United States v. Bonaguro

• Decision Date: 18 November 1968
• Docket Number: No. 68 C 842.,68 C 842.
• Citation: 294 F. Supp. 750
• Parties: UNITED STATES of America v. Michael BONAGURO, Defendant.
• Court: U.S. District Court — Eastern District of New York

294 F. Supp. 750

UNITED STATES of America v. Michael BONAGURO, Defendant.

No. 68 C 842.

United States District Court E. D. New York.

November 18, 1968.

Jesse Zaslav, New York City (Zaslav & Belloff, New York City, of counsel) for defendant.

David M. Quinn, Sp. Atty., Dept. of Justice (Joseph P. Hoey, U. S. Atty., of counsel) for the Government.

MEMORANDUM AND ORDER

DOOLING, District Judge.

A criminal complaint was filed against MICHAEL BONAGURO on August 6, 1968, charging him with having possessed counterfeit Federal Reserve notes on July 19, 1968. A warrant to arrest Mr. Bonaguro was issued on the same day, and Daniel P. Hurley, of the Secret Service, executed the warrant on August 6, 1968; after the arrest and in the Secret Service office at 90 Church Street, New York, N. Y., Mr. Bonaguro was searched, and $1,978 in currency was taken from his person, along with certain papers. Mr. Hurley testified that after he had warned Mr. Bonaguro about his rights, he asked Mr. Bonaguro about the currency, and he declined to discuss it, on Fifth Amendment grounds. Mr. Bonaguro testified that he did not recall such a question and statement.

At the hearing on Mr. Bonaguro's present motion for an order directing return of the currency and suppressing its use in evidence, he testified that he was a scrap metal dealer, was president of Caton Scrap Metal Corp., and that the currency was what remained, after paying for wages, materials, etc., of $3,700.90 that he had received on August 2, 1968, from R & Z Metal Corp. for some 10,000 pounds of scrap copper sold on that day. A handwritten bought note on a printed form of R & Z Metal Corp. was produced by Mr. Bonaguro. The transaction had not been mentioned, nor had the bought note been produced, at the time of the arrest.

The Secret Service on or before August 7, 1968, checked the currency to see whether it was "prerecorded" currency, that is, had originated with the Government for use in a transaction expected to secure evidence bearing on suspected criminal conduct; so far as the Secret Service could determine, the currency was not pre-recorded.

Agent Hurley testified that, as is usual when large amounts of currency are seized, the Internal Revenue Service (in addition to other public agencies) was notified of the seizure.

Internal Revenue Agent Anthony Schifeletti testified that generally, as he understood it, the Intelligence Division of the Internal Revenue Service was notified of such currency seizures and, as— again—he understood it, the Intelligence Division forthwith communicates with the Collection or the Audit Division, requesting consideration of jeopardy assessment 26 U.S.C. § 6861(a). Mr. Schifeletti stated that, advised of the seizure, he did thereafter assess a tax of $2,021.88 against Mr. Bonaguro. He testified that he obtained information and estimated the tax, based on Mr. Bonaguro's having the $1,978 of currency. He treated Mr. Bonaguro as a married man with two children, and, by reference to Bureau of Labor Statistics data, estimated (for) him cost of living, rent, food and other outlay indicia, taking account, in this estimate, of the place where Mr. Bonaguro lived, and he arrived at an estimated income of $7,600, to which was added $1,900 as representing the currency, making in all an income of $9,500. Allowing a standard deduction of $950 and a single (?) exemption of $600, produced an estimated income-taxable amount of $7,950. On this he computed a tax of $1,617.50 26 U.S.C. § 1(a) (2), $1,130 plus 25% of excess over $6,000, and to that tax he added a 25% penalty under 26 U.S.C. § 6658, that is, $404.38, so making up the total assessment of $2,021.88.

It does not appear and, evidently, it is not the case that Mr. Schifeletti ascertained whether or not Mr. Bonaguro had filed a declaration of estimated tax for 1968, or was current or delinquent in the payment of any United States tax. No investigation was made of Mr. Bonaguro's business affairs, and no inquiry was addressed directly to him. It does not appear that an effort was made to determine whether Mr. Bonaguro was in fact underestimating his tax, or doing anything to put any tax in jeopardy, or to nullify the collection of any tax he owed, beyond what—if anything—could be inferred from his possessing $1,978 in currency when he was arrested on the charge of possessing counterfeit Federal Reserve notes. It does not appear that the complaint underlying the arrest warrant was communicated to the Internal Revenue Service: that document recited information indicative that Mr. Bonaguro was a source of counterfeit currency.

The administrative steps followed were not shown by the Government's evidence. It appears, however, that the Government assumed that it was appropriate

(a) for the Service to declare Mr. Bonaguro's taxable year immediately terminated on the ground of the Service's finding that Mr. Bonaguro designed quickly to do some act tending to prejudice or render wholly or partly ineffectual collection of the income tax for the current year unless the proceeding to collect the tax were brought without delay 26 U.S.C. § 6851(a), and to give notice of the finding and declaration to Mr. Bonaguro together with a demand for immediate payment of the unpaid tax for the terminated period;

(b) for the Service to assess immediately any "deficiency" in tax for the terminated period that existed under 26 U.S.C. § 6211(a), provided the Service "believes that the assessment or collection of the deficiency * * * will be jeopardized by delay," such assessment being made by recording the "liability" of Mr. Bonaguro as taxpayer in the proper tax office, 26 U.S.C. §§ 6203, 6861(a);

(c) for the Service to give notice to Mr. Bonaguro stating the amount of the tax assessed and demanding payment of it, 26 U.S.C. § 6303(a);

(d) for the Service to treat the tax liability so assessed, together with any penalty as a lien in favor of the United States on all Mr. Bonaguro's property rights, including his interest in the $1,978. in currency, from the time Mr. Bonaguro neglected or refused to pay the amount assessed "after demand," 26 U.S.C. § 6321; and

(e) for the Service to collect the tax by levy on the $1,978. subject to the tax lien after the failure or refusal of Mr. Bonaguro to pay it on demand without waiting for the usual 10-day period to expire, the levy being made by demanding that the Secret Service as possessor surrender the property rights subject to the tax lien, 26 U.S.C. §§ 6331(a), 6332(a), (c).

Apparently (see Exhibit B) the Service made a Form 1040 income tax return "for" Mr. Bonaguro under 26 U.S.C. § 6020(b) (1); such a return may be made where the taxpayer fails to make a return required by law or regulation at the prescribed time or makes a false return; the Service is required to make such a return, using its own knowledge and such information as it can obtain by testimony or otherwise. The Statement of Tax Due (Exhibit B) refers to a return filed August 15, 1968, describes the assessment as made under date of August 15, 1968, and states the Form Number as "1040"; The Statement of Tax Due gives the "period ending" as being "8/31/68," but if that were the case, no tax could be due, for in theory income tax accrues at the last moment of the taxable period—since a large last moment loss could obliterate all of the period's taxable net income—and the "tax" here was purportedly assessed under date of August 15, 1968. Cf. Frank Ix & Sons Virginia Corp., 1966, 45 T.C. 533, 543-544; Estate of Levi T. Scofield, 1956, 25 T.C. 774, 783, rev'd on...