United States v. Goldstein, 72-CR-18.
| Decision Date | 05 May 1972 |
| Docket Number | No. 72-CR-18.,72-CR-18. |
| Citation | 342 F. Supp. 661 |
| Parties | UNITED STATES of America v. Albert GOLDSTEIN et al., Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Robert A. Morse, U. S. Atty., E.D.N. Y., Brooklyn, N. Y., for plaintiff; by Michael B. Pollack, Asst. U. S. Atty., of counsel.
Kostelanetz & Ritholz, New York City, for Albert Goldstein; by Jules Ritholz, Robert S. Fink, New York City, of counsel.
Arthur W. Lonschein, Jamaica, N. Y., for Morris Kessler.
Joseph E. Brill, New York, City, for Alfred Ceasar.
Moses Kove, and Irving Anolik, New York City, for Sam Jacobson.
Thomas J. O'Brien, New York City, for Murray Geller.
Bernard Dworkin, New York City, for Joseph Factoroff.
(Motions to Dismiss Indictment)
Defendants other than Wisch and Cohen have moved to dismiss the complaint on various grounds.
The court will deal first with defendant Goldstein's motion to dismiss the indictment for failure to comply with allegedly necessary procedures preliminary to submission of the case to the grand jury or, in the alternative, for an evidentiary hearing concerning compliance with regulations, manuals, and practices relating to administrative due process and to his constitutional rights. Defendants Kessler and Jacobson, without expressly raising the same issues, have asked for the benefit of the motions of all other defendants. Since they are not indicted as taxpayers, they would not have the same pre-indictment rights which Goldstein asserts.
Defendant Geller's motion and Ceasar's are based on their assertion that the indictment does not state a federal offense. Defendant Factoroff asserts that he was inadequately advised of his rights before being asked to give testimony to the grand jury. Defendant Jacobson claims lack of speedy prosecution and statute of limitations.
The indictment, in twenty counts, charges a series of interrelated violations of the Internal Revenue Code.
Count One charges Albert Goldstein, the Secretary-Treasurer of Rojo Trucking Corp., Jobie Trucking Corp. and Scotneil Trucking Corp., and Murray Geller, a former Revenue agent of the Internal Revenue Service assigned to auditing the tax returns of the three corporations and of defendant Goldstein, with conspiracy to defraud the United States of income taxes by deducting the salaries of fictitious employees from the corporate income tax returns of the three trucking corporations.
The substantive counts charge Goldstein and various combinations of defendants with filing false income tax returns for various years for the three corporations named in the conspiracy count, a fourth corporation, and Goldstein himself.
Defendant Goldstein claims that he was entitled to a series of four conferences at various administrative levels before the case against him could be presented to the grand jury, that denial of these conferences was arbitrary, and therefore that he has been deprived of due process and equal protection of the laws.
The right to conferences is claimed to exist at the levels of the Special Agent; the Assistant Regional Commissioner, Intelligence; and the Assistant Regional Counsel, Enforcement. Finally, defendant Goldstein claims that any potential prosecution is subject to further review in the Department of Justice, in the Criminal Section of its Tax Division, though it is not clear that he asserts the right to a further conference at this stage. It appears that 50% of prosecutions are declined at the district (Special Agent) level and smaller percentages at each succeeding stage.
The government asserts that the administrative conferences are not a pre-requisite to grand jury action, that the regulations which defendant Goldstein relies on were not intended to create legal rights in taxpayers, and that the administrative practice has been not to provide conferences if information must be obtained through grand jury subpoenas rather than simply from the books and records of the taxpayer, and finally, that the grand jury has plenary power to indict.
No conference was offered at the Special Agent's level. The government points out that the Special Agent on the case did not specifically "recommend prosecution," but suggested instead that the case be referred to the Department of Justice for presentation to a grand jury. The grand jury inquiry was begun in November 1970.
Defendant Goldstein was offered a conference with Regional Counsel, Enforcement, in September 1971, concerning proposed criminal action against him, but the letter to him was returned undelivered with a post-office notation, "Moved, Left No Address." An attorney in the Chief Counsel's office at IRS asserts that it is office policy not to make further efforts to communicate with taxpayers concerning a conference after a mailed notice has been returned. Goldstein had no authorized representative at the time. No other defendant was offered any sort of conference.
The conference with the Special Agent is described in a published regulation, which defendant asserts is mandatory in form. The conference with the Regional Commissioner Intelligence, is described in the same regulations, but is clearly not mandatory. The subsequent conferences are described in internal manuals (for official use only), and in terms of practice or discretion.
None of the cases cited by defendant Goldstein imposes any limits on a grand jury's power to indict or on a United States Attorney's power to present a case to the grand jury, although they do in general terms give certain IRS regulations the force of law.
The statutory basis for defendants' contention is 26 U.S.C. § 7122(a), which in its terms authorizes compromise of criminal cases under the income tax laws, an authority not given in most other criminal cases. The statute provides:
The statutory compromise provision is in Chapter 74 of the Revenue Act of 1954 which is entitled "Closing Agreements and Compromises." It does not apply to assessments of less than $500.
The statute has been construed not to contemplate compromise of purely criminal cases, unrelated to civil liability. In United States v. McCue, 178 F. Supp. 426, 434 (D.Conn.1959), aff'd (without mentioning this point), 301 F. 2d 452 (2d Cir.), cert. denied, 370 U.S. 939, 82 S.Ct. 1586, 8 L.Ed.2d 808 (1962), Judge Anderson held that a compromise agreement concerning civil liability did not justify dismissal of an indictment. Judge Anderson stated (p. 434):
The purpose of the statute was to facilitate the money settlement of tax liabilities. The use of the disjunctive in the phrase to "compromise any civil or criminal case" was intended to take care of circumstances where criminal charges have been brought or a criminal prosecution has actually been commenced but no formal action has been taken with regard to the civil liabilities and an agreement has been reached covering both the civil and criminal aspects.
Section 7122 in any event merely authorizes the compromise of a criminal case, and does not in itself create any right to pre-indictment conferences.
Every person who may be the subject of a recommendation for prosecution shall be given an opportunity to explain his participation in the alleged criminal violation prior to the submission of the case to Regional Counsel, unless compelling reasons exist to the contrary. (Emphasis added).
This regulation is in sub-part A of Part 601 of the Federal Tax Regulations entitled "General Procedural Rules." The provision for an explanation serves a purpose related to efficiency, in avoiding prosecution of cases which may not really merit criminal prosecution. It is not clear that the procedure is intended to confer rights on a taxpayer. Indications are to the contrary as set forth later in this memorandum.
The difference between a recommendation for prosecution and a reference to the Department of Justice for presentation to a grand jury is given specific significance by a provision in the Enforcement Division Manual (for "Official Use Only"), which calls for referral of cases to the Department of Justice for consideration of grand jury investigation in the event that the special agents are unable to develop sufficient evidence to establish a prima facie case within the limits of their statutory authority. Enforcement Division Order #1952-7.
The provision of Reg. 601.107(b) (2) for giving a person an opportunity to explain his alleged criminal violation is subject to the express proviso that the opportunity will not be given if "compelling reasons exist to the contrary."
Defendant Goldstein asserts that "compelling reasons" are restricted to the examples set forth in ¶ 9355.1(1) of the Internal Revenue Manual, such as...
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