U.S. v. Minnesota Min. & Mfg. Co., 76-1730

• Decision Date: 22 April 1977
• Docket Number: No. 76-1730,76-1730
• Citation: 551 F.2d 1106
• Parties: 77-1 USTC P 9259 UNITED STATES of America, Appellant, v. MINNESOTA MINING AND MANUFACTURING COMPANY et al., Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1106

551 F.2d 1106

77-1 USTC P 9259

UNITED STATES of America, Appellant, v. MINNESOTA MINING AND MANUFACTURING COMPANY et al., Appellees.

No. 76-1730.

United States Court of Appeals Eighth Circuit.

Submitted Nov. 8, 1976.

Decided March 3, 1977.

Rehearing Denied April 22, 1977.

Scott P. Crampton, Asst. Atty. Gen., Tax Div., Dept. of Justice, Washington, D.C., for appellant; Gilbert E. Andrews, Robert E. Lindsay, Daniel F. Ross, Attys., Washington, D.C., Robert G. Renner, U. S. Atty., Minneapolis, Minn., on brief.

Lawrence J. Hayes, St. Paul, Minn., and G. Alan Cunningham, Minneapolis, Minn., for appellees; Garrett E. Mulrooney, R. Scott Davies, Douglas W. Thomsom and Jack S. Nordby, St. Paul, Minn., on brief.

Before GIBSON, Chief Judge, HEANEY and HENLEY, Circuit Judges.

GIBSON, Chief Judge.

The Government appeals ¹ from a judgment of the District Court ² dismissing a three-count indictment charging Minnesota Mining and Manufacturing Co. (3M) and two of its principal officers, Bert S. Cross and Irwin R. Hansen, with violating various tax-related statutes. Count I charged the defendants with violating 18 U.S.C. § 371 (1970) by conspiring to defraud the United States and to interfere with the functions of the Internal Revenue Service from 1963 to 1969. This count charged defendants with engaging in an illegal scheme of using 3M monies to create a secret campaign contribution fund and improperly deducting payments into the fund as legitimate business deductions on 3M's corporate income tax returns. Counts II and III of the indictment charged 3M and Hansen with filing false corporate income tax returns in 1968 and 1969, respectively, in violation of 26 U.S.C. § 7206(1) (1970).

The key issue on this appeal is whether a negotiated agreement between the Watergate Special Prosecutor's Force (WSPF) and 3M, which predated the instant indictment, precludes prosecution of 3M and its officers for alleged criminal tax violations arising out of the illegal corporate campaign contributions. The agreement in question allegedly was reached in 1973 after 3M and some of its high echelon officers voluntarily admitted to WSPF that 3M had made illegal political contributions. As a result of this voluntary admission, it was subsequently agreed that 3M and its chief executive officer, Harry Heltzer, would each plead guilty to a misdemeanor violation of 18 U.S.C. § 610 (Supp. V, 1975) for an illegal $30,000 political contribution to the Finance Committee to Reelect the President. Defendants in the present action contend that the guilty pleas of 3M and Heltzer were to be fully dispositive of all federal criminal charges, including criminal tax violations, against 3M and its officials. The Government strongly disputes this contention and asserts that there was never any representation or agreement foreclosing the prosecution of defendants for criminal tax violations.

The District Court reviewed the conflicting evidence presented at the four-day hearing on defendants' motions to dismiss the indictment and, adopting the defendants' argument, found the parties had agreed that the guilty pleas were to be fully dispositive of all criminal matters arising out of the illegal campaign contribution scheme. The court concluded that the Government breached the agreement by filing the present indictment against defendants and dismissed the indictment.

I

Our primary function is to ascertain whether the District Court's factual findings derive adequate support from the record. The testimonial and documentary evidence offered by the respective parties to show what terms were embodied in the unwritten agreement is controverted and ambiguous. It is indeed unfortunate that representatives of WSPF and 3M failed to record any mutual understanding relating to what 3M and its officials were entitled to receive as a quid pro quo for the pleas of guilty on the 18 U.S.C. § 610 charges. The fact remains, however, that the parties are at odds as to whether or not the agreement relieved 3M and its officials of all criminal liability stemming from the illegal political contribution scheme. The parties are then relegated, by necessity, to a judicial evaluation of the now disputed agreement. Concededly an agreement, not a plea bargain, was made to forego certain criminal prosecutions arising out of 3M's campaign contribution scheme. In dispute is the extent of criminal immunity afforded 3M and its officials by the agreement.

At the outset, we acknowledge that our standard of review is circumscribed by the nature of this case. As the parties concede, our review of the District Court's findings of fact is governed by the "clearly erroneous" test. Kilcrease v. United States, 457 F.2d 1328, 1331 (8th Cir. 1972); see Fed.R.Civ.P. 52(a). We are not permitted, under that standard, to simply displace the District Court's findings for our own. Civella v. United States, 509 F.2d 896, 898 (8th Cir. 1975). The factual findings of the District Court are to be upheld unless, after a review of the entire record, this court "is left with the definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948). Particularly where the testimonial evidence is conflicting, as here, deference must be accorded the District Court's ability to observe the demeanor of the witnesses and to weigh the credibility of their testimony. Cognizant of these limitations on our review, we will concisely recount the relevant facts adduced in the trial court proceedings and determine whether the factual findings of the District Court are clearly erroneous.

In 1973, WSPF was engaged in the investigation and prosecution of those who had allegedly made illegal political contributions during the 1972 Presidential campaign. On July 6, 1973, Special Prosecutor Archibald Cox issued a press release encouraging corporations to voluntarily advise WSPF of any illegal political contributions paid out of corporate monies during the campaign. As an incentive to corporate acknowledgement and disclosure of political contribution misdeeds, it was announced that the corporation's "voluntary acknowledgement will be considered as a mitigating circumstance in deciding what charges to bring." Soon after this announcement, the 3M Executive Committee was apprised that 3M may have participated in illegal campaign contribution practices in previous years. An internal investigation was undertaken and an illegal political contribution fund, established and maintained with 3M's pecuniary resources and administered by 3M officials, was discovered.

On August 16, 1973, 3M voluntarily disclosed to WSPF that 3M corporate funds had been involved in a $30,000 illegal contribution to the Finance Committee to Reelect the President in 1972. A series of meetings and communications then ensued between officials of WSPF and 3M. At the initial meeting on August 23, 1973, WSPF attorneys described the general policy considerations which would govern WSPF's disposition of 3M's case. No commitments or promises were forthcoming at that meeting. In subsequent interviews with 3M officials, WSPF officials became apprised of the nature and extent of 3M's illegal campaign contribution scheme, which covered hundreds of illegal contributions. The 3M officials disclosed that 3M funds were deposited into a Swiss bank account under the guise of prepaid insurance premiums. 3M officials periodically withdrew various sums from the account for the purpose of making illegal campaign contributions. In 1967, the bogus insurance premium scheme was abandoned and, instead, 3M officials implemented a plan to pay inflated fees to a foreign consultant, Dr. L. Gutstein, who would rebate a portion of the fees to 3M. These rebates generated a substantial amount of unreported cash which was contributed to various political causes. Both WSPF and the Internal Revenue Service were informed that the amounts attributed to false insurance premiums and Gutstein's fees were deducted from 3M's corporate income tax returns.

On October 3, 1973, WSPF officials informed 3M that they had decided to charge 3M and Heltzer each with a one-count misdemeanor violation of 18 U.S.C. § 610. A 3M attorney, Charlton Dietz, testified that he was informed during a telephone conversation on October 3 with a WSPF attorney, John Koeltl, that the guilty pleas of 3M and Heltzer would be fully dispositive of all federal charges. A marginal notation ³ on Deitz's written memorandum of that call is supportive of this claim. Koeltl disputes that he made such a representation. Dietz and another 3M attorney, Leonard Keyes, testified that they attended a meeting with WSPF officials on October 8, 1973, and were assured that the guilty pleas would be fully dispositive of all criminal charges arising from the illegal campaign contribution scheme. WSPF attorneys present at that meeting contradict this testimony, contending the agreement to forego further prosecutions related to all criminal charges except possible criminal tax violations.

3M and Heltzer pleaded guilty to the § 610 charges on October 17, 1973, in the United States District Court for the District of Minnesota. ⁴ During that proceeding, there was no mention of any prosecutorial agreement not to proceed criminally against 3M and its officials for tax irregularities in connection with the illegal corporate political contributions. In the following months, 3M...