United States v. Florida

• Decision Date: 18 August 1958
• Docket Number: No. 1706.,1706.
• Parties: UNITED STATES of America, Plaintiff, v. George H. FLORIDA, Defendant.
• Court: U.S. District Court — Eastern District of Arkansas

165 F. Supp. 328

UNITED STATES of America, Plaintiff, v. George H. FLORIDA, Defendant.

No. 1706.

United States District Court E. D. Arkansas, Jonesboro Division.

August 18, 1958.

James W. Gallman, Asst. U. S. Atty., Little Rock, Ark., for plaintiff.

E. J. Ball, Fayetteville, Ark., Catlett & Henderson, Little Rock, Ark., for defendant.

JOHN E. MILLER, District Judge.

On May 21, 1958, the defendant filed his motion to dismiss warrant, and in support of the motion served and filed his memorandum brief. On June 27, 1958, the government served and filed its memorandum brief in opposition to the motion. In addition to the briefs of the respective parties, the Court has heard oral argument and has considered the record, and the motion is now ready for disposition.

The material facts necessary for consideration are not in dispute and may be summarized as follows:

On March 13, 1958, Eugene D. Brown, Special Agent, Internal Revenue Service, filed before a United States Commissioner for the Eastern District of Arkansas a complaint for violation of Section 145 (b) of the Internal Revenue Code, 26 U.S.C. § 145(b). The complaint charges:

"That on or about the 18th day of March, 1952, at Little Rock, in the Eastern District of Arkansas, George H. Florida, also known as G. H. Florida, did willfully and knowingly attempt to evade and defeat a large part of the income tax due and owing by him and his wife to the United States of America for the calendar year 1951 by filing and causing to be filed with the Collector of Internal Revenue for the District of Arkansas at Little Rock, Arkansas, a false and fraudulent joint income tax return on behalf of himself and his wife, wherein it was stated that their joint net income for said calendar year was the sum of $10,348.99 and that the amount of tax due and owing thereon was $1,566.18, whereas, as he then and there well knew, their joint net income for the calendar year 1951 was the sum of $44,455.74, upon which said net income there was owing to the United States of America an income tax of $15,621.78."

On the same date the United States Commissioner issued a warrant for the arrest of the defendant, and upon the defendant's arrest he was taken before Carson Boothe, United States Commissioner for the Eastern District of Arkansas, at Jonesboro, Arkansas, where defendant immediately posted bond.

The defendant did not waive preliminary examination but requested a hearing, and on April 14, 1958, such hearing was held by said United States Commissioner at Jonesboro, Arkansas. At the conclusion of the hearing the Commissioner held the defendant to await the action of the United States Grand Jury for the Eastern District of Arkansas, and stated:

"It seems to me according to what has been testified to here today there was enough systematic effort on the part of Mr. George Florida to accept the benefits from these organizations which he was associated with as a partner or a stockholder and justify the Commissioner in holding that there was probable cause for his detention. Therefore, it is my finding that probably the crime has been committed as charged in the complaint against Mr. Florida."

The grounds set forth in the motion of defendant are:

"1. There was no legally competent evidence before the United States Commissioner at the preliminary hearing to sustain a finding of probable cause of the violation of Section 145(b) of the Internal Revenue Code (26 U.S.C. § 145(b)).

"2. The testimony before the United States Commissioner at the preliminary hearing, if believed in toto, was insufficient in law to sustain a finding of probable cause of the commission of the offense charged.

"3. That the holding of the defendant to answer in the District Court, after a preliminary hearing before the United States Commissioner, upon testimony which was insufficient in law to sustain a finding of probable cause of the commission of the offense charged, constitutes a deprivation of liberty and property without due process of law in violation of the Fifth Amendment to the Constitution of the United States."

The only witness who testified at the preliminary hearing was Mr. Brown, the complainant, who stated that during the calendar year 1951 checks in the total amount of $52,628.34 were issued and paid by the partnership of A. J. and G. H. (George H.) Florida for the benefit of George H. Florida, all of which were charged to the personal account of George H. Florida on the books of such partnership; that during such year a total of $11,682.02 was paid to various persons for the benefit of George H. Florida by corporations in which A. J. and G. H. (George H.) Florida owned more than 50 per cent of the stock, and that such payments were deducted by the corporations as items of expense; that he did not find that George H. Florida had destroyed any records, made any entries on any of the records or done anything whatsoever with the records; that there were no unreported or hidden bank accounts maintained by the defendant; that there was no duplicate set of books and that the defendant did not receive any checks or money from any sources that were not reflected on the books of the various companies which issued the checks.

Mr. Brown further testified that the defendant had an additional income of $34,106.75 which the income tax return for the calendar year 1951 did not reflect; that the gross income of the defendant for the calendar year 1951, in addition to the amount of $10,348.99 reflected in his income tax return, consisted of withdrawals by defendant from the partnership in which he held a 50 per cent interest and payments of $11,682.02 made for his benefit by certain corporations in which he held a stock interest. Thus, the total gross income, according to the testimony of the Special Agent, was $74,659.35, but the defendant was entitled to additional credits in the sum of $30,203.61 not claimed by him in his return, which reduced the total gross income to $44,455.74.

The above mentioned sum of $11,682.02 was paid by various Florida controlled corporations in numerous items to third persons to whom defendant was obligated for purchases. Such expenditures were charged to business expenses by such corporations or charged to depreciation accounts, but were actually for the benefit of the defendant. The expenditures consisted of architect's fees, material bills, furniture purchases, electric light bills, interior decorating expenses and labor pertaining to the personal residence of the defendant. Also, some bills for clothing and jewelry were paid by the various corporations for the benefit of defendant. At the end of the calendar year the corporations dropped the drawing account and did not carry it forward in any manner.

It will be noted that the offense charged to have been committed by defendant occurred on March 18, 1952, and prosecution would have been barred on March 19, 1958, under the provisions of 26 U.S.C. § 3748(a) (2). Thus, the complaint was filed and warrant issued six days prior to the expiration of six years from the date the alleged offense was committed.¹

In United States v. Zerbst, D.C. E.D.S.C., 111 F.Supp. 807, 808, the defendant had moved that the Commissioner's warrant against him be dismissed on practically the same grounds alleged by defendant in the instant case. The Court, in considering the motion, stated the questions as follows:

"(1) Does the District Court have the authority to review the action of the United States Commissioner in finding that there was probable cause for holding the defendant for the grand jury?

"(2) Was there sufficient evidence before the commissioner to warrant his finding that there was probable cause to believe that the defendant violated the provisions of Section 2913, Title 26, of the Internal Revenue Code?"

The Court held that it did have "the authority to review the action of the United States Commissioner in finding that there was probable cause in holding the defendant for the grand jury. The United States Commissioner is a ministerial —or, at best, only a quasi judicial— officer and his acts, therefore, are subject to review by the District Court." The ruling of the Court was based upon the opinion of Judge Learned Hand in United States v. Casino, D.C., 286 F. 976, 979, and cases therein cited, and also on the case of In re No. 191 Front Street, Borough of Manhattan, City of New York (Kirvin v. United States), 2 Cir., 5 F.2d 282, 286, and cases therein cited.

At page 810 of 111 F.Supp., the Court, in further discussing the jurisdiction to review the action of the United States Commissioner said:

"The United States Commissioner, being only a ministerial or quasi judicial officer, is always under the supervision and direction of the District Court. His findings may be reviewed by the District Court at any time. I would refuse, however, to review the findings of the commissioner in any case except one such as this. In this case, the defendant is a county police officer of Charleston County. As soon as he was arrested under the warrant he was properly suspended. It is not known when his case will be tried, and it seems to me that it would be improper for the District Court to refuse to take jurisdiction under the existing circumstances. I want to make it perfectly plain, however, to the members of the Bar of the Eastern District of South Carolina that there are very few cases decided by the United States Commissioner which this court will review. The circumstances must be extraordinary and unusual to justify the court's reviewing the case before it has been submitted to the grand jury. I think there are sufficiently strong circumstances in this case, however, to justify my assuming jurisdiction and reviewing the action of the commissioner."

The defendant contends that there was total lack of evidence presented to the Commissioner upon which a finding of probable cause could be made and that this case is unusual and extraordinary...