United States v. Gruberg, 79 Crim. 447 (WCC).

• Decision Date: 29 October 1979
• Docket Number: No. 79 Crim. 447 (WCC).,79 Crim. 447 (WCC).
• Parties: UNITED STATES of America, Plaintiffs, v. Gerald I. GRUBERG and Charles S. Ronder, Defendants.
• Court: U.S. District Court — Southern District of New York

493 F. Supp. 234

UNITED STATES of America, Plaintiffs, v. Gerald I. GRUBERG and Charles S. Ronder, Defendants.

No. 79 Crim. 447 (WCC).

United States District Court, S. D. New York.

October 29, 1979.

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Robert B. Fiske, Jr., U. S. Atty., S. D. N. Y., New York City, for the U. S.; David C. Patterson, Asst. U. S. Atty., New York City, of counsel.

Zane and Teitler, New York City, for defendant Charles S. Ronder; Stanley A. Teitler, Edward S. Rudofsky, Richard H. Levenson, New York City, of counsel.

OPINION AND ORDER

CONNER, District Judge.

Defendant Ronder was indicted on June 18, 1979 on two counts. Count 1 of the indictment alleged that defendant, the independent accountant for the Ulster Electric Supply Company of Kingston, New York, had conspired with Gerald Gruberg, the president of that company and a named co-conspirator, and Grace Ede, the company's bookkeeper, an unindicted co-conspirator, to make and subscribe false tax returns on behalf of the company in violation of 26 U.S.C. § 7206(1). Count 3 alleged that defendant Ronder knowingly aided and advised the preparation and filing of a false tax return on behalf of the Ulster Electric Supply Company, in violation of 26 U.S.C. § 7206(2). Count 2 of the same indictment charged co-defendant Gruberg with a substantive violation of 26 U.S.C. § 7206(1).

On June 28, 1979, defendants Ronder and Gruberg were arraigned. Each pleaded not guilty. On September 9, 1979, co-defendant Gruberg withdrew his plea of not guilty and pleaded guilty to Count 2 of the indictment. Defendant Ronder has now moved to transfer this case to the Northern District of New York under 18 U.S.C. § 3240 or Rule 21(b), F.R.Crim.P. In addition, Ronder has moved to dismiss Count 1 of the indictment as being in violation of Wharton's Rule; to dismiss the entire indictment on grounds that residents of Columbia, Greene and Ulster counties were systematically excluded from the Grand Jury array, in violation of the Fifth and Sixth Amendments of the United States Constitution and of the Jury Selection and Service Act of 1968, 28 U.S.C. § 1861 et seq.; that the Grand Jury was an unconstitutional "openended" referral of an investigation by the Internal Revenue Service to the Justice Department in violation of Rule 6(e), F.R. Crim.P.; that the prosecution improperly disclosed evidence to the Grand Jury, in violation of Rule 6, F.R.Crim.P.; and that the indictment was the result of prosecutorial misconduct; to inspect the Grand Jury minutes, pursuant to Rule 6, F.R.Crim.P.; for discovery; to suppress defendant Ronder's Grand Jury testimony, on the grounds that Ronder was a target of the Grand Jury investigation at the time that he testified; to suppress statements made by Charles Simmons, an attorney who at one point apparently represented the Ulster Electric Supply Company; and to take the depositions of Gerald Gruberg, Charles Simmons and Grace Ede the former bookkeeper for the Ulster Electric Supply Company, who was named as an unindicted co-conspirator in the indictment. The Government has opposed defendant's motions to transfer, to dismiss the indictment, to inspect the Grand Jury minutes, to suppress, and to take depositions, and has asserted that all material requested in defendant's motion to compel discovery has been provided to defendant.

For the reasons stated below, the Court will grant defendant Ronder's motion to transfer under Rule 21(b), F.R.Crim.P. The motion to dismiss Count 1 of the indictment will be denied. The motion to dismiss the indictment under 28 U.S.C. § 1867 will be denied without prejudice. The motions to dismiss due to the "open-ended" nature of the Grand Jury proceeding, improper disclosure of matters occurring before the Grand Jury, lack of competent evidence before the Grand Jury and prosecutorial misconduct will be denied. The motions to inspect the Grand Jury minutes and to take depositions will be denied. Decision on the discovery motion and on the motion to suppress will be deferred, pending transfer of the case to the Northern District of New York.

1. Motion to Transfer

A. 18 U.S.C. § 3240 claim

Defendant's first contention is that he should be granted a transfer to the Northern District of New York "as of right" pursuant to 18 U.S.C. § 3240, covering venue in criminal cases where a new federal judicial district or division is transferred or where territory is transferred from one district or division to another district or division. The basis for defendant's claim is that Ulster County, the county in which the offices of the Ulster Electric Supply Company are located and where the acts alleged in the indictment are alleged to have taken place, was transferred from the Southern District of New York to the Northern District of New York, effective March 31, 1979, pursuant to P.L. No. 95-408, § 4(c), 92 Stat. 885 (1978) (codified at 28 U.S.C. § 112). Defendant asserts that § 3240 requires the Court to transfer a prosecution for offenses committed within a transferred county, such as Ulster County, prior to the transfer to the new district, here the Northern District of New York, whenever the defendant so requests.

The defendant's construction of § 3240 as conferring an automatic right to transfer on a defendant who so requests cannot be supported by the language of § 3240, the case law construing the section, or the policy considerations underlying these venue provisions. § 3240 states that:

"Whenever any new district or division is established, or any county or territory is transferred from one district or division to another district or division, prosecutions for offenses committed within such district, division, county, or territory prior to such transfer, shall be commenced and proceeded with the same as if such new district or division had not been created, or such county or territory had not been transferred, unless the court upon the application of the defendant, shall order the case to be removed to the new district or division for trial." (emphasis added).

Defendant first argues that the Court should read the language of the last sentence as a mandatory "shall," requiring a transfer to the new district following application by the defendant. The use of the word "shall" in this context, however, is grammatically not in a mandatory sense, but rather, as a conditional subjunctive following "unless"; the statutory language is thus silent on the standards under which the Court should review the defendant's application to transfer.

Further, the legislative history indicates that the Court should look to the Federal Rules of Criminal Procedure — in this case, Rule 21 on transfer from the district for trial — in implementing the final sentence of § 3240. The section was initially enacted as part of § 59 of the Judiciary Act of 1911, c. 231, § 59, 36 Stat. 1103, formerly codified at 28 U.S.C. § 121, (1940 ed.). Section 59 covered venue in both civil and criminal actions affected by the creation of a new judicial district or the transfer of territory from one district to another, and referred to § 58 of the Judiciary Act, codified at 28 U.S.C. § 119, the precursor of current 28 U.S.C. § 1404 covering change of venue in civil cases, to provide the mechanism for transferring cases from the original district to the new district. In 1948, those venue provisions of § 59 which related to criminal cases were transferred to Title 18 on Criminal Procedure Act of June 25, 1948, c. 645, 62 Stat. 827; in 1949, this new section was amended, Act of May 24, 1949, P.L. No. 72, c. 139, § 50, 63 Stat. 96, to delete the reference to the transfer mechanism of 28 U.S.C. § 119 (now 28 U.S.C. § 1404), since, as the House report indicated, that reference was "surplusage in view of Rule 19 et seq. of the Federal Rules of Criminal Procedure." H.R.Rep.No.352, 81st Cong., 1st Sess. (1949), reprinted in U.S.Code Cong. & Admin.News, pp. 1248, 1262 (1949). The history of the statute thus suggests that current Rules 20 through 22¹ on transfer of criminal proceedings establish the circumstances under which a court should order a case arising in one judicial district to be transferred to a newly established or expanded judicial district which encompasses the territory in which the offense allegedly occurred.

This interpretation is supported by the fact that none of the cases construing § 3240, or its predecessor § 59, have found that defendant had the right to transfer under the venue section unless Rule 21(b) factors were also present.

The majority of cases interpreting this section have not dealt directly with the issue of standards for transfer. In Lewis v. United States, 279 U.S. 63, 49 S.Ct. 257, 73 L.Ed. 615 (1929), the defendants were alleged to have committed certain violations of the national banking laws in Tulsa, Oklahoma prior to the transfer of Tulsa County and nine other counties from the Eastern District of Oklahoma to the newly created Northern District of Oklahoma. Defendants were indicted and convicted in the Eastern District. They then moved to dismiss the indictment on the grounds that the court lacked jurisdiction to hear the case and that the Grand and Petit Juries had not been legally constituted, id. at 66, 49 S.Ct. at 258. The Supreme Court found that neither § 59 nor the provision of the Sixth Amendment granting defendant a right to be tried by "jury of the state and district wherein the crime shall have been committed, which district shall have been previously ascertained by law" had been violated, since the Eastern District continued to have jurisdiction over crimes committed in its former territory under § 59, the prior statute establishing the Eastern District, and the statute transferring the ten counties in question to the new Northern District, and since the juries had been selected under the Eastern District court's power to call jurors from all counties within the...