United States v. Shotwell Manufacturing Company

• Decision Date: 16 December 1957
• Docket Number: No. 1,1
• Citation: 2 L.Ed.2d 234,355 U.S. 233,78 S.Ct. 245
• Parties: UNITED STATES of America, Petitioners, v. The SHOTWELL MANUFACTURING COMPANY, Byron A. Cain, and Harold E. Sullivan
• Court: U.S. Supreme Court

355 U.S. 233

78 S.Ct. 245

2 L.Ed.2d 234

UNITED STATES of America, Petitioners,

v The SHOTWELL MANUFACTURING COMPANY, Byron A. Cain, and Harold E. Sullivan.

No. 1.

Argued Oct. 17, 1957.

Decided Dec. 16, 1957.

[Syllabus from pages 233-234 intentionally omitted] Mr. Philip Elman, Washington, D.C., for petitioner.

Mr. George B. Christensen, Chicago, Ill., for respondent.

Mr. Justice HARLAN delivered the opinion of the Court.

This case presents an unusual question involving the integrity of a criminal trial in the federal courts.

The Solicitor General has filed a motion in this Court to remand the case to the District Court for further proceedings. This motion is based on a proffer of evidence alleged to have come into the possession of the Government after the United States had petitioned for certiorari to review a decision of the Court of Appeals setting aside the conviction of the respondents. It is claimed that such evidence shows that the decision of the Court of Appeals was based upon a perjurious record attributable to the fraud of the respondents.

A clear appreciation of both the proceedings in the lower courts and the peculiar circumstances in which the Government's motion arises is essential to an understanding of why we believe the motion to remand must be granted.

In 1953 the respondents and Frank J. Huebner, after a jury trial in the United States District Court for the Northern District of Illinois, were convicted of willfully attempting to evade the 1945 and 1946 federal corporate income taxes of the Shotwell Manufacturing Company.¹ Prior to trial they moved for dismissal of the indictment on the ground that their voluntary and timely disclosure of these tax derelictions to the taxing authorities entitled them to immunity from prosecution under the Treasury's former 'voluntary disclosure policy.'² This motion was denied by the District Court after a pretrial hearing. Respondents and Huebner then moved, no the same ground, for suppression of the evidence obtained from them by the taxing authorities as a result of their alleged disclosure. After a further pretrial hearing, the District Court also denied this motion, later filing an opinion in which it found that the disclosure was not made in good faith.³

On appeal, the Court of Appeals affirmed as to the dismissal motion but reversed as to the suppression motion, set aside the convictions, and remanded the case for a new trial. 225 F.2d 394.⁴ The Court of Appeals found that the respondents' disclosure was bona fide, and also ruled that the disclosure was timely, an issue which the District Court had not reached.⁵ The Government petitioned us for certiorari on the suppression issue and the respondents and Huebner cross-petitioned on the dismissal issue.⁶ Thereafter, the Government filed its motion to remand, on which, as later amended and supplemented, respond- ents and Huebner joined issue by the filing of answers.⁷ Considering that the matters presented by the motion to remand raised an important issue affecting the proper administration of justice in the federal courts, we granted the Government's petition for certiorari, 'limited to the issues raised in the amended motion to remand and supplement thereto and the respondents' answer to the amended motion to remand.'⁸ 352 U.S. 997, 77 S.Ct. 552, 1 L.Ed.2d 544. We denied the cross-petition for certiorari. 352 U.S. 998, 77 S.Ct. 552, 1 L.Ed.2d 544.

For an understanding of the significance of the newly discovered evidence⁹ proffered by the Government some knowledge is required of the position taken by the defendants in the District Court on the suppression issue. The substance of that position was presented by Leon J. Busby, Shotwell's accountant, who testified at both the hearing on the motion to suppress and at the trial. He stated that the Shotwell Company in each of the years 1945 and 1946 had received substantial cash payments for black-market candy sales above O.P.A ceiling prices;¹⁰ that these receipts were not recorded on Shotwell's books and were not reported in its income tax returns; that he first learned of these facts in the course of conversations with H. Stanley Graflund, Shotwell's comptroller, during a trip they took to New York early in January 1948; that immediately upon his return to Chicago he discussed the matter with respondents Cain and Sullivan; that he recommended disclosing the omissions to the taxing authorities; and that, at the direction of respondents, he revealed the entire affair to Ernest J. Sauber, Deputy Collector in Chicago, in a series of conferences beginning in the latter part of January 1948, at one or more of which conferences he was accompanied by Cain. He also testified that thereafter, acting under Sauber's instructions and assurances that only a civil liability was involved, he and his staff, with the assistance of Cain, Huebner and Graflund, conducted an exhaustive investigation over a period of several months to reconstruct the Shotwell figures on the black-market transactions. He said that these figures were furnished in August 1948 to a revenue agent for scrutiny.

Sauber and Cain gave similar testimony, except that Sauber fixed Busby's first visit to him at about the middle of March 1948. Cain's explanation of Shotwell's failure to report the black-market receipts in its income tax returns was that he believed such receipts were not taxable since they were used by Shotwell to purchase black-market supplies¹¹ and therefore gave rise to no profit.¹²

In support of its motion the Government has filed with the Court the affidavits of Huebner and Graflund, which they executed after the Government filed its petition for certiorari. These affidavits paint a sharply different picture of the entire affair; indeed, they flatly contradict the tale unfolded on behalf of the respondents in the District Court. More specifically: (1) Graflund swears that the first time he discussed the black-market transactions with Busby was at Busby's home in late June 1948, at which time Busby gave no indication that he had previously known of these transactions;¹³ (2) Graflund and Huebner swear that at no time prior to a meeting held in July 1948 were they ever advised or led to believe by respondents that Shotwell's black-market receipts had been disclosed to the Treasury; (3) Huebner swears that it was at this July 1948 meeting that Cain first told him that a voluntary disclosure would be made, and that Cain also gave him to understand that it had been 'agreed' that the date of the disclosure 'would be set at June 15, 1948'; ¹⁴ (4) Graflund and Huebner swear that prior to the middle of July 1948 no work was done by anyone to assemble records or data for the purpose of making a disclosure to the tax authorities, and that the alleged offsetting payments for black-market supplies were in fact concocted 'out of thin air' at the July meeting; and (5) Huebner swears that in July and August 1948 he gave Cain $10,000 which Cain said he needed 'to fix the tax difficulty we were in.'¹⁵ Huebner says in his affidavit that he was not asked to testify in the District Court 'because I had stated I would not lie on the stand.'

It is obvious that the Government's new evidence casts the darkest shadow upon the truthfulness of the disclosure testimony given by or on behalf of the respondents in the District Court. If true, it indicates that what the respondents have sought to represent in the District Court, the Court of Appeals, and in this Court as a voluntary disclosure, made in a timely manner and in good faith, was instead but a further step in a conspiracy to 'fix' Shotwell's tax difficulties, possibly involving the cor- ruption of government officials,¹⁶ and certainly entailing an attempt to perpetrate a fraud upon the courts. Were we to undertake to review the Court of Appeals upon a record as suspect as this, we might very well be lending ourselves to the consummation of a fraud which may already have made the Court of Appeals its unwitting victim. In these circumstances it is imperative that the case be remanded to the District Court for a full exploration of where the truth lies before the case is allowed to proceed further. The integrity of the judicial process demands no less.

The path to our decision is clearly marked by this Court's actions and pronouncements in two recent cases, Communist Party of United States v. Subversive Activities Control Board, 351 U.S. 115, 76 S.Ct. 663, 100 L.Ed. 1003, and Mesarosh v. United States, 352 U.S. 1, 77 S.Ct. 1, 1 L.Ed.2d 1. In each case the Court refused to consider the questions presented for review in the face of a challenge to the integrity of the record based on newly discovered evidence. In Communist Party the Court remanded the case to the Board with directions to resolve the charges of taint, and to make a fresh determination on the merits, if taint were found.¹⁷ In Mesarosh the Court, believing that the record clearly demonstrated that a key government witness had been wholly discredited, took more drastic action by reversing the convictions of the petitioners and remanding the case to the District Court for a new trial. The basic reason for the Court's action in both cases was made manifest in its opinions. In Communist Party, supra, 351 U.S. at pages 124—125, 76 S.Ct. at page 668, the Court said:

'The untainted administration of justice is certainly one of the most cherished aspects of our institutions. Its observance is one of our proudest boasts. This Court is charged with supervisory functions in relation to proceedings in the federal courts. See McNabb v. United States, 318 U.S. 332, 63 S.Ct. 608, 87 L.Ed. 819. Therefore, fastidious regard for the honor of the administration of justice requires the Court to make certain that the doing of justice be made so manifest that only irrational or perverse claims of its disregard can be asserted. * * * We cannot pass upon a record containing such challenged testimony. ...