Petition for Writ of Certiorari — Storm v. United States

FILED

i

ALEXANOER LU. STEVAS

84 s 9 0 9 (1) [ Office - Supreme Court. US

CLERK

In THE

Supreme Court of the United States

Ocroser Term, 1984

SANFORD STORM,

Petitioner,

vs.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE THIRD CIRCUIT

Howarp D. CoHEeN

Counsel of Record

GutTkuy, Mitter, SHarrro & Setesner, P.A.

Attorneys for Petitioner

225 Millburn Avenue

Millburn, New Jersey 07041

(201) 467-8000

Adams Press Corp., 50 Park Place, Newark, New Jersey 07102—(201) 623-8611

AN

Question Presented

Did the District Court erroneously deprive Petitioner

of his Sixth Amendment rights (and otherwise place in

jeopardy his Fifth Amendment rights) in its denial of

a motion by his trial counsel to declare a mistrial and

to withdraw as counsel in order to render available a

member of his trial counsel’s law firm, who was then

serving as co-trial counsel, to tesiify and rebut Gov-

ernment testimony concerning statements allegedly made

by co-trial counsel.’

1The other party to this proceeding is Jerome Ashfield, a co-

defendant. Mr. Ashfield is not a party to this Petition.

San RR Bs NO AN ne A Ne

TABLE OF CONTENTS

QUESTION PRESENTED ...............-20---ccseceseees

TABLE OF AUTHORITIES

I eceememaems

JURISDICTION

CoNSTITUTIONAL Provisions AND RELEVANT Portions

oF AMERICAN Bar Association (ABA) Cope or Pro-

WRERO IAG, PEREPOMGIBIEATY oon ccsenccceeee

STATEMENT a

a I ninsninsinceeniissiesbeassinbeninensetninenmivinnst

B. Statement of pertinent facts in relation to ques-

tion presented

Reasons FoR GRANTING THE PETITION .................--------

A. Strong policies underlie DR 5-102(A) ............

B. The substantial hardship exception (DR 5-

101(B)(4)) to DR 5-102(A) is to be narrowly

I i cnt ksibiintitenncnerietsionerinn

C. An interrelationship exists between the unim-

pairment policy consideration underlying DR

5-102(A) and the Sixth Amendment right to

unimpaired representation

D. Compliance with DR 5-102 is mandated by Lo-

cal Rule 6 of the District Court -....0000000000....

PAGE

12

13

TABLE OF CONTENTS lil

PAGE

Kk. The overriding policy and constitutional con-

siderations with respect to unimpaired repre-

sentation underlying the mandate of DR 5-

102(A) when considered in conjunction with

Fifth and Sixth Amendment rights, constitutes

an important question of federal law which

has not been, but should be settled by this

Court sinliseliceldsladigiluiidtaccesataidcapiitainnial 14

F. The Third Circuit’s affirmation of the District

Court’s denial of motions for a mistrial and

to withdraw as counsel was not only incon-

sistent with the overriding policy considera-

tions underlying DR 5-102(A) and its inter-

play with the Fifth and Sixth Amendments

but also is in conflict with the rulings of other

I = ei iiisitaiaccinetiiclalncinalntccloiciniiiiicisepaticiinialceidoeetadas 16

G. Co-trial counsel’s testimony was not available

EN BI IE saiiebiticarcrinccenenicindastepseens 17

H. Had Petitioner testified in lieu of co-trial coun-

sel, Petitioner would have been required to com-

promise his Fifth Amendment rights -.............. 17

I. In its review of the District Court’s ruling on

this issue, the Court of Appeals misapplied

the substantial hardship exception and other-

wise arrived at erroneous conclusions, unsup-

ee ar Oe Oe Gs. 18

J. Co-trial counsel’s failure to testify was not a

I I igri cccadincns a cinilecaernindtbacepetninnpioeance 23

ee re ar 25

iv TABLE OF CONTENTS

PAGE

APPENDIX:

A—Opinion of the United States Court of Appeals

Oe is re scsi ascdesesicoespmenaiiaibealion la

B—Judgment and Probation Commitment Order

dated May 10, 1983, and Conditions of Pro-

bation and Order of Release dated May 10,

RI, DI TID anni tecertttttemncesicisnnicne 24a

C—Applicable Provisions of the United States

Constitution and Other Authorities -......0........... 3la

Fifth Amendment and Sixth Amendment of the

United States Constitution -......2222.....2..2......0c000- 3la

Relevant Portions of American Bar Association

Code of Professional Responsibility -............... 32a

D—Order for Stay of the United States Court

of Appeals of the Third Cireuit with Attach-

IIE sscicssccsnininininsndoceninetisenenintieansinatanicansethlninantnaaastentncaaiaih 30a

TABLE OF AUTHORITIES 4

PAGE

Table of Authorities

Cases Cited

Christensen v. United States, 90 F.2d 152 (7th Cir.

ENTE © ssnticheencbeiiensagenstubebblangiaiiiedbuiiidituai ee EE ae 16, 17

Connell v. Clairol, Inc., 440 F.Supp. 17 (N.D. Ga.

ROVE) einem 11

Kmle Industries v. Patentex, Ine, 478 F.2d 562

SOO Ns ID Salitisicentcceiannee ied ae cae 12

General Mill Supply Co. v. SCA Services, Inc., 505

F.Supp. 503 (D. Mich. 1981) 2......c.cccccccccccsseoecc--- 11, 12

Glasser v. United States, 315 U.S. 60 (2982) 0. 13, 15, 19

Hull v. Celanese Corp., 513 F.2d 568 (2nd Cir. 1975) 11

International Electronic Corp. v. Flanzer, 521 F.2d

SenONE. CNS GMD BUEN ~ cccnesccciaccaducbbewuaaiiee ee 10

J.P. Foley & Co. v. Vanderbilt, 523 F.2d 1357 sat

Se PE jsianrnivssiph lnpuacnanibadsandcadta er ane 10

Lau Ah Yew v. Dulles, 257 F.2d 744 (9th Cir. 1958) 10

MacArthur v. Bank of New York, 524 F.Supp. 1205

SRM Cas MED Siciencthnctsbcamenemenes 11, 19, 14, 15

Simmons v. United States, 39 U.S. 377 (1968) ...... 18, 19, 24

United States v. Birdman, 602 F.2d 547 (3rd Cir.

BD aniinsiaettlinatnitntteabenleleda lcci Naas ie ee 11

United States ex rel Sheldon Electric Co. v. Black-

hawk Heating & Plumbing, Inc., 423 F.Supp. 486

SRT c. MOI: :<inkicmibinstiitiiaiabscenistihiniiiahaamaia Neate a 10, 12

United States v. Vereen, 429 F.2d 713 (D.C. Cir.

UTE isncaliinsnsissshaplndeionppibetcbalpiebadiiedeidGiaiahcaatienliidaaacas toll 11, 16,17

vi TABLE OF AUTHORITIES

PAGE

Universal Athletic Sales Co. v. American Gym, Ree-

reational & Athletic Equipment Corp., 546 F.2d

530 (3rd Cir. 1976) ....-.-...--..cecec-scsnscsessssnesesnsnennseenensess 9-11

United States Constitution Cited

WiPt hn A rememe et ances snane nase nssnnsccnonens i, 2, 8, 14, 16-20, 23

Sixth AmenGmMent ...~-...--.0--ccescecssoeeoe i, 2, 8, 14, 16, 18-20, 23

Statutes Cited

26 U.S.C.

$7201 ....n.ceceecennonscenvenscesesessnsesevensensusecensnncsntenenensenanmensneee 3

28 U.S.C.:

§1254( 1) .n.n.neeeeeececeescncsesesncesssensnsesesesnsnsncstnenensnessensnsones 2

Rules Cited

Federal Rules of Evidence:

i I ani icsisinsknnitenenanemnnesicoiiniaesnnsniantietinnsmenineinia 6

Rule 803(6) ........-.-.-----s-cesesesnensnsesessrnenenensenesnnsnsnsnsnsesoes 21

Other Authorities Cited

American Bar Association Code of Professionai Re-

sponsibility Disciplinary Rule 5-101 -.......-..----------- 7,8

American Bar Association Code of Professional Re-

sponsibility Disciplinary Rule 5-101(B) (4) 3, 7, 12, 14, 20

American Bar Association Code of Professional Re-

sponsibility Disciplinary Rule 9-102 -............-..-....--- 7,8

TABLE OF AUTHORITIES Vil

PAGE

American Bar Association Code of Professional Re-

sponsibility Disciplinary Rule 5-102(A) ........ 3, 8-16, 18-

20, 24

American Bar Association Code of Professional Re-

sponsibility Ethical Consideration 5-9 00... 3, 9, 10

American Bar Association Code of Professional Re-

sponsibility Ethical Consideration 5-10 ........ 3, 11, 12,16

American Bar Association Code of Professional Re-

sponsibility Ethical Consideration 7-24 .................... 10

American Bar Association Committee on Ethies and

Professional Responsibility, Formal Opinion 339

So GS ONE MEE REE ee 9, 10, 13, 19

Developments in the Law, Conflicts of Interest in

the Legal Profession, 94 Harv. L. Rev. 1244 (198i) 10

Note, The Advocate Witness Rule: If Z, then X

But Why? 52 N.Y.U.L. Rev. 1365 (1977) ............ 9

6 J. Wigmore, Evidence §1911 (Chadbourn rev. ed.

Ne ts a FES EN a et YD Nai iD Me Cote RS att te

IN THE

Supreme Court of the United States

OcroBER Term, 19S4

-™

—

SANFORD STORM,

Petitioner,

VS.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

THIRD CIRCUIT

The Petitioner, Sanford Storm (“Storm”) respectfully

prays that a Writ of Certiorari issue to review the

Opinion of the United States Court of Appeals for the

Third Cireuit filed on June 1, 1984.

Opinions Below

There was no formal opinion of the District Court.

The Judgment and Probation Commitment Onder dated

May 10, 1983 and Conditions of Probation and Order

of Release dated May 10, 1983, are reproduced in Ap-

pendix B to this Petition (24a-30a)

The Opinion of the Court of Appeals has not yet been

reported. It is reproduced in Appendix A (la-23a).

2

Jurisdiction

The Opinion of the Court of Appeals (App. A infra

la-23a) was filed on June 1, 1984. Pursuant to Rule

4i(b) of the Federal Rules of Appellate Procedure, the

Court of Appeals stayed issuance of its cert:ued judg-

ment in lieu of formal mandate pending the ‘ling of

this Petition, which stay continues until final disposition

by this Court (App. D infra 35a-37a).

The jurisdiction of this Court is invoked under 28

U.S.C. §1254(1).

Constitutional Provisions and Relevant Portions of

American Bar Association (ABA) Code of Pro-

fessional Responsibility

1. The Fifth Amendment to the United States Con-

stitution provides in relevant part:

No person shall * * * be compelled in any eri-

minal case to be a witness against himself * * *.

The full text of the Fifth Amendment is reproduced

in Appendix C (3la) to this Petition.

2. The Sixth Amendment to the United States Con-

stitution provides in relevant part:

“In all criminal prosecutions, the accused shall

* * * have the Assistance of Counsel for his de-

fence.”

The full text of the Sixth Amendment is reproduced

in Appendix C (3la) to this Petition.

3

3. ABA Code of Professional Responsibility:

Disciplinary Rules:

DR 5-102(A)

DR 5-101(B) (4)

Ethical Considerations:

EC 5-9

EC 5-10

The text of the above provisions of the ABA Code

of Professional Responsibility is reproduced in Appendix

D (32a-34a) to this Petition.

Statement

A. Procedural history.

This case originated from Indictment Cr. 82-125 filed

on April 16, 1982 in the United States District Court

for the District of New Jersey charging Petitioner and

co-defendant, Jerome Ashfield (“Ashfield”), in eight counts

with criminal violations of the Internal Revenue Code.

Six of the eight counts were dismissed prior to trial

on the grounds that they were barred by the statute

of limitations.

Trial on the remaining two counts, one against Peti-

tioner and one against Ashfield, each of which charged

an attempt to evade personal income tax for the cal-

endar year 1975 (26 U.S.C. §7201), commenced on Janu-

ary 31, 1983 before the Honorable John W. Bissell, United

States District Judge, and a jury.

4

On February 9, 1983 the jury returned a verdict of

guilty against both Petitioner and Ashfield.”

On April 11, 1983, the District Court denied Peti-

tioner’s motion for a judgment of acquittal or, in the

alternative, for a new trial. The District Court granted

Ashfield’s motion for a judgment of acquittal.

On May 10, 1983 Petitioner was sentenced to a two-

year term of imprisonment, execution of which was sus-

pended except for 90 days, with a three year term of

probation to follow, and was fined $5,000.00. Petitioner

is at liberty on bail pending this appeal.

Separate appeals were filed by the Government, Pe-

titioner and Ashfield from the District Court’s post con-

viction orders and consolidated for consideration by the

United States Court of Appeals for the Third Circuit.

On June 1, 1984 the Court of Appeals filed an Opinion

which affirmed the judgment of conviction against Pe-

titioner and reversed the judgment of acquittal in favor

of Ashfield and remanded Ashifield’s case to the Dis-

trict Court for action consistent with its Opinion (App.

A infra 1a-23a).

B. Statement of pertinent facts in relation to question

presented.

The gist of the Government’s case was that in 1975

$28,000.00 in commission income received by National

Talent Associates, Inc. (“NTA”), in which Petitioner and

Ashfield were 50 percent shareholders, had been improp-

erly credited by Giblen & Co., NTA’s certified public

* The Government’s proofs alleged that Petitioner and Ashfield

cach attempted to evade the tax on $14,000.00 of income which

was not reported on their respective 1975 Federal income tax

returns.

5

accountants, to the corporation’s officers’ loans ac-

count in its general ledger in the amount of $14,000.00

each to Petitioner and Ashfield. These credits were

deemed constructive dividends which were not reported

on the personal income tax returns of Petitioner and

Ashfield, which had been prepared by Giblen & Co.

Petitioner and Ashfield did not challenge the under-

statement of income. Their defense rested upon lack

of willfulness and the result of error by their accountants.

The question presented herein arose within the fol-

lowing context. Petitioner was jointly represented at

trial by Howard D. Cohen, Esq. (“Cohen”) and Jerome

R. Miller, Esq. (“Miller”), members of the New Jersey

law firm of Gutkin, Miller, Shapiro & Selesner, P.A.

Although Cohen acted as lead trial counsel, Miller en-

tered his appearance as co-counsel for Petitioner at trial,

participated in jury selection, sat at counsel’s table, was

introduced to the jury as one of Petitioner’s trial at-

torneys, and otherwise continued as Petitioner’s attorney.

During the course of trial, the Government made an

offer of proof of its intention to introduce testimony

of IRS Special Agent Michael R. Faiella (“Faiella”)

concerning certain alleged statements made by Miller to

Faiella at a meeting in September, 1978. The meeting

took place in the presence of Petitioner and another

IRS Special Agent and related to the production of NTA

books and records in response to an IKS Summons

issued on August 16, 1978 in connection with a then pend-

ing civil tax audit of NTA. The Government alleged

through the testimony of Faiella that Miller purportediy

told Faiella that all of the documents forming the sub-

ject of the Summons had been produced.

6

Counsel for Petitioner objected to the introduction of

this testimony and requested and was granted an evi-

dentiary hearing outside the presence of the jury. At

that hearing, Special Agent Faiella testified (without cor-

roborative support from his contemporaneously made in-

terview notes or memorandum) that he had been told

by Miller at the September, 1978 meeting that all records

had been produced.

Faiella further testified that, following issuance of a

subsequent IRS Summons to the National Community

Bank, it was determined that ledgers and bank records

relating to a certain Management Trvrst Account of NTA

(into which was originally deposited NTA’s commission

income) had not been produced.

The Government argued that the original non-produc-

tion of these records was part of a cover up to pre-

sent the disclosure of documents that ultimately led

to the indictments returned against Petitioner and Ash-

field.

Notwithstanding Miller’s unequivocal denial in the evi-

dentiary hearing of ever having stated to Faiella that

all documents had been produced, the District Court de-

nied Petitioner’s motions to reject the testimony of Faiella

pursuant to Rule 403 of the Federal Rules of Evidence

or, in the alternative, to declare a mistrial and/or to

withdraw as counsel.

The application for a mistrial and/or to withdraw as

counsel was premised upon the following:

(a) Miller had entered his appearance as co-

counsel for Petitioner at trial, participated in jury

selection, sat at counsel’s table, was introduced to

the jury as one of Petitioner’s trial attorneys and

otherwise continued as Petitioner’s attorney;

(b) Miller’s law partner, Cohen, was Petition-

er’s lead trial counsel; and

(c) Miller’s testimony would be required if Fai-

ella was permitted to testify concerning the Sep-

tember, 1978 meeting.

Based upon the above, Cohen advised the District Court

that under DR 5-101 and 5-102 of the ABA Code of

Professional Responsibility, an attorney cannot act as

a witness in a proceeding in which he appears as counsel.

The District Court, in denying Petitioner’s application,

‘stated it was doing so based upon “its inherent powers

with regard to smooth and expeditious disposition of

cases, keeping in mind, among other things, the con-

siderations of the Speedy Trial Act and others deter-

mining the granting of a mistrial in this instance or

the granting of an application to withdraw as counsel”.

The District Court also expressed the view that under

the substantial hardship exception, DR 5-101(B)(4), Pe-

titioner’s attorneys ought to continue in their repre-

sentation and that Miller could testify without his firm

being required to withdraw as counsel.

Certain guidelines were fixed by the District Court

with respect to the further conduct of trial including

a prohibition against the use of Miller’s name in the

context of testimony and directing any references to

Miller to be expressed in terms of “Storm’s attorney”

or other similar references; the Court also prohibited

Miller from further participation as trial counsel.

Based upon the prohibition of DR 5-102(A), counsel for

Petitioner then moved to be relieved as counsel in order

to avoid any intentional violation of that disciplinary

rule. That motion was also denied and counsel was

ordered to proceed in his representation of Petitioner.

During the course of trial, neither Miller nor the Pe-

titioner testified before the jury to rebut Faiella’s tes-

timony concerning the September, 1978 meeting.

On appeal Petitioner unsuccessfully argued that the Dis-

trict Court’s refusal to grant a mistrial constituted error

requiring a new trial.

REASONS FOR GRANTING THE PETITION

This case presents a question of novel impression to

this Court involving the delicate balancing of the under-

lying policy considerations of DR 5-101 and 5-102 of

the ABA Code of Professional Responsibility and an indi-

vidual’s Fifth and Sixth Amendment rights, which is of

substantial importance as a matter of federal law, and

which should be settled by this Court.

DR 5-102(A) of the Code of Professional Responsi-

bility provides:

“Tf, after undertaking employment in contemplated

or pending litigation, a lawyer learns or it is

obvious that he or a lawyer in his firm ought

to be called as a witness on behalf of his client,

he shall withdraw from the conduct of the trial

and his firm, if any, shall not continue repre-

sentation in the trial, except that he may con-

tinue the representation or he and a lawyer in

his firm may testify in the circumstances enu-

merated in DR 5-101(B)(1) through (4).”

A. Strong policies underlie DR 5-102(A).

Calling a party’s attorney as a witness undermines

the integrity of the judicial process. See generally 6 J.

Wigmore, Evidence §1911 (Chadbourn rev. ed. 1976);

Note, The Advocate Witness Rule: If Z, then X. But

Why? 52 N.Y.L.J. Rev. 1365 (1977); American Bar As-

sociation Committee on Ethics and Professional Respons-

ibility, Formal Opinion 339 (January 31, 1975).

These policies are amplified in Ethical Consideration

5-9 (EC 5-9) which states, in pertinent part:

“Occasionally a lawyer is called upon to decide

in a particular case whether he will be a _ wit-

ness or an advocate. If a lawyer is both counsel

and witness, he becomes more easily impeachable

for interest, and thus may be a less effective wit-

ness. Conversely, the opposing counsel may be

handicapped in challenging the credibility of the

lawyer when the lawyer also appears as an ad-

voeate in the case. An advocate who becomes a

witness is in the unseemly and ineffective post-

tion of arguing his own credibility. The roles of

an advocate and a witness are inconsistent; the

function of an advocate is to advance or argue

the cause of another, while that of a witness is

to state facts objectively.” (Imphasis Added).

DR 5-102(A) implicitly recognizes the potential conflict

of interest with which an attorney may be faced in this

situation. Attorneys anxious to participate in the li-

tigation might fail to step aside as counsel and testify

even if their testimony could help the client; other at-

torneys might fail to step aside and testify because

the client insists upon their continued representation. EC

5-9. See Universal Athletic Sales Co. vy. American Gym,

10

Recreational & Athletic Equipment Corp., 546 F.2d 530,

539-40 (3rd Cir. 1976); Law Ah Yew v. Dulles, 257 F.2d

744, 746 (9th Cir. 1958). Thus, the jury may discount

the weight and credibility of testimony needed by the

client to the client’s detriment. American Bar Asso-

ciation, Committee on Ethics and Professional Respons-

ibility, Formal Opinion 339, P. 2 (January 31, 1975).

The Code of Responsibility seeks to prevent such con-

flicts by keeping separate the roles of attorney and wit-

ness. EC 5-9.

The Bar is ill served when an attorney’s veracity be-

comes an issue in a case; lay observers especially might

speculate whether counsel has compromised his integrity

on the stand in order to prevail in the litigation. See

International Electronic Corp. v. Flanzer, 521 F.2d 1288,

1294 (2d Cir. 1975); United States ex rel. Sheldon Elec-

tronic Co. v. Blackhawk Heating & Plumbing Co., 423

F.Supp. 486, 489 (S.D.N.Y. 1976); 6 J. Wigmore, supra,

§1911; Cf. EC 7-24 (attorney may not claim innocence

of client or justness of position to the jury). Further,

having seen the attorney take an oath on the witness

stand, the jury might accord testimonial weight to his

closing arguments, or might simply place undue weight

on the testimony of a court officer. See Developments

in the Law, Conflicts of Interest in the Legal Profession,

94 Harv. L. Rev. 1244, 1290 (1981).

DR 5-102(A) applies when a lawyer “ought to be

called as a witness on behalf of his client.” That the

lawyer may not actually testify is not controlling. What

matters is that he ought to testify. See J.P. Foley &

Co. v. Vanderbilt, 523 F.2d 1357 (2d Cir. 1975). The

test is therefore whether the attorney’s testimony could

be significantly useful to his client; if so, he ought to

be called.

11

The provisions of DR 5-102(A) are mandatory: the party

cannot choose between the attorney’s testimony and his

representation. The rule embodies a conclusive prefer-

ence for testimony: “Where the question [of testimony

versus representation] arises doubts should be resolved

in favor of the lawyer testifying and against his be-

coming or continuing as advocate. EC 5-10. A party

can be represented by other attorneys, but cannot ob-

tain substitute testimony for a counsel’s relevant, per-

sonal knowledge. See MacArthur v. Bank of New York,

524 F.Supp. 1205, 1209 (S.D.N.Y. 1981). See also Hull

v. Celanese Corp., 513 F.2d 568, 571 (2d Cir.); Connell

v. Clairol, Inc., 440 F.Supp. 17, 19 (N.D. GA. 1977);

United States v. Vereen, 429 F.2d 713, 715 n.3 (D.C.

Cir. 1970). See generally Universal Athletic Sales Co.

v. American Gym, Recreational & Athletic Equipment

Corp., swpra at 538-40; United States v. Birdman, 602

F.2d 547, 551-53 (3rd Cir. 1979).

In deciding whether an attorney should be disqualified,

courts have balanced the interests underlying the rule

against the potential damage to the client. See Gen-

eral Mills Supply Co. v. SCA Services, Inc., 505 F.Supp.

1093, 1096 (D. Mich. 1981).

Absent extreme hardship to the client, the mandate

of DR 5-102(A) has been strictly invoked:

“Aside from the likelihood of actual prejudice. ..,

the court must be mindful of the possibility that

testimony by an attorney in the case may lead

the public to think ‘that lawyers may as witnesses

distort the truth’ thereby diminishing the public’s

respect for and confidence in the profession. . .

Where doubt may becloud the publiec’s view of

the ethies of the legal profession and thus impune

the integrity of the judicial process, it is the re-

12

sponsibility of the Court to insure that the stand-

ards of ethics remain high.” United Siates ex

rel. Sheldon Electric Co. v. Blackhawk Heating &

Plumbing, Inc., 423 F.Supp. 486, 489 (S.D.N.Y.

1976), quoted in General Mill Supply Co. v. SCA

Services, Inc., supra at 1098.

The Rule controls irrespective of when the need for

the attorney’s testimony becomes evident:

“Regardless of when the problem arises the [law-

yer’s] decision is to be governed by the same

basic considerations.” EC 5-10.

The mandatory ethical obligations imposed by DR 5-

102(A) cannot be overcome by the equitable defenses of

laches, waiver, or estoppel. Emle Industries, Inc. vy. Pa-

tentex, Inc., 478 F.2d 562, 574 (2d Cir. 1973).

B. The substantial hardship exception (DR 5-101(B) (4) )

to DR 5-102(A) is to be narrowly construed.

Courts have narrowly construed the substantial hard-

ship exception (DR 5-101(B)(4)). Hardship alone, how-

ever substantial, is insufficient to permit continued rep-

resentation. The deprivation to the client will be great-

est precisely when the attorney was most intimately in-

volved in, and familiar with, the events giving rise to

the suit. See e.g. United States ex rel. Sheldon Elec-

tric Co. v. Blackhawk Heating & Plumbing, Inc., 423

F.Supp. at 490. Withdrawal will be costly whenever it

oceurs. But if the expense in delay routinely incident

to disqualification satisfied the substantial hardship ex-

ception, that exception would soon swallow the Rule.

See MacArthur v. Bank of New York, supra at 1210.

13

C. An interrelationship exists between the unimpairment

policy consideration underlying DR 5-102(A) and the

Sixth Amendment right to unimpaired representation.

The fundamental policy consideration underlying the

mandate of DR 5-102(A) requiring counsel to withdraw

from the conduct of trial where he or a lawyer in his

firm ought to be called as a witness on behalf of his

client to address a contested issue is well stated in For-

mal Opinion 339, supra:

“The client’s need for the testimony from a dis-

interested source and the client’s entitlement to

an advocate whose effectiveness cannot be impaired

because of his advocate having been a witness as

to contested issues are the foundation of DR 5-

102(A).”

These policy considerations accord with this Court’s

previous holding that in order to guarantee a defend-

ant effective assistance of counsel, consistent with his

Sixth Amendment rights, such representation must be “un-

trammeled and unimpaired.” Glasser v. United States,

315 U.S. 60, 70 (1942).

D. Compliance with DR 5-102(A) is mandated by Local

Rule 6 of the District Court.

Further emphasis upon compliance with the proscrip-

tions of the Disciplinary Rules of the Code of Pro-

fessional Responsibility is found in Local Rule 6 of

the District Court for the District of New Jersey which

provides:

“The Disciplinary Rules of the Code of Profession-

al Responsibility of the American Bar Associa-

tion as amended by the Supreme Court of New

14

Jersey and the Code of Judicial Conduct of the

American Bar Association, shall govern the con-

duct of the judges and members of the Bar ad-

mitted to practice in this Court.”

E. The overriding policy and constitutional considerations

with respect to unimpaired representation underlying

the mandate of DR 5-102(A) when considered in con-

junction with Fifth and Sixth Amendment rights, con-

stitutes an important question of federal law which has

not been, but should be settled by this Court.

We respectfully submit, that the decisions by the Dis-

trict Court and Court of Appeals with respect to this

issue were erroneous in that they operated to materially

impair Petitioner’s Fifth and Sixth Amendment rights.

The District Court’s refusal to grant Petitioner’s mo-

tions for a mistrial and to withdraw as counsel, and

the Court of Appeals affirmation of the District Court’s

ruling on this issue manifest a failure to acknowledge

the substantial policy and constitutional considerations

underlying the mandate of DR 5-102(A) and its inter-

play with an individual’s Fifth and Sixth Amendment

rights.

Instead, both the District Court and the Court of Ap-

peals erroneously applied the “substantial hardship” ex-

ception (DR 5-101(B)(4) to DR 5-102(A)). A fair read-

ing of the substantial hardship exception and the narrow

construction to be accorded to it, MacArthur, supra at

1210, within the factual context of this case demonstrates

that it was misapplied thereby seriously impairing Pe-

titioner’s Fifth and Sixth Amendment rights.

It is the “exceptional situation” where a lawyer is

permitted to act as a witness. A showing that it would

be “manifestly unfair” or that an “unreasonable hard-

15

ship” would be imposed upon the client is required to

permit the lawyer-witness to continue. EC 5-10. No

such circumstances existed herein. First, Petitioner did not

seek to have Messrs. Cohen and Miller continue as his

attorneys. Petitioner was prepared to incur whatever ad-

ditional expense was required in obtaining new counsel

in order to insure a fair trial. Second, the matter on

which Miller was to testify went to the heart of the

prosecution’s case—whether or not Petitioner acted will-

fully. Were Miller’s testimony even, in part, disbelieved

or doubted, the credibility of Petitioner’s trial counsel

would inevitably have been affected adversely in the

eyes of the jury. Third, Miller was subject to impeach-

ment for interest. This needlessly would have then un-

dermined his eredibility. Fourth, in view of the con-

flicting hearing testimony of Special Agent Faiella and

Miller, counsel would have been required to argue Mil-

ler’s credibility. Such a result is expressly condemned

in Formal Opinion 339 which states that in the excep-

tional circumstance where a lawyer does act as a wit-

ness “[h]Je should also refrain from expressly arguing

the credibility of his own testimony or that of a lawyer

in his firm”. (Emphasis Added), P. 4. Petitioner’s rep-

resentation would thereby have been seriously undermined.

There was no justification for Miller and Cohen and

their firm to continue as counsel. Even assuming that

the substantial hardship exception did apply, the hard-

ship to Petitioner in such circumstances having Cohen

and Miller continue as trial counsel was far greater

than in having them withdraw. Petitioner’s Sixth Amend-

ment right to unimpaired representation was undermined

and the very foundation of DR 5-102(A) was disre-

garded. See MacArthur, supra at 1210; Glasser, supra

at 70.

The inconvenience from a mistrial would not have been

substantial. There had been only four days of trial

16

when the motion for mistrial was made. Any doubts

about a lawyer testifying should be resolved in favor

of the lawyer testifying and against his continuing as

counsel. EC 5-10.

F. The Third Circuit’s affirmation of the District Court’s

denial of motions for a mistrial and to withdraw as

counsel was not only inconsistent with the overriding

policy considerations underlying DR 5-102(A) and its

interplay with the Fifth and Sixth Amendments but

but also is in conflict with the rulings of other circuits.

In Christensen v. United States, 90 F.2d 152 (7th Cir.

1937), the defendant sought to call as a witness (like

Miller) who had participated in the trial, but was not

lead counsel. The attorney’s testimony was needed to

rebut a witness’ claim that she made a false written

statement at the request of the defendant. The state-

ment had been prepared by the attorney, who also met

with the witness. The District Court refused to per-

mit the attorney to testify. The Seventh Circuit re-

versed, holding that the attorney was a competent wit-

ness and that the District Court should have excluded

the attorney from further participation in the trial to

enable him to testify for the defendant.

In United States v. Vereen, 429 F.2d 713 (D.C. Cir.

1970), the defendant sought to introduce the testimony

of his defense counsel in connection with a pre-trial office

interview conducted by the attorney with the complain-

ing witness. The witness’ statements to the attorney

at the interview conflicted with his testimony at trial.

Thus, the defense counsel’s proffered testimony drew into

question the complaining witness’ credibility. The Dis-

trict Court denied counsel’s motion to withdraw so that

he could be called as a witness. The Court of Appeals

reversed, holding that the defendant’s attorney should

have been permitted to withdraw and to testify:

17

“(A)fter counsel found himself in these circumstanc-

es, his suggested solution—personally to withdraw

without any trial delay, substitute an associate as

counsel, and then take the stand—was manifestly

appropriate.” 429 F.2d at 715.*

Both the Christensen and Vereen cases confirm that

when an attorney is required to testify, he should not

be permitted to continue in the case. The Third Cir-

cuit’s opinion in the case herein is at variance with

these decisions of the Seventh and D.C. Circuits.

G. Co-trial counsel’s testimony was not available from

other sources.

At the evidentiary hearing before Judge Bissell, Miller

testified concerning a telephone conversation with Special

Agent Faiella. No one else was party to that conversation

and Miller was the only witness available to contradict

Special Agent Faiella’s recollection of the September

1978 meeting attended by Special Agents Faiella and Dono-

van, Miller and Petitioner. During the evidentiary hearing,

the Assistant United States Attorney stated that Special

Agent Donovan’s testimony would be similar to Special

Agent Faiella’s.

H. Had Petitioner testified in lieu of co-trial counsel, Pe-

titioner would have been required to compromise his

Fifth Amendment rights.

Petitioner would not have been an effective witness

as to what transpired at the September, 1978 meeting.

The Circuit Court held it was error not to allow defense

counsel to withdraw even though the circumstance of the defense

attorney having to testify resulted from defense counsel’s failure

to have another person present at the witness interview—con-

trary to the standards announced in the ABA Project on Minimum

Standards for Criminal Justice.

18

Even assuming that Petitioner recalled what Miller had

said at that meeting, his recollection would have been

attacked as affected by his own self-interest. More signi-

ficantly, however, by testfying, Petitioner would have

waived his Fifth Amendment privilege against self incrimi-

nation. On this particular issue, this Court’s previous

holding in Simmons vy. United States, 390 U.S. 377, 394

(1968) is clear and unequivocal:

“We find it intolerable that one Constitutional right

should have to be surrendered in order to assert

another.”

Here, because Miller was precluded by the District

Court’s ruling from being an effective witness, Petitioner’s

right to present a defense was impermissibly conditioned

upon his taking the stand and waiving his privilege against

self-incrimination. While it may appear that Petitioner

had the option of testifying or deciding to refrain from

testifying and thereby forego a benefit, in reality, he had

no option at all. “[A]n undeniable tension” was created

between his Fifth Amendment right not to testify and his

Sixth Amendment right to effective assistance of counsel,

which we submit would have been seriously impaired were

Miller to testify. Cf. Simmons vy. United States, supra at

394; Glasser v. United States, supra at 70.

I. In its review of the District Court’s ruling on this issue,

the Court of Appeals misapplied the substantial hard-

ship exception and otherwise arrived at erroneous con-

clusions, unsupported by the record.

We respectfully submit the Court of Appeals misapplied

the substantial hardship exception to DR 5-102(A). This

is so because of the critical nature of the testimony which

only Miller, but for his status as co-trial counsel, was in

19

a position to offer. There is a clear incompatibility of hav-

ing an attorney, whose firm remains as trial counsel, testify

under the substantial hardship exception to DR 5-102(A) as

to a contested issue that goes to the heart of defendant’s

defense—lack of wilfulness—and the defendant’s Sixth

Amendment right to effective assistance of counsel which

is impaired by such testimony. For looming on the horizon

is the prospect that the credibility of the testifying attorney

will be challenged by the Government in both cross ex-

amination and later argued before the jury in summa-

tion. This, in turn, leads to the untenable result of

Petitioner’s trial counsel being forced to argue the cre-

dibility of a member of his law firm before the jury

at the time of summation—a result specifically deplored

by Formal Opinion 339.

Petitioner was therefore left with the following equally

unattractive options:

1. Allowing his attorney to testify, thereby impairing

his Sixth Amendment rights to effective assistance of

counsel, contrary to the spirit of this Court’s holding in

Glasser, swpra at 70.

2. Waiving his Fifth Amendment privilege against self-

incrimination in order to rebut the Special Agent’s testi-

mony, in lieu of having his attorney testify, thereby re-

sulting in Petitioner’s surrender of his Fifth Amendment

right in order to preserve his Sixth Amendment right, a

result specifically deplored by this Court in Simmons v.

United States, supra at 394.

3. Leaving the Government testimony, which went to

the heart of Petitioner’s defense, unrebutted in deference

to preservation of Petitioner’s Fifth and Sixth Amend-

ment rights.

20

Had the District Court properly applied the proscription

of DR 5-102(A) and not misapplied the substantial hard-

ship exception under DR 5-101(B)(4), we submit Peti-

tioner would never have found himself faced with this

constitutional dilemma.

The Court of Appeals, in affirming the District

Court’s application of the substantial hardship exception,

expressed the view that the “longtime involvement of

Miller’s law firm, both in the IRS investigation and in the

trial preparation . . . would have worked a substantial

hardship on [Petitioner]”. We respectfully disagree.

Given Petitioner’s lack of objection to counsel’s motion

to withdraw, coupled with Petitioner’s Fifth and Sixth

Amendment rights and the delicate balancing of those

rights with the underlying foundation to DR 5-102(A),

we submit a far greater hardship was practiced upon

Petitioner in the District Court’s denial of the motions

for a mistrial and te withdraw as counsel.

We respectfully reject the Court of Appeals con-

clusion that the potential of Miller having to tes-

tify to rebut Special Agent Faiella’s testimony con-

cerning production of the records should have been antici-

pated by Petitioner’s attorneys. Contrary to the findings

by the Court of Appeals in its Opinion, which we submit

resulted from a misstatement of the facts by the Govern-

ment in its Briefs and are otherwise unsupported by the

record, Petitioner’s trial counsel was never alerted during

the pretrial proveedings that Miller’s testimony might be

required with respect to a contested issue, thereby raising

the possibility of Miller’s credibility being brought into

question. A search of the record will reveal that at no

time did the Government ever place Petitioner’s trial coun-

sel on notice that Miller’s credibility would be brought

into question through the proffer of Special Agent Faiella’s

testimony concerning production of the records.

21

There were at least three oceasions on which the Govern-

ment could have so alerted trial counsel and apparently

elected not to do so. The first occasion occurred shortly

after return of the indictments when the Government moved

to disqualify Miller’s firm from representing both Peti-

tioner and co-defendant Ashfield. The Government’s mo-

tion papers made no reference to the likelihood of Miller’s

testimony at trial on a matter of substance. The only

reference in the Government’s motion was with regard

to the possibility of Miller testifying about custody of

NTA’s records. Even the trial judge acknowledged that

the disqualification motion was the appropriate time for

the Government to disclose all relevant facts relating to

the possibility of Miller being called as a trial witness.

Further, prior to trial, counsel entered into a Stipulation

with the Government providing that the requirements of

Federal Rule of Evidence 803(6) were satisfied with re-

spect to the documents of NTA. The Stipulation specific-

ally provided that its purpose was “to eliminate the need

for calling a custodian of records to testify in order to lay

a foundation pursuant to Federal Rule of Evidence 803(6)

for documents of NTA ...” Thus, the prospect of Miller

being called to testify as a custodian of records was dis-

posed of prior to the commencement of trial and trial

counsel was never placed on notice that Miller might be

required to testify as to a matter of substance.

The second occasion on which the Government could

have so advised counsel of the possibility that Miller

might be required to testify as to a matter of substance

arose immediately before the commencement of trial when

the Government sought to introduce a certain memorandum

from a Special Agent named Bailey. Here, again, the

Government made no mention of Miller’s alleged state-

ment to Special Agent Faiella concerning production of

documents, nor was the alleged admission contained in

22

any Jencks Act material produced to Petitioner’s coun-

sel. Further, Judge Bissell, in denying the Government’s

application to introduce the Bailey memoranduni, speci-

fically stated that it would be unfair to plae Miller’s

credibility in question by allowing Bailey’s memorandum

in evidence, particularly given the Government’s laches

in failing to disclose during the motion to disqualify

that Miller’s testimony was needed on substantive mat-

ters.

The third oceasion on which the Government could

have informed counsel that Miller might be required

to testify to a substantive matter also arose at the com-

mencement of trial in connection with the identification

of certain disbursement sheets which Miller identified to

IRS Special Agents at the critical September, 1978 meet-

ing, as having been prepared by Petitioner. The ad-

missibility of the disbursement sheets was disposed of

by way of stipulation of counsel. Significantly, while

the Government specifically dealt with the September,

1978 meeting in relation to the disbursement sheets, it

never advised trial counsel at that time that it also

intended to place Miller’s credibility in question through

the testimony of Special Agent Faiella concerning the

production of documents.

Thus, prior to the commencement of trial, both the

District Court and Petitioner’s attorneys believed that

they had disposed of all outstanding issues relating to

the possibility of Miller having to testify, and, further,

had no reasonable basis upon which to anticipate that

Miller’s credibility would be ultimately brought into ques-

tion.

Even in the Government’s opening statement no refer-

ence was made to the alleged statement by Miller to

Faiella concerning the production of documents.

23

We therefore respectfully submit that the record fails

to support the conclusion by the Court of Appeals that

the Petitioner’s trial counsel should have anticipated the

prospect of Miller’s credibility being brought into ques-

tion with respect to vii September 1978 meeting. The

record is barren of any such knowledge or advance no-

tice. To the contrary, the record below and the pre-

trial proceedings reflect a bona fide effort on the part

of trial counsel to dispose of all matters relating to the

prospect of Miller’s testimony on non-substantive mat-

ters and the lack of any knowledge or notice from the

Government that Miller’s testimony might be required

with respect to substantive matters. The mere fact that

Miller had encounters with the Government during the

civil tax audit of NTA and subsequent criminal investi-

gation of its principals does not necessarily lead to the

conclusion that Petitioner’s trial counsel should have con-

cluded that Miller would be required to testify as to

a substantive matter absent some notice from the Gov-

ernment or indication in the documents exchanged prior

to trial that Miller’s credibility would be placed in issue

by the Government. No such indication was ever

given. Petitioner’s attorneys reasonably concluded prior

to trial that there was no foreseeable prospect of Miller

having to testify. In fact, the trial judge also similarly

concluded within the context of the Faiella/Miller issue

that ultimately developed at trial, specifically finding that

the development of the problem during the trial was

not “entirely foreseeable” by Petitioner’s attorneys.

J. Co-trial counsel’s failure to testify was not a tactical

decision.

Contrary to the Government’s arguments adopted by

the Third Cireuit, Miller’s failure to testify was not

24

“trial tactics” but rather based upon the serious dilemma

posed by the foundation of DR 5-102(A) and Petitioner’s

corresponding Fifth and Sixth Amendment rights to un-

impaired representation and privilege against self-ineri-

mination discussed hereinabove. In fact, prior to Spe-

cial Agent Faiella’s testimony before the jury, Petition-

er’s trial counsel stated:

“T do not want the record to reflect in any way

that I am now voluntarily participating in this

trial. I do not want to be subject to disciplinary

proceedings, and I respectfully move first, for a

mistrial, and secondly, if the Court is not willing

to grant a mistrial, I request to be relieved as

counsel because I will not intentionally violate a

disciplinary rule.”

We respectfully submit that overriding ethical consid-

erations and preservation of Fifth and Sixth Amend-

ment rights, under the circumstances herein, mandate,

as a matter of federal law, the disqualification of trial

counsel and his firm pursuant to DR 5-102(A). Such

a result is necessary in order to insure that an in-

dividual’s Fifth and Sixth Amendment rights are pro-

tected. Anything less, we submit, potentially places that

individual in the untenable position of having to make

the intolerable decision as to whether to forego one con-

stitutional right in order to assert another, a result spe-

cifically rejected by this Court. See Simmons v. United

States, supra at 394.

The question herein presents an important issue of

federal law involving the delicate balancing of the policy

considerations of the Disciplinary Rules and an indi-

vidual’s Fifth and Sixth Amendment rights that should

be conclusively settled by this Court.

25

CONCLUSION

For the foregoing reasons, we respectfully submit

the petition for a writ of certiorari should be granted.

Respectfully submitted,

Howarp D. CoHEen

Counsel of Record

GuTKIN, MILLER, SHAPIRO

& Sevesner, P.A.

Attorneys for Petitioner

Dated: July 31, 1984

[APPENDICES FoLLow]

APPENDIX A

Opinion of the United States Court of Appeals

for the Third Circuit

‘INITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

NOS. 83-5344, 83-5380, 83-5384

UNITED STATES OF AMERICA,

Appellant in No. 83-5344

Appellee in No. 83-5380

Cross-Appellee in No. 83-5384

Vv.

JEROME ASHFIELD,

Appellee in No. 83-5344

Cross-Appellant in No. 83-5384

Vv.

SANFORD STORM,

Appellant in No. 83-5380

On Appeal from the United States

District Court for the

District of New Jersey

(Crim. Nos. 82-125-01 & 02)

Argued February 27, 1984

Before: ADAMS, SLOVITER, Circuit Judges,

and TEITELBAUM, District Judge*

(Opinion Filed June 1, 1984 )

* Hon. Hubert I. Teitelbaum, United States District Court for the

Wesie-n District of Perynsylvania, sitting by designation.

EE

2a

Appendix A

W. HUNT DUMONT

United States Attorney

FAITH HOCHBERG (Argued)

Sills, Beck, Cummis, Zuckerman,

Newark, New Jersey 07102

Radin & Tischman, PA.

Newark, New Jersey 07102

On the Brief:

JONATHAN S. FELD

Asst. U. S. Attorney

Attorneys for U.S.A.

Of Counsel

LAWRENCE S. HORN (Argued)

On the Brief:

TRENT S. DICKEY

Attorneys for Jerome Ashfield

Kostelanetz & Ritholz

New York, New York 10005

and

Gutkin, Miller, Shapiro &

Selesner, P.A.

Millburn, New Jersey 07041

BORIS KOSTELANETZ

LAWRENCE S. FELD (Argued)

EDWARD M. SPIRO

JAMES C. SHERWOOD

ELLIOT SILVERMAN

HOWARD D. COHEN,

Of Counsel

Attorneys for Sanford Storm

na Sa casement tart al

ON ME TO Ne oe eee

3a

Appendix A

OPINION O¥ THE COURT

ADAMS, Circuit Judge

This appeal comes to us from the trial of Sanford

Storm and Jerome Ashfield, two business associates

who were charged with attempted evasion of personal

income taxes. After a jury returned guilty verdicts

against each defendant, the trial court sustained

Storm's conviction, but ruled that the evidence against

Ashfield was insufficient and entered a judgment of

acquittal in his favor. On appeal, a careful examination

of the record leaves us satisfied that Storm’s conviction

should be affirmed. We are, however, compelled to

differ with the trial court’s weighing of the evidence

against Ashfield. While the record here, as with most

white-collar crimes, consists of a complex web of

inferential proof, we are persuaded that the evidence is

sufficient to support the jury's verdict against Ashfield.

We therefore reverse the judgment of acquittal for

Ashfield and affirm the conviction of Storm.

I.

Storm and Ashfield are the sole shareholders and

officers of National Talent Associates (NTA), a closely

held corporation that placed child models for

television, magazine and catalog advertising. NTA

essentially acted as a referral service for another, larger

talent agency. After locating interested parents by

direct mail, NTA would select suitable children, execute

a 5-year contract with the parents, photograph the

aspiring child model, and send the picture to the

Schuller Talent Agency, which would in turn accept

about one in twenty referrals, and arrange job

interviews for them. For this service, NTA charged a

one-time fee of $135 to $165 when the contract was

4a

Appendiz A

signed. Thereafter, NTA received a commission of 10%

of a child's earnings up to %1000, and 15% of any

additional earnings.

NTA established two corporate bank accounts. The

first, the management trust account, was the

repository for compensation paid by employers for the

work of the child models. From these payments, NTA

deducted its commission and sent a check for the

remainder to the client. NTA’s commission earnings

were then transferred to the second corporate account,

the operating account.

Within NTA’s operating account were various

categories such as commission income (the 10% or

15% fees transferred from the management trust

account), sales income (the %135 to 165 one-time

registration fee), and officers’ loans receivable (outlays

and repayments for personal expenses of Storm and

Ashfield).' All payments to the operating account were

credited as sales income, unless specifically designated

for deposit to some other category.

During an audit of NTA, the Internal Revenue

Service (IRS) discovered that between 1973 and 1975

almost *60,000 from the trust account was deposited

in the officers’ loans account and credited in equal

amounts to Storm and Ashfield as repayment of

personal loans. As a result of these loan repayments,

each defendant tn effect received 30,000 in dividends

that twice escaped taxation. Because the deposits were

never listed as income to NTA, no corporate tax was

paid on them, and because the deposits were never

reported as income to Storm and Ashfield, no personal

tax was paid on them.

1. Through this officers’ loans account, Storm and Ashfieid

borrowed from corporate funds to pay for such personal

expenses as rent, college tuition, tax bills, and even a

cemetery plot. App. at 526a-538a.

5a

Appendiz A

In April 1982, Storm and Ashfield were indicted on

eight counts of evading corporate and personal income

tax in 1974 and 1975. Six of the eight counts were,

however, dismissed as barred by the statute of

limitations, leaving only two counts in place: one count

each for Storm and Ashfield for attempted evasion of

personal income tax in 1975.7

At trial, the defendants did not contest that the

loan repayments had been incorrectly credited to them.

Rather, the defense asserted lack of “willfulness” on the

part of Storm and Ashfield. In particular, Storm

attempted to show through cross-examination of the

government's witnesses that the repayments were

erroneously recorded because of a mistake by NTA’s

accounting firm. Ashfield’s defense was that he had no

control over NTA's accounting practices and that he

was unaware of the errors. Neither Storm nor Ashfield

took the stand, and no other witness testified on behalf

of the defense.

On February 9, 1983, the jury returned a guilty

verdict against each defendant. But on April 11, 1983,

the district court granted a motion for acquittal of

Ashfield, ruling that “reasonable minds could not have

concluded that all of the elements of the crime charged

were established beyond a reasonable doubt....” App. at

44a. The district court, however, left in place the jury's

guilty verdict against Storm, and on May 19, 1983,

sentenced him to 90 days imprisonment, three years

probation, and a *5000 fine. Timely appeals were filed

by Storm, by the government (appealing Ashfield's

2. Specifically, Count 1 of the indictment alleged that Storm

“did knowingly and willfully attempt to evade and defeat a

large part of the income tax due and owing by him to the

United States for calendar year 1975 ... [ijn violation of Title

26, United States Code, Section 7201.” App. at 19a. Count 2

alleged the same crime by Ashfieid. App. at 20a.

6a

Appendiz A

acquittal) and by Ashfield (defensively cross-appealing

the trial court's denial of his motion for a new trial).

Although both defendants assert that the district

court committed errors requiring us to order a new

trial, the central issue before us ts the sufficiency of the

evidence against Storm and, particularly, against

Ashfield. Because a ruling that the proof adduced at

trial was inadequate would be dispositive of both of the

defendants’ appeals, we consider that issue first.

A.

To establish guilt of tax evasion under 26 U.S.C.A.

8 7201 (West Supp. 1983), the government must show:

(1) the existence of a tax deficiency, (2) an affirmative

act constituting an attempted evasion of payment of

taxes, and (3) willfulness. Sansone v. United States,

380 U.S. 343, 351 (1965). Neither Storm nor Ashfield

challenge the proof of the first two elements of the

crime; they contest only the proof of the last element --

willfulness.

For purposes of 8 7201, willfulness is defined as

the voluntary, intentional violation of a known legal

duty. See U.S. v. Pomponto, 429 U.S. 10, 11-13 (1976)

(per curiam); U.S. v. Bishop, 412 U.S. 346, 359-60

(1973). Willfulness may, however, be inferred from

circumstantial evidence. The Supreme Court has made

clear that willful tax evasion may be proven by a

consistent pattern of underreporting large amounts of

income and by the taxpayer's failure to include all his

income on his books and records. Holland v. U.S., 348

U.S. 121, 139 (1954). See Sptes v. U.S.. 317 U.S. 492,

499 (1942). Likewise in this circuit, we have repeatedly

held that repetitious conduct resulting in

underpayment of taxes may be sufficient to show

willfulness. U.S. v. Alker, 260 F.2d 135, 148 (3d Cir.

7a

Appendia A

1958) (“consistent understatement [of tax liability) is

evidence of wiilfulness”); U.S. v. Frank, 245 F.2d 284,

287-88 (3d Cir. 1957) (proof of a consistent pattern of

underreporting “is itself enough” to sustain a jury

finding of willful tax evasion). See also U.S. uv.

Greenlee, 517 F.2d 899, 903 (3d Cir. 1975) (“a two year

pattern of derelictions ... [is] itself indicative of the

willfulness.”). Recently, our Court reversed a decision

to acquit an accused tax evader, holding that the

evidence was sufficient given the proof of a long-run

pattern of reporting at variance with the taxpayer's

defense, the substantiality of the sums the taxpayer

failed to report, and the number of times taxpayer

received income checks he claimed to have forgotten.

U.S. v. Doan, 710 F.2d 124, 126 (3d Cir. 1983).

Obviously, these decisions pertaining to the

permissible scope of a jury’s inferences from

circumstantial evidence are necessarily fact-intensive

and therefore not subject to easy generalization.

Nonetheless, it is clear that a jury may find a

defendant's tax evasion was willful wholly on the basis

of inferential proof.

In the case at hand, the jury was carefully

instructed on the meaning of willfulness. The court

explained that

in this case the attempt to evade or defeat the tax

must be a willful attempt, that is to say it must be

an attempt made voluntarily and intentionally and

with specific intent to keep from the government a

tax imposed by the income tax laws which it was

the legal duty of the defendants to pay to the

government and which the defendants knew it was

their legal duty to pay.

App. at 895a. Having heard this definition as well as

seven days of testimony, the jury found that both

Ashfield and Storm were guilty of the crime charged in

8a

Appendix A

their indictment -- that is, that they “did knowingly

and willfully attempt to evade and defeat a large part of

the income tax due and owing ... to the United States.”

App. at 89la; see App. at 892a, 910a-91 la.

Given those verdicts, the trial court's ruling on the

sufficiency of the evidence was governed by strict

principles of deference to a jury's findings. In deciding

whether to grant the motions for acquittal, the trial

court was required to view the evidence in the light

most favorable to the prosecution and to draw all

reasonable inferences therefrom in the government's

favor. See Glasser v. U.S., 315 U.S. 60, 80 (1942); U.S.

v. Jannotti, 673 F.2d 578, 598 (3d Cir. 1982) (in banc).

Viewing the evidence in this light, the trial court was

obliged to uphold the jury’s verdict unless no rational

jury could conclude beyond a reasonable doubt that the

defendants willfully attempted to evade their tax

obligations. See Burks v. U.S., 437 U.S. 1, 16-17

(1978); Doan, supra, 710 F.2d at 127; Jannottt, supra,

673 F.2d at 598.

In our review of the sufficiency of the evidence, we

must apply the same standard of deference to the jury's

findings. See Burks, supra, 437 U.S. at 17; U.S. v.

Dixon, 658 F.2d 181, 188 (3d Cir. 1981). Thus, we

must independently re-examine the record and

determine as a matter of law whether the evidence

could support an inference of guilt beyond a reasonable

doubt. See Jannottt, supra, 673 F.2d at 598. Our task

is not to decide what we would conclude had we been

the finders of fact; instead, we are limited to

determining whether the conclusion chosen by the

factfinders was permissible.

After hearing argument on Storm's motion for

acquittal, the district court announced that “there was

more than ample evidence in the record to justify the

9a

Appendix A

jurors in determining and assessing guilt of Mr. Storm

beyond a reasonable doubt.” App. at 994. We agree.

As the officer in charge of NTA’s bookkeeping,

Storm was responsible for producing the financial

records which were in turn used by NTA’s accounting

firm to prepare the corporation's tax returns. App. at

174a, 234a. Most importantly, Storm’s bookkeeping

duties included the task of filling out the internal

deposit slips. These slips designated the source of

money being deposited in NTA’s operating account and

the particular category of the operating account -- such

as officers’ loans or commission income -- to which the

money was to be credited. App. at 240a, 242a, 337a,

342a. Under NTA’s accounting practices, unidentified

deposits were treated as sales income. App. at 241a.

The accountants could not credit a deposit to any

category other than sales income without an express

designation on the internal deposit slip or specific

instructions from Storm himself. App. at 244a-45a,

342a, 419a, 42la, 436a. Consequently, any deposit

credited as a repayment to the officers’ loans account

had to be requested -- directly or indirectly -- by Storm.

Between 1973 and 1975, a series of repayments to

the officers’ loan account followed a consistent pattern.

In 1975, checks for 20,000 and $8,000 were drawn

from the management trust account and deposited in

the operating account as officers’ loan repayments,

divided equally between Storm and Ashfield. App. at

482a, 647a, 730a. In 1974, by the same procedure,

9,000 and then %6,000 from the trust account were

credited as loan repayments. App. at 526a, 660a, 662a,

665a. Likewise in 1973, $6,500 and then $10,000 were

transferred from ‘he trust account to the loan account.

App. at 661a-65a. For three consecutive years, there-

fore, the same method was used to understate the

corporate income of NTA and the personal income of

the defendants. |

10a

Appendiz A

In view of Storm's control of the NTA books and

especially the designation of deposits to the officers’

loan account, a rational jury could conclude beyond a

reasonable doubt that the three-year pattern of

misreported loan repayments was the product of a

voluntary and intentional effort by Storm to evade

payment of taxes. When we consider, in addition,

certain other inculpatory facts, we must conclude that

the evidence against Storm rises well above the level

necessary to sustain a guilty verdict. Storm had taught

accounting, App. at 686a, and accordingly there can be

little question that he understood the implications of

crediting a deposit as an officers’ loan repayment.

More significantly, there is evidence that Storm sought

to conceal the records pertaining to the management

trust account and thereby evinced consciousness of the

impropriety of using commission earnings to repay

officers’ loans. Before the IRS audit, none of NTA’s

accountants knew of the management trust account or

of the separate ledger maintained for it. App. at 325a,

331a. When the IRS served a summons on NTA

requesting all financial records, Storm produced no

document containing any reference to the trust

account and, through his attorney, claimed that the

production was complete. App. at 689a-90a. Placed

alongside the other evidence, this evidence of

attempted concealment by a person trained in

bookkeeping confirms that the district court properly

denied Storm's motion for acquittal.

C.

Less compelling is the evidence against Ashfield

because, in contrast to Storm, he did not directly

participate in preparing NTA’s bookkeeping entries.

Nevertheless, viewing the evidence in the light most

favorable to the government, as we must, we believe

that the record was sufficient to sustain the jury's

guilty verdict against Ashfield.

lla

Appendix A

The district judge reached the opposite conclusion

in a brief oral opinion that relies on U.S. v. Forrest, 620

F.2d 446 (5th Cir. 1980).* By focussing on the Forrest

case, the district judge intimated his concern that

Ashfield was convicted merely on the basis of his close

business association with Storm. In Forrest, the Fifth

Circuit held that a wife's guilty knowledge could not be

inferred simply from the fact that she was married to

the kingpin of a large-scale illegal operation. 620 F.2d

at 451. The Forrest court emphasized:

That one is married to, associated with, or in the

company of a criminal does not support the

3. The district court's analysis of the record consisted of the

following statement:

I am not going to recite chapter, line and verse of the evidence

that bore upon the knowledge, the intent, the guilt, if you

will, of Mr. Ashfield. It has been amply explored here by both

counsel.

The Court realizes also that it does not sit as a super jury to

retry this case and [sic] if the jury had not rendered its

verdict. Whether or not I would reach a different result as the

trier of the facts is not the standard, and the [U.S. v.]Gross|,

375 F. Supp. 971 (D.N.J. 1974)] and Curley [v. U.S., 160

F.2d 229 (D.C. Cir. 1947)] test which I have described here

makes that clear.

However, based upon what I consider to be well-reasoned

precedent in United States v. Forest |sic], (620 F.2d 446 (5th

Cir. 1980)], which I have cited earlier, I determine that giving

indeed due regard to all of the functions of the jury here as

the triers of the fact and the drawers of legitimate inferences,

reasonable minds could not have concluded that all of the

elements of the crime charged were established beyond a

reasonable doubt as to the defendant Ashfield.

The record and the evidence which might have served as a

source for the jury's verdict in that respect was insufficient to

permit the jury’s verdict based upon that high standard and

burden of proof.

Accordingly, this Court will enter a judgment of acquittal

with regard to the defendant Jerome Ashfield.

App. at 44a-45a.

12a

Appendix A

inference that that person is a criminal or shares

the criminal’s guilty knowledge.

Id. (footnotes omitted). We do not take exception with

this statement; rather we believe that the evidence of

Ashfield’s participation in a tax evasion scheme goes

well beyond a mere professional association with

Storm.

Between 1973 and 1975, Ashfield borrowed

$29,000 of corporate funds and spent it for such

personal expenses as tuition payments for his child at

Rider College and individual income tax payments to

the IRS. App. at 532a, 534a. For a person whose

maximum reported income during this three-year

period reached approximately $41,000 in 1975, App. at

675a, these loans from NTA were not negligible. The

jury could reasonably infer that Ashfield was aware of

his substantial personal indebtedness to the

corporation.

To repay this debt legally, Ashfield should have

deposited funds from his personal, after-tax income in

NTA’s operating account and designated these deposits

as repayments to his loan account. Ashfield did this

only once, however, during the period 1973-75. In

1975, he endorsed a $4,000 salary check -- from which

tax had been withheld -- and deposited it as a loan

repayment. App. at 750a-5la. From this evidence, a

rational jury could infer that Ashfield knew the proper

method to be employed in repaying his loans from NTA.

In contrast to this one legal repayment of 4,000,

the record shows that from 1973 to 1975 seven

deposits totalling almost *60,000 were transferred

from the trust account and credited one-half to

Ashfield as loan repayments. App. at 674a-82a. This

repetition of a particular transaction whereby

corporate funds were used to repay the officers’

persona! debts would support an inference that the

13a

Appendiz A

deposits were being misreported by plan, not by

accident. The question left open by this pattern of

misreporting is whether Ashfield willfully participated

in the arrangement, either by affirmative act or by tacit

approval.

When we consider the record as a whole, we are

persuaded based on the inferential proof that a jury

could rationally conclude beyond a reasonable doubt

that Ashfield at least tacitly approved of his fellow

officer's tax evasion scheme. The record links Ashfield

to one of the series of transactions by which the tax

evasion scheme was implemented. In 1973, Ashfield

wrote a %6,500 check on the trust account and

deposited it in the operating account as a loan

repayment, equally divided between him and Storm.

App. at 661la. Each of the other six transfers of NTA

income from the trust account to the officers’ loan

account during 1973-75 were evenly divided between

Ashfield and Storm. Since nothing in the evidence

indicates that NTA’s accounting system ordinarily

required the officers to repay their loans in equal and

simultaneous sums, the jury could infer that the loan

repayments were being shared intentionally. It seems

improbable that Ashfield’s business associate wouid be

so scrupulously honest about splitting the profits of

the tax evasion scheme if Ashfield were unaware of its

existence. This inference is strengthened by the

evidence that these loan repayments permitted

Ashfield to escape a substantial proportion of his

personal income tax during 1973-75, rising from

nineteen per cent in 1973, to twenty per cent in 1974,

and to thirty-six per cent in 1975. App. at 676a, 678a,

682a. These do not appear to be the sort of

insignificant amounts that an experienced business

executive would easily overlook.

Our review of this evidence is further influenced by

Ashfield’s substantial role in the management of a

l4a

Appendix A

successful enterprise. Since its incorporation in 1969,

Ashfield was a fifty per cent shareholder and one of the

two officers of NTA, a firm that realized gross income

exceeding %452,000 in 1975. App. at 608a. As the

corporation's vice president, Ashfield’s responsibilities

included supervising NTA’s pension plan and

investments. App. at 336a, 768a. Moreover, although

Ashfield did not prepare NTA’s bookkeeping records, he

did attend financial meetings with the accountants.

App. at 190a-9la, 324a-26a. At none of the meetings

did he disclose the existence of the trust account. When

he filled out a tax preparation questionnaire from the

firm's accountants, Ashfield certified that there was no

income other than that disclosed on the records of

NTA’s operating account. App. at 296a-98a, 764a-65a.

When Ashfield’s managerial and ownership role at

NTA is viewed alongside all the evidence of his

profitable involvement with the officers’ loan account,

we believe that the record is adequate to support a jury

finding that Ashfield willfully participated in a tax

evasion scheme. The district court’s judgment of

acquittal must therefore be reversed. We do not ,

however, mean by this holding to foreclose the district

court from reconsidering Ashfield’s motion for a new

trial. The district judge denied that motion “for the

record,” App. at 45a, without stating his reasons and

immediately after granting Ashfield an acquittal.

Consequently, his ruling may perhaps have been

premised on the view that the acquittal mooted the

motion for a new trial. Given our decision today, and

the fact that the district judge's focus on U.S. v.

Forrest, 620 F.2d 446 (5th Cir. 1980), may indicate his

concern that the jury's deliberations were tainted by

the spillover effect of evidence against Storm, we

expressly leave open to the district court, in its

discretion, the option of considering a renewed motion

15a

Appendix A

for a new trial of Ashfield. Cf. U.S. v. Dixon, 658 F.2d

181, 193 (3d Cir. 1981).

Il.

Having determined that the evidence was

sufficient to support the guilty verdicts rendered

against both defendants, we turn to Storm and

Ashfield's* assertion that during their trial the district

court committed reversible error.

A.

The defendants claim that the district court

erroneously excluded a hearsay statement suggesting

that the misreporting of income occurred by mistake.

Specifically, the defense sought at trial to establish that

Irwin Giblen, owner of NTA’s accounting firm (Giblen &

Co.), had characterized the treatment of the loan

repayments as an “accounting error.” Because Giblen

died prior to trial, this comment could be admitted only

as a “statement against interest” under Fed. R. Evid.

804(b)\(3). After a special hearing on admissibility, the

trial court ruled that this comment, at least as recalled

by accountant Donald Smith, was not a statement

against interest and was therefore inadmissible

hearsay. Storm and Ashfield contend that this ruling

constitutes an incorrect application of the rules of

evidence.

4. Most of Ashfield's brief is devoted to arguing that the district

court correctly granted his motion for acquittal. Ashfield also

argues, however, that if we reverse the judgment of acquittal,

we should order a new trial because of purported trial errors

of the district court. On these issues, Ashfield’s brief

incorporates the arguments pressed in Storm's brief, except

for one claim based on newly discovered evidence. See Part

IV, infra.

16a

Appendix A

At the hearing held to determine the admissibility

of the Giblen hearsay statement, Smith testified that

prior to meeting with an IRS agent to discuss the

investigation, he received instructions from Giblen as

to “how to deal with the revenue agent.” App. at 441a.

Smith at first maintained that Giblen told him to say

“an accounting error had been made,” and that “an

accountant had made a mistake.” App. at 439a. But on

cross-examination, Smith conceded that the

“accounting error” explanation “may well have come

from either Mr. Storm or Mr. Ashfield,” App. at 446a,

and finally acknowledged that no one other than Storm

and Ashfield “would know whether there was an error.”

App. at 449a.

Following this hearing, the trial court found that

“basically ... [Giblen’s statement] is a position that is

go:ng to be taken with the IRS.” App. at 453a. More

importantly, the judge found that the statement was

“not one which Mr. Giblen was necessarily adopting or

endorsing or vouching for as being true.” App. at 455a.

Based on these findings, the court determined that

Giblen’s statement was not a statement against

interest “either of himself or his company.” App. at

453a.

Rule 804(b)(3) provides that an out-of-court

statement by an unavailable witness is admissible if it

was

at the time of its making so far contrary to the

declarant’s pecuniary or proprietary interest, or so

far tended to subject him to civil or criminal

liability ... that a reasonable man in his position

would not have made the statement unless he

believed it to be true.

Thus, an essential predicate for applying this rule

is that the hearsay be objectively contrary to the

17a

Appendix A

declarant’s interest. In the case before us, the district -

court concluded that this prerequisite was lacking.

Because, in the court’s view, Giblen failed to “adopt{] or

endorsie] or vouch{] for” the explanation, his statement

was not objectively contrary to his interest and

therefore did not satisfy Rule 804(b)(3)’s threshold

requirement.

Reviewing this determination under the abuse of

discretion standard, we are satisfied that the trial court

properly exercised his discretion in excluding the

Giblen hearsay. Two factors undergird our conclusion.

First, Giblen’s comment was so general that it never

expressly assumed responsibility by a Giblen & Co.

accountant: no accountant was named and no

particular error was identified.* Second, Giblen made

his statement after his firm had begun to act as a

representative of Storm and Ashfield in the IRS

investigation. Giblen seems to have been serving as a

conduit for defenses suggested by his clients.

The defendants have suggested that the trial

judge’s exclusion of this hearsay is at odds with his

decision to admit another Giblen hearsay statement.

Allen Stockelberg, the second-in-command at Giblen &

Co., was permitted to testify about Giblen’s comments

after an evidentiary hearing at which he reported

Giblen as saying “we had fouled up.” App. at 207a.° As

we view this statement, it differs substantially from the

excluded comments in that it approaches a direct and

5. Indeed, despite all the testimony by accountants, no

accounting error was ever identified at trial. Moreover, the

Giblen & Co. accountant who actually worked on NTA's books

during 1973-75, Maurice Fleinblatt, told Smith that no error

was made. App. at 447a.

6. Before the jury, however, Stockelberg testified that Giblen

had said the loan repayments “should have been handled

differently.” App. at 365a.

18a

Appendix A

personal assumption of responsibility by Giblen & Co.'s

owner. Certainly the distric: judge acted within his

discretion in admitting this statement while excluding

Donald Smith's recollection of Giblen’s other

comments.

Storm and Ashfield also argue that the district

court erred in refusing to grant a mistrial in order that

the law firm representing Storm could withdraw from

the case and one of its attorneys could take the stand.

The defendants assert that the significance of the

lawyer's testimony was not apparent until the

government surprised them at trial with unexpected

evidence that the lawyer could rebut and that the

court’s decision not to grant a mistrial effectively

deprived them of their right to present a complete

defense.

The issue arose when, at trial, an IRS special agent

testified about a September 1978 meeting with Storm

and his attorney, Jerome Miller. Storm was supposed

to produce all of NTA’s financial records for 1973-75,

and, according to the special agent, Storm claimed that

he had indeed produced all the documents required by

the IRS summons. The IRS later discovered, through

NTA’s bank, that records for the management trust

account were not produced, and this discovery

ultimately led to the uncovering of the illegal loan

repayments.

When the testimony regarding the missing

documents was introduced, Storm moved for a

mistrial. Storm argued that because Miller's law firm

represented him at trial, and because Disciplinary

Rules 5-101 and 5-102 of the Model Code of

Professional Responsibility (1979) prevented Miller

from testifying in a case in which his firm acted as

19a

Appendix A

counsel, a mistrial was necessary to permit Storm to

retain new counsel and to put Miller on the stand to

impeach the special agent’s report of the September

1978 meeting. The trial court refused to grant a

mistrial, declaring that Storm's attorneys had “fully

discharged their obligation” and that they fell under an

exception to the rule because they were “now so

completely immersed in this case” that they would

“surely [provide] the most effective representation.”

App. at 628a-629a. Despite these assurances from the

judge, the defense chose not to call Miller to the stand.

The district court's decision not to order a new trial

because of this development was proper for two

reasons. First, assuming for the moment that Storm

was indeed surprised at trial by the special agent’s

testimony, the district court properly invoked an

exception to the disciplinary rules. Although ordinarily

a lawyer must withdraw from representation of a client

when “it is obvious that ... a lawyer in his firm will be

called as a witness on behalf of his client,” Model Code,

supra, DR 5-102(A), the Model Code permits an

attorney to continue “[als to any matter, if refusal

would work a substantial hardship on the client

because of the distinctive value of the lawyer or his firm

as counsel in a particular case.” Id. at DR 5-101(B). We

agree with the district court that in view of the

longtime involvement of Miller's law firm, both in the

IRS investigation and in the trial preparation, the

firm's withdrawal would have worked a “substantial

hardship” on Storm.

Second, and more importantly, the record

demonstrates that the defense knew the September

1978 meeting might well be brought up at trial. Far

from being a “booby trap” -- the term used in Storm's

brief -- the testimony by the IRS special agent was

brought to the defense’s attention with adequate time

to prepare a response. Well before trial, the government

20a

Appendiz A

sent the special agent's memorandum of the

September 1978 meeting to the defense as part of the

Brady production. Once again during pretrial

evidentiary rulings, the government moved to

introduce Miller's statement during the September

1978 meeting as an adoptive admission of Storm. In

light of these early warnings, we believe the

government fairly characterizes Miller's failure to

testify as a “tactical decision.”

The defendants argue that they should have been

specifically put on notice about the special agent's

testimony on three other occasions: (1) when the

prosecution moved to disqualify Miller's law firm; (2)

when the prosecution moved for admission of a

memorandum containing statements by Miller about

the document production; and (3) when the

prosecution agreed with Storm to stipulate to

admission of NTA financial records without calling a

document custodian. But this catalog of purported

“concealment” by the government simply reaffirms the

conclusion that, despite Miller's extensive involvement

in the IRS investigation, and despite the innumerable

points on which he could have testified, the defense

intentionally chose to keep Miller's firm in the case.

The September 1978 meeting was anything but an

isolated “booby trap”; the prosecution's evidence was

replete with such encounters, a fact the defense well

knew. Having made the decision to use Miller's firm

nonetheless, the defense is not persuasive in its

contention that we should order a new trial to be

conducted by other counsel.

C.

Storm and Ashfield’s final claim of trial error arises

from a statement by the prosecutor that they insist

constitutes a comment on the defendants’ failure to

2la

Appendiz A

take the stand. In his rebuttal summation, the

Assistant United States Attorney stated:

Sure trust accounts are common in business.

There is nothing wrong with having a trust

account. It is part and parcel of a business where

you have client income. You heard no explanation

of the reason why it was necessary to keep such a

trust account secret except to avoid payment of

taxes.

App. at 872a. Defense moved for a mistrial and curative

instruction, but the judge ruled that “I didn’t find

anything offensive” and “I don't feel there is the

likelihood of the jury drawing an improper inference.”

App. at 874a-875a. The judge gave only the standard

cautionary instruction about not drawing inferences

from a defendant's failure to testify.

In the circumstances of this case, we do not believe

this comment required a mistrial. The “explanation”

for the secrecy could have come from a number of

witnesses. Trust accounts were discussed at length in

the testimony of several Giblen & Co. accountants and

a talent agency employee, and an explanation for the

secrecy surrounding NTA’s trust account could have

been extracted from them if the defense so chose.

Thus, when the prosecution asked rhetorically why no

explanation was proffered, the question might just as

well have referred to persons who took the stand. Since

it was far from clear that the prosecutor's statement

referred to the defendants, we believe that the judge

acted within the proper scope of his discretion in

refusing a mistrial.

IV.

On behalf of Ashfield alone, it is asserted that the

district judge erroneously denied a post-verdict motion

for a new trial based on the discovery of an

22a

Appendix A

accountant’'s workpaper containing the notation “7500

- each officer was withdrawn to personal name from

escrow account.” According to Ashfield, the discovery

of this document required a new trial because the

notation proved that NTA’s accountants knew of the

existence of the management trust account, and

therefore supported the claim that the underpayment

of taxes resulted from an accounting error. To prevail

on a motion for a new trial based on newly discovered

evidence, a defendant bears the heavy burden of

establishing five requirements: the evidence must be

newly discovered; facts must be alleged from which the

court may infer diligence on the part of the movant; the

evidence must not be merely cumulative or

impeaching; it must be material to the issues; and it

must be such that, on a new trial, it would probably

produce an acquittal. U.S. v. Rocco, 587 F.2d 144, 146

(3d Cir. 1978). We have carefully considered the

document as well as the record on the basis of this

exacting standard. In view of Ashfield’s limited

showing of diligence and failure to demonstrate that

this new evidence would probably produce an

acquittal, we are satisfied that the district judge

properly exercised his discretion in refusing Ashfield a

new trial on the ground of this newly discovered

document.

J

The judgment of conviction against Storm will be

affirmed. The judgment of acquittal in favor of Ashfield

will be reversed, and Ashfield’s case will be remanded to

the district court for action consistent with this

opinion.

23a

A ppendiz A

A True Copy:

Teste:

Clerk of the Untted States Court of Appeals

Sor the Third Circutt

24a

APPENDIX B

(Filed—May 12, 1983)

Judgment and Probation Commitment Order dated

May 10, 1983, and Conditions of Probation and

Order of Release dated May 10, 1983, attached

thereto

Received: Allyn Z. Lite, Clerk, the District of New

Jersey. May 12, 1983. 11:18 A.M. Docket No. CR.

82-125.

Defendant: Sanford Storm.

Counsel: With counsel, Howard Cohen, Esquire.

Plea: Not guilty.

Finding and Judgment: Guilty on count 7 of original

indictment (count 1 of redacted indictment). Defend-

ant has been convicted as charged of the offense of

income tax evasion, 26: 7201.

Sentence or Probation Order: The court asked whe-

ther defendant had anything to say why judgment

should not be pronounced. Because no sufficient cause

to the contrary was shown, or appeared to the court,

the court adjudged the defendant guilty as charged

and convicted and ordered that: The defendant is

hereby committed to the custody of the Attorney Gen-

eral or his authorized representative for imprisonment

for a period of two (2) years; and on condition that

the defendant be confined in a jail-type or treatment

institution for a period of ninety (90) days, the exe-

cution of the remainder of the sentence of imprison-

ment is hereby suspended and the defendant placed

on probation for a period of three (3) years to com-

mence upon the defendant’s release from confinement.

25a

Appendiz B

Special Conditions of Probation: Ir 1s FurrHer Orperep

that the defendant be fined $5,000. and that said fine

be paid within (9) months from this date or stand

committed.

FurtHer Orperep the defendant is to submit financial

records to the probation office as requested particu-

larly income tax returns.

FurrHer Orperep the execution of sentence be stayed

pending appeal.

Dated: May 10, 1983

/s/ Joun W. BIssEL,

U.S.D.J.

26a

Appendix B

ConDITIONS OF PROBATION

UNITED STATES DISTRICT COURT

For the District of New Jersey

Docket No. Cr. 82-00125-01

To: Sanford Storm.

Address: 101 W. Lindsley Road, Cedar Grove, New

Jersey.

In accordance with authority conferred by the United

States Probation Law, you have been placed on pro-

bation this date, May 10, 1983, for a period of three

years by the Hon. John W. Bissell, United States Dis-

trict Judge, sitting in and for this District Court at

Trenton, N.J.

It is the order of the Court that you shall comply

with the following conditions of probation:

(1) You shall refrain from violation of any law

(federal, state, and local). You shall get in touch

immediately with your probation officer if arrested

or questioned by a law-enforcement officer.

(2) You shall associate only with law-abiding

persons and maintain reasonable hours.

(3) You shall work regularly at a lawful occu-

pation and support your legal dependents, if any,

to the best of your ability. When out of work

you shall notify your probation officer at once.

You shall consult him prior to job changes.

27a

Appendiz B

(4) You shall not leave the judicial district with-

out permission of the probation officer,

(5) You shall notify your probation officer im-

mediately of any change in your place of residence.

(6) You shall follow the probation officer’s in-

structions.

(7) You shall report to the probation officer as

directed.

The special conditions ordered by the Court are as

follows: Committed to the custody of the Attorney Gen-

eral for two years, and on condition that the defendant

be confined in a jail-type institution for 90 days, the

execution of the remainder of the sentence of imprison-

ment is hereby suspended and defendant placed on pro-

bation for 3 years to commence upon release from con-

finement. Fine of $5,000 to be paid within 9 months

or stand committed. Special Condition: To submit fi-

nancial records to the probation office as requested, par-

ticularly income tax returns. You shall carry out all

rules, in addition to the above, as prescribed by the Chief

U.S. Probation Officer, or any of his associate Proba-

tion Officer.

I understand that the Court may change the condi-

tions of probation, reduce or extend the period of pro-

bation, and at any time during the probation period or

within the maximum probation period of 5 years per-

mitted by law, may issue a warrant and revoke proba-

tion for a violation occurring during the probation

period.

28a

Appendiz B

I have read or had read to me the above conditions

of probation. I fully understand them and I will abide

by them.

/s/ Ilegible

Probatiouer

Dated: May 10, 1983.

You will report as follows:

Mail written reports on the last day of the month

to the U. S. Probation Office, 100 Hamilton Plaza,

Post Office Box 2097, Paterson, N.J. 07509.

/s/ Illegible

U.S. Probation Officer

Dated: May 10, 1983.

29a

Appendix B

ORDER OF RELEASE

UNITED STATES DISTRICT COURT

For the District of New Jersey

Crim. No. 82-125

L-

—_

UNITED STATES OF AMERICA

VS.

SANFORD STORM

_.

a

It is, on this 10th day of May, 1983, Orprrep:

That bail be fixed at $10,000 and the defendant be re-

leased upon:

a. Executing an unsecured appearance bond.

b. Executing an appearance bond and depositing

in cash in the Registry of the Court % of the

bail fixed.

ce. Executing an appearance bond with approved

sureties, or the deposit of cash in the full amount

of the bail in lieu thereof, without 10% cash al-

ternative.

It is further Ordered that the Clerk furnish to the

defendant a copy of this order and a notice of the penal-

ties applicable to violation of conditions of release.

/s/ John W. Bissell

U.S. D. J.

30a

Appendix B

I hereby certify that the defendant was furnished (per-

sonally—by mail) a copy of this Order and a Notice of

Penalties Applicable To The Violation of Conditions of

Release.

John T. O’Brien

Deputy Clerk

3la

APPENDIX C

Applicable Provisions of the United Staies Constitution and

Other Authorities

Firth AMENDMENT AND SIxtH AMENDMENT OF THE

Unitrep States CoNSTITUTION

Constitutional Amendment Involved:

AMENDMENT V

No person shall be held to answer for a capital,

or otherwise infamous crime, unless on a present-

ment or indictment of a Grand Jury, except in

cases arising in the land or naval forces, or in

the Militia, when in actual service in time of War

or public danger; or shall any person be subject

for the same offense to be twice put in jeopardy

of life or limb; or shall be compelled in any crim-

inal case to be a witness against himself, nor

be deprived of life, liberty, or property. without

due process of law; nor shall private property be

taken for public use, without just compensation.

CJOF OY LE Re, LEG | ESE ae Ce ee 7

AMENDMENT VI

In all criminal prosecutions, the accused shall

enjoy the right to a speedy and public trial, by an

impartial jury of the State and district wherein

the crime shall have been committed, which district

shall have been previously ascertained by law, and

to be informed of the nature and cause of the

accusation; to be confronted with the witnesses

against him; to have compulsory process for ob-

taining witnesses in his favor, and to have the

Assistance of Counsel for his defence.

32a

Appendiz C

Revtevant Portions or ABA Covr or Proressiona, Re-

SPONSIBILITY :

Disciplinary Rules:

DR 5-101 (B) A lawyer shall not accept em-

ployment in contemplated or pending litigation if

he knows or it is obvious that he or a lawyer

in his firm ought to be called as a witness, ex-

cept that he may undertake the employment and

he or a lawyer in his firm may testify:

(1) If the testimony will relate solely to an

uncontested matter

(2) If the testimony will relate solely to a

matter of formality and there is no reason to

believe that substantial evidence will be offered

in opposition to the testimony.

(3) If the testimony will relate solely to the

nature and value of legal services rendered in the

case by the lawyer or his firm to the client.

(4) As to any matter, if refusal would work a

substantial hardship on the client because of the

distinctive value of the lawyer or his firm as

counsel in the particular case.

DR 5-102 (A) If, after understaking employment

in contemplated or pending litigation, a lawyer

learns or it is obvious that he or a lawyer in his

firm ought to be called as a witness on behalf of

his client, he shall withdraw from the conduct of

the trial and his firm, if any, shall not continue

representation in the trial, except that he may

continue the representation and he or a lawyer in

his firm may testify in the circumstances enumer-

ated in DR 5-101(B)(1) through (4).

33a

Appendix C

Ethical Considerations:

EC 5-9 Occasionally a lawyer is called upon to

decide in a particular case whether he will be a

witness or an advocate. If a lawyer is both counsel

and witness, he becomes more easily impeachable

for interest and thus may be a less effective witness.

Conversely, the opposing counsel may be handi-

capped in challenging the credibility of the lawyer

when the lawyer also appears as an advocate in the

ease. An advocate who becomes a witness is in the

unseemly and ineffective position of arguing his own

credibiliy. The roles of an advocate and of a witness

are inconsistent; the function of an advocate is to

advance or argue the cause of another, while that

of a witness is to state facts objectively.

EC 5-10 Problems incident to the lawyer-witness

relationship arise at different stages; they relate

either to whether a lawyer should accept employ-

ment or should withdraw from employment. Regard-

less of when the problem arises, his decision is to

be governed by the same basic considerations. It is

not objectionable for a lawyer who is a potential

witness to be an advocate if it is unlikely that he

will be called as a witness because his testimony

will relate only to an uncontested issue. In the

exceptional situation where it will be manifestly

unfair to the client for the lawyer to refuse em-

ployment or to withdraw when he will likely be a

witness on a contested issue, he may serve as advo-

eate even though he may be a witness. In making

such decision, he should determine the personal or

financial sacrifice of the client that may result from

his refusal of employment or withdrawal there-

34a

Appendiz C

from, the materiality of his testimony and the effee-

tiveness of his representation in view of his personal

involvement. In weighing these factors, it should

be clear that refusal or withdrawal will impose an

unreasonable hardship upon the client before the

lawyer accepts or continues the employment. Where

the question arises, doubts should be resolved in

favor of the lawyer testifying and against his

becoming or continuing as an advocate.

35a

APPENDIX D

Order for Stay of the United States Court of Appeals

of the Third Circuit with Attachment

UNITED STATES COURT OF APPEALS

For rue Tuirp Circuit

Nos, 82-5433, 83-5380 and 83-5384

—+

UNITED STATES OF AMERICA

vs.

JEROME ASHFIELD,

Appellant in Nos. 83-5344 and 83-5384

SANFORD STORM,

Appellant in No. 83-5380

Pursuant to Rule 41(b) of the Federal Rules of Appel-

late Procedure, it is ORDERED that issuance of the

certified judgment in lieu of formal mandate in the above

cause be, and it is hereby stayed until August 1, 1984.

Argus M. Apams

Cireuit Judge

Dated: June 22, 1984

36a,

Appendiz D

Office of the Clerk

UNITED STATES COURT OF APPEALS

for the Third Circuit

21400 United States Courthouse

Independence Mall West

601 Market Street

Philadelphia 19106

Satty Mrvos Telephone

Clerk 215-597-2995

June 22, 1984

Lawrence 8. Feld, Esquire

Kostelanetz & Ritholz

80 Pine Street

New York, New York 10005

Howard D. Cohen, Esquire

Gutkin, Miller, Shapiro & Selesner, P.A.

225 Millburn Avenue

Millburn, New Jersey 07041

Re: U.S.A., Appellant in No. 83-5344 vs. San-

ford Storm, Appellant in No. 83-5380 vs.

Jerome Ashfield, Appellant in No. 83-5384

Dear Counsel:

Enclosed herewith is a conformed copy of order filed

If during the period of the stay we receive notification

from the Clerk of the Supreme Court that a petition for

today staying the issuance of the mandate to August 1,

1984, in the above entitled cases.

37a

Appendix D

writ of certiorari has been filed, the stay shall continue

until final disposition by the Supreme Court.

Very truly yours,

Sally Mrvos, Clerk

By: Berry J. Ropinson

Betty J. Robinson

Deputy Clerk

Direct Dial

597-3134

ml

ec: Faith 8S. Hochberg, Esquire

Lawrence 8. Horn, Esquire