Smith v. United States 8212 1949

• Decision Date: 31 May 1949
• Docket Number: No. 292,292
• Citation: 337 U.S. 137,69 S.Ct. 1000,93 L.Ed. 1264
• Parties: SMITH v. UNITED STATES. Argued March 4—7, 1949
• Court: U.S. Supreme Court

337 U.S. 137

69 S.Ct. 1000

93 L.Ed. 1264

SMITH

v UNITED STATES.

No. 292.

Argued March 4—7, 1949.

Decided May 31, 1949.

Mr. Walter R. Hart, Brooklyn, N.Y., for petitioner.

Mr. Harold D. Cohen, Washington, D.C., for respondent.

Mr. Justice REED delivered the opinion of the Court.

Petitioner, George Smith, together with Daisart Sportswear, Inc., and another person was charged by the United States in two informations of forty-one counts each with violations of § 301 of the Second War Powers Act¹ and Priorities Regulations Nos. 1 and 3.² The first information charged petitioner and his co-defendants with the intentional misuse of priority ratings in forty-one instances in order to purchase certain cotton and rayon materials and the second information charged them with the unlawful utilization of the textiles so obtained. The same defendants were also indicted in the same court for conspiring to violate the Emergency Price Control Act of 1942³ and the regulations thereunder by selling finished piece goods above the established maximum price and by keeping false records of their transactions. The two informations and the indictment were consolidated for trial in the District Court of the United States for the Southern District of New York; after trial before a jury petitioner was found guilty on the indictment and on thirty-five counts of each of the informations. On appeal the Court of Appeals for the Second Circuit affirmed the conviction as to the indictment and twenty- three counts of each of the informations, but reversed as to twelve counts of each of the two informations. United States v. Daisart Sportswear, 2 Cir., 169 F.2d 856.

During 1944 and 1945 the petitioner, Smith, was the sole owner and officer of Daisart Sportswear, Inc. (hereinafter called Daisart), a corporation engaged in the fabrication, purchase, and sale of textile goods. Its actual operation was as a contractor working on the goods of others. As part of its business Daisart was to furnish Metals Disintegrating Corporation with cloth bags for filtering and packing the metal powders manufactured by Metals Disintegrating under contracts with the Army and Navy. The War Production Board had granted Metals Disintegrating high pr ference ratings to secure the materials necessary to fulfill its government contracts. Because of its inability to provide the particular cloth used to make powder bags, which was of a greyish white duck color, very similar to the canvas used in tents, Metals Disintegrating gave Daisart high blanket preference ratings which Daisart was to apply or extend⁴ to purchase all the piece goods needed to manufacture the bags.

There is evidence which would justify a jury in finding the following facts. Through the use of these top priorities petitioner obtained piece goods for his company, and in the orders he certified that the goods were to be manufactured into powder bags. Over two and a half million square yards of material were thus invoiced to and paid for by Daisart. Metals Disintegrating, however, purchased from Daisart only 11,987 powder bags consisting of 48,920 square yards of material. Moreover these piece goods which petitioner obtained by means of preference ratings consisted of fabrics of a wide variety of colors and finishes. They were resold by Daisart, often still in their original packing, to manufacturers of civilian clothing at prices far in excess of the maximum established by law. In these transactions petitioner and his corporation in conspiracy with the other person indicted used fictitious names, gave false descriptions of goods and prices, and falsified invoices, but the money paid for the goods arrived by circuitous and devious routes into the bank accounts of either petitioner or Daisart Sportswear, Inc.

Such evidence is amply sufficient to sustain petitioner's conviction on the informations and indictment, but he insists that he is immune from prosecution for the acts of which he stands convicted. He bases his claim to immunity on § 202 of the Emergency Price Control Act of 1942, as amended, 56 Stat. 23, 58 Stat. 632, 50 U.S.C.A.Appendix, § 922, which reads as follows:

'(a) The Administrator is authorized to make such studies and investigations, to conduct such hearings, and to obtain such information as he deems necessary or proper to assist him in prescribing any regulation or order under this Act, or in the administration and enforcement of this Act and regulations, orders, and price schedules thereunder.

'(c) For the purpose of obtaining any information under subsection (a), the Administrator may by subpena require any other person to appear and testify or to appear and produce documents, or both, at any designated place.

'(g) No person shall be excused from complying with any requirements under this section because of his privilege against self-incrimination, but the immunity provisions of the Compulsory Testimony Act of February 11, 1893 (U.S.C., 1934 edition, title 49, sec. 46), shall apply with respect to any individual who specifically claims such privilege.'

The Compulsory Testimony Act of February 11, 1893, 27 Stat. 443, 49 U.S.C. § 46, 49 U.S.C.A. § 46, provides:

'That no person shall be excused from attending and testifying or from producing books, papers, tariffs, contracts, agreements, and documents before the Interstate Commerce Commission, or in obedience to the subpoena of the commission, * * * on the ground or for the reason that the testimony or evidence, documentary or otherwise, required of him, may tend to criminate him or subject him to a penalty or forfeiture. But no person shall be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter or thing, concerning which he may testify, or produce evidence, documentary or otherwise before said commission, or in obedience to its subpoena, * * * Provided, That no person so testifying shall be exempt from prosecution and punishment for perjury committed in so testifying.'

Petitioner's plea of immunity arose out of his testifying before an examiner of the Office of Price Administration in response to subpoenas issued by that office. In August, 1945, investigators of the War Production Board began an inquiry into the transactions of Daisart Sportswear, Inc. Two subpoenas were issued by the Office of Price Administration summoning petitioner individually and as an officer of Daisart to appear before an official of the Office of Price Administration. The subpoenas directed petitioner to produce all records and documents 'pertaining to the purchase, sale, manufacture, fabrication and/or finishing piece goods, materials, fabrics from January 1 1945, up to the present time.' On April 30, 1946, pursuant to the subpoenas, petitioner appeared with counsel before an examiner of the O.P.A. After a ruling, unchallenged by respondent, that the appearance was under the compulsion of a valid subpoena, petitioner was sworn in as a witness and advised erroneously that he could not be compelled to make any self-incriminating statements and further advised that he had certain constitutional guarantees. This was an obvious reference to the Fifth Amendment's protection against self-incrimination as recognized by § 202 of the Emergency Price Control Act of 1942, quoted above.

After a few questions of a preliminary nature, petitioner stated: 'I want to claim privilege as to anything that I say.' Thereafter, in answer to questions by the examiner, petitioner explained that the records required by the subpoenas had either been destroyed, lost, or misplaced. He testified that he was the sole owner and officer of Daisart Sportswear, Inc., which until it went out of business in October, 1945, was engaged in the manufacture, purchase, and sale of textiles and allied products. In carrying on this business, the material out of which products were made was often furnished to Daisart by the organization, a so-called manufacturer, for whom Daisart contracted to make the product. Smith then testified that from various operations Daisart sold surplus fabrics and textiles; that for Metals Disintegrating Company, Daisart made bags and that for certain manufacturing operations Daisart had to acquire materials and fabrics. He denied that Daisart bought any material for the sole purpose of reselling it and stated that Daisart sold only material which was surplusage from its various operations. As examples of his company's operations, petitioner said that Daisart was a contractor for five companies which he specifically named and for many others whose names had slipped his mind, and that Daisart also manufactured ammunition bags as a subcontractor for Metals Disintegrating Company, which had a prime contract with the Government. In reply to the question as to how Daisart arrived at its selling price with respect to the material it sold, petitioner answered: 'Since it was surplus, it was sold at the price billed to me plus freight and haulage and less discount allowed to me.'

Petitioner gave the names of A. Steinman & Co., L. Lazarus & Co., and Southeastern Cottons as three of the firms from whom Daisart purchased materials and fabrics, stated that Daisart received invoices from the suppliers for its purchases, and that Daisart paid for its purchases by check at all times. He disclosed the Fidelity Union Trust Company of Newark, N.J., as the bank where Daisart maintained its account, and gave the name of the accountant who had the social security and bank statements of Daisart. He testified that these records would reflect the total overall business of Daisart, including the purchase and sale of all materials. According to petitioner, Daisart usually received the material from the manufacturer with whom it was contracting, and Daisart merely supplied labor and tr mming. The manufacturer did not bill Daisart for the material, but simply shipped it for use by Daisart, who in turn billed the manufacturer for the finished...