United States v. Catalano

• Decision Date: 21 January 1974
• Docket Number: 73-1985.,303,73-1984,237,No. 199,Dockets 73-1559,199
• Citation: 491 F.2d 268
• Parties: UNITED STATES of America, Appellee, v. Michael CATALANO et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

491 F.2d 268 (1974)

UNITED STATES of America, Appellee, v. Michael CATALANO et al., Defendants-Appellants.

Nos. 199, 237, 303, Dockets 73-1559, 73-1984, 73-1985.

United States Court of Appeals, Second Circuit.

Argued September 26, 1973.

Decided January 21, 1974.

COPYRIGHT MATERIAL OMITTED

Herbert I. Handman, New York City, for appellant Catalano.

Neal J. Hurwitz, New York City, for appellant Goldman.

Herald Price Fahringer, Buffalo, N. Y. (Joseph Panzer, New York City, of counsel), for appellant Dellacroce.

Shirah Neiman, Asst. U. S. Atty., New York City (Paul J. Curran, U. S. Atty. S. D. N. Y., New York City, Robert P. Walton, James E. Nesland, Michael B. Mukasey, Richard Wile, John W. Nields, Jr., Asst. U. S. Attys., of counsel), for appellee.

Before MANSFIELD, MOORE and OAKES, Circuit Judges.

MOORE, Circuit Judge:

Aniello Dellacroce, Michael Catalano and Martin Goldman appeal from judgments of conviction entered against them in the United States District Court for the Southern District of New York after a jury trial and from orders denying motions for a new trial. The indictment contained three counts. Count ONE charged a conspiracy amongst the three defendants and certain non-defendant co-conspirators to evade income taxes due from Dellacroce to the United States for the calendar year 1968 (26 U.S.C. § 7001, 18 U.S.C. § 371). Count TWO charged Dellacroce with filing a false tax return for that year (26 U.S.C. § 7201). Count THREE charged Dellacroce with making and subscribing a false tax return wherein "wages, salaries, tips, etc." were stated as $10,400 whereas in fact and to his knowledge they were $134,500 (26 U.S.C. § 7206(1)). All three defendants were convicted of conspiracy; Dellacroce, in addition, was found guilty of false filing and tax evasion.

Many trial errors are asserted by the defendants; many overlap. To the extent that they are claimed to apply only to one of the defendants, they will be considered as to him alone.

The Conspiracy

The gist of the conspiracy to enable Dellacroce to defraud the government of income taxes is that in 1968 Dellacroce allegedly received 22,500 shares of Yankee Plastics, Inc. stock (valued at approximately $123,000) for services rendered by Dellacroce and Catalano (1) to help Yankee Plastics, Inc. acquire a company known as Mr. Hanger, Inc. and (2) to insure "labor peace" for Mr. Hanger, Inc. In order to avoid showing this stock as income to Dellacroce (and hence to evade a tax to him), devious means were employed. The 22,500 shares were placed in the name of a nominee, Preston Smith. The certificates representing these shares were never in the physical possession of Dellacroce. Thus the government's case is based upon his dominion and control of the shares and his resultant constructive possession.

To trace the physical custody of the 22,500 chares requires the introduction of other persons, Rosen, Goldman, Terranova and Catalano.

Rosen and Goldman, using Preston Smith as a nominee, purchased 15,000 shares of Mr. Hanger, Inc. which, upon its merger with Yankee Plastics, became 22,500 shares of that company's stock. In the summer of 1968, Goldman told Terranova, the government's chief witness and through whom these transactions became known, that the shares were being held for Dellacroce in Smith's name so that Dellacroce would not have to report them as income. Goldman requested Terranova to replace Smith as nominee. Accordingly, the single certificate for the 22,500 shares in Smith's name was cancelled and forty-five 500-share certificates, issued in Smith's name but endorsed by Smith with a signature guarantee, were delivered by Goldman to Terranova. The stock was now in negotiable form.

Goldman and Terranova then opened an account, still using Smith's name, with Francis I. duPont and Company and deposited the 22,500 shares there.

Catalano enters the picture, according to Terranova's testimony, as an accomplice and employee of Dellacroce.

During the ensuing months, there were many meetings between Goldman and Terranova on the one hand and Dellacroce and Catalano on the other, at which the stock, still in the brokerage account, was discussed. Dellacroce was advised not to sell since it was thought that Yankee Plastics was doing well. However, the stock was eventually removed from the duPont account and kept in offices at 312 Fifth Avenue, maintained by a company operated by Goldman and Terranova. In May 1969 they (Terranova and Goldman) put 7,500 shares into an account with First Hanover Corporation. In June 1969 4,000 shares were sold, realizing some $21,000. The remaining 3,500 shares were delivered to Terranova. In November 1969 the balance of the 22,500 shares (37 certificates for 500 shares each) were delivered into the custody of a private attorney, and in March 1971 they were released to Terranova's wife who, in turn, gave them to Goldman. The 37 certificates finally reappeared via Goldman's attorney at the trial, ostensibly from Goldman.

The theory of the government's case is that Dellacroce received the stock in 1968 in payment for services rendered by him and his assistant, Catalano, to insure labor "peace" and to aid in the merger of Mr. Hanger and Yankee Plastics. Despite the many resting places of the stock and the inferentially suspicious character of the methods employed, the fundamental appellate question is centered around the testimony that the stock was given to Dellacroce for his services and was handled in such a way as would enable him to evade income taxes thereon. There was much embellishing proof which would support inferences to this effect but essentially the case rests upon jury belief or disbelief in Terranova's testimony. It chose to believe. It also chose to believe the involvment of Goldman and Catalano. Each appellant, however, raises particular points of alleged trial error which must be considered separately.

Dellacroce

Dellacroce argues that in his previous appearance before a New York County grand jury he received transactional immunity regarding events relating to the subject matter of the present indictment. This previous grant of immunity places upon the government a heavy burden of proving that the indictment did not stem from information given to the grand jury. If this were not so, a defendant's Fifth Amendment rights would be considerably abrogated, Kastigar v. United States, 406 U.S. 441, 92 S.Ct. 1653, 32 L.Ed.2d 212 (1972). The problem is complicated in this case by the fact that the County Assistant District Attorney who interrogated Dellacroce before the grand jury transferred from the County to the Federal prosecutor's office and in part presented this case to the Federal grand jury. In this case, however, that burden was met. Dellacroce's testimony before the grand jury was circumspect in the extreme; so much so that he was cited for contempt. Further, the large bulk of the questions were of a leading nature from which it may be concluded that the prosecutor knew what the response would be. This conclusion is buttressed by an affidavit of Goldman dated before the grand jury hearings, covering the subject matter of several of the questions.

A hearing on Dellacroce's motion to dismiss the indictment led the court to conclude that nothing material had been disclosed in Dellacroce's County grand jury testimony which provided the Federal prosecutor's office with either information or leads. In keeping with the mandate of Kastigar the proof, which included testimony by the former County (and later Federal) prosecutor, not only negatived any possibility of taint, but also carried the affirmative burden of proving a legitimate, wholly independent source of evidence. In the face of this showing Dellacroce would have us hold that access to grand jury testimony ipso facto prevents the government from carrying its burden under Kastigar. This we decline to do. Neither Murphy v. Waterfront Commission, 378 U.S. 52, 84 S.Ct. 1594, 12 L.Ed.2d 678 (1964), nor Kastigar v. United States, 406 U.S. 441, 92 S.Ct. 1653, 32 L.Ed.2d 212 (1972), purports to establish such a peremptory rule. United States v. McDaniel, 482 F.2d 305 (8th Cir. 1973), relied upon by Dellacroce, is clearly distinguishable. The defendant there, in his prior testimony before the State grand jury, had poured forth three volumes of self-incriminating testimony. The court sensibly concluded that the United States Attorney who read this testimony in its entirety could not wholly obliterate it from his mind in his preparation and trial of the federal case. Furthermore, unlike the present case, the United States Attorney there made no attempt to show that he had prior knowledge of the information revealed by the grand jury testimony and his offer of F.B.I. reports as proof of an independent source failed to satisfy the burden of showing that he had not used the testimony in some significant way short of introducing it. By way of contrast the prosecutor here established that he had prior knowledge of substantially all the information covered in the Dellacroce testimony, thus foreclosing the possibility that he made "any use, direct or indirect, of the compelled testimony and any information derived therefrom." Kastigar v. United States, 406 U.S., at 460, 92 S.Ct. at 1664. A review of the record supports this conclusion. The Kastigar rule is aimed at preventing the misuse of information gained under a grant of immunity; it does not require information not gained in this fashion to be discarded. The motion to dismiss the indictment was properly denied.

Dellacroce next argues the question which to him "dominates this appeal" (Dellacroce Br. p. 27). He states that he "cannot be convicted of income tax evasion for failure to report the alleged receipt of stock which was not registered in his name, which was never possessed by him, and which was being held in escrow subject to adverse claims." He is, of course, correct that he is not taxable for...