232 F.2d 589 (2nd Cir. 1956), 249, United States v. Giglio

Docket Nº:249, 23620.
Citation:232 F.2d 589
Party Name:UNITED STATES of America, Plaintiff-Appellee, v. William GIGLIO, Frank Livorsi, and Howard Lawn, Defendants-Appellants, Louis J. Roth and American Brands Corporation, Defendants.
Case Date:April 20, 1956
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

Page 589

232 F.2d 589 (2nd Cir. 1956)

UNITED STATES of America, Plaintiff-Appellee,

v.

William GIGLIO, Frank Livorsi, and Howard Lawn, Defendants-Appellants, Louis J. Roth and American Brands Corporation, Defendants.

Nos. 249, 23620.

United States Court of Appeals, Second Circuit.

April 20, 1956

Argued March 6, 7, 1956.

Page 590

Milton R. Wessel, Sp. Asst. to U.S. Atty. for Southern Dist. of N.Y., New York City (Paul W. Williams, U.S. Atty., New York City, and Ira L. Tilzer, Tax Atty., Internal Revenue Service, New York City, on the brief), for plaintiff-appellee.

Solomon A. Klein, Brooklyn, N.Y. (Harold W. Wolfram, New York City, on the brief), for defendants-appellants Giglio and Livorsi.

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Milton Pollack, New York City (Samuel N. Greenspoon, New York City, on the brief), for defendant-appellant Lawn.

Before CLARK, Chief Judge, MEDINA, Circuit Judge, and GALSTON, district judge.

CLARK, Chief Judge.

Appellants Giglio, Livorsi, and Lawn appeal from judgments of conviction of violations of the Internal Revenue Laws and conspiracy entered after a lengthy trial to a jury. Appellants and one other defendant, Louis J. Roth, who pleaded guilty on all counts and who was a principal witness for the prosecution, were named as conspirators in one count of a ten-count indictment charging violations of 26 U.S.C. §§ 145(b) and 3793(b) and of 18 U.S.C. § 371. In addition, Giglio was named in seven, Livorsi in three, Lawn in two, and Roth in eight substantive counts. The jury found each of the three guilty as charged. A fifth defendant named in the conspiracy count, American Brands Corporation, was eliminated by dismissal of the indictment after the jury failed to report as to it. Judge Walsh sentenced Giglio and Livorsi to a total of fifteen years of imprisonment on the various counts on which they were convicted, while he gave Lawn a total of a year and a day.

The conspiracy here disclosed involved attempts by a variety of means to evade assessment and payment of federal income taxes on large amounts of income earned in the World War II black market in sugar. The individual and corporate taxes evaded for the calendar year 1946 alone amounted to more than $800, 000. Generally three means of evasion of tax assessment were used: (1) the fraudulent allocation of income among the various companies and individuals in the conspiracy, (2) the fraudulent overstatement of expenses, and (3) the failure to disclose income (a technique very infrequently resorted to by these defendants). Further, defendants attempted to defeat collection of taxes through the concealment of the individual assets of Giglio and Livorsi and the misappropriation, conversion, and diversion of corporate assets. The testimony adduced amply sustained the charge.

Giglio and Livorsi were the central figures in the conspiracy. It was they who profited so royally as equal partners in the fabulous proceeds of the wartime black market. And it was they who procured the services of Roth, an accountant, to assist them in protecting their ill-gotten gains from tax claims. Lawn, a lawyer, had been Chief of the Criminal Division of the United States Attorney's Office for the District of New Jersey before entering their employ. He participated in much of the planning of the conspiracy for evasion of taxes by Giglio-Livorsi enterprises. He held executive positions in some of the participating companies; and, although his beneficial stock interest was small, he, like Roth, received substantial compensation for his services.

It is neither necessary nor feasible to describe here all the details of the multifarious techniques of tax evasion employed in the furtherance of this conspiracy, but sufficient facts should be set forth to show the magnitude and ingenuity of the operation. In April, 1945, the Tavern Fruit Juice Company was organized as a partnership. Giglio and Livorsi, the two real partners, also listed their wives as partners, though the latter contributed no capital to the enterprise. The information return of Tavern partnership falsely listed the wives as partners, even though Giglio and Livorsi later picked up the wives' supposed distributive shares on their own personal tax returns. 1

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About a month after Tavern was organized, a second partnership, Eatsum Food Products Co., Ltd., was launched. The true partnership interest at the time of formation in this enterprise was as follows: Giglio, 25%; Livorsi, 25%; and Lubben (a key government witness at the trial below), 50%. But a partnership information return for Eatsum was filed showing several dummy partners, including the wives of Giglio and Livorsi. The wives' income was in fact picked up on the husbands' individual returns. Nine months after its formation the Eatsum partnership agreement was modified, Lubben agreeing to accept about $117, 000 as his distributive share of the partnership profits in return for the right to start a separate business and Giglio agreeing to pay the taxes on Lubben's share.

Of the two partnerships, during the first nine months of operation Eatsum alone earned almost three quarters of a million dollars. In order further to reduce taxes the conspirators set up a series of corporations, each bearing in some combination the name 'American.' The purpose of the corporations was to drain off the profits of Eatsum through the use of fraudulent invoices. The corporations were then to be dissolved before taxes fell due, and no income would be reported. The important corporations themselves were financially successful. So, in order again fraudulently to minimize taxes, Giglio and Roth procured the filing in the name of American Brands Corporation of a consolidated return covering the associated corporations, even though they knew that the parent-subsidiary relationship required by statute did not exist.

As thus indicated, appellants rarely resorted to an actual failure to report income. Roth's testimony, however, disclosed one illuminating instance in which such a failure apparently did take place. Part of the Eatsum operation involved the purchase and sale of corn and corn syrup, with black market price overages being paid and received in cash passing through a cash box kept in the Eatsum office. Over $400, 000 in cash passed through the cash box in the course of the corn syrup operations, resulting in a profit to Eatsum of about $140, 000. Apart from an item of $50, 000 of 'Other Income' entered on both Livorsi's and Giglio's return, the cash box profit was not reported.

Another device used for the evasion of tax assessment consisted of fraudulent deductions for fictitious expenses and purchases. Along similar lines $63, 091.52 in Tavern closing inventory was not reported, thereby fraudulently reducing the reported income of Tavern and shifting the inventory to American Brands, where it would not be reported until a corporation return was filed at a later date.

In addition to their efforts to defeat the imposition of full tax liability, appellants sought in a number of ways to delay, hinder, and prevent the collection of those taxes for which they admitted liability. They accomplished this result by filing late returns, by failure to withhold taxes as required by law, by filing false estimated personal tax returns, by filing false tentative corporate returns, by filing returns in the wrong district, by filing false returns for certain third persons in order to obviate the necessity of disclosing certain 'cash box' receipts by Eatsum, and possibly also by filing an inaccurate carry-back loss claim and by the erroneous reporting by Giglio and Livorsi of $50, 000 of 'other income.' Upon the filing of all tax returns here relevant on September 15, 1947, the conspirators made an extensive effort to convert leviable assets to cash. A particularly colorful incident in this process was the sale of the Livorsi estate in New Jersey. Livorsi received a check for $64, 335.49 in payment for his equity in

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this property,...

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