373 F.2d 250 (2nd Cir. 1967), 88, United States v. Birnbaum

Docket Nº:88, 30511.
Citation:373 F.2d 250
Party Name:UNITED STATES of America, Appellee, v. Saul I. BIRNBAUM, Appellant.
Case Date:February 10, 1967
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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373 F.2d 250 (2nd Cir. 1967)

UNITED STATES of America, Appellee,


Saul I. BIRNBAUM, Appellant.

No. 88, 30511.

United States Court of Appeals, Second Circuit.

February 10, 1967

Argued Oct. 25, 1966.

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David W. Peck, New York City (Ben Herzberg, Howard T. Milman, Frederick F. Greenman, Jr., Hays, Sklar & Herzberg, New York City, of counsel), for appellant.

Peter E. Fleming, Jr., New York City (Robert M. Morgenthau, U.S. Atty. for Southern Dist. of New York, Douglas S. Liebhafsky, Michael W. Mitchell, Asst. U.S. Attys., of counsel), for appellee.

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

IRVING R. KAUFMAN, Circuit Judge:

This Court is no stranger to this case. In September 1963, Saul I. Birnbaum was convicted by a jury of bribing and conspiring to bribe an Internal Revenue Agent. On appeal we reversed his conviction and ordered a new trial. On remand, a jury for the second time found the appellant guilty. Birnbaum now urges us to reverse this second conviction, claiming that the judge's charge to the jury was prejudicial and that certain evidence was improperly admitted.

The indictment, filed on November 3, 1961, contained four Counts. The first charged that Birnbaum, a certified public accountant, and Harold Simon, an Internal Revenue Agent, had conspired with Alexander L. Guterma, Robert J. Eveleigh, and Robert C. Leonhardt, to violate various sections of the Criminal and Internal Revenue Codes dealing with bribery. 1 Guterma, Eveleigh and Leonhardt

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were named as co-conspirators but not defendants.

Counts Two and Four named Simon alone, and charged him with violating 26 U.S.C. § 7214(a)(2) by accepting a bribe in return for a favorable determination regarding the tax returns of Guterma and Leonhardt. The third Count asserted that Birnbaum only had violated 18 U.S.C. §§ 2 and 201 by giving cash and securities to Simon for the purpose of influencing his determinations.

Simon pleaded guilty to Counts One, Two and Four, and was sentenced to 18 months' imprisonment on each of the latter two Counts, and a year and a day on the first Count, the sentences to run concurrently. He was also fined $2000 on Count Four.

Birnbaum entered a plea of not guilty, and in September 1963 he was tried before Judge Thomas J. Murphy and a jury. Found guilty on both Counts in which he was named, Birnbaum was sentenced to 18 months' imprisonment on each, the sentences to run concurrently. On appeal, however, we reversed his conviction and remanded the case for a new trial, principally because of the erroneous admission of certain evidence. United States v. Birnbaum, 337 F.2d 490 (2d Cir. 1964).

Birnbaum's second trial commenced in February 1966 before Judge Irving Ben Cooper and a jury. The prime issue was whether Birnbaum was implicated in the bribery of Simon, and once again a verdict of guilty on both Counts was returned, Judge Cooper imposed a sentence of one year on each Count, the terms to run concurrently. It is from this judgment that the present appeal is taken.


It is not possible to explore adequately Birnbaum's numerous claims of error without a thorough understanding of the complicated transactions underlying the alleged bribery of Simon. In summarizing the voluminous evidence presented to the jury, we are mindful of the well established principle that 'on appeal the evidence must be considered in a light most favorable to the Government.' United States v. Dardi, 330 F.2d 316, 325 (2d Cir.), cert. denied, 379 U.S. 845, 85 S.Ct. 50, 13 L.Ed.2d 50 (1964); United States v. Kelly, 349 F.2d 720, 730 (2d Cir. 1965), cert. denied, 384 U.S. 947, 86 S.Ct. 1467, 16 L.Ed.2d 544 (1966). The government relied primarily on the testimony of co-conspirators Guterma, Eveleigh and Leonhardt. From their testimony and other evidence adduced at the trial, the jury was entitled to find the following facts.

The Wickersham Transaction

Saul Birnbaum, a certified public accountant and a partner in Birnbaum & Birnbaum, became acquainted with Robert Leonhardt in 1951, and Birnbaum's accounting firm served thereafter as Leonhardt's personal accountant until 1956.

In 1953, Leonhardt and Alexander Guterma formed an over-the-counter brokerage firm known as the McGrath Securities Corporation (McGrath), and Birnbaum's firm served as its accountant until 1956. Although Birnbaum knew Guterma, at no time did he serve as his personal accountant.

Birnbaum was also acquainted with Philip Shaiman, Albert Hayutin, and Marvin Hayutin, and in 1954 he became a principal owner with them of 1840 Lincoln Road Corporation (Lincoln), 2 a

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Denver enterprise which held real estate and was engaged in acquiring uranium claims in the Far West. The Denver group desired to sell its securities to the public and it was in this connection that in late 1954 Birnbaum put Marvin Hayutin in communication with Guterma. After exploring the situation, Guterma approved the idea of merging Lincoln with an existing public corporation, and he recommended the Shawano Development Corporation (Shawano), of which he was president and the controlling stockholder, as the ideal company with which to merge. Shawano shares were already being traded in a wide market, and Guterma was eager to sell its shares to the public.

In January 1955, at a conference held in Denver, Guterma proposed to Birnbaum and the other owners of Lincoln that the Denver-based enterprise change its name to the Paul Revere Uranium Corporation (Revere), and that Guterma or his nominee purchase a 40% interest in revere for $30,000. Thereafter, Revere would exchange its assets for 550,000 shares of Shawano stock and would dissolve. Guterma or his nominee would receive approximately 200,000 shares of Shawano, while Birnbaum and his associates would divide the remaining shares in proportion to their respective holdings in Revere. Following these transactions, the parties would cooperate in selling their Shawano shares to the public.

Rather than purchase a 40% interest in Revere directly, Guterma decided to exercise his option to buy its stock through a nominee. Upon returning to New York from the Denver meeting, he informed Leonhardt of the details of the proposed Shawano-Revere merger, and proposed to 'sell' Leonhardt the stock of the Wickersham Corporation (Wickersham), a dormant Panamanian company owned entirely by Guterma, in exchange for Leonhardt's personal notes for $295,000, 3 which would be secured only by the Wickersham stock so 'purchased.' Under the terms of the 'sale,' Wickersham was to purchase the 40ss% Wickersham was to purchase the 40% the option. The profits that Wickersham would eventually realize by virtue of the merger and dissolution of Revere and the sale of the Shawano shares to the public through McGrath, would go to Guterma, with Leonhardt receiving about one-quarter as his share.

To summarize these complex transactions, it appears that the essence of the plan was that (1) Leonhardt would purchase Wickersham from Guterma, financing the purchase by his personal notes secured only by the Wickersham stock itself; (2) Leonhardt would cause Wickersham to purchase 40% of Revere's stock for a price of $30,000; (3) Revere would then exchange its assets for 550,000 shares of Shawano stock and dissolve; (4) upon dissolution of Revere 200,000 Shawano shares would be distributed to Wickersham, whose sole shareholder, Leonhardt, would sell them to the public and divide the profits with Guterma; and (5) the remaining 350,000 shares would be divided among Birnbaum and his associates who would also sell them to the public and retain the proceeds.

The plan, master-minded by Guterma, was carried out with precision. The eventual sale to the public of the Shawano stock brought Birnbaum approximately $190,000 in profits, while Wickersham derived a profit of $397,000. As Wickersham received cash from the sales of its Shawano shares, Leonhardt caused the corporation to 'loan' these proceeds to Guterma in three installments, taking back Guterma's personal notes which then became Wickersham's only assets. Guterma in turn 'loaned' Leonhardt $102,000, representing the latter's share of the profits.

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Ten months after Leonhardt's acquisition of Wickersham, the corporation was dissolved and its assets distributed to him. The ambagious transactions between Leonhardt and Guterma were finally concluded in August 1956 when Leonhardt gave Guterma two checks, one for $102,000 to repay Guterma's 'loan' made in June 1955, and the second for $295,000 to pay off the notes with which Leonhardt had 'purchased' Wickersham in February 1955. At the same time, Guterma repaid Leonhardt the $397,000 which Wickersham had 'loaned' him after the sale of its Shawano stock to the public.

The Bribery of Simon

We now return to the core of the charges. When the proposed Wickersham transaction was outlined to Leonhardt in February 1955, Guterma assured him that his share of the profits could be treated as long-term capital gain, provided Leonhardt held his Wickersham stock for at least six months after 'purchasing' it. Leonhardt then consulted his accountant Birnbaum about the proposed Wickersham transaction, and specifically sought instructions as to the form the deal should assumed so that his profits would receive capital gains treatment.

Leonhardt's personal tax return for 1955, prepared by Birnbaum's firm, reported that his profits on the Wickersham deal were realized in December 1955 when the corporation was formally liquidated. Since Leonhardt purchased the Wickersham stock in February 1955, some ten months before, he reported the profits as long-term capital gains. The government urges, however, that Leonhardt's...

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