United States v. Hurwitz

• Decision Date: 21 October 1983
• Docket Number: Crim. No. 83-20065.
• Court: U.S. District Court — Southern District of West Virginia
• Parties: UNITED STATES of America, Plaintiff, v. David N. HURWITZ, Marc Weitzen and Richard M. Firestone, Defendants.

573 F. Supp. 547

UNITED STATES of America, Plaintiff, v. David N. HURWITZ, Marc Weitzen and Richard M. Firestone, Defendants.

Crim. No. 83-20065.

United States District Court, S.D. West Virginia, Charleston Division.

October 21, 1983.

Samuel Strother, Trial Atty., U.S. Dept. of Justice, Washington, D.C., Mary S. Feinberg, Asst. U.S. Atty., Charleston, W.Va., for the U.S.

Thomas H. Dundon, James F. Neal, Neal & Harwell, Nashville, Tenn., Stanley E. Preiser, Preiser & Wilson, L.C., Charleston, W.Va., for defendant David N. Hurwitz.

John P. Cooney, Jr., Robert B. Fiske, Jr., Davis, Polk & Wardwell, New York City, Joseph R. Goodwin, Charleston, W.Va., for defendant Marc Weitzen.

Benjamin Brafman, New York City, for defendant Richard M. Firestone.

MEMORANDUM OPINION AND ORDER

HADEN, Chief Judge.

On June 30, 1983, a grand jury returned the within fifteen-count indictment, wherein Count One alleges that from approximately the Spring of 1976 until the date of the indictment, that the Defendants, Hurwitz, Weitzen and Firestone, violated 18 U.S.C. § 371 by knowingly conspiring to defraud the United States by impeding, impairing, obstructing and defeating the Internal Revenue Service's ascertainment, computation, assessment, management and collection of income taxes. The indictment further charges Hurwitz¹ and Firestone,² both of whom then resided in the Southern District of New York, with substantive violations of 26 U.S.C. § 7206(2).³ Currently pending before the Court is Hurwitz's and Firestone's motion to dismiss the substantive § 7206(2) counts for lack of venue or, alternatively, for a transfer of these counts, along with the § 371 conspiracy count,⁴ to the Southern District of New York, pursuant to 18 U.S.C. § 3237(b),⁵ as well as all three of the Defendants' motion for a transfer to the Southern District of New York, pursuant to Rule 21(b), Federal Rules of Criminal Procedure. For the reasons set out below, the Court hereby grants Hurwitz's and Firestone's motion to dismiss the § 7206(2) counts for lack of venue, and grants the Defendants' motion for a transfer of the remaining § 371 conspiracy count to the Southern District of New York, pursuant to Rule 21(b), Federal Rules of Criminal Procedure.

I. Factual Background

In its response to the Defendants' motions, the Government summarized the factual background of the case as follows:

"Defendant David Hurwitz is a senior partner in a New York City law firm, Gordon, Hurwitz, Butowsky, Baker, Weitzen and Shalov (aka Gordon Hurwitz) and specializes in tax law. The law firm provided legal services for, and structured several limited partnership coal tax shelters during 1976 including Sortir Associates 2 and Malade Associates. Defendant Marc Weitzen is also a partner in the Gordon Hurwitz law firm, specializing in corporation law.

Richard Firestone was a partner in the general partnership called F.M.S. which was formed in 1975 and was involved in the promotion and creation of coal tax shelters.

Sortir Associates 2 was a Connecticut limited partnership in house coal tax shelter formed on December 31, 1976. The shelter obtained subleases on seams of coal underlying land located in Mingo County, West Virginia (Southern District of West Virginia).

Formation of Sortir Associates 2

At a meeting in the offices of the law firm of Gordon Hurwitz during the middle of December, 1976, Defendant Marc Weitzen inquired of Lyle E. `Pete' Neal if there were other coal leases on property available and further stated `we want to lease some property ourselves for our own tax shelter.' (Indictment — Overt Act 10). Subsequently, David Hurwitz contacted Defendant Firestone on or about December 15, 1976 and inquired whether F.M.S. had any coal properties that could be leased to the Gordon Hurwitz law firm. (Indictment — Overt Act 11). During December, 1976, Defendants Hurwitz and Weitzen were involved in recruiting investors or limited partners in Sortir Associates 2. Total cash receipts amounted to $675,582. (Indictment—Overt Act 12).

The properties which eventually became the basis for the limited partnership coal tax shelter were obtained through two subleases of coal rights: one from Ecart Associates and one from Stewart Justice to Theta Energy Associates. Both Ecart and Theta are Firestone-related entities; both subleases were executed and transferred to Sortir on December 31, 1976. All the coal properties are in Mingo County.

One of the Justice subleases was signed at the airport in Huntington, West Virginia, in the Southern District of West Virginia (Indictment — Overt Act 15). Pete Neal, the general partner of Sortir Associates 2 through his corporation, Ken Coal Company, Inc., transported to West Virginia a $150,000 check dated December 31, 1976, which check had been drawn on the checking account of Sortir Associates 2, and personally delivered the check to Stewart Justice in West Virginia in consideration of the sublease to Theta Energy Associates (Indictment—Overt Act 16). At the time Pete Neal transported and delivered the check from Sortir Associates 2 to Stewart Justice, he was acting as the agent and at the direction of David Hurwitz, Marc Weitzen and Richard Firestone.

As a result of the closing on December 31, 1976, the transfer of the subleases to Sortir, and the payment of $645,000 in cash and the giving of a $12,500,000 nonrecourse promissory note, the investors in Sortir claimed deductions on their individual income tax returns averaging more than eighteen times their cash investment."

Government's Memorandum of Law in Response, at pp. 3-5.

II. Venue⁶

Since Congress did not see fit to specify the locus delicti when it enacted 26 U.S.C. § 7206(2), it is incumbent upon the Court to do so by examining "`the nature of the crime alleged and the location of the act or acts constituting it.' ... In determining the act or acts constituting the crime, ... courts have commonly focused on the verbs employed in the statute defining the offense." U.S. v. Blecker, 657 F.2d 629, 632 (4th Cir.1981) cert. denied 454 U.S. 1150, 102 S.Ct. 1016, 71 L.Ed.2d 304 (1982) (citations omitted). In construing 26 U.S.C. § 7206(2)'s predecessor, the Fourth Circuit stated that: "The key verbs in the statute are `aids,' `assists in,' `procures,' `counsels,' or `advises' the preparation or presentation of a false or fraudulent return, affidavit, claim or document." Newton v. U.S., 162 F.2d 795, 796 (4th Cir.1947) cert. denied 333 U.S. 848, 68 S.Ct. 650, 92 L.Ed. 1130 (1948).

Notwithstanding the fact that Counts Two through Fifteen allege that Hurwitz and Firestone committed violations of 26 U.S.C. § 7206(2) "in the Southern District of West Virginia, and elsewhere", the Defendants argue that the Court should pierce this boilerplate language and find that there is not proper venue over Counts Two through Fifteen in the Southern District of West Virginia. In advancing this argument, Hurwitz maintains that he never entered West Virginia in connection with the Sortir and Malade transactions and that he did not have any contacts with the taxpayers while either he or they were in West Virginia.⁷ Without specifying the nature of his visit, Firestone maintains that he was only in West Virginia once during the period of time covered by the indictment.⁸ These Defendants further maintain that none of the returns in question were either prepared or filed in West Virginia. On the basis of these facts, Hurwitz and Firestone urge the Court to find that venue is improper in the Southern District of West Virginia, inasmuch as they did not render "aid," "assistance," "procurement," "counsel," or "advice" in this district.

The Government, on the other hand, maintains that Hurwitz and Firestone are accused of a "continuing offense" in Counts Two through Fifteen, and that venue is proper in the Southern District of West Virginia, pursuant to 18 U.S.C. § 3237(a).⁹ In particular, the Government contends that Hurwitz and Firestone committed the alleged violations of 26 U.S.C. § 7206(2) in this district when Pete Neal, who was acting at the direction of the Defendants, delivered Sortir Associates 2's check for $150,000 to Stewart Justice on December 31, 1976, at the airport in Huntington, West Virginia, as consideration for Justice's sublease of certain coal properties located in Mingo County, West Virginia.

The issue before the Court, therefore, is whether Hurwitz and Firestone violated 26 U.S.C. § 7206(2) in this district as a result of the December 31, 1976, transaction between their agent, Neal, and Justice.¹⁰

Casting Neal in the role of an aider and abetter, and themselves as principals, Hurwitz and Firestone argue that they may not be properly tried on Counts Two through Fifteen in this district merely because of Neal's "accessorial" actions in this district. In advancing this argument, the Defendants rely on U.S. v. Walden, 464 F.2d 1015 (4th Cir.1972) cert. denied 410 U.S. 969, 93 S.Ct. 1436, 35 L.Ed.2d 705 (1973); U.S. v. Bozza, 365 F.2d 206 (2d Cir.1966) (Friendly, J.); U.S. v. Sweig, 316 F.Supp. 1148 (S.D.N. Y.1970), which hold that neither the common law, nor 18 U.S.C. § 2 authorizes the Government to try principals in a district where only their accessory's acts, as opposed to their own acts, were performed. The Government responds that Walden is distinguishable for two reasons. First, the principals in Walden were accused of having committed discrete, substantive crimes, as opposed to continuing ones, as are the Defendants at bar. Second, the Government maintains "that § 7206(2) is itself an `accessory' statute, ... which does not require a culpable principal."

After having carefully considered these arguments, the Court agrees with the Defendants' assessment that venue over the § 7206(2) counts is improper in the Southern District of West Virginia. The fact that the substantive offenses alleged in Counts Two through Fifteen may be characterized as continuing crimes which may be "prosecuted...