120 F.2d 485 (2nd Cir. 1941), 263, United States v. Goldstein

Docket Nº:263.
Citation:120 F.2d 485
Case Date:June 02, 1941
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

Page 485

120 F.2d 485 (2nd Cir. 1941)




No. 263.

United States Court of Appeals, Second Circuit.

June 2, 1941

Page 486

Theodore Kiendl and Schwartz & Frohlich, all of New York City (Arthur H. Schwartz, of New York City, on the brief), for Goldstein.

Lester R. Bachner and Koenig & Bachner, all of New York City, for Schwartz.

Benjamin Kronenberg, of New York City, for Elentuch.

Sidney J. Loeb, of New York City, for Rubin.

Maxwell S. McKnight and Mathias F. Correa, U.S. Atty., both of New York City, for appellee.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

L. HAND, Circuit Judge.

These are appeals from convictions for a scheme to defraud-- together with a conspiracy to commit the same crime. The scheme was the same as that which was before us in United States v. Weiss, 2 Cir., 103 F.2d 348; but the convictions which we then affirmed were under another indictment and all of the accused except Goldstein were different from those now at bar. The Supreme Court reversed these convictions (Weiss v. United States, 308 U.S. 321, 60 S.Ct. 269, 84 L.Ed. 298) because of the admission of certain 'wire taps, ' and when the case went back for a new trial, a preliminary hearing was had, following the practice prescribed in Nardone v. United States, 308 U.S. 338, 60 S.Ct. 266, 84 L.Ed. 307. Before any decision had been made upon the evidence taken at this hearing, J. J. Weiss, one of the accused, pleaded guilty; thereupon the prosecution proceeded under the present indictment, which was then pending, and abandoned the 'Weiss' indictment. The evidence already taken was by agreement admitted in a similar preliminary hearing begun under this indictment, at the end of which the judge decided that the prosecution should be allowed to call as witnesses two of the prime movers in the scheme, Messman and Garrow, overruling the objection that they had been induced to turn state's evidence by means of records obtained by 'tapping' their wires. One of the seven accused pleaded guilty during the trial, but the other six went through to verdict, and the appellants are four of these. The important points raised are (1) that the testimony of Messman and Garrow was procured by 'taps, ' (2) that it did not also appear that the 'taps' had not served as clues leading to other evidence which had been introduced, (3) that the judge's charge was not impartial, and (4) that the evidence did not support the verdict.

In order to decide how far the use of the 'taps' should have prevented the calling of Messman and Garrow, we must go back to the original discovery of the frauds. Sometime before August, 1936, a number of large insurance companies, suspecting that they were being victimized, retained two firms of lawyers to run down the culprits. One Bernstein was a member of one of these firms, and in that month a man named Kipnis came to him and made an oral confession which laid bare the outlines of the whoel scheme. Kipnis had been one of the insured who had fraudulently collected upon a disability policy, and he had helped a number of others to commit similar frauds. The plan involved the insured's taking digitalis or some similar drug which would make his heart's action simulate disease, and this, together with a proper paraphernalia of cardiograms, hospital records and declarations of systoms, was enough to evade detection by the insurers. To the success of such a scheme a confederation of lawyers, doctors-- including heart specialists-- and of course the insured themselves, was necessary. Kipnis inculpated Weiss and Garrow, lawyers, Messman and Goldstein,

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doctors, and a great many others. His story to Bernstein, as Bernstein gave it, if believed, made a complete case, but obviously he would not be believed unless thoroughly corroborated; and Bernstein set out to procure the necessary corroboration. He instructed Kipnis to keep up a front of continued participation in the scheme and he installed in Kipnis's offices a dictaphone which would record talks with visitors. Besides this, he got records of telephone talks between Kipnis and his confederates, by means of an extension receiver at which a stenographer was placed; no machine was interposed in the circuit during this period. Matters went along in this way through August and September, Kipnis meanwhile disclosing to Bernstein numerous fabricated 'case histories' of fraudulent claimants. On October 8, 1936, Kipnis made a detailed and lenthy written confession which implicated Weiss, Garrow, Messman, Goldstein and a great many others, and which, along with his other material, Bernstein shortly thereafter presented to Hardy, the district attorney, who on November 27th, called in a post-office inspector, Shea, to work up the case. On December 6, Shea, without any independent investigation of his own, turned in a report to Hardy in which he declared that there was ground for the indictment of 75 or more persons. Towards the end of January, 1937, Hardy had a conference with Bernstein and the other insurance lawyers at which they decided to begin the regular 'tapping' of the wires of the principals in the scheme by introducing recording machines into the circuits; and this went on with some interruptions from that time until the arrest of Messman and Garrow on May 18, 1937, and even later. By these means nearly a thousand records were procured of talks between the confederates, in none of which, however, did any of the appellants at bar take part. The prosecution introduced none of these records in evidence, and they could therefore have contributed to the convictions only in two ways: they might have contained clues leading to the discovery of some of the evidence actually introduced; and they might have served in whole or in part to induce Messman and Garrow to turn state's evidence and become the chief witnesses at the trial. The prosecution denied that they were useful as clues, or that they had helped in any way except as confirmation of information which it already had. The record contains nothing to contradict the testimony of those gentlemen who had prepared the case and who swore that Kipnis's confession, the cardiograms, the insurance files and the hospital records were the sources of all their information. We should not therefore have been justified in sustaining a finding that the 'taps' had served as clues, even if one had been made and if the prosecution had the burden of proof upon the issue.

There remains the question whether the 'taps' served to break down either Messman or Garrow and turn them into informers. The testimony of each was so vital to the case that the convictions cannot survive if the prosecution should not have been permitted to call either. Both these men were arrested on May 18, 1937, and Messman was taken at once to the district attorney's office where an assistant examined him. The assistant told him that his telephone and 'all these lawyers' telephones' had been 'watched'; that he might hear hiw own voice if he chose; that the prosecution would like to know whether he would tell everything or 'play ball' with the accused; and that it knew what was going on and was not 'stabbing in the dark.' As he did not then break down he was put into the same cell with one, Nelson, another of the confederates, who told him and still another, Gross, that the prosecution had gathered together 'an awful lot of evidence' including telephone records in which he, Nelson, had heard a talk of his own with Weiss. There was 'too much dirt against us. The government has got everything.' After hearing this from Nelson Messman was on the same day taken back to the assistant's room where he confessed. On the preliminary hearing he denied that the telephone record had had anything to do with his breakdown; he said that he had seen the net gathering about him for some months before his arrest, had decided that his only chance was to plead guilty, turn informer, make what terms he could with the prosecution, and, as to his sentence, to rely upon the help he could give to convict the others. He confessed that he was abandoned in morals, ready to do anything that would serve his turn, and showed himself utterly untrustworthy. It is indeed curious, if he had made up his mind to change front before he was arrested, that he failed to confess when he was first before the district attorney and waited until after Nelson had dilated upon the amount of evidence which had been accumulated against him. One

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would have expected that on his own story his arrest would have been enough to touch off his confession. However, if the judge had affirmatively found that the 'taps' contributed nothing to this result, we should not have disturbed the finding; it is not impossible that although from the start he meant to confess, he might not have seized the first monment to do so. The difficulty is that it does not appear that the judge meant to find more than that the accused failed to prove that the 'taps' had contributed to the breakdown. For this reason the issue depends upon which side had the burden of proof at the hearing.

The case for the accused is considerably weaker as to Garrow. He too was arrested on May 18, 1937, but he did not confess until nearly two years later. It is true that he did so only a few days after we had held in United States v. Weiss, 2 Cir., 103 F.2d 348, that it was proper to allow the introduction of the 'taps, ' and the argument is not without plausibility that this sequence was causal. Still, he was not subjected to the same pressure as Messman, and like Messman he declared that the 'taps' had not influenced him at all, though his word was, if possible, even less reliable. Again, we should not have disturbed an express finding, had there been one, and the issue, like that as to Messman, depends upon the burden of proof. Upon that question we have nothing to...

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