Court Opinion

ID: 8894160
Source: CourtListenerOpinion
Date Created: 2022-11-26 23:41:15.61655+00
Date Added: 2024-06-11T17:07:22.911452
License: Public Domain

DUNIWAY, Circuit Judge:
I concur in the portions of this opinion prepared by Judges Renfrew and Browning.
XVI. Criminal Liability of Emprise Corporation.
Appellant Emprise Corporation argues that it is not liable for any criminal acts committed by its predecessor in interest. The facts are these: Before March 1, 1970, there was a New York corporation called High Park Corporation, which owned all of the shares of another New York corporation, Emprise Corporation (Old Emprise). On March 1, 1970, Old Emprise merged into its parent, High Park Corporation. On March 17, 1970, High Park Corporation amended its corporate name to Emprise Corporation (New Emprise).
The February 26, 1971, indictment in this case charged “Emprise Corporation” as a defendant. In July, 1971, it became clear that this meant Old Em-prise, and, on September 9, 1971, the district court dismissed as to Old Em-prise for want of personal jurisdiction over it. The government filed an information against New Emprise. New Emprise moved to dismiss, but this motion was denied, and New Emprise was convicted of violating 18 U.S.C. §§ 371 and 1952 and was fined $10,000. The charged offense was committed by Old Emprise, before the merger.
*907The question is whether the surviving corporation of a merger, here New Em-prise, can be held criminally liable for acts committed by a former subsidiary constituent corporation (Old Emprise) which later merged into the survivor.
Appellants argue that in this federal ease we must apply federal law, regardless of what the state law may be, and that under federal law only the constituent corporation, not the surviving corporation, can be prosecuted. Of course we apply federal law. That, however, does not answer the question. Federal courts, in deciding federal cases, often borrow otherwise applicable state law as the federal law to be applied in a federal case when doing so is reasonable and there is no contrary federal policy. Here, Old Emprise and New Emprise are New York corporations. We can think of no federal policy that would prohibit our borrowing New York law in deciding whether New Emprise is liable for a crime committed by Old Emprise. Neither can appellants, beyond mere assertion.
 Under the Constitution, the federal government is not expressly granted the power to form corporations; it may do so only under the necessary and proper clause.1 See, e. g., McCulloch v. Maryland, 1819, 17 U.S. (4 Wheat.) 316, 4 L.Ed. 579. The result is that nearly all corporations in the United States are creatures of state law. This also means that when Federal statutes refer to “corporations” they necessarily include within that word corporations created under state law. Some Federal statutes are expressly applicable to state created corporations. See, e. g., 15 U.S.C. § 7; Melrose Distillers v. United States, 1959, 359 U.S. 271, 272, 79 S.Ct. 763, 3 L.Ed.2d 800. In this case New Emprise was convicted of violations of 18 U.S.C. §§ 371 and 1952. § 371 refers to “persons” and § 1952 to “ [w] hoever.” Under the Federal Rules of Construction, 1, U.S.C. § 1.
In determining the meaning of any Act óf Congress, unless the context indicates otherwise— H
* -x- -x- * -x- ti-
the words ‘person’ and ‘whoever’ include corporations * * * as well as individuals;
***** -X- ”
The term “corporations” as used in 1 U. S.C. § 1 clearly includes corporations formed under state law. See Alamo Fence Company of Houston v. United States, 5 Cir., 1957, 240 F.2d 179, 181. Nothing in the contexts of §§ 371 and 1952 indicates meanings for the terms “persons” and “whover” other than those of 1 U.S.C. § 1. Therefore, the existence and status of corporations charged under §§ 371 and 1952 should be determined by reference to the law of the state of their incorporation, unless the application of that law would conflict with federal policy. Cf. Melrose Distillers v. United States, supra, 359 U.S. at 274. In this case, no such conflict exists, and New York law, therefore, will be applied.
Convenience and common sense also point to the adoption of New York law as the federal law in this case, for the purpose of determining whether New Emprise is criminally liable. Both Old and New Emprise are artificial creations, wholly dependent on New York law for their existence. New York law defines their powers, rights and liabilities, prescribes their procedures, governs their continued existence, and defines the terms upon which mergers may occur and the effect to be given to mergers. These corporations were created under New York law by people, however, and any penalty imposed on them is, indirectly, a penalty imposed upon the people who own and control them. If New York law provides for the imposition of such a penalty for acts for which those people bear the ultimate responsibility, there is no good reason for relieving them of the penalty because it arises *908from federal law. See Alamo Fence Company of Houston v. United States, supra, 240 F.2d at 183.
Under modern state corporation laws, a corporation once formed, in the absence of a provision limiting its juristic life, exists perpetually unless it is dissolved or its corporate character is annulled.2 It is often said that the merger of a corporation into another is similar to the death of an individual, in that all current or future litigation by or against it is abated except insofar as the state of incorporation may continue its juristic life. Melrose Distillers v. United States, 1959, 359 U.S. 271, 272, 79 S.Ct. 763, 3 L.Ed.2d 800; Oklahoma Natural Gas Co. v. Oklahoma, 1927, 273 U.S. 257, 259-260, 47 S.Ct. 391, 71 L.Ed. 634; United States v. Safeway Stores, Inc., 10 Cir., 1944, 140 F.2d 834, 836; United States v. Brakes, Inc., 157 F.Supp. 916, 918-919 (S.D.N.Y.1958); United States v. Cigarette Merchandisers Ass’n, 136 F.Supp. 214, 215 (S.D.N.Y.1955) (and cases cited therein at 215, n. 4). We turn to the New York law to determine the effect of the merger in this case.
The relevant state statute governing the question here is N.Y.Bus.Corp. Law § 906(b)(3) (McKinney 1963, Con-sol.Laws, c. 4), which provides that after a certificate of merger or consolidation has been filed,
The surviving or consolidated corporation shall assume and be liable for all of the liabilities, obligations and penalties of each of the constituent corporations. No liability or obligation due or to become due, claim or demand for any cause existing against any such corporation, or any shareholder, officer or director thereof, shall be released or impaired by such merger or consolidation. No action or proceeding, whether civil or criminal, then pending by or against any such constituent corporation, or any shareholder, officer or director thereof, shall abate or be discontinued by such merger or consolidation, but may be enforced, prosecuted, settled or compromised as if such merger or consolidation had not occurred, or such surviving or consolidated corporation may be substituted in such action or special proceeding in place of any constituent corporation.
The first sentence of § 906(b)(3) states that the surviving corporation is liable for its constituents’ “liabilities, obligations and penalties. .” While no court has decided whether “liabilities” and “obligations” as used in § 906(b)(3) refer to criminal liabilities and obligations, two courts have held that these words, as used in other provisions of New York’s corporation laws, do refer to criminal liability. United States v. Cigarette Merchandisers Ass’n., supra (construing § 90 of the New York Stock Corporation Law); People v. Bankers’ Capital Corp., 1930, 137 Misc. 293, 241 N.Y.S. 693 (construing § 216(1)(e) of the New York General Corporation Law). We note, too, that § 906(b)(3) also uses the word “penalties.” We therefore hold that the first sentence of § 906(b)(3) permits the maintenance of a prosecution against the surviving corporation for crimes allegedly committed by a constituent corporation.
Such a construction of New York’s corporation law is not unique. New York courts have held that civil causes of action arising before a merger or consolidation may be instituted against the surviving or the consolidated corpora*909tion. O’Brien v. New York Edison Co., et al. (two cases). 19 F.Supp. 968 (S.D.N.Y.1937); Cameron v. United Traction Co., 1902, 67 App.Div. 557, 73 N.Y.S. 981; Lee v. Stillwater and Mechanicville St. Ry. Co., 1910, 140 App.Div. 779, 125 N.Y.S. 840. Appellants cite numerous cases which hold that a constituent corporation3 or a dissolved corporation 4 remains subject to criminal prosecution. None of these cases, however, holds that a surviving corporation (in the case of a merger or consolidation) may not be prosecuted. These cases therefore do not conflict with our holding. We adopt, as to the liability of New Emprise, the New York law as the federal law in this case. We leave to another day the question whether we would borrow applicable state law if that law were to purport to relieve both the constituent corporation and the surviving corporation of liability for crimes of the constituent corporation.
XVII. Sufficiency of the Evidence.
Appellants argue that the evidence is insufficient to sustain their convictions. Except as to appellant Giordano, whose arguments we have discussed above (see part XV, supra), their arguments lack substance. It would serve no useful purpose to set out the evidence in detail. We have examined it,- and we find it more than sufficient.
XVIII. The Taint of Illegal Electronic Surveillance.
Appellants claim that the trial was materially tainted by leads from unlawful electronic surveillance.
Between 1962 and 1965, the government conducted electronic surveillance against appellants Zerilli, Polizzi and Giordano.” The product of this surveillance is embodied in typewritten transcriptions or “logs” of the intercepted conversations. The government concedes that the electronic surveillance was conducted illegally.
The prosecutors were initially unaware of this surveillance, but on June . 3, 1971, they were informed of it by the Justice Department. On September 8, 1971, the district court ruled that there would be a post-trial Alderman hearing.5 An in camera hearing was held on November 13, 1971, at which the court ruled that pretrial access to the logs would be limited to appellants Zerilli, Polizzi, Giordano, and their respective attorneys. At the post-trial Alderman hearing, which commenced on June 12, 1972, and continued on June 13, June 14, June 15, June 23, and July 7, 1972, the court concluded that “the evidence in this case came from an independent source and was not tainted by the illegal electronic surveillance.”
Appellants argue that the evidence accumulated from the unlawful surveillance was used in their prosecution and fatally contaminated their trial. Alternatively, they ask that we remand for a more complete Alderman hearing.
a. Standing.
Only Zerilli, Polizzi and Giordano were subjected to electronic surveillance and the court ordered that only these three appellants and their attorneys be given access to the logs. On appeal, appellants Shapiro and Bellanca assert that they, as coconspirators, should also have been given access to these logs. *910This same argument was made by petitioners in Alderman v. United States, supra, and was rejected. 394 U.S. at 171-176. See also Mancusi v. DeForte, 1968, 392 U.S. 364, 88 S.Ct. 2120, 20 L.Ed.2d 1154; Simmons v. United States, 1968, 390 U.S. 377, 88 S.Ct 967, 19 L.Ed.2d 1247; Jones v. United States, 1960, 362 U.S. 257, 261, 80 S.Ct. 725, 4 L.Ed.2d 697; Wong Sun v. United States, 1963, 371 U.S. 471, 491-492, 83 S.Ct. 407, 9 L.Ed.2d 441; Goldstein v. United States, 1942, 316 U.S. 114, 121, 62 S.Ct. 1000, 86 L.Ed. 1312. The court’s ruling as to standing was correct.
b. The Existence of Taint.
At an Alderman hearing, the court must determine whether the prosecution used unconstitutionally seized material directly or indirectly to develop the evidence it produced at trial, or obtained its trial evidence from an independent and untainted source. Alderman v. United States, supra, 394 U.S. at 183. A defendant who shows that he was the victim of an unconstitutional search “must go forward with specific evidence demonstrating taint.” 394 U.S. at 183. Then the burden shifts to the government to show that it acquired its evidence from an independent source.6
Appellants make numerous arguments to show that their trial was tainted by the use of the logs. We consider them seriatim.
1. The benchside conference of March 28, 19721
Polizzi testified on direct examination that he was unable to obtain a Nevada gambling license in March, 1966, because he had a “problem.” [R.T. 5391, 5398, 5402.] On cross-examination, the prosecutor asked the nature of Polizzi’s problem. Polizzi then stated that his “problem” was that in 1963 he had been placed on the Attorney General’s list of Mafia figures. [R.T. 5466.]
On redirect examination, Polizzi’s attorney returned to the subject of the Mafia. Polizzi testified:
“It was Mr. George Edwards who was the police commissioner of the City of Detroit that made his testimony before the Senate Committee, and he was the one that was directly responsible for putting my name on this chart.
. I was very disturbed and felt that I was falsely accused. I wrote a letter to the Mayor of Detroit and felt that it was unjust that for no rhyme or reason to just be put on there and be falsely accused of these things . . . .” [R.T. 5576-77.]
At this point, Mr. Kotoske, the prosecutor, approached the bench and, outside of the jury’s hearing, told the court that Polizzi was perjuring himself and threatened to introduce the surveillance logs showing Polizzi’s ties with organized crime in Detroit:
“Mr. Kotoske: . . . [I]f [Mr. Murphy, Polizzi’s attorney] read those logs at all he understands that this man on the witness stand [Polizzi] and Tony Zerilli laid out the whole Mafia organization in Detroit, how they cut up black money—
They laid out the whole organization, who is on this payoff, who is running the rackets, how the money is transferred, all discussion about black money, who it is that they have to eliminate from the organization, who they are going to — the whole complete thing, the complete structure is laid out there.
*911I have sat by for about six weeks and let this nonsense go on. If he continues to persist in this, I have no alternative but to confront this witness with his own transcription of his voice and make him out a crown liar right in this courtroom.
I don’t want to do that ....
We had better draw the line and abandon the topic or I am telling counsel I will come forward with those logs ....
The Court: Mr. Murphy, let me say this :
[T]his thing has gone far enough. You have the ability to have your client make the explanation that he has made, but my suggestion to you — I am not ordering it at all, but my suggestion to you is that you ought not go much further with that, because it may open a wider door than you want to have opened. And I do not want this trial to get into a public accusation of who is or is not a member of the Mafia . . . .” [R.T. 5578-80.]
The line of questioning about the Mafia was dropped by Polizzi’s counsel and the government never introduced the logs to impeach Polizzi’s testimony.
Appellants contend that the incident was a use of the surveillance logs at the trial and tainted the entire case. We cannot agree although it was indeed a “use.” First, no evidence from the logs was actually introduced. The prosecutor only threatened to use the logs to impeach Polizzi’s character. Second, the government’s threat came only after Polizzi at least twice testified to his own lack of Mafia connections, once on direct and again on cross. It cannot be said that the prosecutor’s threat hindered the defense from making its point to the jury. Third, the threat to use the tapes did not form part of the government’s case; it related solely to impeachment, after Polizzi had testified to his own lack of Mafia ties. Walder v. United States, 1954, 347 U.S. 62, 65, 74 S.Ct. 354, 98 L.Ed. 503, cf. Harris v. New York, 1971, 401 U.S. 222, 91 S.Ct. 643, 28 L.Ed.2d 1. Such use would not be an unlawful taint.
2. The leak to the press.
On March 29, 1972, the day after the benchside conference, one Gene Blake, a Los Angeles Times reporter, was seen reading the government’s copy of the previous day’s transcript. [R.T. 5786.] Defendants’ counsel accused the prosecutor of deliberately providing Mr. Blake with the transcript; the prosecutor denied this charge.7 Defendant’s counsel then asked the court to order the Times not to report on the March 28 benchside conference, but the court refused.
The next day a Times article was headlined “Transcript Shows U. S. Bugged Vegas Defendants’ Mafia Talks.” The article contained direct quotes from the March 28 benchside conference concerning the surveillance logs. Appellants assume that the jury saw this article and took it into account in reaching its verdict, and that therefore the trial was tainted by information from the logs. We cannot agree. There was no evidence that any juror read this article, nor were the logs used by the jury in their deliberations. Thus there was no “relevance to [appellants’ convictions] of any conversations which may have been overheard through . . . surveillance.” Alderman v. United States, supra, 394 U.S. at 186.
3. The Friedman sentencing memorandum.
One of the major sources of the prosecutor’s case was the Friedman sentencing memorandum, a document prepared *912in connection with the sentencing of Maurice Friedman on February 3, 1969, in another case. Appellants claim that this document was tainted by information from the surveillance logs.
Looking at the evidence in the light most favorable to the government, the following testimony was produced concerning the sentencing memorandum: U. S. Attorney David Nissen, who wrote this memorandum, relied on three sources for its preparation: (1) information he received from FBI agent Wayne Hill, (2) a tape supplied to him by one Dr. Victor Lands in connection with another trial (the Lands transcript), and (3) information he received from (then) U. S. Attorney William Matthew Byrne, Jr. [R.T. 10,029-31.]
Appellants do not claim that the Lands transcript or Byrne’s information is tainted; their only objection concerns agent Hill’s information. Hill testified that all the information he received, which he subsequently passed on to Nissen, came from either “live Bureau informants” (civilian informants) or from the Intelligence Division of the Los Angeles Police Department. [R.T. 9421-24.] He was then asked:
“Q. Now do you know, Mr. Hill, that any of the information you provided Mr. Nissen that found its way into this sentencing memorandum was the result or can in any way be attributed to the surveillance logs in this case?
A. No, it could not.” [R.T. 9425.]
On cross-examination, Hill said that these live Bureau informants gave information to various FBI agents around the country, who passed the material on to Hill, who, in turn, passed the information on to Nissen, who wrote the memorandum. [R.T. 9522-23, 9563-65.] Although the names of the informants were not revealed [R.T. 9523], agent Hill did provide the names of two FBI agents who received such information. [R.T. 9524, 9531, 9563-64.] The appellants did not produce any evidence to refute Hill’s testimony. The court properly concluded that the Friedman sentencing memorandum was not tainted.8
4. Lack of FBI monitors at the Alderman hearing.
Appellants argue that they did not receive a fair Alderman hearing because only one of the FBI personnel who conducted electronic surveillance was called as a witness.
Alderman provides a flexible standard as to what witnesses must be examined in a taint hearing:
“Armed with the specified records of overheard conversations and with the right to cross-examine the appropriate officials in regard to the connection between those records and the case made against him, a defendant may need or be entitled to nothing else. Whether this is the case or not must be left to the informed discretion, good sense, and fairness of the trial judge.” Alderman, supra, 394 U.S. at 185.
The district court adopted the following procedure to govern the taint hearing: There were numerous government officials throughout the country who had had access to the surveillance logs. The critical issue at the taint hearing, however, was not whether these officials had had access to the logs but whether any knowledge of the contents of the logs was imparted by these officials to the United States prosecutors in Los Ange-les. Thus, instead of bringing all the government officials to the hearing, the court ordered the government to provide *913the defense with the names of all of them so that the defendants could ask each government prosecutor, on the witness stand, whether he had received any information about the logs from the named officials.9 [Clerk’s Transcript (hereinafter referred to as C.T.) 3321.]
At the taint hearing, three members of the prosecution team testified that the source of this case was the Friedman interview and sentencing memorandum.10 Two members of the team testified that they were not even aware of the existence of the logs when the indictments in this case were handed down on February 26, 1971.11 Judge Byrne, who left the United States Attorney’s office in May, 1970, testified that he did not know that the logs existed in February, 1970, when he interviewed Mr. Friedman. [R.T. 9225.] U. S. Attorney Hornbeck knew of the existence of the logs, but had not read them and therefore did not use any information from the logs to assist him before the grand jury. [R.T. 10,262.] In addition, three members of the team testified that they did not contact any government officials who had access to the logs.12 Two other attorneys did contact one of these officials, James Ritchie,13 but none of the information received from Ritchie related to the logs. This information, which consisted of some bank records, audits, and IRS personal interviews, was the result of subpoenas served on banks or of personal interviews.
The picture which thus emerges from the taint hearing is that no member of the prosecution team had read the logs ■ or had any information derived from them when the indictments were handed down. Only two attorneys had contacted a government official who had access to these logs, and the information received from him was not derived from the logs. Moreover, by the time the indictments were handed down the evidence gathering process was complete, and no other significant evidence was produced at the trial. Counsel for appellants did not produce any witnesses to refute this testimony.
While FBI monitors have testified at some taint hearings,14 there is no rule that they must testify. The issues raised in cases in which the court has ordered FBI personnel to testify15 are obviated here as a result of the prosecution team’s undisputed testimony that they received no information related to the logs from any government officials who had access to the logs.
The district court concluded that the government met its “ultimate burden of persuasion to show that its evidence is untainted.” Alderman, supra, 394 U.S. at 183. Having carefully examined the evidence produced at the taint hearing, we agree with the district court’s finding.
Affirmed.

. U.S.Const. art. I, § 8.

. “Neither bankruptcy . . . nor cessation of business . . . nor dispersion of stockholders, nor the absence of directors . nor all combined, will avail without more to stifle the breath of juristic personality. The corporation abides as an ideal creation, impervious to the shocks of these temporal vicissitudes. Not even the sequestration of the assets at the hands of a receiver will terminate its being.” Petrogradsky Mejdunarodny Kommercliesky Bank v. Nat’l City Bank of New York, 1930, 253 N.Y. 23, 31-32, 170 N.E. 479, 482 (Cardozo, C.J.), reargument denied, 1930, 254 N.Y. 563, 173 N.E. 867, cert. denied, 1930, 282 U.S. 878, 51 S.Ct. 82, 75 L.Ed. 775.

. United States v. Stone, 8 Cir. 1971, 452 F.2d 42; United States v. Anaconda American Brass Co., 210 F.Supp. 873 (D.Conn.1962); United States v. Maryland and Virginia Milk Producers, Inc., 145 F.Supp. 374 (D.D.C. 1956); United States v. Cigarette Merchandisers Ass’n, Inc., supra; United States v. Union Carbide and Carbon Corp., 132 F.Supp. 388 (D.Colo.1955), modified, 10 Cir., 1956, 230 F.2d 646.

. Melrose Distillers, Inc. v. United States, supra; United States v. BBF Liquidating, Inc., 9 Cir. 1971, 450 F.2d 938; Alamo Fence Co. of Houston v. United States, 5 Cir., 1957, 240 F.2d 179; United States v. P. F. Collier & Son Corp., 7 Cir., 1953, 208 F.2d 936; United States v. Globe Chemical Co., 311 F.Supp. 535 (S.D.Ohio 1969); United States v. Arcos Corp., 234 F.Supp. 355 (N.D.Ohio 1964); United States v. San Diego Grocers Ass’n, Inc., 177 F.Supp. 352 (S.D.Cal.1959); United States v. Brakes, Inc., supra.

. Alderman v. United States, 1969, 394 U.S. 165, 89 S.Ct. 961, 22 L.Ed.2d 176.

. “The burden is, of course, on the accused in the first instance to prove to the trial court’s satisfaction that wire-tapping was unlawfully employed. Once that is established — as was plainly done here — the trial judge must give opportunity, however closely confined, to the accused to, prove that a substantial portion of the case against him was a fruit of the poisonous tree. This leaves ample opportunity to the Government to convince the trial court that its proof had an independent origin.” Nardone v. United States, 1939, 308 U.S. 338, 341, 60 S.Ct. 266, 268, 84 L.Ed. 307. See also Alderman, supra, 394 U.S. at 183.

. “Mr. Kotoske: May I make a full and complete but short statement, your Honor?
[A] bout giving transcripts of the daily proceedings to any newspaperman, I never in my life have done that. I have never done that in this case. I did see Mr. Blake reading from the transcript and I personally took it upon myself to go over to Mm this morning and ask him to please not print anything that transpired at the side bar. That is the fact, that is not fantasy.” B..T. 5790-91.

. Appellants claim that “the court refused even to permit appellants, at their own expense to produce those agents to find out the names of the purported live informants who are the sources of the Friedman sentencing memorandum allegations [52 RT 10,474-76].” Electronic Surveillance Brief at 20. The court clearly acted within its discretion in refusing to allow the names of the informants to be revealed. Appellants, however, could have called these agents to ask other questions about how they gathered the information which was subsequently passed on to Hill. The court did not preclude the appellants from calling these agents.

. The court did not preclude calling any of these officials as witnesses, but stated only that they should not be called “unless there is some reason to believe that any of those persons communicated any information received from the tapes to any of the persons who had charge of the preparation of the evidence in this case.” C.T. 3321.

. R.T. 9224 (U. S. Attorney Byrne), 9546-47 (agent Hill), 10,031 (U. S. Attorney Nis-sen).

. R.T. 10,032-33 (U. S. Attorney Nissen), 9283 (U. S. Attorney Friedman).

. R.T. 9282-84 (Friedman), 9428-29, 9437-39 (Hill), 10,033 (Nissen).

. R.T. 10,245-46 (Hornbeck), 9751 (Uel-men).

. See, e. g., United States v. Stassi, 5 Cir., 1970, 431 F.2d 353; Baker v. United States, 139 U.S.App.D.C. 126, 1970, 430 F.2d 499, cert. denied, 1970, 400 U.S. 965, 91 S.Ct. 367, 27 L.Ed.2d 384; United States v. Clay, 5 Cir., 1970, 430 F.2d 165, rev’d. on other grounds, 1971, 403 U.S. 698, 91 S.Ct. 2068, 29 L.Ed.2d 810; United States v. Ivanov, 342 F.Supp. 928 (D.N.J.1972).

. See, e. g., United States v. Giordano, 6 Cir., 1971, 440 F.2d 449; United States v. Alderisio, 10 Cir., 1970, 424 F.2d 20.