United States v. Nicosia
| Decision Date | 20 June 1973 |
| Docket Number | No. 72 H Cr. 108.,72 H Cr. 108. |
| Citation | 360 F. Supp. 814 |
| Parties | UNITED STATES of America v. John B. NICOSIA. |
| Court | U.S. District Court — Northern District of Indiana |
John Wilks, U. S. Atty., N. D. of Indiana, South Bend, Ind., and Frank J. Kimbrough, Asst. U. S. Atty., Hammond, Ind., for plaintiff.
William A. Barnett, Chicago, Ill., Marshall J. Goldsmith, East Chicago, Ind., for defendant.
PERRY, Senior District Judge (Sitting by special designation).
This case grew out of an ingenious scheme by officials of the Northern Natural Gas Company to bribe public officials in order to speed and smooth the way for construction of a pipeline running from DuPage County through Cook County, Illinois and Lake County, Indiana to the lakefront at East Chicago, Indiana.
In September 1972 the Northern Natural Gas Company, two of its subsidiaries and two corporate officers were indicted in the United States District Court for the District of Nebraska at Omaha in connection with the scheme and charged with engaging in an illegal conspiracy. Also named in the same indictment were several public officials in the area through which the pipeline ran. They were charged with accepting bribes for using their influence to smooth the way for the pipeline's construction. All were charged in Count I of the indictment with violations of Title 18, United States Code, Sections 1952 and 1341, and Title 26, Sections 7201 and 7206(1).
Among the public officials named in the indictment at Omaha was John B. Nicosia, a physician who served as Mayor of East Chicago, Indiana from 1964 to 1971 and during the period in question. He was not brought to trial at Omaha as some of the other defendants were. Defendant Nicosia was tried before this court in May 1973 at Hammond in case numbered 72 H Cr 108. The conspiracy indictment numbered 73 CR 10 was transferred from Nebraska and consolidated with two other counts under 72 H Cr 108 for trial. In this case the Government alleged Nicosia accepted and received one bribe of $9,500 in 1966 and another of $5,000 in 1967. Nicosia was also charged, under Title 26, United States Code, Section 7201, in Counts II and III of said consolidated cases with omitting and failing to report these two cash payments which he allegedly received as bribes as taxable income on his 1966 and 1967 Federal income tax returns.
A jury found Nicosia not guilty of the charge of conspiracy in Count I and guilty as to Counts II and III involving his income tax returns. Defendant Nicosia made a motion for a judgment of acquittal at the end of all the evidence. The court did not rule upon the motion but took it under advisement and sent the case to the jury. The court has now heard further argument of counsel for the parties on the motion.
It is undisputed that a criminal conspiracy did exist and that certain of the individuals and corporations named in the Omaha indictment were involved. It was a sordid affair, conceived prior to 1966 and continuing through 1969, and the scheme to bribe public officials was cynically undertaken.
The gas company and its subsidiaries hired Rochester, Goodell, Moldovan and Spain, Engineers, Inc. of Salem, Illinois to plan the pipeline and to make the necessary acquisitions and arrangements for easements and to perform all necessary services. An account, the "R.G.M. & S. Escrow Account", was set up at a bank in Salem, Illinois. Its agents were Frank M. Rochester, Warren B. Goodell, Earl Moldovan and William L. Spain, individually, of the engineering firm bearing their names. The stated purpose of the escrow was to provide cash for acquisition and approval of rights of way, licenses and permits for the pipeline and to pay all costs. Morrison Construction, Inc. of Hammond, Indiana was employed to construct the pipeline. James R. Morrison, the principal owner and president of Morrison Construction, supervised and carried out the construction work under the direction of Rochester and Spain, officers of the engineering firm.
The evidence before this court revealed that the actual purpose of the escrow was not only to pay for lawful acquisitions of rights of way but was to provide money for a fraudulent scheme whereby Rochester, Goodell, Moldovan and Spain would each individually render statements for alleged services not actually rendered, obtain payment of money from the escrow account, include the amount in his Federal income tax return, pay the tax thereon, and instead of retaining the remainder turn it over to Frank Rochester, who then coverted it into old $20 U.S. bills and delivered same to James R. Morrison for use in bribing whatever public officials he chose to bribe. The undisputed evidence is that the conspiracy was carried out in the manner just described to the extent of $60,000 being delivered in old $20 bills to Morrison by Rochester and Spain. The disputed evidence concerns whether Morrison actually bribed public officials with the money, or kept some part or all of it, or whether he did in fact use the $60,000 or some part thereof to bribe public officials and, if so, how much and to whom such bribes were paid.
Trial of defendants Northern Natural Gas Company and its subsidiaries, Northern Gas Products Company and Hydrocarbon Transportation, Inc., and two corporate officers, Delbert William Calvert and James C. Smith, began in Omaha, Nebraska on April 2, 1973. After three days of trial the case was terminated by an agreement between counsel for the Government and counsel for said defendants. The three corporate defendants and James C. Smith were permitted to plead nolo contendere to one mail fraud charge and all other counts of the indictment against them were dismissed. All counts were dismissed against defendant Delbert William Calvert. All of these defendants agreed to cooperate with and to testify for the Government in the trial of all the other indicted defendants. Before the conspiracy indictment was returned some of the defendants died. Frank M. Rochester of the engineering firm died in April 1967. John J. Kavanagh, a permit engineer for the Cook County, Illinois Department of Highways, and James L. Dent, an East Chicago councilman, died. George C. Lamb, also a member of the City Council of East Chicago, committed suicide a few days after he was indicted.
Defendants Calvert and Smith testified at the Hammond trial of Nicosia. So did co-conspirators James R. Morrison and William L. Spain, who had been granted immunity. Earl Moldovan, who also was granted immunity, testified. They told of a complex scheme to bribe public officials with money which had been co-mingled with money intended for lawful purchases of rights of way, permits and licenses out of the R. G. M. & S. Escrow Account in the bank at Salem. As aforesaid, the money was paid out to Messrs. Rochester, Goodell, Moldovan and Spain upon receipt of vouchers for services which were in fact never rendered. Each of these individuals then accounted for the funds received in his Federal income tax returns and paid taxes thereon. The sizeable amount left over in the possession of each was then given to Rochester who in turn employed Morrison. It was Morrison who decided who should receive the money and when and where the payments should be made. Rochester did not even know the names of the persons who received payments. The names and the amounts paid were known only to Morrison. Morrison simply called Rochester who either brought money as requested or sent it by Spain.
Morrison confessed in his testimony that Rochester and Spain turned over to him a total of $60,000 to deliver to public officials. Spain's testimony and the records of the deceased Rochester confirmed this. Rochester relied on Morrison to make the payments because of Morrison's long experience in the contracting business in the area involved and because of his long contact and intimate acquaintance with many of the public officials in Lake County, Indiana and Cook County, Illinois. Morrison had received $60,000 when Rochester died in April 1967 but he had not paid out all of it. He had approximately $40,000 from which he continued to make payments until, he said, the amount was exhausted in 1969.
Morrison testified in detail as to how, when and where and to whom he said he paid the money. Morrison said that in each case he told the public official to whom he gave money that he was making a political donation to him. Upon cross-examination he admitted that he did not report any of the $60,000 he received from Rochester and Spain as political contributions in accordance with Indiana law, although he did report a number of other political contributions of sizeable amounts he made during the same period of time in which he paid out the $60,000. He testified that he had been in the habit of making political contributions in Lake County, Indiana for many years.
The Government contends that all of the payments made out of the $60,000 fund which Morrison controlled were bribes paid out under the guise of political contributions.
After the Government traced the $60,000 to Morrison, an I.R.S. agent came to see him. The agent informed Morrison the Government had traced the $60,000 to him and knew he had paid no income tax on it. The agent informed Morrison the Government was conducting a criminal investigation of him. Morrison was informed of his right to refuse to make a statement by the agent. On cross-examination Morrison admitted that he then made no statement at that time. Thereafter he conferred with a lawyer who specialized in tax matters and he learned that if he could show that he merely acted as an agent and kept none of the $60,000 himself but delivered it as political contributions to third persons, he would not be liable for filing fraudulent income tax returns.
Morrison made a statement to the I. R.S. agent in which he stated he kept none of the $60,000 himself but gave it out to eight different persons in various sums,...
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