United States v. Gold

Citation470 F. Supp. 1336
Decision Date20 April 1979
Docket NumberNo. 77 CR 1073.,77 CR 1073.
PartiesUNITED STATES of America, Plaintiff, v. Harvey S. GOLD, Charles J. Calo, John C. Tapas, Kenneth L. Schulz, Neil R. Mitchell, Bernard H. Lorant, and Velsicol Chemical Corporation, Defendants.
CourtU.S. District Court — Northern District of Illinois

COPYRIGHT MATERIAL OMITTED

Thomas P. Sullivan, U. S. Atty., Chicago, Ill., for plaintiff.

Williams & Connolly, Edward Bennett Williams, Vincent J. Fuller, Washington, D. C., Donald J. McLachlan, Isham, Lincoln & Beale, Chicago, Ill., Lipnick, Barsy & Joseph, Herbert Barsy, Chicago, Ill., A. E. Botti, Wheaton, Ill., Walsh, Case & Coale, Ralph Brown, Chicago, Ill., George J. Cotsirilos & Associates, Inc., George J. Cotsirilos, Chicago, Ill., Jenner & Block, Donald R. Harris, Laura A. Kaster, Chicago, Ill., Wildman, Harrold, Allen & Dixon, Bernard Harrold, Douglas Carlson, Chicago, Ill., for defendants.

MEMORANDUM

LEIGHTON, District Judge.

In this criminal prosecution, an eleven-count indictment charges six individuals and a corporation, all in one count and all or some in other counts, with conspiracy to make, and with having made fraudulent statements, false representations to, and having concealed material matters from a governmental agency; and with violations of the Mail Fraud Act. Defendants have jointly filed 47 pretrial motions, 14 of them directed against the indictment because of alleged defects of form and substance.

In one motion to dismiss, supported by memoranda, exhibits and affidavits, defendants alleged that the grand jury which returned this indictment had an unauthorized person in the grand jury room. They allege that while Bingham Kennedy acted as a Special Attorney for the Department of Justice presenting the government's case to the grand jury, he was at the same time on the staff of the Environmental Protection Agency, the complaining party in the criminal charges being investigated; that he was in the employ of the agency, and represented it in administrative proceedings in which the corporate defendant was a party; and that he became an important witness who alternated his position from that of a prosecutor to that of a person who testified and furnished evidence on which the grand jury returned the indictment in this case. These serious allegations, and the nature of the government's response to them, led this court to conclude that an evidentiary hearing was required. Accordingly, a hearing has been had at which witnesses have testified and a large number of exhibits have been offered and received.1 The issue that arises is whether the evidence adduced requires dismissal of this indictment.

I.
A.

Velsicol Chemical Corporation is engaged in the production, distribution, and sale of various pesticide chemicals, including heptachlor and chlordane, of which in this country it is the sole manufacturer. The national distribution, sale, and use of pesticide chemicals is regulated by the United States Environmental Protection Agency that functions pursuant to certain federal laws. The most important of these are the Federal Insecticide, Fungicide, and Rodenticide Act, amended in October 1972, 7 U.S.C. § 136, et seq., and §§ 408, 409 of the Federal Food, Drug and Cosmetic Act, 21 U.S.C. §§ 346a, 348.2 A pesticide chemical cannot be manufactured, distributed or sold within the United States without being registered with the Administrator of EPA upon compliance with the requirements of FIFRA. The same statute governs the cancellation and suspension of registered pesticide chemicals; and in section 6(a)(2), it is provided that "if at any time after the registration of a pesticide the registrant has additional factual information regarding unreasonable adverse effects on the environment of the pesticide, he shall submit such information to the Administrator." 7 U.S.C. § 136d(a)(2). Sections 408 and 409 of the Federal Food, Drug and Cosmetic Act regulate the tolerance that is permitted in the use of a pesticide chemical, in or on a raw agricultural commodity. These provisions require that a petitioner for the tolerance established by the Administrator of EPA furnish data, including reports of investigations made with respect to the safety of a pesticide chemical. 21 U.S.C. § 346a(d)(1)(C). A petition for a food additive tolerance must "contain full reports of investigations made with respect to the safety for use of such additive, including full information as to the methods and controls used in conducting such investigations." 21 U.S.C. § 348(b)(2)(E).

In 1971, in fact for a long time before and throughout the period alleged in this indictment, heptachlor and chlordane were registered by the Administrator of EPA for distribution and sale in the United States. Defendants Harvey S. Gold, Charles J. Calo, John C. Tapas, Kenneth L. Schulz, and Neil R. Mitchell were Velsicol executives, all of them acquainted with and having varying degrees of responsibilities for the corporation's compliance with the regulatory requirements of FIFRA as they pertain to the registration of heptachlor and chlordane. Defendant Bernard H. Lorant, during the same time, was a Velsicol attorney similarly involved.

Sometime in June 1971, at EPA's suggestion and in order to answer questions concerning whether heptachlor was tumorigenic or carcinogenic in man or laboratory animals, Velsicol entered into an agreement with the International Research and Development Corporation of Mattawan, Michigan3 for the administration of an 18 month feeding study in mice using a mixture of heptachlor and hetachlor epoxide, a metabolite of heptachlor. Later that year, in December 1971, Velsicol again contracted with IRDC for the administration of a similar 18 month feeding study in mice for chlordane. Slides from some two thousand animals were involved in the studies. IRDC made reports; and thereafter, between December 1972 and January 1973, Velsicol retained two consulting pathologists, Dr. John Rust of the University of Chicago and Dr. Paul Newberne of the Massachusetts Institute of Technology, to examine slides of liver tissues from mice used in the heptachlor and chlordane studies. In a report to Velsicol dated December 29, 1972, Dr. Rust, from a review of 50 IRDC slides, concluded "it is quite clear that the test animals were subjected to a severe hepatoxin and carcinogen." In a report completed at approximately the same time, Dr. Newberne found among 22 IRDC slides he examined "liver cell carcinomas."4

On October 15, 1973, in the course of an administrative proceeding, Velsicol submitted to EPA a copy of IRDC's final report concerning the feeding study of mice in which heptachlor had been used. This "showed a compound-related incidence of nodular hyperplasia of the liver but no induction of cancer." In the same month that this report was given to EPA, Velsicol employed Dr. William MacDonald of the University of Miami in Coral Gables, Florida, a consulting toxicologist, to examine for tumorigenicity all of the IRDC slides from the carcinogenicity study of heptachlor. In September 1974, Dr. MacDonald's employment was extended to include an examination for tumorigenicity of all IRDC slides from the carcinogenicity study of chlordane. IRDC's final report of its carcinogenicity study on chlordane was received by Velsicol during the month of December 1973. In the months of June and October 1974, Dr. MacDonald reported to Velsicol that many of the IRDC slides from mice that had been fed heptachlor showed tumors or pre-tumorous lesions; during January 1975, he reported that many of the slides from mice fed chlordane showed tumors or pre-tumorous lesions, and that both heptachlor and chlordane were liver tumorigens. Velsicol did not give EPA any of the Rust-Newberne-MacDonald reports.

Sometime during the month of February 1975, William E. Reukauf, lead EPA counsel in the administrative proceedings to cancel the registration of heptachlor and chlordane that had been pending since November 1974, had a conversation with a government consultant who suggested that Velsicol be asked whether other pathologists had examined some of the IRDC slides. Reukauf immediately wrote to Velsicol's lawyers and inquired. Then, an exchange of letters informed Reukauf of the fact that Drs. Rust, Newberne, and MacDonald had made such examinations; and on June 10, 1975 he was sent copies of the Rust-Newberne reports with the promise he would be furnished with a copy of the one made by Dr. MacDonald. Two days later, Reukauf sent a memorandum to the general counsel of EPA informing him of the discovery that other pathologists had looked at selected slides from the IRDC study and had furnished Velsicol with data adverse to the continued registration of heptachlor and chlordane. Reukauf, without having made any other inquiry or investigation, expressed the view "that Velsicol has violated section 6(a)(2) of FIFRA if they did not inform the Agency of these data." He quoted the words of the section and said, "I believe we should consider utilizing the criminal sanctions provided for in FIFRA. (Sec. 14(b)(1).)" A month later, expanding on Reukauf's memorandum, but also without any further inquiry or investigation, the General Counsel of EPA referred the matter to the Department of Justice recommending criminal prosecution of "Velsicol and its appropriate officers and employees" for the violations of FIFRA which he believed occurred when the data contained in the Rust-Newberne-MacDonald reports was not submitted to the Administrator of EPA.

B.

At the time of this referral, Bingham Kennedy was a lawyer on the General Counsel's staff. He joined the agency on March 13, 1975, and from then throughout the grand jury investigation of this case, he was in touch with the administrative proceedings in which EPA was seeking cancellation or interim suspension of the registrations of heptachlor and chlordane. At issue in those proceedings, in fact central in them, was the alleged...

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