United States v. Daisart Sportswear, 268

• Citation: 169 F.2d 856
• Decision Date: 23 August 1948
• Docket Number: Docket 20978.,No. 268,268
• Parties: UNITED STATES v. DAISART SPORTSWEAR, Inc., et al.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

169 F.2d 856 (1948)

UNITED STATES v. DAISART SPORTSWEAR, Inc., et al.

No. 268, Docket 20978.

Circuit Court of Appeals Second Circuit.

August 23, 1948.

COPYRIGHT MATERIAL OMITTED

Walter R. Hart, of Brooklyn, N. Y. (Louis Timberg, of Brooklyn, N. Y., on the brief), for defendant-appellant Smith

Morris Siegel, of New York City, for defendant-appellant Deeb.

Frederick H. Block, Asst. U. S. Atty., of New York City (John F. X. McGohey, U. S. Atty., and Bruno Schachner, Asst. U. S. Atty., both of New York City, on the brief), for respondent-appellee.

Before L. HAND, SWAN, and CLARK, Circuit Judges.

CLARK, Circuit Judge.

The appellants, Daisart Sportswear, Inc., George Smith, and Albert J. Deeb, were charged with two offenses by two separate informations for misusing priorities established under § 301 of the Second War Powers Act, 50 U.S.C.A.Appendix, § 633; and in addition they were indicted, under 18 U.S.C.A. § 88, for conspiring to violate the Emergency Price Control Act of 1942, 50 U.S.C.A.Appendix, § 901 et seq. The first information was of forty-one counts, and it in substance alleged that defendants had unlawfully and wilfully failed to utilize textiles, received as a result of the application of extension ratings, for a prescribed or permitted use. The second information, of a like number of counts, alleged that defendants had unlawfully and wilfully applied and extended preference ratings for textiles which they were not entitled to apply or extend.¹ Finally, the indictment charged them with conspiring to sell finished piece goods at prices in excess of the maximum established therefor.

The indictment and the two informations were consolidated for trial. All of the defendants were found guilty on the indictment. On the two informations, however, certain counts were eliminated either by action of the court or upon verdict of not guilty, so that Smith and the corporation were found guilty on only thirty-five counts of each, while Deeb was found guilty on but five counts of each. Fines aggregating $710,000 were thereupon imposed on the corporation and Smith, and in addition Smith was sentenced to a total of three years' imprisonment. Deeb was fined a total of $20,000 and sentenced to imprisonment for a year and a day.

Viewing the evidence in its aspect most favorable to support the jury's verdict, Phelps v. United States, 8 Cir., 160 F. 2d 858, 868, rehearing denied Peters v. United States, 8 Cir., 161 F.2d 940, we may treat the following facts as established: Smith was secretary of Daisart Sportswear, Inc., and Deeb was a salesman for it. During the years 1944 and 1945, the defendants applied and extended certain priority ratings of the War Production Board, originally granted to the Metals Disintegrating Company, for the purpose of obtaining certain materials. The defendants certified that the goods were to be used for the manufacture of ammunition powder bags for the Army and, by using top priorities, acquired some two and a half million yards of piece goods. Actually, however, they used only 49,000 yards for the certified purpose, which required a canvas material of a grayish white duck color. The bulk of the goods acquired, including fabrics of all sorts of descriptions and colors, was diverted to civilian handkerchief, dress, negligee, and raincoat manufacturers at prices in excess of the ceilings.

While various issues have been raised on this appeal, there is only one which presents a serious question, namely, whether the defendant Smith gained immunity as a result of testifying before an official of the Office of Price Administration in response to a subpœna issued by that office. His appearance before that agency was on April 30, 1946, or nearly a year before the present charges were made, and was pursuant to two subpœnas served upon him — one in his individual capacity, and the other as an officer of the defendant corporation. By these he was required to produce all purchase records, sales records, invoices, journals, ledgers, cash disbursements books, accounts receivable ledgers, accounts payable ledgers, and all other records and documents of either himself individually or the corporation pertaining to the purchase, sale, manufacture, fabrication, and/or finishing piece goods, materials, and fabrics from January 1, 1945, to the time of the examination. He appeared at the examination with counsel and took the oath as witness. Next the OPA official explained to him that he could not be compelled to make any incriminating statements and that he had certain constitutional guarantees. The questioning then followed.

After a few questions of a preliminary nature and before any matter germane to the present issue had been educed, however, Smith asserted a claim of "privilege as to anything that I say." In response to further questions he explained his failure to produce any of the records required by the subpœnas on the ground that they had been either destroyed or lost or misplaced. During the course of the examination he stated that the defendant corporation was a contractor for the Metals Disintegrating Company, which in turn was under contract to manufacture ammunition bags directly for the United States Government. Since the company was unable to purchase materials, it, so he said, had asked him to do so and provided him with a blanket priority rating for that purpose. Accordingly, as he testified, he maintained a constant stock of material and would manufacture the ammunition bags as orders were received from the Metals Disintegrating Company. He also brought out that his corporation was a contractor for many other concerns as well, naming in all five companies. He further revealed the names of three concerns from which he had purchased fabrics — A. Steinam & Co., L. Lazarus & Co., and Southeastern Cottons. These figured in some fifteen counts of each information, and at the trial, as sellers in making purchases from whom the defendants had illegally extended specific preference ratings. Other disclosures included the name of the bank upon which the corporate checks were drawn in paying for such purchases, the selling of materials and fabrics, and the method of establishing the price for such sales.

All this Smith asserts to be vitally important evidence which went to the very heart of the matters on which his conviction rests and for which he claims immunity under § 202(g) of the Emergency Price Control Act of 1942, 50 U.S.C.A.Appendix, § 922(g). This provides that no person shall be excused from complying with any requirements to testify under the act "because of his privilege against self-incrimination," but the immunity provisions of the Compulsory Testimony Act of February 11, 1893, 49 U.S.C.A. § 46, shall apply "with respect to any individual who specifically claims such privilege." The Compulsory Testimony Act provides that no person shall be excused from testifying before the Interstate Commerce Commission on the ground of this privilege and then continues: "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 subpœna, or the subpœna of either of them, or in any such case or proceeding," except for perjury committed in so testifying. Smith's position is that, since he was compelled to make the disclosures detailed above, he must be granted the immunity from prosecution provided by statute.

In examining this contention we shall initially consider the charges contained in the two informations. As we have seen, the first alleged that defendants had unlawfully failed to utilize textiles obtained under preference ratings for the purposes certified, while the second alleged that they had unlawfully and wilfully applied and extended preference ratings for textiles. In proof of these charges the prosecution would necessarily show the dealings with the Metals Disintegrating Company, the use of a blanket preference rating to obtain the desired commodities, the companies from which the materials had been purchased, the disposal of the surplus stock, and the companies to which it had been sold. Except for the last, Smith gave information as to all of these matters on his OPA examination. His claim of immunity would therefore be clear except for the circumstance, now to be stated, of his waiving immunity as to a part of his testimony.

He had already testified generally to all the elements stated above — except the names of purchasers of the surplus which he never did disclose — when he volunteered the following, supplementing not too responsively an answer he had just made to a specific question: "Metals Disintegrating Company being a foreign concern and being unable to furnish this material, they asked me to purchase materials for them. They were aware that I cannot do that without proper priorities. Those priorities were forthcoming in a blanket sum. No stipulated amount and I was further told to maintain a constant stock for any orders they may call. I mean Daisart Sportswear Inc., for any orders they may call for. Their orders came to me sometimes dated and never in any set size or specified form. They charged from day to day. I then went about purchasing material for their work. When and if I had a surplus, I would notify them and ask them if they had anything immediately on hand as I am overstocked, at which time they told me they had not and to dispose of it." Then the examiner said: "This is a voluntary statement. You do not claim immunity with respect to that statement?" to which the answer was, "No." There followed certain explanatory answers, set forth in the margin,² which reiterated the use by Daisart of the blanket preference ratings to obtain material and the disposal of the material by sale.

While this account thus to a certain extent overlapped testimony previously...