Opinion ID: 395207
Heading Depth: 3
Heading Rank: 4

Heading: Investigation of Leads

Text: 36 After introducing proof that Scott's net worth increased during 1972 due to campaign contributions diverted to his personal use, the government demonstrated that it had investigated all reasonable leads provided by Scott as to nontaxable sources of income which, if true, would establish his innocence. Holland v. United States, 348 U.S. 121, 135, 75 S.Ct. 127, 135, 99 L.Ed. 150 (1954). Scott presented various leads to the Tax Division of the Department of Justice in a conference held on March 27, 1979 with the Division lawyers. 21 A letter submitted shortly after the conference, on March 30, 1979, detailed these leads. The government spent considerable time at trial proving that these leads had been investigated and accounted for in the net worth analysis. Some leads were shown to be false exculpatory statements made by Scott or through his counsel. 37 In this letter of March 30, 1979, Scott claimed that he had used the safe deposit box monies discovered by Mrs. Humphrey to repay himself for unreimbursed political expenses. He alleged that he was owed $14,000 from his 1964 gubernatorial campaign and $35,000 from his 1968 campaign. The government introduced considerable evidence to rebut this claim. 38 As to the 1964 debt, the accountant for Scott's 1964 campaign testified that he had examined all of the 1964 campaign records and found nothing indicating that anyone, including Scott, had incurred unreimbursed expenses during that campaign. Moreover, in January, 1965, supporters held a testimonial dinner for Scott for the purpose of repaying any remaining campaign expenses and raising money for future campaigns. After all of the dinner expenses and all the known 1964 campaign debts had been paid, $51,466.84 remained, all of which was deposited in the William J. Scott Continuing Fund and the William J. Scott Dinner Committee Fund, both of which were campaign accounts. Scott sought no reimbursement from the proceeds of this dinner, and the dinner chairperson testified that he could not recall Scott mentioning any unpaid campaign expenses. Finally, the government introduced evidence that, based on his 1964 tax returns and work papers, Scott had insufficient funds available in 1964 to make the $14,000 in expenditures claimed. 22 39 The government also introduced records from Scott's 1968 campaign. These records showed no unreimbursed expenses. Indeed, on October 18, 1967, Scott wrote a letter to Elliott Frank, trustee of Scott's newly formed Citizens for William J. Scott for Public Office (the Committee), see note 15, supra, regarding the manner in which he was to be reimbursed for political expenditures he personally incurred. In this letter, Scott stated that he would forward the invoices of any new expenditures so that the Committee could make the payments directly. He then wrote, I will also turn over a monthly list of my personal political expenses for reimbursement. During 1967, all of 1968, and on through the indictment years, Scott kept meticulous records of his political expenses, which the Committee then reimbursed. For example, his reimbursement requests for 1968 included $606 for political secretarial services, Gov't Ex. C-5, as well as $4 baby-sitting expenses and baggage tips, Gov't Ex. C-6. In early January, 1969, he submitted a final tally of 1968 Political Expenses of William J. Scott Not Previously Recovered, Gov't Ex. C-11. This tally totaled $546.69 and again, covered everything from dinner and transportation expenses to $1.50 baggage tips. The jury could infer from this evidence that Scott had not spent $35,000 in personal funds in 1968 for political purposes without seeking reimbursement. Moreover, the government introduced testimony that Scott had insufficient personal funds available to make such expenditures in the first place. 40 In the March 30, 1979 letter, Scott also stated that until February, 1975, he was a major shareholder in, chief executive officer of, and primary salesman for the Holiday Travel House, Inc. He was therefore able to travel on Holiday House business and at its expense during the prosecution years. He further alleged that he received free airline travel and lodging on special occasions, and was able to purchase travel tickets at a 75% discount. 41 The government rebutted this lead by demonstrating that its net worth calculations credited Scott with any reduced rate or free travel he had obtained: the schedules were based solely on Scott's documented expenditures and assumed no full price travel on his part. Nor did the government treat as income any reimbursements Holiday Travel House may have given Scott. 23 Thus, Scott's claims regarding his travel costs had no impact on the government's net worth calculations. 42 The March 30, 1979 letter also contained eight subparagraphs purportedly describing sources of cash available to Scott. The first subparagraph referred to attached documents, which were photocopies of purchaser's copies of two bank drafts. Each draft was for $2,500, and payable to Mrs. Mary Abelson and William J. Scott, respectively. The letter stated that Scott did not have the original checks, but that the one to Mrs. Abelson was reendorsed to William J. Scott, and that he cashed both drafts in 1971. At trial, the government showed that Mrs. Mary Abelson and not Scott had in fact endorsed and negotiated the check made out to her, contrary to Scott's assertion. As to the check made payable to William J. Scott, the government proved that Scott had not cashed the check, but rather had used it to purchase Treasury Notes. 43 The second purported source of cash listed by Scott in the letter was a cashier's check on the LaSalle National Bank dated May 10, 1968, in the amount of $5,000. The government introduced evidence showing that this money was deposited into the savings account that Scott and his first wife maintained at Harris Trust & Savings Bank. 44 The third subparagraph listed a National Boulevard Bank document dated February 23, 1971, indicating that Scott received $5,000 in Treasury Notes due on November 15, 1971. The sixth subparagraph referred to a letter from the National Boulevard Bank dated December 16, 1970, stating that Scott possessed $7,000 in U.S. Treasury Notes due on November 15, 1971. The government's evidence indicated that both of these paragraphs referred to the same transaction, which began with a check payable to Citizens for Scott for Public Office and ended with the $7,000 being turned into certificates of deposit, rendering it unavailable as cash. 45 The fourth subparagraph referred to a National Boulevard Bank document stating that Scott received a $5,000 U.S. Treasury Bill due on January 31, 1971. The government's evidence indicated that the proceeds of this Treasury Bill were used to purchase the two bank drafts referred to in the first subparagraph, the checks payable to Mrs. Mary Abelson and William J. Scott, thereby providing no evidence of cash available to Scott. 46 The fifth subparagraph listed three possible sources of cash. The first was a National Boulevard Bank record reflecting 1966 ownership of World Airways Stock. Government evidence showed that Scott had originally purchased 700 such shares. He sold 600 of them in 1966. The remaining 100 shares he sold for $2,225 in 1967, the proceeds of which he deposited in his Harris Bank account. The second alleged source of cash listed in this paragraph referred to the same transaction previously listed in subparagraphs four and one, thus providing no cash for Scott. Finally, the third source listed in subparagraph five was the same transaction listed in paragraphs three and six. 47 There were no documents attached in support of the seventh subparagraph, which implied that Scott, at some point in time, owned 80 units of securities in Loew's Theatres, Inc. Scott referred to no such interest in any of his income tax returns filed between the late 1960s and 1975, nor did he include it in any Statements of Economic Interest filed with the Illinois Secretary of State. Neither was it referred to in the property settlement between Scott and his first wife. A government witness contacted Loew's for evidence of any investment held by Scott but testified that Loew's had no records of any such investment. In short, the government could uncover no evidence indicating that Scott had any cash available from that source. 48 The eighth subparagraph purported to list six withdrawals from Scott's checking accounts during 1967, for a total of $16,000. Government evidence showed that three of these listings were the same transaction. None of them resulted in any cash being available to Scott. Rather, these checks for cash were simply deposited into savings accounts or other accounts maintained by the Scotts. 49 Finally, between March 27, 1979 and April 2, 1979, Scott provided the Tax Division of the Department of Justice and the U.S. Attorney with the names of 100 persons who allegedly made cash gifts to Scott. Prior to the indictment, various Internal Revenue Service agents attempted to contact these people on these lists for information about their purported gifts. The government introduced memoranda reporting these contacts as evidence of its efforts to investigate leads. The memoranda stated that of the persons contacted, seventy-five reported that they gave only nominal amounts to pass-the-hat funds for Scott's birthday or Christmas presents. 24 Two of the people Scott listed did not exist, and sixteen could not be reached prior to the return of the indictment. The remaining individuals reported several different things. One stated that he had loaned $1,500 to Scott in 1970 which had never been repaid. This sum was already reflected in the government's net worth figures. One remembered making one payment of $500, which the government showed was deposited into Scott's campaign account. Another could recall giving Scott no money after the late 1960s, and yet another reported making no contributions of any nature. Two persons refused to talk to the government agents. Only one person said that he gave gifts between the early 1960's through 1976 which perhaps totaled $1,000. He was called as a government witness. 50