United States v. Standard Drywall Corp.

• Decision Date: 28 August 1985
• Docket Number: No. CR-85-00036 (CPS).,CR-85-00036 (CPS).
• Citation: 617 F. Supp. 1283
• Parties: UNITED STATES of America v. STANDARD DRYWALL CORPORATION, Michael Gedell, Arnold Koslow, Frances Katz, Murray Koslow, Joseph Koslow, Harvey Shulman, Barry Shulman, Kevin Ebel, Edward Piccirillo and Arthur Giangrande, Defendants.
• Court: U.S. District Court — Eastern District of New York

617 F. Supp. 1283

UNITED STATES of America v. STANDARD DRYWALL CORPORATION, Michael Gedell, Arnold Koslow, Frances Katz, Murray Koslow, Joseph Koslow, Harvey Shulman, Barry Shulman, Kevin Ebel, Edward Piccirillo and Arthur Giangrande, Defendants.

No. CR-85-00036 (CPS).

United States District Court, E.D. New York.

August 28, 1985.

COPYRIGHT MATERIAL OMITTED

Raymond J. Dearie, U.S. Atty., E.D. of N.Y., Edward A. McDonald, Atty.-in-Charge, Organized Crime Strike Force, Brooklyn, N.Y. (Anthony J. Siano, Sp. Atty., Brooklyn Strike Force, Brooklyn, N.Y., of counsel), for the government.

Hoffman Pollok & Gasthalter, New York City (Jeffrey C. Hoffman, New York City, of counsel), for defendant Standard Drywall Corp.

Gerald L. Shargel, New York City, for defendant Michael Gedell.

Hochheiser & Aronson, New York City (Lawrence Hochheiser, New York City, of counsel), for defendant Arnold Koslow.

LaRossa, Cooper, Axenfeld, Mitchell & Bergman, New York City (John W. Mitchell, New York City, of counsel), for defendant Frances Katz.

Brownstein & Brownstein, New York City (Irwin Brownstein, New York City, of counsel), for defendant Joseph Koslow.

Michael B. Pollack, New York City, for defendant Edward Piccirillo.

Robert M. Simels, New York City, for defendant Arthur Giangrande.

Opinion and Order

MALETZ, Senior Judge.¹

Defendants in this criminal action have made a series of pretrial motions. The background is this. On January 14, 1985, a grand jury charged one corporation and ten individuals,² in a forty-eight-count indictment, with one violation of the conspiracy statute (18 U.S.C. § 371 (1982)); four substantive mail frauds (id. § 1341); three violations of the Taft-Hartley Act (29 U.S.C. § 186 (1982)); one obstruction of justice (18 U.S.C. § 1503 (1982)); a conspiracy within the meaning of the Racketeer Influenced and Corrupt Organizations Act (RICO) (id. § 1962(d)); one substantive violation of the RICO Act (id. § 1962(c)); nine counts of filing false corporate payroll tax returns (26 U.S.C. § 7206 (1982)); fourteen counts of attempted evasion of individual income and FICA taxes (id. § 7201); and fourteen counts of filing false individual federal income tax returns (id. § 7206).

The indictment alleges that defendants Michael Gedell and Arnold Koslow owned and—together with defendants Frances Katz and Joseph Koslow—operated defendant Standard Drywall Corporation (hereafter referred to as Standard Drywall or Standard) as a "double breasted" company. In other words, according to the indictment, Standard had a dual existence during 1979 through 1981, with an apparently legitimate facade masking a totally illicit operation.

More particularly, the indictment alleges, among other things, that Standard violated its contractual obligations to comply with applicable union agreements in performing drywall carpentry and related construction work; that the defendants became involved in mail fraud, federal and state tax fraud, frauds on state worker benefit programs, and corruption of labor officials; that Gedell and Arnold Koslow set up "shell companies," which they operated under pseudonyms; that bank accounts of the shell companies were used to pay workers "off the books"; that, in furtherance of this scheme, Standard made false reports to union benefit funds, state unemployment offices, a disability insurer, and federal and state tax authorities; and that Gedell and the Koslows bribed and threatened union officials, both directly and through defendant Arthur Giangrande.

The defendants have moved jointly for the following relief:

(1) dismissal of the indictment because of the government's delay in returning the indictment;

(2) dismissal of the indictment with respect to Standard and Michael Gedell because of allegedly prejudicial and inappropriate statements made by the prosecutor to the grand jury;

(3) dismissal of count 1 for failure adequately to charge a scheme to defraud the United States;

(4) dismissal of counts 1, 2, 10, and 11 for failure to state a violation of the mail fraud statute;

(5) dismissal of count 1 as multiplicious with count 10;

(6) dismissal of counts 10 and 11 as against Standard on the ground that a corporation cannot be both the "enterprise" and a defendant under RICO, 18 U.S.C. § 1962(c) (1982);

(7) dismissal of paragraphs 1 through 5 of count 11 for failure adequately to allege the extent of the interests that are subject to forfeiture under RICO;

(8) dismissal of counts 1, 2, 3, 10, and 11 on the ground that the mail fraud counts are pyramided upon violations of the Internal Revenue Code;

(9) severance of Arthur Giangrande's trial;

(10) severance of personal tax charges against Frances Katz (counts 21-24) and Edward Piccirillo (counts 43-48);

(11) suppression of statements made by Gedell to FBI Special Agent Stanley Nye;

(12) suppression of all fruits of the search of Standard's offices; and, alternatively

(13) suppression of those books and records seized from Standard's offices that were not described in the search warrant.

In addition, Arthur Giangrande has moved for the following relief:

(14) dismissal of count 1 as duplicitous;

(15) severance of the charges against him on the grounds that joinder was improper and prejudicial; and (16) a bill of particulars and various discovery.

Finally, Arnold Koslow has moved for:

(17) suppression of statements he made to Agent Nye; and

(18) a bill of particulars and various discovery.

The court has conducted an evidentiary hearing on three motions: to dismiss the indictment because of unreasonable delay, to suppress statements by Gedell and Arnold Koslow to government agents, and to suppress materials seized during the search of Standard's offices. Additionally, the court has considered the extensive prehearing and posthearing submissions by the parties.

I. Preindictment Delay

Defendants move for dismissal of the indictment on the theory that they were deprived of due process by an unwarranted delay between the alleged offenses and filing of an indictment. The government's investigation of Standard Drywall began in 1979 and the search warrant was executed on May 28, 1981. The grand jury returned an indictment in January 1985. Essentially, the defendants contend that the lateness of the indictment constituted a deprivation of due process because (1) the government has misplaced books and records seized from Standard Drywall's offices, (2) the government obtained information, in the interim, from attorneys representing plaintiffs in civil suits against Standard Drywall, and (3) memories have faded and at least one witness has disappeared.

The Supreme Court has stated that "statutes of limitations, which provide predictable, legislatively enacted limits on prosecutorial delay, provide `"the primary guarantee against bringing overly stale criminal charges."'" United States v. Lovasco, 431 U.S. 783, 789, 97 S.Ct. 2044, 2048, 52 L.Ed.2d 752 (1977) (quoting United States v. Marion, 404 U.S. 307, 322, 92 S.Ct. 455, 464, 30 L.Ed.2d 468 (1971) (quoting United States v. Ewell, 383 U.S. 116, 122, 86 S.Ct. 773, 777, 15 L.Ed.2d 627 (1966))). The Court recognized, however, "that the Due Process Clause has a limited role to play in protecting against oppressive delay." Id. The Fifth Amendment "would require dismissal of the indictment if it were shown ... that ... pre-indictment delay ... caused substantial prejudice to defendants' rights to a fair trial and that the delay was an intentional device to gain tactical advantage over the accused." United States v. Marion, 404 U.S. at 324, 92 S.Ct. at 465 (footnote omitted). "Proof of prejudice is generally a necessary but not sufficient element of a due process claim, and ... the due process inquiry must consider the reasons for the delay as well as the prejudice to the accused." United States v. Lovasco, 431 U.S. at 790, 97 S.Ct. at 2048. Accord, e.g., United States v. Birney, 686 F.2d 102, 105 (2d Cir.1982) (prejudice necessary but not sufficient to claim of preindictment delay); United States v. Lawson, 683 F.2d 688, 694 (2d Cir.1982) (defendant must show substantial prejudice and delay engineered by government for improper purpose); United States v. Elsbery, 602 F.2d 1054, 1059 (2d Cir.) (defendant must show actual prejudice and unjustifiable government conduct), cert. denied, 444 U.S. 994, 100 S.Ct. 529, 62 L.Ed.2d 425 (1979).

Defendants face a heavy burden on their motion to dismiss for preindictment delay. United States v. Elsbery, 602 F.2d at 1059. "The burden of demonstrating actual prejudice is on defendant, and the proof of prejudice must be definite and not speculative...." United States v. Birney, 686 F.2d at 105-06.

Against this background, the court considers the timing of the instant investigation. As of May 28, 1981, all the defendants, except Arthur Giangrande, were aware that the government was investigating Standard Drywall. Giangrande was on notice by August 16, 1982 that he was a target of the grand jury. Nevertheless, prior to December 1983, Standard Drywall made only one request for copies of documents seized during the May 28, 1981 search, and the government complied promptly. In December 1983, Standard Drywall requested copies of all the documents seized, and the government complied in March 1984. No one examined the original search proceeds on behalf of the defendants until June 1985, when one defendant, one attorney, and a consultant reviewed the proceeds for approximately three hours. Moreover, Arnold Koslow's list, purporting to name all documents missing following the search, was not prepared until June 1985, and was based on his memory, a review of FBI photographs, and consultation with an employee of counsel.

Given all these considerations, the court is hard pressed to believe that the allegedly missing documents carry much importance, let alone pose a threat to defendants' right to a fair trial. Nor was there any impropriety in the government's obtaining information from...