Source: http://ny.findacase.com/research/wfrmDocViewer.aspx/xq/fac.19560410_0040190.C02.htm/qx
Timestamp: 2018-03-20 14:05:20
Document Index: 632218857

Matched Legal Cases: ['§ 371', '§ 4047', '§ 1503', '§ 1505', '§ 14', '§ 3282', '§ 3748', '§ 371', '§ 4047', '§ 371', '§ 4047']

decided : April 10, 1956.
HENRY W. GRUNEWALD, DANIEL A. BOLICH AND MAX HALPERIN, APPELLANTS, AND MAX STEINBERG, HARRY T. SCHERM, MILTON HOFFMAN, IRVING DAVIS AND SAMUEL SCHOPICK, DEFENDANTS.
The case involves the activities of a tax-fixing ring in Washington and New York generally, and especially in connection with the taxpayers Pattullo Modes, Gotham Beef Company and at least one other. The indictment was filed on October 25, 1954, against appellants Henry W. Grunewald, Daniel A. Bolich and Max Halperin and others: in Count 1 all defendants are charged with conspiracy to defraud the United States in the exercise of its governmental functions of administering the internal revenue laws and of detecting and prosecuting violations of the internal revenue laws free from improper influence, dishonesty, fraud and corruption, and in the right and interest of the government in the conscientious, honest and faithful services, judgments, determinations, and actions of the defendants who were members of the Bureau of Internal Revenue, and to conceal the acts of the conspirators, in violation of the general conspiracy statute, 18 U.S.C. § 371; in Count 2 substantially the same charge is made against Bolich, Steinberg and Scherm, as employees of the Bureau of Internal Revenue, in violation of 26 U.S.C. § 4047 (e) (4); and in Counts 5, 6 and 7 appellant Halperin is charged with having corruptly endeavored to influence witnesses before the Grand Jury in the Eastern District of New York to give false testimony concerning certain of the transactions involved in the tax-fixing scheme alleged in Count 1, in violation of 18 U.S.C. § 1503 and § 1505. The general, continuing conspiracy is alleged to have been in operation from January 1, 1946 to the return date of the indictment; and the activities of Halperin, charged in Counts 5, 6 and 7, are alleged to have taken place in March, 1952. Counts 3 and 4 were dismissed and are not involved on this appeal.
The proof of the existence of a single, over-all conspiracy is simply overwhelming. The complicity of Halperin, as well as Davis, Hoffman and others, is established beyond peradventure of a doubt. The evidence is no less convincing against Grunewald and Bolich, and the jury were warranted in drawing the conclusion that all the circumstances taken together established beyond reasonable doubt that Grunewald and Bolich were not only members of the conspiracy, but that they were "the fixers."
The first reference in the proofs to the Pattullo Modes case is to a time in 1947. Bolich was then Special Agent in charge of the Intelligence Unit of the Bureau of Internal Revenue in New York City. In the fall of 1948, he became Assistant Commissioner of Internal Revenue, with his office in Washington and his living quarters in part of a suite, in the Hotel Washington, maintained as an office by Grunewald and at his expense.The intimacy between Bolich and Grunewald during the time of the events relevant to this case is amply proved. Scherm was a Civil Audit Agent in New York and Steinberg was his superior. These two play a minor role.
Pattullo Modes was a New York dress manufacturing concern controlled by family stockholders. From 1942 through 1946 Pattullo Modes had defrauded the government of corporate and individual income and other taxes by the simple expedient of making off-the-record sales and "jacking up the travel and entertainment accounts," putting the cash proceeds of over $300,000 in a safe deposit box.
In the spring of 1947 Scherm who had been making an audit of Pattullo Modes told Smith, the Pattullo Modes accountant, that an examination of a customer of Pattullo Modes had revealed that "there were certain sales or certain income that was missing" and that a Form 917 disclosing such information was out against them. The effect of this on the Pattullo Modes' people need not be described. It was in June, 1947, that the Gotham Beef Co. case reached a critical stage.
The sordid details of how both cases found their way to the law offices of Schopick & Davis were related at the trial. The upshot of the testimony of the taxpayers and of Davis and Hoffman, all of whom turned state's evidence, was that, after a number of preliminary moves to obtain assurances of no criminal prosecution had proved futile, Davis told Halperin that they needed some "real help." Halperin suggested that such help might be obtained from Grunewald in Washington, an old friend of his and, far more important, "a close personal friend" of Bolich, the Agent in Charge in New York. In due course Patullo Modes produced $100,000 in cash and Gotham Beef Co. produced $60,000 in cash, for "the man in Washington," to be paid over to him when the assurances of no criminal prosecution were officially given.
Another case, that of "the Glovers," comes in only incidentally because it ended in an impasse over price. Davis testified that Halperin told him that Grunewald wanted "something in the neighborhood of $175,000 or $200,000," and that he and his associates withdrew from the case when "the Glovers" said $100,000 was as high as they would go.
There is abundant and convincing evidence of how the taxpayers raised the huge amounts of cash said to have been demanded by Grunewald, without disposing of assets, cashing checks or leaving other traces of their having done so; of the details of counting the money and putting it in various safe deposit boxes with safeguards that delivery to Grunewald should not be made until official announcement was made that there would be no criminal prosecution of the taxpayers. There was no direct proof that any part of these sums reached the hands of Bolich; nor did any witness testify to the delivery of either sum to Grunewald. However, in October, 1948, after the Gotham Beef case was closed out "on a no prosecution basis," Tobias called Greenstein, co-escrowee with Halperin, and told him he could release the money to Halperin. A few days later Greenstein told Tobias that he had done so; and Halperin informed Davis that he had taken the money to Washington and delivered it to Grunewald. Hoffman testified that, after the official decision not to prosecute Pattullo Modes was made, he went with Halperin to Halperin's safe deposit box in the Chemical Bank and Trust Company. Together they counted the $100,000, placed it in two brief cases, and took it by train to Washington, where Grunewald met them at the Union Station. Halperin, carrying the two brief cases containing the money, and Grunewald walked off together.
Grunewald's status as a co-conspirator is established by direct evidence. Hoffman testified that, on one of his trips to Washington with Halperin, he went up to the suite in the Washington Hotel, remaining in the living room where he was joined later by Grunewald and Halperin, who introduced him to Grunewald. Davis further testified that in late September or October of 1948 there was a conversation between Halperin, Grunewald and Davis, in Grunewald's office in the Munsey Building, to the effect that Grunewald had agreed to accept $100,000 in the Pattullo Modes' case, that he, Davis, thanked Grunewald for this, to which Grunewald replied "O.K., O.K."
Grunewald is reported to have discussed the Gotham Beef case with Halperin in the early summer of 1948 at the Hotel Washington, at which time Grunewald, identifying himself as "captain Henry," telephoned an order to "put a red flag * * * on the Gotham Beef case." There was testimony both by Bolich's secretary and by Grunewald's secretary that Bolich received repeated telephone calls from "Captain Henry" and that, when calling Bolich, Grunewald was identified only as "Captain Henry."
Even in the much less open-and-shut case of Gotham Beef Co., Mullenbach, the government agent, had made a final report in April, 1948, recommending that the individuals involved be criminally prosecuted. The case was assigned to Kuehl, the Assistant Special Adviser in Intelligence Division in New York who had arranged with Ronayne, the taxpayer's attorney, for a conference on August 3, 1948. At this stage, his own efforts to see Bolich having proved unavailing, Davis had Halperin telephone Grunewald who said that Bolich would see Davis. Thereafter Davis conferred with Bolich and Bolich passed the Gotham Beef Co. contentions along to Kuehl. Kuehl, after protesting that Ronayne, not Davis, was the attorney of record, decided the case was too weak for prosecution. Kuehl also testified that although Bolich had been his superior for three years prior to this, he had never previously received any communication from him, by telephone or otherwise.
The malefactors slipped seriously when Bolich received in November, 1949, the report of his former subordinate, Joseph R. Baradel, head of the Conference and Review Section in the Special Agent's office in New York. Baradel was the man who reluctantly announced to the Pattullo Modes' people on January 10, 1949, that, in view of Bolich's commitment, there would be no criminal prosecution of the taxpayers. It having occurred to Baradel that some explanation of Bolich's commitment was called for in the file, he sent the report to Bolich with a little scratch pad note reading "Any comments? JRB." Bolich then telephoned Baradel at his home and asked him to write an explanatory memorandum "to take a little heat off the situation," which Bolich said "left him on a hot spot." Certain changes were made but the substance remained.
Much of the evidence was admitted "subject to connection." Grunewald protests that this worked an injustice as to him because it gave a "fatal aura" to the case, the inevitable effect of which was so to condition the minds of the jurors that they were incapable of viewing the facts in true perspective. Grunewald concedes, however, that such qualified admission is common practice, as indeed he must. 1 Wigmore, Evidence § 14 (3rd ed.).This is not to deny the possibility of a case in which it is so abused as to demand reversal, but this is not such a case. Indeed, there was an abundance of direct proof of statements and conduct of Grunewald and, against this background, the protestations of innocence made by his counsel are far from convincing.
Neither accountant nor lawyer, but the intimate of such highly placed persons as Assistant Commissioner of Internal Revenue Bolich, Grunewald successfully demanded $100,000 as the price of his participation in the Pattullo Modes matter. His suggestion that this might be due to a philosophy of "ask and ye shall receive" could persuade only a person of rare naivete. And while "fixing" broken chairs, windows and so forth is commonly understood to mean restoring the objects to good condition, this is not the common understanding of "fix" when used, as by Grunewald, in conversation with his secretary, Nancy Hain, with reference to tax cases. Thus the jury could reasonably have understood "fix" in this context to mean "to dispose in one's favor by bribery or similar means; to procure the favor of; as, to fix a jury." Funk and Wagnall's New Standard Dictionary of the English Language, p. 933, col. 2 (1946). On the basis of this and other evidence against Grunewald the jury's finding of his membership in a criminal conspiracy cannot be said to be unwarranted.
Appellant Bolich summarizes the case against him as amounting only to proof of his "friendly acquaintanceship with Grunewald." He claims that there was nothing unlawful about any of the steps taken by him as an officer of the government charged with the administration of the Internal Revenue Laws. And he relies upon the presumption of innocence and the oft-repeated statement that in a case of circumstantial evidence "the facts must exclude every other reasonable theory or hypothesis except that of guilt." What this boils down to, however, is a contention that, as the jury might have found that the association of Bolich and Grunewald was merely one of friendship, and that the relationship between his various rulings, conversations and telephone calls, and the acts of the other participants in the conspiracy, was purely coincidental and wholly innocent, therefore the question of his guilt or innocence should not have been submitted to the jury. But this confusion of the functions of judge and jury merely befogs the issue. It was for the jury to draw the inferences to be deduced from the proofs taken as a whole, after they had, in accordance with the instructions of the trial judge, determined questions of credibility, culled the wheat from the chaff, and reached a conclusion as to what the facts were. In this connection the usual instructions on the presumption of innocence and the rules applicable to circumstantial evidence are given to aid the jury in its deliberations. And see, Holland v. United States, 348 U.S. 121, 139-140, 75 S. Ct. 127, 99 L. Ed. 150. If the law were as contended by appellant Bolich, the court would be required to assume that of conflicting possible inferences those favorable to a defendant must be taken as matter of law; and thus the conviction of the ring leaders and real brains behind illegal conspiracies of the most vicious and harmful character would become impossible, as they often have a front of apparent respectability and keep well concealed their contacts with those who do their bidding and who are more likely to be discovered. United States v. Valenti, 2 Cir., 134 F.2d 362.
Each of appellants argues that, even if a conspiracy is proved, prosecution is barred by the Statute of Limitations. This is an interesting and important question, seemingly one of first impression. As all parties agree that the three-year period prescribed by 18 U.S.C. § 3282 is applicable, the crucial date is October 25, 1951.Bolich, Grunewald and Halperin earnestly press their view that the Statute of Limitations began to run no later than January 10, 1949, when the official ruling was made that there would be no criminal prosecution in the Pattullo Modes case.
"To determine whether certain of the alleged overt acts were in furtherance of the object of the conspiracy, you have to determine the duration of the conspiracy. Did it end when the Pattullo Modes people and the Gotham Beef people received an assurance of no prosecution from the Bureau of Internal Revenue, or was a part of the conspiracy a continuing agreement to conceal the acts done pursuant thereto?In determining whether a part of the conspiracy was an agreement to continue to conceal the illegal acts after their consummation, you may not imply that such an agreement was part of the conspiracy. You would have to find from the evidence of the acts and declarations of the co-conspirators that there was an understanding or agreement to conceal the conspiracy. If you find that such an agreement or understanding to conceal the conspiracy was not a part of the conspiracy to defraud the government, but no more than an afterthought brought to the surface when the co-conspirators were confronted with the Grand Jury and King Committee investigations, then you must find, as a matter of law, that the defendants are not guilty of the crime charged in the first count of the indictment. If you find that the evidence shows, beyond a reasonable doubt, that as a part of a conspiracy to defraud the government, there was an agreement or understanding to conceal the illegal acts and that this too was an objective or part of the conspiracy, then you may find that such understanding was a part of the conspiracy. However, you must additionally determine whether this objective of the conspiracy was known to the defendants. If this objective was known originally by only part of the conspirators but thereafter during the existence of the conspiracy, the scope of the conspiracy was extended so as to include such an agreement to conceal, and if you find that some of the defendants did not know of the expansion to include the agreement to conceal, you may not impute to them the knowledge of their co-conspirators and they could not be found guilty of the crime charged in Count One."
The overt acts relied upon were alleged to have taken place in 1951 and 1952, within the three-year period thus referred to. Accordingly, if there was insufficient evidence to support the above-quoted portion of the judge's charge, we must reverse.
That there was ample evidence of a single, continuing conspiracy by members of a tax-fixing ring is, we think, too plain for reasonable debate.United States v. Ganey, 2 Cir., 187 F.2d 541; United States v. Manton, 2 Cir., 107 F.2d 834; United States v. Witt, 2 Cir., 215 F.2d 580; United States v. Johnson, 3 Cir., 165 F.2d 42. The partners in the law firm of Schopick & Davis, with their business chaser Hoffman and their associate Halperin, were operating regularly with Grunewald and Bolich, and the specialty of this combination of wrongdoers was fixing tax cases. There is no evidence whatever that the ring ceased operations, nor that any of the appellants withdrew from the conspiracy. The unsuccessful attempt to get the Glover case was made in 1950; and there was evidence that in the post-1951 period appellants maintained a continuing relationship and communication, partly under cover of an alias, and that Grunewald had more than once made statements to the effect that he was in the business of handling tax cases and "would get them fixed." Moreover, there was a considerable quantum of evidence of statements and acts, both before and after the refusal of "the Glovers" to meet the terms suggested by the conspirators, which tended to show that one of the terms of the conspiracy was that the participants would take whatever steps were necessary to cover up their tracks and prevent disclosure of their activities.
The various steps taken by Bolich were necessarily reflected in numerous official reports of others in the Internal Revenue Bureau. It required no unusual acumen to appreciate the fact that the possibility, indeed the likelihood of an investigation of some sort hung over the conspirators like a sword of Damocles. Indeed, the preliminary steps at avoidance of detection were proved to have been taken while the Pattullo Modes and Gotham Beef cases were being processed. The telephone call to Baradel at his home is one instance. Another is the insistence, at Grunewald's suggestion, that the law firm of Schwaeber & Saver be continued as lawyers for Pattullo Modes and made to believe that the happy outcome, which was the result of the "fix," was due to their honest efforts in behalf of their client. This could have served no other purpose than that of forestalling suspicion.
This conspiracy is wholly unlike the ordinary illegal scheme in that the jury may well have inferred that the official announcement that there would be no criminal prosecution of the taxpayers was merely the delivery of a substantial installment of what appellants agreed to deliver for the huge sums paid. The six-year Statute of Limitations, 26 U.S.C. (1940 Ed.) § 3748, did not run in favor of the taxpayers until some time after the commission of the overt acts relied upon. In the interval there was no assurance, other than continuing efforts by Grunewald, Bolich and the others, that the whole nefarious business might not be brought to light, followed by the revocation of the decision not to criminally prosecute the taxpayers. This is a significant element in the proofs adduced by the government, as concealment of the conspiratorial acts was necessary not only to protect the conspirators from a conspiracy prosecution but also to protect the taxpayers from a tax evasion prosecution. And the indictment in paragraph 1 specifically charges that the conspirators agreed upon a scheme to defraud the United States in the exercise of its governmental functions of "* * * prosecuting violations of the internal revenue laws."
Appellants lean heavily upon Krulewitch v. United States, 336 U.S. 440, 69 S. Ct. 716, 93 L. Ed. 790 and Lutwak v. United States, 344 U.S. 604, 73 S. Ct. 481, 97 L. Ed. 919; but these cases, properly construed, support the contentions of the government. In Krulewitch the conspiracy was definitely over when the alleged concealment took place. The contention which the court rejected was that conspirators must be deemed to have agreed "to collaborate with each other to conceal facts in order to prevent detection, conviction and punishment" and that this was a sort of implied "subsidiary phase of the conspiracy." Indeed, no such "subsidiary" agreement was even alleged in the indictment. In the case before us now it was charged in the indictment that one of the terms of the illegal agreement was that continuing efforts would be made "to avoid detection and prosecution by any governmental body" and much of the proof adduced at the trial was admitted in support of this charge. The jury were instructed that no such term of the agreement could be implied but that they must make a finding based upon the evidence before them, and that if the efforts to conceal were "no more than an afterthought" they must find defendants not guilty.
In Lutwak, despite the fact that the indictment charged an agreement to conceal, there was no evidence to support it.The clear implication is that, if the allegation had been supported by evidence, the court would have arrived at a different conclusion, for it is stated in the opinion, 344 U.S. at page 616, 73 S. Ct. at page 488: "But there is no statement in the indictment of a single overt act of concealment that was committed after December 5, 1947, and no substantial evidence of any. Such acts as were set forth and proved were acts that revealed and did not conceal the fraud." Here the record is replete with evidence of acts of concealment.
It is argued that the charge is absurd, as no one could have known in 1948 and 1949 that there would be a congressional investigation in 1951 and a grand jury inquiry in 1952. But these appellants must have known from the outset that the success of their enterprise was in real danger at all times, especially while the files of the taxpayers remained open, cf. United States v. Kissel, 218 U.S. 601, 31 S. Ct. 124, 54 L. Ed. 1168; Fiswick v. United States, 329 U.S. 211, 67 S. Ct. 224, 91 L. Ed. 196, and that any suspicious entry or report found by one of the men in the government intelligence service might touch off an investigation. It was not necessary that the conspirators should know in advance precisely what contingencies would arise, in order to agree as to how they would deal with all possible contingencies which appeared likely to have the results which the conspirators sought to avoid. Cf. United States v. Perlstein, 3 Cir., 126 F.2d 789, certiorari denied 316 U.S. 678, 62 S. Ct. 1106, 86 L. Ed. 1752; United States v. Siebricht, 2 Cir., 59 F.2d 976.
It is theoretically possible that in 1952 Davis might have seen breakers ahead and felt it in his interest to sound out the government reaction to his hypothetical statement. But it is scarcely probble that he foresaw his wife's suit for her alleged share of $125,000 in cash or his own indictment for tax evasion of $160,000, or the effect on his possible disbarment of a plea to an indictment which had not yet been found against him.
On the oral argument particular stress was laid upon the fact that Davis' lawyer was only authorized to repeat the statement hypothetically. We were told that this differs widely from a prior statement of fact to the same effect as his testimony given on direct examination. But we need not pass on this as the statement made to his attorney was not hypothetical in form but a plain statement of actual fact.This was admissible, nor does it become any the less so because the authority to repeat it was confined to mere hypothesis.
The government, in support of the conviction, argues that proof of official employment, an element of the crime charged in Court 2, is not an element of that charged in Count 1. Both statutes under which Bolich was indicted, tried, and convicted make it a crime to "conspire * * * to defraud the United States." One of these statutes, 18 U.S.C. § 371, applies to all persons; the other, 26 U.S.C. § 4047(e)(4), applies specifically to "every officer or agent appointed and acting under the authority of any revenue law of the United States * * *." This question has been considered by the Supreme Court in Albrecht v. United States, 273 U.S. 1, 47 S. Ct. 250, 71 L. Ed. 505 and again in Blockburger v. United States, 284 U.S. 299, 304, 52 S. Ct. 180, 76 L. Ed. 306. In both cases the test applied to determine whether the defendant was being subjected to double punishment was "whether each provision requires proof of an additional fact which the other does not." Blockburger v. United States, supra, 284 U.S. at page 304, 52 S. Ct. at page 182. In the case at bar, it is true, as the government contends, that proof of a violation of § 371 of Title 18 of U.S.C., charged in Count 1, will not prove a violation of § 4047(e) (4) of Title 26 of U.S.C., charged in Count 2, which requires proof of the additional fact of official employment. But it is no less true that guilt under Count 2 of necessity means that guilt under Count 1 has been proved, and, consequently, the test laid down by the Supreme Court has not been met.
The function of this test, however, is not to create a harmonious body of penal law, desirable though that is, but to protect defendants from being punished twice for having committed a single crime. Hence the rule is that a defendant may not be heard to complain because he has been convicted and sentenced to prison under two separate statutes for having committed a single offense, if the prison terms are to run concurrently. Hirabayashi v. United States, 320 U.S. 81, 85, 63 S. Ct. 1375, 87 L. Ed. 1774; Brooks v. United States, 267 U.S. 432, 441, 45 S. Ct. 345, 69 L. Ed. 699.Since the prison terms to which Bolich has been sentenced are to run concurrently, they may stand. This does not completely answer the double punishment argument, however, because Bolich was also fined under both statutes. On the foregoing reasoning, only one of these may be permitted to stand, and the question now becomes which one.
This approach is not feasible in the instant case because here the specific provision antedates the general one and imposes the lighter sanction of the two. It may be that persons who have undertaken the trust and responsibility of enforcing a particular law should not because of that undertaking be subjected to a severer punishment for an infraction of that law than any one of the public at large who is, of course, under a duty to obey the laws of the land.But surely no justification or reason can be found for treating the infraction of the public official more leniently than an otherwise identical infraction by a non-official.Moreover, any invocation of legislative intent can only be the grossest sort of fiction where, as here, we have no legislative history to guide us.
There is then no rational basis for determining that one of the two statutes in question applies to the defendant's conduct and the other does not.Both are undoubtedly valid and subsisting. All that we can and do determine is that both statutes can not validly apply in so far as their application operates to produce cumulative punishment. Since both fines, therefore, cannot stand, the smaller of the two is set aside.
Bolich's brief makes two other points, one relating to evidence and the other to the instructions to the jury, neither of which has any merit and which may, therefore, be disposed of briefly. The testimony of both Everett Harding and Daniel Olsen, relating respectively to hotel records of charges to Bolich and to carpentry work done in Bolich's home, was properly admitted since the testimony of these witnesses, together with the other proofs referred to supra, tended to support the allegation that a ...