United States v. Cole

• Decision Date: 06 June 1972
• Docket Number: No. 817-819,Dockets 72-1075 to 72-1077.,817-819
• Citation: 463 F.2d 163
• Parties: UNITED STATES of America, Appellee, v. Marvin R. COLE et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

463 F.2d 163 (1972)

UNITED STATES of America, Appellee, v. Marvin R. COLE et al., Defendants-Appellants.

Nos. 817-819, Dockets 72-1075 to 72-1077.

United States Court of Appeals, Second Circuit.

Argued May 12, 1972.

Decided June 6, 1972.

Certiorari Denied October 16, 1972.

Edward M. Shaw, Asst. U. S. Atty. (Whitney North Seymour, Jr., U. S. Atty., for the Southern District of New York, Lawrence S. Feld, and John W. Nields, Jr., Asst. U. S. Attys., of counsel), for appellee.

Myron J. Greene, New York City (Peter H. Morrison, Charles A. Stillman, Benjamin Zelermyer, Julian W. Friedman, and Morrison, Paul Stillman & Beiley, New York City, of counsel), for defendants-appellants.

Before FRIENDLY, Chief Judge, and McGOWAN^* and TIMBERS Circuit Judges.

Certiorari Denied October 16, 1972. See 93 S.Ct. 238.

FRIENDLY, Chief Judge:

After a hotly fought trial before Judge Pollack and a jury in the Southern District of New York, Cole, Fischer & Rogow, Inc., an advertising agency (CFR) with offices in New York, New York, and Beverly Hills, California, and Marvin R. Cole and Arthur S. Fischer, its sole stockholders and principal officers, were convicted on seven counts of an indictment. The first count charged all three defendants with conspiring in violation of 18 U.S.C. § 371 to evade payment of their 1962-64 income taxes. Counts Two and Four charged all three defendants with evasion of CFR's taxes for 1963 and 1964 in violation of 26 U.S.C. § 7201. Counts Three and Five charged Fischer with signing false returns for the same years in violation of 26 U.S.C. § 7206(1). Counts Six and Seven charged Cole with evasion of his own taxes for 1963 and 1964 in violation of 18 U.S.C. § 7201.¹ The court sentenced Cole to one year concurrent prison terms and Fischer to three month concurrent terms on each of the five counts on which they were convicted, fined Cole $5,000 and Fischer $1,000 on each such count, and fined CFR $10,000 on each of Counts One, Two and Three.

Appellants challenge the convictions on three principal grounds: (1) that the evidence was insufficient to support the convictions; (2) that the Government should not have been allowed to introduce certain testimony at a trial of Cole before a federal court in California for obstructing justice and his conviction there, see Cole v. United States, 329 F.2d 437 (9 Cir.), cert. denied, 377 U.S. 954, 84 S.Ct. 1630, 12 L.Ed.2d 497 (1964), and that, in any event appellants' motion for a new trial should have been granted when the California conviction was set aside on coram nobis as having resulted in part from illegal bugging of Cole's office at CFR and various hotel and motel rooms that he used; and (3) that the decision to focus on the defendants' income tax evasion and evidence presented at the trial stemmed from the same illegal source.

I.

Although we regard the attack on the sufficiency of the evidence as bordering on the frivolous, it is necessary for other purposes to state the facts and we can dispose of the argument in that context.

The gist of the Government's case was that Cole and Fischer had caused CFR to pay, and take deductions for, items that were personal in nature, thereby understating the income of CFR, Cole and Fischer. The largest item consisted of legal fees and expenses in connection with the proceeding against Cole in the federal court in California.² Although the defense contended that the conduct for which Cole was convicted—persuading Joel Benton, a former CFR employee, who had been called to testify before a grand jury, to claim the privilege against self-incrimination—was intended to protect the interests of some of CFR's hotel clients and thus, in the opinion of several lawyers, was properly chargeable to and deductible by CFR, the Government's position was that Cole's motives were either friendship for Benton, as he had unsuccessfully claimed in the California proceedings, see 329 F.2d at 449, or, more likely, a desire to prevent his own prosecution for making false statements of his lack of significant relations with one Joseph "Doc" Stacher, see 329 F.2d at 442-443. To show that the taking of deductions for these items was something more than a pardonable error, the Government presented evidence of the efforts to disguise it. The payments of Cole's legal bills in 1963 were recorded in CFR's books as legal expense payments in behalf of a CFR client, Candygram, Inc., and fees subsequently paid by Candygram for advertising services were treated as a reimbursement for these nonexistent Candygram expenses. Reuben Miller, CFR's outside accountant, testified that this had been done on the direction of Cole and Fischer. The defense countered with inconsistent statements of Miller and testimony by Fischer and two other witnesses, but the jury was entitled to credit Miller.

The other items alleged to have been illegally deducted were a large number of payments for what seemed on their face to be an outrageous pattern of expense account living. Joseph Bevacqua, a Manhattan tailor who had furnished custom-made clothes to Cole and Fischer for many years, was paid $150 twice monthly by CFR during 1963 and 1964, the payments being recorded as "T and E" (travel and entertainment). On CFR's 1963 return $3,665 in Bevacqua checks were deducted as a production expense. In December, 1964, after learning that IRS was reopening its examination of earlier years, Fischer told Miller to remove the $3,800 of Bevacqua checks from the T and E production account for that year and charge himself and Cole with an additional $1,900 of salary. No corresponding change was made for 1963. Cole and Fischer ordered custom-made Sulka ties tailored to their special lengths, and had the bills paid by CFR and charged to T and E. CFR paid and deducted numerous bills for airplane tickets for flights which, on their face, were by Cole's father and mother, Cole's wife and children, and Fischer's mother, none of which had any apparent business purpose. Although the defense claimed that the prosecution had not established beyond peradventure that the flights were actually taken by the persons named in the invoices or tickets and that Cole's father, a retired haberdasher, had rendered services by advising how to collect delinquent accounts and entertaining clients when Cole and Fischer were too busy, the jury was entitled to accept the Government's version. CFR paid for and charged to T and E roughly $530 for a "sweet sixteen" party for Cole's daughter at his Beverly Hills home in June 1963. In February 1964 it was Fischer's turn, on a larger scale. A Bar Mitzvah reception and dinner dance was held for his son at the Astor Hotel, one of CFR's clients, at a cost of $3,676.61. CFR issued a credit invoice offsetting an equivalent amount of Astor's indebtedness; Fischer did not reimburse the firm for this. Although appellants argue that CFR was later forced to write-off certain bad debts from the Astor in excess of this bill and therefore CFR's taxable income was not understated by this transaction, Fischer's clearly was. A $275 dance music bill for the Bar Mitzvah dance was paid by CFR and charged and deducted as T and E. Similar treatment was afforded to bills for Cole's parents, wife and children at the Americana Hotel in Miami in the spring of 1963; for Fischer, his wife and two children at Grossinger's in the Catskills, from December 27, 1963 through January 1, 1964; and for three visits by Fischer and his wife (accompanied by two children on one occasion) to Kutcher's County Club in the Catskills in 1963 and 1964. While Fischer claimed his own stays had a business purpose, this, even if believed, did not authorize a deduction for his wife and children. Finally, CFR paid, charged to T and E, and deducted the bills of a Manhattan garage for a car which was delivered to Mrs. Fischer five days a week at her home at 10:30-11:30 a. m.,³ and of a Beverly Hills garage for service on a car used by Mrs. Cole.⁴

Although appellants cast their argument mainly in terms of insufficiency of the evidence to warrant submission of the case to the jury, this is so plainly without merit that their real point must be another, which they mention in a lower key. This is an assertion that the judge submitted some items on which a finding of guilt would not be justified and therefore the entire edifice must fall since we cannot know how far these affected the verdict. The principle is sound enough in a proper case, see United States v. Guterma, 281 F.2d 742, 747-748 (2 Cir.), cert. denied, 364 U.S. 871, 81 S.Ct. 114, 5 L.Ed.2d 93 (1960), but we see no sufficient basis for applying it here. The essence of the charge was the payment of the legal fees, an issue which clearly was proper for submission, and a pattern of having CFR take deductions for personal expenses of Cole and Fischer. The evidence of this was so overwhelming that no one could reasonably suppose the verdict would have been different even if one or two of the nearly twenty items should have been withheld from the jury—a question on which we thus need not pass. Although the government may not have proved every dollar of income alleged by the indictment to have been concealed, proof of some lesser amount will sustain a verdict if, as here, it remains material. E. g., United States v. Burdick, 221 F.2d 932, 934 (3 Cir.), cert. denied, 350 U.S. 831, 76 S.Ct. 65, 100 L.Ed. 742 (1955).

II.

The Government apparently had intended to make a prima facie case as to the nature of Cole's interest in the California criminal proceeding simply by offering the indictment,⁵ and the Assistant United States Attorney in charge of the case indicated at pre-trial proceedings that he had no intention of proving Cole's conviction. The court having reserved ruling on the admissibility of the indictment, the prosecution called Joseph A. Ball, the Los Angeles attorney who had represented Cole at the trial. Its examination of Ball consisted only of...