United States v. Birnbaum

• Decision Date: 13 October 1964
• Docket Number: No. 428,Docket 28683.,428
• Citation: 337 F.2d 490
• Parties: UNITED STATES of America, Appellee, v. Saul I. BIRNBAUM, Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

337 F.2d 490 (1964)

UNITED STATES of America, Appellee, v. Saul I. BIRNBAUM, Defendant-Appellant.

No. 428, Docket 28683.

United States Court of Appeals Second Circuit.

Argued April 27, 1964.

Decided October 13, 1964.

Mortimer Todel, Executive Asst. U. S. Atty. (Robert W. Morgenthau, U. S. Atty. for Southern District of New York, Bernard W. Nussbaum, John S. Martin, Jr., Andrew T. McEvoy, Jr., New York City, of counsel), for the United States of America.

David W. Peck, New York City (Hays, Sklar & Herzberg, Ben Herzberg, Leonard Schaitman, New York City, of counsel), for defendant-appellant.

Before LUMBARD, Chief Judge, and MOORE and SMITH, Circuit Judges.

MOORE, Circuit Judge:

Saul I. Birnbaum appeals from his conviction in the United States District Court for the Southern District of New York after a jury trial. He was found guilty of bribing Internal Revenue Agent Harold Simon (count three) and of conspiring with Simon and others to do so (count one). Simon was named as a co-defendant but before trial pleaded guilty to the counts in which he was named.

The indictment was in four counts. Count one charged in substance that co-defendant Birnbaum and Simon conspired with Alexander L. Guterma, Robert J. Eveleigh and Robert C. Leonhardt, named as co-conspirators but not as defendants, to violate 18 U.S.C.A. §§ 201,¹ 202,² and 26 U.S.C.A. § 7214,³ in that as part of the conspiracy Simon would receive from Birnbaum and the other conspirators greater sums than were authorized by law to induce him to corruptly examine the tax returns of Guterma and his wife, Leonhardt and his wife and of McGrath Securities Corporation. Count two, against Simon alone, charged that in April, 1957, he received a sum greater than authorized by law, namely, $10,000 and 5,000 shares of stock of Shawano Development Corporation for a determination favorable to the taxpayers of taxes owing by Guterma for 1955 and 1956 and by Leonhardt for 1954 through 1957, in violation of 26 U.S.C.A. § 7214(a) (2). Count three alleged that Birnbaum gave $10,000 and 5,000 shares of Shawano stock to Simon in violation of 18 U.S. C.A. §§ 2 and 201. Count four alleged that on October 9, 1961, Simon received $1,250 for the determination favorable to the taxpayers of taxes owing the United States by Leonhardt for 1954 through 1957 and by McGrath Securities for 1953 through 1956, in violation of 26 U.S.C.A. § 7214(a) (2).

The Government's Evidence

The prosecution's case was constructed primarily on the testimony of co-conspirators Guterma, Eveleigh and Leonhardt. The jury was entitled to find from their testimony and supporting exhibits the following facts.

Birnbaum, a certified public accountant and partner in the firm of Birnbaum & Birnbaum, met Leonhardt in 1951. Birnbaum's firm did Leonhardt's personal accounting work as well as that of McGrath Securities Corporation, an over-the-counter brokerage firm formed by Leonhardt and Guterma in 1953. Although Birnbaum's firm also served other corporations in which Leonhardt and Guterma shared an interest, it never acted as Guterma's personal accountant. In 1956, the Birnbaum firm ceased to act for Leonhardt and McGrath except that it was later called in to handle the tax examinations for the years in which it had prepared the returns. Prior to the termination of its employment, the Birnbaum firm had prepared the returns of McGrath and Leonhardt for the tax year 1955. It was in that year that Leonhardt bought the Wickersham Corporation from Guterma, a transaction which later occasioned the bribery of Simon.

The Wickersham Transaction

In 1954 Birnbaum, along with two others, controlled the Paul Revere Uranium Corporation. They were anxious to float a uranium issue. At this same time, Guterma was looking for a way to issue additional shares of Shawano Development Corporation, a publicly held company of which he was President. Birnbaum arranged a meeting with his group and Guterma, and it was decided that instead of the floating of a new issue by Paul Revere, Shawano would buy Paul Revere's uranium assets in exchange for new Shawano shares. So that he would control a large portion of the new Shawano stock, Guterma persuaded Leonhardt to buy from Guterma the stock of the dormant Wickersham Corporation (a company wholly owned by Guterma) for Leonhardt's notes in the amount of $295,000, and then to have Wickersham purchase a large block of Paul Revere stock. Thereafter, upon Paul Revere's dissolution, Wickersham would obtain approximately 200,000 shares of Shawano which could be sold to the public through McGrath Securities. The profit on the sale of Shawano was to go to Guterma and he would give Leonhardt a percentage of the proceeds. It was understood that Leonhardt's profit on the transaction would be treated as capital gain, and to that end Leonhardt relied on Birnbaum's advice on how to handle his part of the venture. The plan was consummated.

As soon as Wickersham's Shawano stock had been sold to the public at a profit of $392,000, Leonhardt and Guterma arranged for the proceeds to be distributed to Guterma as "loans." Guterma, in turn, on June 7, 1955, "loaned" Leonhardt $102,000, an amount equalling the profit Leonhardt had anticipated. Six months after Leonhardt's acquisition, Wickersham was dissolved and its assets distributed to Leonhardt.

When he filed his 1955 tax return in August, 1956, Leonhardt declared his profit on the Wickersham transaction as a long-term capital gain. In addition, upon the advice of Birnbaum, he and Guterma at that time exchanged checks which had the effect of paying Leonhardt's obligation to Guterma for the purchase of Wickersham and of repaying Wickersham's loan to Guterma. It is the Government's theory that since Leonhardt's $102,000 profit was actually in his hands on June 7, 1955, less than six months after he had purchased Wickersham, serious questions would have arisen in the mind of an examining Internal Revenue agent about the propriety of the long-term capital gains treatment. Consequently, argued the Government, there was cause to influence his decisions.

The Bribery of Simon

Leonhardt receive a telephone call in the fall of 1956 from Agent Simon, who announced that he had been assigned to audit McGrath's 1955 return. Their first meeting was not held until January, 1957, however, and at that time Leonhardt told Simon to see Birnbaum. After meeting with Simon, Birnbaum reported to Leonhardt that Simon "could be taken care of"; and, several months later, in April, Birnbaum told Leonhardt that the question of capital gains treatment of the Wickersham transaction could be settled for a payment of $5,000. Birnbaum also told Leonhardt that he and Simon had arranged to bring Guterma into the matter since Guterma had profited most from various deals in which he and Leonhardt had participated. Later in April, after Leonhardt had told Guterma of his conversation with Birnbaum, Simon and Birnbaum convened at Guterma's office where, after some bickering, it was agreed that Guterma would give Simon $10,000 and 5,000 shares of Shawano stock. About ten days later, Eveleigh, Guterma's right-hand man, transferred the stock and cash to Simon. Eveleigh testified that although Birnbaum was present at Guterma's office when this payment was made, at Birnbaum's request he did not make the payment while Birnbaum was in the same room. This bribe was the basis of counts two and three of the indictment.

In the summer of 1957, Birnbaum informed Leonhardt that he (Leonhardt) was going to have to pay some $20,000 more than Birnbaum had earlier anticipated. Leonhardt only agreed, however, to pay $10,000 then and "five or six later on if he could afford it." On September 17, 1957, Leonhardt gave Birnbaum the $10,000 in cash.

Another meeting between Birnbaum, Leonhardt and Simon occurred in April, 1958, at Birnbaum's office, at which Birnbaum expressed his dissatisfaction with Leonhardt's "not coming up with the money" and his anxiety because of Guterma's difficulties with the Government. According to Leonhardt, when he insisted that he had no funds and was deeply in debt, Birnbaum retorted: "`If you Leonhardt have any further payments to make, you have to pay Mr. Simon, and you pay him directly from now on' * * *." Thereafter, Simon continued to badger Leonhardt in an unsuccessful effort to make Leonhardt pay.

In July of 1961, four years after Leonhardt's payment of $10,000 to Birnbaum for Simon, Leonhardt told the Federal Bureau of Investigation of the Simon bribery. Then, acting in cooperation with the federal authorities, Leonhardt arranged a meeting with Simon for September 13, 1961 and at that time told him that he would be able to pay more of the money, although he thought the amount unfair. Leonhardt testified that to this Simon replied:

"Well, it was my own fault because he had made direct contact with me, and from the very first day I sent him to Birnbaum, that Birnbaum had declared himself a partner in the deal and that Birnbaum had kept most of the money, and he had told me this before over the years, but this time he was very emphatic about the thing, and I requested permission to go confront Birnbaum and say, `You kept my money, you know. Either give it to the man or give it back to me.\'"

This conversation was recorded by a device that Leonhardt was wearing at the time, as were two other conversations between the two during the first week of October, 1961. Finally, on October 9, 1961, at Leonhardt's apartment, as FBI agents recorded the event with a concealed movie camera and recording apparatus, Leonhardt gave Simon $1,450 in marked money of which Simon for no disclosed or apparent reason returned $200. Immediately thereafter Simon was arrested. This transaction was set forth in count four of the indictment which named Simon alone.

Birnbaum took the stand in his own defense, and denied the accusations made by Leonhardt, Guterma and Eveleigh. Simon did not testify.

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