United States v. Mathies, 15085.

• Decision Date: 28 September 1965
• Docket Number: No. 15085.,15085.
• Citation: 350 F.2d 963
• Parties: UNITED STATES of America v. William E. MATHIES, Jr., Appellant.
• Court: U.S. Court of Appeals — Third Circuit

350 F.2d 963 (1965)

UNITED STATES of America v. William E. MATHIES, Jr., Appellant.

No. 15085.

United States Court of Appeals Third Circuit.

Argued April 9, 1965.

Decided September 28, 1965.

Melvin Schwartz, Cooper, Goodman & Schwartz, Pittsburgh, Pa. (Alexander Cooper, Pittsburgh, Pa., on the brief), for appellant.

Sebastian C. Pugliese, Jr., Asst. U. S. Atty., Pittsburgh, Pa. (Gustave Diamond, U. S. Atty., Pittsburgh, Pa., on the brief), for appellee.

Before GANEY and FREEDMAN, Circuit Judges, and KIRKPATRICK, District Judge.

KIRKPATRICK, District Judge.

The appellant was convicted upon five of the six counts of an indictment charging violations of Title 18 U.S.C. § 152. Count 1 charged that, in contemplation of the bankruptcy of Pitt Wholesale Company, Inc., the defendant knowingly and fraudulently transferred and concealed "assets and property" belonging to that corporation. Counts 2, 3, 5 and 6 charged him with having made false oaths in the course of the bankruptcy proceedings. He was sentenced to three years imprisonment (concurrently) on each of the counts upon which he was convicted and fined $25,000. He moved for judgment of acquittal or, in the alternative, for a new trial and, from the Court's denial of his motion, took this appeal.

Involved in the transactions out of which the prosecution arose was a group of four corporations all of which were controlled or dominated by the appellant. One of them, Pitt Wholesale Company, Inc., the bankrupt, of which corporation the appellant was president, owned a warehouse and carried on a wholesale business about half of which consisted of sales to the other corporations. The appellant's principal business activity was running the wholesale business. He was also majority stockholder of Mathies and Sons, Inc., a corporation which owned all the stock of two other corporations which owned and operated retail stores (Bill's Bargain Stores Nos. 1 and 2) and which operated, as owner, Bill's Bargain Store No. 3, another retail establishment.

The appellant was indicted originally on May 9, 1961. On his motion, the indictment was dismissed by Judge Willson as to the charge of concealment of assets. Thereafter, on January 10, 1962, the Government reindicted the appellant upon the same charges. After the argument of his motion to dismiss and before any action by the Court, this second indictment was withdrawn by the Government. He was indicted for the third time upon the present indictment. On the appellant's motion to dismiss, Judge Miller, a third judge, sustained the indictment, and the case came on for trial before a fourth judge, Judge Sorg, resulting in the appellant's conviction. He now raises the point that Judge Miller erred in refusing to dismiss Count 1 contrary to the action taken by Judge Willson. It is to be noted, however, that the indictment which Judge Miller sustained was not the same indictment which had been dismissed by Judge Willson, nor was it identical in its charging language. Under the circumstances, the opinions of this and other courts disapproving judges sitting in the same court and in the same case overruling one another have no application. In any event, the rule was never intended to apply to a situation in which one judge, in a different case, merely declines to follow a rule of law enunciated by a colleague. Even in the same case, the rule "is not absolute and all-embracing in its scope." TCF Film Corporation v. Gourley, 3 Cir., 240 F.2d 711, 713.

The violations of which the appellant was convicted were all charged to have taken place between January 1, 1959, and March 22, 1960.

The only error complained of which calls for more than the briefest discussion is the Court's refusal to strike from the evidence a document identified as Government's Exhibit 45. The ruling assigned as error was made under the following circumstances:

The Government undertook to establish concealment as charged in Count 1 by proving the amount and value of the corporation's assets on hand at the beginning of the year 1959, adding thereto the value of merchandise and cash acquired during the year, subtracting the expenditures and goods sold during the same period and comparing the value of assets on hand at the end of the period with the starting figure. This was substantially the net worth procedure often used in tax fraud cases. Any substantial shortage thus developed, if unexplained, is recognized as evidence of concealment. Bisno v. United States, 9 Cir., 299 F.2d 711.

The principal witness upon this branch of the case was an accountant who had made an examination of such books and records of the corporation as had been turned over to the trustee. Based upon his testimony, the verdict of guilty necessarily involved the jury's finding that there was an unexplained shortage in "a substantial amount"¹ in the assets. In his opinion denying a new trial, the judge stated that the shortage amounted to the difference between $1,173,543.32 and $911,897.51 ($261,645.81), and there was evidence which, if competent and admissible, pointed to at least a very large shortage. The appellant did not testify and offered nothing to account for the discrepancy. There was also evidence (offered primarily in support of the false oaths counts) from which it could be inferred that on several occasions sums of money had been paid to the corporation which did not appear upon its books or in its bank account.

It goes without saying that the net worth procedure resorted to by the Government depended for its validity upon there being competent evidence of the amount and value of the assets of the bankrupt corporation at both the beginning and the end of the accounting period. The first of these figures was obtained from the corporation's tax return. The second, the Government's accountant got from the exhibit referred to above, which purported to be a report of an inventory and appraisal as of January 27, 1960, of the bankrupt corporation's assets, made by appraisers appointed in a state equity receivership proceeding which preceded the bankruptcy. This document, consisting of 38 typewritten sheets, contains a list of over a thousand items² of merchandise, fixtures and equipment. The first sheet (or cover), on which appear the signatures of the appraisers, gives five totals — merchandise at cost, merchandise at actual value, furniture and fixtures at warehouse and at office and autos — but no details. The remaining pages contain a complete itemization of the merchandise on hand with the...