Petition — Leonard v. United States
Supreme Court brief1976
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In THE
Supreme Court of the United Staten
OCTOBER TERM, 1975
wo. %@5-1016
Jackson D, Leonarn,
Petitioner,
against
Unrrep States or AMERICA,
Respondent.
_ 7 SS eee, SN sa ——
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
James Scrremer
330 Madison Avenue
New York, N.Y, 10017
Attorney for Jackson D. Leonard
Aan KANnzer
Of Counsel
TABLE OF CONTENTS
I EEE enh ndds duuceeeennnbdesecteessscecs
GUPIEOUOM OF GES COUEE occ cc ccccccccccccccccnees
ED IEE ccc ckccuccccedbanceteccesods
Statutes, Regulations and News Releases Involved . .
Btatement OF the Case ..cccccccccscccccccvccccccee
The IRS Investigation of Leonard's Tax Affairs
The Foreign Bank Account Project ............
The Audit and the Indietment ...........6.6444.
The Swiss Bank Affidavit .......6. 66666 c eeu
The Government's “proof” of the affidavit's
~~ aeierrervrTTTTTrerTrerrrrrrrrererrrrerTere
bva Brooke's testimony ....... cece eeeeeeees
The Decision of the Court of Appeals for the Second
CUIOUNS cccccccccncccccccccceecccecccccccegecs
Reasons for Granting Certiorari .......6. 666660005,
I—This Court should resolve the conflict among the
Circuits as to whether the [RS must comply with
its own rules and give taxpayers suspected of
criminal activities the constitutional warnings
prescribed by IRS regulations .......... 6006.
14
ii TABLE OF CONTENTS
Il—This Court should decide whether the Swiss mail
WAGER WAS LOMB) oc ccccccccccccccccccecces ‘owe
111—The Court should resolve the conflict among the
Circuits governing the admissibility of similar
act evidence, and should insure that its decision
in Bronston v, United States, 409 U.S, 352
(1973) is not undermined ........ 6660 0e cee eee
1V—This Court should exercise its power of super-
vision of the federal administration of justice
to condemn prosecutorial misconduct of a par-
ticularly prejudicial nature oo... 66. cece eens
1, The Government improperly obstructed the
defendant's interviews of ipehieet wit-
WETTTTITETTLET Le TETTTTITINT TTT iii
2. The government improperly used a Letter
Rogatory to obtain the presence and testi-
mony of Eva Brooke, a British citizen, upon
the false threat that she was otherwise sub-
ject (in England) to “extradition and arrest”
although she was completely innocent of any
wrongdoing. In addition, the government
improperly failed to disclose these circum.
stances at trial, as required by this Court's
decision in Brady v. Maryland, 373 U.S, 83
CRUD cccvccccesecccsccccececscccccesces
ee eee cece bh dee eehh deka be
PAGR
19
22
27
TABLE OF CONTENTS iii
Arrenpix:
PAGE
Appendix A, Opinion, United States Court of Ap-
peals For the Second Cireuit, August 28,1975... 1a
Appendix B, Opinion, United States Court of Ap-
peals For the Seeond Cireuit, November 18, 1975,
Denial of Rehearing and Suggestion for En Bane
SED. Sob badence chacucedcbeacescccce 30a
Appendix C, United States Court of Appeals For the
Second Circuit, December 4, 1975, Stay of Man-
GD bhcvesnccecedcsccecccecssvecccseccascens 33a
Appendix D, Title 26, U.S.C. § 7206 ........00ce00es 34a
Appendix KE, United States Post Office Manual and
ED 4.55 de Soncedueéonetceseseeccescécs 35a
Appendix F, United States District Court For the
Southern District of New York, Letter Rogatory
to the Appropriate Judicial Authority in London,
England, January 14, 1975 00.0.0... 666 c ccc Sla
Appendix G, Internal Revenue Service News Releases
A ry rer er rr Da
Appendix H, Order United States Supreme Court,
Extending Time To File Petition For Writ Of
ED CANS cicees cobs cde cove decocecocseses 57a
Tasue or Cases
Beckwith v, United States, No, 74-1248 ............. 2,19
Brady v. Maryland, 873 U.S, 88 (1968) ........6. 05. 29, 32
Bronston v, United States, 409 U.S, 352 (1973) ..... 2, 4,24,
25, 26
Canaday v. United States, 354 F.2d 849 (8 Cir, 1966) 20
iv TABLE OF CONTENTS
PAGE
California Bankers Association v, Shultz, 416 U.S, 21
(2008) . coccccceeeceseocesseuubneeneenel 21
ee ee em 27, 28
Hammond vy. Lenfest, 398 F.2d 705 (2 Cir, 1968) .... 2
Kraft v, United States, 238 F.2d 794 (8 Cir. 1956) ... 2, 24
Mathis v. United States, 391 U.S. 1 (1968) ........5. 18
Michelson vy, United States, 335 U.S, 469 (1948) ..... 23
Service v, Dulles, 354 U.S. 363 (1957) . 0.0... c cece 2
Smith v. Resor, 406 F.2d 141 (2 Cir, 1969) 0.0.0.0...
Spencer v. Texas, 385 U.S. 564 (1967) . 0.0.6. cece 23
U.S. ex rel. Accardi v. Shaugnessy, 347 U.S, 260 (1954) 2
United States v, Costello, 255 F.2d 876 (2 Cir, 1958)... 20
United States vy, Crisona, 416 F.2d 107 (2 Cir, 1969),
cert, denied, 397 U.S. 961 (1970) occ ccc ees 22
United States v. Deaton, 381 F.2d 114 (2 Cir, 1967) .. 22
U.S. ex rel, Donham vy. Resor, 436 F.2d 751 (2 Cir.
ADTA) nccccccccccccccccccccseeseccssceeseeees 2
United States v. Heffner, 420 F.2d 809 (4 Cir.
| J MMETITITITITITIT TT 2, 14, 16, 19
United States vy, Isaacs, 3A7 F.Supp. 743 (N.D, Til.
IDTS) acccccrccccccccccccovesesesesseseeeeeen 20
United States v. Lawrence, 480 F.2d 688 (5 Cir, 1973) 2, 24
United States v, Leahey, 434 F.2d 7 (1 Cir, 1970)... 2,14,
16,19
United States v. Matlock, 491 F.2d 504 (6 Cir, 1974),
cert, denied, 419 U.S, 864 (1974) oo... cece aes 27
United States v. Reagan, 453 F.2d 165 (6 Cir, 1971),
cert, dented, 406 U.S, 946 (1972) oo. cece aes 30
I
TABLE OF CONTENTS Vv
PAGE
United States v. Sicilia, 475 F.2d 308 (7 Cir. 1973),
cert. denied, 414 U.S. 865 (1973) ...........645: 17
United States v. Schwartz, 283 F.2d 107 (3 Cir. 1960),
cert. denied, 364 U.S. 942 (1961) ............... 20
United States v. Sourapas, 515 F.2d 295 (9 Cir. 1975) 2, 14,
16, 19
United States v. White, 454 F.2d 437 (7 Cir. 1971),
cert. denied, 406 U.S. 962 (1972) ............55. 27
Vitarelli v. Seaton, 359 U.S. 535 (1959) ............ 2
Volkswagenwerk A.G. v. The Superior Court of Sac-
ramento County, 109 Cal. Rept. 219, 33 CA 3d
508 (#73) bin ee DER MMiAeadubeeceen eevee. 29
Wong Sun v. United States, 371 U.S. 471 (1963) .... 16
Yellin v. United States, 374 U.S. 109 (1963) ........ 2
Sratutes CITED
EERE a ee 8
26 U.S.C
es eee e es segesescoces 5
Eee cckebeceeeseecoecocccoses 4,5
28 U.S.C.
ee icc cieseteseoccececcoes 3
EE ELI SIE OP PPP OPT ESTEE ETT Y 31
Ee eee cd cece sccecccccesocece 30, 31
31 U.S.C.
ee ccc ceecdeceesecococcces 21
ESE SSE SLES SPIE PPP OTTETTTE TELL TY 21
Foreign Tribunals Evidence Act of 1856 ........... 31
i ce oc esas eeeccocececcoss 31
vi TABLE OF CONTENTS
Oruer AUTHORITIES
PAGF.
Postal Manual of the Post Office Department,
EEE 56-0 a0 h ¢00.a00 on becchdocn seme avetete tet 4
Pan EEE dncddununeChkeeeine ds cabndewinnane 15
Pe EE d.ducunddcavsdapdsodecenncesecdaeun 22
PRE seiveccdéddvusckddabeucdessiscwes 22
PS dahugascdedeccenedceadahesuenee 22
PEE A ivfeccicedwsndncuneaideteuryeiaeni 22
DR MED cu éuve'set cudxagauancevaunueeneeeas 22
PR TE 55 scxnncidicadnnnsccowssndtcneass 22
IRS News Releases Nos. 897 (issued October 3,
1967), and 949 (issued November 26, 1968) .... 4,14
ABA Standards Relating to the Administration of
Criminal Justice, The Prosecution Function,
9 3.1(¢); Diseovery and Procedure before Trial,
DE sevdéusbecnnudasesiasenasecebsdsaconiion 27
Kamisar, La Fave and Israel, Modern Criminal Pro-
cedure 1236-37 (1974 ed.) ......cccccccsccccces 27
2 Wigmore, Evidence $§ 300-373 ...............005- 23
ee Gee WEE kno n0ecense dwaueusseseebonnseounns 28
Ballentine’s Law Dictionary (3d ed. 1969), pp. 726-727 29
Oh ot ennai
a. =
In THE
Supreme Court of the United States
OCTOBER TERM, 1975
No.
,
7
Jackson D. Leonarp,
Petitioner,
against
Unrrep States or AMERICA,
Respondent.
s.
a
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
Jackson D. Leonard (“Leonard”) petitions for a Writ
of Certiorari to review the judgment of the United States
Court of Appeals for the Second Circuit, entered on August
28, 1975, affirming a judgment of conviction entered in the
United States District Court for the Southern District of
New York on March 7, 1975, after a seven-day jury trial.
In a decision of far-reaching importance, the Second
Cireuit:
(1) Created a confiiet with decisions of the First,
Fourth and Ninth Cireuits, which all held that the Internal
Revenue Service (“IRS”) must comply with its published
2
rules and regulations requiring its agents to give specified
warnings to taxpayers suspected of criminal tax fraud.*
(2) Sanctioned a massive and unprecedented mail
watch which was virtually unlimited in scope and involved
the interception of all mail from Switzerland arriving at
John F. Kennedy airport in New York City during two
entire four month periods in 1968 and 1969 and which vio-
lated applicable Post Office Regulations and the United
States Constitution.
(3) Created a conflict with the decisions of the Fifth
and Eighth Cireuits, United States v. Lawrence, 480 F.2d
688 (5 Cir. 1973) and Kraft v. United States, 238 F.2d
794 (8 Cir. 1956), by rejecting the “plain, clear and
convincing’’ standard governing the admissibility of al-
leged ‘‘similar ecrime’’ proof. Moreover, although this
Court in Bronston v. United States, 409 U.S. 352 (1973),
held that a defendant could not be prosecuted for making
a statement, which although misleading, was not literally
* The decisions of the First, Fourth and Ninth Cireuits to which
reference is made are: United States v. Leahey, 434 F.2d 7 (1
Cir. 1970), United States v, Heffner, 420 F.2d 809 (4 Cir. 1969),
and United States v. Sourapas, 515 ¥.2d 295 (9 Cir. 1975).
This Court, on June 16, 1975, granted certiorari in Beckwith v.
United States, No. 74-1243, in which the issue of the failure of
the IRS to give taxpayers constitutional warnings is also raised.
The Beckwith case, argued December 1, 1975, involved the ques-
tion of whether Miranda warnings were constitutionally required
in non-custodial interrogations by IRS agents. The instant case
raises a different issue; namely, whether the IRS must comply
with its published regulations governing the conduct of criminal
tax investigations (requiring that specified warnings be given to
taxpayers) as a matter of due process and equal protection. See
Yellin v. United States, 374 U.S. 109 (1963). Vitarelli v. Seaton,
359 U.S. 535 (1959), Service v. Dulles, 354 U.S. 363 (1957)
and U.S. ex rel. Accardi v. Shaughnessy, 347 U.S. 260 (1954),
which prohibit arbitrary deviations by agencies from published
regulations and procedures. See also U.S. ex rel. Donham v. Resor,
436 F.2d 751 (2 Cir. 1971), Smith v. Resor, 406 F.2d 141 (2 Cir.
1969) and Hammond v. Lenfast, 398 F.2d 705 (2 Cir. 1968).
et ae ee ow ae alll
PO
3
untrue, the decision below permitted a comparable state-
ment to be used as ‘‘similar crime” proof relevant to
wilfulness.
(4) Sanctioned prosecutorial misconduct of a particu-
larly prejudicial nature in which the prosecutor improp-
erly obstructed defense counsel’s pretrial access to poten-
tial witnesses and concealed the fact that (in order to ob-
tain the presence and testimony at trial of a foreign
witness) the prosecutor had, through the improper use of
a Letter Rogatory, threatened such witness with “arrest
and extradition’’, despite the fact that the witness was in-
nocent of any wrongdoing.
Opinions Below
The opinions of the Court of Appeals are not yet re-
ported but are set forth in full in Appendix A and B at
la-32a.*
Jurisdiction of this Court
The judgment of the Court of Appeals was entered
on August 28, 1975, and on November 18, 1975 the Court
of Appeals denied Leonard’s petition for rehearing and his
suggestion for rehearing in banc (Appendix A and B at la-
32a). On December 5, 1975, Mr. Justice Marshall extended
Leonard’s time for filing a Petition for Certiorari to and in-
cluding January 17, 1976 (Appendix H at 57a).
The jurisdiction of this Court is invoked under 28
U.S.C. § 1254(1).
Questions Presented
1. Should the IRS be required to comply with its own
regulations governing the conduct of criminal tax fraud
* References to sections of the Appendix are by capital letter,
followed by the page number and the letter ‘‘a’’.
4
investigations, as the First, Fourth and Ninth Circuits
have held?
2. Did the massive and unprecedented IRS mail watch
(which intercepted all mail arriving from Switzerland at
Kennedy Airport during two entire four month periods in
1968 and 1969) violate applicable Post Office regulations and
the United States Constitution, and should evidence ob-
tained as a result of the illegal mail watch be suppressed?
3. Should the standard of proof governing the admis-
sibility of alleged “similar crime evidence” be “plain, clear
and convincing” as the Fifth and Eighth Circuits have
held (because of the highly prejudicial nature of such
proof), or merely a “preponderance of the evidence” as
the Second Circuit held below? Further, does this Court’s
decision in Bronston vy. United States, supra, bar proof of
wilfulness (through alleged “similar crime evidence”) by
means of an allegedly “false (but not literally untrue)
statement” dictated by a government agent but signed by
the defendant?
4. Did the prosecutor’s misconduct in obstructing Leon-
ard’s access to prospective witnesses and in concealing
from defendant’s trial counsel that the Government,
through the improper use of a Letter Rogatory, threatened
a key foreign witness (who was innocent of any wrongdo-
ing) with arrest and extradition in order to obtain the
witness’s presence and testimony at trial, deny Leonard a
fair trial?
Statutes, Regulations and News Releases
Involved
This case involves 26 U.S.C. § 7206(1), Part 861 of the
Postal Manual of the Post Office Department, and IRS
News Releases Nos. 897 (issued October 3, 1967) and 949
(issued November 26, 1968), the texts of which are set
forth in pertinent part in Appendix D at 34a, E at 35a-44a,
and G at 55a-56a.
ele call
Statement of the Case
Jackson D. Leonard was convicted on March 7, 1975,
after a seven-day jury trial before United States District
Judge Richard Owen of the Southern District of New
York, on two counts of subscribing income tax returns for
1967 and 1968 which omitted income from reported ad-
justed gross income, in violation of 26 U.S.C. § 7206(1).°
Judge Owen sentenced Leonard to eighteen months im-
prisonment, but suspended execution of all but three
months, and imposed the maximum fine of $10,000 ($5,000
on each count), plus the costs of prosecution. Execution
of sentence has been stayed pendiag disposition of
Leonard’s Petition for a Writ of Certiorari.
The IRS Investigation of Leonard’s Tax Affairs
The IRS investigation of Leonard’s tax returns was
precipitated by two independent events which occurred
almost simultaneously. The first was that an undisclosed
informant, who was seeking a reward, claimed that Leonard
had been receiving commercial bribes, i.e., illegal kick-
backs.** The second was that a mail watch conducted by
the IRS led the IRS to suspect that Leonard had a secret
Swiss bank account. As a result, Leonard’s investigation
* Leonard was not charged with tax evasion, a more serious
violation. Compare 26 U.S.C. § 7201 with 26 U.S.C. 7206(1). The
income which Leonard allegedly omitted from his adjusted gross
income (“AGI”) was $24,168.09 in 1967 and $58,684.42 in 1968.
His reported AGI was $259,051.97 in 1967 and $134,276 in 1968.
The allegedly omitted income was received by Leonard from Tread-
well Corporation (“Treadwell”), pursuant to a contractual over-
ride between Union Carbide Corporation (“Union Carbide”) and
Leonard, providing that Leonard was to supervise engineering
work done by Treadwell for a chemical plant in Louisiana designed
by Leonard for Union Carbide.
** This allegation was later proved to be untrue.
was assigned to a highly unusual IRS program called the
Foreign Bank Account Project (“FBA Project”),
The Foreign Bank Account Project
The Foreign Bank Account Project, instituted in 1968,
was a major, clandestine program to identify and prosecute
American taxpayers who had dealings with Swiss banks,
The FBA Project was so highly secret that agents
working on it were forbidden to discuss it even with other
IRS personnel, A major aspect of the project was a mail
watch conducted by Special Agents of the Intelligence
Division® of the IRS who intercepted, inspected and
photocopied mail coming into the United States from
Switzerland,
In order to obtain authority for the mail watch, the
IRS (under then current Post Office regulations, pertinent
portions of which are set forth in Appendix E at 35a-44a)
was required to represent in writing te the Post Office
that the mail watch was part of a criminal investigation.
The mail watch involved an unprecedented effort by
Special Agents of the IRS to intercept, handle and inspect
all mail arriving at Kennedy Airport from Switzerland
during two four month periods (January through April)
of 1968 and 1969, Utilizing machines that microfilmed
3600 pieces of mail per hour, the IRS photocopied every
envelope which lacked a return address, as the IRS sus-
* Special Agents work in the Intelligence Division of the Inter-
nal Revenue Service, They are the criminal investigators of the
IRS and they have the right to carry guns and inake arrests,
Revenue Agents (as op to Special Agents) are aney audi-
tors, i.¢., accountants, w responsibility is to conduct civil audits
in order to determine the correct income tax liability of a taxpayer.
Revenue Agents occasionally work with Special Agents on fraud
cases, i.¢., criminal investigations, but then only under the diree-
tion of Special Agenta,
7
pected that the practice of Swiss banks was not to put
their names or addresses on envelopes.* Since the micro-
filming took a few hours at least, and in some cases when
the mail was heavy a second machine was brought in, the
number of envelopes which the Special Agents photo-
graphed may have exceeded 100,000,
As a result of the mail watch, the tax returns of untold
numbers of American citizens who the IRS suspected were
receiving mail from Swiss banks were examined to deter-
mine whieh would be “good candidates”’ for audits, Selee-
tions were thereafter made of 110 of them in the New
York area alone, without regard to the normal criteria for
determining which taxpayers should be audited, Leonard
was one of the taxpayers selected for special investiga-
tion,
The investigations of these 110 were supervised by
Special Agent Hyman Boller who was assisted by a Reve-
nue Agent named Bernard Morris. Investigators were
specially picked from a select fraud group in the Audit
Division and given detailed lists of specific things they
were expected to look for in the audits, These items, which
included telephone records, cable and telex charges and
backs of checks, were not normally reviewed in civil tax
examinations, and their selection reflected techniques em-
ployed in criminal investigations,
Revenue Agents, who were trained or supervised by
Special Agents, conducted the FBA Project audits, gave
no constitutional warnings, and deliberately concealed
that they were conducting criminal investigations, While
the audits were in progress, Special Agents continued the
* The LRS was able to identify envelopes sent by Swiss banks
by comparing the postage meter numbers on the envelopes with
the numbers on mail obtained by the IRS in response to earlier
inquiries secretly sent to Swiss banks by IRS agents who pretended
to be interested in opening Swiss acounts.
mail watches, and envelopes from Switzerland to tax-
payers under investigation were intercepted, inspected
and photocopied,
If the examination of the taxpayers’ records failed to
disclose independent proof of Swiss bank accounts, the
Revenue Agents were instructed by Special Agents how to
obtain incriminating admissions from the taxpayers,
Despite the fact that the IRS had documentary informa-
tion that a taxpayer had contacts with a Swiss bank, the
Revenue Agent was instructed to obtain a personal con-
frontation and utilize a subtle ploy by asking the tax-
payer whether he had any foreign (rather than Swiss)
accounts.” If he denied having any, the Revenue Agent
was directed then to dictate, for the taxpayer's signature,
an affidavit confirming the denial, apparently to commit
the taxpayer in writing to a false denial that could be
utilized in subsequent prosecutions either as direct evi-
dence of criminal activity (making false statements to
government agents in violation of 18 U.S.C, § L001) or as
circumstantial evidence of wilfulness (to be used in a sub-
sequent prosecution for tax related violations as was done
in the instant case).
The Audit and the Indictment
Leonard was informed that his returns had been selected
for review by a standard audit notice sent to his home, It
contained nothing to alert him of the criminal nature of
the investigation.
The audit was begun in June or July, 1968 by Revenue
Agent Mortimer Laski (‘‘Laski’’) of the FBA Project. It
*The Government conceded in its brief before the Court of
Appeals below that the agents were specifically “instructed” to
bypass the taxpayer's “accountants or attorneys” and “to directly
ar the taxpayer” the foreign bank question, See page 17, fn.,
infra.
was six years before the investigation was completed, dur-
ing which time at least eight, and possibly as many as
seventeen, IRS agents dealt directly with Leonard or his
representative,
The Swiss Bank Affidavit
In August 1969, during the course of the audit, Agent
Laski, who did not inform Leonard of the criminal nature
of the investigation, and did not give Leonard the warnings
required by IRS regulations governing the conduct of
criminal tax investigations, asked Leonard, outside the
presence of his attorney and accountant, whether he had a
Swiss bank account. According to Agent Laski, Leonard
denied that he presently (in August 1969) had a foreign
account,
Thereafter, at the direction of his IRS superiors, Laski
dictated an affidavit which was substantially broader than
Leonard's oral denial but which Leonard signed. It pro-
vided, inter alia:
(1) ‘*I do not now and I have not had any foreign
bank accounts’’; and
(2) ‘I have not had any transactions or dealings of
any nature with any foreign banks or other repre-
sentatives except for [specified loans in Australia
and currency conversions ].’’
The Government's “proof” of the
affidavit’s “falsity”
The Government offered the Laski-dictated, Swiss bank
affidavit as ‘‘similar act’’ evidence relevant to ‘wilful.
ness’’,
The Government sought to prove the falsity of the affi-
davit through the testimony of Harris Egan, the manager
of a branch office of Chase Manhattan Bank (‘‘Chase’’),
He testified that between April and November of 1968 he
Ee
10
delivered to Leonard, at the request of Chase's Interna-
tional Office, a number of official Chase checks totalling
$383,000, and that Chase had made these payments at the
direction of a Swiss bank.*
Despite the fact that the Swiss bank affidavit did not
purport to address itself to indirect transactions and de-
spite the fact that the IRS drafted the affidavit and thereby
determined the seope and content of Leonard's denial, the
Government contended that the payments by Chase con-
stituted ‘‘indireet’’ dealings with a foreign bank which
Leonard should have disclosed, In the Government's view,
this rendered the affidavit false and made it proper evi-
dence of a similiar crime relevant to wilfulnesa,
Eva Brooke's testimony**
iva Brooke, the widow of an employee of Kerr-MeGee
Chemical Corporation, testified that in the summer of 1971
(three years after the last tax-return year in the indictment
and two years after Leonard had signed the affidavit) she
was present when Leonard had business discussions with
her late husband, According to Mrs, Brooke, “Mr, Leon-
-——e - <i e
* This $383,000 was not alleged to be taxable income to Leonard
nor was it alleged to have constituted any of the omitted income
in either 1967 or 1968, As noted at p, 5 supra, the income alleged
in the indietment to have been omitted was from Treadwell for
engineering work performed on a chemical plant designed by
Leonard for Union Carbide in Louisiana, The allegedly omitted
income had no connection, direct or indirect, with any alleged
Swiss bank,
** The Government improperly used a Letter atory which it
never filed in England, to coerce Mrs, Brooke, a British citizen, to
travel to New York to testify upon a false representation and threat
(contained in the Letter Kogatory itself) that she was otherwise sub-
ject in England to “extradition and arrest”, Appendix F at 5la
he Government concealed these circumstances from defense coun-
wel at trial, and the facts did not become known until the appeal
stage when the Government was required to file the Letter .
tory as part of the record for transmission to the Court of Appeals
for the nd Cireuit, See Point LV, infra,
11
ard was extremely anxious that my husband join him in
business” and as a result offered him:
“A free apartment at Sutton Place, and he mentioned
the sum of $100,000 a year, with my husband as presi-
dent of the company, 50,000 of which would be made
in U.S. doilars and 50,000 to be deposited into a Swiss
bank account,”
Mrs. Brooke also claimed that there was “a written note
on this, but I did not see it myself.’’ During the evening,
Leonard and his wife and Mr. and Mrs. Brooke had gone
to dinner and then for drinks. Mrs. Brooke stated that
some time during that evening there was discussion as to
how to open a Swiss bank account and Leonard said: “1
have one,”’*
Mrs. Brooke also said she questioned Leonard about
Swiss banks, and Leonard mentioned that ‘‘Swiss bank
accounts are numbered and not in a name.’’
The Government claimed that Eva Brooke's testimony
was evidence that Leonard had made a false statement in
his 1971 federal income tax return when he checked the box
that indicated that he did not personally have ‘‘any inter-
est in or signature or other authority over a bank account
in a foreign country.”’**
* Since this conversation allegedly took place in 1971, it was not
relevant to Leonard's Swias bank affidavit, which was signed two
years before,
** The 1971 tax return (containing the foreign bank account
disavowal) waa filed in April 1972, four and five years after the
tax return years which were the subject of the indictment, Con-
sequently, it was too remote to be relevant to whether Leonard
wilfully subscribed his 1967 and 1968 tax returns knowing that
they omitted material amounts, although it was clearly Highly
inflammatory and prejudicial, See Point III, page 23n., infra,
12
The Decision of the Court of Appeals
for the Second Circuit
The Court of Appeals rejected Leonard’s contentions
that the IRS's investigation of him was criminal and
that the mail watch was illegal, and held that Revenue
Agent Laski (despite IRS regulations governing the con-
duct of criminal investigations) had no duty to advise
Leonard that he was the subject of a criminal investigation
nor to warn him of his rights to counsel or to refuse to
answer Laski’s questions,
Whiie the Court of Appeals agreed with Leonard that
the Government had failed to prove that Leonard’s affi-
davit was false insofar as it related to whether Leonard
personally had ever had any Swiss bank accounts, and
while the Court of Appeals caustically noted (Appendix A
at 25n-26a) that:
‘It would doubtless have been wiser for the judge
to have excluded the (Swiss bank] evidence or, at
the least, to have exeluded it until after the presenta-
tion of the defendant's case when there would have
heen a better opportunity to appraise the prosecu-
tion’s need for it. We do not think, however, that
the trial judge’s admission of this evidence was be-
yond the bounds of his legitimate diseretion, although
it may have been close to the edge.’’ (emphasis sup-
plied) (citation omitted),
it nevertheless held that the jury might reasonably have
inferred that Leonard had a transaction with a foreign
hank since the “official’’ Chase cheeks Leonard received
were predicated on instructions received by Chase from a
Swiss bank,
The Court of Appeals reached this conclusion only be-
cause it applied a ‘‘mere preponderance”’ of the evidence
standard for the admissibility of similar act proof (i.e.,
the affidavit) rather than using the “plain, clear and con-
vincing’’ standard mandated by the Fifth and Eighth
Circuits,
13
Although the Court of Appeals acknowledged that
Leonard had raised issues of importance concerning how
far the Government may go in discouraging witnesses
from being interviewed by defense counsel, particularly
when the witnesses are government employees, the Court
of Appeals held that it did not need to reach those issues
because it did not believe that Leonard had demonstrated
tat he had been prejudiced ‘‘in any significant degree’’
by the prosecutor’s interference.
In fact, Leonard did prove prejudice: the information
which the prosecutor refused to allow the prospective wit-
nesses to supply him was the very data necessary to es-
tablish that the “audit’’ of Leonard was a criminal in-
vestigation from its inception. And this, of course, is the
very thing the Court of Appeals held that Leonard had
failed to do, and assigned as a principal reason for not
suppressing the statements Leonard gave to Revenue Agent
Laski. Further, the opinion also overlooked the fact that
the prosecutor’s misconduct itself prevented Leonard from
demonstrating additional prejudice.
The decision below also failed to comprehend the import
of the improper methods the Government used to get Mrs.
Brooke to testify, which coercive methods undoubtedly
affected the content of her testimony. Although the de-
fense vigorously attacked the credibility of her testimony,
it did so on the erroneous premise that her memory was
simply wrong or that she was motivated by some unknown
reason to hurt Mr. Leonard. Had the defense known that
Mrs. Brooke’s testimony had been procured and colored
by threats of “arrest and extradition” and misrepresenta-
tions, it would have been able to challenge what must have
been viewed by the jury as highly incriminating testimony.
As an examination of the record will readily show, Mrs.
Brooke’s testimony had a significant adverse impact on
Leonard.
14
Reasons for Granting Certiorari
This Court should resolve the conflict among the
Circuits as to whether the IRS must comply with
its own rules and give taxpayers suspected of crim-
inal activities the constitutional warnings prescribed
by IRS regulations.
The First Cireuit (United States v. Leahey, 434 F.2d 7
fl Cir. 1970], Fourth Cireuit (United States v. Heffner,
420 F.2d 809 [4 Cir. 1969]) and the Ninth Cireuit (United
States v. Sourapas, 515 F.2d 295 [9 Cir. 1975]), have all
unequivocally held that IRS agents must comply with the
requirements of IRS News Releases 897 and 949.*
Although the Second Circuit (as is explained more fully
below) clearly indicated its disagreement with the deci-
sions of the First, Fourth and Ninth Circuits, it avoided a
direct and explicit conflict by setting up a series of artificial
distinctions between the facts in those eases and the instant
one,
Thus the Court of Appeals has claimed that the IRS had
not focused on Leonard as a criminal suspect at the time
he was interviewed by Revenue Agent Laski and signed
the allegedly false affidavit, and that Laski was a Revenue
Agent, and not a Special Agent, and therefore not bound
by regulations governing the manner in which criminal tax
investigations should be conducted.
Contrary to the Court of Appeals’ conclusion, however,
the record clearly demonstrates that the IRS’s investigation
of Leonard was criminal from its inception. In the first
~~ oe
Post Office authority for the mai! watch the IRS was re-
* See Appendix E at 35a-44a for the text thereof, and infra.
15
quired to represent to the Chief Postal Inspector that the
F BA Project was a criminal investigation.
The relevant sections of the regulations are Parts 861.41
and 861.42, which provide as follows:
‘¢ 41 The Chief Postal Inspector is the principal officer
of the Post Office Department in the administration of
all matters governing mail covers. .
“42 The Chief Postal Inspector . . . may order mail
covers [only] under the following circumstances:
“bh. When written request is received from any law
enforcement agency wherein the requesting authority
stipulates and specifies the reasonable grounds that
exist which demonstrate the mail cover is necessary to
. .. (3) obtain information regarding the commission
or attempted commission of a crime.” (emphasis sup-
plied) (Appendix E at 36a).
Indeed, the only basis on which the IRS could legiti-
mately have obtained authority to conduct the mail watch
was if it made an explicit representation that the informa-
tion sought was necessary to an investigation “regarding
the commission or attempted commission of a crime’’.*
* The Government contended both before the District Court and
the Court of Appeals that the investigation of Leonard was strictly
a civil audit and that the FBA Project, rather than being a criminal
investigation, was merely a program to ‘‘develop audit techniques
relevant to foreign bank accounts”. In fact, the Government as-
serted in its brief below that ‘‘there is no inconsistency’’ between
the previous ‘‘IRS representation to the Postal authorities’’ con-
cerning the criminal nature of the FBA investigation and the Gov-
ernment’s opposite claim asserted below that the investigation was
civil. According to the government's brief before the Court of
Appeals, these inherently inconsistent positions are reconcilable
because the Government in the future intended to prosecute “other
. . . [taxpayers] ultimately detected through the latter use of the
(footnote continued on following page)
a ee
16
Additionally, the origin of the investigation, the manner
in which it was conducted and the functions actually per-
formed by Agent Laski demonstrate that he was a part of
a criminal investigation and not performing a strictly “civil
audit”.
The FBA Project originated in the Intelligence Division
of the TRS, and initially only Special Agents took part in
the mail watches. It was the Special Agents (who are
criminal investigators) that utilized and compiled the
master list of stamp meter numbers corresponding to par-
ticular Swiss banks and who produced the computer print-
out of taxpayers and the names of Swiss banks with which
they corresponded. It was also Special Agents who ini-
tially wrote to such Swiss banks, falsely representing them-
selves to be American citizens interested in opening Swiss
bank aecounts. Further, it was Special Agent Hyman
Boller who selected (with the assistance of Revenue Agent
Morris) which taxpayers should be targeted for investi-
gation.
(footnote continued from preceding page)
audit techniques developed by the FBA project’’ and that there-
fore the investigation was essentially civil. However, this argument
would permit mail watches in every routine IRS audit on the
theory that such audits might lead to criminal prosecution in the
future. If this argument is correct, it would nullify the explicit
limitations for mail watches contained in the Post Office regulations.
See Part 861, infra, Appendix E at 37a.
Further, the Government cannot have it both ways. Either, as
the IRS represented to the Post Office in 1967 or 1968, the FBA
Project was a criminal investigation (in which case the IRS im-
properly failed to give Leonard the required warnings—United
States v. Leahey, supra, United States v. Heffner, supra, United
States v. Sourapas, supra), or the mail watch was part of a civil
investigation (in which ease the mail watch was improperly au-
thorized since it was based upon a material representation now
admitted by the Government to have been false—Wong Sun v.
United States, 371 U.S. 471 (1963)). In either case, Leonard’s
statements should have been suppressed. Leahey, supra, Heffner,
supra, Wong Sun, supra.
17
Special Agents also determined how the investigation
should be conducted, and directed that its criminal nature
should not be disclosed to the taxpayers. The obvious
reason for such concealment was to induce unsuspecting
taxpayers to cooperate with the “auditors”. The IRS
doubtless realized that cooperation was most unlikely once
a taxpayer was advised he was a criminal suspect and
thereafter sought and received legal counsel.
Use of Revenue Agents, rather than Special Agents, was
clearly a part of the IRS’s effort to conceal from the tax-
payer the true nature of the investigation. As the Seventh
Circuit stated in United States v. Sicilia, 475 F.2d 308, 310
(7 Cir. 1973), cert. denied, 414 U.S. 865 (1973):
“In general, special agents are concerned with
criminal investigations. On the other hand, the audit
type of investigations are handled by revenue agents
with no particular contemplation of criminal prose-
eution. There, therefore, is considerable potential for
the taxpayer being misled as to the nature of the
investigation.”
Furthermore, Laski, though designated by the IRS as a
“Revenue Agent”, was acting as a “Special Agent” when
he interrogated Leonard and secured his signature on the
Swiss bank affidavit. Pursuant to instructions, Laski in-
sited on a personal meeting with Leonard, conducted the
interrogation as instructed by the Intelligence Division
and inquired into an area that had no relation to the
purely “civil” aspects of his audit. As this Court
* The Government lamely contended below in its brief to the
Court of Appeals that the reason the agents conducting the in-
vestigations in the field were specifically “instructed” to bypass the
taxpayer’s “accountants or attorneys” and “to directly ask the
taxpayer” the foreign bank question was because the taxpayer's
representatives “may well have been given no knowledge of the
existence of the Swiss account by the client.” Of course, even if
(footnote continued on following page)
eee ee
18
recognized in Mathis yv. United States, 391 U.S. 1 (1968),
it is the reality of the situation, rather than the nominal
status of the IRS employee, that determines whether
there is a requirement to give warnings.
Most importantly, there are additional critical indicia
that the FBA project was a criminal investigation. Dur-
ing the alleged “audit” stage, Special Agent Boller se-
lected a group of “20 odd” good candidates, who had orally
denied having a foreign account and had also signed affi-
davits confirming the denial, and referred them to the U.S.
Attorney’s office for the Southern District of New York for
questioning by Assistant United States Attorneys in the
criminal division. The use of a federal prosecutor’s office
is completely inconsistent with the Government’s claim
below that the investigation was strictly civil. Further,
IRS regulations limit mail covers only to criminal investi-
gations; however, the mail watch of Leonard and others,
run initially between January and April 1968, was con-
tinued in 1969, while the ‘‘audits’’ were still in progress to
coincide with the personal confrontation with the taxpayer
when the foreign bank question was to be asked. Addi-
tionally, the FBA investigation was ‘‘top secret’? and
was not disclosed, even to other IRS agents, except on a
“need-to-know” basis. All of these are clearly character-
istic of a criminal (not a civil) investigation.
(footnote continued from preceding page)
that were true, the “accountant or attorneys” could always have
inquired of their clients and reported the informaiion back to the
agents. However, the fact that the agents in the project insisted
on personal confrontations demonstrates that these meetings were
designed to obtain either admissions or false denials.
Further, the insistence by a Revenue Agent that a taxpayer
execute an affidavit is a rare occurrence in routine “audits”; only
in alimony eases (i.e. where alimony is deductible by the husband)
and in certain estate cases (where an accounting is required) are
affidavits requested, but then the affidavits concern specific pay-
ments or items. Here, by contrast, the affidavit did not foeus on
any specific amounts but merely documented the taxpayer’s oral
denial, demonstrating that the Swiss bank affidavit here was de-
signed to force an admission out of taxpayers who would “think
yee A as IRS Agent Morris testified below, before signing a
enial.
19
Consequently, this case is in fact indistinguishable from
Heffner, Leahey and Sourapas, supra, and this Court
should decide the important question uf whether evidence
obtained in violation of IRS regulations which are in-
tended to protect the rights of citizens to due process
should be excluded.*
This Court should decide wivther the Swiss mail
watch was legal.
The Court of Appeals decision that the IRS mail watch
is legal raises issues of substantial national importance.
At a time when there have been frequent revelations of
unauthorized surveillance by government agencies, includ-
ing the IRS, this Court should not allow to pass unre-
viewed a decision that sanctioned inspection of every piece
of mail arriving in New York from Switzerland by air dur-
ing a period of eight months, when there was not the slight-
est evidence that the people receiving the overwhelming
bulk of this mail were connected in any way with any
criminal activities. This is especially true since the num-
ber of individuals whose mail was microfilmed was sub-
stantial (perhaps exceeding 100,000), and also because
the damage to privacy and freedom of speech and asso-
ciation that could result from such misuse of mail watches
is considerable.
* Moreover, as noted, at page 2, supra, this case raises a dif-
ferent question than Beckwith, supra, does, since agents there gave
warnings which may have satisfied IRS regulations, while here no
warnings at all were given until after Leonard had made his
allegedly incriminating statements and turned over to the IRS
substantial numbers of allegedly incriminating documents. Fur-
ther, the opinion of the Court of Appeals for the District of
Columbia does not indicate whether Beckwith raised the issue of
non-compliance with IRS regulations, or only asserted that he had
not been given full Miranda warnings.
20
This is the first case, as far as we can discover, which
raises the question of whether the Government may insti-
tute broadscale mail watches of an entire class of people
when it has no reason to believe that any specific member
of the class has committed or is about to commit a crime.
Indeed, the mail watches which the courts have hereto-
fore approved have all been quite limited in scope, and
clearly restricted to the inspection of the mail sent to spe-
cifie individuals who were reasonably suspected of having
committed, or having attempted to commit, particular
crimes, See, eg. Canaday v. United States, 354 F.2d 849
(S Cir, 1966), United States v. Schwartz, 283 F.2d 107
(3 Cir, 1960), cert. denied, 364 U.S, 942 (1961), United
States v, Costello, 255 F.2d 876 (2 Cir, 1958), and United
States vy. Lsaacs, 347 F. Supp. 743 (N.D. Tll. 1972).
The Second Cireuit in effeet has conceded that the FBA
Project mail watch was of a very different order from
earlier judicially approved mail watches, and raised greater
risks of infringement of important constitutional rights, ob-
serving:
“It may well be that, in these days of increased con-
cern for the protection of privacy, the statement in
Costello [supra] should not be read as an absolute,
permitting, for example, the Government to copy the
outside of any envelope received by every citizen.”
Appendix A at La,
The Seeond Circuit was nevertheless reluctant to hold
the instant mail watch illegal, however, because it regarded
the Leonard case as “an unattractive candidate for creat-
ing an exception” 7d. ai 15a, both because it did not regard
the searc) as unreasonable or believe that addressees had
a reasonable expectation that the outside of incoming in-
ternational mail would not be inspected, and because it
shared the concern of the IRS that Swiss bank accounts
21
were being used to evade the revenue laws and were under-
mining the public’s confidence in the failure of the tax
laws.
In support of its conclusion that the search was legal,
the Court of Appeals cited the Bank Secreey Act of 1970,
31 U.S.C, §§1101 and 1121 and this Court’s decision in
California Bankers Association v, Shultz, 416 U.S, 21
(1974), but overlooked entirely the fact that the Bank
Secrecy Act was enacted subsequent to the mail watch
challenged here and provided significant procedural safe-
guards that were wholly lacking in the FBA Project mail
cover, and further that the Bank Secrecy Act’s terms were
public, while the mail cover was secret. A person who
wished to maintain his privacy could avoid government
surveillance of his financial dealings by not engaging in
transactions which were reportable under the Bank Secrecy
Act. No such protection could be achieved by the subject
of the clandestine mail watch.
Moreover, this case is distinguishable from earlier mail
watch cases in that heretofore the courts have always em-
phasized that the mail watches they were reviewing had not
violated any laws.
Here, in marked contrast, the mail watch was not only
extraordinarily broad, but it was also conducted in direct
violation of the applicable Post Office regulations, which
permitted mail watches only to protect the national secur-
ity, to catch fugitives, or to assist in obtaining information
concerning “the commission or attempted commission of a
crime”, (Parts 861.42b and 861.51b of the Post Office de-
partment, Appendix E at 36a and 37a.) Since the Govern-
ment claimed both at trial and on appeal that the purpose of
the FBA Project was simply to “develop audit techniques”
concerning foreign bank accounts, and adamantly denied
that the audit of Leonard was an outgrowth of a criminal
investigation, it is clear that the Swiss mail watch does not
come within any of the three recognized categories of cases
for which mail watches are authorized.* Such cavalier
disregard of regulations designed to protect the privacy of
the mail should not be condoned nor allowed to go un-
reviewed and uncriticized.
The Court should resolve the conflict among the
Circuits governing the admissibility of similar act
evidence, and should insure that its decision in
Bronston v. United States, 409 U.S. 352 (1973) is not
undermined.
The rule in the Second Circuit is that evidence of other
crimes is admissible for any relevant purpose, including
proof of wilfulness, United States v. Deaton, 381 F.2d 114
(2 Cir, 1967); United States vy. Crisona, 416 F.2d 107 (2
Cir, 1969), cert, denied 397 U.S, 961 (1970). The majority
of courts express their “other crimes” rule in an exclusory
*The Seeond Cireuit purported to find compliance with the
aforecited Postal Regulations “, . . because IRS had reason to be-
lieve that crimes under the revenue laws were being committed by
some taxpayers through the use of Swiss accounts” (emphasis
supplied) (Appendix A at 21a), In so arguing, the Court of Appeals
wholly ignored that the Post Office Regulations clearly were de-
signed to limit mail watches to the mail of specific individuals sus-
pected of committing specific crimes, See, ¢.g., Parts 861.42(a)
and 861.51(a), which both speak of having reason to believe that
the “subject or subjects” of the mail watch are violating postal
regulations, Part 861.62, which prohibits copying of information
on envelopes mailed between the mail cover “subject” and his
known attorney-at-law, Part 861.64, which refers to mail covers
ordered upon “subjects” engaged, or suspected to be engaged, in
activities which jeopardize the national security, Part 861.66 which
states:
“Excepting fugitive cases [which of course concern specific
known individuals], no mail cover shall remain in foree when
the subject has been indicted for any cause, If the euhject
is under investigation for further criminal violations, a new
mail cover order must be requested .. .” (emphasis supplied),
and Part 861.74, which provides that the “subject” of a mail cover
is entitled to discover any data relating to the mail cover. See
Appendix E at 36a-38a,
form, that is, evidence of other crimes is not admissible
except for certain purposes. See 2 Wigmore, Evidence
§§ 300-373 for an analysis of specific crimes. See also
Michelson v, United States, 385 U.S. 469, 475 (1948);
Spencer v. Texas, 385 U.S, 554, 561 n. 7 (1967),
However, regardless of which formulation is used, such
evidence is admissible only if its probative value outweighs
its prejudicial effect, the prejudice being the danger that
the jury is likely to conclude that because the defendant
committed the similar crime, he is a “bad person” who
deserves to be punished irrespective of whether the Govern-
ment has proved beyond a reasonable doubt that he has
committed the erime charged in the indietment. Indeed,
for this reason, admission of alleged similar act proof
carries with it a substantial potential for prejudice.*
In all Circuits, the question whether the probative value
of such evidence outweighs the prejudicial effect is a
matter, in the first instance, for the trial judge's disere-
tion. However, the decision below created a conflict in the
Circuits as to the applicable legal standard governing
admissibilty.
*In this case, the Government's evidence of alleged ‘‘similar
crimes” dominated the trial. As a consequence, the foeus of the
trial shifted from the charges in the indictment (whether Leonard
had wilfully subseribed tax returns which pen omitted
specific amounts) to the highly inflammatory and prejudicial alle-
gation that Leonard had a secret Swiss account, which was wholly
unrelated to the offenses cha in the indictment and specified
in the Government's Bills of culars. The result waa that in
reality Leonard was tried and convicted of ae a Swiss account,
rather than of failing to inelude certain items in his adjusted groas
income in his 1967 and 1965 tax returns. Only by reading the
entire record, and in particular the prosecutor's opening and clos-
ing, is it possible to fully appreciate the extent to which Leonard's
revolved around the question of whether he had a Swiss
account,
ee ee
24
Both the Fifth and BHighth Cireuits have held that
similar act evidence is admissible only if it is “plain, clear
and convincing”, United States v. Lawrence, 480 F.2d 688
(5 Cir, 1973), Kraft v. United States, 238 F.2d 794 (8
Cir, 1956). The Second Cireuit, however, rejecte. that
standard and held that it sufficed if the similar act were
established by a mere preponderance of the evidence,
presenting a clear conflict among the Cireuits which should
be resolved by this Court.
Moreover, the Second Circuit, in reaching its conclusion,
totally disregarded this Court’s holding in Bronston vy.
United States, 409 U.S, 352 (1973), that a literally true,
albeit deliberately misleading statement, is not criminally
false.
The “similar act evidence” which the Government (over
Leonard's repeated objections) introduced to prove that
Leonard wilfully signed his tax returns which omitted
material amounts was the Swiss bank affidavit drafted by
the Government and signed by Leonard in August 1969, in
which Leonard denied that he ever had any foreign bank ac-
counts or had any transactions or dealings (other than as
deseribed in the affidavit) with any foreign banks.
Although the Court of Appeals acknowledged that the
Government had failed to prove that Leonard personally
had a Swiss account in 1969, and although the Court of
Appeals also conceded that there was no direct evidence
that Leonard had any dealings or transactions with for-
eign banks, and admitted that it would have been wiser for
the District Court to have excluded the foreign bank evi-
dence entirely, it nevertheless held that the district court
had not erred (“although it may have been close to the
edge”) in admitting the affidavit since there was sufficient
circumstantial evidence for the jury, under a preponder-
ance of the evidence standard, to have inferred that
Leonard knew he was really dealing with a Swiss bank,
although Chase, a domestic bank, delivered the checks to
him,
25
While Leonard strenuously pointed out that the Govern-
ment had failed to prove that the affidavit was literally
false since the sole evidence it had introduced on that point
was that he had dealings with Chase, the Second Cireuit
rejected this contention as “formal to an extreme”,
Clearly, the standard used for determining the admis-
sibility of similar act evidence was of critical importance.
Kven assuming, arguendo, that a jury could reasonably have
concluded that Leonard had indirect transactions with a
foreign bank, the evidence of such dealings (Chase's pay-
ments to Leonard at the direction of a Swiss bank) was
not “plain, clear and convincing”, and certainly not ade-
quate to prove that the affidavit Leonard signed was
literally false.
Leonard’s transactions were directly with Chase, a
domestic bank. The checks which Kgan delivered to
Leonard stated on their face only that they were “official’’
Chase checks. Indeed, Leonard’s only contact was with an
officer of a domestic bank,"
* There was no testimony or documentary evidence that the
$354,000 came from a personal account of Leonard and the Gov-
ernment offered no explanation as to the reasons for the pay,
ments. Indeed, as in Bronston, supra, the Swiss account could
just as consistently have belonged to a corporation or a third
pod as to Leonard personally, As the record below demonstrates,
onard had extensive dealings with foreign corporations in Europe.
Hie designed chemical plants in Belgium, France, Italy and Ger-
many. The transfers may well have been in relation to that work.
Additionally, the affidavit itself revealed that Leonard made use of
Australian banking faciiities to secure a loan for a project in
Australia and it is entirely 1 that he was repaid by the
Australian corporation through a Swiss bank.
Leonard, who elected to exercise his privilege not to testify,
was under no obligation to prove the alternative explanations of
the Swiss account evidence, It was the Government's burden to
prove by at the very least, plain, clear and convincing evidence,
that Leonard personally had a Swiss bank account or had “trans-
(footnote continued on following page)
ee
If the Government had wanted Leonard to state he had
never had any indirect dealings with a foreign bank, it
could and should have so provided when it prepared the af-
fidavit. If the Government failed to draft the affidavit
carefully, it cannot blame the defendant, Consequently,
Leonard's denial of transactions with a foreign bank does
not constitute a criminally false statement any more than
Bronston’s implicit denial of ever having had a Swiss ac-
count did. Bronston, supra,
Therefore, this Court should exercise its jurisdiction
both to resolve the conflict among the circuits over the
proper standard for proof of similar acts, and to protect
its decision in Bronston, supra, from eviseeration,
IV
This Court should exercise its power of supervision
of the federal administration of justice to condemn
prosecutorial misconduct of a particularly prejudi-
cial nature.
The prosecution obstructed Leonard’s access to poten-
tial witnesses and failed to disclose to trial c unsel that the
Government had obtained the presence and testimony of a
foreign witness, whose credibility was of critical import-
ance to the Government's case, by improperly using a
Letter Rogatory which falsely threatened the witness, who
was completely innocent of any wrongdoing, with arrest
and extradition,
(footnote continued from preceding page)
actions’ with a Swiss bank. The Government failed to meet this
burden.
“It may well be that petitioner's answers were not guidelines
but were shrewdly calculated to evade. Neverthcloss, we are
constrained to agree with Judge Lumbard, . . . that any
special problems arising from the literally true but unrespon-
sive answer are to be remedied through the ‘questioner’s
acuity’ and not by a federal perjury prosecution.” Bronston
v. United States, supra at 362.
27
1. The Government improperly obstructed the defend-
ant’s interviews of prospective witnesses.
The Government repeatedly obstructed defendant's pre-
trial preparation by insisting on being present during al!
interviews of prospective Government witnesses and in-
structing them not to answer questions which were clearly
relevant to matters covered in Leonard’s indictment.
The question of how far the prosecution may go in
directing witnesses not to be interviewed by defense coun-
sel has received increasing attention since the decision in
Gregory v. United States, 369 F.2d 185, 187-89 (D.C. Cir.
1966). Although this Court does not seem to have ex-
plicitly dealt with the issue, other courts and commenta-
tors have. United States v. White, 454 F.2d 435, 438-39
(7 Cir. 1971), cert. denied, 406 U.S. 962 (1972), United
States v. Matlock, 491 F.2d 504, 506 (6 Cir. 1974), cert.
denied, 419 U.S. 864 (1974); ABA Standards Relating to
the Administration of Criminal Justice, The Prosecution
Function, 4 3.1(¢); Discovery and Procedure before Trial,
§ 4.1; Kamisar, LaFave and Israel, Modern Criminal Pro-
cedure 1236-37 (1974 ed.).
All have taken the view that it is improper for the
prosecutor to discourage prospective witnesses from being
interviewed by defense counsel.
In the present case, the Government sought io dis-
courage all _ terviews of prospective witnesses. For ex-
ample, Leonard was denied the opportunity to question
Revenue Agent Morris Laski, a key prosecution witness
whose credibility was sharply in issue at the trial, either
as to his contacts with the prosecutors or why, despite the
total absence of any reference to a foreign account in
Leonard’s records (which the IRS had extensively
audited), Laski, a Revenue Agent, had, for no apparent
reason, asked Leonard whether he had a foreign bank ac-
count.
28
The prejudice Leonard suffered was substantial. At
the time defendant’s counsel interviewed Laski and sought
to question him about the Swiss bank account affidavit, the
defendant was not aware that this was an FBA Project
ease and further did not know that there had been a mail
watch. Indeed, the prosecutor’s instructions to the wit-
nesses not to answer questions on this subject blocked, at
an early and key point, discovery by Leonard of the mas-
sive mail watch and the relevant Post Office regulations
and related IRS documents necessary for a full under-
standing of the mail watch.*
While it may he that the relevance of these inquiries
related primarily to a suppression hearing on the legality
of the mail watch, the fact remains that the Court of Ap-
peals ruled that Leonard had not made a sufficient factual
showing of prejudice. It is apparent, however, that the
prosecutor’s misconduct itself prevented the defendant
from making a further showing of prejudice.**
* Discovery of al! relevant facts and documents would have re-
quired production of the original letter from the IRS to the Post
Office in late 1967 requesting authority for the mail watch. This
document, containing the IRS’s representation as to the criminal
nature of the investigation, was never produced by the Government
below. Indeed, the lower court’s decision that the FBA investi-
gation was not a criminal investigation and further that the mail
watch was proper was based only on what the court assumed this
letter contained. Leonard subpoenaed the IRS to produce all
documents relevant to the maal watch, but the subpoena was
quashed by the trial court.
Additionally, Post Office regulations governing mail covers were
not published in the Code of Federal Regulations until March 11,
1975, four days after Leonard had been sentenced. 39 C.F.R.
§ 233.2. Consequently, Leonard, who had no knowledge of the
existence of these regulations (and certainly no access either) was
prejudiced by the prosecutor's obstruction of the interviews of the
witnesses on the subject of the mail watch. Indeed, it was
Leonard’s appellate counsel who discovered the Post Office regula.
tions by writing to the Post Office and requesting them under the
Freedom of Information Act and then only after Leonard had
been sentenced. See Appendix E at 35a.
** Where the prosecutor’s conduct violates a defendant's
constitutional rights, the defendant need not establish prejudice,
since the prosecutor's instructions to the witnesses not to cooperate
themselves prevented the defendant from making such a showing.
See Gregory v. United States, supra.
Thus, the defendant’s access to essential information
which might have led to possible legal defenses and wit-
nesses was restricted and therefore his ability fully to
prepare a defense improperly hampered.
2. The Government improperly used a Letter Roga-
tory to obtain the presence and testimony of Eva
Brooke, a British citizen, upon the false threat that
she was otherwise subject (in England) to “extra-
dition and arrest” although she was completely
innocent of any wrongdoing. In addition, the Gsv-
ernment improperly failed to disclose these cir-
cumstances at trial, as required by this Court’s
decision in Brady v. Maryland, 373 U.S. 83 (1963).
This Court, in Brady v. Maryland, 373 U.S. 83, 87
(1963), held that:
“. . . the suppression by the prosecution of evidence
favorable to an accused upon request® violates due
process where the evidence is material either to guilt
or to punishment regardless of the good faith or bad
faith of the prosecution.”
During trial the government secretly and improperly
conducted er parte discussions with the court concerning
a “Letter Rogatory [request] to the Appropriate Judicial
Authority” in London, England, to compel Eva Brooke to
travel from England to testify in New York at trial.
Appendix F at 5la-55a.
A “letter rogatory” is a judicial request “addressed to a
foreign court that a witness be examined within the
latter’s terri[torial] jurisdiction by written interrogatories,
or, if the foreign law permits, by oral interrogatories.”
Ballentine’s Law Dict. (3d ed. 1969) pp. 726-727. Volks-
wagenwerk A. G. v. The Superior Court of Sacramento
County, 109 Cal. Rept. 219, 33 CA 3d 508 (1973). The pur-
pose of a letter rogatory is simply to provide a means for
* There was a pretrial request by Leonard for Brady material.
30
taking the testimony of a witness abroad. United States
v. Reagan, 453 F.2d 165 (6 Cir. 1971), cert. denied, 406
U.S. 946 (1972).
Because a Letter Rogatory is a request from one na-
tion to another for assistance in exercising the judicial
power of the requesting nation, protoco! requires, and 28
U.S.C. § 1781 provides, that a Letter Rogatory be trans-
mitted to the judicial authority of the foreign nation.
Since an order of a United States court requiring a person
to give testimony has no extraterritorial effect, it is highly
improper to seek, as the Government did herein, to directly
serve a foreign citizen in a foreign nation, rather than to
have the appropriate foreign judicial official effect service
on the witness,
The Letter Rogatory in the instant case was both im-
properly served and used for an improper purpose. The
Letter Rogatory stated that the court below had been in-
formed by the Government that Eva Brooke, a British
citizen, “presently residing in London at an address known
to the United States Government’’ had admitted to ‘‘rep-
resentatives of the United States’’ that ‘‘the defendant
Leonard had made materially incriminating statements to
her’’ but that ‘‘even though she was previously served with
a subpoena requiring her attendance as a witness . . . in
this present case, she . . . has resisted coming to New
York . . . though the United States has agreed to bear all
her reasonable travel expenses.’’ (emphasis supplied).
Appendix F at 52a-53a.
The court below thereafter requested in the Letter Roga-
tory (which was drafted by the Government) that the Eng-
lish court “enter an order” compelling her to travel to New
York ‘‘as soon as physically possible’’ to testify at the trial.
The Letter Rogatory further requested that the English
court take “such other steps (such as arrest and extradi-
dition) that may be necessary in order to secure compli-
ance with such orders’’ (emphasis supplied). Appendix F
at 53a-54a.
31
The only English authorities explicitly relied on in sup-
port of this extraordinary request (compare 28 U.S.C.
§§ 1781-1783, 1696), the Foreign Tribunals Evidence Act
of 1856 and the Extradition Act of 1870, are completely
irrelevant. The Foreign Tribunals Evidence Act of 1856
covers only civil matters and simply gives English courts
the power to take testimony in England at the request of
a foreign court. The Extradition Act of 1870 merely per-
mits the taking of testimony for a criminal case pending
in a foreign court in the same manner as provided by the
Foreign Tribunal’s Evidence Act of 1856.
In short, neither Act cited in the Letter Rogatory sup-
ported the request that Mrs. Brooke be arrested and ex-
tradited to testify in the United States. Indeed, both Acts
establish that the request inherently lacked merit, which
indicates that it was designed for a completely different
purpose.
More particularly, there is no proof that the Government
properly filed the Letter Rogatory in any English court. In-
deed, it is apparent that the Government, fully aware of
the improper request contained in the Letter Rogatory,
never intended to seek the aid of an English court, but
instead served it on Mrs. Brooke directly, realizing that
she would not know it was improper and would be intimi-
dated into abiding by its terms.*
* As noted at p. 29, infra, the Government’s contacts with the
court on the Letter Rogatory were during the trial and were ex
parte and concealed from Leonard until this appeal. The Letter
Rogatory was signed by the court on January 14, 1975. Trial
began January 13. When the existence of ex parte conferences
accidentally came to Leonard’s attention below, he specifically
asked the trial Court whether he would learn what they were
about and the court remarked that it “assume[d] at some point
that may oecur.”” However, Leonard’s counsel never learned about
them until after trial, after Leonard had been convicted and sen-
tenced, and only when the Government filed the Letter Rogatory .
for the first time as part of the record on appeal. There was
simply no legitimate prosecutorial or judicial reason for this
ez parte procedure.
a Pa ee
32
2%,
If this was indeed the case, then Leonard suffered sub-
stantial prejudice. The lengths the Government went to in
order to obtain the presence of Mrs. Brooke in New York
must have seriously concerned her, especially since she was
recently widowed and therefore vulnerable. Indeed, despite
the fact that she claimed to be an old friend of the Leonard
family, she apparently was so intimidated by these events
that she did not call Leonard when she arrived in New
York to inform him, simply as a matter of courtesy, that
she was to be a witness. This was hardly the normal
reaction of a friend of 25 years who voluntarily said that
the Leonards “have always been kind and friendly towards
me”,
The Government’s extraordinary efforts to obtain her
testimony also indicate how important Mrs. Brooke was
as a witness, and her testimony was, in fact, extremely
damaging to Leonard. It was, therefore, clearly significant
that her presence as well as her testimony were colored
by the Government’s threat that she was subject to “arrest
and extradition” even in England.
The Government’s threat tc arrest and extradite a key
witness unles. she testified in a manner desired by the
Government was certainly the vype of information which
the Government should have disclosed to the defendant
prior to or at trial. See Brady v. Maryland, 373 U.S. 83
(1963).
Conduct of this sort is reprehensible, and this Court,
in the exercise of its power of supervision of the federal
administration of justice, should condemn it and insist that
Leonard be given the opportunity of a new and fair trial.
CONCLUSION
For the foregoing reasons, this petition should be
granted and a writ of certiorari should be issued to
review the decision below.
Respectfully submitted
James SCHREIBER
330 Madison Avenue
New York, New York 10017
Attorney for Petitioner
Jackson D. Leonard
ALAN KANZER
Of Counsel
APPENDIX
la
Appendix A, Opinion, United States Court of Appeals
for the Second Circuit, August 28, 1975.
UNITED STATES COURT OF APPEALS
For THE Seconp Circuit
No. 1176—-September Term, 1974.
(Argued July 18, 1975 Decided August 28, 1975.)
Docket No. 75-1153
=
As
Usitep States or AMERICA,
Appellee,
v.
Jackson D. Leonarp,
Appellant.
=
A
Before:
Moorg, Frrenpty and Van GRAAFEILAND,
Circuit Judges.
Appeal from a judgment of the United States District
Court for the Southern District of New York, Richard
Owen, Judge, convicting Leonard, after a verdict, on two
counts of an indictment charging him with violating 26
U.S.C. § 7206(1), by filing income tax returns for 1967
and 1968 which he did not believe to be true and correct
with respect to his adjusted gross income.
Affirmed.
és.
7
James Scureiper, New York, N. Y. (Walter,
Conston, Schurtman & Gumpel, P.C., New
York, N. Y., and Alan Kanzer, of counsel),
for Appellant.
2a
Appendiz A.
W. Cuntes MacDonatp, Assistant United States
Attorney, New York, N. Y. (Paul J. Curran,
United States Attorney for the Southern
District of New York, New York, N. Y., and
John C. Sabetta, Assistant United States
Attorney, of counsel), for Appellee.
s.
vw
Frenpiy, Circuit Judae:
Jackson D. Leonard, a successful New York chemical
engineer, appeals from his conviction, after trial before
Judge Owen and a jury in the District Court for the
Southern District of New York, on two counts of an in-
dictment charging him with violation of 26 U.S.C. § 7206
(1)... The first count charged the omission of $24,168.09
from Leonard’s reported 1967 adjusted gross income of
$259,051.97; the second count charged the omission of
$58,684.42 from reported 1968 adjusted gross income of
$134,276.00. He received a light sentence—concurrent
terms of 18 months of imprisonment with 15 months
suspended, fines of $5,000 on each count and the costs of
prosecution.
I.
Of the many claims of error, only a few relate to the
basie question of guilt. We shall deal with these in this
section of the opinion. In that connection it will be neces-
' This provides that:
Any person who—
(1) Declaration under penalties of perjury.—Wilfully
makes and subscribes any return, statement, or other docu-
ment, which contains or is verified by a written declaration
that it is made under the penalties of perjury, and which he
does not believe to be true and correct as to every material
matter; or
shall be guilty of a felony. .. .
3a
Appendiz A.
sary to summarize the evidence, which in view of the ver-
dict we must do in the light most favorable to the Gov-
ernment.
On February 20, 1967, Leonard, “doing business under
the name and style of the Leonard Process Company,” a
sole proprietorship, and Union Carbide Corporation
(UCC) entered a contract for engineering services in
connection with the construction of two chemical plants
—a very large one in Taft, Louisiana, which was built,
and a smaller one in South Charleston, West Virginia,
which was not. Leonard’s fees were to be of two sorts.
One sort consisted of initial lump sum payments of
$180,000 and later periodic payments of $37,000 each.
The indictmeni did not charge that any such payments
had been unreported. The other sort was a 10% override
on UCC’s reimbursements for amounts paid by Leonard
to subcontractors performing detailed engineering serv-
ices which his office was not equipped to provide. The
Treadwell Corporation of New York became the subcon-
tractor. None of these 10% overrides were reported as
income for 1967 or 1968.
The general pattern which Leonard established was as
follows: UCC would send him a single check covering
the total amount owing for the subcontracted services in-
cluding the 10% override, and in some cases also inelud-
ing the $37,000 periodic payment due to Leonard. Instead
of depositing the UCC check in his bank account at First
National City Bank (KF NCB) and then paying Treadwell,
Leonard endorsed the UCC check and sent it to Tread-
well. Treadwell would -hen send Leonard one or two
checks, as the case might be, one for the 10% override
and another for the periodic payment due to Leonard
when this had been included in the UCC check. While the
return checks for the periodic payments found their way
into bank accounts, as did other UCC cheeks not inelud-
4a
Appendiz A.
ing Treadwell payments, Leonard never deposited the
checks representing the 10% override—$24,168.09 in 1967
and $58,684.42 in 1968. Instead he cashed them or used
them to purchase travelers’ checks.
So far as concerns his 1967 return, Leonard’s claim is
that the Government did not bear its burden of proving
that the $24,168.09 of undeposited checks had not in fact
been reported. The proof was this: Leonard’s 1967 FNCB
bank statements bear markings identifying certain de-
posits as UCC deposits, and others as coming from other
jobs he was doing. Marion Bardes, who worked as a fre-
lance bookkeeper for Leonard accountants, testified that
she had prepared a first draft of Leonard’s 1967 tax re-
turn on the basis of these bank statements. The work
papers for this draft return show that a figure of $291,000,
as income from the UCC contract, was arrived at by
adding the lump-sum payments and the periodic payments
which had been deposited in 1967. This $291,000 was
added to other Leonard income to make a total figure of
$461,000 as gross income from Leonard’s engineering ac-
tivities. The figure of $461,000 was carried through each
of the several drafts of Leonard’s return and appeared
as the “gross receipts” figure on Schedule C of the return
that Leonard filed. That Schedule C showed a net profit
of $256,872.95 which, when combined with a loss of
$15,166.48 from his wife’s Schedule C, yielded a profit
of $241,707.47 which was entered on their Form 1040, as
“Business income.” That last figure was combined with
miscellaneous other income of $17,344.50 to give an ad-
justed gross income figure of $259,051.94; it is this figure
which Leonard is charged with having understated.
The defendant raises three objections: First, he claims
there is no testimony to show that it was Leonard who
identified the various income items on his bank state-
ments as a basis for the preparation of his tax return.
_——-
5a
Appendiz A.
Second, he claims there is no evidence that the missing
$24,168.09 was not included as part of the other $170,000
of income (i.e., the difference between $291,000 and
$461,000). Third, he stresses that Miss Bardes did not
prepare the fina! return and contends that, since the gov-
ernment did not put the final preparer on the stand, the
evidence is insufficient to connect the earlier draft forms
with the return ultimately filed with the IRS.
All these were arguments for the jury, not for us. The
jury was entitled to infer that Leonard had given the bank
statements to the accountants for the purpose of preparing
his return, knowing that the statements contained some but
not all the UCC payments. The second point is frivolous;
an exhibit shows the items that made up the other $170,000,
and the Treadwell 10% payments were not among them.
On the third point while the Government’s case would have
been stronger if it had called the person who prepared the
final form and elicited that he had relied on the initial
drafts, Miss Bardes’ testimony showed that she had for-
mulated the $461,000 figure that appeared on the final re-
turn, using bank records which Leonard knew did not con-
tain the $24,168.09 of Treadwell checks he had cashed or
used for buying travelers checks. In the absence of any
contrary evidence, this was enough to permit the jury to
infer that the $24,168.09 was not included on the final re-
turn, and that Leonard knew it was not included. If any
further evidence of wilfulness were needed, it would be fur-
nished by Leonard’s clumsy attempt to delete the 10%
override provision from the copy of the contract that was
exhibited to Revenue Agent Laski in the course of the
audit.
Leonard’s argument about the 1968 return is quite dif-
ferent. Conceding that he directed that the 10% pay-
ments from Treadwell, and for that matter the $37,000
payments subsequent to January, not be included ‘n his
6a
Appendiz A.
1968 personal income tax return, he says they were not
required to be. This result follows, he claims, because in
January, 1968, he formed a corporation entitled The Leon-
ard Process Co., Inc. (hereafter Leonard Inc.) to which
he transferred the business of his sole proprietorship, The
Leonard Process Company. On January 18, 1968, The
Leonard Process Co., Index filed Form 2253, electing to
have its income taxed directly to its shareholders as a
small business corporation under Subchapter S of the In-
ternal Revenue Code, for the taxable year beginning Jan-
uary 1, 1968. By letter of March 22, 1968, UCC agreed to
an assignment of its contract from Leonard Process Com-
pany to Leonard Inc., effective February 1, 1968.2 After
February 1, 1968, Leonard deposited the $37,000 checks
from UCC in a Leonard Ine. bank account. lLlowever, both
before and after February Ist, he continued the practice
of cashing the 10% checks from Treadwell—$6,229.20 for
January and $52,455.22 for later months—although the
checks after February 1 admittedly belonged to Leonard
Inc. In response to the Government’s contention that this
simply meant that the checks were embezzled income re-
portable in the year of embezzlement, James v. United
States, 366 U.S. 213 (1961), Leonard argues that, under
this court’s decision in DiZenzo v. C.I.R., 348 F.2d 122 (2
Cir. 1965), they are to be treated rather as constructive
dividends. Acceptance of this still does Leonard no good
unless, as he asserts, Leonard Inc. had no earnings or
? Apparently use of the February Ist date was due to a belated
recognition that unless Leonard Ine. had a fiscal year starting
later than January 1, 1968, the benefit of using Subchapter S as
a means for shoving income into 1969 would not be realized.
We give no weight to the Government's contentions that the
assignment was invalid for want of consideration since Leonard
remains personally liable, or that it was valid only from March 22,
1968. Whatever merit those contentions might have in litigation
between the parties, and we doubt that they would have any, they
are not open to the IRS. There is no claim that the assignment
was a sham.
Oe RY ORE ret on OL et
> ee ly irene ome
es
7a
Appendia A.
profits, IRC $4 301(c), 316. He contends that it had none
in the year beginning February 1, 1968, and that a prop-
erly instructed jury could find that the failure to include
the $6,229.20 for January, 1968, was not material.
The Government introduced no evidence on the subject
except to show that Leonard Inc. did not file a Subchapter
S corporate tax return (Form 1120S) for 1968, 1969 or
1970. The defense offered an exhibit purporting to be a
proposed corporate income tax return for the period Feb-
ruary 1, 1968, to January 31, 1969, see note 2, showing a
loss of $73,742.33. This form was subscribed by the ac-
counting firm as preparer but bore no signature of any
officer of Leonard Inc. The return was presented through
a member of the accounting firm but without any testimony
by any person who had prepared it; the judge admitted
it only for the purpose of showing that such a return had
been prepared but not as evidence of the truth of the matter
asserted. The Government countered with another unfiled
form showing a loss of only $29,017.77, for the year be-
ginning February 1, 1968, which the judge admitted on the
same limited basis. This latter form was of little weight
since it was wholly unsigned and was marked ‘‘super-
ceded.’”
There is no doubt that if this had been a civil case,
Leonard would have had the burden of showing ‘‘that the
corporation did not have earnings and profits equal to
the amount diverted,’’ DiZenzo v. C.I.R., supra, 348 F.2d
at 126-27, and that he would not have met it. But he con-
tends he had no such burden under the rules governing
the burden of proof in criminal prosecutions.
In prosecutions for income tax violations, production
of a rather slight amount of evidence by the Government,
here the proof of receipt of what are charitably character-
> Neither draft return included the cashed Treadwell checks as
income.
Sa
Appendiz A.
ized as constructive dividends rather than embezzled funds,
may transfer the burden of going forward to the defend-
ant, see Holland v. United States, 348 U.S. 121, 137-39
(1954); United States v. Vardime, 305 F.2d 60, 63 (2 Cir.
1962). Although the ultimate burden of persuasion re-
mains with the Government, Leonard did not introduce
sufficient evidence of an absence of earnings or profits to
warrant submission to the jury of a claim that, except for
January 1968 income, the assignment of the UCC contract
to Leonard Ine. constituted an absolute defense. An un-
filed tax return, signed only by the accounting firm and
unexplained by any preparer, has little probative weight;
indeed, the defense’s failure to call the preparer, whose
testimony did not come under any privilege, could properly
give rise to a negative inference as to whether Leonard Ine.
had a loss. See 8 Wigmore, Evidence § 2273 (McNaughton
rev. 1961). Moreover, the return introduced by the defend-
ant was for the wrong year. Leonard Inc. had elected a
tax year beginning January 1, 1968. The IRS Regula-
tions are quite explicit that a Subchapter S corporation
may change its tax year only with the prior approval of
the Commissioner—Reg. 1.442-1(c)(4)—which is by no
means routinely given—see Reg. 1.442-1(b)(1), especially
examples ii and iii(a). See also 7 Mertens, Federal In-
come Taxation § 41B.21 (1967). The only issue on which
Leonard was entitled to have the jury consider the as-
signment, and the unfiled return, was that of wilfulness,
and it was clearly permissible for the jury to find that
this evidence did not negate the other evidence bearing on
that point.
The only remaining point on this phase of the case is
Leonard’s contention concerning the charge. Tria! coun.
sel for Leonard had submitted a request to charge in re-
gard to Leonard Inc., which sounded in terms uf an abso-
9a
Appendia A.
lute defense to Count Two rather than as bearing only
upon wilfulness. Before instructing the jury, the judge
informed counsel that he would not give the requested
charge. The judge said nothing specific about the defend-
ant’s contention relating to Leonard Inc., relying rather
on his general remarks about wilfulness and burden of
proof. After the charge Leonard’s counsel excepted gen-
erally to the failure to give requested charges; he also
asked that since the judge had outlined some of the Gov-
ernment’s contentions, he should also outline the defend-
ant’s. The court agreed to do this and mentioned several
defense contentions, not including the one about Leonard
Ine. Counsel expressed no further objections.
The requested charge suffered from the usual defect
of asking more than was deserved. For reasons already
indicated, the judge was not required to, indeed could not
correctly, charge that “|T]he proof in this case shows
that in the first year of operation, the corporation sus-
tained a loss of approximately $73,000.” Neither was
Leonard entitled to have the jury instructed “as a mat-
ter of law that the checks addressed to The Leonard
Process Co., Inc., from the period February 1968 through
November 1968 are returns of capital and are not tax-
able ;’’ there was no evidence that this was so. Although
lawyers seem never to learn the lesson, it is elementary
that to put a trial court in error for declining to grant
a requested charge, the proffered instructions must be ac-
curate in every respect. Southern Ry. Co. vy. Jones, 228
F.2d 203, 213 (6 Cir. 1955); Shaw v. Lauritzen, 428 F.2d
247, 250 (3 Cir. 1970). The most to which Leonard was
entitled was a charge that if the jury found he believed
both that the undeposited checks beginning in February
1968 were the property of Leonard Inc., and that leonard
Ine. had no earnings or profits, the jury could find a
lack of wilfulness in failing to report theses payments in
10a
Appendiz A.
A
a
his personal income tax return. We have no reason to
think that if counsel had requested such a charge, the
judge would have refused to give it.
Il.
As so often happens, the prosecutor chose to imperil a
good case by introducing a line of evidence that added
little but was bound to be a prolific breeder of substan-
tial claims of error—to which the remainder of this opin-
ion must be devoted.
In order to provide a basis for understanding these
claims, we must back up a bit; if the reader wonders what
all this will have to do with Leonard’s case, we must crave
indulgence.
The New York Regional Office of the IRS had become
concerned over possible losses of United States income
taxes through the use of secret Swiss bank accounts. It
occurred to someone that taxpayers having such accounts
might be identified by their receipt of statements from
the banks. However, detection was impeded by the fact
that, in the interest of secrecy, the Swiss banks used
envelopes not bearing the banks’ names or return ad-
dresses. Some agents penetrated this shield by writing
various Swiss banks about establishing accounts and ob-
serving the postal meter numbers on the answers. Armed
with these numbers, IRS requested the Postal Service,
in a communication not in the record, for permission to
conduct a mail cover during the first four months of 1969.
On the evenings of about 60 days during that period, a
Postal Inspector and IRS Special Agents, working at the
main New York City Post Office, photostated with high
speed copiers the faces of all air mail envelopes without
return addresses, mailed from Switzerland to New York.‘
*Two machine were employed each with a capacity of 3,600
envelopes per hour. The sorting and copying process usually took
lla
Appendiz A.
Thereafter postage meter numbers on these photostats
were examined to see if any matched those known to have
been used by Swiss banks. This group, which amounted
to thousands of envelopes, was converted into a print-out
containing the recipients’ names, addresses, dates of en-
velopes and the identities of the banks. From the several
hundred names in the print-out, B. H. Morris, a Senior
Regional Analyst in the office of the Assistant Regional
Commissioner of Audit, and Special Agent Boller selected
a group of 100 in the Manhattan and about 50 in the
Brooklyn District. Leonard, whose name appeared in the
larger sample and whose return had already been selected
for audit because of a development described below, was
added to the list, along with a few others similarly situ-
ated. In 1969 the procedure was repeated. All this was
known as the Foreign Bank Account (F BA) Project.
We now turn to another development. In early 1968 the
IRS had received an informer’s report that Leonard had
been getting kickbacks from a subcontractor. Although
the report came originally to the Intelligence Division,
which handles criminal investigations, it was referred, in
accordance with usual procedures, to the Audit Division,
which it reached on April 16, 1968. On June 7th the Man-
hattan District Director advised Leonard that his 1966
personal income tax return had been assigned for examina-
tion to revenue agent Rothstein.
Rothstein was not one of the special group of revenue
agents who had been selected to pursue investigations
emanating from the FBA project. On August 7, 1968,
Leonard’s audit was reassigned to revenue agent Mortimer
Laski. In accordance with normal procedures, Laski also
only half an hour. The evidence was that delivery of the mail
was not delayed since the mail arrived late in the afternoon or
early in the evening and sorting for delivery would not begin
until the next morning in any event.
12a
Appendix A.
audited Leonard’s 1965 return and, when the ordinary post-
filing processing was completed, the 1967 return.
The audit began in normal fashion with an examination
of Leonard’s papers—including the UCC contract with
the 10% override provision deleted by a hand inked line—
at the office of his accountant. Sometime early in 1969,
Laski met Leonard at the accountant’s office. Laski did not
advise Leonard of his right to refrain from answering
incriminating questions or to have counsel. Laski inquired
about the UCC payments; Leonard claimed that the pro-
visions of the contract relating to the $37,000 monthly pay-
ments, and the 10% overrides, had been changed. When
asked, in accordance with prescribed procedures in FBA
investigations, whether he had foreign bank accounts,
Leonard said he had none except for one in an Australian
bank. Again in accordance with prescribed FBA pro-
cedures, Laski furnished Leonard’s accountant a proposed
affidavit which Leonard executed on August 27, 1969; we
reproduce this in the margin.’ Agent Laski then continued
his audit, particularly requesting more information from
UCC. On the basis of this, Agent Laski and a successor
revenue agent, on June 30, 1970, submitted a report recom-
mending that the matter should be referred to the Intel-
ligence Division for a fraud investigation. The recom-
° Jackson D. Leonarp, being duly sworn, deposes and says:
1. I make the following statements in connection with the
examination of my U.S. Income Tax Returns for the years
1965, 1966 and 1967.
2. I do not now have and I have not had any foreign bank
accounts. I have not had any transactions or dealings of any
nature with any foreign banks or other representatives except
for the following:
(a) Nominal currency conversions for living expenses
while I was travelling.
(b) In 1968 I made use of Australian banking facilities
to secure a loan which is directly related to an engineering
project which I have completed in Australia.
13a
Appendiz A.
mendation was accepted, and a criminal investigation was
begun with a Special Agent in charge. Thereafter Leonard
was given warnings of his constitutional rights at the
beginning of each interview.
We can now satisfy the curiosity of anyone who has per-
sisted in reading so far as to what these events had to do
with the case. The Government sought to prove that the
statements in the affidavits that Leonard had no foreign
bank accounts and had no dealings with foreign banks, with
two exceptions, were false. This was not for the purpose
of showing that any of the unreported UCC payments got
into foreign bank accounts but simply to bolster the proof
that the omissions of the 10% override payments from
Leonard’s 1967 and 1968 income tax returns were wilful.
The evidence was of two sorts: Harris Egan, an official
at the Chase Manhattan Bank (CMB) branch on United
Nations Plaza, near Leonard’s apartment, testified that
in April, 1968, he delivered to Leonard’s apartment three
official CMB checks—two checks for $20,000 and $25,000
dated April 12th and a $120,000 check dated April 26th.
Three other official CMB checks for $64,000, $16,000 and
$138,000 were delivered to Leonard later in the year. In all,
the checks totaled $383,000. All six checks were payable to
Leonard on remittance instructions issued by Banque
Cantonale de Zurich. Leonard used most of the checks to
pay off a personal FNCB loan.
Eva Brooke testified that in the summer of 1971, in the
course of an endeavor to hire her now deceased husband,
Jack Brooke, away from his then employer, Kerr-McGee
Chemical Corporation, Leonard offered Brooke $100,000 a
year, half to be paid in dollars and the other half to be
deposited in a Swiss bank account. Later, in answer to an
inquiry from Brooke, Leonard admitted to having such an
account. Since this admission in 1971 was not necessarily
14a
Appendiaz A.
inconsistent with the affidavit executed in August 1969, the
Government also put in evidence Leonard’s 1971 income tax
return, executed April 10, 1972, which contained the follow-
ing question and answer:
Did you, at any time during the taxable year, have any
interest in or signature or other authority over a bank,
securities, or other financial account in a foreign
country (except in a U.S. military banking facility
operated by a US. financial institution) ?
[ Answer:] No.
Now for the flood of objections which the admission of
this evidence has precipitated.
(1) The broadest in scope is that the mail cover was an
unreasonable search in violation of the Fourth Amendment;
that the interrogation of Leonard about foreign bank
accounts and the execution of the affidavit resulted from it;
and that any false statement in the affidavit was, thus, the
fruit of a poisonous tree.
It has been settled since Ex parte Jackson, 96 U.S. 727
(1878), that ‘‘The right of the people to be secure in their
persons, houses, papers and effects, against unreasonable
searches and seizures’’ protects against a warrantless
opening of sealed letters and packages, save insofar as
may be needed in the case of incoming international mail
for the enforcement of the customs laws. See United States
v. Odland, 502 F.2d 148 (7 Cir.), cert. denied 419 U.S. 1088
(1974), and cases there cited. However, this court said in
United States v. Costello, 255 F.2d 876, 881 (2 Cir. 1958) :
We think the Jackson case necessarily implies that
without offense to the Constitution or statute writing
appearing on the outside of envelopes may be read and
used.
15a
Appendix A.
Leonard counters by saying that “the mail watches which
the courts have heretofore approved have all been quite
limited in scope, and clearly restricted to the inspection of
the mail sent to specific individuals who were reasonably
suspected of having committed, or having attempted to
commit, particular crimes.”
It may well be that, in these days of increased concern
for the protection of privacy, the statement in Costello
should not be read as an absolute, permitting, for example,
the Government to copy the outside of every envelope re-
ceived by every citizen. But this case is an unattractive
candidate for creating an exception. The IRS was con-
fronted with a serious problem in the use of Swiss bank
accounts to evade the revenue laws. Not too long after the
mail covers here at issue, the House Report on the Bank
Secrecy Act of 1970, quoted in California Bankers Ass’n
v. Shultz, 416 U.S. 21, 28-29 (1974), was to state:
One of the most damaging effects of an American’s
use of secret foreign financial facilities is the under-
mining of the fairness of our tax laws.
and
The former U.S. Attorney for the Southern District
- of New York has characterized the secret foreign bank
account as the largest single tax loophole permitted
by American law.
In 1968 and 1969 the IRS did not have the assistance now
provided by the reporting requirements of Title II of the
Bank Secrecy Act, 31 U.S.C. §§ 1101, 1121. Even if we
assume that copying the outside of letters may in some
circumstances be a “search,” the 1968-1969 project impro-
vised by the IRS did not involve an unreasonable one;
indeed it involved less in the way of disclosure than the
l6a
Appendiz A.
foreign reporting requirements which the Supreme Court
has sustained in the California Bankers Association case
supra, 415 U.S. at 59-63. Moreover, if the test for applie-
ability of the Fourth Amendment is a “reasonable expecta-
tion of privacy,” Katz v. United States, 389 U.S. 347, 360
(1967) (concurring opinion of Mr. Justice Harlan), it is
difficult to see how there can be any such reasonable ex-
pectation with respect to the outsides of incoming inter-
national mails which are subject to inspection and even in
some cases to opening in aid of the enforcement of the
customs laws.
(2) A second attack against the mail cover is that it
could not have been lawfully authorized under the appli-
cable Postal Regulation. The Postal Manual then in effect
provided in § 861.42,°
A2 The Chief Postal Inspector, or his designee, may
order mail covers under the following circumstances:
b. When written request is received from any law
enforcement agency wherein the requesting authority
stipulates and specifies the reasonable grounds that
exist which demonstrate the mail cover is necessary
to (1) protect the national security, (2) locate a fugi-
tive, or (3) obtain information regarding the commis-
sion or attempted commission of a crime.
Leonard argues that § 861.42b(3), the only provision that
can he applicable, requires that the agency seeking per-
mission must be engaged in the investigation of a specific
crime which it has reason to think has been committed,
or is about to be. Apart from the fact that the objection
__* The applicable mail cover regulations have now been
lished, with some changes, in the Federal Register. 40 Fed Rep,
11579 (1975), to be codified as 39 C.F.R. § 233.2(e).
17a
Appendiz A.
was not made below, we see no reason to read the regulation
so narrowly. Apparently the Postal Service did not, and its
interpretation of its internal regulations is entitled to
weight. See 4 Davis, Administrative Law Treatise, $ 30.12
at 261 & n.12 (1958).
(3) The objection most strongly pressed is this:
Although this circuit and a majority of the others have
held that Miranda v. Arizona, 384 U.S. 436 (1966) does not
require the IRS to give the Miranda warnings to taxpayers
not in custody, even in criminal tax fraud investigations,
IRS has gone beyond its constitutional obligation. In In-
ternal Revenue Service News Release No. 897, issued Octo-
ber 3, 1967, it stated, so far as here pertinent:
“In response to a number of inquiries the Internal
Revenue Service today described its procedures for
protecting the Constitutional rights of persons sus-
pected of criminal tax fraud, during all phases of its
investigations.
“Investigation of suspected criminal tax fraud is con-
ducted by Special Agents of the IRS Intelligence Divi-
sion. This function differs from the work of Revenue
Agents and Tax Technicians who examine returns to
determine the correct tax liability.
“Instructions issued to IRS Special Agents go beyond
most legal requirements to assure that persons are
advised of their Constitutional rights.
“On initial contact with a taxpayer, IRS Special Agents
are instructed to produce their credentials and state:
‘As a special agent, I have the function of investigating
the possibility of criminal tax fraud.’”’
|
18a
Appendiz A.
In News Release No. 949, issue November 26, 1968, it
further provided:
“One function of a Special Agent is to investigate pos-
sible criminal violations of Internal Revenue laws. At
the initial meeting with a taxpayer, a Special Agent
is now required to identify himself, describe his fune-
tion, and advise the taxpayer that anything he says
may be used against him. The Special Agent will also
tell the taxpayer that he cannot be compelled to in-
criminate himself by answering any questions or pro-
ducing any documents, and that he has the right to seek
the assistance of an attorney before responding.”
Three circuits have held that when a special agent has
failed to give the advice described in these Releases, in-
criminating statements by the taxpayer will be suppressed.
United States v. Heffner, 420 F.2d 809 (4th Cir. 1969) (one
judge dissenting); United States yv. Leahey, 434 F.2d 7
(1 Cir. 1970); United States v. Sowrapas, 515 F.2d 295 (9
Cir. 1975).
Leonard cites various reasons why the audit must be
considered as having been one “of suspected criminal tax
fraud” from the outset even though it was conducted by a
revenue agent and not by a special agent. These include
the fact that the mail cover could be justified under the
Postal Regulations only if its purpose was to “obtain in-
formation regarding the commission or attempted commis-
sion of a crime’’; that special agents participated in the
mail cover and in framing the instructions for the audits
of the persons selected as a result; and that persons who
are the subject of ordinary audits are not asked to sign
affidavits as Leonard was.’
’ The defendant also claims that he was the subject of a crimi-
nal investigation quite apart from the FBA project, since IRS
19a
Appendia A.
We are not at all sure that we would follow the Heffner—
Leahey—Sourapas doctrine in the case of an occasional
and undeliberate departure from the procedure described
in the News Releases if the issue were squarely before us.
It is, of course, well established that when agency action
“is based on a defined procedure, even though generous
beyond the requirements that bind such agency, that pro-
cedure must be scrupulously observed.” Vitarelli v. Seaton,
359 U.S. 535, 546-47 (1959) (concurring opinion of Mr.
Justice Frankfurter). However, Vitarelli and almost all
of the great number of cases that have applied the doctrine
have concerned the validity of the agency’s own action in
the face of a violation of its own regulations, see Note,
Violations by Agencies of Their Own Regulations, 87
Harv. L.Rev. 629 (1974), rather than an invocation of the
exclusionary rule. The latter, as Judge Clary said in a
perceptive but seemingly neglected opinion many years
ago, “represents an attempted accommodation of com-
peting values.” United States v. Schwartz, 176 F.Supp.
613, 615 (E.D.Pa. 1959), aff’d on other grounds, 283 F.2d
107 (3 Cir. 1960), cert. denied 364 U.S. 942 (1961). Judge
Clary thought that, while this accommodation required ex-
clusion when the Constitution or a statute had been violated,
the balance turned the other way when an official of an
agency had simply violated the agency’s own regulation—
something which the agency would presumably be inter-
ested in correcting for the future, as it might not be when
the Constitution or a statute imposed distasteful require-
ments upon it. Despite persuasive contrary arguments in
acticz. was precipitated by an informer’s tip made in the first in-
stauce to the Intelligence Division. We do not think that this
fact, by itself, makes the Audit Division’s work subject to the News
Releases; despite defense counsel’s earnest efforts to distinguish the
case, we find the reasoning of United States v. Robson, 477 F.2d
13, 16-17 (9 Cir. 1978), cert. denied 420 U.S. 927 (1975), per-
suasive on this point.
20a
Appendiz A.
Judge Coffin’s opinion in United States v. Leahey, supra,
a period of increasing disenchantment with the exclusion-
ary rule, see Bivens v. Six Unknown Federal Narcotics
Agents, 403 U.S. 388, 412-18 (1971) (dissenting opinion of
the Chief Justice); Schneckloth v. Bustamonte, 412 U.S.
218, 266-69 (1973) (concurring opinion of Mr. Justice
Powell, joined by the Chief Justice and Mr. Justice Rehn-
quist); see also United States v. Burke, —— F.2d ——,
(2 Cir. 1975), slip opinions 3571, 3588-90, would not
seem to be a good time for us to embrace a rule that when
an agency voluntarily publishes a press release announcing
that it will extend to suspects more procedural protection
than the Constitution or a statute demands, any violation,
however unintentional or excusable, will lead to suppres-
sion.
We find it unnecessary, however, to decide whether we
would follow the cited cases. For even if we were persuaded
by them, we would not reach the result urged by Leonard.
In the first place, we read the News Releases as out-
lining the instructions which the IRS has given to Special
Agents, something that Agent Laski was not. Leonard’s
position thus must be that exclusion is required not only
when a Special Agent fails to observe his instructions but
also when IRS, mistakenly believing that the investigation
has not yet become one “of suspected criminal tax fraud,’’
does not assign a Special Agent to conduct it, or at least
fails to instruct an ordinary revenue agent to act as if he
were a special agent. We think this goes beyond the bounds
of good sense interpretation. A different case would be
presented if IRS consistently assigned ordinary revenue
agents to conduct what it knew to be criminal investiga-
tions and they failed to give the warnings indicated in the
News Releases, but there is no evidence of this.
Second, we do not think the investigation had become
one “of suspected criminal tax fraud’’ when Leonard
2la
Appendiz A.
executed the affidavit on August 27, 1969. To borrow Mr.
Justice Frankfurter’s phrase, Universal Camera Corp. v.
NLRB, 340 U.S. 474, 493 (1951), “we do not find ourselves
pinioned between the horns of [counsel’s}] dilemma” that
unless the mail cover was to unearth crime it was illegal
under the Postal Regulations, and that if it was legal, the
tax investigation of Leonard was criminal, The mail cover
came within the Postal Regulations because IRS had rea-
son to believe that crimes under the revenue laws were
being committed by some taxpayers through the use of
Swiss bank accounts. It does not follow that every per-
son whose name turned up in the print-out as probably
having a Swiss bank account was suspected of committing
such a crime. In fact the audit disclosed no sufficient evi-
dence that Leonard had committed a crime by having a
Swiss bank account. What ultimately led Agent Laski to
recommend a criminal investigation was the data furnished
by UCC, which showed, not a “kick-back” as represented
by the informer, but a failure to report the 10% overrides
which Leonard had received.
(4) Citing Bronston yv. United States, 409 U.S. 352
(1973), Leonard next claims that the Government did not
produce sufficient proof of the falsity of his affidavit, see
note 5, to justify its admission into evidence. The prosecu-
tion did not offer evidence from the mail cover showing
that Leonara had received communications from the
People’s Bank in Switzerland, although, as will be seen,
the defendant elicited some evidence that at least hinted as
to his having a Swiss account; the Government relied
rather on the testimony of the CMB branch manager
deseribed above and, to a lesser degree, on that of Mrs.
Brooke. Leonard claims that the manager’s testimony did
not show that Leonard personally had any Swiss bank
accounts, since the numbered account at the Banque Can-
22a
Appendiz A.
tonale de Zurich whence the remittance to CMB was made,
might have belonged to a corporation owned by him or even
to an outsider, and that Mrs. Brooke’s testimony to an
admission in the summer of 1971 does not sufficiently show
falsity in an affidavit made in the spring of 1969. We think
that this contention is valid and that if Leonard’s trial
counsel had requested an instruction that the jury could
not find this portion of the affidavit to be false, he would
have been entitled to it. However, no such request was
made and the defendant is thus forced to show also that
there was no falsity in the denial of “any transactions or
dealings of any nature with any foreign banks or other
representatives’ (emphasis supplied). He argues that the
transactions to which the CMB manager testified were
between Leonard and CMB, and that therefore there is no
falsity. That argument, however, seems formal to an ex-
treme; it is more reasonable to say that in fact Leonard had
had such dealings with a Swiss bank, and that CMB had
simply been a conduit for transmission of the funds from
the Banque Cantonale de Zurich. The real question 1s
whether there was sufficient proof that Leonard knew that
the money had come from a foreign bank. Since the money
came from a Swiss numbered account, it is understandable
that there was no direct eviderce on this point; under a
preponderance of the evidence standard, there was enough
circumstantial evidence to entitle the jury to draw the
required inference. In addition to the practical point
stressed by the trial judge, that Leonard probably had a
pretty fair general idea of how $383,000 was being trans-
mitted to him, the jury could also consider the fact that
Leonard had no account at CMB, the peculiar method
chosen to deliver the CMB official checks to him, and the
pains taken by Leonard to keep them out of his FNCB
account.
23a
Appendiz A,
Leonard further argues that the preponderance standard
is not high enough for “similar act” evidence and points
to statements that such evidence must be ‘‘plain, clear and
conclusive” to be admissible. Kraft v. United States, 238
F.2d 794, 802 (8 Cir. 1956) ; United States v. Broadway, 477
F.2d 991, 995 (5 Cir. 1973). This view appears to rest on
a misconception. Similar act evidence is admitted to show
wilfulness and for other purposes, not because it may indi-
cate the commission of crime but in spite of that. 2 Wig-
more, Evidence § 305 (3d ed. 1940). Insufficiency of the
evidence to support submission to the jury of an indictment
charging that the August, 1969, affidavit was a false state-
ment in violation of 18 U.S.C. § 1001, does not mean that
the evidence could not be received to prove wilfulness with
respect to a different crime if other evidentiary rules were
satisfied. While “the Due Process Clause protects the
accused against conviction except upon proof beyond a
reasonable doubt of every fact necessary to constitute the
crime with which he is charged,” Jn re Winship, 397 U.S.
358, 364 (1970), the “fact” here is wilfulness, not each
subsidiary fact offered to establish it. United States v.
Taylor, 464 F.2d 240, 244 (2 Cir. 1972), compare Lego v.
Twomey, 404 U.S. 477 (1972). A preponderance standard
is sufficient for such facts if the aggregate of the evidence
on the issue of wilfulness meets the Winship requirement,
as it plainly does here.
(5) Leonard also claims that the whole line of proof
regarding Swiss banks and statements he made about them
should have been excluded on the basis that the small
probative value of the evidence was outwieighed by its
prejudicial potential. United States v. Deaton, 381 F.2d
114 (2 Cir. 1967); Fed. Rules Evid. Rule 403. The probative
value of similar acts used to prove wilfulness or intent is
dependent on the existence of a close parallel between the
24a
Appendiz A.
crime charged and the acts shown, 2 Wigmore, Evidence
§ 302 at 200-01 (3 ed. 1940). The crime here charged is the
wilful subscribing of a false document under I.R.C. § 7206
(1), a seetion of the Code which, both in its language, see
note 1, and in its history, makes knowing falsity the grav-
amen of the offense. Kolashi v. United States, 362 F.2d 847,
848 (5 Cir. 1966); 10 Mertens, Federal Income Taxation
§55A.13 at 65-69 (1970). If the jury, crediting the testi-
mony that was offered, found that the 1969 affidavit and
the statement on the 1971 tax return were false, they could
properly use that conclusion to help them “in determining
whether the defendant had a wilful intent to sign here a
false return,” as the trial judge charged. Although the fit
between the similar acts and the crime for which Leonard
was convicted is not so close as it has been in cases where
identical forms for immediately preceding years have been
introduced, e.g., United States v. Coblentz, 453 F.2d 503
(2 Cir.), cert. denied 406 U.S. 917 (1972), it is within the
bounds established by some of the decided cases, e.g., our
own United States v. Kaufman, 453 F.2d 306 (2d Cir.
1971).°
There remains, however, the question whether the value
of the evidence is “worth what it costs.” McCormick, Evi-
dence § 185 at 438 (2 ed. 1972). It is true that transacting
business with Swiss banks, or lying about not having done
so, is rather more likely to “arouse the irrational passions
of the jury” than was evidence of the claiming of an im-
proper deduction in an income tax return in United States
v. Kaufman, swpra. At the same time, we think that the
defendant has overstated the case in claiming that this line
_*The Government’s brief chides Leonard for having “utterl
failed even to inform this Court of the District Court’s stated,
independent ground of admissibility—that both the 1969 affidavit
and the 1971 return are false exculpatory statements—and of the
authorities supporting that ground, which were cited and relied
upon below.” We agree with counsel for Leonard that this claim
is frivolous and that the cases are not in point.
258
Appendiz A.
of proof was “highly inflammatory.” The evidence was
hardly the equivalent of a bloody shirt, compare State v.
Goebel, 36 Wash. 2d 367, 379, 218 P.2d 300, 306 (1950), a
dying accusation of poisoning, Shepard v. United States,
290 U.S. 96, 104 (1933), or a claim of homosexuality, United
States v. Provo, 215 F.2d 531, 537 (2 Cir. 1954). Moreover,
defendant’s counsel at trial must not have considered it
to be that damaging, for he was willing to bring out
additional allegations of foreign bank connections if they
could be used for his own purposes. The prosecution did
not introduce evidence that Leonard had been identified
for investigation as part of the FBA project and indeed,
objected to the introduction of that information. Never-
theless defense counsel went into the matter, apparently
attempting to show, as he later argued to the jury, that
Leonard was the victim of a bureaucratic steam-roller.
Indeed, our impression is that in fact the defense weleomed
the Government’s resort to similar act testimony since this
tended to distract the jury from an issue on which the
prosecution’s case was exceedingly strong to one on which
it was considerably weaker, and also offered abundant
opportunities for objection and possible reversal.
In any case, the weighing of the probative value of the
evidence against its potentially prejudicial effect is pri-
marily for the trial judge who has a feel for the effect of
the introduction of this type of evidence that an appellate
court, working from a written record, simply cannot obtain.
We said in United States v. Ravich, 421 F.2d 1196, 1203-04
(2 Cir.), cert. denied, 400 U.S. 834 (1970), citing Cotton v.
United States, 361 F.2d 673, 676 (8 Cir. 1966), and Wan-
grow v. United States, 399 F.2d 106, 115 (8 Cir.), cert.
denied 393 U.S. 933 (1968), that “his determination will
rarely be reversed on appeal.’’ It would doubtless have
been wiser for the judge to have excluded the evidence or,
at the least, to have excluded it until after the presentation
26a
Appendiz A.
of the defendant’s case when there would have been a better
opportunity to appraise the prosecution’s need for it. Cf.
United States v. Kaufman, supra, 453 F.2d at 311. We do
not think, however, that the trial judge’s admission of this
evidence was beyond the bounds of |: > legitimate discretion,
although it may have been close to the edge.
. (6) Even this does not exhaust the claims of error aris-
ing from the course adopted by the prosecutor. Defendant
raises a number of other points, with which we must deal
more briefly.
(a) Relying on United States v. Baum, 482 F.2d 1325,
1331-32 (2 Cir. 1973), Leonard claims to have been the
victim of unfair surprise with respect to the ‘‘similar act”
evidence. Baum differs in several respects: The trial
court had erroneously denied a request that would have
disclosed the name of the surprise witness, Greenhalgh, id.
at 1329, 1331, and had refused any continuance at all when
he was called, td. at 1330. Here Leonard’s counsel was on
notice as to the Laski-Egan evidence and had obtained dis-
covery of the CMB checks six days before they were put
into evidence, Counsel had enough knowledge of Mrs.
Brooke’s prospective appearance to have served a subpoena
duces tecum on the preparer of an affidavit she had signed.
He also interviewed her and obtained copies of prior state-
ments during a recess and evening after her direct testi-
mony. Counsel’s only substantial complaint is the denial
of a two weeks continuance, not clearly sought until the day
before the trial ended, in order to make a trip to Switzer-
land, Australia, or both, in an endeavor to develop proof
that the $383,000 paid through CMB to Leonard might
have come from the Australian bank which constituted an
exception in the August, 1969, affidavit. The request was
unaccompanied by any showing that this travel would be
27a
Appendiz A.
productive and the court was justified in rejecting it as a
ploy.
(b) Many pages of the briefs are devoted to the de-
fense’s claim that the Government improperly obstructed
its interviews of several IRS employees. After defense
counsel had written to them, the employees apparently
referred the letters to the Assistant United States Attor-
ney who was to prosecute the case. When the employees
appeared for the taking of depositions, the prosecutor and
defense counsel were in agreement that the interviews
should be reported and that the witnesses should have
an opportunity to read the daily copy and make appro-
priate corrections; however, defense counsel noted his dis-
like of the prosecutor’s presence and particularly of his
instructing the witnesses not to answer some of the ques-
tions. Defense counsel orally moved the court that the
prosecutor be excluded or, in the alternative, be directed
not to tell the witnesses not to answer questions. The court
denied the motion; the Government later supplied, as
promised, affidavits by the agents in which they dutifully
stated that they “would have declined the interview unless
permitted to be counseled, advised and guided by the As-
sistant United States Attorney assigned this case.”
The question how far the prosecution may go in dis-
couraging witnesses from being interviewed by defense
counsel has received increasing attention since the decision
in Gregory v. United States, 369 F.2d 185, 187-89 (D. C.
Cir. 1966), although this circuit does not seem to have dealt
with the issue. See United States v. White, 454 F.2d 435,
438-39 (7 Cir. 1971), cert. denied 406 U.S. 962 (1972);
United States v. Matlock, 491 F.2d 504, 506 (6 Cir. 1974),
cert. denied 419 U.S. 864 (1974); ABA Standards Relating
to the Administration of Criminal Justice, The Prosecution
Function, § 3.1(¢); Discovery and Procedure before Trial,
28a
Appendiz A.
§ 4.1; Kamisar, LaFave and Israel, Modern Criminal Pro-
cedure 1236-37 (1974 ed.). None of these discussions, how-
ever, has focused on a situation like that here presented,
where the persons sought to be interviewed are government
employees who in some sense are part of the prosecutorial
team; where most of the disclosure sought relates to the
internal workings of a government agency; and where the
agency has established procedures in regard to disclosure,
26 C.F.R. § 301.9000-1(c) and (d), which have apparently
been ignored. Indeed the method devised by Leonard’s
trial counsel] seems more like an ingenious way for getting
around the limitation of discovery in the last sentence of
F.R.Cr.P. 16(b).
This case does not require us to decide issues of such
importance, for on this record we fail to see how the
defendant has been prejudiced in any significant degree.
The prosecutor intervened primarily to prevent answers
being given to questions directed to what the judge called
“talks between the agents themselves, ‘What did you say
to each other about the Leonard case?’” Such relevance as
there might be in such answers would relate mainly to the
suppression hearing, as to which the need for interviews
beforehand is much less than in the case of a jury trial.
The prime example of obstruction cited by Leonard’s coun-
sel consists of the prosecutor’s instructing Special Agent
Shulman not to answer broad questions concerning what
he had done in “the investigation” from March or April,
1972, until June, 1972, and what further steps he had taken
after July, 1972. The relevance of this is not self-evident,
and the defendant has not clarified the matter for us. The
interview with revenue agent Laski, the only agent who
testified at trial, runs over fifty-seven typewritten pages
and was relatively free of interruptions by the prosecutor;
Leonard has not shown how the few negative instructions
29a
Appendiz A.
given by the prosecutor impeded effective cross-exami-
nation.
(c) Counsel makes a variety of attacks, unnecessary to
detail, on the methods by which the prosecution secured the
presence of Mrs. Brooke. Apart from the fact that it is
not clear that these objections were raised below and that
they are of doubtful merit, the short answer is that impro-
priety in the method by which the prosecution has obtained
the attendance of a witness, while a proper subject for
cross-examination or proof insofar as the impropriety may
go to the weight of the witness’ testimony, is not of itself
a ground for reversal. ;
. * *
We have considered the other arguments made by Leon-
ard’s indefatigable appellate counsel but do not believe
they warrant prolongation of this opinion.
The judgment of conviction is affirmed.
30a
Appendix B, Opinion, United States Court of Ap-
peals for the Second Circuit, November 18, 1975,
Denial of Rehearing and Suggestion for En Banc
Consideration.
UNITED STATES COURT OF APPEALS
For tHe Seconp Cincurr
No. 1176—September Term, 1974.
Docket No. 75-1153
Filed: November 18, 1975
sé
4
Unitep States or Amenica,
Appellee,
v.
Jackson D. Leonarp,
Defendant-A ppellant.
°
Before:
Moore, Frienpiy and Van GraareiLanp,
Circuit Judges.
,
vr
On Petition ror REHEARING
-.
.
Per Curiam:
In a petition for rehearing Leonard raised, inter alia,
a claim that our discussion of the omission of income from
his 1968 tax return, slip opinion at 5847-52, was incomplete
in one respect. Our opinion assumed, on pp. 5849-50, that
the only evidence of the alleged $73,742.33 loss of Leonard
Inc., for the period February 1, 1968 through January 31,
1969, was ‘‘an unfiled tax return, signed only by the account-
ing firm and unexplained by any preparer . .”—in fact
a copy of the unfiled return—whereas the defense had
3la
Appendiz B.
also introduced a copy of the same unfiled return signed
by Leonard, and the Government had introduced the orig-
inal financial books and records and cancelled checks of
Leonard Ine., which allegedly “fully corroborate these
losses.” We called upon the Government to answer, and
Leonard has replied. While the opinion should be cor-
rected as hereafter set forth, our conclusion is not af-
fected.
It is therefore ordered that:
(1) The second and third sentences of the first full para-
graph on p. 5849 be changed to read:
The defense offered two exhibits purporting to be
copies of a proposed corporate income tax return for
the period February 1, 1968 to January 31, 1969, see
note 2, showing a loss of $73,742.33; both copies were
subscribed by the accounting firm, and one was also
signed “Jackson D. Leonard.”
(2) The second and third sentences on p. 5850 are
stricken and the following is substituted therefor:
The corporate tax return was never filed. Even if the
copies of the proposed return were admissible at all
as proof of the facts stated in the absence of testimony
by the preparer, which seems doubtful, see Standard
Oil Co. of California v. Moore, 251 F.2d 188, 222-23
(9 Cir. 1957), cert. denied, 356 U.S. 975 (1958), the
mere existence of copies of an unfiled return carries
little weight; indeed, the defense’s failure to call the
preparer could properly give rise to a negative in-
ference whether Leonard Ine. had a loss. See 8 Wig-
more, Evidence § 2273 (MeNaughion rev. i961). The
books and records were apparently “corrected” in
several respects, including the moving of a $40,000
item from an income to a joan column; the “uncor-
32a
Appendix B.
rected” sheets would support the unsigned form show-
ing a loss of only $29,017.77—not enough to counter-
balance the $58,684.12 of undeposited Treadwell checks.
If these changes could be explained, defendant had the
burden of going forward and doing so by calling the
preparer or some other witness. Moreover, the books
were not closed on December 31, 1968, and the pro-
posed return was for the wrong year.
(3) Inall other respects the petition for rehearing by the
panel is denied.
33a
Appendix C, United States Court of Appeals for the
Second Circuit, December 4, 1975, Stay of Mandate.
75-1153
A 36
UNITED STATES COURT OF APPEALS
Second Circuit
At a Stated Term of the United States Court of
Appeals, in and for the Second Circuit, held
at the United States Court House, in the
City of New York, on the 4th day of Decem-
ber, one thousand nine hundred and sev-
enty-five.
>
sy
United States of America,
Plaintiff-A ppellee,
v.
Jackson D. Leonard,
Defendant-Appellant.
%
4
It is hereby ordered that the motion made herein by
counsel for the appellant by notice of motion dated Novem-
ber 18, 1975 to stay issuance of the mandate pending appli-
cation to the Supreme Court of the United States for a
writ of certiorari pursuant to Rule 41(b) of the Federal
Rules of Appellate Procedure be and it hereby is granted.
Lzonarp P. Moorg
Henry J. FRrenviy
E. A. Van GRAAFEILAND
Cireuit Judges
34a
Appendix D, Title 26, U.S.C. Sec. 7206.
“26 U.S.C. § 7206. Fraud and false statements
Any person who—
(1) Deciaration under penalties of perjury.—Will-
fully makes and subscribes any return, statement, or
other document, which contains or is verified by a writ-
ten declaration that it is made under the penalties of
perjury, and which he does not believe to be true and
correct as to every material matter; or
(2) Aid or assistance.—Willfully aids or assists in,
or procures, counsels, or advises the preparation or
presentation under, or in connection with any matter
arising under, the internal revenue laws, of a return,
affidavit, claim, or other document, which is fraudulent
or is false as to any material matter, whether or not
such falsity or fraud is with the knowledge or consent
of the person authorized or required to present such
return, affidavit, claim, or document .. . shall be guilty
of a felony.”
35a
Appendix E, United States Post Office
Manual and Pepulations.
arrs ros ‘4,
+ UNITED 5s,
* tenuis
CHIEF POSTAL INSPECTOR
Washington, OC 20260
May 5, 1975
Mr. Alan Kanzer, Esq.
Walter, Conston, Schurtman
and Gumpel, P. C.
Attorneys at Law
330 Madison Avenue
New York, New York 10C17
Dear Mr. Kanzer:
Your letter of April 18, 1975, to the U. S. Postal
Service, Attention: General Counsel, has been referred
to me for reply. In your letter you requested, pursuant
to the Freedom of Information Act, copies of Postal
Service regulations, postal bulletins, and any other
material relevant, during 1968 and 1969, to the initiation
of a mail cover at the request of another agency.
On June 17, 1965, the Post Office Department published
new regulations governing the use of mail covers in
Postal Bulletin No. 20478, a copy of which is enclosed.
These regulations are still in effect today. These requla-
ticnB were subsequently published in Part 861 of the
Postal Manual of the old Post Office Department, supplemented
by section 233.2 of the Postal Service Manual. tLnclosed
are copies of these regulations. Also enclosed is a copy
of the mail cover regulations which were recently republished
in the Federal Register. This republication makes no sub-
stantive changes in mail cover procedures or safequards, but
it updates the provisions dealing with the delegation of
mail cover authority to reflect the present organizational
structure of the Postal Inspection Service.
Sincerely,
{ S Grse0 cue
wigdli J. Cotter
Ch
Inspector
Enc ]Osures
36a
Appendix E,
661.1 | Mail Covers: Administration
Subchapter 869 MAIL COVERS
Part 861
ADMINISTRATION
861.1 POLICY
The Post Office Department has ostablished rigid controls and supervision
= — to the use of mail covers as investigative or law enforcement
861.2 SCOPE
These regulations establish the sole authority and procedure for ini
processing, placing and sing mail covers. Any other regulations pend
ad or in conilict with these regulations are of no effect for postal
ces.
861.3 DEFINITIONS
For purposes of these regulations, the following terms :
a. “Mall cover” js the process by which a record is made bey A + oe
ing on the outside cover of nny class of mail matter, including checking the
contents of uny second-, third- or fourth-class mail matter as now sanc-
tioned by law, in order to obtain information in the interest of (1) protect-
ing the national security, (2) locating a fugitive, or (3) obtali.ing evidence
of conunission or attempted commission of a crime.
b. “Fugitive” is uny person who has ficd from the United States or any State
Kivitery, the istrict of Columide ov possession of the United States to
avoid prosecution for @ criine, to avoid punishment for a crime or to avoid
giving ~y~y~ in a crimJnal proceeding. |
c. “Crime,” for purposes of these regulations, is any commission an act or
the atlemmpled comsnission of an act ti
rent torn twee a pa wat ils punishabiec by law L, imprison-
. “Law enforcciment agency” is any authority of the Fede
or any eulhority of a Biate or local guvernment one of — ly Sete cern
to Investigate the commission or atte:
a crime. or attempted cuinmission of acts constituting
861.4 AUTHORIZATIONS-—CHIEF POSTAL INSPECTOR
41 The Chief Postal In:pector is the principal oM Office
Departarcint in the edininistretion of oll seromy SSA. bn A Ile
may Celegute by written ord c pny or Pll author ity in this 1egard to not ‘more
bog Pe ae pr oliicials within his Nureay.
. 2 ef Postal Jiuupect
FMR nb wpb - . wv, or his designee, may order mall covers under
&. When he bas rcasun to believe the subsect or
Bro Che sged nanny wettvity vieletive of = nd Bs Ay sealant
b. When wrilicn request is iscelved from ny law enforcement agency
wherein the reque:thig out) ortty stipulates and specifies the reasonable
grounds that cxint which «cmonstrete the mall cover is hutensacy to 11)
Protect the nutional sceurity, (2) luce te a fumitive, or (3) obtain informa-
Hon begurding the coamisson or att mpd commincton of a crime.
Orgenisat!-+ ond Administution 11-199, 9-13 46—teewe 1114
37a
Appendix E.
Mall Cevers: Administration U61 46
— _———— a + —
c. Where time ta of the ersence the Cutef Vostal Tnepector. or tin denmnece,
may act upon an oral request Wo be contiimed by the requesting authority
ta writing within 2 business days However, no tiformintion shall be
released until an approprince written request is received
861.5 POSTAL INSPECTORS IN CHARGE
51 All Postal Inspectors in Charge, and not more than three desimners pur-
suant to deicgations in writing, may order mail covers under the follow ti
circumstances:
a. Where he has reason to believe the subject or subjects are engaged in an
activity violative of any postal statute.
b. Where written request ts received from any law enforcement agency of
the Federal, Siate, or luce! yovernments, wherein the requesting authority
stipulates and specifics the reasonable viounds that exist which drinon-
strate the mail cover wow ald in the location of a fueitive, or thet It
would assist in obtaining information concerning the commission or at-
tempted corumission of a crime. FExceytitus fusilive cases, any requent
from a Federal agency for a mail cover and the determination made si.all
promptly be transmitted to the Chicf Postal Inspector for review
.$2 Except where mail covers are ordered by the Chicf lostal Inspector,
or his designee, request for mail covers must be approved by the Postal
Inspector in Charge, or his designee, in each district in which the mat! cover
is to operate.
533 Where time is of the essence, the ostal Inspector In Charge, or his
designee, may act upon an oral request to be confirmed by the requesting
authority in writing within 2 business days. However, no information shall
be released until an appropriate written order is received.
861.6 LIMITATIONS
61 No persons in the postal service, except those employed for that purpore
in dead-mail offices, may break or permit breeking of the seal of any mater
mailed as first-class mail without a search warrant, even though (t may con-
tain crimin*] or otherwise unmriiable metier, or furnish evidence of the
* commission of a crime.
62 No mail covers shall include rnatter matied between the mail cover sub-
ject and his known attorney-at-law.
63 No officer or employee of the postal service other than the Chief Postal
Inspector, or Pustal Inspectors in Charee, and their desusnees, are authorized
to order mail covers.
4 Excepting mail covers ordered upon subjicts ergaged, or suspreted to
‘be engaged, in any activity asainst the national :ccurity, or activity vicl..vive
of any postal law, no mail cover order :)all teimain in force and ehect for
moie than 30 days. At the expiration of such period, or prior thereto, the
requesting authoiity may be granted edditional 30-day periods under the
same conditions and procedures applicable to the or'vinal request
6$ No mall cover shall remain tn force lor.gver than 120 days unless por-
tonally approved for further c:tension by the Chief Postal Inspector
46 Excepting fugilive cases, no mall cover shall remain tn force when the
bject has been indicted for any cause If the subject ts under investipation
= further criminal violations, a new mail cover order must be requested
consistent with these regulations.
Orvganizetion ond Administration TL —125, 1! 18 46~—teswe 1017
38a
Appendix E.
861.7 Mall Covers: Administration
861.7 RECORDS
71 ~All requests for mail covers, with records of action ordered thereon, and
all reports issued pursuant theroto, shall be deemed within the custody of the
Clief Postal Incspectur. WUowever, the physical housing of this data shall be
at the diserction of the Chief Postal inspector
72 «The Postal Inspectors Iu Charge shall submit copies of all requests for
mail covers to the Chief Postal Inspector, together with reports of the action
ordered thereon.
73> «If the Chicf Postal Inspector determines a mail cover was improperly
ordered by a Postal Inspector in Charge or his designee all data acquired
while the cover was in force shall be destroyed, and the requesting authority
notified of the discontinuance of the mail cover and the reasons therefor.
74 Any data concerning mail covers shal] be made available to any mail
cover subject in any legal proceeding through appropriate discovery
procedures.
.75 The retention period for files and records pertaining to mall covers shall
be 8 years.
851.68 REPORTING TO REQUESTING AUTHORITY
Once a mail cover has been duly ordered, authorization may be delegated
to any officer in the postal service to transmit mail] cover reports direotly to
the requesting authority. Where at all possible, the transmitting officer
should be a Postal Inspector. ,
861.9 REVIEW
91 The Chief Postal Inspector, or his designee, sha!) review al) actions taken
by Postal Inspectors in Charge or their designees upon initial submission of a
report on a request for mail cover.
92 The Chief Postal Inspector's determination in all matters concerning
mail] covers shall be final and conclusive and not subject to further adminis-
trative revicw.
Orgenisetion end Administration Th=-1 25, 19-18-46—issue 1002
* US Government PRINTING OFFICE t969 O— 336-030
39a
‘ Appendix E.
933.2 MAIL COVERS
21 DETINITION fe aS
A mail cover is the process yr whieh a record is Senge oe ae —_ my gos |
on the outside cover of any Class of mat mvsebter, fine eg = ~ hor Priog
tents of any second-, third- or fourth -chess mail matt ve — As bert
by Jaw, to obtain information in the interest of a) = pov chey ages
security (2) locating a fucitive or (3) obtaining evidenre : :
sttempicod commission of acrime.
22 AUTKORITY
Only the Chief Post) Inspector > his
Under no circumstances shall a postr stor or po
mition as defined in 233.21 to any person except
Postal Inspecior or his desigiice.
or his designee nay order mail cuvers.
stal employee furnish infor-
as authorized by the Chief
Appendix vad aa
oe Oe sae:
40a
All Postal Insiallations
5-Cent Dante |
Alighieri Commemorative
Postage Stamp
The 5-cent stamp commemorating
the 700th anniversary of the birth of
the great Italian , Dante -
3 Doel
u Franci a
on July 17, 1965.” aes
POSTMASTERS SHALL NOT
PLACE THIS STAMP ON SALE
BEFORE JULY 18, 1965
yen
rg ee
wf e- .
2 ee awe
hie) ALES.
s) . 5: - ty
at rae Aa kie als:
_ i etnaarer
Size: 0.81" x 1.44" (vertical)
SSSVED IN PANES OF 50
Color: nn aon mage
ion
- Initial printing: 112
Douglas Gorsline’s design simulates
the style of carly Florentine allegori-
cal paintings. Dante is shown wear-
ing a laurel wreath, symbolic of
etry, against a background related to
the pocm “Fhe Divine Comedy.”
4la
Appendix E,.
All Postal Personnel
MAIL COVERS
Effective immediately, the following regulations govern procedures
concerning mail covers.
Policy: -
It is hercby declared to be the
policy of the Post Office Departinent
that rigid controls and supervision be
established with respect to the use
of mail covers as investigative or law
enforcement techniques. In order
that this policy be effectively promul-
gated, implemcnted and enforced, the
following regulations are adopted.
Scope:
The following regulations hereby
establish the sole authority and pro-
cedure for the initiating, precessing,
placing and using of mail covers.
Any other regulations inconsistent or
To obtain first-day cancellations,
collectors may submit requests to
the Postmaster, San Francisco, Calif.
94101. See Postal Manual, section
145.3. Selected mint stamps will be
available at the Philatclic Sales Agen-
cy, Post Office Department, Wash-
ington, D.C. 20260, on and after July
19, 1965.
All classes of post offices will re-
ceive an initial supply of the stamps
under the automatic distribution
schedule.
First- and sccond-class post offices
requiring additional bulk quantities
may submit a scparate requisition
(Form 3356) to the Bureau of En-
graving and Printing (Item 456)
with memorandum, POD 31, stating
that the stamps are required in addi-
tion to those automatically furnished.
All post offices requiring less than
bulk quantities in addition to the
automatic dist:ibution may sulnit a
separate requisition (Form 17) to
their RDPO and endorse at top “Ad-
ditional.” All requisitions not so en-
dorsed will be returned.—-Office of
the Special Assistant to the Postmas-
ter General, 6-17-65.
in conflict with these regulations are
of no effect for postal employces.
For purposes of these regulations,
a following terms are hereby de-
ned:
“Mail cover” is the process by
which a record is made of any data
appearing on the outside cover of any
class of mail matter, including check-
ing the contents of any second, third
or fourth class mail matter as now
sanctioned by Jaw, in order to obtain
information in the interest of (a)
protecting the national security, (b)
locating a fugitive, or (c) obtaining
evidencc of commission or atiempted
commission of a crime.
“Fugitive” is any person who has
fled from the United States or any
State, territory, the District of Co-
lumbia or possession of the United
States, to avoid prosecution for a
crime, to avoid punishment for a
crime or to avoid giving testimony in
a criminal proceeding.
“Crime,” for purposes of these reg-
ulations, is any commission of an act
or the attempted commission of an
act that is punishable by Jaw by im-
prisonment for a term exceeding one
year.
“Law enforcement agency” is any
authority of the Federal Government
or any authority of a State or local
government one of whose functions
is to investigate the commission or
attempted comunission of acts consti-
tuting a crime.
Authorizations—Chief Postal
Inspector:
The Chief Postal Inspector is the
principal ofliccr of the Post Office De-
putment in the administration of all
nuatters governing mail covers. And
Appendix E,
MAIL COVERS
(Continued from p. 1)
he may delegate by written order any
or all authority in this regard to not
more than four subordinate officials
within his Burcau.
The Chief Postal Inspector, or his
designee, may order mail covers under
the following circuinstances:
1, Where he has reason to believe
the subject or subjects of the mail
cover are engaged in any activity
violative of any postal statute.
2. Where written request is re-
ceived from any law enforcement
agency whercin the requesting au-
thority stipulates and specifies the
reasonable grounds that exist which
demonstrate thesmail cover is neces-
sary to (a) protect the nationai secu-
rity, (b) locate a fugitive, or (c)
obtain infonnation regarding the
commission or attempted commission
of a crime.
3. Wherc time is of the essence, the
Chief Postal Inspector, or his desig-
nee, may act upon an oral requesi to
be confirrned by the requesting au-
thority in writing within two busi-
ness days. However. no information
shall be releneed until an appropriate
written request is received.
Postal Inspectors in Charge:
All Postal Inspectors in Charge,
and not more than three designees
pursuant to deicgations in writing,
may order inail covers under the fol-
lowing circumstances:
1. Where he has reason to believe
the subject or subjects are engaged in
an activity violative of any postal
statute.
2. Where written request is re-
ceived from any law enforcement
agency of the Federal, State, or local
governments, whercin the request-
ing authority stipulates and specifics
the reasonable prounds that exist
which demonstrate the mail cover
would aid in the location of a fugi-
tive, or that it would assist in obtain-
ing information concerning the com-
Inission or attempted commission of
42a
a crime. Excepting fugitive ca
any request from a Federal agency
a mail cover and the determina
inade shall promptly be transmit
to the Chief Postal Inspector for re
view.
3. Except where mail covers ;
ordered by the Chief Postal Inspec
tor, or his designee, request for mail
:
in cach district in which themail cov.
cr is to operate.
4. Where time is of the essence, t
Postal Inspector in Charge, or his des-
ignec, May act upon an oral request
to be confinned by the requesting au-
thority in writing within two business
days. However, no information shall
be released until an appropriate writ-
ten order is received.
Limitations:
_ 1. No persons in the Postal Serv-
icc, except those employed for that
— in dead-mail offices, may
reak or permit breaking of the seal
of any matter mailed as first-class
mail without a search warrant, even
though it may contain criminal or
otherwise unmailable matter, or fur-
nish evidence of the commission of a
crime.
2. No mail covers shall include
mattcr mailed between the mail cover
subject and his known attorncy-at-
law. ;
3. No officer or employce of the
Posta! Service other than the Chief
Postal Inspector, or Postal Inspectors
in Charge, and their designees, are
authorized to order maii covers.
4. Excepting mail covers ordered
upon subjects engaged, or suspected
to be engaged, in any activity against
the national security, or activity vio-
lative of any postal Jaw, no mail cover
order shall remain in force and effect
for more than 30 days. At the ex-
piration of such period, or prior
thercto, the meeeing authority may
be granted additional 30-day periods
under the same conditions and proce-
dures applicable to the original re-
quest.
44a
Appendix E.
5. No mail cover shali remain in
force longer than 120 days unless
personally approv
tension by the Chicf Postal Inspector.
for further ex-
6. Excepting fugitive cases, no
mail cover shal} remain in force when
the subject has been indicted for
any cause. If the subject is under in-
vestigation for further criminal vie-
jations, 2 new mail cover order must
be requested consisicnt with these
regulations.
Records:
1, All requests for mail covers, with
rec. rds of action ordered thereon, and
all reports issued
shall raced within the custody of
ursuant thereto,
the Chief Postal Inspector. However,
the ical housing of this data
oo the discretion of the Chicf
Postal Inspector.
2. The Postal Inspectors in Charge
shall submit copies of all requests for
mail covers to the Chief Postal Inspec-
tor, together with reports of the ac-
tion ordered thereon.
3. If the Chief Postal Inspector
determines a mail cover was improp-
erly ordered by a Postal Inspector in
Charge or his designee all data ac-
uired while the cover was in force
shall be destroyed, and the requesting
authority notificd of the discontinu-
ance of the mail cover and the rea-
sons therefor. ;
4. Any data concerning mail covers
shall be sade available to any mail
cover subject in any legal proceeding
through appropriate discovery pro-
cedures.
: 5. The retention period for files
and records pertaining to mail covers
shall be 8 years.
Reporting to Requesting Authority:
Once a mail cover has been duly
ordered, authorization may be dele-
gated to any officer in the Postal Serv-
ice to transmit mail cover reports di-
rest to the recs ing avihen si
Where at all possible, the iransimuit-
ting officer should be a Postal In-
spector.
Review:
1. The Chief Postal Inspector, or
his designee, shall review all actions
taken by Postal Inspectors in Charge
(Continued on p. 3)
CONTENTS
Page Col.
5-Cent Dante Alichicri Com-
memorative Stamp ..-.-.. 1 1
Arrest of Postal Offenders..... 3 1
Bulk Stamp Requisitioning
. - aay l
Ficld Printing and Duplicating. 3 2
Forcicn Fraud Order. ..------ 4 1
Form 4541...-----. atin _ -
Former Peace Corps Volunteers,
Finployment of... -. ..--- 6 1
Heltiday Service Independence
ES ceaesiliiatatiatiina se
Jet Airtnail Service AM -9...- 3 J
OS Se
Moncey Order Forms, Canadian, 7 1
Moncy Order Forms, U.S...-.- 8 1
Post Office Changes ....----- ——
Postal Manual Issue 854, Cor-
COUR ec cccceccce<cccece 6 1
Puster No. 44, Discontinu-
| » -%
Summer Post Offices Opening. 6 3
Winter Post Offices--Closing-. 6 J
MAIL COVERS
(Continued from p. 2)
or their designees upon nitial sub-
mission of a report on a request for
mail cover.
2. The Chicf Postal Inspector's de-
termination in all matters concerning
mail covers shall be final and con-
chusive and not subject to further
administrative review.
« « * * .
Existing instructions will be revised
accordingly. Postinasters shall not,
wider any 58 mail
covers without prior approval from
their Postal Inspectors in Charge.
Ab ioe
Postmaster: General.
a Ps on
om mee be btm ee
awe NER EONIE Ooty tied
44a
Appendix E.
All Postal Installations
Jet Airmail Service—AM-9
On or about July 4, 1965, Braniff
Airways, Inc. will inaugurate jet air-
mail service from Waterloo, lowa.
An official cachet will be furnished
for application to philatelic covers
transported only on Braniff’s first jet
flight departing from Waterloo on
that day. The covers wil] be back-
stamped at the terminus of the flight.
The usual philatelic treatment,
outlined in scction 145.5, Postal
Manual, will be provided.
Patrons desiring to receive this
cachet should forward their covers
in another envelope to:
Postmaster
Waterloo, Iowa 50701
First-flight covers should reach .
Waterloo at least 5 days before the
flight date.—Bursau of Transporta-
tion and International Services, 6-
17-65.
All Postal Installations
Arrest of Fostal Offender
The following postal offender has
been apprehended:
Ronald Guy Picklesimer
Destroy the wanted circular con-
cerning him.—Bureau of the Chief
Postal Inspector, 6-17-65.
Field Printing and Duplicating
——— hee me
1. Purpose
These instructions will cnable
postal installations to manage their
printing and duplicating activities
more cflectively. ‘They are in line
with the President’s policy for redue-
ing »2perwork and for saving man-
powu, and moncy. ‘Ihe new pro-
cedures are effective immediately.
2. Program for Improvement
Major efficiencies in the duplicat-
ing, copying, and publication areas
can be achieved under these pro-
— The program will assure
at:
© Only necessary and justified
publications are uced at the
_ office level. _ ag
® Only necessary equipment is
* Printing and binding regulations
of the Congressional Joint Committee
on Printing are understood and fol-
° Duplicating and printing activi-
= are idated yar eos pos-
®@ Cvordination of icy matters
concerning duplicating and printing
is othdovell
® Responsibilities in these areas
are correctly placed and clearly un-
derstood
3. Field Printing
Field offices we y peer
equipment must follow i-
me Spar ed
ng, -
ices. That handbook is being revised
and will include all necessary in-
formation onthe subject. It will be
distributed dircctly to offices with
duplicating equipment.
4. Procurement of Equipment
The Congressional Joint Commit-
tee on Printing requires that requests
for printing and duplicating equip-
ment be approved by qualified per-
sonnel, fore, all ficld requests
(except those from the Inspection
Service) for the purchase or rental
of printing and duplicating cquip-
ment must be sent on Form 73 to the
regional py ewey and supply
officer with a detailed justification so
that he can obtain the necessary ap-
proval. ‘There will be no exception
to the foregoing procedure.
5. Managing Local Publications
This section establishes a program
for managing local publications and
keeping then within reasonable
bounds. It applics only to formal
types of = publications --manuals,
handbooks, p:unphiets, booklets, and
45a
Appendix E.
brochures. Office memorandums,
schemes and schidules and chanres
thereto, and internal circular issuance
systems ave not affected.
Postinasters will submit proposed
publications in outline form to the
regional postal systems division for
regional approval. Request for ap-
proval will include justification for
the publication, the estinrited num-
ber of printed pages, the quantity
to be printed, and a list showing the
number to be distributed to each
receiving point.
If the postal systems division deter-
mines that the proposal mects the
following criteria, it will secure ap-
proval of the Regional Director and
return the outline to the post office
for preparation of the final manu-
script. ‘The postal systems division
will indicate whether the publication
is to be reproduced at the post office
or returned to the regional oflice for
final printing. os
Consider the following critena
thoroughly before requesting ap-
proval for a publication:
a. Is the proposed publication
absolutely necessary? Local publica- .
tions must be limited to those which
are essential to the service.
b. Does the proposal repeat } lead-
quarters, Postal Bulletin, Postal Man-
ual or other instructions? Such re-
petition must be avoided.
c. If the publication is considered
to be essential, how much will it cost?
An estimated per page cost of $150 is
considered a reasonable figure (Gen-
eral Services Administration uses
$100 per page). This cost includes
such factors as salaries, draft prepara-
tion, approval time, printing mate-
rials and equipment, and a factor for
general overhead.
d. Does the proposal contain mate-
rial which les nationwide possibility?
If so, the postmaster should request
the region to consider proposing a "a-
tional publication.
47a =
5
. 4 1. 280,
J. Rosear Huwren,
Acting Fedcre: insurance Admintitraior.
Acto
QULES AND KCGULATIONS
[PR Moc.7} C253 Miled 3-11-75;6:45 am]
qtitle
(National Flood Insurance Act of 1968 (title XID of the Mousing and Urban Development Act of 198.4" effective Jon. 28. ‘949 (32 PTL 174,
Nov. 28, 1968), as aurcuded, 42 UL.C. 4001-4128; and Secretary's delegation of authority to Pederai Insurence /dislsisiratd
' Jeb. 27, 2069)
February 28, 1975.
' The Postal Service has decided to re-
publish the reculstions coverning the
use of the mall cuver #s an Investivative
technigqre to mal:c Urere rcxulavions move
accessible to the public. and to is-
courage confusion concerning the nature
and uses of this important law enforce-
ment tool. In this repu lication the
Posts! Service has updated the provisions
Gealing with the delegation of mall
cover authority to reficct the present
organizationa) structure of the Po.ial
Inspection Service. Hov.ever, no subslan-
live changes have bees made in mail
The
erned by regulations cor:tuined in § 233.2
of the Postal Service Manwal, supple-
by provisions formerly cot.tained
in 861 of the Postal Mu al of tho
old Post Office Department which have
been retained as opcrating Inctructions
by the Postal In«nection Service. The
wmbiuuiion of Unne provisions under
™ tne Loge of Fracrai
tions wilh improve their nercut-
bility and faciiitate their interpretation.
A mall cover is a rciatively simple m-
veatigntive or law cnforcereent tech-
It involves recording the name
mail are not cxainined. As sanctioned
by law, the contents of second-, third-,
and fourth-ciass mati matter may be
* examined in connection with a mail
cover.
In their new format, the mall cover
regulations of the Postal Service con-
tinue existing procedurui and subsian-
live safeguards dcsigned to assure the
confident'ality of the mail cover process
and prevent the wnjustitied use of mail
_ covers. Mail covers aie available to law
enforecment acte:cies only in order to
obtain: information in the interest of (1)
ting the nationai vecurity, (2) lo-
cating a fugitive, or +3? obtaminr evi-
dence of commission or attempted com-
raission of a crime. Mail cover: are
ordered pursuant to a written icaqucst
from a law enfor*ement ateney only If
tle requesting authority stipulates and
46a
Appendix E, Appendix E.
Tithe 35-—-’o 1-1 Service a ye reocenavle groum’, that
: ealst which demon trate the mail cever
CHAPTER I—U"'IIED STATES POSTAL is pecensery bor 4b. cithmate parr ce. No
. SERVICE offiecra or Crmploses) oof the Poot) Serv.
PART 233-—INSPCCTION SCRVICE ice other than the Chicl Postal lecpector,
AUTHORITY &@ Postal Jnspector in Char: eo, and a lim-
Mail Ce ited number of Uieir destences, are au-
thorized to erder mall cover.. Only the
Chief Postal Inspector. or his designees
at Inspection Service Head yuatters, may
order a ational security mall cover.
Mail covers dio not include matter mailed
between the mail cover sulject and lids
known ullorney-at-liw: and except in
fugitive cases, no mail cover remains in
force when the subtect bas been iIn-
dicted for vty cause. Any data concern-
ing mail covers is made availuble to any
mail cover subject In any Iccel procecd-
ing throuch eppropriate discovery pro-
cedures. ‘Thcse ndministrative§ safe-
guards afford significant protection to
the privacy of the users ef the mail,
without compromising the cifectiveness
of the mall cover.
Accordinsly, the Postal Service adopts
the followin: amendments to the pro-
visions conccrning Postal Eervice man-
agcment crrun'zation, procedure, and
practice with regarc to nail covers, ef-
fective March 14, 1975:
233.2 (Redesignated)
1. In 39 CPR Part 233. § 233.2 With-
drawal of mail privileges I< renunbered
as ¢ 233.3. “nd e new § 275.2 is added to
read as follows:
§ 233.2 Mail covers.
(a) Policy. The USB. Postal Pervne
maintains rigid controls and supervision
with respect to the use of mall covers
os investigative or law enforcement tech-
niqucs.
(b) Scope. These regulations con-
etitute the eole authority ond procedure
fo. initiating, processing, placing and
using mali covers.
(ec) Definitions. For purposes of these
reguictions, the following terms are
hereby defined:
(1) “Moll cover” ig the process by
which a record is made of any data ap-
pearing ot the outside cover of any class
of mall matter, including checking the
contents of any second-, third-, or
fourth-class mail matter os now sanc-
tioned be law. in order to obtain informa-
tion tn the ‘nterest of (1) protectin the
national sccurity, (11) locatiucd a turitive,
or GH) obtaining evidence of commission
or pltcemptcd comintsuon of a crime.
(2) “Pwelttive’ ts any person who hus
fied from, the United States or any State,
territory, the District of Columoia, or
possersken of the United States, to avoid
rrosecution ier a crim:. to avoid puntsh-
ment for a crinte or to avoid giving testl-
mony in a criminal procceding.
(3) “Crime”, for purpo-s@s~of these
reculations, is any comnis ton of an act
or the atlempicd comnitsion of aa ect
that t: punishable by jaw by haprison-
racnt for a teria cxececing 1 year.
(4) “Law enforerment apency” is any
authoil‘y of the Pedcral Gaver mt or
any auihority of ¢ State or local euvern-
tact one of whos functions ts to in-
vextirate the commicion or atte:npted
commission of acts constituting a erune.
(cd) Authorizativous—Chic/ Postal In-
spector, (1) The Chief Postal lner-ctor
is the principal offiecr of the Pustati-.1ry-
ice in the adminixtrativn of all toatters
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