Petition — Pomponio v. United States

Sy ; * i. ¢.

)

SEP 26 1977

| MICHAEL RODAn, uk, CLERK

ly THE

Supreme Court of the Anited States

October Term, 1977

No. 77- 77-466

Lovis J. Pomponto, Jr.,

Petitioner,

Unrrep Sratres or AMERICA.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Leonard B. Bovupin

Victor RasrInow!rz

30 East 42nd Street

New York, New York 10017

MicHart L. Herrzserc

Of Counsel

September 22, 1977

TABLE OF CONTENTS

PAGE

SEINE TTI. cnccepissssepiconinissmemupeneienenioaieensionttnnssiatnessntien 1

ID Speeersccnrenenessiisninninieietihscthiemneinniinnninpeatentsieenmnntintts 1

INL SUNN 11st acthiccuiienasiiieteniesningtictlenineittiensnde 2

Constitutional Provisions, Statutes, Rules and Regula-

tions Involved ..... sciatic ti did taatilaahineiataaiehaattilin 3

RET Te rate li Jes ao AS EIS So OO a 3

A. The Criminal Investigations by the Internal

Revenue Service and by Grand Juries ................ 3

| ef” . ” eaaaeen 7

Reasons for Granting the Petition —......02. 10

IEEE eS TI SR eo ed eT ON CES 10

Appenpix A .. REE AEE A os ee ne la

pL ERIN EEN ar a ee 4a

a lla

ERT SOFT aes Oe Coe eee ae a 12a

ii

TaBLE or AUTHORITIES

PAGE

Cases:

Beverly v. United States, 468 F.2d 732 (5th Cir. 1972) 11

Brinegar v. United States, 338 U.S. 160 ~...................-... 15

Coffin v. United States, 156 U.S. 432 2... eee eee 15

Federal Trade Comm. v. Bunte Bros., 312 U.S. 349 ...... 19

Gilbert v. United States, 370 U.S. 650 -.....2.-- eee 20

Greathouse v. United States, 170 F.2d 512 (4th Cir.

TUTE ~ sersseseoveieitntecicnndeiesciseiumadanintahamansteapspecitdahiatenisemmiitéietadition 20

In re Dolly Madison, 351 F.Supp. 1038 (E.D. Pa. 1972),

aff'd. without opinion, 480 F.2d 917 (3d Cir. 1973) ... 21

In re Grand Jury Investigation of Banana Industry,

BBA Pe. GED Cie Tile TD creccssdetrcsecscettcsnevsescncenins 12,13

YS, 8 gS 8 eran 15

Marteney v. United States, 216 F.2d 760 (10th Cir.

RR ES 5 Mae ET 20

McCoy v. American Express Co., 253 N.Y. 477 (1929) 21

Mesarosh v. United States, 352 U.S. 1 -.........222.--.------020--+- 10

Norwegian Nitrogen Co. v. United States, 288 U.S.

ET Lestnssoscnesesnssisntinstiiteastatnein cnnaictiicesialilesstidieudasliaineideinilidiniaas 19

Quercia v. United States, 289 U.S. 466 _. 17

Rewis v. United States, 401 U.S. 808 — 0002... 19

Surratt v. Fire Association, 43 F.2d 467 (4th Cir. 1930) 21

United States ex rel. Accardi v. Shaughnessy, 347 U.S.

260 - jecaneibdiedncietiihia ial 10

iii

United States v. Alvero, 470 F.2d 981 (5th Cir. 1972) ... 16

United States v. Atkins, 487 F.2d 257 (8th Cir. 1973) ... 16

United States v. Bass, 404 U.S. 336 20... 18

United States v. Basurto, 497 F.2d 781 (9th Cir. 1974) .. 12

United States v. Beasley, 550 F.2d 261 (5th Cir. 1977),

petition for cert. pending No. 77-54 _.....-.-22.--------2----- 11

United States v. Bridges, 499 F.2d 179 (7th Cir. 1974),

Se is I a coscemsnsabesnnmsnttabemecneis 16

United States v. Byrd, 494 F.2d 1275 (8th Cir. 1974) ... 16

United States v. Crouch, 528 F.2d 625 000 16

United States v. Dardi, 330 F.2d 316 (2d Cir. 1964),

Ey a ee eee 11

United States v. Doe, 455 F.2d 1270 (1st Cir. 1972) ....11, 12

United States v. Estepa, 471 F.2d 1132 (2d Cir. 1972) ... 12

United States v. Gallo, 394 F.Supp. 310 (D. Conn. 1975) 12

United States v. Heffner, 420 F.2d 809 (4th Cir. 1970) ..4, 10

United States v. Jones, 414 F.Supp. 964 (D. Md. 1976) 20

United States v. Kirk, 496 F.2d 947 (8th Cir. 1974) ... 16

United States v. Litton Systems, Inc., (Cr. No. 77-70-A,

DS rT 12

United States v. McDonald, 531 F.2d 196 (4th Cir.

1976), cert. granted, No. 75-1892, 45 U.S.L.W. 3822... 14

United States v. Muckenstrum, 515 F.2d 568 (5th Cir.

1975), cert. den., 423 U.S. 1082 -................2.-.....2c-eseneee 16

United States v. Phillips Petroleum Co., —— F.Supp.

—— No. 76-Crim. 117-B (N.D. Okl. 1977) _............ 12

United States v. Pomponio, 517 F.2d 460 (4th Cir.

1975), cert. dem., 423 U.S. VOUS 2... cececceneneess es 6

United States v. Robinson, 545 F.2d 301 (2d Cir. 1976) 17

United States v. Sheridan, 329 U.S. 379 _.. 19

United States v. Spock, 416 F.2d 165 (1st Cir. 1969) ... 17

United States v. Star, 470 F.2d 1214 (9th Cir. 1972) ... 11

United States v. Walker, 176 F.2d 564 (2d Cir. 1949) ... 19

iv

PAGE

Weed v. Georgia, TIO OB, GID cccccconninssiniminiiia 12

Younger v. Harris, 401 U.S. 37 ....................scsssseesenessesenees 18

Constitutionai and Statutory Provisions:

United States Constitution, Fifth Amendment ............ 3

United States Constitution, Sixth Amendment ....1, 2, 3, 7,13

TR te | Ee passim

Ris Oe | 1, 2, 3, 7,13

, Bis (oe |) |) a 2

Federal Rules of Criminal Procedure, Rule 6(e) -......... 5, 11

Rules of the United States District Court for the East-

ern District of Virginia, Rule 4 ~..................0.......-..--- 3

Miscellaneous:

8 Moore’s Federal Practice, §16.08{1] (2d ed. 1970) ... 12

Internal Revenue Service News Release No, 897, Oct.

3, 1967, 7 CCH 1967 Stand. Fed. Tax Rep. ................ 3, 10

Clark, The Grand Jory (1GTG) a ncannnneseseceeeees 12

Frankel and Naftalis, The Grand Jury, An Institution

Sy, 8) | on ee 12

In THE

Supreme Court of the Anited States

October Term, 1977

No. 77-

Louis J. Pompowto, Jr.,

Petitioner,

v.

Untrep Srares or America.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Louis J. Pomponio, Jr. petitions for a writ of certiorari

to review the judgment of the United States Court of

Appeals for the Fourih Circuit affirming his conviction

under 18 U.S.C. 2314.

Opinions Below

The opinion of the court of appeals (App. B infra) is

unreported.

Jurisdiction

The judgments of the court of appeals (App. C, D,

infra)* were entered on July 27, 1977. On August 22, 1977

1 App. C is the judgment in 76-1485 affirming the district court’s

denial of a motion to dismiss based upon the Sixth Amendment

and the Speedy Trial Act of 1974, 18 U.S.C. 3161(e). App. D is

the judgment in 76-1885 affirming the judgment of conviction.

2

the Chief Justice extended the time for filing a petition

for a writ of certiorari to and including September 25,

1977. The jurisdiction of this Court is invoked under 28

U.S.C. 1254(1).

Questions Presented

1. Were the indictment and conviction obtained through

abuses of the grand jury process and violations of regula-

tions of the Internal Revenue Service?

2. Did the abuses of the grand jury system also deprive

petitioner of his constitutional right to a speedy trial under

the Sixth Amendment and the Speedy Trial Act of 1974,

18 U.S.C. 3161(e)?

3. Did the district court impermissibly reduce the gov-

ernment’s burden of proof by instructing the jury to con-

vict unless it had a “substantial doubt” as to the peti-

tioner’s guilt?

4. Did the district court invade the province of the

jury by a one-sided charge that the government had proven

an essential element of a crime where the evidence was

circumstantial, if not speculative?

5. Is the first paragraph of 18 U.S.C. 2314 applicable

to a situation in which (a) the security transported in

interstate commerce is taken from a person who was not

defrauded, and (b) the defrauded person is induced to

endorse a promissory note which was not transported in

interstate commerce?

6. Are stock certificates “counterfeit” within the mean-

ing of the fourth paragraph of 18 U.S.C. 2314 when (a)

_——— = mwer- ee

- Et ee ee OO

eee ee ee

3

they are issued by officers authorized by the corporate

by-laws and state law to issue stock certificates; and (b)

the stock certificates are substitutes for previously issued

certificates to which the petitioner had legal title and in

which no one else had a valid and existing security

interest?

Constitutional Provisions, Statutes, Rules

and Regulations Involved J

f

The constitutional provisions involved are the Fifth and

Sixth Amendments to the Constitution. The statutes in-

volved are 18 U.S.C. 2314 and the Speedy Trial Act of

1974, 18 U.S.C. 3161(e). The regulations and rules in-

volved are Internal Revenue Service News Release No.

897, 7 CCH 1967 Stand. Fed. Tax Rep., (6832, and Rule 4,

Rules of the United States District Court for the Eastern

District of Virginia. These statutes, rules and regulations

are reproduced in App. A, infra.

Statement

A. The Criminal Investigations by

the Internal Revenue Service

and by Grand Juries

Petitioner and his two brothers were builders and man-

agers of high-rise office buildings in Northern Virginia.

Beginning with 1970, the Civil Division of the Internal

Revenue Service (herein called the “IRS”) purported to

conduct a civil audit of the fiscal affairs of the petitioner.’

Its agents physically occupied petitioner’s office with his

* The audits were of petitioner, his brothers (who were acquitted

by the jury) and their corporate organizations. For convenience

we refer to them collectively as “petitioner”.

4

permission, and were granted full access to his records

(123a).°

In fact, the purported civil audit was a cover for a crim-

inal investigation of the petitioner by the IRS (see offer

of proof, 121a-128a). The plan had originated among the

Special Agents of the Intelligence Division of the TRS,

the division in charge of criminal investigations which be-

lieved that the examination of the petitioner’s records

might reveal crimes by him. Those Special Agents there-

after communicated with the Civil Audit Division using it

as an innocuous “front” to secure information.

This extensive, unrestricted examination of petitioner’s

rGPrds was not accompanied by any notice that he was

in fact being subjected to a criminal investigation, as re-

quired by the IRS rules (App. A, infra p. 2a) and enforced

by the court below in United States v. Heffner, 420 F.2d

809 (4th Cir. 1970). Thus, petitioner was not advised that

the IRS was “investigating the possibility of criminal tax

fraud” “or that he had constitutional rights to remain si-

lent and to retain counsel” (7d. at 811). Instead, the Civil

Division conducted the audit outwardly in apparently

routine fashion; secretly, it conferred throughout this

period with the Intelligence Division and followed its sug-

gestions as to the lines of inquiry.

In the summer of 1971 the case was formally, but still

secretly, referred to the Intelligence Division. Neverthe-

less the Civil Audit Division continued to secure informa-

tion from the petitioner and to transmit it to the Intelli-

gence Division.

Petitioner did not learn that he was the subject of a

criminal investigation until the service of subpoenas on

$a” refers to the Joint Appendix on Appeal; “A” refers to

the Appendix on the speedy trial issue.

re

—

— yoo oe

—

5

January 19, 1972 returnable before a grand jury in the

Alexandria Division of the Eastern District of Virginia,

ealling for his records, those of his brothers and the Pom-

ponio organization in general. The grand jury did not

read or examine the materials subpoenaed in its name, if

indeed it even received them. Instead, the United States

Attorney immediately turned the materials over to the

IRS Intelligence Division where they were examined as

part of its continued criminal investigation (121a-128a).

It was not until May 1972 that the government made an

ex parte application to the district court for a Rule 6(e)

order to permit the IRS officers to examine the records

(124a). By that time, the IRS had been in unlawful pos-

session of the records subpoenaed by the grand jury for

approximately four months. There is no evidence that the

grand jury ever actually eugaged in an investigation of

petitioner.

In July, 1972, a grand jury in Alexandria, Virginia was

empaneled for the first time to hear the case against the

petitioner and his brothers. It received from the United

States Attorney or the IRS the Pomponio records which

had been the subject of the January, 1972 subpoenas, and it

issued additional subpoenas duces tecum for records

sovght by the United States Attorney.

In addition, grand juries sitting in Richmond, Norfolk,

Newport News and New York City also issued subpoenas

addressed to Pomponio employees, Pomponio corporations,

banks, investors and other persons who did business with

the Pomponios. None of these grand juries (with the pos-

sible exception of New York) was investigating any crime

arguably within its territorial jurisdiction. Instead of in-

dicting anyone, the Virginia grand juries in divisions out-

side of Alexandria (or the United States Attorney acting

in their name), turned over the subpoenaed documents un-

6

examined by them to the Special Grand Jury sitting in

Alexandria.

The result was an indictment found on September 24,

1973 by the Alexandria grand jury charging petitioner

and others with various crimes, including income tax vio-

lations and violations of 18 U.S.C. 2314 (Indictment 73-

270).

That indictment was superseded on November 14, 1973

by separate indictments, one of which, 73-303-A, charged

inter alia the instant violation of 18 U.S.C. 2314. A convic-

tion in that case was reversed by the court below which

ordered a new trial (United States v. Pomponio, 517 F.2d

460 (4th Cir. 1975)). Petitioner sought certiorari in this

Court to review matters not decided by the court below;

the petition for certiorari was denied on December 8, 1975,

Pomponio v. United States, 423 U.S. 1015.

On January 29, 1976 two new indictments were found

by an Alexandria grand jury, one of which, 76-14-A, again

alleged the instant violation of 18 U.S.C. 2314. Petitioner

sought and secured additional time to prepare the two

cases which were then set for trial respectively on April

12, 1976 and May 12, 1976.

Petitioner also moved to dismiss the new indictments

for insufficiency (5la-52a) and prosecutorial misconduct

(119a-120a) ; alternatively, petitioner moved to suppress the

illegally obtained evidence (52a(1)-52a(10)). The motions

were denied. With leave of the court, petitioner filed an

offer of proof with respect to the charge of prosecutorial

misconduct (121a-128a, App. E, infra).

In April, 1976 petitioner’s counsels’ investigation re-

vealed that the term of the indicting Alexandria grand

jury in case 76-14-A had expired on December 31, 1975

prior to the return of the indictment. Petitioner’s motion

7

to dismiss the indictment was granted on April 9, 1976 over

government objection (7a, 14a).

On the next working day, April 12th, the United States

Attorney presented the case (for the fourth time)‘ to a

grand jury sitting in Norfolk, Virginia, although all of

the other indictments had been found by grand juries in

Alexandria. The Norfolk grand jury returned the instant

indictment (76-93) a few hours later. Petitioner moved

again to dismiss the indictment, incorporating by reference

the earlier motions and the offer of proof (17a, 14a). Peti-

tioner also asserted the additional ground that the indict-

ment had been deliberately obtained from a grand jury

sitting in Norfolk, Virginia in knowing violation of the

local rules of the district court (107a). The motions were

denied.

Petitioner also moved to dismiss the indictment in 76-93

on the ground that he had been denied a speedy trial in

violation of the Sixth Amendment and the Speedy Trial

Act of 1974, 18 U.S.C. 3161(e), (131a, 10A). The motion

was denied by the district judge on the ground that peti-

tioner had waived his rights by seeking a postponement of

the trial on the preceding indictments, 76-14 and 76-15

(20A). Petitioner appealed to the Court of Appeals and

sought a stay of the trial (1A). The Court of Appeals

denied the application for a stay and deferred the govern-

ment’s motion to dismiss the interlocutory appeal pending

an appeal from any future conviction (No. 76-1485, Order,

May 6, 1976).

B. Indictment and Trial

The indictment was in two counts. Count 1 charged that

petitioner had caused to be transported in interstate com-

* We refer to Indictments 73-270, 73-303, 76-14 and 76-93, supra

pp. 6-7.

8

merce a cashier’s check of the Continental Bank “knowing

the same to have been taken and obtained by fraud” (33a).

As a result of repeated demands for clarification by a bill

of particulars or otherwise, the government ultimately con-

ceded that the Continental Bank had not been defrauded.

Count 2 charged that petitioner had transported in inter-

state commerce “falsely made, forged, altered and counter-

feit securities”, ?.¢e., stock certificates of the Zachary Taylor

Corporation (33a, 34a). At trial the court deleted the

charge that the securities had been “falsely made, forged

(or) altered”, leaving only the charge of counterfeiting.

The government’s case on Count 1 was based upon peti-

tioner’s procurement of John McShain’s accommodation en-

dorsement of petitioner’s promissory note to the Continen-

tal Bank which issued a check to petitioner. The government

claimed that McShain was defrauded into making the ac-

commodation endorsement to the note which was not trans-

ported in interstate commerce.

The government’s case on Count 2 rested upon the claim

that petitioner had pledged stock in Zachary Taylor Cor-

poration to Jerome Murray and then issued new stock cer-

tificates in the corporation to John McShain purporting to

be all the stock in that corporation. The petitioner estab-

lished that both sets of stock were issued by corporate

officers whose authority to do so under the corporate by-

laws and state law was accepted by the court below. (App.

B, infra, p. Ta). The evidence showed further that legal

title to the stock purportedly pledged to Murray had re-

mained in the Pomponios because it was held in escrow and

that it had never been delivered to Murray. There was no

direct evidence that petitioner had caused the stock to be

transported in interstate commerce.

After a three week trial, the court delivered a charge to

the jury defining “reasonable doubt” as follows:

9

“T can define reasonable doubt no better than to say

that it means a doubt that is based on reason and must

be substantial rather than speculative.

“It must be sufficient to cause a reasonably prudent

person to hesitate to act in the face of it in the more

important affairs of his life’ [emphasis supplied]

(786a, 787a).

The Court also undertook to “comment briefly on the

evidence” (79la). After noting that both counts of the in-

dictment required proof by the government that petitioner

transported or caused the securities to be transported in

interstate commerce, the district judge added:

“However, it seems to me that both the check and the

stock certificates did travel in interstate commerce, to

and from Arlington, Virginia and Philadelphia, and it

seems to me reasonable to assume that if the other ele-

ments of the offense are present, that such travel was

contemplated by the defendants, either as principals

or aiders and abettors.

“So, I would think yon need not detain yourselves long

on that aspect of the case.

“Issues that remain,....” (792a).

The jury deliberated for 17 hours over three days and

found the petitioner guilty. The court imposed a sentence

of one year.

The Court of Appeals affirmed the conviction, address-

ing itself only to two matters. It held that 18 U.S.C. 2314

was violated even if the bank had not been defrauded in

issuing the check described in the indictment (App. B,

infra, pp. 8a-10a). It also held that the stock certificates

were “counterfeit”, although they were issued by persons

10

authorized by law to do so, because they were intended

to deceive McShain into believing that they constituted all

the corporate stock (App. B, infra, pp. 6a-8a). Although

the other issues were fully briefed, they were not discussed

by the court.

Reasons for Granting the Writ

1. This case presents the important question of “the

integrity of a criminal trial in the federal courts” Mesarosh

v. United States, 352 U.S. 1, 13. The detailed charges

against the government which the two lower courts have

declined to adjudicate now call for the exercise of this

Court’s supervisory jurisdiction.

The integrity of the trial is challenged here by a series of

acts of the Internal Revenue Service and of the United

States Attorney described in detail in petitioner’s offer of

proof in the district court (App. E, infra).

a. The government’s use of the Civil Division of the IRS

as a cloak for a criminal investigation violated that

agency’s own regulations (IRS News Release No. 897,

October 3, 1967 (App. A, infra, pp. 2a-3a)). Such was the

holding of the court below in an earlier case, United States

v. Heffner, 420 F.2d 809 (4th Cir. 1970). This violation

requires a reversal of the conviction under this Court’s

decision in United States ex rel. Accardi v. Shaughnessy,

347 U.S. 260.

The factual allegations of the detailed offer of proof in

this case were not contested by the government or chal-

lenged by either of the lower courts. Instead, the district

court stated that it was “not going to allow any evidence

on what you refer to as the Heffner point. That in my view

was fully explored in a prior hearing. I incorporated the

Court’s ruling and the evidence here at that time.” (Tr. 7,

y

11

Mar. 26, 1976). The district court was in plain error in

relying upon a ruling by another judge in a trial under a

prior indictment upon a motion made, not by the petitioner,

but bys co-defendant, and based upon evidence signif-

icantly More limited than the offer of proof herein.

b. The second aspect of governmental misconduct lies in

the issuance of grand jury subpoenas for petitioner’s rec-

ords that were not given to the grand jury but to the IRS

Intelligence Division. While this was a violation of Rule

6(e), Federal Rules of Criminal Procedure, the more fun-

damental objection is that it was an abuse of the grand

jury process which may not properly be used as a prosecu-

torial discovery device for the benefit of the United States

Attorney or the IRS.

The affirmance by the court below, in view of the un-

challenged factual statement on this point, is in conflict

with the decisions of other appellate courts. See United

States v. Dardi, 330 F.2d 316 (2d Cir. 1964), cert. denied,

379 U.S. 845; Beverly v. United States, 468 F.2d 732 (5th

Cir. 1972); United States v. Star, 470 F.2d 1214 (9th Cir.

1972) ; United States v. Doe, 455 F.2d 1270 (1st Cir. 1972).

See also United States v. Beasley, 550 F.2d 261 (5th Cir.

1977), petition for certiorari pending, No. 77-54.

This case presents much more than the grand jury’s tak-

ing of evidence for an improper purpose. Here, the grand

jury abdicated its historic function by subpoenaing mate-

rial not for its own examination but solely for use by the

IRS.

Misuse by United States Attorneys of the grand jury

process in recent years has increasingly been the subject of

concerned discussion by judges, commentators and the

Congress. A most cogent discussion of the problem ap-

pears in District Judge Marvin E. Frankel’s recent book,

® Gov't Br. p. 106 in the Court of Appeals.

F 12

Frankel and Naftalis, The Grand Jury, An Institution on

Trial (1977). See also, Clark, The Grand Jury (1975).

Quite recently, the same district court dismissed an in-

dictment secured by the very Assistant United States At-

torneys involved in the instant case because of their misuse

of the grand jury process. United States v. Litton Systems,

Inc. (Cr. No. 77-70A, E.D. Va., Alexandria Division).* This

misuse of the zrand jury system is also presented by the

Beasley case, supra, pending in this Court. The subject is

one upon which the lower courts urgently need this Court’s

guidance and concerning which citizens need this Court’s

protection.

e. Another prosecutorial abuse was the use of grand

juries in four cities other than Alexandria to subpoena

documents from the petitioner in the Alexandria Division.

This procedure ccnfiicts with the principle recognized by

the First Circuit in United States v. Doe, 455 F.2d 1270 (1st

Cir. 1972), (subpoenas claimed to search out evidence for

the pending Ellsberg trial) and the decision of Judge

Thomsen In re Grand Jury Investigation of the Banana

Industry, 214 F. Supp. 856, 859 (D.Md. 1963). The conduet

of the United States Attorney in the present case consti-

tuted “an abuse of one of the most effective discovery mech-

anisms yet devised—the grand jury” (8 Moore’s Federal

Practice { 1608[1], at 16-100 (2d ed. 1970) quoted with ap-

proval, United States v. Doe, supra.

d. The history of grand jury abuse was capped in the

present case by the United States Attorney’s decision to

present evidence to a Norfolk grand jury which indicted

the petitioner on the same day. The significance of this

* Similarly, abuse of the grand jury process by United States

Attorneys resulted in the recent dismissal of the indictment in

United States v. Phillips Petroleum Co., —— F.Supp. —— (No.

76-Crim. 117-B N.D. Okl. 1977). Copies of the opinions in these

eases have been lodged with the Clerk.

13

shift to a division which lacked jurisdiction under the court

rules lies less in the violation of the rules than in its in-

difference to the structure of the grand jury system. Even

more significant, « three or four hour presentation of evi-

dence to a grand jury in a case requiring the examination

of a series of complex finan:ial transactions involving hun-

dreds of exhibits strongly suggests the pro forma character

of the grand jury proceeding. This is not the grand jury

envisioned by this Court in Wood v. Georgia, 370 U.S. 375.

See also United States v. Basurto, 497 F.2d 781 (9th Cir.

1974); United States v. Estepa, 471 F.2d 1132 (2d Cir.

1972); United States v. Gallo, 394 F.Supp. 310 (D. Conn.

1975) ; In re Grand Jury Investigation of Banana Industry,

supra.

2. The government’s misconduct with respect to the

grand juries following this Court’s denial of certiorari on

December 8, 1975 in the 303 case also presents a serious

question of whether petitioner was denied his constitu-

tional right to a speedy trial under the Sixth Amendment

and the Speedy Trial Act of 1974, 18 U.S.C. 3161(e). Under

that statute petitioner should have been tried again within

60 days from this Court’s action, namely by February 6,

1976. Instead, the government waited until 52 days had

passed and then indicted petitioner on January 29, 1976 in

Case 76-14, clearly too late for a trial in 60 days from

December 8, 1975. But even if the government’s delay

were permissible, the fact is that the indictment must be

disregarded because it was rendered by a grand jury whose

term had previously expired (supra, pp. 6-7). The next

indictment—the subject of this petition—was found on

April 12, 1976, 125 days after this Court’s action on Decem-

ber 8, 1977. The delay in filing the instant indictment was

in violation of the express terms of the Speedy Trial Act

of 1974, 18 U.S.C. 3161(e), which requires that “the trial

shall commence within sixty days from the date the action

14

occasioning the retrial becomes final”. The statute does

give the Court the right to “extend the period for retrial

_not to exceed one hundred and eighty days from the date

the action oceasioning the retrial becomes final”, but only

“if unavailability of witnesses or other factors resulting

from passage of time shall make trial within sixty days

impractical” (Ibid.). These were not considerations that

led the government to delay the filing of the indictment in

76-14; it made no claim of the unavailability of witnesses

and there were no other “factors resulting from passage of

time” which made trial within sixty days “impractical.”

The government cannot justify the delay in the instant

trial under 76-93 by relying upon an intervening indict-

ment in 76-14 by a grand jury whose term had expired

prior to the indictment. Nor was the district court justified

in ruling that petitioner had somehow or other waived his

right by requesting a delay in the trial in 76-14 under the

invalid indictment (20A-22A). Petitioner made no request

for a delay in the trial of the present indictment; instead,

he moved to dismiss it because of the previous delay.

The case presents an important question of the construc-

tion of the Speedy Trial Act never considered by this

Court. It poses the question of whether the government’s

cavalier treatment of the grand jury system by securing

an indictment from an expired grand jury can extend its

time to prosecute a defendant. This issue might well be

considered by the Court, together with United States v.

McDonald, No. 75-1892, cert. granted, —— U.S. —~, 45

U.S.L.W. 3822 (June 21, 1977), to review another aspect

of the right to a speedy trial decided by the court below at

531 F.2d 196 (4th Cir. 1976.)’

* One of the rare appellate decisions under this statute has jnst

been made by the Court of Appeals for the Second Circuit, United

States v. Carini, No. ——, August 30, 1977 (New York La .

nal, Sept. 15, 1977, p. 1, eol. 1). ' _—

15

3. The district court’s charge of “substantial doubt”

(supra, p. 9) upheld sub silentio by the court below, fails

to conform to the constitutional requirement of an acquittal

unless guilt is established beyond a reasonable doubt, and

is in conflict with the decisions of other circuits.

(a) The requirement that guilt in a criminal prosecution

be established beyond a reasonable doubt is an “histori-

cally-grounded right of our system, developed to safeguard

men from dubious and unjust convictions, with resulting

forfeitures of life, liberty and property.” Brinegar v.

United States, 338 U.S. 160, 174. The reasonable doubt

standard gives vitality to the presumption of innocence

which is the ecernerstone of our criminal justice system.

See Coffin v. United States, 156 U.S. 432, 453. In In re

Winship, 397 U.S. 358, 364, this Court held that the due

process clause of the United States Constitution prohibits

conviction of a criminally aceused, “except upon proof

beyond a reasonable doubt of every fact necessary to con-

stitute the crime with which he is charged.” It added that

“[i]t is also important in our free society that every indi-

vidual going about his ordinary affairs have confidence

that his government cannot adjudge him guilty of a crim-

inal offense without convincing a proper fact-finder of his

guilt with utmost certainty.” Jd. at 363, 364.

The district court followed neither the spirit nor the

letter of this Court’s views when it equated reasonable

doubt with substantial doubt.

“T can define reasonable doubt no better than to say

that it means a doubt that is based on reason and

must be substantial rather than speculative.” (786a).

(b) The district court’s charge conflicts with the recent

criticism by other circuits of jury charges equating rea-

sonable doubt with substantial doubt. See, e.g., United

16

States v. Alvero, 470 F.2d 981 (5th Cir. 1972); United

States v. Muckenstrum, 515 F.2d 568, 571 (5th Cir. 1975),

cert. den., 423 U.S. 1032; United States v. Atkins, 487 F.2d

257, 260 (8th Cir. 1973); United States v. Kirk, 496 F.2d

947 (8th Cir. 1974); United States v. Byrd, 494 F.2d 1275

(8th Cir. 1974); United States v. Bridges, 499 F.2d 179

(7th Cir. 1974), cert. den., 419 U.S. 1010.

As the Fifth Circuit observed in the Muckenstrum case,

a charge that “. .. a doubt must be substantial rather

than speculative is confusing in that arguably it raises the

burden from ‘reasonable doubt’ to ‘substantial doubt’ and

would better be left unsaid.” (515 F.2d at 571)

While the court below did not address itself to the prob-

lem, the government called its attention to confusion among

the various panels of the 7th Circuit, culminating in

United States v. Crouch, 528 F.2d 625 (7th Cir. 1976) which

“cautioned against using . . . [“substantial doubt”] lan-

guage in the future” (Govt. Br., p. 53). This led the gov-

ernment to suggest that if the court below agreed with

the petitioner, “the conviction should be affirmed with an

opinion which cautions the trial courts in this Circuit

against using similar language in the future.” (Govt. Br.,

p. 56). It argued, alternatively, that “the better view on

the instruction at issue here is for this Court to endorse

it.” (ibid). We believe that instead the time has come for

this Court to review the matter and to give its considered

judgment on the subject so as to eliminate the differences

among the circuits and the confusion within the circuits

themselves.

4. The error in the district court’s charge on substantial

doubt was compounded by its virtual instruction to the

jury that the petitioner had caused the transfer of stock

in interstate commerce, supra, p. 9.

17

This was very serious because petitioner argued that the

government had failed to establish a nexus between peti-

tioner and the transportation of the stock certificates,

essential elements of the offense charged under 18 U.S.C.

2314. See Umited States v. Robinson, 545 F.2d 301 (2d

1976). There was no direct evidence on this point and

there remained a sharply contested issue of fact for the

jury’s determination.

The trial court’s charge that the jury “need not detain

yourselves long on that a t of the case” (supra p. 9)

was an additional pressure upon the jury in disregard of

this Court’s reminder in Quercia v. United States, 289 U.S.

466, 470, that “(t]he privilege of the judge to comment on

the facts has its inherent limitations”, and that the trial

judge has the “duty .. . to use great care that an expres-

sion of opinion upon the evidence ‘should be so given as

not to mislead, and especially that it should not be one-

de

In United States v. Spock, 416 F.2d 165 (1st Cir. 1969)

the First Circuit struck down a conviction because of a

far more subtle form of pressure on the jury, namely, a

request for special findings to be made after the general

verdict. “The constitutional guarantee of due process and

trial by jury require that a criminal defendant be afforded

the protection of a jury unfettered directly or indirectly.”

(Id. at 182).

5. Petitioner’s conviction on Count 1 presents the im-

portant question of whether 18 U.S.C. 2314 applies to a

case in which the security transported was not taken from

the defrauded person. This issue has never been presented

to this Court, or, so far as we know, to any appellate court.

* The improper statement to the jury was not rendered meaning-

less by the prefatory remark that “my comment is based on my

recollection of the evidence ... .” (791a).

18

The only security recited in Count 1 of the indictment

was the bank’s check which was allegedly transported from

one state to another in violation of the statute. But the

government made no claim that the bank was defrauded.

Rather the government claimed that McShain had been

defrauded into giving petitioner an accommodation en-

dorsement. That endorsement was never transported in

interstate commerce.

Therefore, no property was taken from McShain and

moved in interstate commerce, even if an accommodation

endorsement can be deemed property or “security”. The

court below was therefore expanding the statutory lan-

guage to permit a federal criminal prosecution for the

interstate transportation of property from a person not

defrauded because it was obtained by the proceeds of a

prior fraudulent act committed upon a different person.*

The government’s theory would permit prosecution un-

der 18 U.S.C. 2314 of very intrastate fraud if the fruits

of such fraud subsequently are used to obtain securities

which travel in interstate commerce. This construction of

18 U.S.C. 2314 would effect a drastic expansion of federal

jurisdiction in criminal law enforcement, altering sensitive

federal-state relations and potentially over-extending lim-

ited federal police resources. Cf. Rewis v. United States,

401 U.S. 808, 812. Such a restructuring of the federal-state

roles is not to be favored, at least in the absence of a clear

congressional intention to do so. Ibid.; United States v.

Bass, 404 U.S. 336, 349; cf., Younger v. Harris, 401 U.S. 37.

Here, not only is there nothing in the legislative history of

*For example, under the government’s theory, Section 2314

would reach the following situation:

X sells Y a used car but misrepresents the condition of the

ear. The transaction is entirely intrastate. X then uses the

proceeds of the sale to buy $5,000 worth of common stock of

General Motors Corporation. The certificates of stock are

transported by X in interstate commerce.

19

the statute warranting such a broad construction of the

statute, but the language of the statute clearly indicates

the contrary.

Indeed, it will be recalled that the statute was originally

entitled the “National Stolen Property Act” and was di-

rected against persons who stole automobiles and then

transported those very automobiles across state lines.

While the statute has been broadened from theft to fraud,

and from automobiles to securities, the original conception

of the statute must not be forgotten in determining its

purpose.

This is the first case in which the government has at-

tempted to expand the scope of 18 U.S.C. 2314 in the man-

ner indicated. Such a long-standing interpretation of the

limited scope of the statute is persuasive evidence that

section 2314 does not reach the acts alleged in the present

case. Federal Trade Comm. v. Bunte Bros., 312 U.S. 349,

352; see also Norwegian Nitrogen Co. v. United States, 288

U.S. 294, 315.

Neither of the two cases cited by the court below is au-

thority for its expanded interpretation of 18 U.S.C. 2314.

United States v. Sheridan, 329 U.S. 379, involved “the

transportation in interstate commerce of a specified forged

check, knowing it to have been forged.” The only question

there was whether the defendant’s intention to transport

was an element of his crime. In United States v. Walker,

176 F.2d 564 (2d Cir. 1949), the victim gave the defendant

checks, which, changed into other checks, were transported

to another state. All these monies were fungible and be-

longed to the victim whose property was transported in

commerce. In the instant case, McShain merely assumed a

contingent obligation by endorsing a promissory note which

was never transported in interstate commerce.

20

6. The Court of Appeals, in affirming petitioner’s con-

viction on Count 2, also decided what it described as the

“more difficult question . . . raised by [petitioner’s] con-

tention that the certificates were not counterfeit.” (App.

B, infra, p. Ta).

(a) That ruling does not satisfy this Court’s distinction

in Gilbert v. United States, 370 U.S. 650, between fraud

and such concepts as forgery and counterfeiting. It also

conflicts with other decisions of courts of appeals, includ-

ing one by an earlier panel in the Fourth Circuit, Great-

house v. United States, 170 F.2d 512, 514 (4th Cir. 1948) ;

Marteney v. United States, 216 F.2d 760 (10th Cir. 1954).

See also United States v. Jones, 414 F. Supp. 964, 966-967

(D. Md. 1976).

Basically, the court below failed to distinguish between

making a fraudulent statement and making spurious

documents. As Justice Harlan said in Gilbert, supra,

“(where the falsity lies in the representation of facts, not

in the genuineness of execution, it is not forgery.” The

court below recognized that “[t]he corporation’s charter

and by-laws and the law of the state of incorporation con-

ferred on [the petitioner and his brothers] . . . the power

to issue stock” (App. B, p. 7a), including both stock to

Murray and the additional stock to McShain. There was

nothing counterfeit about the additional stock certificates.

They were genuine certificates giving McShain a stock in-

interest in the corporation, That the stock certificates may

have been of less value than anticipated or bore allegedly

deceptive numbers is, at most, proof of fraud. It is not

proof of counterfeiting since “the genuiness of execution”,

the Gilbert standard, supra, is not disputed by the gov-

ernment.

(b) Independent of the foregoing, as a matter of law,

the undisputed facts established that Murray retained no

21

stock interest. Legal title to the stock at all times remained

in the petitioner and his brothers; neither the stock certifi-

eates nor the pledge aqremmntiiiee the underlying deed

of trust were ever delivered to Murray. “While the deed

was held in escrow, there was no delivery to the grantee

and the legal title remained in... , the grantor.” Surratt

v. Fire Association, 43 F.2d 467, 471 (4th Cir. 1930).

There had been no valid pledge to Murray because

neither the pledged property nor the pledge agreements

were ever delivered. “The rule is fundamental that there is

no pledge without delivery [cases cited]”, McCoy v.

American Express Co., 253 N.Y. 477 (1929) (Cardozo, J.).

The Court of Appeals’ decision must be taken as reject-

ing sub silentio this view of pledge law and is in direct con-

flict with the decision of the Court of Appeals for the Third

Cireuit, In re Dolly Madison, 480 F.2d 917, affirming with-

out opinion, 351 F. Supp. 1038 (E.D. Pa. 1972): “[{T]he

simultaneous existence of an escrow and a pledge is a legal

impossibility.” Id. at 1042. This conflict requires resolution

by this Court.

CONCLUSION

The petition should be granted for the reasons stated

above.

Respectfully submitted,

Leonarp B. Bovupin

Victor RaBINowITz

30 East 42nd Street

New York, New York 10017

Micuaet L. Herrzserc

Of Counsel

September 22, 1977

APPENDIX

APPENDIX A

1. 18 U.S.C. 2314 provides in relevant part:

Transportation of stolen goods, securities, moneys, fraud-

ulent State tax stamps, or articles used in counterfeiting

Whoever transports in interstate or foreign commerce

any goods, wares, merchandise, securities or money, of

the value of $5,000 or more, knowing the same to have

been stolen, converted or iaken by fraud; [par. 1]

Whoever, with unlawful or fraudulent intent, transports

in interstate or foreign commerce any falsely made, forged,

altered, or counterfeited securities or tax stamps, knowing

the same to have been falsely made, forged, altered or

counterfeited ... [par. 4].

2. The Speedy Trial Act of 1974, 18 U.S.C. 3161(e)

provides in relevant part:

“« * * * Tf the defendant is to be tried again follow-

ing an appeal... , the trial shall commence within

sixty days from the date the action occasioning the

retrial becomes final, except that the court retrying

the case may extend the period for retrial not to ex-

ceed one hundred and eighty days from the date the

action occasioning the retrial becomes final if unavail-

ability of witnesses or other factors resulting from

passage of time shal] make trial within sixty days

impractical.”

3. Rule 6(e), Federal Rules of Criminal Procedure, pro-

vides as follows:

la

2a

Appendiz A

Rule 6(e): Secrecy of Proceedings and Disclosure

Disclosure of matters occurring before the grand jury

other than its deliberations and the vote of any juror may

be mede to the attorneys for the government for use in

the performance of their duties .. . Otherwise a juror,

attorney, interpreter, stenographer, operator of a record-

ing device, or any typist who transcribes recorded testi-

mony may disclose matters occurring before the grand

jury only when so directed by the court preliminarily to

or in connection with a judicial proceeding or when per-

mitted by the court at the request of the defendant upon

a showing that grounds may exist for a motion to dismiss

the indictment because of matters occurring before the

grand jury. No obligation of secrecy may be imposed upon

any person except in accordance with this rule. The court

may direct that an indictment shall be kept secret until

the defendant is in custody or given bail, and in that event

the clerk shall seal the indictment and no person shall

disclose the finding of the indictment except when neces-

sary for the issuance and execution of a warrant or

summons.

4. IRS News Release No. 897, Oct. 3, 1967, reprinted

in 7 CCH 1967 Stand. Fed. Tax Rep. § 6832, provides in

relevant part:

“In response to a number of inquiries, the Internal

Revenue Service today described its procedure 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

conducted by Special Agents of the IRS Intelligence

3a

Appendia A

Division. This function differs from the work of Rev-

enue Agents and Tax Technicians who examine re-

turns to determine the correct tax liability.

“Instructions issued to IRS Special Agents go be-

yond 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 in-

vestigating the possibility of criminal tax fraud.’

“If the potential criminal aspects of the matter are

not resolved by preliminary inquiries and further in-

vestigation becomes necessary, the Special Agent is

required to advise the taxpayer of his Constitutional

rights to remain silent and to retain counsel.

* e e te e

“TRS said although many Special Agents had in the

past advised persons, not in custody, of their privilege

to remain silent and retain counsel, the recently

adopted procedures insure uniformity in protecting

the Constitutional rights of all persons.”

5. Local Rule 4, Rules of the United States District

Court for the Eastern District of Virginia, provides in

relevant part:

Division in Which Suits to be Instituted

Suits or prosecutions of which this Court has jurisdic-

tion and venue, except where otherwise especially provided,

shall be brought in the division (a) wherein the cause of

action or any part thereof arose; or (b) wherein any of

the defendants may reside; * * *

4a

APPENDIX B

UNITED STATES COURT OF APPEALS

For tHe Fovrts Crrcvir

No. 76-1485

Unttep States oF AMERICA,

Appellee,

—V,.—

Lovis J. Pomponto, Jr., Peter Pomponto

and Pavt Pomponto,

Appellants.

No. 76-1885

Unrrep States oF AMERICA,

Appellee,

—Y,.—

Lovis J. Pomponto, JR.,

Appellant.

Appeals from the United States District Court for the

Eastern District of Virginia, at Alexandria. Albert V.

Bryan, Jr., District Judge.

(Argued June 9, 1977 Decided July 27, 1977.)

——— e—--——-- —- --

3a

Appendia B

Before:

Wiyter, Burzyer and Wmener,

Circuit Judges.

LzoyarnpD B«Bovpry (Victor Rabinowitz, Michael

Lee Hertzberg, Eric M. Lieberman, Rabin-

owitz, Boudin and Standard on brief), for

Appellants.

Frank W. Dunnam, Jr., Assistant United States

Attorney, Josepx A. Fiscuer, ITI, Assistant

United States Attorney (William B. Cum-

mings, United States Attorney, Robert F.

McDermott, Jr., Assistant United States

Attorney, James R. Hubbard, Assistant

United States Attorney; Stephen Wegliar,

Trial Attorney, Criminal Division, U.S. De-

partment of Justice on brief), for Appellee.

Burzner, Circuit Judge:

Louis J. Pomponio, Jr., appeals from a judgment con-

victing him of violating the National Stolen Property Act,

18 U.S.C. § 2314, which proscribes the interstate trans-

portation of counterfeit securities and securities taken by

fr od. Though he assigns numerous errors, only two merit

discussion. First, Pomponio claims that the stock certifi-

eates he is charged with transporting were not counterfeit.

Second, he alleges that the cashier’s check in issue was not

“taken by fraud” within the meaning of the statute. We

affirm the district court’s judgment.

6a

Appendia B

1

In October, 1970, Pomponio and his two brothers pledged

to Jerome S. Murray all of the stock of the Zachary Taylor

Corporation, represented by certificates numbered 1, 2,

and 3, as collateral for the performance of an obligation

of another Pomponio corporation.

In June, 1971, Pomponio pledged the same stock to John

McShain without securing a release from Murray. He ac-

complished this by buying another stock book, issuing cer-

tificates 1, 2, and 3 from the new book, sending them from

Virginia to McShain in Pennsylvania, and again repre-

senting that these certificates were all of the stock of the

Zachary Taylor Corporation.

Upon receipt of the pledged stock, McShain endorsed a

promissory note executed by Pomponio and his brothers

payable to the Continental Bank in the amount of

$3,800,000. Relying on McShain’s endorsement, the bank

issued a cashier’s check for $2,000,000 to the Pomponios

and held the balance of the loan in an escrow account.

Pomponio then carried the check from Pennsylvania to

Virginia.

1

Title 18 U.S.C. § 2314 provides in part: “Whoever, with

unlawful or fraudulent intent, transports in interstate...

commerce any . . . counterfeited securities . . . knowing the

same to have been . . . counterfeited” shall be fined, etc.

The evidence discloses that Pomponio acted with fraud-

ulent intent and that he caused the stock certificates to be

transported in interstate commerce.’ Therefore, his as-

1 Pomponio was also charged with violating 18 U.S.C. § 2, which

provides :

Ta

Appendix B

signments of error with respect to these elements of the

statute need no extended discussion. A more difficult ques-

tion is raised by his contention that the certificates were

not counterfeit.

The record establishes that Pomponio and his brothers

were the sole stockholders, officers and directors of the

Zachary Taylor Corporation. The corporation’s charter

and by-laws and the law of the state of incorporation con-

ferred on them the power to issue stock. Pomponio con-

tends that these undisputed facts establish that the cer-

tificates were not counterfeit. He bases his defense on

cases that draw a distinction between making a false and

fraudulent statement in a document, which is not punish-

able under the statute, and making a spurious or fictitious

document, which is punishable as a forgery. See, e.g., Gil-

bert v. United States, 370 U.S. 650 (1962); Marteney v.

United States, 216 F.2d 760 (10th Cir. 1954); and Great-

house v. United States, 170 F.2d 512 (4th Cir. 1948). Pom-

ponio argues that although the stock certificates may have

represented 50% of the stock of the corporation rather

than 100% as he had claimed, such a misrepresentation,

even if fraudulent, does not make them counterfeit.

The difficulty with Pomponio’s position is that he did

much more than make a fraudulent misrepresentation to

McShain about the pledged certificates. To allay suspicion,

he purchased another stock book and simulated the original

certificates pledged to Murray by numbering the new cer-

tificates 1, 2, and 3.

(a) Whoever commits an offense against the United States

or aids, abets, counsels, commands, induces or procures its

commission, is punishable as a principal.

(b) Whoever willfully causes an act to be done which if

directly performed by him or another would be an offense

against the United States, is punishable as a principal.

8a

Appendix B

United States v. Smith, 318 F.2d 94, 95 (4th Cir. 1963),

observes that “‘Counterfeited’ means imitated, simulated,

feigned or pretended.” In United States v. Anderson, 532

F.2d 1218, 1224 (9th Cir. 1976), the court quoted as a

frequently approved definition of counterfeit “an imitation

of a genuine document having a resemblance intended to

deceive and be taken for the original.” In light of these

definitions, we conclude that Pomponio counterfeited his

corporation’s original stock certificates numbered 1, 2, and

3 by executing a second set of certificates bearing the same

numbers. Consequently, he violated the Act when he

caused the counterfeit securities to be transported in inter-

state commerce.

Tit

Title 18 U.S.C. § 2314 also provides in part: “Whoever

transports in interstate ... commerce any .. . securities

... knowing the same to have been .. . taken by fraud” shall

be fined, ete.

The government charged that Pomponio violated this

statute when he carried the Continental Bank check from

Pennsylvania to Virginia. It asserts that McShain was the

principal victim of Pomponio’s fraud and acknowledges

that the bank was not defrauded because it obtained all that

it sought—McShain’s valid endorsement on Pomponio’s

promissory note.

Pomponio insists that the statute requires that the person

from whom the security is “taken” be the victim of the

fraud. Accordingly, he contends that because the bank

was not defrauded, the check was not “taken by fraud”

within the meaning of the statute. He argues that, at most,

the endorsement on the promissory note was “taken by

9a

Appendix B

fraud,” but that note did not travel in interstate commerce

and cannot be the basis for conviction.

We believe § 2314 was not meant to be applied so re-

strictively. The plain language of the Act does not impose

any requirement that the security transported in interstate

commerce be taken directly from the person who was de-

frauded. The imposition of such a requirement by judicial

gloss would defeat the purpose of the Act. In United States

v. Sheridan, 329 U.S. 379, 384 (1946), the Court emphasized

that Congress enacted the statute to facilitate federal-state

cooperation in apprehending and punishing criminals who

utilize the channels of interstate commerce. In explanation

of congressional intent the Court said:

Congress had in mind preventing further frauds or

the completion of frauds partially executed. But it

also contemplated coming to the aid of the states in

detecting and punishing criminals whose offenses are

complete under state law, but who utilize the channels

of interstate commerce to make a successful getaway

and thus make the state’s detecting and punitive pro-

cesses impotent. This was indeed one of the most ef-

fective ways of preventing further frauds as well as

irrevocable completion of partially executed ones.

This broad interpretation of the statute was applied in

United States v. Walker, 176 F.2d 564 (2d Cir. 1949).

Walker fraudulently induced his victim to mortgage her

property and give him the proceeds in the form of checks.

He then cashed these checks and purchased travelers

checks, which he carried from Texas to New York. Walker’s

defense was substantially the same as Pomponio’s. He

argued that even conceding that he took the mortgagee’s

checks from the victim by fraud, “he did not violate the

10a ~ tn

Appendiz B

statute, because he did not carry either of them with him

from Houston to New York.” 176 F.2d at 566.

Rejecting Walker’s defense, Judge Learned Hand wrote:

We are by no means prepared to hold that, whenever

any one fraudulently obtains the property of another,

the proceeds are not also “taken feloniously by fraud”,

into whatever form he may convert them. That is the

view of equity, and it is impossible to find any reason

in the purpose of the statute to distinguish between the

original property and its substitute.

176 F.2d at 566.

Pomponio’s conduct was strikingly similar to Walker’s.

In both instances the fraudulent acts—the procurement of

an endorsement and the inducement to execute a mortgage

—did not immediately involve interstate transportation.

Moreover, the banks issuing the securities that were trans-

ported were not the victims of the fraud.

Sheridan and Walker fully sustain Pomponio’s convic-

tion. His procurement of McShain’s endorsement was an

essential step—albeit a preliminary one—toward receiving

the proceeds of the loan from the bank in the form of a

eashier’s check. Pomponio did not consummate his fraud-

ulent scheme until he gained possession of the cashier’s

check. It is therefore apparent that the check was literally

taken by fraud.’ By transporting the check from Pennsyl-

vania to Virginia Pomponio violated the statute.

We find no cause for reversal in Pomponio’s other assign-

ments of error.

Affirmed.

2 Webster’s Third International Dictionary (1961 ed.) defines

“take” as: “to get into one’s hands or into one’s possession, power,

or control by force or strategem. . . .”

It

lla

APPENDIX C

UNITED STATES COURT OF APPEALS

For tHe Fovrtx Crrcvuitr

No. 76-1485

Unrrep Sratres or AMERICA,

Appellee,

—vV.—

Lovis J. Pomponto, Jr., Peter Pomponio

and Pavut Pomponto,

Appellants.

Appeal from the United States District Court for the

Eastern District of Virginia.

This cause came on to be heard on the record from the

United States District Court for the Eastern District of

Virginia, and was argued by counsel.

On consideration whereof, it is now here ordered and

adjudged by this Court that the judgment of the said Dis-

trict Court appealed from, in this cause, be, and the same

is hereby, affirmed.

Wuuum K. Srare, I

Clerk

12a

APPENDIX D

UNITED STATES COURT OF APPEALS

For tHe Fovrts Crrcurr

No. 76-1885

Untrrep States or AMERICA,

Appellee,

—

Lovis J. Pomponto, JR.,

Appellant.

Appeal from the United States District Court for the

Eastern District of Virginia.

This cause came on to be heard on the record from the

United States District Court for the Eastern District of

Virginia, and was argued by counsel.

On consideration whereof, it is now here ordered and

adjudged by this Court that the judgment of the said Dis-

trict Court appealed from, in this cause, be, and the same

is hereby, affirmed.

Wruum K. Stare, I

Clerk

13a

APPENDIX E

IN THE

Unrrep States District Court

For tHE Eastern District or VirGInia

Alexandria Division

Criminat No. 76-14-A

Usirep States or AMERICA,

Vv.

Lovts J. Pomponto, Jz., Peter Pomponto,

Pact Pomponto, CHartes J. Privso.

CriminaL No. 76-15-A

Unrtep States oF AMERICA,

v.

Lovis J. Pomponro, Jr., CHartes J. Privso.

Orrer or Proor ry Connection Witrn Motion To

Dismiss FoR Misconpuct

In connection with the motion of defendants to dismiss

the indictments for prosecutorial misconduct, or, alterna-

tively, to suppress, the defendants offer to prove:

l4a

Appendiz E

1. As To Violation Of I.R.S.

Rules And Regulations

The Pomponio investigation by I.R.S. orginated in a con-

versation between Robert Irish and Mr. Tarangelo, both of

them Special Agents at the Alexandria office of I.R.S. in the

latter part of 1969 or first few months of 1970. Tarangelo

had seen a newspaper article reporting that the Pomponio

family were heavy borrowers from the Royal National

Bank in New York. He knew, as did Irish, that the Royal

Bank was then under investigation by a Justice Department

Strike Force and it was generally thought in government

law enforcement circles that the said Bank was a funnel for

the financing of enterprises carried on by organized crime.

Tarangelo suggested that an investigation of the Pom-

ponios and their relationship to the Bank might be appro-

priate to determine the connections, if any, between the

defendants and “the Mafia”. Irish agreed and spoke to

Larry Richards, his supervisor. Thereafter Irish “pulled”

copies of the Pomponios’ tax returns and after examining

them came to the conclusion that the standard of living they

maintained, as reported in the press, was inconsistent with

the modest level of income shown on their tax statements.

This fact, together with the organized crime link suggested

by the Royal Bank connection, prompted Richards and Irish

to suggest to W. O. Miller, Head of the Civil Audit Section

of the I.R.S. to conduct an investigation of the Pomponios’

affairs through the Audit Division.

Miller agreed and Wills and several other agents were.

assigned to conduct an audit, which was purportedly civil

but in fact was prompted by the belief of the Intelligence

Division that there was a strong probability of criminality.

Wills approached the Pomponios and advised them that

he wished to examine their books. They gave him full run

15a

Appendiz E

of the office and full access to all of the records of the Pom-

ponio enterprises. Wills and several other agents worked

at the Pomponio offices for about a year.

At no time during that time did Wills or anyone else

advise the Pomponios that his investigation was in fact a

criminal investigation and that he was seeking evidence of

criminality. Throughout the period in question he reported

to his supervisor, Miller, and Miller in turn conferred fre-

quently with the Intelligence Division, particularly Rich-

ards, Irish and Eugene Bennett. Representatives of the

Intelligence Division made frequent suggestions as to lines

of inquiry which were then transmitted by Miller to Wills.

The files of the Intelligence Division and the Audit Divi-

sion will contain a number of memoranda on the subject

passing between the Intelligence Division and the Civil

Audit Division.

In July or August, 1971 Wills concluded his civi! audit

and formally referred the case to the Intelligence Division.

At that time he physically moved out of the Pomponio

offices but continued to request and to secure information

from the Pomponios through their chief auditor, H. Burton

Bates, Jr., and perhaps other employees. At no time did

Wills or any other agent of the Civil Section advise Bates

or any member of the Pomponio organization that the civil

investigation had turned into a criminal investigation.

The Special Agents who worked on the Pomponio case

were primarily Bennett, Jennings and Irish. They did not

personally speak to anyone in the Pomponio organization ;

neither did they advise the Pomponios that there was a

criminal investigation underway. Wills continued to work

with the Special Agents for some time after the case was

assigned to Intelligence.

16a

Appendiz E

On January 19, 1972 the first grand jury subpoenas were

served upon the Pomponio corporation. Up until this time

they had no knowledge of the existence of a criminal in-

vestigation. The papers which were subpoenaed were in

fact never examined in detail by any grand jury, if indeed

they were even presented to a grand jury in any but a

formal sense. Instead the papers were turned over to the

Intelligence Division of I.R.S. where they came under the

custody of Bennett. In May, 1972 an ez parte application

was made to the court for a 6(e) order to permit LR.S.

officers to examine the records. In fact this was an effort

to cure the illegal possession of the records by I.R.S.

2. Abuse Of The Grand Jury Process

As is noted above, the first subpoena was issued to the

Pomponios calling for their books and records early in

1972. In fact those records were never considered in any

meaningful way by a good jury but were turned over to

I.R.S. for its examination. In July, 1972 a special grand

jury was appointed to hear the Pomponio cases and the

books and records were thereupon submitted to it. Other

subpoenas were from time to time issued by that grand

jury which carried on the investigation which ultimately

led to indictments in cases number 268-73A ; 269-73A; 270-

73A; 303-73A; 304-73A and 305-73A.

All through the year 1973 grand jury subpoenas were

issued, returnable not only before the special grand jury

sitting in Alexandria, but before other grand juries sit-

ting in Richmond, Norfolk, Newport News and New York.

About 20-25 such subpoenas were issued, addressed to em-

ployees of the Pomponio organization and to banks, inves-

tors, lenders, and other persons who had business with

the Pomponios. None of these grand juries (with the pos-

17a

Appendia E

sible exception of the one in New York) were investigating

any crime which even arguably might have come within

their respective territorial jurisdictions. None of them

ever indicted anyone in connection with the documents

subpoenaed from the Pomponios or witnesses relevant to

this case. In fact the grand juries in question turned over

both testimony and documents they received pursuant to

the above-mentioned subpoenas to the special grand jury

sitting in Alexandria.

At no time between 1971, when the first subpoena was

issued and the end of 1973, was any 6(e) order issued by

the District Court other than the 6(e) order mentioned

above as having been issued in May, 1972. In September,

1973, three subpoenas were issued to three doctors who

had treated members of the Pomponio family. Those sub-

poenas were returnable in Norfolk. The Pomponios’ law-

yer made a motion to quash the subpoenas which motions

came on to be heard before Judge Lewis on August 31,

1973. He appeared surprised to find that any Pomponio

subpoenas had been issued returnable other than before

the special grand jury in Alexandria (see Transcript p.

4-13 in United States v. John Doe #1) and he directed that

the subpoenas issued to the doctors returnable in Norfolk

be quashed for that reason, with leave to issue new sub-

poenas returnable in Alexandria. After that incident no

further subpoenas for Pomponio papers were issued by

any grand jury in 1973, other than those returnable be-

fore the special grand jury in Alexandria.

The indictments handed down by the special grand jury

were based upon a good deal of testimony and documentary

material which, as it is indicated above, was presented to

it in violation of Rule 6(e).

18a

Appendia E

Rule 6(e) was not only violated in the wholesale transfer

of grand jury documents from one grand jury to another

without leave of court; other confidential grand jury doc-

uments together with oral testimony was made known to

at least one person who ultimately testified at the 303 trial,

namely Sidney Zneimer, and to his lawyer who were given

access to documents secured from the Pomponios’ files by

the grand jury subpoenas and to testimony given by wit-

nesses before the grand jury.

After the decision by the Court of Appeals reversing the

conviction on Indictment No. 303, superseding indictments

were handed down by a grand jury which was appointed

in the latter part of 1975 or January, 1976. That grand

jury on January 29th handed down the two indictments in

question here. No bona fide hearings were held by that

grand jury. No witnesses were called other than IRS.

agents who summarized in much abbreviated form the

evidence which had originally been presented to the special

grand jury.

3. Other Forms Of Prosecutorial Misconduct

In their motion the defendants adverted to two other

matters, both going to the integrity of the United States

Attorney’s office in the Alexandria Division. One relates

to a charge of attempted extortion, the file on which has

been sealed. Defendants stand ready to offer testimony as

to that incident; the material in the sealed file may be read

as an offer of proof. The other relates to the relationship

between the United States Attornev in the Alexandria Divi-

sion and one of the Judges in the Division. Documentary

-_—

19a

Appendix E

evidence of that relationship has already been submitted to

the court; that, too, may be read as an offer of proof.

Respectfully submitted,

Dated: March 29, 1976

Lovis J. Marry, Esq.

1311-A Dolly Madison Blvd.

Suite 3B

MeLain, Virginia 22101

Leonarp B. Bovory, Esq.

Victor RasrnowiTz, Esq.

30 East 42nd Street

New York, New York 10017

By: /s/ Victor Rasinow1tz

Attorneys for Defendants,

Louts J. Pomponio, Jr.,

Peter Pomponio, Paul Pomponio