Peterson v. United States

• Decision Date: 13 April 1965
• Docket Number: No. 21353.,21353.
• Citation: 344 F.2d 419
• Parties: L. K. PETERSON and William H. Scott, Jr., Appellants, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

344 F.2d 419 (1965)

L. K. PETERSON and William H. Scott, Jr., Appellants, v. UNITED STATES of America, Appellee.

No. 21353.

United States Court of Appeals Fifth Circuit.

April 13, 1965.

COPYRIGHT MATERIAL OMITTED

William F. Walsh, E. Taylor Moore, Houston, Tex., for appellants.

Morton L. Susman, Asst. U. S. Atty., Houston, Tex., Woodrow Seals, U. S. Atty., Houston, Tex., for appellee.

Before WHITAKER,^* Senior Judge, and RIVES and JONES, Circuit Judges.

RIVES, Circuit Judge:

Peterson is in the small loan business in Texas. Scott is a lawyer. Peterson was charged in Count 1 with attempting to evade a large part of his personal income taxes for 1958 in violation of 26 U.S.C. § 7201. Both Peterson and Scott were charged in Count 2 with stating falsely that $5,000 which Peterson paid to Scott was a legal fee "properly chargeable as an expense" on Peterson's 1958 income tax return in violation of 18 U.S.C. § 1001. After two mistrials, Peterson was convicted on Count 1 and both Peterson and Scott were convicted on Count 2.¹

Peterson owned and operated five corporations² as loan offices in Houston, Texas, for making loans and collections. The management of and bookkeeping for these five corporations was handled by a proprietorship also owned by Peterson, entitled Finance Management Company. To avoid application of the Texas usury laws,³ Peterson set up a "lender" proprietorship in the name of his head bookkeeper, Helen Hooper, later Helen Flora. After about two weeks of this arrangement, the "lender" company was taken out of Mrs. Flora's name and put in Scott's name. By assumed name certificates filed in the Harris County records, the names of two "lender" companies were so established, "Commercial Investment Company" and "Security Discount Company." The latter company was found to be not necessary and its funds were transferred to Commercial Investments Company. Peterson's five small loan corporations would then charge less than the statutory maximum as "interest," plus a "brokerage" fee for "finding" the lender. Scott would draw $50 a week out of Commercial Investments Company for the use of his name. The "lender" company had only one full-time employee, a woman, who always "approved" the loan on the telephone if the "broker company" manager "recommended" it. The Texas enforcement authorities contended, and the Texas courts held that this "brokerage" plan was nothing more than a device for charging usurious interest and that the "brokerage fees" were actually interest.

We discuss below the rulings claimed to be erroneous in the order of their occurrence.

1. Severance. No misjoinder of offenses or of defendants under Rule 8, Fed.R.Crim.P., is or can be claimed. The contention is that the district court should have granted a severance of defendants as relief from a prejudicial joinder under Rule 14, Fed. R.Crim.P. Whether to grant such relief is a matter committed to the sound discretion of the trial judge.⁴ There have been comparatively few reversals for abuse of discretion in denying a severance.⁵ The test is well stated by Judge Weinfeld in United States v. Kahaner, S.D.N.Y., 1962, 203 F.Supp. 78, 81, 82:

"The ultimate question is whether under all the circumstances of the particular case, as a practical matter, it is within the capacity of the jurors to follow the court\'s admonitory instructions and accordingly to collate and appraise the independent evidence against each defendant solely upon that defendant\'s own acts, statements and conduct.10 In sum, can the jury keep separate the evidence that is relevant to each defendant11 and render a fair and impartial verdict as to him? If so, though the task be difficult,12 severance should not be granted."

"10. Cf. United States v. Stromberg, 268 F.2d 256, 264-265 (2d Cir.) cert. denied, Lessa v. United States, 361 U.S. 863, 80 S.Ct. 119, 4 L.Ed.2d 102 (1959).

"11. Cf. United States v. Lotsch, 102 F. 2d 35 (2d Cir.), cert. denied, 307 U.S. 622, 59 S.Ct. 793, 83 L.Ed. 1500 (1939).

"12. Lutwak v. United States, 344 U.S. 604, 619, 73 S.Ct. 481, 97 L.Ed. 593 (1953).

Without elaborating all the circumstances of this case, we hold that the district court did not abuse its discretion in denying a severance.

2. Admitting Mrs. Flora's Former Testimony. When the case was called for trial, the Government announced ready subject to the court's ruling upon the admissibility of the former testimony of the absent witness, Mrs. Helen Flora. The substance of her testimony was explained to the court by the United States Attorney as follows:

"MR. SUSMAN: This witness will testify as to both Counts 1 and 2 of the indictment. This witness was in the middle of all of these transactions and has first-hand knowledge.

"THE COURT: Was she employed? Tell me who she was.

"MR. SUSMAN: She was the head bookkeeper for Mr. Peterson, as I characterize her. However, she was present at a great deal of the negotiations and so forth concerning the representations alleged in Count 2 of the indictment against Mr. Scott. I believe that is a fair statement of her position."

Mrs. Flora had been present and had testified on each of the two earlier trials. Though duly subpoenaed, she was unavailable for the third trial because of pregnancy and its attendant complications. Her physician from Fort Pierre, South Dakota, was present and testified before the court that Mrs. Flora's pregnancy was not normal, and that she could not travel from Fort Pierre, South Dakota, to Houston, Texas, and testify before the jury without extreme risk to herself and the unborn child. As to when Mrs. Flora would be free to travel, the physician testified:

"A. With the past history I have on this lady, with the past difficulty this lady has had from the previous pregnancies, my answer to that would be probably after the baby is delivered. Her calculated date should be approximately September (the doctor was testifying on April 1). Whether she would be ready before the six weeks post-birth check, which is the time we usually follow them up there, and dismiss them, I couldn\'t answer. I imagine she would ask to breast feed, which I would recommend her not to, and that would delay a further four months follow up after she delivered the baby. But I would specifically request her not to travel for six weeks, if she carries the baby to term."

Upon further questioning, the doctor testified that her future travel was also conditioned on such unpredictable factors as whether or not she aborted, and whether or not she became pregnant again.

The Government offered to allow defendants' counsel to read to the jury such parts of the cross-examination of Mrs. Flora on both previous trials as they wished, and also offered to waive formal proof of the predicate required for the admission of additional impeachment testimony.

The Government had not tried to prove a conspiracy on the first two trials. As to the third trial, the United States Attorney stated: "At this time we have rearranged our tactics and we have done a little more research on the law and we are convinced there is a conspiracy that could be proved."

In arguing against a severance, the Government contended that the claimed conspiracy would make much of the evidence admissible against both defendants. When the court stated, "In effect, I am being asked to determine here and now whether or not a conspiracy exists," the United States Attorney responded: "We are prepared to do that with our first witness, Mrs. Flora, and we strongly urge the Court to hear the testimony and carry the motion along."

The court acquiesced in that suggestion, and stated:

"Upon the statement of counsel that the government will proceed immediately into the point of laying the predicate so that in the very early stages of the case the Court can make his determination as to the duration of the conspiracy, I will carry the motions with the case until the point is raised.

"I would admonish counsel, though, for the government, that we are running for the possibility of a motion for mistrial on the part of these defendants."

After hearing Mrs. Flora's testimony, the court confirmed its denial of the motions for severance, stating:

"* * * the Court has overruled your motion to sever, and as of this time, on the showing that has been made, and within the holdings and teachings of the cases that have been discussed here, the Court is inclined to the view that the conspiracy has been pretty well indicated insofar as admissibility is concerned, and would indicate it to have been in effect as of the time."

The Sixth Amendment to the Constitution provides that, "In all criminal prosecutions, the accused shall enjoy the right * * * to be confronted with the witnesses against him." Rule 26 of the Federal Rules of Criminal Procedure provides that, "In all trials the testimony of witnesses shall be taken orally in open court * * *." It is well settled, however, that the literal language of the Constitution and of the Rule must sometimes give way to the simple necessities of the case. As said in the leading case of Mattox v. United States, 1895, 156 U.S. 237, 242, 243, 15 S.Ct. 337, 339, 340, 39 L.Ed. 409:

"The primary object of the constitutional provision in question was to prevent depositions or ex parte affidavits, such as were sometimes admitted in civil cases, being used against the prisoner in lieu of a personal examination and cross-examination of the witness, in which the accused has an opportunity, not only of testing the recollection and sifting the conscience of the witness, but of compelling him to stand face to face with the jury in order that they may look at him, and judge by his demeanor upon the stand and the manner in which he gives his testimony whether he is worthy of belief. There is doubtless reason for saying that the accused should never lose the benefit of any of these safeguards even by the death of the witness; and that, if notes of his testimony are permitted to be read, he is

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