United States v. Allied Stevedoring Corporation

• Decision Date: 20 July 1956
• Citation: 143 F. Supp. 947
• Parties: UNITED STATES of America v. ALLIED STEVEDORING CORPORATION, John Ward, John Potter, and Michael Bowers, Defendants.
• Court: U.S. District Court — Southern District of New York

143 F. Supp. 947

UNITED STATES of America v. ALLIED STEVEDORING CORPORATION, John Ward, John Potter, and Michael Bowers, Defendants.

United States District Court S. D. New York.

July 20, 1956.

Paul W. Williams, U. S. Atty., Southern Dist. of New York, New York City, Joseph DeFranco, Asst. U. S. Atty., New York City, Martin Carmichael, Jr., Sp. Asst. to Atty. Gen., of counsel, for the United States.

Manes, Sturim, Donovan & Laufer, New York City, Arthur M. Laufer, New York City, of counsel, for defendants.

PALMIERI, District Judge.

The defendants were indicted under § 145(b) of the Internal Revenue Code of 1939 for attempting to defeat and evade income taxes. 26 U.S.C. § 145(b) (1952 ed.). On March 23, 1956, after a trial which lasted approximately seven weeks, they were found guilty by a jury. The individual defendants were all admitted to bail pending the imposition of sentence on April 16, 1956. Sentences were imposed pursuant to the provisions of the statute referred to, as follows: Allied Stevedoring Corporation, $10,000 fine; Michael Bowers, five years imprisonment and $10,000 committed fine plus one-half of the costs of prosecution; John Potter, one year and one day imprisonment; John Ward, four years imprisonment and $10,000 committed fine plus one-half of the costs of prosecution.

Two motions are now before me:

On July 19, 1956, all the defendants moved to vacate their sentences as illegal. They rely squarely upon the dissenting opinion in the case of Berra v. United States, 1956, 351 U.S. 131, 135, 76 S.Ct. 685.

On the same date, July 19, 1956, Ward and Bowers, the two individual defendants presently incarcerated, and with respect to whom I denied applications for admission to bail at the time of sentence, have now moved anew for bail pending appeal, pursuant to the recently amended Rule 46(a) (2), Fed.Rules Crim.Proc. 18 U.S.C.A., which took effect on July 9, 1956. This new rule provides that: "Bail may be allowed pending appeal or certiorari unless it appears that the appeal is frivolous or taken for delay."

I.

The Motion to Vacate the Sentences.

Essentially, the question presented by this motion is whether the charge expressly framed by the indictment under § 145(b)¹ was in legal force and effect a charge under § 3616(a)². The defendants' argument is that the violation charged in the indictment could have been drawn in those very words under § 3616(a), and that consequently only the penalty provided by that statute should have been applied upon conviction.

The impact of the decision in Berra v. United States, supra, can be of no comfort to the defendants. The majority opinion states, 351 U.S. at page 133, 76 S.Ct. 685, at page 687, that the only question before the Court was whether the jury should have been allowed to decide whether it would apply § 3616(a) rather than § 145(b). The Court held that it was not a question for the jury and that the trial court properly refused a request to charge that a verdict of guilty of "the `lesser crime'" under § 3616(a) would be permissible. By agreement of the parties before the Supreme Court, it was assumed that § 3616(a) was applicable to income tax returns and the Court made the same assumption, arguendo.³

The dissenting Justices regarded the majority's hypothesis as a correct statement of law, pointing to the presence in the statute of the words "fraudulent" and "return". 351 U.S. at page 136, 76 S.Ct. 685. The defendants, seizing upon this premise, seek to equate § 3616(a) to § 145(b). But the crime under § 145(b) is a wilful attempt in any manner to defeat or evade any tax. The crime under § 3616(a) is delivery of a false or fraudulent list, return, account, or statement to the Collector with intent to defeat or evade a valuation, enumeration, or assessment.

Defendants correctly insist that they "could only be convicted of the crime charged in the indictment — and none other." The crime here charged was a wilful attempt to defeat and evade the corporate tax due for 1951, an act expressly condemned by Congress as a felony.

But the appellants argue that if the indictment sets forth, as a means of consummating this attempt, the filing of a false income tax return, then despite the fact that its allegations are expressly couched in the language of § 145(b), it is magically transformed into a misdemeanor charge under § 3616(a).

The anomalies of such an interpretation are apparent:

In United States v. Albanese, 2 Cir., 224 F.2d 879, 881-882, certiorari denied, 1955, 350 U.S. 845, 76 S.Ct. 87, the appellant challenged the Southern District venue of a similar indictment, under § 145(b), which differed from the instant pleading only in that it alleged that the false tax return was prepared and mailed in the Southern District and was filed in the Northern District of New York. The District Court, ruling that the attempt to evade or defeat the tax, and not the filing of the return, was the gravamen of the offense proscribed by § 145 (b), denied defendant's motion to dismiss the indictment. D.C.S.D.N.Y.1954, 117 F.Supp. 736. Defendant was subsequently convicted and sentenced pursuant to § 145(b). In affirming the pre-trial denial of the motion to dismiss, and the conviction, Judge Frank, for a unanimous Court, said, 224 F.2d at page 882:

"But the crime specified by 26 U.S.C. § 145(b) is an `attempt in any manner to evade or defeat any tax'. The actual act of filing is not an essential element of the offense. The defendant's entire course of conduct in the Southern District of New York, from preparing false records to the mailing of false returns, came within the ambit of the `attempts' statute, and venue was thus proper."

The Court of Appeals for the Second Circuit has held that an indictment brought under § 145(b) need not allege the means by which the attempt was carried out. United States v. Miro, 2 Cir., 1932, 60 F.2d 58, 60. Thus, pursuing defendant's reasoning, if an indictment under § 145(b) alleges no means at all, defendants are charged with a felony, yet if the filing of the return is added as the means of implementing the attempt, the crime alleged is changed from a felony to a misdemeanor. Such a conclusion is untenable.

But, totally apart from its conflict with the logic of the Albanese and Miro holdings, the defendants can sustain this argument only upon a showing that § 3616(a) applies to income tax returns. The Courts have held to the contrary. See Dillon v. United States, 8 Cir., 218 F.2d 97, certiorari granted, 349 U.S. 914, 75 S.Ct. 603, 99 L.Ed. 1248, writ dismissed, 1955, 350 U.S. 906, 76 S.Ct. 991; followed in Berra v. United States, 8 Cir., 1955, 221 F.2d 590, affirmed. 1956, 351 U.S. 131, 76 S.Ct. 685; United States v. Dodson, Cr.Docket No. C146-82 (S.D. N.Y. Oct. 27, 1955) (Decision endorsed on moving papers). I have been unable to find any cases in which § 3616(a) was held to be applicable to income tax returns. I do not agree, therefore, with the defendants' contention that § 3616 (a) is the sole and exclusive measure of their guilt. It is extraneous to their guilt.

The defendants must rely on the further assumption that if § 3616(a) is applicable to income tax returns, the facts constituting the offenses under both statutes are coterminous.⁴ But this is totally unrealistic. As the Supreme Court said, in Spies v. United States, 1943, 317 U.S. 492, 499, 63 S.Ct. 364, 368, 87 L.Ed. 418:

"Congress did not define or limit the methods by which a willful attempt to defeat and evade might be accomplished and perhaps did not define lest its effort to do so result in some unexpected limitation. Nor would we by definition constrict the scope of the Congressional provision that it may be accomplished `in any manner'. By way of illustration, and not by way of limitation, we would think affirmative willful attempt may be inferred from conduct such as keeping a double set of books, making false entries or alterations, or false invoices or documents, destruction of books or records, concealment of assets or covering up sources of income, handling of one's affairs to avoid making the records usual in transactions of the kind, and any conduct, the likely effect of which would be to mislead or to conceal. If the tax-evasion motive plays any part in such conduct the offense may be made out even though the conduct may also serve other purposes such as concealment of other crime."

This was clearly illustrated on the trial of these defendants. They conducted a business of substantial volume without customary books of account, by the extensive use of check-cashing services, fictitious names, anonymous billing devices, and large cash transactions.

The thrust of the evidence spelled out a cleverly devised and astutely executed pattern of fraud calculated to conceal income and defeat the payment of corporate income taxes legally due the Government. The scope of the prosecution and the impact of its proof, of which the defendants were sufficiently advised not only by the indictment but by extensive pre-trial discovery,⁵ could leave no doubt that the issue joined and submitted to the jury was the accusation that the defendants wilfully attempted to defeat and evade the taxes due and owing by the defendant Allied Stevedoring Corporation for the calendar year 1951.

II.

The Motion for Bail Pending Appeal.

I now turn to a consideration of the two questions raised by Rule 46 (a) (2), F.R.Cr.P.: First, is this appeal frivolous? Second, is this appeal taken for delay?

With respect to the first question, I have not found a clear or satisfactory definition of the term "frivolous" within the context of the Rule. For want of a better definition, I shall accept the views urged upon me by defendants' counsel and expressed in United States v. Motlow, 7 Cir., 1926, 10 F.2d 657, 662, and D'Aquino v. United States, 9 Cir., 1950, 180 F.2d 271, certiorari denied, 343 U. S. 935, 72 S.Ct. 772, 96 L.Ed. 1343, rehearing denied, 1952, 343 U.S. 958, 72 S.Ct....