United States v. Donnelley

• Decision Date: 02 February 1965
• Docket Number: Civ. No. 706.
• Citation: United States v. Donnelley, 241 F.Supp. 200 (D. Nev. 1965)
• Parties: UNITED STATES of America and Thurston Snyder and James H. Lawhn, Special Agents, Internal Revenue Service, Plaintiffs, v. J. A. DONNELLEY, Defendant.
• Court: U.S. District Court — District of Nevada

241 F. Supp. 200

UNITED STATES of America and Thurston Snyder and James H. Lawhn, Special Agents, Internal Revenue Service, Plaintiffs, v. J. A. DONNELLEY, Defendant.

Civ. No. 706.

United States District Court D. Nevada.

February 2, 1965.

John W. Bonner, U. S. Atty., Las Vegas, Nev., Robert S. Linnell, Asst. U. S. Atty., Las Vegas, Nev., Michael DeFeo, Sp. Asst. U. S. Atty., Las Vegas, Nev., for plaintiffs.

J. A. Donnelley, San Diego, Cal., for defendant.

ROGER D. FOLEY, District Judge.

On April 1, 1964, pursuant to 26 U.S.C. § 7602(2), the Internal Revenue Service issued an administrative subpoena in connection with its investigation of the tax liability of Wilbur I. Clark and Moe B. Dalitz for the period 1953-1962, inclusive, requiring the Defendant to produce, at Las Vegas, Nevada, on April 20, 1964, the following:

"Your records relating to the receipt and disbursement of funds, including ledger accounts, journal records, bank statements, loan records, bank deposit receipts or tags, cancelled checks, correspondence received and sent, memoranda made, and copies of accountings and billings of fees and costs and any other records of any and all financial transactions with or on behalf of Wilbur Clark, Moe B. Dalitz, Martinolich Construction Company, Refrigerated Transport Co., Martinolich Shipbuilding Co., and Atlantida."

On September 29, 1964, the Government filed herein a petition to enforce the Internal Revenue summons under 26 U.S.C. § 7604(a), alleging:

(a) That Special Agents of the Internal Revenue Service, Thurston Snyder and James H. Lawhn, had been conducting an investigation of the income tax liability of Wilbur I. Clark for the years 1953-1962, inclusive, and of Moe B. Dalitz for the year 1961, for the purpose of ascertaining the correctness of the income tax returns as filed by said taxpayers;

(b) That Defendant is an attorney representing said taxpayers and has in the past been involved in numerous financial transactions on taxpayers' behalf, and as a result, has, in his possession, numerous financial records, including the records of the corporations named in the summons in which the taxpayers have been involved, which records have a direct financial relationship to the correctness of the taxpayers' returns; and

(c) That Defendant has failed to produce the records demanded.

Following the issuance of an Order to Show Cause why the Defendant should not comply with the administrative summons, Defendant answered admitting that the agents had been conducting the said investigation of taxpayers as alleged in the petition and that as an attorney-at-law, he had represented the taxpayers and had been involved in financial transactions on their behalf and has in his possession records of financial transactions concerning taxpayers. The Defendant alleges that he does not know whether the records of the corporations in his possession have any relation, direct or otherwise, to the correctness of the income tax returns of the taxpayers.

This Court conducted a hearing upon an order to show cause on the 6th day of November, 1964, and heard arguments of counsel on January 13, 1965. Following the filing of final briefs, the matter stood submitted on January 25, 1965. Counsel have stipulated that the records of the corporation described in the summons as Atlantida are no longer sought and may be disregarded.

The Government has stipulated to limit the scope of their request for production to the books, records and papers described in the summons, in the possession of the Defendant, of financial transactions of each of the taxpayers with each of three corporations, to wit, Martinolich Construction Company, Refrigerated Transport Co. and Martinolich Shipbuilding Co., and to financial transactions among the three corporations that bear, directly or indirectly, upon the financial transactions of either or both of the taxpayers for the period involved, excluding financial transactions among the three corporations and between any of the three corporations and third parties that in no way pertain to or bear upon or affect the financial transactions of either or both of the taxpayers.

From uncontroverted evidence, the Court makes the following findings of fact:

1. That Clark, during the period involved, first owned one-half of the stock of Martinolich Construction Company, Anthony Martinolich owning the other one-half, and later, about 1955, Clark became the owner of all the stock of this corporation.

2. That Martinolich Construction Company borrowed, apparently without interest, approximately Four Hundred Fifty Thousand Dollars ($450,000) from Refrigerated Transport Co. between 1952 and 1955.

3. That the original officers of Refrigerated Transport Co. were Anthony Martinolich, his son and the Defendant. Martinolich and son owned the controlling stock.

4. That Martinolich and wife owned approximately sixty per cent of the stock in Martinolich Shipbuilding Co.

5. That Martinolich Shipbuilding Co....