United States v. Lipshitz, Cr. 43152.

Citation132 F. Supp. 519
Decision Date24 June 1955
Docket NumberCr. 43152.
PartiesUNITED STATES of America v. Louis LIPSHITZ, Defendant.
CourtUnited States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)

Leonard P. Moore, U. S. Atty., Brooklyn, N. Y., by Edgar G. Brisach, Asst. U. S. Atty., Brooklyn, N. Y., for the United States.

Goldstein, Judd & Gurfein, New York City, by Murray I. Gurfein, Morris Wirth, David Zack, and Martin Young, New York City, of counsel, for defendant.

RAYFIEL, District Judge.

On March 12th, 1953, an indictment was filed against the above-named defendant, charging him with wilfully and knowingly attempting to evade the payment of part of his income tax due and owing for the calendar year 1946, in violation of Title 26 U.S.C. § 145(b). On July 10, 1953, the defendant moved (1) for an order suppressing certain evidence, and directing the return of certain papers and documents described in part in the affidavit filed in support of the motion, (2) for the inspection of the Grand Jury Minutes, and (3) for the dismissal of the indictment.

The defendant contended that the obtainment and use of the evidence in question was violative of his rights under the 4th and 5th Amendments of the Constitution of the United States. Because of certain express or implied admissions in the affidavit submitted in opposition to the motion, I directed, in a memorandum dated January 5, 1954, D.C., 117 F.Supp. 466, that a hearing be held, so that a comprehensive inquiry could be made into the manner in which such information was obtained, its nature and extent, and the direct and derivative use, if any, which was made thereof. The hearing was held on January 21, 24 and 25, 1955. Considerable testimony was adduced and documentary evidence received. Based on the supporting affidavits and the evidence produced at the hearing, the facts, so far as they are pertinent to the indictment and the motion under consideration, are as follows: At various times prior to June 30, 1948, representatives of the Bureau of Internal Revenue, including one Martin Obst, a Revenue Agent, now deceased, were engaged in auditing the books and records of Louis Lipshitz Dress Corporation, in which the defendant had a stock interest, and Louis Lipshitz Dress Company, in which he was a partner, for several years, including 1946, the year covered by the indictment. It appears, however that the information obtained as a result of such audit was not very extensive. On June 30, 1948, Special Agent Potts, a member of the Intelligence Unit of the Bureau, was assigned to work on the defendant's case with Revenue Agent Obst in what is referred to in the Bureau's Regulations as a "Joint Investigation", which, as appears from the testimony of Potts at the hearing, (S.M. p. 34 et seq.) contemplates an investigation in preparation for criminal prosecution. As Potts testified, the investigation was initiated by the Special Intelligence Unit, and was not ordered as the result of a Revenue Agent's report of fraud, disclosed by an audit of the taxpayer's books and tax return. Potts testified (S.M. p. 35) that it was his function to prepare the criminal features of the case while Obst was supposed to make an audit of the taxpayer's books and determine the correct tax liability.

Paragraph 678 of the Manual of Instructions for Revenue Agents, relating to the duties of agents in joint investigations, reads as follows: "In joint investigations the Special Agent will be responsible for the criminal features of the case and for the procurement of appropriate proof to establish the criminal charge should prosecution be authorized. The Internal Revenue Agent participating in such investigation will be responsible for the audit features of the case and for the preparation of a record of the proof to support the ad valorem addition to the tax. In such an investigation the Special Agent will be responsible for the method of procedure in, and conduct of, the investigation. The Special Agent in charge will be the officer responsible for a recommendation for or against criminal prosecution and may in his discretion recommend the assertion of an ad valorem addition to the tax in cases where criminal prosecution is not recommended."

On July 1, 1948, the day following his assignment to the case, Potts communicated with Obst by telephone, and inquired as to the then status of the previous investigation. Thereafter he met and conferred with Obst on October 5, 1948, and on at least five occasions in 1949, in connection with matters involved in the investigation. On these occasions he asked Obst to visit the offices of the Louis Lipshitz Dress Company and make copies of various book entries and records, including the ledger accounts, drawing accounts, capital account, loan account, accounts receivable, accounts payable and total debits and credits by years (pp. 173, 174, 177 S.M.) Potts also instructed Obst to obtain information respecting the accounts of Ruskin Fashion Salon, Anglo-African Shipping Co. and H. T. Stanley Company, three South African customers of the partnership.

Pursuant to those instructions Obst visited the offices of the Louis Lipshitz Dress Company on many occasions. Revenue Agent Silverman, testifying for the Government, stated (P. 79 S.M.) that Obst's records disclosed that he visited the said offices on 79 occasions, 19 of them between June 20, 1949, and July 26, 1949, and 13 of them between March 1, 1949 and March 21, 1949. On those visits he made copies of or extracts from various books, records, and accounts, which had been requested by Potts, part of which were included in the very large collection of papers, consisting of several hundred sheets, which were referred to during the hearing as Obst's work-sheets, and received in evidence as Exhibit "A".

The records and information obtained by Obst from the taxpayer's books were far more voluminous and extensive than the preparation of the "audit features of the case" (See Par. 678 of the Manual of Instructions, supra) required. Agent Silverman, when shown Exhibit A, testified that a routine examination of the taxpayer's books and records would not produce the extensive information contained in the said Exhibit.

Obst's daily reports disclosed that on many occasions during 1949 he visited the offices of the Louis Lipshitz Dress Company, after which he would call at the offices of the Intelligence Unit of the Bureau, at 253 Broadway, and at Government offices at 341 9th Avenue, where he would confer with Government agents.

Potts received the list of the partnership's accounts receivable from Obst in September, 1949. Obst died in October, 1949, and Revenue Agent Sheehan was assigned to replace him. The work-sheets (Exhibit A) remained in Sheehan's custody until February, 1950, when they were given to Potts. The latter admitted (PP. 167, 168 S.M.) that he obtained information from the said work-sheets concerning the accounts of and sales to customers of the partnership, and then compared the information so obtained with the customers' own records. Among those customers were the three South African firms hereinabove named.

In his affidavit, submitted in opposition to the motion herein, Potts stated that he obtained his information relating to the defendant from sources other than Obst. That can hardly be true of the South African accounts, for he testified (P. 304 S.M.) that he asked Obst to look for the accounts of the said firms in the taxpayer's books and records, and (P. 306 S.M.) that the...

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  • United States v. Tarlowski, 68-CR-278
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • 4 Agosto 1969
    ...obtained at the second conference are concerned. United States v. Prudden, 305 F.Supp. 110 (M.D.Fla.1969); United States v. Lipshitz, 132 F.Supp. 519 (E.D.N.Y.1955); Goodman v. United States, 285 F.Supp. 245 (C.D.Cal.1968); see also Gouled v. United States, 255 U. S. 298, 305-306, 41 S.Ct. ......
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    • United States
    • United States State Supreme Court of Iowa
    • 12 Noviembre 1963
    ...Watson v. United States, 101 U.S.App.D.C. 350, 249 F.2d 106; see also Wilson v. United States, 10 Cir., 217 F.2d 754; United States v. Lipshitz, D.C., 132 F.Supp. 519. However, where the government relies upon consent to an otherwise illegal search and seizure, it has the burden of proving ......
  • Hinchcliff v. Clarke, Civ. A. No. 37102.
    • United States
    • United States District Courts. 6th Circuit. United States District Court of Northern District of Ohio
    • 1 Agosto 1963
    ...States v. Coplon, 185 F.2d 629 (2nd Cir., 1950); United States v. Paroutian, 299 F.2d 486 (2nd Cir., 1962); and United States v. Lipshitz, 132 F.Supp. 519 (E.D.N.Y., 1955). The same reasons which compel the Court to permanently suppress, in this and in all future proceedings, the evidence o......
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    ...R. Co., D.C., 20 F.R.D. 607. 24 See Smith v. Katzenbach, 122 U.S.App.D.C. 113, 114—116, 351 F.2d 810, 811—813; United States v. Lipshitz, D.C., 132 F.Supp. 519, 523; United States v. Guerrina, D.C., 112 F.Supp. 126, 128. 25 Cf. Nelson v. United States, 93 U.S.App.D.C. 14, 19, 21, and n. 19,......
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