Task: songer_geniss

What follows is an opinion from a United States Court of Appeals.
Your task is to identify the issue in the case, that is, the social and/or political context of the litigation in which more purely legal issues are argued. Put somewhat differently, this field identifies the nature of the conflict between the litigants. The focus here is on the subject matter of the controversy rather than its legal basis. Consider the following categories: "criminal" (including appeals of conviction, petitions for post conviction relief, habeas corpus petitions, and other prisoner petitions which challenge the validity of the conviction or the sentence), "civil rights" (excluding First Amendment or due process; also excluding claims of denial of rights in criminal proceeding or claims by prisoners that challenge their conviction or their sentence (e.g., habeas corpus petitions are coded under the criminal category); does include civil suits instituted by both prisoners and callable non-prisoners alleging denial of rights by criminal justice officials), "First Amendment", "due process" (claims in civil cases by persons other than prisoners, does not include due process challenges to government economic regulation), "privacy", "labor relations", "economic activity and regulation", and "miscellaneous".

JOHN W. PECK, Circuit Judge.
Defendants-appellants Fruehauf Corporation, William E. Grace, and Robert Rowan were indicted for conspiring, in violation of 18 U.S.C. § 371, to defraud the United States by obstructing the lawful governmental functions of the Internal Revenue Service, to attempt to have appellant Frue-hauf Corporation evade illegally the payment of federal excise taxes, and to aid or assist in the preparation and presentation of materially false and fraudulent excise tax returns for the appellant Fruehauf. Following a lengthy trial without a jury, the district judge, found that appellants were guilty as charged. Appellant Frue-hauf Corporation was sentenced to pay a $10,000 fine. Appellants Grace and Rowan were each sentenced to serve a prison term of six months and one day (the one day was suspended), followed by a two year period of unsupervised probation, and to pay a $10,000 fine. Appellants perfected this appeal. We affirm.
I
District Judge Thomas P. Thornton entered 142 findings of fact in his opinion to support his conclusion that appellants were guilty as charged of having engaged in a conspiracy in violation of 18 U.S.C. § 371. After examining the voluminous record in this case, we conclude that Judge Thornton’s findings of fact were supported by substantial evidence and were not clearly erroneous. The following statement of facts is based on the findings made by Judge Thornton.
The Indictment: The Parties and the Excise Tax Provisions Involved
The corporation indicted in the present case, appellant Fruehauf, is a very large and well-known manufacturer of trailers. Appellants Grace and Rowan were top executives of the Fruehauf Corporation. During the period of the alleged conspiracy, appellant Grace served as vice-president (1955-57), executive vice-president (1957-58), president (1958-65), and chief executive officer (1959-65), and appellant Rowan held the positions of controller (1955-64), vice-president (1962-64), and vice-president, finance (1964-65).
Named in the indictment along with appellant Fruehauf Corporation and appellant-executives Grace and Rowan were two other Fruehauf executives, unindicted co-conspirators Kenneth A. Morris and Robert M. Chawner. From 1951 through 1965, Morris was the manager of appellant Fruehauf’s Tax Department. In that position, Morris was responsible to appellant Rowan for the correct reporting of appellant Fruehauf’s taxes. From 1955 to 1964, Chawner was appellant Fruehauf’s assistant controller, and from 1962 to 1964, he was the controller of the Fruehauf Division of the appellant Fruehauf Corporation.
Section 4061 of the Internal Revenue Code of 1954, 26 U.S.C. § 4061, imposes a tax on the sale of motor vehicles and parts (including trailers) by the manufacturer. The tax is computed by applying the tax rate established in § 4061 to the motor vehicle or part “price.” That “price” is defined in § 4216(a) of the Internal Revenue Code of 1954, 26 U.S.C. § 4216(a), as the price for which the article is sold;- however, § 4216(b), as amended effective January 1, 1959, provides for a constructive sales price that enables a manufacturer which sells at both retail and wholesale to compute the excise tax on all sales based upon the highest price for which the motor vehicle or part is sold at wholesale.
Appellant Fruehauf Corporation sold 94% of its trailers at retail and the remaining 6% at wholesale. By virtue of § 4216(b) and of a private ruling obtained by appellant Frue-hauf in 1949, appellant Fruehauf used its wholesale price as the base for excise tax computations on all sales. Just prior to the beginning of the conspiracy, in December, 1956, distributors of appellant Fruehauf Corporation paid 61.75% of the list price for the trailers, a discount of 38.25%.
Section 6416(c) of the Internal Revenue Code of 1954, 26 U.S.C. § 6416(c), provides for tax credits that reduce the excise tax liability of a manufacturer. A tax credit is given when a finished taxable article sold by the manufacturer includes parts that have previously been subjected to a separate excise tax. Hence, excise tax credits are given when trailers are sold with tires upon which an excise tax, in this case imposed by § 4071 of the Internal Revenue Code of 1954, 26 U.S.C. § 4071, has been previously levied. Appellant Fruehauf Corporation took such credits on the tires that were placed on their trailers.
Appellant Fruehauf Corporation could thus reduce its excise tax liability by (1) reducing the price at which the trailers were sold at wholesale to distributors and (2) increasing the price paid for tires that were to equip the trailers. If, however, Fruehauf Corporation were to cut its excise tax liability simply by reducing its wholesale trailer prices and increasing the prices paid for tires, the net income total would be reduced more by the decreased gross income and increased tire expense than increased by the excise tax savings.
The indictment in the present case, brought November 9, 1970, alleged that appellants conspired to obtain by two fraudulent schemes the best of two worlds, excise tax savings and income unaffected by reduced wholesale trailer prices and increased tire payments. The first scheme, which involved a supplemental billing plan, sought to reduce the excise tax base without reducing gross income. The second scheme was directed at generating excessive excise tax credits by computing the tire tax credit on invoice prices without adjustment for rebates. As overt acts charged to have been committed to further the conspiracy, the indictment alleged the filing of quarterly manufacturers excise tax returns for 37 consecutive quarters, beginning in the final quarter of 1956 and extending through the last quarter of 1965, returns which understated the excise tax liability of appellant Fruehauf Corporation in the amount of $12,344,587.31.
The Supplemental Billings Scheme
1. The Meeting in Washington, D.C.: Approval of the Supplemental Billing System.
On December 13, 1956, appellant Rowan and co-conspirator Morris met with appellant Fruehauf’s Washington, D.C. counsel, Raymond Cushwa, of the law firm of Davies, Richberg, Tydings & Landa, and with W. K. Engel, of the accounting firm of Touche, Niven, Bailey & Smart. The purpose of the meeting was to obtain Cushwa’s and Engel’s approval of a “supplemental charge plan” that had originally been drafted by co-conspirator Chawner. The supplemental charge plan would break out of the price of a trailer charges for certain “extra” services allegedly rendered to appellant Fruehauf’s distributors and would bill for those services separately. At the same time, the discount to distributors would be increased, and by lowering the wholesale price of the trailer, appellant Fruehauf’s excise tax liability would also be reduced because the excise tax base for both retail and wholesale sales was computed on the wholesale price.
Engel, in an inter-office memorandum written five days after the meeting, summarized the proposal presented on behalf of appellant Fruehauf by appellant Rowan and co-conspirator Morris.
Fruehauf performs certain services for its wholesale customers which it does not perform for its retail customers. In the past the charges for these extras has been included in the invoice price to distributors and consequently in the excise tax base. Fruehauf has concluded that the charges for these extra services should be made separately and not included in the invoice price of the trailers in order to make the invoice price of trailers to distributors comparable to that to retailers. It is anticipated that the extra charges to be billed separately to distributors would approximate the $260 reduction in selling price due to the proposed additional discount so that the total received per trailer from distributors would be what it is at present. The advantage would be in obtaining a lower wholesale base on which excise tax would have to be paid and thus a saving in excise tax of about $26 per trailer on both wholesale and retail sales.
The extra charges to distributors which Fruehauf has proposed are as follows:
EXPENSE EXPENSE
PER
BASIS FOR CHARGE UNIT
Advertising National advertising
charge — total units sold $ 34.00
General sales Executive sales expense
expense per unit sold 58.00
Interest 4% of average balance of equipment accounts receivable which are at present carried by Fruehauf until units are sold by dis-
tributors 164.00
Sales engi-Estimated 5.00
neering
EXPENSE EXPENSE
PER BASIS FOR CHARGE UNIT
Sales man- Estimated 2.00 uals, technical bulletins, etc.
Legal and ac- Estimated 5.00 counting services _
$268.00
(Government Exhibit 16).
Cushwa and Engel approved this proposal, stating to appellant Rowan and co-conspirator Morris that it was generally in accord with the law governing manufacturers excise tax, but conditioned their approval on the observance of certain procedures. First, it would be necessary to be able to demonstrate that a particular distributor actually received the service for which the distributor was charged. Second, the proposed charges would need to be based upon the cost of the services performed; the amounts charged in a specific case had to equal or be less than the value of the services actually performed. Third, records would have to be maintained showing the services rendered for each distributor and for each of the categories of supplemental fees charged. Cushwa and Engel told appellant Rowan and co-conspirator Morris that a flat charge to a distributor for some service never received, even though billed separately, was part of the selling price of the trailer and would have to be included in the excise tax base. Appellant Rowan and co-conspirator Morris were thus put on notice that appellant Fruehauf’s counsel approved the supplemental charge plan on the conditions that records would be maintained which would demonstrate that the supplemental charges were for extra services actually performed and that the value of the services rendered equalled or exceeded the amounts charged.
2. Implementation and Control of the Supplemental Billing System.
Following the December 13, 1956, meeting in Washington, D.C., appellant Rowan personally called all of appellant Fruehauf’s distributors in order to inform them about the implementation of the supplemental charge plan. The plan increased the discount to distributors to 42% off the list price. Along with this increased discount, however, the distributors received from appellant Fruehauf supplemental billings for amounts designated on the special invoices as “advertising,” “management consulting fees,” and “interest.”
These monthly supplemental charges to distributors were posted as credit entries to Fruehauf’s advertising, general administrative, and interest earned accounts. Distributors were advised by appellant Fruehauf that the supplemental charges should be posted on the distributors’ books as selling or administrative expenses and not as part of the trailer costs so that appellant Frue-hauf’s billing system would not be misinterpreted by the Internal Revenue Service. As an additional precaution, the invoices for the supplemental charges were mailed to distributors in envelopes marked “personal and confidential.” Co-conspirator Chawner told F. S. Newman, manager of appellant Fruehauf’s Sales Department, that the supplemental billing practice should be kept on a confidential basis so that appellant Frue-hauf’s tax position would not be endangered.
This concern was legitimate. The supplemental charge plan as implemented was designed so that the total of the supplemental billings to each distributor equalled the 3.75% increase in the discount extended to distributors at the time of the institution of the supplemental charge plan.
Appellant Fruehauf’s home office billing department monitored the supplemental charge plan by means of “Distributor Analysis of Price Adjustment” work sheets, which were used to reconcile the supplemental billing figures against the increase in the discount to the distributors. A running account of the amounts by which total supplemental billings exceeded or fell short of the increase in discount was kept by means of a credit or debit entry under a column entitled “Adjustment Due Customer.” Appellant Fruehauf kept distributors informed as to the status of this running account in monthly “Status of Excise Tax Savings” reports.
Moreover, it was impossible for a distributor to avoid full payment of the supplemental charges. Trailer sales to distributors were made on open account with thirty or ninety day terms. The monthly supplemental charge for interest was computed at the rate of 4%% per annum on the month-end balance of each distributor’s open receivables account. No adjustment was made if payment was received by Fruehauf within the thirty or ninety day terms of the trailer invoices. The monthly supplemental charge for advertising and management consulting were computed by subtracting the interest charge from the “net selling price adjustment” (which was 3.75% of the list price when the additional discount given to the distributors was 3.75% of the list price) and then allocating the remainder to advertising and management consulting. If, however, a distributor would return a trailer to appellant Fruehauf Corporation, the supplemental billings were proportionately cancelled; if there were no trailer sales to a distributor, there were no supplemental billings. Appellant Fruehauf Corporation could thus receive roughly the same payment from distributors as they would have without the supplemental billings plan, but had a lowered wholesale price as its excise tax base, which meant reduced excise taxes on the trailers sold to all customers.
3. Amounts in the Supplemental Billings Increase.
Despite the fact that the supplemental billing system had been approved by counsel only on the conditions that records be maintained to show that the supplemental charges were for actual services rendered and that the value of the services equalled or exceeded the amounts charged, by July, 1957, only nine months after the effective date of the supplemental charge plan, the charges for advertising and management consulting fees had risen to amounts vastly in excess of the amounts that appellant Rowan and co-conspirator Morris had represented to the attorney Cushwa as the proper charges for the extra services allegedly rendered to the distributors. In 1957, the distributor Motor Truck Equipment Company was charged $147.34 per unit for advertising, an increase from $34 in December, 1956. In November, 1957, Berman Sales Company was charged $124.91 per unit for advertising, also increased from $34 in December, 1956.
Because the charges for advertising, management consulting, and interest were vastly overstated, appellant Fruehauf’s budget was being distorted. This distortion was rectified in August, 1957, when the supplemental charges were taken out of the expense and income account postings and thereafter posted as reductions to the cost account applicable to new trailers.
In July, 1958, an internal Fruehauf study was made, which demonstrated that the average supplemental charges to each distributor under the categories “advertising” and “management consulting” were in excess of the amounts conditionally approved by the attorney Cushwa at the December, 1956, meeting in Washington, D.C. Consequently, in the autumn of 1958, co-conspirator Morris expressed concern to appellant Rowan that the records maintained by appellant Fruehauf Corporation were not sufficient to substantiate the supplemental charges for services being rendered to distributors. Nevertheless, appellant Rowan, who was responsible for appellant Frue-hauf’s record keeping, did not cause Frue-hauf Corporation to maintain records to demonstrate that a certain distributor actually had received the service for which it was charged or that the value of the service in a specific case equalled or exceeded the amounts charged.
It was during this initial period of swelling supplemental charges that appellant Grace became aware of and educated himself about the supplemental billing system. In fact, in a letter dated October 11, 1957, to Christopher Hammond, President of Great Dane Trailers, appellant Grace boasted “The excise tax problem is one which I believe no one has gone into any deeper and come up with more ways to save money than yours truly.” Also in 1960, appellant Grace was aware of a Fruehauf memorandum titled “The Excise Tax Story,” which described the supplemental billing procedures and indicated that Fruehauf had saved $921,324 in excise taxes in 1959 as a result of the supplemental charge plan.
4. Treasury Regulation 330.1-l(b) and Appellant Fruehauf’s Response.
On December 16,1958, the Internal Revenue Service published in the Federal Register, Treasury Regulations on Manufacturers Excise Tax. T.D. 6340, 1959-1 Cum.Bul. 694, Regulation 330.1-l(b) provided:
Any charge which is required by a manufacturer, producer, or importer to be paid as a condition of sale of a taxable article and which is not attributable to an expense falling within one of the exclusions provided in Section 3441(a), is includible in the sale price upon which the tax is based. It is immaterial for this purpose that the charge may be paid to someone other than the manufacturer, producer, or importer, or that it may be separately billed to the purchaser as one earmarked for expenses incurred or to be incurred in his behalf, as for example, for advertising at the national or local level, for a demonstration or display of the article, for a sales promotion program, or otherwise. As a result of the promulgation of this regulation, appellant Fruehauf did not eliminate its supplemental billing for advertising and include that cost in the wholesale price. Rather, appellant Fruehauf changed in its supplemental charges the billing designation “advertising” to “printed matter, catalogues, etc.” Co-conspirator Morris testified at trial that the printed matter charge was based on the $7 per unit sales engineering and sales manual expenses in the plan presented to Cushwa and Engel in December, 1956; apparently no study was made to justify the new printed matter charge. The printed matter charge was in effect from January, 1959, through December, 1964.
5. Excise Tax Audit 1958-59; Indiana Gross Income Tax Incident.
Internal Revenue Service Agent Francis J. Rochefort conducted an excise tax audit of appellant Fruehauf Corporation from the fall of 1958 to November, 1959. On December 5, 1958, co-conspirator Morris conferred with the attorney Cushwa concerning the audit and the excise tax procedures followed by appellant Fruehauf. Fruehauf Corporation did not want a close scrutiny of the supplemental billing system. Co-conspirator Morris told Cushwa that the invoices for the supplemental billings were being kept in a completely separate file from the trailer invoices so that it would only be remotely possible that the examination would turn up the billings.
During the course of the audit Revenue Agent Rochefort asserted that Fruehauf had erroneously excluded from its excise tax base an Indiana gross income tax included in the invoice price of the trailers sold at wholesale to three distributors, Warner-Fruehauf Trailer Company, Motor Truck Equipment Company, and Berman Sales Company. Appellant Fruehauf responded by proposing a compromise with the Internal Revenue Service. Fruehauf offered to refund the amounts collected from the three distributors.
On August 28,1959, the Internal Revenue Service accepted the Fruehauf proposal and agreed that if the refunds were made, no tax deficiency would be asserted. Credit memoranda, prepared by co-conspirator Chawner and personally approved by appellant Rowan, were issued to the Warner-Fruehauf Trailer Company, the Motor Truck Equipment Company, and the Ber-man Sales Company. In the next monthly billing to the three distributors, however, the same amounts that had been credited to their accounts pursuant to the compromise between appellant Fruehauf Corporation and the Internal Revenue Service were re-billed to them as extra charges, in addition to the normal monthly supplemental charges, under the designation “printed matter, catalogues, etc.”
6. The Hobbs Trailer Company Installation Charge and the Appellant Frue-hauf Handling Charge for Retail Sales.
In 1955, appellant Fruehauf Corporation acquired Hobbs Trailer Company. Examination by Fruehauf of the excise tax procedure of Hobbs as to its installation charge triggered an inquiry into the possible exclusion from the excise tax base of a $50 Fruehauf charge for handling.
On November 15, 1955, the attorney Cushwa wrote to co-conspirator Morris. Cushwa advised that the costs incurred in putting the trailer in perfect condition for delivery were not excludable from the excise tax base. On December 12, 1955, Cush-wa again wrote to co-conspirator Morris, advising Morris that he had consulted with a Mr. Dodge of the Internal Revenue Service. Cushwa stated that the opinion of Mr. Dodge was that if a handling charge was included in the sales price, the charge was includable in the excise tax base and that only if a separate charge for installation had been made to the customer could the charge be excluded from the excise tax base.
In a memorandum dated December 14, 1955, addressed to appellant Rowan, co-conspirator Morris compared the Hobbs method of computing tax on a new trailer sale with the method used by appellant Fruehauf Corporation. Co-conspirator Morris showed that appellant Fruehauf would have paid a greater tax than Hobbs on the same transaction; however, Hobbs had an installation charge included in its sales price that was excluded from its excise tax base. Co-conspirator Morris stated that Hobbs was in error to exclude the installation charge from the excise tax base.
On December 5, 1958, Cushwa advised co-conspirator Morris that the handling charge to retail customers need not be included in the excise tax base so long as the charge was not made to distributors. Cush-wa and co-conspirator Morris reviewed trailer invoices, which indicated that a handling charge was being made to distributors. It was decided to discontinue the practice of charging distributors for a handling charge.
On March 6, 1959, appellants Rowan and Grace and co-conspirator Morris discussed the excise tax aspect of Fruehauf’s handling charge. Appellant Grace stated that it was his impression that Hobbs Trailer Company, before it had been acquired by Fruehauf Corporation, had obtained a ruling from the Internal Revenue Service to the effect that a “get ready” charge could be included in the list price of the trailers but excluded from the excise tax base. Co-conspirator Morris subsequently obtained the Hobbs ruling, which was in fact a District Director’s letter. That letter approved the exclusion of an installation charge from the excise tax base when the installation charge varied from sale to sale depending upon the cost of labor and parts.
At an April 13, 1959, meeting, appellant Rowan and co-conspirator Morris represented to Cushwa that appellant Fruehauf’s handling charge in connection with retail sales was exactly the same as the installation charge of Hobbs Trailer Company. Accepting the representation of appellant Rowan and co-conspirator Morris, Cushwa advised that appellant Fruehauf Corporation could use the Hobbs method of including the handling charge in the retail price but excluding that amount from the list price for the calculation of the excise tax base.
Fruehauf’s handling charge, however, was not the same as the Hobbs installation charge. Fruehauf’s handling charge for retail sales was not limited to installation but covered such diverse items as repairing minor manufacturing defects, replacing defective light bulbs, repairing scratches, lubricating the wheels, washing the tires, and hitching the trailer to the customer’s tractor. Appellant Fruehauf always charged $50 for these services, without regard to the actual costs incurred. Furthermore, appellant Rowan and co-conspirator Morris were aware that the District Director’s letter to Hobbs, which upheld the exclusion from the excise tax base of an installation charge included in the retail price, conflicted with the advice that Mr. Dodge of the Internal Revenue Service had given Cushwa about Fruehauf’s handling charge. Revenue Agent Rochefort did not represent to appellant Fruehauf that the exclusion of a handling charge from appellant Fruehauf’s excise tax base was proper.
In November, 1959, the Hobbs method was instituted through the issuance of new Fruehauf sales manuals. The implementation of the Hobbs method resulted in Frue-hauf maintaining a double set of equipment invoices with respect to each trailer sold to a distributor. One copy showed figures in accord with the information sent to the distributors, the list price less a distributor discount, which was the method of computation consistent with representations made by' Fruehauf to the Internal Revenue Service concerning sales to distributors. The other copy showed an $83 reduction in the list price of the trailer prior to the application of the distributor discount, which was in accord with the figures used by Fruehauf in recording the transaction for its own books and which reflected the exclusion of the handling charge from the excise tax base.
7. Further Increases in the Supplemental Charges and the Distributor Discount.
Along with the issuance of new Fruehauf sales manuals in November, 1959, the distributor discount was increased from 42% off the list price to 45%, and total supple-'mental charges increased from 3.75% of the list price to 5%. The supplemental billings maintained the same designations as before the increase; interest was increased from 4V2% to 6% per annum on the open receivables account balance due from each distributor. Co-conspirator Chawner recommended this increase in supplemental billings, and appellant Rowan approved the increase, even though there were no studies made by appellant Fruehauf to support the increase in supplemental charges. At this time, distributors again were cautioned to record supplemental charges as expenses rather than as a part of trailer cost.
Effective September 1, 1961, appellant Fruehauf, with the specific approval of appellant Grace, again increased the discount to distributors from 45% off the list price to 50% off, plus $50 per unit. With this rate of discount, Fruehauf Corporation was selling certain models of its trailers to distributors virtually at cost; in developing list prices, appellant Fruehauf’s rule of thumb was that cost was 50% of the list price.
This September, 1961, increase in the distributor discount was motivated by excise tax savings considerations. In a memorandum dated February 13, 1962, appellant Grace advised R. N. Biggers, the vice-president of Fruehauf Corporation in charge of the Hobbs Division, that the reason for the “fooling around we have done with Federal Excise Tax” was that “Fruehauf will pick up some $20,000 per month by a 50 percent discount with a 5 percent charge-back than they would if they had stayed at 45 percent and charged back 5 percent.”
8. The Warranty Allowance.
The September, 1961, increase in the distributor discount to 50% off the list price included the warranty allowance that prior to September, 1961, had been indicated specifically on the face of each distributor equipment invoice. The change was quite significant.
At the December 13, 1956, meeting in Washington, D.C., Cushwa, Engel, appellant Rowan, and co-conspirator Morris discussed not only the'proposed supplemental charge plan but also the effect on the excise tax base of a $40 warranty allowance given to Fruehauf’s distributors. In 1956, appellant Fruehauf Corporation had reduced the wholesale price by $40, with the understanding that the distributors would bear the expense of performance under the routine warranty, but in accordance with advice received from the attorney Cushwa and the Internal Revenue Service, had been adding back this warranty allowance into the excise tax base for retail sales. At the Washington, D.C. meeting, Cushwa again advised appellant Rowan and co-conspirator Morris that the warranty allowance would still have to be included in the excise tax base in computing excise taxes on retail sales.
After that meeting, Cushwa sought to verify his advice by conferring with Mr. Dodge of the Internal Revenue Service and by requesting the Internal Revenue Service to issue a ruling on the question. Both the advice of Mr. Dodge and the formal ruling of the Internal Revenue Service indicated that a warranty charge to retail purchasers must be included in the excise tax base in computing the tax on retail sales, despite a warranty allowance given at wholesale. As to distributor sales, the Internal Revenue Service refused to take a position in the absence of the copies of the agreements in which the distributors agreed to assume the warranty costs. Until September, 1961, the procedure was thus to treat retail and wholesale sales differently in terms of the excise tax treatment of the warranty. The warranty allowance to distributors was excluded from the excise tax base on distributor sales, but it was added back to the excise tax base on retail sales.
Effective September 1, 1961, the price to distributors was decreased from 45% off the list price to 50% off plus $50 per unit. Concealed in the increased discount at wholesale was the warranty allowance that had previously appeared as a separate deduction on each distributor equipment invoice. The warranty charge to retail purchasers was thus effectively eliminated from the excise tax base attributable to retail sales, contrary to the ruling of the Internal Revenue Service.
Co-conspirator Morris, in an October 25, 1961, letter to Cushwa falsely stated that after September 1, 1961, there was “no allowance to the distributor for warranty expense.” In fact, there was still a warranty allowance. It was concealed in the additional discount so that the warranty allowance could be excluded from the excise tax base for retail sales as well as wholesale sales. Appellant Grace told one distributor that appellant Fruehauf “changed the name from warranty to something else in order to help out a little on the tax problem.”
9. Appellant Fruehauf’s Make-Ready Allowance to Distributors.
In his October 25, 1961, letter to Cushwa, co-conspirator Morris wrote that appellant Fruehauf Corporation was extending a $50 make-ready allowance to its distributors to cover the expenses of adjusting the customer’s coupler, of any necessary rework, and of any other delivery preparation, expenses which were being incurred in connection with the sale of each trailer. Beginning January 1, 1962, the $50 allowance to distributors was recovered by increasing the supplemental charge to distributors by $50 per unit. The make-ready charge was thus shifted from the wholesale price to the supplemental billings. This additional $50 per unit supplemental charge was not separately designated on the monthly supplemental charge invoices.
Before this procedure of extending the make-ready allowance and recouping that allowance in the supplemental billings was instituted, co-conspirator Morris expressed a reluctance to appellant Rowan as to putting into effect the procedure. Co-conspirator Morris did not believe the $50 exclusion from the distributors’ price, with subsequent recovery of the allowance through supplemental charges, to be proper. When at one time co-conspirator Morris and appellant Rowan were discussing the matter, appellant Rowan received a telephone call from appellant Grace, who asked to speak to co-conspirator Morris. Appellant Grace told co-conspirator Morris that he wanted to hear co-conspirator Morris tell appellant Rowan to go ahead with the make-ready allowance from price and recovery in supplemental charges. Despite the misgivings that co-conspirator Morris had concerning this matter, Morris, holding the telephone in a way that would carry his voice to appellant Grace, told appellant Rowan to go ahead with the make-ready charge.
In February and March, 1962, co-conspirator Chawner told distributors that the $50 per unit increase in supplemental charges for handling was strictly fictional for the purpose of saving $5 in excise tax. Despite the obvious addition of a $50 per unit charge on the supplemental billings, appellant Rowan told attorney Milton J. Mehl that there had been no change in the procedure or amount of supplemental billings.
10. The Supplemental Charges For the Southern Railway Trailers.
In March and April of 1964, distributor Warner-Fruehauf purchased a number of trailers from appellant Fruehauf and then leased those trailers to Southern Railway. At Warner-Fruehauf’s request, appellant Fruehauf cancelled the supplemental charges for “printed matter” and “management consulting” that had been issued at the time of the sale of the trailers to Warner-Fruehauf. New charge invoices were prepared for the same amount as had been billed under the designations “printed matter” and “management consulting,” but the charges were for special engineering research, stress analysis, and design cost work allegedly performed from January 1, 1964, through June 30, 1964. No records were maintained by appellant Fruehauf, however, as to these services described as special engineering research, stress analysis, and design cost.
11. Supplemental Charges Come Under Internal Revenue Service Scrutiny; Fruehauf’s Response.
By 1964, when Internal Revenue Service agents were questioning appellant Frue-hauf’s supplemental charge plan, the amounts charged in the supplemental billings had really grown to excessive proportions. In September, 1964, the supplemental charges to Hobbs Trailer Company were in excess of $366 per unit for printed matter and in excess of $733 per unit for management consulting fees. In October, 1964, Hobbs was charged $473 per unit for printed matter and $946 per unit for management consulting fees. (Government Exhibit 22.) These figures for September and October were within a few cents of equall-ing 5% of the trailer price.
On September 18, 1964, co-conspirator Morris told Revenue Agent Kiefer that the denomination of billings for services to distributors made no difference to the Frue-hauf Corporation and that the supplemental charge for interest was “not really interest but an amount billed to show the distributor what he could owe as interest.” On October 16, 1964, co-conspirator Morris admitted to Revenue Agent Kiefer that there were no records to substantiate the supplemental charges.
On December 29, 1964, co-conspirator Morris wrote a memorandum to appellant Rowan, recommending that Fruehauf Corporation consider the revision of its method of computing the federal excise tax on its sales. In the memorandum, co-conspirator Morris first reviewed the structure of the supplemental charge plan, noting that the supplemental billings were at 5% of the list price, and then indicated that federal agents would be contending that the supplemental charges were components of the wholesale price and hence includable in the excise tax base. Morris stated that most of the items billed as supplemental charges were “doubtful at best” and that “upon negotiation we will be fortunate. to sustain our position on two of the five (percentage) points.” Morris advised that the alternatives were: (1) that the supplemental billings be eliminated, (2) that the supplemental billings be based on specific charges rendered (which according to the original advice of attorney Cushwa was necessary to counsel’s approval of the plan), (3) that the supplemental billings be included in the wholesale price, and (4) that computation of the excise tax be done according to the “retail method.”
Effective January 1, 1965, the Fruehauf supplemental charge plan designations were changed from “printed matter,” “management consulting,” and “interest” to “finance,” “teletype,” and “interest.” These new charges were posted on appellant Fruehauf Corporation’s books, like the old charges, as recovery of costs applicable to new trailers. The supplemental charge for “teletype” was an allocation of Fruehauf’s total expenses of operating its teletype system, over and above that amount already recouped through monthly teletype “rental” charges to each distributor. The supplemental charge for “finance” was a proration of the total operating expenses of the Fruehauf Finance Company, a separately incorporated but wholly owned subsidiary of appellant Fruehauf Corporation. The supplemental “interest” charge was equal to 9% per annum on the month-end balances of each distributor’s equipment account and parts and services account. These billing designations continued in effect through February 8, 1966, the date of the filing of the quarterly manufacturers excise tax returns for the fourth calendar quarter of 1965, the last overt act listed in the indictment.
In recorded testimony taken in 1967 by the Internal Revenue Service, appellant Rowan admitted that the cost of rendering services to appellant Fruehauf’s distributors was an unsegregated portion of the cost of operating several of appellant Fruehauf’s departments and was considered by appellant Fruehauf in developing its selling prices and profit margins. At trial, co-conspirator Morris testified that he had no knowledge of any studies that justified the increases in and modifications of the supplemental billings.
The Tire Tax Credit Scheme
Tire manufacturers publish price lists, known as OEM (original equipment-manufacturer) price lists. During the period of the conspiracy charged in the indictment, appellant Fruehauf Corporation, as a large volume purchaser

Question: What is the general issue in the case?
A. criminal
B. civil rights
C. First Amendment
D. due process
E. privacy
F. labor relations
G. economic activity and regulation
H. miscellaneous
Answer:

Answer: A