instructions with respect to the payment of money, but he was asked to report all future developments to Mr. Hill or to Mr. Gibbons' associate.

On September 18, the defendant telephoned the doctor and told him that "the group" would not accept less than $20,000. The doctor asked him how "they" wanted the money. Defendant's reply was that he would let him know at a later date. Ten days later, the defendant called the doctor by telephone and told him that "the group" wanted the $20,000 in denominations of twenties, fifties and hundreds, and made arrangements to pick up the money on October 7, 19 49, at the doctor's South Fifteenth Street office.

On October 7, 19 49, when the defendant came to the doctor's office, three agents of the Bureau were stationed in the house, two in the cellar and one on the second floor. The doctor invited him into the examination room and closed the door with a bang. This was a prearranged signal for the two agents in the cellar to ascend to the first floor and take positions outside the examination room where they could hear the conversation between the doctor and the defendant. Then the doctor took the package containing the $20,000 and said in a loud voice: "Ernie, here is the money". The defendant responded, "I guarantee there will be no indictment, we are going to quash that. If you have a high tax liability, we are going to cut that down for you". With that, the defendant opened the door leading into the waiting room. As he was entering the hallway outside the waiting room he saw the agents coming toward him from the opposite end of the hallway, he dropped the package containing the money. The agents immediately apprehended him.

[He Could Not Adjust or Settle Taxes]

In addition to the fact that the doctor's residence and offices were not located in the zone in which the defendant was assigned to work by his superiors, the defendant did not have the legal authority to compromise, adjust or settle alleged tax discrepancies or violations of the tax laws; his duties were to collect delinquent taxes and check book accounts. Prior to the defendant's arrest, the doctor did not know that the defendant was employed by the Bureau of Internal Revenue.

In support of his motion for judgment of acquittal, the defendant contends that before an agent of the Bureau of Internal Revenue can be found guilty under Sec. 4047(e)(10) of the Internal Revenue Code, the government must prove that at the time the agent demanded or accepted the money he must be acting under the authority of the revenue laws. Against the motion, the attorney for the government argues that the agent need not be acting under the authority of law at the critical time in order to convict him. In other words, he maintains that the words: "and acting under the authority of any revenue law of the United States" in the code means, "and during his appointment". We cannot agree. The words of the section are plain. Before an agent can be convicted under it, he must have authority, or at least color of authority, to compromise, adjust or settle the taxpayer's violation or alleged violation of law. It is true that such an interpretation makes this section a duplication of 18 U. S. C. Sec. 202, concerning the acceptance of solicitation of money by employees of the United States for the purpose of having his decision or action in a matter influenced thereby. But we think the greater penalty under Section 4047(e)(10) may have been one of the reasons why this particular section was not repealed by the criminal code of 1948.

Since the defendant in the instant case had no authority to compromise, adjust or settle the taxpayer's alleged violation of law, he cannot be indicted under this statute. This conclusion is reached with extreme reluctance, as the defendant's conduct throughout was extremely reprehensible.

The motion for judgment of acquittal must be allowed.

The motion for new trial is denied.

 

 

[68-1 USTC ¶9376]United States of America, Appellee v. Percy Branker, Grover Cooper, John L. Lacey, David Lopez, Charles Moore and John A. Ross, Jr., Defendants-Appellants

(CA-2), U. S. Court of Appeals, 2nd Circuit, Docket Nos. 30935, 30936, 395 F2d 881, 5/13/68, Affirming in part and reversing and remanding in part an unreported District Court decision

[1954 Code Sec. 7214]

Crimes: Internal Revenue Service agents: Schemes to defraud the Government: Joinder.--Where the lower court dismissed conspiracy charges to defraud the United States against six defendants it did not err in not granting separate trials to two former Internal Revenue Service agents who had central roles in most of the schemes. However, the court should have granted separate trials to the other four defendants since they were prejudiced by the denial of severance and separate trials. Therefore, the convictions of the two former IRS agents on various charges to defraud the United States were upheld while the convictions of the remaining four defendants were reversed and remanded for new trials.

One judge concurred in the finding that the two IRS agents were not prejudiced by the denial of severance and separate trials but dissented on the granting of new trial to the remaining defendants since their guilt was established beyond doubt as to all counts to defraud the United States.

Robert M. Morgenthau, United States Attorney, John E. Sprizzo, David M. Dorsen, James W. Brannigan, Jr., Assistant United States Attorneys, New York, N. Y., for appellee. John T. Baker, A. Edward Grashof, 40 Wall St., New York, N. Y., for P. Branker; Alan B. Adler, Adler & Adler, 20 S. Broadway, Yonkers, N. Y., for G. Cooper; John F. X. Peloso, 2 Wall St., New York, N. Y., for J. Lacey; Louis Bender, Lloyd A. Hale, 225 Broadway, New York, N. Y., for D. Lopez; Albert J. Krieger, 401 Broadway, New York, N. Y., Leonard H. Sandler, 52 Broadway, New York, N. Y., for C. Moore; Sidney Meyers, 51 Chambers, New York, N. Y., for J. Ross, Jr., defendants-appellants.

Before KAUFMAN and HAYS, Circuit Judges, and RYAN, District Judge. ^*

HAYS, Circuit Judge:

The six appellants, ¹ two of whom are former employees of the Internal Revenue Service and four of whom are persons with whom these employees dealt, were convicted after a nine-week jury trial of various offenses arising out of fraudulent schemes to avoid payment of income taxes and to obtain tax refunds to which the recipients were not entitled. Appellants were tried together with two other defendants ² on eighty-one counts drawn from two indictments consolidated for trial. The first count charged a conspiracy among all defendants. The other counts charged substantive offenses involving defendants both singly and in various combinations. At the close of the government's case, the trial judge dismissed the conspiracy count ³ and eighteen substantive counts as to all defendants, and dismissed five counts as to certain of the defendants named therein. The jury acquitted appellant Cooper on a count charging him with impersonating an officer and employee of the United States, but convicted the appellants and defendant Catherine Wood ⁴ on all of the remaining counts in which they were charged.

Appellants' principal contention on appeal is that their motions for separate trials should have been granted after the conspiracy count was dismissed at the close of the government's case. An understanding of this issue requires some familiarity with the charges in the indictments and the evidence adduced to support them.

The Indictments

The consolidated indictments, which contained eighty-four counts, named twelve persons as defendants and six additional persons as co-conspirators. Four defendants were granted severances prior to trial. ⁵

Count one charged all defendants with a conspiracy to commit various crimes relating to income tax returns. In essence, the count alleged that the conspiracy was designed to enable certain persons to avoid payment of taxes which were due and owing and to secure for these persons and others income tax refund checks to which they were not entitled.

The substantive counts can be classified in several categories:

1. Thirty-eight counts charged various defendants with making opportunities for a number of persons to defraud the United States in violation of 26 U. S. §7214(a)(5):

Counts 2 through 20 ⁶ charged appellant Lacey with causing defendant Neely to process certain tax returns so as to avoid an audit.

Counts 21 through 37 charged appellant Ross with causing Neely to process certain other tax returns so as to avoid audit.

Count 83 charged appellants Moore and Cooper with causing defendant Neely to process Moore's 1959 tax return so as to make it appear that the tax due and owing had been fully paid.

Count 84 charged appellants Moore, Cooper and Lacey and defendant Bayley with causing Bayley and defendant Neely to transfer an Unidentified Taxpayer's Account to Moore's account although they knew that he was not entitled to it. The trial court dismissed this count as to Moore and Cooper.

2. Eighteen counts charged various defendants with making and causing to be made false, fictitious and fraudulent claims against the United States in violation of 18 U. S. C. §287:

Counts 38 through 49 charged appellants Cooper and Branker with presenting and causing to be presented for payment tax refund checks payable to Branker although they knew that he was not entitled to such refunds.

Counts 62 through 64 charged appellants Lacey and Cooper and defendant McTootle with similar conduct in connection with refund checks payable to McTootle. The trial court dismissed these counts as to Lacey.

Counts 69 and 70 charged appellants Lopez and Cooper with similar violations with respect to refund checks payable to Lopez.

Count 78 charged appellant Cooper and defendant Tendrich with a similar violation in connection with a refund check payable to Tendrich.

3. The eighteen counts dismissed by the trial judge as to all defendants charged violations of 18 U. S. C. §1001 in connection with the conduct involved in 2., supra. The court ruled that the presentation of an endorsed refund check did not involve the use of a "trick, scheme or device" to "falsify, conceal, or cover up" a material fact within the meaning of the statute.

4. Three counts charged certain defendants with making statements on their income tax returns as to payment of estimated tax which they knew to be false:

Count 75 charged appellant Moore with respect to his 1959 return.

Counts 76 and 77 charged appellant Lopez with respect to the 1960 and 1961 joint returns of Lopez and his wife.

5. Two counts charged certain defendants with concealing, removing, multilating, obliterating and destroying Taxpayer Delinquent Account records in violation of 18 U. S. C. §2071(a):

Count 73 charged appellants Cooper, Lacey and Lopez with respect to the records of Lopez and his wife. The trial court dismissed this count as to Lopez.

Count 74 charged appellant Cooper and defendant Wood in connection with Cooper's records.

6. Count 68 charged appellant Cooper with impersonating an officer and employee of the United States. The jury acquitted on this count.

The Government's Evidence

The presentation of the government's case consumed five weeks, and nearly five thousand pages of the trial transcript are devoted to the testimony concerning this part of the case. The following summary is intended to contain only such detail as is necessary for an understanding of the issues presented on this appeal; some relevant evidence is therefore either omitted or described very generally.

The government's chief witness was Ethel Ivy Neely, who had pleaded guilty to the conspiracy count prior to trial. Mrs. Neely had been a supervisor in the Math Verification Group at the Manhattan District office of the Internal Revenue Service. Her testimony disclosed a series of schemes by which payments of taxes were avoided and unlawful refunds obtained. In addition to Neely, the principal malefactors were appellants Grover Cooper and John L. Lacey, also Internal Revenue Service employees, who acted as intermediaries between Neely and persons seeking to avoid payment of taxes or to obtain unlawful refunds.

Neely testified that in 1955 and early 1956 Cooper induced her to process about twenty-five returns so as to avoid audit. Neely accomplished this by marking the returns with symbols indicating that the returns had been examined prior to coming into her unit and had been found not to require audit. She then placed the returns with the other work sent out of her unit for further processing. In March or April of 1956 Cooper informed Neely that he needed money and asked her to prepare and process a fictitious refund return. When she refused, Cooper told her that the returns he had previously given her were fraudulent and threatened to report her. Neely yielded and prepared a fictitious return using her own address and the name of a relative. When the refund check arrived, she turned it over to Cooper. Between 1956 and 1961 Neely prepared and processed several fictitious returns at Cooper's request. On one occasion Cooper stated that he needed money because he was in the policy business with appellant Charles Moore.

The Branker Refund Checks

In November, 1958, Cooper persuaded Neely to process so as to avoid audit a 1957 income tax return of Percy Branker calling for a refund of about $2,200. A few months later Cooper asked her to process another 1957 return for Branker. When Neely asked why Branker was filing two returns for the same year, Cooper stated that he and Branker had "worked out a scheme." Because Branker, who owned a bar, was able to cash large checks, they could obtain substantial sums by submitting fraudulent returns calling for large refunds.

From 1958 to 1962, Neely processed approximately twelve returns with Branker's name on them. On each occasion, Cooper would tell Neely the amount of money "he and Branker wanted," and she would fill out and process a return. Refunds totalling more than $80,000 were obtained in this way. After each refund check was issued, Neely ordinarily removed the corresponding return from the files and gave it to Cooper. On some occasions Cooper sent defendant Frank McClary to pick up the returns.

The testimony of other witnesses was introduced to show (1) that most of the returns were missing from the files and (2) that the refund checks were deposited in bank accounts belonging to Branker. Also introduced were portions of Branker's Grand Jury testimony in which he admitted receiving and endorsing the refund checks which he knew did not represent amounts owed to him.

The McTootle and Hendrich Refund Checks

Defendant Herman McTootle, who testified for the government, stated that a tax deficiency of $116,675.23 had been assessed against him in 1959 as a consequence of a raid on his wagering business. He described his tax problems to appellant David Lopez who replied that he knew a man who had gotten him "off the hook." Lopez then arranged for McTootle to meet Cooper. Cooper agreed to take care of the problem for twenty-five percent of the amount assessed. McTootle paid Cooper a total of $8,000 over a period of time. By Thanksgiving, 1960, McTootle's funds were exhausted. Cooper, however, continued to press him for payment; on several occasions he visited McTootle's Long Island barber shop seeking money. On two such visits Cooper was accompanied by appellant John Lacey and on one by defendant McClary.

Finally, in May or June of 1961, Cooper told McTootle that he had "another angle." He would obtain refund checks payable to McTootle, the proceeds of which could be used to reduce McTootle's tax liability. In December, 1961 Cooper met Neely and told her that he was going to work the same refund scheme with McTootle that he had worked with Branker. Neely prepared a return calling for a $9,334.41 refund. When McTootle received the check, he cashed it and turned over the proceeds to a Miss Shirley King pursuant to Cooper's instructions.

About one month later Cooper asked Neely to prepare a return in the name of Irving Hendrich calling for a $9,300 refund. Since the McTootle refund was in about the same amount, Neely simply removed the McTootle return from the files, changed the name and the account number and sent it out of her unit to be processed again.

In succeeding months two more refund checks in McTootle's name were obtained and disposed of in the same manner as the first, except that McTootle retained $500 of the proceeds of the third retained check. None of the proceeds which McTootle turned over to Miss King were in fact used to reduce his indebtedness to the government.

The Moore Returns

In November, 1956 Cooper told Neely that appellant Charles Moore owed a lot of money in taxes and that he, Lacey and defendant Catherine Wood were removing Moore's taxpayer delinquent accounts and planned to destroy them. He then asked Neely to process as fully paid returns the balance due returns which Moore would be filing. Neely replied that she did not think that she could do so as she did not have access to the required remittance stamp. In October, 1957 Cooper gave her Moore's 1956 return, but Neely refused to process it since it bore no remittance stamp. The next day Cooper gave her the return stamped. Neely then marked the return so as to make it appear that it was fully paid and sent it out of her unit for further processing. Later Neely processed Moore's 1958, 1959 and 1960 balance due returns as fully paid. Neely testified in considerable detail about the special precautions she took in processing the 1959 return so that it would escape scrutiny in a newly instituted validation program.

An Internal Revenue Service employee testified that a search of the records did not disclose the estimated tax payment claimed by Moore on his 1959 return.

The Lacey Returns

In March, 1958 Lacey met Neely and told her that he had prepared a large number of returns for taxpayers claiming deductions and exemptions "which were not true to form." He added that these taxpayers had paid him to prepare and process the returns to avoid audit and that Cooper had told him that she was able to do this. When Neely replied that she did not handle such returns, Lacey answered that he knew she had been processing such returns for Charles Moore. Neely thereupon agreed to process returns for Lacey. Lacey gave her about 25 returns in 1958 and about 200 returns in each year from 1959 to 1962. At trial Neely identified each of the nineteen returns mentioned in the indictments.

The Ross Returns

In May, 1960 Lacey called Neely and asked her to meet him at Grand Central Station. When she arrived, Lacey introduced her to appellant John Ross, Jr., as one who could see to it that a return would avoid audit. Ross said "you're just the girl I am looking for." After Lacey left, Ross gave Neely twenty-five returns to process. He assured Neely that he would take care of her handsomely. Then Ross, a lawyer, gave her his business card on which his telephone number was written in case she needed to get in touch with him.

From 1960 through 1962 Ross met Neely about a dozen times and gave her a total of about fifty to seventy-five returns. Neely testified in detail about her meetings with Ross and the procedures she followed in connection with the seventeen returns specified in the indictments.

The Transfer of Funds to Moore's Estimated Tax Account

Neely testified that in November, 1958 Lacey instructed her to have defendant Laurel Bayley transfer funds in another taxpayer's account to Moore's Estimated Tax Account. Thereafter, she and Bayley carried out these instructions.

The Transfer of the Lopez Taxpayer Delinquent Account

Neely testified that Cooper told her in November, 1959 that he was attempting to have Lopez's Taxpayer Delinquent Accounts transferred from the Newark office to Manhattan so that he and Lacey could destroy them.

A Transfer Clerk in the Newark office testified that she recalled three attempts to transfer the Lopez accounts in the fall of 1959 and the early part of 1960, the last of which was successful. She testified as to various irregularities and unusual circumstances surrounding these attempts.

Although Neely was only tangentially involved in the attempts to transfer, she was able to give testimony implicating both Lacey and Cooper. In November, 1959 Cooper asked Neely to contact the Transfer Clerk and ask her to let her know when the Lopez Account was received. Neely refused on the ground that she did not know the Transfer Clerk well enough. Cooper said he would discuss it with Lacey. One week later, Lacey approached Neely and made the same request, but added "tell her [the Transfer Clerk] you are handling the transfer for me, she has handled transfers for me before." Having thus linked Lacey with Cooper, Neely gave testimony which, if believed, conclusively established Cooper's guilt. The most damaging testimony indicated that early in March, 1960 Cooper showed Neely Lopez's Taxpayer Delinquent Accounts. Several days later, Cooper told her that the accounts had been destroyed.

The Lopez Returns

In April, 1961 Cooper gave Neely the 1960 return of Lopez and his wife and told her that the estimated tax claimed on the return had not been paid. He asked her to make sure that the return was not audited, and Neely complied with his request. One year later, the same sequence of events took place with respect to the Lopez's 1961 return.

An Internal Revenue Service employee testified that a search of the files disclosed no record of the estimated tax payments claimed on the returns.

Lopez admitted endorsing the refund checks which he received as a result of the substantial estimated tax payments claimed on the returns.

The Cooper Taxpayer Delinquent Account

In April, 1962 Cooper gave Neely his own 1961 return and asked Neely to process it as fully paid. Neely did not do so, and Cooper was billed for his taxes. He became angry with Neely but told her that he didn't care because he would have Catherine Wood destroy his Taxpayer Delinquent Account. Three months after Cooper's arrest, Wood went to her supervisors and admitted destroying Cooper's account. ⁷

The Joint Trial

Appellants have at all stages complained that their joinder was prejudicial. Although appellants Moore and Lopez continue to maintain that denial of their pre-trial motions for severance was error, appellants' most vigorous objections are directed at the denial of the motions for severance or separate trials made following the dismissal of the conspiracy count at the close of the government's case.

In United States v. Aiken, 373 F. 2d 294 (2d Cir.), cert. denied, 389 U. S. 833 (1967) this court said:

"Where joinder was originally proper under Fed. R. Crim. P. 8(b), . . . a motion for severance after the count justifying joinder (here the conspiracy count) is dismissed will not be granted unless the defendant was prejudiced by the joinder or the count dismissed was not alleged by the government in good faith, that is, with reasonable expectation that sufficient proof would be forthcoming at trial." 373 F. 2d at 299. See Schaffer v. United States, 362 U. S. 511 (1960).

We do not believe that appellants Cooper and Lacey, who had central roles in most of the schemes charged in the indictments were prejudiced by the joinder. However, we hold that appellants Branker, Lopez, Moore, and Ross should have been granted separate trials.

Originally twelve defendants and six co-conspirators were named in eighty-four counts. The eight defendants who were tried were named in eighty substantive counts charging violation of six criminal statutes. While it is true that this court has on several occasions sustained convictions on substantive counts after dismissal of a conspiracy count relied upon to justify joinder, see, e.g., United States v. Schaffer, 266 F. 2d 435 (2d Cir. 1959), aff'd Schaffer v. United States, 362 U. S. 511 (1960); United States v. Elgisser, 334 F. 2d 103 (2d Cir.), cert. denied, 379 U. S. 879, 881 (1964), we are not aware of any such case in which the number of counts even approached the number involved here. It is obvious that as the number of counts is increased, the record becomes more complex and it is more difficult for a juror to keep the various charges against the several defendants and the testimony as to each of them separate in his mind. See United States v. Bufalino, 285 F. 2d 408, 417 (2d Cir. 1960). See also Kotteakos v. United States, 328 U. S. 750, 766-67 (1946).

This kind of prejudice is particularly injurious to defendants who are charged in only a few of the many counts, who are involved in only a small proportion of the evidence, and who are linked with only one or two of their co-defendants. The jury is subjected to weeks of trial dealing with dozens of incidents of criminal misconduct which do not involve these defendants in any way. As trial days go by, "the mounting proof of the guilt of one is likely to affect another." Schaffer v. United States, 362 U. S. 511, 523 (1960) (Douglas, J., dissenting). See Blumenthal v. United States, 332 U. S. 539, 559-60 (1947); United States v. Kelly, 349 F. 2d 720, 759 (2d Cir. 1965), cert. denied, 384 U. S. 947 (1966). See also Kotteakos v. United States, 328 U. S. 750, 775-77 (1946); United States v. Bentvena, 319 F. 2d 916, 956 (2d Cir.), cert. denied sub nom. Ormento v. United States, 375 U. S. 940 (1963).

In the present case, the trial of the four taxpayer defendants was accompanied by a huge volume of testimony relating not to them but to the manifold criminal activities of Cooper, Lacey and Neely. Their own cases, in contrast, were simple ones which would have taken only a short time to try separately. Moore was named in three counts, two of which were submitted to the jury, and Lopez was named in seven counts, four of which went to the jury. While several counts named Ross and Branker, each was charged only with the repetition of one criminal act a number of times. Counsel for Moore and counsel for Branker estimate that fewer than 150 pages of the nearly 7000 page transcript contain testimony relating to each of their clients.

The taxpayer defendants had very little connection with their co-defendants. Branker apparently was acquainted only with Cooper. Although he was introduced to her by Lacey, Ross dealt only with Neely. Moore dealt with Cooper and perhaps one or two others; even though he had been associated in business with Lopez, he was not linked to him criminally. Lopez was apparently involved only with Cooper and McTootle.

Apart from the prejudice inherent in any mass trial, a defendant in a trial in which the conspiracy count has been dismissed is likely to be prejudiced in defending the charges in the substantive counts by evidence, particularly hearsay testimony, which was admissible on the conspiracy count but which could not have been used against him in a separate trial on the substantive counts. One of the most dramatic of the many examples of this in the record before us is Cooper's statement to Neely that he needed money because he was in the policy business with Charles Moore.

Courts have recognized the grave danger of this kind of prejudice and have required "impregnable" safeguards to protect against it. See Blumenthal v. United States, 332 U. S. 539, 559-60 (1947). In the present case the trial judge instructed the jury to consider as to any defendant only (1) documentary evidence relating to that defendant, (2) testimony as to acts of that defendant and (3) conversations either with that defendant or in his presence. However, he permitted the hearsay statements of a co-defendant principal to be considered against a defendant charged with aiding and abetting on the question of whether the offense had been committed, though not on the question whether the defendant had aided and abetted. He made no attempt to itemize the evidence which had been stricken. The difficulty with this approach is that it leaves to the jury the task of mastering these abstract principles and applying them to the vast amount of evidence introduced at trial. We accept the submission that the alternative of spending hours or even days telling the jury precisely what it is supposed to forget is not demonstrably superior to the method followed by the trial judge. In our view the risk of prejudice to the taxpayer defendants by reason of the joinder was so great that "no amount of cautionary instructions could have undone the harm." United States v. Kelly, 349 F. 2d 720, 758 (2d Cir. 1965), cert. denied, 384 U. S. 947 (1966). See United States v. Patrisso, 262 F. 2d 194 (2d Cir. 1958).

It is regrettable that the trial court had to confront substantial motions for severances after five weeks of trial. Since the testimony of Mrs. Neely provided no surprises, counsel for the government must surely have known in advance of trial that the chances of proving the conspiracy charged in the indictment were very slim. Yet the conspiracy count provided the only justification for the joinder of the eight defendants. If the prejudice of joint trial is to be eliminated without the waste of time and energy which results from a joinder which is declared improper in the midst of trial, or, as here, on appeal, we must rely on the responsibility and good judgment of the prosecutors. See United States v. Agueci, 310 F. 2d 817, 840-41, (2d Cir. 1962), cert. denied, 372 U. S. 959 (1963); Panel Discussion, The Problems of Long Criminal Trials, 34 F. R. D. 155, 158-61 (1963) (statement of Judge Weinfeld).

Other Points

We turn now to the other points raised by appellants Cooper and Lacey.

Cooper challenges the adequacy of the court's instructions on the treatment of hearsay evidence, discussed above. We hold that, as to him, the instructions were sufficient.

Lacey ⁸ asserts that the court below erred in refusing to inspect the minutes of the Grand Jury which returned the indictment on which he was convicted. We find no error. The claim that the indictment was found without evidentiary basis is unsupported by the record.

Lacey also contends that there was insufficient evidence to justify his conviction on count 73. Viewed in the light most favorable to the government, United States v. Beltram, 388 F. 2d 449 (2d Cir. 1968), we hold that the evidence is sufficient.

Branker argues that the presentation of a refund check for payment does not constitute the making of a false claim against the United States within the meaning of 18 U. S. C. §287, ⁹ a point which, if sustained, would bar his retrial. We disagree. In Scolnick v. United States, 331 F. 2d 598 (1st Cir. 1964), it was held that the indorsement and deposit for collection of a government check to which the depositor was not entitled constituted a false claim within the meaning of the civil false claims statute, 31 U. S. C. §231. See also Dimmick v. United States, 116 Fed. 825 (9th Cir. 1902), cert. denied, 189 U. S. 509 (1903); United States v. Coggin, 3 Fed. 492 (E. D. Wis. (1880).

In view of our disposition of the appeals of Branker, Lopez, Moore, and Ross, we need not discuss the other points which they raise in their briefs.

The judgments of conviction of appellants Cooper and Lacey are affirmed; the judgments of conviction of appellants Branker, Lopez, Moore and Ross are reversed and the cases remanded for new trials.

^* Of the District Court for the Southern District of New York, sitting by designation.

¹ Percy Branker, Grover Cooper, John L. Lacey, David Lopez, Charles Moore, and John A. Ross, Jr.

² Frank McClary, Jr. and Catherine Wood.

³ Since defendant McClary was named only in the conspiracy count, he was acquitted when that count was dismissed.

⁴ The trial court suspended imposition of sentence on defendant Wood, and she has not appealed.

⁵ Irving Tendrich was granted a severance because of a question as to his competency to stand trial. Ethel Ivy Neely, Herman McTootle and Laurel Bayley were granted severances because they pleaded guilty to one or more counts of the indictment. Since Bayley was the only defendant charged in counts 80, 81 and 82, the number of counts involved in appellants' trial was reduced to 81.

⁶ Each count referred to one income tax return.

⁷ At trial, Wood testified in her own behalf and denied destroying the account. She explained her pre-trial statements to the contrary on grounds of illness and duress.

⁸ Lopez and Ross raise similar points.

⁹ §287. False, fictitious or fraudulent claims.

Whoever makes or presents to any person or officer in the civil, military, or naval service of the United States, or to any department or agency thereof, any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, fictitious or fraudulent, shall be fined not more than $10,000 or imprisoned not more than five years, or both.

[Concurring and Dissenting Opinion]

RYAN, District Judge (concurring in part; dissenting in part):

I concur in the conclusion that appellants Cooper and Lacey were not prejudiced by the denial of severance and separate trial. I agree that their convictions should be affirmed.

I dissent from the conclusion reached setting aside the convictions of appellants Branker, Lopez, Moore and Ross. The convictions of all appellants should be affirmed. Guilt was established beyond doubt as to all the counts on which the jury returned verdicts of guilty. I find that no prejudice resulted to any appellant from the joint trial which was had. I find no basis in the record for a conclusion as to these four appellants different from that reached as to appellants Cooper and Lacey.

The Court notes that "counsel for the government must surely have known in advance of trial that the chances of proving the conspiracy charged in the indictment were very slim," and the exercise of "good judgment" should have led the Government to have moved prior to trial to dismiss Count 1 of the indictment; with this, I agree. I do not agree, however, with the further statement that ". . . the conspiracy count provided the only justification for the joinder of the eight defendants."

It is plain that the central roles of the conspiracy, operating within the office of the Internal Revenue Service, were played by Cooper, Neely and Lacey but, as the activities of these three expanded to embrace the returns of Moore, Branker, Lopez and the returns handled for Ross, each one of these four became willing and active collaborators in so far as the respective returns in which they were interested were involved. The concise résumé of the evidence in the prevailing opinion details how in turn each one of them joined with the Cooper-Neely-Lacey combination as it undertook further to swindle the Government.

The Court apparently finds prejudice per se with respect to four of the defendants in the fact of the joint trial. The prejudice is said to flow from the length of the trial and the volume of testimony not relating to these four defendants, and from the jury's lack of capacity to deal with abstract principles of law expounded by the trial judge. From this generalization, the Court seems to be satisfied that the risk of prejudice was so great that no amount of cautionary instructions could undo the harm.

While it is true that the four taxpayer defendants had very little connection among themselves, Neely was the common center to the fraudulent processing of all the returns. She was the "hub" about which all revolved. It would have been proper, therefore (even without the conspiracy count), to have joined all these four defendants in one indictment (Rule 8(a) and (b), F. R. Cr. P.).

I read nothing abstract for the jury to master in the trial judge's instructions. They were precise and factual, and were separately stated as to each defendant.

I do not argue with the Court's statement that, as the number of counts increases or as a trial record becomes complex, it may become more difficult for a juror to keep separate the various charges against the several defendants and the testimony as to each of them. But prejudice must be established as to each defendant, before the jury's finding of guilt as to a particular defendant may be overturned on appeal.

Although Kotteakos (328 U. S. 750) speaks of the abstract right of defendants not to be tried en masse, the Court there looked at the particular circumstances of the case, at the evidence and at the erroneous charge, and concluded on the basis of all this that it was "highly probable that the error had substantial and injurious effect or influence in determining the jury's verdict." (p. 776). The same cannot be said to be the case here. Aside from the volume of evidence, the record discloses that the proof against each of these four defendants was simple, direct and brief, resting as it did on Neely's veracity and that of other Government witnesses and on undisputed documents, as well as on defendant's own admissions.

Much may be written of evils which come from many-count, multi-defendant indictments. They should be avoided whenever consistent with fairness to the defendant and to the Government. We must not, however, lose sight of the problems which come from requiring the repeated testimony of an accomplice and conspirator, who is called upon to testify at a succession of trials. Separate trials as of right for defendants jointly indicted, is no longer the rule. The prevailing opinion agrees it was not required as to two of the appellants--Cooper and Lacey; failure to grant it to the other appellants is not ground for reversal.