# Petition for Writ of Certiorari — Schipani v. United States

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1970
- **Citation:** 397 U.S. 922

## Text

.- FILED

UPREME COURT. U & | ae OCT 101969 |

3 : | JOHN F. DAVIS, CLERK.

©

In THE

Supreme Court of the United States

- Ocrcean TERM, 1969

4 5

° JOSEPH F. SCHIPANI, - %
Petitioner,

Vs.

UNITED STATES OF AMERICA,
_ Respondent.

$$

- PETITION FOR WRIT ‘OF CERTIORARI TO THE .-
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

Jacos P. Lerxowrrz
150 Broadway
New York, N: Y.

ABRAHAM GLASSER 7
52 Highth Avenue
New York, N. Y. 10014

Attorneys for Petitioner

Joseph F. Schipant

ee | é
Beier a JosePH F ScHIPANI, 3 .

, . ma

(due process and self incrimination), and the Sixth
Amendment (right of counsel and confrontation) of the
United States Constitytion. It also involves 26 U. S. C.
§7201 and 28 U.S. C. §1651.

10
- .

: Statement of the Case
1. Introductory ea

Petitioner seeks review ‘of a judgment of the United
States Court of Appeals for the Second Cireuit which af-
firmed a judgment of the United States District Court for
the Eastern District of New York (Weinstein, D.J.), after
a trial without a jury, convicting petitioner on five counts
of personal income tax evasion through failure to file re-
turns for the years 1956-1960, in violation of 96 U. S. C.
§7201, and senteneing him to three years on each count
to run concurrently plus committed fines of $2500 on
each count totalling $12,500. ns 7

This is the second time the case has been tried. The
first trial, before Judge Rosling, without a jury, resulted
- in a conviction and in imposition of the same sentence
now imposed; the Court of Appeals. affirmed the first-
trial conviction in United States v. Schipani, 362 F. 2d-
825 (C. A. 2, 1966); but this Court reversed, on grounds
of electronic taint (Schipani v. United States, 385 U. 8.
372, decided December 12, 1966). =

The case was tried in both trials on the “net worth”
theory. The defendant introduced no proof .at either
trial; he rested on the insufficiency: of the Government’s
proofs.

The Government’s proof of its “net worth” contentions
depended to an unusual degree—indeed, we think, to a
unique degree in this case as compared with any other
reported criminal prosecution in this country on the net
worth theory—on a voluminous and complex ‘process of
“inferences” claimed to ke derivable from “circumstantial
evidence”. There were no “leads” obtained from the de-
fendant. | | 3

ae ie ae
But now, in thege proceedings for review of the second
conviction there is an important difference concerning
the appellate. merits of those same net-worth-theory is-
sues, because Judge Weinstein found. it necessary to sup-
press a certain portion of the Government’s ' first-trial
proofs in view of: the circumstances of electronic taint
which led to the reversal by this Court in 1966 as ‘above
mentioned. Judge Weinstein suppressed: all proof of
“likely source” of taxable income during the prosecution
years (details infra). This meant that the Government
had to satisfy the test of United States v. Masset, 355
U. S. 595—“* * * should all possible sources of non-tax-
able income be negatived, there would be no necessity£or
proof of a likely source”—and Judge Weinstein con-\,
cluded the Government met this requirement.

This last makes it of next immediate pertinence to, men-
tion that Judge, Weinstein decided this second trial solely
on the same proofs the Government introduced in. the
first trial* (minus the suppressed “likely source” proofs),
The Government did introduce into evidence on this sec-
ond trial just one new item (testimony by FBI Agent |
Shedd, infra), but Judge Weinstein expressly declined to
givé probative consideration to this single new item.
Thus, one new; issue is whether the first-trial proof with-

out more, is sufficient for this second conviction, since
the first-trial proof is now stripped of any proof of
likely source. |

The reason why this problem of the sufficiency of the
proof in this second 'trial is so acute, is that (1) the Gov-
ernment’s whole indispensable proof of “opening net
worth” (as of the beginning of the first indictment year,

* The entire first-trial record was received in evidence here as
an exhibit.

- 12

1956) entailed both negating a pre-indictment period cash
hoard and negating that such hoard would have been suffi-
cient to account for the expenditures or the alleged “net
worth increases” during the indictment years, whereas
these proofs to negate eash hoard are- intrinsié

ally and_ notably insufficient, in this ease; and (2)

since “likely source” is out of this case, the Government’s
‘burden of negating cash hoard, and of establishing “open-
ing net worth”,. became increased in this ease to the de-
gree of the Massei test, supra (“all possible sources of
‘non-taxable income be negatived”).* = s

2. The, Electronic Taint Factor And The Second Trial.

After Schipani lost his previous appeal in the Court
of Appeals (362 F. 2d 825—decided June 29, 1966) he

petitioned for certiorari, and on November 7, }966 the vat
petition was denied (385 U. 8.934). Schipani was ready-
ing himself to begin serving his jail sentence when, near. :;

the end of November 1966, the Solicitor Lig ey
“Supplemental Memorandum For The United States”,’ a ot
copy of which is reproduced in Appendix F hereto, infra. f
The Solicitor General told this Court it had been dis-
covered that by reason of trespassory electronié activity
which “provided investigatory leads and other informa-
tion used in proceeding against petitioner [Schipani]”,
“fhere was material evidence against petitioner which
was tainted, his conviction eannot stand, and no purpose ©
would be served here in having the District Court con-
duct a collateral hearing * * *” (p. 3. of the Solicitor
General’s supplemental memorandum).
On Deceniber 12, 1966 this Court rendered the follow-
ing opinion per curiam (Schipani v. United States, 385
U. S. 372): . 5

* As noted in our Questions Presented, we are preserving these
issues as to sufficiency of proof in the event of granting of
certiorari.

Sa

ae

“Upon the suggestion. of the Solicitor General,
and upon an independent examination of the case,
the petition for a rehearing is granted, the ofder
of this Court denying certiorari is vacated, cer-
tiorari granted, the judgment of the United States

. Court of Appeals for the Second Cireuit is vacated

“~and the case is remanded to the United States Dis-
trict Court for the Eastern District of New York .
for a new trial should the Government seek to
prosecute petitioner anew.” (Emphasis supplied.)

Early in 1968 we were favored with word from the

* Government that they wanted to re-try Schipani because

a “Trial Attorney” in the Department of Justice in
Washington was eonvineed that the Solicitor General had
been “in error”. We quote from the affidavit of that
Washington Trial Attorney (dated May 1968) :

‘The’ United States of America by Expon F.
Hawtey, Trial Attorney, Criminal Section, Tax Di-
vision, Department of Justice represents to the
Court as follows that:

(1) Upon information and belief the evidence in

the defendant’s prior trial, which will be used on a
re-trial, is not and was not tainted and should not
be suppressed; further analysis and examination
by the Government of the evidence establishes that
the Solicitor General was in error, when he in-
formed the United States Supreme Court that
‘Since there was material evidence against peti-
tioner which was_4Minted, his conviction cannot
z stand * * ** (Soli€itor’s General Supplemental Mem-
orandum No. 504, October Term 1966). Although

- the Solicitor General stated to the Supreme Court
that conversations of the defendant were illegal-

14 y ae

ly and electronically monitored by the. FBI at a

place of business frequented by the defendant, none

of the conversations provided evidence or supplied

leads to evidence at defendant’s trial.” (Emphasis -
. in’original.) \'.

Our aforesaid venemel-sibtide to suppress was set for -.
hearing by Judge Weinstein. It was agreed by all con-
cerned that, in wiew of this Court’s ruling, the Govern-
ment had the burden “of proving that, its evidence is
not tainted” (Hawley affidavit, supra). Early in the re-
-newed suppression hearing it became apparent that fhe
Washington trial attorney who wanted this case re-tried
(Mr. Hawley) was quite in earnest in his contention that.
the case should be re-tried because the Solicitor General’ — -
was “in error”.* For, it appeared that Mr. Hawley wantél
to re-try this case not because he had found some new,
untainted evidence, independent of the first trial -record |
-eontents which this Court had independently examined |
and had unqualifiedly pronounced @tainted. Instead, it
,appeared that Mr. Hawley wanted to re-try this case
ecause that adjudicatedly tainted first trial record was
not tainted after all. At the outset of the new suppres-
sion hearing we pointed out to Judge Weinstein that the
Government was confronting the District Judge with. the
severe jurisdictional dilemma of in effect undertaking a;
———

* The Solicitor General himself has not been heard from con-
cerning any of this, neither the former Solicitor General (now
Mr. Justice Marshall) nor any successor. Even when thie time
came to ‘‘proye’’ just/how such ‘‘error’’ inside the Department
of Justice. had enmeshed the Solicitor General himself, the Gov-

ernment in the suppréssion hearing herein did not bother to call
even any junior employee of the Solicitor General’s offi¢e (de-

»

15

collateral “review” of the Supreme Court ruling (Tr.
5/6/68, pp. 12, 43), but the Court said, “I am not con-
cerned with what was before the Solicitor General and
IT am not coneérned with what the Supreme Court did”

“(id., p. 43). (Subsequently we briefed this same conten-

tion twice for the District Court, but without avail.)

In essence, the Government’s thrust, in the new suppres-
sion. hearing, was that each and every item of proof
needed to convict Schipani in the first trial could be traced
ultimately to a non-tainted source. An elaborate 31-page
chart entitled “Analysis Of The Sources Of The Proof”
(exhibit 1) had been prepared by I.R.S. agent Masetti,
the main investigative agent in the case, to substantiate
this contention. The Government also supplied the Dis-
ge Judge and defense counsel with copies of FBI logs

trespassory buggings at a location in New York City
( risco’s Travel Agency) where Schipani frequently vis-
ited during the investigative period in 1961; nine of these

logs: contained conversations by Schipani (exhibit 2);
- twenty-seven other logs contained conversations of other

persons referring to Schipani (exhibits 1A to 1Z). The
electronic monitoring covered by these logs extended from
January 16, 1961 to January 31, 1963. There had also
been electronic monitoring by the Alcohol and Tobacco
Tax Unit, but allegedly it produced no evidence (details
imfra).

The Government called Agent Masetti to the stand, —

several FBI agents, several agents of the Alcohol and
Tobacco Tax Unit who had participated in the Schipani
investigation, and two Department of Justice lawyers who
had worked on the ease (details infra). The theme of
all this testimony was supposed to be that nobody who
ever actually got any of the first-trial proof against Schi-

es re er aru

16

pani had any knowledge of the massive electronic, moni-
toring. According to the Government; every single in-
vestigator and Government lawyer. who prosecuted Schi-
. pani just did not know anything about the whole elec-
tronic business. Let us see:

The Government’s first witness at the new suppression
hearing was I.R.S. Agent Masetti.* Masétti testified con-
cerning Exhibit 1, which he had prepared or had par-
ticipated in preparing (54 et seq.). He stated that he had
no contemporaneous knowledge of the electronic activity ~
of the F.B.1. (57-58), and that he had never seen the logs
and did not know their contents. (112). He had “hear-
say” knowledge of the ATTU electronic surveillance (58) ;
he got no information from the ATTU electronic sur-
veillance concerning the Schipani case (112). It is. of
interest that Masetti also testified that the ATTU elec-
tronic surveillance “did not work”, according to his un-
derstanding (112). This is interesting because, as was
made perfectly clear by other witnesses (infra), at least
one of the two ATTU electronic installations did work
quite well,ethe claim of those other witnesses being that
they got no significant information. (We contended in the
Courts below that Masetti’s overstatement of the situa-

tion, in claiming he understood the ATTU installations
—did not work at all, casts suspicion on the good faith of
either Masetti himself or of whichever Government of-
ficials supposedly told him this, or on both Masetti and
those other officials.) ;

Masetti then went on to testify extensively as to the
sources of the evidence listed in Exhibit 1 (59 et seq.). As

*In the following description of the hearing testimony. we
shall be referring to transcripts, numbered from pages 1 to 688,
dated respectively May 6, 7, 8 and 9, 1968.

17

was to be expected, there was no electronic surveillance.
source for any of this evidence, according to Masetti. ©

However, Masetti in several instances admitted he got
information from the F.B.I. and saw F.B.I. files (64, 77,
96, 102, 103, 106). (We urged in the Courts below that
it is of utmost importance that Masetti thus apparently
had access to the F.B.I. files, which of course were sat-
urated with electronically obtajned information.)

Further as to Masetti’s dealings with ATTU, the Courts
below and the Government attached decisive importance

to certain alleged physical surveillance by ATTU which

supplied the so-called “money orders” leads that are
claimed to have “made” this case (details wnfra).* Maset-
yf testimony as to sources of his evidence in Exhibit 1 is
replete with such “money order” references (e.g., 66-75,
77, 84-86, 89-91, 94-102, 104-109, 114-122). We are not
overlooking that the ATTU witnesses (infra) denied in
the hearing that they got any significant information from
their own electronic installations. But, as we shall show
infra, the eredibility of this testimony is poor, and the
record hérein furthermore reveals strong likelihood that
the ATTU people got information from the F.B.1. in cir-
cumstances indicating taint. The Government never es-
tablished that the all-important “money order” leads are
free of electronic taint.

Tt is.to be noted also in connection with Masetti’s testi-
mony that he said his ‘initial investigative materials in-
cluded a memorandum from an I.R.S. Intelligence Agent

\

- *"ATTU physical surveillance spotted Schipani buying money
orders at a bank on July 17 and September 25, 1961 (the FBI’s
trespasssory electronic bugging had started in January 1961).
The money order ‘‘leads’’ in turn produced a mass of proof of
expenditures, ‘‘net worth’’ increases and ‘‘wilfulness’*

v
,

£

18

named Tarangelo (125-130). (Where, we ask, was Mr.
Tarangelo during this hearing? Why did not the Govern-
ment produce Tarangelo? The absénce of this i pe
leaves a gaping hole in the Government’s “showing”
this proceeding (imfra). )

Masetti also testified (136-137) (re Me canbeiey. that,
- with a Department of Justice letter turned over to him by
Tarangelo at the commencement of his investigation in
1961, he also received “miscellaneous notes” which “in-
eluded handwritten notes relative to inspection of files
of the F.B.1., a note in connection with checking through
on the Nareotics Bureau”. The Government did not ne-
gate in the hearing that those latter papers, which came
to Masetti apparently in March 1961 or later, were taint-
ed. True, Masetti also said (138) that the F.B.I. notes
he received referred to a report of October 10, 1960* and
were made on March 22, 1961 (the notes were introduced
in evidence herein as Exhibit 4); but the total picture
in regard to Masetti and his F.B.I. materials remains ex-
tremely unsatisfying.**

Masetti also testified that subsequently he asked for
and received additional F.B.I. information, from F.B.1.
Agent McShayne (144, 168-174, 197-198).

Further as to Tarangelo—who did not testify—Masetti
said he “probably” had talked to Tarangelo about the lat-
ter’s activities and information in this case (149-150).

* Which antedates the within FBI ‘‘bug’’ that started in Jan-
uary 1961 (138). The Government also claims a ‘‘clean’’ 1959
+ F.B.I. report (infra).

** Unsatisfying is hardly the word; see the description infra
of the November 1966: memorandum by Department of Justice
attorney ‘‘Dewey’’ O’Brien.

3
f an t

Sk
Sie

~@

ES rear if
. =

activities (405), and he made no “dissemination” of elec-
tronically obtained information to any other Federal
agency (405-406). McShayne said the F.B.I. had consider-
able information concerning Schipani prior to January
1961, when their bugging commenced (404-405). He was
shown Government’s xxhibit 9, an F.B.I. report or memo-
randum of October 10, 1960, which contained references
to Gurney’s Inn and to Schipani’s son’s wedding; this ex-
hibit, MeShayne said, contained nothing derived from any
electronic source (407-409). He insisted that in-his con-

ferences with I.R.S. and ATTU representatives he gave:

them only innocuous “background” information (409-410).
It was never made clear hy McShayne just how he han-
dled the allegedly taint-free Exhibit 9 items as distinct
from subsequent F.B.I. information which was derived
from electronic sources, in his dealinys with the other
agencies. 4

McShayne testified that he was not assigned to the
Schipani matter until some two or three months after the ..
F.B.I. electronic activities began in 1961 (416-419). We ©

called the attention of the Courts below to this last item
as another indication of the way in which an intensify-
‘ing dynamic was apparently operating in this ease ir
chronological and causative relation to the F.B.I. elec-

tronic activities. A similar item is McShayne’s testimony ,

that one reason he was assigned to the Schipani case was
that “I had current knowledge of Mr. Schipani’s activities
as a result of this electronic surveillance” (420-424): The
dynamie was revealed also in McShayne’s testimony that
- when he first. started the Clemente*-directed bugging at
Priseo’s Travel Agency he had never heard of Schipani;

*The original F.B.I. monitoring target at Prisco’s Travel
Agency was Michélino Clemente. _

te

(24

“he first heard of Schipani from the results of that bug-
ging (441-442). And he said that the bugging, revealed in-
formation about the Casa Bianea restaurant, labor union
activities, and the garbage business (445-444.)*

While MeShayne was insistent, as above noted, that he
gave only innocuous “ba¢k-ground” information to other
agencies, he admitted on cross-examination. that he had
“cooperated” with other law enforcement agencies in the
Schipani investigation (434-435); and he had no knowl!-
edge as to whether his superior officers in Washington
had given mformation to other agencies (449-4954, 456).
He also admitted that he had conferred with ATTU Agent
Hay, and that another, F.B.I. agent had done so, in the
Summer of #961, concerning Schipani (454-456).

Of foremost interest was MeShayne’s testimony at 458-
459 that neither he nor anyone else of whom he knows
“in ‘the F.B.I. were consulted by Mr. Rogovin or the
‘Solicitor General at the time of the Schipani review dis-
cussions in November 1966. (Since it is inconceivable that
no one from, the office of Mr. Rogovin or of the Solicitor
General had > any communication at all with responsible
‘F.B.I. representatives at that juncture in 1966, the reec-
ord presents another gaping hole from the standpoint
of completeness of the Government's showing. Where is
the F.B.I. functionary, or functionaries, who must have
been consulted by Mr. Rogovin or the Solicitor General
or their representatives? The Government has not ne-
‘gated that there was such consultation.)

¥

* These were activities -offered by the Government as s ‘likely
source’’ items ‘in this prosecution.

25

Philip Wilens, a Department of Justice attorney,* tes-
tified for the Government concerning the letters and mem-
oranda in the Department of Justice in early 1961 which
apparently initiated or helped to initiate the Schipani in-
vestigation (473 et seq.). He said he had no contempo-
raneous knowledge of the F.B.I. electronic activity (483-
484); but he also said that he had been transferred to
another assignment early in the year 1961 (479, 487). He
testified also that his initial written recommendations
early in 1961 had been based on the F.B.I. report or mem-
orandum of October 10, 1960, Exhibit 9** (476-479). Mr.
Wilens also testified that he received voluminous and reg-
ular F.B.I. reports 6n the Schipani matter (485-486) ; and
he did not know whether he had seen the Exhibit 11
series of F.B.I. reports, which concededly were based on
the electronic activity; he thought his successor, a Mr.
Gerald Shur would know about this (499-508). (Jt is
therefore interesting that the Government did not see fit
to produce Mr. Shur as a witness in this proceeding.) t

Mr. Wilens also said that Upon receiving the kind of in- |
formation contained in the F.B.I. reports here in question
it would have been the regular practice in his office to
alert other law-enforcement agencies, but with use of eva-
sive tactics to conceal that the information was from elec-
tronic sources (499-508). (The Exhibit 11 series of F.B.I.
reports—the reports referred to by Mr. Wilens—are re-
plete with passages plainly stggesting on their face that
live human conversations had been audited.)

* Organized Crime Section.
** Which allegedly is untainted.

tShur’s name and activities become practically ubiquitous as
will soon appear—ubiquitous, that is, everywhere except in this
hearing record of governmental witnesses produced for ques-
tioning.

26
° ,

Also interesting in Mr. Wilens’ testimony was that he
knew nothing of the review proceeding in November 1966
by Mr. Rogovin and the Solicitor) General (509-510). The
question therefore arises, did’: Mr. Wilens’ successor Mr.
Shur participate in ee latter discussions, and if so why
has the Government not produced, him; and if not, why
has the Government not negated such role of Mr. Shur?

F.B.I. Agent James T. Mulroy testified for the Govern-
ment that he had anade no dissemination of the Schipani
electronic information “to an agency of the United
States Treasury Department” (515-516). :

(We may here note that nowhere in the Government’s
proof in this hearing Was there any distinct, or even in-
distinct, showing as to the F.B.1.’s disclosures of its elec-.
tronic’ data to attorneys of the Department of Justice—
who would be the gentlemén/ ultimately responsible for
the actual institution of this/criminal prosecution. It is
self evident that there must/have been such “dissen\na-
tion” to the Justice Department’s prosecuting sues
See, the multifarious instances in this record where wit-
nesses speaking for various Government agencies have
claimed that they did not know what representatives of
other agencies were doing—from which the Government’s
attorneys who presented this matter in the Courts below
in effect asked those Courts to conclude that the Govern-
ment’s case is free of unconstitutional electronic taint
on this basis of the existence in the Government’s far-
fling law-enforcement’ establishment of any number of:
“Poohbalig” who function unto themselves alone. We
urged in the Courts below that the constitutional policy.
of “deterrence” of unconstitutional police conduct (e.g.,

t

of ;
* One answer to.this mystery is probably attorney Shur (de-
tails infra).

Linkletter v. Walker, 381 U. 8. 618, 629) is hopeless when
even the most “saturational” illegal electronic eavesdrop-
ping by Federal police may be held to be of mo constitu-
tional significance on the mere claim of the various police
witnesses that each of them (or the enforcement agency .
which employed each of them) functioned “autonomously”
and without, mutual knowledge of What the others were
doing.)

We interrupted. our description of the testimony of
F.B.I. Agent Mulroy, supra, to insert the above theme of
comment. Agent Mulroy further testified that, in regard
to the Exhibit 11 series of F.B.I. electronically obtained
reports, certain of the contents theredf “could be dis-
closed” to other agencies but not the text thereof; and
that if I.R.S. Agent Masetti had asked for F.B.I. infor-
mation about “any restaurants” in wlich Schipani had
an interest, “and you looked at the report that had any-
thing to that effect, would you tell him about it?”, agent
Mulroy answered flatly “yes” (544-545).

F.B.1. agent Norman A. Murray:testified for the Gov-
ernment that there had been no “dissemination” by him
of the F.B.1’s electronic information (565), and that he
knew of cooperation withopther agencies (571).

F.B.I. agent Guy C. Berado testified that he had not
“disseminated”? any of the F.B.I. electronic information
(575).

F.B.I. agent Ralph Desena testified that he had no
contacts with Treasury Department personnel (577).
When it came to giving F.B.I. electronic information to
other agencies, he would find means of camouflagijg the
source but would, apparently, give the substance of the
information (580-581). (Here again we hea one of those

occasional narrow but very revealin ams of light af-

28

forded by this hearing record, to the effect that the F’.B./.
electronic information must in fact have got through to
the herein ultimately significant person, agent Masetti of

the I.R.S.)

F.B.I. supervisory official James Patrick Mansfield was
examined on direct examination by defense counsel in this
hearing (586 et seq.). Mansfield was agent MecShayne’s
supervisor, having taken over from a Mr. Emery (588,
591); Emery did not testify in this hearing. Mansfield
said he had no contemporaneous knowledge of the F.B.I.
electronic activity concerning Schipani (589). He did
know of the F.B.I. electronic surveillance directed at
Clemente (589-590, 594). At 596-612 Mansfield sparred
with defense counsel repeatedly as to what he had learned
from his subordinates about Schipani. At 612-613 Mans-
field similarly hedged as to what information would be
given by the F.B.I. to other agencies. He admitted, how-
ever, that Attorney General Kennedy’s directives at the
time in question ordered cooperation with other agencies
to the completest extent possible (613-614).*

F.B.I.agent MeShayne was recalled to the stand by the
Government (617 et seq.). MeShayne -had marked with
red and blue pencils the portions of the Exhibit 11 series
“ of the F.B.I. reports to indicate which items came from
the electronic surveillance (618-269). We invite this Court
to scan’ the impressive aggregation of these tainted items
thus marked by MecShayne in the F. B.I. reports covering
the two years’ electronic surveillance period (1961-1963).

* Agent Mansfield, evidently not an official overly burdened
with a sense of intra-agency reverence towards the superior
‘‘eivilian’’ echelons in the Department of Justice, unhesitatingly
gave it as his opinion that Solicitor General Marshall ‘had
‘‘erred’’ in this case (614).

29

The last witness at the suppression hearing was De-
partment of Justice Attorney James D. “Dewey” O’Brien
(642 et seq.): Unlike all of the Government’s other wit-
nesses in this matter (supra), Mr. O’Brien was truly a
“key” witness on the issue of taint,* because Mr. O’Brien
is the official who made the initial study of the Schipani
case late in 1966 which culminated.in the Solicitor Gen-
eral’s Supplemental Memorandum. to this Court ree-
ommending a vacating of the conviction for electronic
taint. The results of Mr. O’Brien’s study were written
up by him in a six-page typewritten memorandum dated
November 18, 1966 (Govt’s exhibit 15 in the suppression
hearing herein, printed as Appendix G hereto, infra).

It appears that Mr. O’Brien’s memorandum came about
as part of the Departmental program during the latter
part of 1966 for a thorough self-searching governmental
review of electronically tainted federal criminal prosecu-
tions, a program prompted by the happenings of the
Black case (Black v. United States, 385 U. 8S. 26, decided

|

*Not even Agent Masetti was a key witness in any degree
comparable to Mr. O’Brien. For the ultimate question is not
E whether Masefti, or any other I.R.S. or even Department of
Justice prosecutive officials actually consciously knew electronic
taint existed; the ultimate question is whether Masetti or any-
one else who helped to ‘‘make’’ this case had in some way re-
ceived or acted on information tainted by what the FBI had
done. This simple and realistic question was unfortunately ob-
secured by Judge Weinstein’s peculiarly formalistic method of
analyzing the issues and proofs in the suppression hearing, i.e.,
he formulatedga supposed differentiation between (a) whether
specific items of trial proof were tainted and (b) whether ‘‘focus-
ing’’ or intensification of the prosecutive effort as a whole in
the Schipani matter had been influenced by the electronic ac-
tivity. See further infra as to this ‘‘logical’’ approach of the
Court below.

“f

A
{>

ss |

November 7, 1966), where the Court threw out a criminal
conviction for electronic taint even though the Govern-
ment represented that its attorneys responsible for the -
prosecution got nothing of value from or had no con-
temporaneous knowledge of the electronic activity.

' (The now famous “Schipani review procedure” in which
the Solicitor General proposed and this Court adopted
a systematic program, post-Black, for reviewing cases
thus tainted, is a creation that came out of the deliberate
and careful efforts pressed by then Solicitor General
Marshall inside the Department of Justice in conjunction
with the Black case problem. And it is this creation, the
“Schipani review procedure”, which is, we surmise, the
Government’s real target in this present second trial of
Joseph Schipani. Far more is at stake here, then, than
the re-conviction of Joseph Schipani as an individual.
What we are having here is a flank attack on the whole
Fourth Amendment rampart against electronic abuses.
Utmost care is therefore needed in the judicial evaluation
of the record of the suppression hearing in this case, and
utmost scrutiny is needéd in reviewing just exactly what
Judgé Weinstein has done in this case. It is our position
that nothing in this suppression hearing record justifies
what Judge Weinstein has done in allowing this case to
be re-tried solely and exclusively on the first-trial record
which this Court adjudged to be tainted, and. that the
one item in this suppression hearing record which above
all imported into that record something of real signifi-
cance for the issue, the O’Brien memorandum (infra),
was utterly misapprehended by the Courts below. It is
also our position that items far more important than
even the O’Brien memorandum—the testimony of the sev-
eral other key Government officials in this matter who
were not brought. to testify before Judge Weinstein—

31

will need to be known before the deliberate policy choice
of Solicitor General Marshall and the deliberate inde-
pendent adjudication of this Court, in November-Decem-
ber 1966, can ever validly be judged to have been “in
error”.) ;

Let us return to the subject of the O’Brien memoran-
dum. The memorandum states that Mr. O’Brien had read |
five volumes of relevant FBT electronic logs, the Criminal
Division’s effice files, the ATU case reports, and the trial
Court’s (Judge Rosling) findings of facts on Schipani.
Mr. O’Brien then noted how, in the nature of net worth
prosecutions, “everything which relates to the financial
condition or enterprises of the defendant during the pe-
riod under examination is material”, fr. O’Brien then
referred to Judge Rosling’s fizflings agd noted that the
Judge had discussed Yarious aleged bufiness interests of
Schipani including particulayl? the Casa Bianca restaur-
ant and labor unién services. “fr. O’Brien then noted
that Masetti on Febriiary 20, 1963 reported having com-

enced the Schipani income tax case as a result of a

op EA TRE in the Spring of 1961, in conjunction with
which Mr. O’Brien noted “the context” of an electronic
surveillance of Schipani from January 10, 1961 to Janu-
ary 31, 1963. The Masetti report of February 20, 1963
referred to various alleged illicit business activities of
Schipani, including activities as to which the F.B.I. elee-
tronic logs abound with detailed references.

Mr. O’Brien also stated that the Masetti report of Feb-
ruary 20, 1963 was by Masetti and another I-R.S. special
agen} Wynne. (We therefore ask, where was Agent
Wynne in this suppression hearing—another of the big
gaps in the Government’s ostensible plenary “showing”
to negate taint.) Farther on in his memorandum Mr. OBri-
en gives numerous details of how.the contents of the F.B.I.

32

logs correspond to the contents of the Masetti-Wynne re-
port of February 20, 1963.

Then, examining the chronology of the Schipani matter
at the level of the Department of Justice Attorneys of
Organized Crime Section and the Criminal Division,
Mr. ®Brien_ lists happenings which reveal the time con-
junctions betwedq the F.B.I. monitoring and the inception
and intensificatioz of ‘the efforts of the Government Attor-
neys, early in 1961. Mr. O’Brien then describes in detail
‘the further numerous coincidings of the leads produced by
the logs and of the spreading and intensifying investiga-
tions by both Department of Justice and Internal Reve-
nue personnel through the middle months of 1961 espe-
cially, when the F.B.I. monitoring was at its height and
was producing a spate of information about Schipani.

(It is hopelessly beyond the space confines of this pe-
tition for us to attempt even ‘the most superficial sum-
mary of the relevant contents of the thirty-six F.B.I. logs.
Asideefrom specific items in those logs which tie in so
acutely with the evolution of this prosecution in 1961-1968,
there is the perhaps more significant factor.that the logs
seethe with just the sort of raw, undigested “data” of no-
torious “organized crime” personages and activities. that
would naturally appeal to the prosecutive mentality as of-
fering especially tempting avenues for sensationalistic
prosecution of a Joseph Schipani. If ever electronic
“data” spurred zealous prosecutors to pursue a particular
individual, it happened here. To anyone reading the full
text of these logs, it is simply preposterous to think that
this “data” had nothing to do with this income tax prose-
cution; or that this “data” did not filter through from the
_F.B.I. to the [I.R.S. investigators. and the prosecuting
lawyers; or that somehow a “clean” case against Schipani
ean be quarantined out of the infected, totality. Thanks

33

to the apparently’ extraordinary degree of inter-agency
co-operation and unity of effort that Schipani inspired in
1961-1963, this is probably the last case in which any prop-
erly advised Court would conclude that such: quarantine
is possible here.)

Of special interest also in Mr. O’Brien’s memorandum
is his detailed reference to a report of Masétti dated May
14, 1962 relating his liaison with his predecessor I.R.S.
Agent Tarangelo—this Tarangelo is the I.R.S. agent of
whom we previously spoke as having avidly preoccupied
himself with means for improving additional electronic
surveillanee by /.R.S. itself in the Spring of 1961, and it
is this Tarangelo who is one of those important witnesses
that was never heard from in this suppression hearing. |
Mr. O’Brien, speaking of this Masetti-Tarangelo phase, |
notes that Masetti apparently took over from Tarengelo
shortly before’ May 1, 1961 and that at that time Masetti
reported “that he had reviewed Tarengelo’s materials, in-’
cluding transcripts of files of * ** F.B.1.” which revealed
some of Schipani’s “financial interests”. It will be re-.
called that by that time (May 1961) the F.B.E. had been
bugging the Schipani locale (Prisco’s Travel Agency) for
nearly four months.

Inconspicuously (but inconspicuous only to the unknow-
ing eye) nestled in Mr. O’Brien’s intriguing memorandum
is the following item, which is probably the single most
important specific factual revelation in that memorandum:

«* * * Tn a memo from Shur [a Department of Justice
Criminal Division attorney] to Silbering [Chief of
the Organized Crime Section] dated May 29, 1961,
Shur said the last FBI report was 10-10-60 but this
obviously referred only to a report on Schipani as
he also referred to an FBI report dated May 3,
1961, on Clemente the subject of the electronic. sur-

34

veilance. Special agent Donovan (apparently of
the BI), according to Shur, stated Shur would re-
ceive periodic intelligence reports and recommended
that the I.R.S. continue with the investigation of
the cartage association as it did not involve ecross-
ing State lines. Shur also referred to what Dono-
van told him concerning Schipani in the garbage
collecting business and that Schipani was a Profaci
man. He quoted the 5-3-61 report of the FBI on
Clemente.”

Concerning the itcm just quoted we ask: (1) Again, where
was Attorney Shur in this suppression hearing; why was -
he not called by the Government (in pursuance of its. sup-
posed discharge of its burden of proof to negate taint)?
(2) Where was, also, Donovan in this supprression hear-
ing—here we have an entirely new gap in the Govern-
ment’s “showing”. (3) Can there be any doubt, in view
of the above words of the knowledgable Mr. O’Brien—a
Department of Justice career attorney who was Assistant
Chief of the Criminal Section of the Tax Division in
Washington at the time he wrote the instant memoran-
«lum, and who later took over comparable rank and duty
in the Civil Section of that Division—that there was ample
cause indeed, in. November 1966, in the Solicitor General’s
office, to conclude that the F.B.I. electronic activity had
heen “getting through” to the Department’s prosecutive
lawyers? And is it not disturbing that, in view of this
single most revealing item in the O’Brien memorandum,
and in view of the endemic agnosticism or innocent ignor-
ance professed by the chosen list of witnesses whom the
rovernment did produce before Judge Weinstein, for
some unexplained reason Judge Weinstein and we were.
not favored with testimony from the evidently strategie

Messrs. Shur and Donovan? Is-it possible to doubt that,
in this Shur-Donovan sector, lies (thus ‘far hidden) one—
path to revelation of. the actual truth about the issue of
electronic taint in this case? And only the Muse of over-
zealous Governmental Prosecutors can know all there real-
ly-is to be known about other like hidden sectors and hid-
den pathways in this case.* x

Mr. O’Brien’s memorandum further notes that in a re-
port around the end of ‘May 1961 Masetti made it perfect-
ly clear just how closely he was working with the F.B.I—_
“said he would arrange to secure information from the
files of the F.B.I.” Mr. O’Brien also notes that on July
12, 1961 the busy Mr. Shur wrote of “a field trip»on the
case in which he talked to agents of the different agen-
cies.” Mr. O’Brien gives two additional proofs of the ex-
eellent mutual absorption of: investigative information -

‘among the several agencies that had come about by mid-
July 1961:

“By letter of July 17, 1961, Mr. Miller [Assist-
ant Attorney General in charge of the Criminal Di-
vision] asked Mr. Caplin [Head of I.R.S.] for a
‘saturation . investigation’ because of information
‘supplied us by other investigative agencies’. An-

5

* We speak of the ‘‘Muse’’ of the Prosecutors, rather than

» of the individua] prosecutive gentlemen themselves, because in
the bureaucratic maze it may well happen that a conscientious
Government lawyer like prosecutor Hawley in this ¢ase has him-
self not been able:to find out all the relevant facts about the
taint issue. Nevertheless, any such forgiveable failure on Mr.
Ilawley’s part individually, does not foreclose us from adducing
the demonstrable record indications that there is more to be known
and that somewhere within the four corners of the Government’s
total knowledge the full truth does exist and is available for judi-

cial disclosure, and has not thus far been disclosed.

36

other letter (10-19-61) to Alan Long [Director of
the 1.R.S. Intelligence Diy ision] gave full report on
Schipani and said ‘the following information was
obtained from recent reports of the FBI * * *”,

Immediately following this last item in his memorandum
Mr. O’Brien states, “The FBI reports often parrot almost
verbatim what was overheard by means of the electronic
surveillance of Clementi and Schipani”.

In concluding his memorandum Mr. O’Brien said:

“From the foregoing, it can be seen that during
the period in which the Schipani tax: case was in-
vestigated the Government achieved the rare ob-
jective of complete interchange of information be-
tween three investigative agencies and the Depart-
ment of Justice.. Unfortunately, much of it was
tainted.

“I do not see how we can support the conviction
thus obtained of Schipani on income tax evasion
charges. The nature -of the proof is such that T
would have little hope of ever perfecting a taint-
free case. * * * [I]n view of the fact that three
Government agencies were, apparently keeping a
personal surveillance of the defendant, it would be
difficult to convince a Court that anything is free
from taint.”* (Italies in original:)

*In the omitted portion of the above -quoted item from Mr.
O’Brien’s memorandum he referred to possibilities of tracing
prosecutive proofs to non-tainted sources, but all of.these non-
taint possibilities mentioned by Mr. O’Brien related solely to
‘‘likely source’’ of income, not to the structure of the inter-

(Footnote continued .on following page)

37

As above mentioned, the Government called Mr. O’Brien
to testify in this suppression hearing (642 et seq.). The
prosecutor tried by various lines of questioning to get
Mr. O’Brien to repudiate his memorandum or at least to
palliate it—in short, to help the prosecutor’s theory that
the Solicitor General and this Court were “in error”. But
apparently in Mr. O’Brien the prosecutor had the wrong
man for any such purpose. The closest that the prosecu-
tor was able to come in getting any solace out of Mr.
O’Brien was in eliciting from him that (1) he did not
think he had seen the entirety of the evidence and exhibits
of the first trial (648), (2) that he had not written the
Solictor General’s Supplemental Memorandum (657-658),
and (3) that as to the statement in said Supplemental
Memorandum that “Some of the materizl in the F.B.I. re-
ports * * * provided investigatory leads and other infor-
mation used in proceeding against petitioner” he (Mr.
O’Brien) would not have phrased it that way if he had
written it but would have said “may have provided” (660-
661).

The heart of Mr. O’Brien’s testimony is in the tran-
script at pages 657-659 where, under questioning by the

(Footnote continued from preceding page) p

joined several elements of the requisite net worth proofs as a
whole. Judge Weinstein has suppressed all proof of likely source
in this case anyhow, as earlier noted. The big question is, and it
is the question for which Mr. O’Brien’s memorandum offers no
hope of an answer favorable to the Government, can this net-
worth theory prosecution as a whole be maintained on a taint-
free basis in view of’ all of the foregoing circumstances of taint
depicted in Mr. O’Brien’s memorandum, thereafter solemnly
_recommended for reversal of the conviction in Solicitor General
Marshall’s Supplemental Memorandum to this Court, and then
acted upon by this Court via its own expressly announced
‘‘independent examination of the case’’.

r be (
. : . Sad

38

4

™

Court, he confirmed ‘that, in contrast with the Black case, ,

“T did recommend, of course, that we concede the necessity
of a new trial” and “because the investigation was contem-
_ poraneous with the intercepts and there had been ex-
changes of information between the investigative agencies
* * © [e]ssentially our position was, and think the key
part of this is that: ‘We cannot say in the instant case

that none of the evidence used was obtained directly or

indirectly from an improper source’” (657-658).

Nowhere in Mr. O’Brien’s testimony is there the remot-
est intimation that he would now change his mind, as the
prosecutor himself was apparently satisfied should be
done. The prosecutor did not get Mr. O’Brien to say
that he (or the Solicitor General) were now shown to have
been “in error”. The prosecutor, before calling Mr. O’Brien
to the stand, might have had Mr. O’Brien examine thor-
oughly Agent Masetti’s exhibit 1 in order that Mr. O’Brien
might decide whether in trath his original opinion had
been wrong; but jit is evident that the prosecutor had not
fad Mr. O’Brien look into exhibtt 1. Is this because the
: prosecutor feared Mr. O’Brien would not endorse Masetti’s
exhibit 1 or the prosecutor’s new-fangled theory of
“error”. It is extremely significant that Mr. O’Brien was
not put through a study of exhibit 1, and was apparently
not even asked by the prosecutor to read the testimony
of the agents and other Government officers who had pre-
ceded him on the stand in this suppression hearing. He
was not asked to study or to read any of that material
in preparation for taking the stand himself, and we say
that this is extremely significant. For, without Mr.
O’Brien’s having gone into that material hefore taking
the stand, all that the Gov@rnment was asking him (from
any meaningful probative standpoint) was whether his
November 1966 memorandum was justified at the time it

0

39
was written, and Mr. O’Brien said it was, as we have just
seen. The Government could not, and we suggest it dared
not, ask Mr. O’Brien whether he agreed with the prose-
cutor’s snpposedly detailed “new” reasons for now.urging
that there was “error” in 1966.

The record is clear (supra) from Masetti’s own testi-
mony that he was present at the largely attended conter-
ence in Mr. Rogovin’s office at the end of November 1966,
where Mr. O’Brien was also present. And the record
shows also that Mr. O’Brien had interviewed both Masetti
and the ATTU agents at a stage which evidently preceded
both the meeting in Mr. Rogovin’s office and, obviously,
the Solicitor General’s Supplemental Memorandum in the
Supreme Court (648). Thus Masetti, and the ATTU peo-
ple, were evidently interrogated in the intensest fashion
before Mr. Rogovin made his recommen lation to the Solli-
citor General—and before the Solicitor (seneral announced
his position to this Court. ug

Had the Government. called as witnesses in the sup-
pression hearing, in a proper and meaningfl descending
“echelon” series, the former Solictor General. himself and
thence all other persons having knowledge of the alleged

“error”, the picture might claim some pretense, towards.

probative rationality at least. But instead the Govern-
ment only made haphazard stabs at the problem, with the
result that the pieture ends up probatively meaningless.
a word, the Government has not revealifgly portrayed
at all just how it came about that the om if General
“erred” in November-December 1966, fortiari, the Gov-
érnment has not even touched at all the staggering prob-
lom of demonstrating’ how the Supreme Court of the
United States “erred”. - \

-
a
.

40

The above concludes our description of the proofs at
the suppression hearing. Judge Weinstein wrote a leng-
thy opinion, which is set forth in Appendix C hereto,
infra. His conclusion was that “All evidence relating to
the defendant’s likely sources of income which was intro-
duced at the first trial is suppressed. The motion is denied
in all other respects”. The net result of this ruling, taken
together with Judge Weinstein’s subsequent Memorandum
And Order of October 14, 1968 (printed as Appendix D
hereto, infra) which struck or suppressed all evidence as
to illicit income, and which ruled that the Court would
not rely on the only new evidence of “likely source” ad-
duced by the Government for the second trial (testimony
of F.B.I. Agent Shedd), was that the case went to the
trier of the facts in the second trial herein solely and
exclusively on the evidence in the first trial record (minus
all “likely source” evidence). But what Judge Weinstein’s
ruling on the motion to suppress (Appendix C hereto,
mfra) also meant was that the Government: was allowed
to keep and t6 use again at the second trial the ‘entire.
first-trial proof of income tax violation via the net worth
theory, omitting only the likely source items. That is,
despite the permeation of the whole investigation by, the
influence ‘of the. F.B.I.. and ATTU electronic activities
which this ‘Court had inflependently adjudicated as taint-
ing the .case, Judge Weinstein permitted the Government
to salvage the case as a whole and, particularly, the
“money order” leads from which admittedly the Govern-

ment-had built the entirety of its net worth proofs as to
- the indispensable items of expenditures and net worth in-
ereases in the’ indictment years. Judge Weinstein’s rea-
soning enabled him to arrive at this twofold conclusion—
suppress likely souree and save everything else. as un-
tained—by posing a distinction hetween (1) the influence

— Bee? me RN 08 B® BRD SS + reas

41.

_of\the electronic activity on the obtaining of specific evi-.
dence, ahd (2) the influence of that activity on the Gov-
ernment’s overall decision in 1961 to “focus” on an income
tax prosecution of Schipani. This distinction artificialized
the whole actual reality of what had taken place in 1961,

it conferred on the unitary taint of the inter-agency con-
dfict in 1961-1963 the benefit of an arbitrary judicial sur-
gery to amputate from the unitary corpus tainted sub-

stances which had already hopelessly infected the whole:
and it did not even consistently apply the idea of distin-
guishing between “focus” and specific items of proof, be-

cause, without justification (infra), it suppressed the likely
source items while salvaging the at least equally tainted
“money order” item.*

o

*The Government has insisted above all that its likely source
items are surely pure because they derive ultimately from pre-
* taint FBI reports of 1959 and 1960. Yet Judge Weinstein sup-
pressed the likely source items. The Government has not even
tried to suggest that the ‘‘money order’’ leads pre- -dated the
tainting electronic activity. Yet, these latter items Judge Wein-
stein declined to suppress. Is this because, under the law of net-
worthy:theory prosecution, the Government ean convict a man
without showing ‘‘likely- source’’, but could never get a convic-
tion in a case like this one without the money order leads that
made possible ‘the proof of expenditures and net worth increases?
Did the Courts below make a judicial judgment, or did they
make a*‘‘stragétic’’ one in disposing of our motion to suppress?

%

42

3. The Second-Trial Proofs As Such (Consisting Of A
Re-Incorporation Of The First-Trial Proofs Into The
Second-Trial Record Except For Proof Of Likely
Source)

At the second trial as such*—.e., the proceedings be-
fore Judge Weinstein following conclusion of the proceed-
ing on the motion to suppress (supra)—the proof con-
sisted solely of a stipulation (reserving various rights as
to admissibility of evidence) plus the entirety of the first-
trial reeord subject to the terms of the latter stipulation.
The defense rested without introducing any evidence (Tr.
9-16-68, p. 73). Judge Weinstein found Schipani guilty on
all counts (Appendix E hereto, infra).

* * *

The opinion of the Court of: -Appeals affirming the con-
viction (Appendix A hereto, infra) in essence approved
all of Judge Weinstein’s reasons and conclusions.

Reasons For Granting The Writ

1. The electronic-taint issues in this case are broader
than those of a mere issue of “suppression” of specific.
items.of illegally obtained evidence. The broader issue is
whether the Government may constitutionally re-try this
case at all, in view of the entire background situation,
i.e., the circumstances of this Court’s order in December
1966 vacating the judgment of the Court of Appeals and

{

* The stenographer’s transcript of what we have above termed
the second-trial proceedings as such consists of minutes for Sep-
tember 16; 1968 numbered pages 23-97, and minutes-for’ November |
1, 1968 numbered pages 1-59a. The sentencing minutes (Decem-
ber 6, 1968) were not ordered to be typed.

43

remanding ‘the case, and the circumstances of the Solici-
tor General’s Supplemental Memorandum which resulted
in the latter order of this Court. The Government has
taken the: position, now endorsed by both Courts below,
that, in effect, nothing which occurred in this Court’s
action of December 1966 has any binding force here ‘be-
cause the Solicitor General was “in error.” But the
Government (and the Courts below) ignore the signifi-
cance of the words “and upon an independent examination
of the case”.in this Court’s per curiam order of December
12, 1966. Unless this last-quoted language in this Court’s
order-is correctly understood and applied, there emerges
an indeed most peculiar cluster of procedural difficulties
of the most fundamental sort, difficulties touching pro-
found issues of federal jurisdiction as well as individ-
ual constitutional right, difficulties which we respectfully
think were not adequately considered ly the Courts be-
low. For, when this Court expressly states in a formal
order or decision that such order, or decision is made

“upon an independent, examination of the ease,” does it:

not of necessity follow that, in any subsequent proceed-
ing upon remand toa lower Court, such lower Court
is required to construe the mandate of this Court in the
light of the decisionally announced statement of this
Court that its order of remand is based upon such “inde-
pendent examination?”. That is, do we not have here

a difficulty far transcending even the difficulty posed by

a lower-echelon governmental claim of an alleged “error”
by the Solicitor General—the Federal officer designated by
Congress to represent the Government in the Supreme
Court of the United States (28 U.S.C. §518)?° Do we -not
have here, to speak bluntly, what amounts to an invita-
tion (“imposition upon” might be the truer phrase) by
(Giovernment attorneys to a lower Federal Court to en-
~\ ,

44
gy :
6 A similar procedure of remand for an exclusionary hearing was. fol-
lowed-in United States v. Wade, 1967, 388 U.S. 218, 87 S. Ct. 1926,
18 L. Ed. 2d 1149; Gilbert v. California, 1967, 388 U.S. 263, 87 S. Ct.

1951, 18 L. Ed. 2d 1178.

3171

6a

tunity to cross-examine the key agents and investigators
who had any knowledge of the electronic surveillance.’

The per curiam opinion of the Supreme Court did not
hold or even suggest that all evidence at the first trial was
tainted by electronic surveillance. The Court had been
advised by the Solicitor General that some of the leads
and evidence were tainted. Neither the Solicitor General
nor the Supreme Court had the benefit of the careful
analysis and testimony with respect to the sources of all
evidence which were available to the district court as a
result of the suppression hearing.‘

The evidence at the suppression hearing disclosed that
the F.B.I. had been compiling information on appellant
since 1958. In a report dated October 10, 1960, the defen-
dant was described by one source as “one of the most in-
fluential and most powerful figures in New. York under-
world” and “considered to be associated with several of
New York’s top hoodlums” (289 F. Supp. at p. 46). The
first information obtained by electronic surveillance was in
1961 through an investigation of Michael Clemente and
covered the “Prisco Travel Bureau, a ‘front’ for Clemente’s
criminal activities and a meeting place for many of New
York’s top mobsters.” Although appellant was not the
subject of that electronic surveillance, nine conversations
in which he participated and 27 others in which he was.

7 The evidence adduced at the suppression hearing included “a pain- -
staking analysis of all the evidence introduced” in the first trial, pre-
pared by the Special Agent of Intelligence in charge of the Schipani
investigation, with a member of the staff of the United States Attorney.
“The products of their labors was a comprehensive chart which denotes
a specific source or sources for each witness and piece of evidence (in-
eluding 292 exhibits) introduced at the trial” (289 F. Supp. at p. 49).

8 The same is true of the memorandum prepared by James Dewey
O’Brien, then the Assistant Chief of the Criminal Section of the Tax
Division, upon which appellant heavily relies in support of his conten-
tion that all first trial proofs were tainted.

°

3172

7a oy

discussed or his name was 1::entioned were electronically
monitored (p. 47). 7

The district court properly examined all of the evidence
in the first trial to determine whether all or only a part
was tainted by the electronic surveillance, and whether any
untainted portion was independent of and distinguishable
from that which was tainted.? After a full hearing the

- court, in a careful opinion, first recognized that “evidence
is admitted if it is obtained from an untainted ‘indepen-
dent source’ but excluded if it is obtained as a result of
the illegality’; that evidence discovered “as a result of
both legal and illegal leads” is inadmissible, even though
“the legal lead would itself probably have sufficed to un-
cover the evidence” (289 F. Supp. at p. 54); and that the
Government is required to “prove beyond a reasonable
doubt that the evidence it introduces was legally obtained”
(at p. 59).

Applying the foregoing rules, the court found, inter alia,
that the only tainted evidence was that relating to a likely
source of income; that the “(o)ther evidence of the defen-
dant’s net worth was proved beyond a reasonable doubt to

- be untainted” (at p. 61); that the investigation was not
intensified by reason of any tainted information,” and that

9 The proper test is: “(W)hether, granting establishment of the pri-
mary illegality, the evidence to which instant objection is made has been
come at by exploitation of that iNegality or instead by means suffi-
ciently distinguishable to be purged of the primary taint.” Wong Sun
v. United States, 1963, 371 U.S. 471, 488, 83 S. Ct. 407, 9 L. Ed. 2d 441;
Hoffa v. United States, 1966, 385 U.S. 293, 309, 87 S. Ct. 408, 17 L. Ed.
2d 374; United States v. Wade, 1967, 388 U.S. 218, 241, 87 8S. Ct. 1926,
18 L. Ed. 2d 1149.

10 “The government has established by a preponderance of evidence and
possibly by clear and convincing proof—though not beyond a reasonable
doubt—that the intensity of its investigation by Intelligence and the
Alcohol Tax Division was not affected by tainted information.” 289
F. Supp. at p. 64. '

(footnote continued on next page)

3173

@

8a ©

it was “highly likely that tne government would have
launched a saturation investigation * * * even if no in-
formation had been received from electronic surveillance of
the Prisco Travel Bureau” ™ (at p. 64).

We approve the legal principles applied. The findings
were not clearly erroneous. They were supported by sub-
stantial evidence. nae.

II.

Appellant's next contention that the evidence was insulli-
cient to sustain a conviction was considered by this court
on the appeal from the first conviction.” As noted supra,
at each trial the Government relied on the “net worth”

theory. The evidence of “likely source” income aecepted

The court had previously concluded that proof showing that the in-
tensity of the investigation was not the result of tainted infermation
was satisfied by a preponderance of the evidence.

11 _ _—In reaching this conclusion the eourt relied in part upon the untainted
F.B.I. report: of October 10, 1960, supra, and “additional leads * * *
through acceptable investigative techniques. Defendant had never filed
an income tax return althoygh he obviously enjoyed a high standard of
living. Immediately after the investigation began, the defendant ap-
peared so vulnerable and the likelihood that an income tax investigation
would prove fruitful was so great, that government agents would -natu-
rally focus on him?’ (289 F. Supp. at p. 64).

12 In view of the factual background contained in the prior opinion of
this court (362 F.-2d 825) and the detailed findings of Judge Weinstein
in his order following the suppression hearing (289 F. Supp. 43) and
in his opinion following trial (293 F. Supp. 156), we do not deem it
necessary to set forth the evidence in detail in this opinion. —

13 In a net worth ease, the Government “attempts to establish an ‘opening
net worth’ or total net value of the taxpayer’s assets at the beginning of
a given year. It then proves increases in the taxpayer’s net worth for
each succeeding year during the period under examination and calculates
the difference between the adjusted net values of the taxpayer’s assets :
at the beginning and end of each of the years involved. The taxpayer’s
non-deductible expenditures, including living expenses, are added to these
increases, and if the resulting figure for any year is substantially greater
than the taxable incom? reported by the taxpayer for that year, the

s

3174

: - « 9a.

at the first trial was excluded at the second trial. The evi-
dence negating non-taxable income, however, was identical
at the two trials. ‘

In affirming the first conviction, this court fcund that. the
“totality of circumstances shown by the evidence” sup-
ported the conclusion that no “cash hoard” ever existed ;
that the “absence of such a reserve fund was established
as part of the Government’s prima facie case” and appel-
lant “remained quiet at, his own peyil.”** The opinion
pointed out that the appellant had not suggested any “non-
taxable sources other than a cash hoard” and that “the
Government negatived all other reasonably: possible sources
from which Schipani could’ have acquired non-taxable
funds.” It was held that, “Under the circumstances, proof
of ‘a likely source’ of net worth increases is not necessary,”
relying on United States v. Massci, supra, and other cases
cited. (362 F. 2d at 830.)¥

We adhere to our conclusion that- it was not necessary
to rely upon a “likely source” of net worth to sustain a
conviction, and hold that after the elimination of all evi-

a

Government claims the excess represents unreported taxable income. In
addition, it asks the jury to infer willfylness from this understatement,
when taken in connection with direct evidence of ‘conduct, the likely
effect of which would be to mislead or to conceal.’ Spies v. United
States, 317 U.S. 492, 499.” Holland vy. United States, 1954, 348 U.S. 121,
129, 79 8. Ct. 427, 99 L. Ed. 150, rehearing denied 348 U.S. 932, 75 8. Ct.
334, 99 L. Ed. 731.

14 Appellant did not offer any evidence at either trial, but relied on
insufficiency of the Government’s proof.

15 Appellant recognizes that this issue was determined adversely to his
contention in our opinion’ affirming conviction on the first appeal, but
argues that the “inartistic reference to a ‘reasonably’ proved negation
of ‘all possible’ non-taxa%le source under the Massei ease” was an un-
warranted extension of the Massci rule and does not find support in
other eases construing Masset. We find nothing in the cases cited by
appellant contra to our construction of Massei as applied to the facts
of this case.

3175

-

10a
denee of “a likely source,” the evidenee was still sufficient
to prove guilt. beyond a reasonable doubt.

With respect to appellant's contention that the Govern-

ment failed to establish the element of “willfulness,” Judge

Weinstein sets forth in detail the factors showing “a pat-
tern consistent only with that of a guilty mind” (293 1.
Supp. at 161). We agree with his conclusion. The factors
enumerated in his opinion are essentially the same as those
considered by this court in its prior decision (362 I*. 2d at
831). |

ay ae 2

This court also considered on the prior appeal appel-

lant’s contention that the trial court erred. in admitting

into evidence the prison record of a statement given by
appellant to a prison official in February, 19438, that he had
only $1350 in cash which he had left with his wife. The-
statement was offered to show appellant’s net worth in
1943 as a starting point in proving his net worth at the
beginning of the indictment period. The statement was
given in the course of a routine interrogation by prison
authorities relating to Schipani’s personal history. It was
unrelated to any pending investigation of a criminal of-
fense, and particularly bore no relationship to the present
case, which was not initiated until many years later. We
adhere to our prior holding that there is no basis for ap-
pellant’s claims that this statement constituted an involun-
tary or incriminatory statement in violation of appellant’s

_Vifth Amendment rights and was an unlawful search and

seizure in violation of the Fourth Amendment.”

‘
16 The cases upon which appellant relies are factually distinguishable in
that the statements under consideration in those cases were given in
connection with the investigation of the accused.

; 3176

lla

IV.

Finally, appellant complains cf the conduct of the trial
judge, first in “refashioning * * * an indispensable element
in the formulation and proof of the indictment charges.”
In the first trial, the Governinent relied upon the “pre-

®imption of innocence” arising from the failure to file re-
| &

turns in pre-indictment years. This court held this ap-
proach improper, and the trial’ judge properly called this
conclusion to the Government's attention. In following the
‘suge restion of this court (362 F. 2d at 829-30) the district
court did not abuse its discretion.

Nor is there merit in ap Hant’s contention that he was
denied a fair trial by the “infection of the record with
reference to his alleged notorious criminal background.”
As noted supra, appellant resisted the Government’s mo-
tion to withdraw its consent to a trial without jury. The
“notion was denied by reason of the trial court’s conclusion
that there was “a substantial danger that the defendant
will be severely prejudiced if he is tried before a jury” (44
F.R.D. at 463), based in large part upon the testimony
in the suppression hearing with respect to defendant's
criminal activities. In an order entered October 14, 1968,
Judge Weinstein granted appellant’s motion to strike all
references, to appellart’s alleged background of illicit ac-
tivities, saying in part: “The Court will not base its de-
cision on the defendant’s criminal background, if any.”

We find no evidence that the trial court gave any weight to

the evidence of appellant’s criminal activities in arriving
at the guilty verdict. The proof was sufficient without
considering this evidenee.

Appellant also complains of the court's reference to ap-
pellant’s “demeanor and general appearance,” in view of

3177

ee TN:

¢

l2a
the Caet that appellant did not take the stand. We agree:
with the distract court that, “The trier’s observation of the
nen-witmss defendant's demeanor and general appearance
may be—emd almost invariably is—considered by him in
evalugtime evidence introduced atthe trial (citing cases).’”
Moreover. Jadge Weinstein specifically stated that “* * *

“the eomelasoom that defendant was guilty beyond a reason-

able deubt was reached solely on the record.”
Affirmed. -
. } . .

‘

o”

13a

APPENDIX B

Opinion of the United States District Court
(May 10, 1968, Weinstein, D. J.)

(Reported in 44 F. R. D. 461 (1968))

—>

Unirep States or AMERica,
Plaintiff,
v.
JosePH F’, Scuipant,
. Defendant.

—.~

No. 63 CR 237.

United States District Court
KE. D. New York.

May 10, 1968.

Prosecution for income tax evasion. The United States
Supreme Court vacated judgment of conviction and re-
manded cause for new trial, 385 U. S. 372, 87 Sup. Ct.
533, WL. Ed. 2d 428. On motion by the United States
to withdraw its consent to trial without jury, the Dis-
trict Court, Weinstein, J., held that where government
sought to prosecute income tax evasion case on same, rath-
er than upon superseding indictment and government’s
waiver of jury trial covered “the above entitled case”

rather than particular trial, waiver was not limited to first
trial but would be applicable to subsequent trial on same
indictment.

Motion denied.
: * * *
Joseph P. Hoey, U. S. Atty. for Eastern District of

New York, Brooklyn, N. Y., for plaintiff; Eldon F. Haw-
ley, U. S. Department of Justice, of counsel.

Jacob P. Lefkowitz, New York City, for defendant.

MEMORANDUM AND ORDER
WernstTErN, District Judge.

‘The defendant, Joseph F. Schipani, was found guilty
in this Court of five counts of income tax evasion on Oc-
tober 15, 1965. He was tried by the Court without a
jury since both the government and defendant consented
to a waiver of a jury trial. The conviction was affirmed
by the Second Circuit (632 F. 2d 825) and thé Supreme
Court denied certiorari on November 7, 1966 (385 U.S
934, 87'S. Ct. 293, 17 L. Ed. 2d 214).

On Mia oe 30, 1966, the Solicitor General filed a sup-
plemental memorandum with the Supreme Court which
suggested that “the Court vacate its order denying cer-
tiorari, grant certiorari, vacate the judgment of the court
of appeals, and remand the cause to the district court for
a new trial, should the government seek to prosecute peti-
tioner anew.” The basis for this suggestion was the dis-
covery by attorneys in the Department of Justice that the
defendant had been a participant in a number of conver-
sations which had been electronically monitored as a re-

a

Q

15a
Appendiz B

sult of a trespass. This electronic surveillance took place
during the period when-much of the evidence used at
the trial was discovered. Thus, the Solicitor General was
unable, on the basis of the information then available to
him, to “say * * * that none of the evidence used by the
government at petitioner’s trial was obtained, either di-
rectly. or indirectly, from an improper source.”

The Supreme Court, acting on this suggestion, vacated
the judgment and remanded “the cause to the district
court for a new trial, should the Government seek to pros-
ecute petitioner anew.” 385 U. S. 372, 87 S. Ct. 533, 17
L. Ed. 2d 428.

Following a detailed analysis of the hundreds of ex-
hibits and the testimony of the many witnesses relied
upon at the trial, the Government concluded that none
of the evidence it utilized was tainted. It has decided to
continue the prosecution.

/

Defendant moved to suppress and a full evidentiary
hearing was held before this Court. The Government
freely revealed all data available to it. It presented all
the relevant surveillance logs; the files of the Federal Bu-
reau of Investigation, the Aleohol and Tobacco Tax Divi-
sion of the Treasury Department, the Intelligence Divi-
sion of the Internal Revenue Service; and the Depart-
ment of Justice; and the testimony of the many agents
and attorneys involved in the 1961-1963 investigations of
the defendant and the 1966 review of their work by the
Department of Justice.

At the outset of the hearing the government made
known its view that the second trial, if it should be had,
should be before a jury. The defendant strongly indi-

GND, AD. Daf TCIM CLABES i ALTE LEIA Ra og: SO Na EL EAPS 8Bd OG Jor aeSy Wile ce IT by RA AH &

16a >
Appendia B

cated his desire to be tried a second time without a jury.
The issue of the form of the trial has been briefed and
argued. The parties have agreed that “whatever motions
are required under 23(c) to raise the issue of the right to
a jury trial have been made.”

The Court reserves decision on the suppression motion.
The government’s motion to withdraw its consent to a
non-jury trial is denied.

Subdivision (a) of rule 23 of the Federal Rules of Crim-
inal Procedure requires the consent of the defendant, the
government and the Court to a waiver of a jury trial.
See Singer v. United States, 380 U. S. 24, 85 S. Ct. 783, »
13 L. Ed. 2d 630 (1965). The rule provides:

“Cases required to be tried by jury shall be so tried
unless the defendant waives a jury trial in writing
with the approval of the court and the consent of
the government.”

Prior to the first trial such a jury waiver was signed
by defendant and his attorney; the United States Attor-
ney “Consented” and a District Judge of this Court “Ap-
proved.” The body of the document they executed reads
as follows:

“Waiver Of Trial By Jury
Criminal No. 63-CR-237

IT IS HEREBY STIPULATED, CONSENTED TO AND AGREED
by and between the defendant Joseph F. Schipani
and the. United States of America that the above-
entitled case in which the defendant Joseph FP. Schi-
pani is charged with violations of Title 26, United
States Code, Section 7201, be tried by the Court

Jd, ~

50a
>». Appendia C

concludes that’ one item of evidence is reliable, this may
-affect his evaluation of the credibility of a witness who
gives testimony inconsistent with this evidence. His eval-
uation of the credibility of this witness may, in turn, af-
fect his conclusion as to the probative force of the wit-
ness’ testimony with respect to another line of proof.) But

confirming evidence of that other line of proof may re-

quire a reevaluation of the witness’ credibility and a com-
plex readjustment of the assessment of all the interlock-
ing evidence.

[5] Since so much of the evaluation of evidence de-
pends upon varying hypotheses applied by triers with
different backgrounds and views of life, fact finding dif-
ferences among jurors and between judge and jury are
to he expected. The court’s function is, in the usual sim-
-ple case, only to decide whether a reasonable man might
have his assessment of the probabilities of a material
proposition changed by the piece of evidence sought to
be admitted. If it may affect that evaluation it is rele-
vant and, subject to certain other rules, admissible.
Even, therefore, if a juror decides that the probability is
only 40% that the document referred to above is au-
thentic, it may help him determine whether the material
proposition is-more—probably true than not. This dif-
ference between the probabilities required—of—a_material

proposition and of relevant evidence and individual lines.

of proof partly explains why, in criminal cases, some
courts have said that while the burden of proof of an ele-
ment of the crime is beyond a reasonable doubt, indi-

vidual items of evidence need not be proved by so high .

a standard. United States v. Valenti, 143 EK. 2d 362, 364
(2d Cir. 1943); Pdople v. Klinkenberg, 90 Cal. App. 2d

rd

bla
Appendiz C

608, 204 P. 2d 47, 62 (1948); 9 Wigmore, Evidence, § 2497,
p. 324 (3d ed. 1940).

It is apparent, then, that the judge’s function in deter-
mining admissibility in a case such .as is hypothesized
above is relatively simple. 9 Wigmore, Evidence § 2550
(2d ed. 1940); Maguire and Epstein, Preliminary Ques-
tions of Fact in Determining the Admissibility of Evi-
dence, 40 Harv. L. Rev. 392 (1927); Morgan, Same Prob-
lems of Proof Under the Anglo-American System of Liti-
gation 86-105 (1956); Note, 59 Harv. L. Rev. 488-491
(1964); California Law Revision Commission, Recom-

mendation Proposing an Evidence: Code, 50-70 (1965). He’

need not. be concerned unduly about mistakenly admitting
evidence because, if the.document lacks probative force,

the jury can (absent factors such as prejudice) be counted -

on to ignore it. Only time has been lost by admitting evi-
dence with probative force as low that is cannot affect
the outcome.

Where admissibility of evidence depends upon extrinsi¢

policies rather than upon probative force, the problem
is more complex and the pressure on the trial judge is
greater. Let us suppose, solely for the sake of analysis,
that the burden on the government is to prove by a pre-
ponderance that a proferred document with high proba-
tive force was not ohtained in violation of the law. As-
__sume that exclusion depends upon an extrinsic policy de-
signed to protect constitutional rights and to discourage
obtaining evidence illegally. Suppose that the only ma-

terial proposition in the case is whether deféndant had.

certain knowledge (as that the powder he possessed was
a narcotic). Let us suppose that the only evidence on the

point is a letter from the defendant and that it would

permit a jury to find beyond a reasonable doubt (95+%

52a

*

Appendia C

probable, for the purpose of this analysis) that he did
have knowledge.

Now, if we suppose that the judge has decided that there
is a question about whether the document was illegally
obtained but that there is a bare preponderance (50+ %
probable) in favor of the government’s contention that it
was legally obtained, the judge will, on the assumptions
made, admit it. -The question of whether the document
was:or was not illegally obtained is not considered by
the jury and normally it will not have before it evidence
bearing on this question. Thus, the jury will give the
‘document its full probative weight and it will find the
defendant guilty beyond a reasonable doubt.

- Whether such a result in a criminal case is proper de-
pends upon how the rule of law is stated. If it is: “the
material proposition of -knowlédge must be proven _be-
yond a reasonable doubt by evidence proper y admitted
in the trial” the verdict should stand. .If it is: “the ma-'
terial proposition of knowledge must be proven beyond a
reasonable doubt by legally obtained evidence,” there is

doubt about the validity of the conviction. A judge who_

tried the case without a jury might well have to come
to a different conclusion applying the second test. As-
‘suming that the analyzed the evidence in the way a jury
would, he might have concluded that the probability of
knowledge was 95+% if he assessed the document solely
on the basis of its probative force. But if he discounted
that probative force by the probabilities relating to the
illegality, then the total probative force of all the. rele-
vant evidepce mighty swell have fallen below 95+%. The’

eo {locumentary line of proof would not then have a force
of 95+% probability but of (95+ x 50+)%, or some- |

where in the order of 50+%.

“

_ = eC Sr Cr mc

53a
Appendia C

This attenuation of probabilities results from the fact
that, where variables are independent and the probability
of a combination of variables is to be determined, the
probability ofeach variable is multiplied by the prob-
abiilty of one of two variables aproaches 100% the
tary Statistics, 56-63 (1966); Keynea, A Treatise on
Probability, 121, 135-186 (1952). Prebative force and ille-

_° gality are sufficiently independent to justify multiplying
them for the purposes of this analysis. Where the prob-
*abiilty of one of two variables approaches 100% the
‘product will, of course, approximate the probability of
the less probable variable. as,

[6] Dicta of the Supreme Court, while not decisive,
suggest that the rule of law is that a defendar* must be-
proved guilty beyond a reasonable doubt by legally ob-
-tained evidence. See, e. g., Lynumn y. State of Tilinois,
372 U. S. 528, 537; 83 S.Ct. 917, 9 L. Ed. 2d 922 (1963) ;
Payne v. State of Arkansas, 356 U. S. 560, 568, 78 S. Ct.
844, 2 Li Ed. 2d 975 (1958). For example, in Payne v.
State of Arkansas, 356 U. S. 560, 568, 78 S. Ct. 844, 850,
2 L. Ed. 2d 975 (1958),.The Court noted that it:

“has uniformity held that even though there may
have been sufficient evidenve, apart from the co-
erced confession, to support a judgment of convic-
tion, the admission in evidence * * * of the coerced
confession vitiates the judgment * * *.” |

Cf. Fahy v. State. of Connecticut, 375 U. 8. 85, 86-87, 84
S. Ct. 229, 11 L. Ed. 2d 171 (1963) (search and seizure }
“whether there is a reasonable possibility that the evi-
dence complained of might have contributed to the con-
viction”). Since even the slightest possibility that ille-

d4a
‘Appendia C

lly obtained evidence was used vitiates a confession, a
very effective procedural screen must be interposed.

Most of the cases dealing with’ burdens of proof on
admissibility have been confession cases and the issue has,
been unconstitutional “coercion.” But it is hard to see —
why the issue of whether the police “coerced” a confes-
sion in violation of the constitution should be treated,
for: procedural purposes, any differently from -that of
whether they obtained evidence “as a result of’’ illegal
electronic surveillance. Both words“coercion” and “re-
sult”—have factual and legal eontent and a finding with ©
respect to the fact comffonent in-each presents similar
problems to the judge.

, Any evidence which is illegally obtained may be damn-
ing, so that the decision cannot turn on the importance of
a confession in a case. Frequently, having lost on a
motion to suppress, the defendant’s chance of avoiding
conviction is hopeless. A “confession” may contain ex-

- eulpatory material, ,be incomplete, or be unreliable so that
it is no more the equivalent of a plea of guilty than is
key evidence illegally obtained. Certainly the burden of
proof at a preliminary hearing should not depend upon
how critical the evidence sought to he suppressed may
be at the trial. The judge is often unable to accurately
predict at that stage whether particular. evidence will
clinch the prosecution’s case.

The fact that exclusion in “coercion” cases .was his-
torically based upon lack of probative force (Maguire,
Evidence of Guilt, 108-109 (1959)) while exclusion of .
other kinds of illegal evidence has been based upon purely
. extrinsic policies (People v. Cahan, 33 Cal. 2d 434, 439,
442, 445-449, 282 P. 2d 905, 907, 909-914 (1955) ; Maguire,

55a

Appendia C 4 ig
_ Evidence of Guilt, 167-169 (1959)), does not justify a
higher burden in a confesison case. In fact, as we
have already seen, the probative force argument may be
available to the jury where a confession is introduced,
while it may not be if evidence obtained by illegal
‘searches or surveillance is used. Cf., as analogous fo con-
fession cases, United State v. Davis, —~ F. 2d , ;
n. 1 (2d Cir. July 17, 1968), (voir dire on identification.
procedures followed by evidence before jury on réliability
of identification in court). There is, therefore, some pos-
sibility that the jury will discdunt a confession which is.
in fact not voluntary but almost none that it will ignore
evidence obtained by illegal electronic surveillanee, wire-
taps or searches. More, rather than less, protection*there- ©
fore seems called for in.cases such as the ‘one before us.

_It is extrinsic policy considerations rather than lack
of probative force that now explain’ many confession ex- _
clusion rulings. See, e.g., Spano v. People of the State
of New York, 360 U. S. 315, 320-321, 79 S. Ct. 1202, 3 -L.
.Ed. 2d 1265 (1959); Jackson v. Denno, 378 U. S. 368,
— 886,-n. 13, 84 S. Ct. 1774, 12 L? Ed. 2d 908 (1964). The:
policies are essentially the same in search and seizure,
wiretapping and electronics eavesdropping cases. See,
_e. g., American Bar Association. Project on Minimum
Standards for Criminal Justice, Standards Relating to
Electronic Surveillance, 114-115 (1968). Im each instance
an important constitutional right of the defendant is be-
ing protected and the policy of deterring future lawless-
ness by officials is being applied. “The dignity of the
United States Government will not permit the conviction
- of any person on tainted testimony,” Mesarosh v. United
States, 352 U. S. 1, 9, 77 S. Ct. 1, 5, 1 L. Ed. 2d 1 (1956).

8

56a :
Appendix C savas

[7] Conféssions obtained as a result of violations of
constitutional: search and ,seizure requirements are, for
that reason alone, inadmissible; “it matters not,” Judge
Fuld has properly instructed us; “that these ‘fruits’ hap-
pen to be confessions rather than some other type. of evi-
dence.” People v. Rodriguez, 11 N. Y. 2d 279, 286, 229 .
'N. Y. S. 2d 353, 357, 183 N. KE. 2d 651,654 (1962). It
would make little sense if, as a result of a doubt about a
single illegal search, the. confession alleged to have been
obtained were .excluded and the seized real proof were
* admitted because the burdens were different. Simplicity.
and ease in administration suggests the desirability of a
single high standard in all suppression hearings. There
‘is “no reasonable or logical basis for any distinction be-
tween inanimate (tangible) and animate (testimonial)
evidence.” People v. Dentine, 21 N. Y. 2d 700, 703, 287 |
N. Y. S. 2d 427, 429, 234 N. E. 2d 462, 463 (1967) (Fuld, °
C. J. dissenting).

[8] A workable rule giving’ adequate corlsidgration to
the importange of the exclusionary policy is to require the
government to prove beyond a reasonable doubt that the
evidence it introduces “was ‘tegally obtained. This is a
familiar standard in criminal cases. It is the one already
utilized in some jurisdictions and adopted by the most
recent appellate decisions on the subject. -See Pea v.
United States, 397 F. 2d 627 (D. C. Cir. 1968) and see

cases cited at pp. 54, 55, supra. ,

Application of this standard, based on observations in
this Court, would not affect the government adversely in .
any significant number of cases. Most of the problems
with. respect to illegally obtained evidence fn the federal
courts are of an interim nature arising in large part from

57a -
‘Appendix C

a lack of clear guidelines available to federal law enforce-.
-ment personnel rather than to undisciplined lawlessness.
As the legal standards become clearer and the procedures
for insuring compliance more routinized, motions to sup-
press because of illegally obtained evidence -will become

less important than they are today. As a practical mat-

ter, even today at hearings on motions to suppress, there
is: often no serious dispute about the facts (see, e. g.,
“United States v. Feinberg, 383 F. 2d. 60, 70 (2d. Cir.:
1967), cert. denied, 589 U. S. 1044, 88 S. Ct. 788, 19 L.
Ed. 2d 836 (1968))—-what Justices Frankfurter has. re-
ferred to as “the erude histerical facts, the external
‘phenonumenological’ occurrences and events.” Culombe
v.- Connecticut, 367 U. S. 568, 603, 81 S. Ct. 1860, 1879,
6 L. Ed. 2d 1037 (1961). Where there remains a rea-
sonable doubt about what happened and whether the gov- .
ernment acted lawfully, the evidence should be excluded.

We need not now decide whether this rule ought to

apply to factual issues such as consent in search and séi-
’ gure eases. Cf. United States v..Dawson, — F. 2d
——— (2d Cir. August 12, 1968). The government’s con-
duct Jias concededly been illegal, the information and evi-
dence bearing on the factual questions new before us are
peculiarly within its ken, and an important federal policy
_ of protecting citizens against this sort of, intrusion on
their privacy is. at stake. It is fitting that the govern-.
ment bear the burden of proof and that it be a high ~
one. See Pitler, “The Fruit of the Poisonous Tree” Re-
visited and’ Shepardized, 56 Calif. L’ Rev.:.579, 647- 48
(1968). ° | ‘

This decision with respect to burdens of proof in sup-
pression eases is consistent with “the high standards
which past decisions have insisted. be maintained in the

.
,
-

W-

58a
Appendia C

conduct of federal criminal trials.” Lawn vy. United
States, 355 U. S. 339, 365, 78 S. Ct. 311, 326, 2 L. Ed. 2d
321 (1958) (concurring. opinion) (emphasis supplied).

-Mesarosh v. United States, 352 U. S. 1, 3,77 S. Ct. 1, 2,

1 L. Ed. 2d 1 °(1956) (“the decision herein passes only
on the integrity of the criminal trial in the federal .
courts”).; Whether the Constitution requires that the same
rule be asuitled by the states is not a matter we need now
consider. - Cf. Chapman v. State of California, 386 U. S.
18, 43, n. 2, 87 S. Ct. 824, 17 L. Ed. 2d 705 (1967).

(b) Statutory Rule °

[9, 10] This analysis of the common law is’ consistent
with the Omnibus Crime Control and Safe Streets Act of
1968. Except for the specific ogerruling of the McNabb-
Mallory ryle by subdivision (c) of section 3501. of title
18 of the United States Code (P.L. 90-351, § 701(¢)), the
language of the Act is directed to the reliability com-
ponents of the confession-exclusion rules, not ‘to the ex- -
trinsic policy components. Senate Report No. 1097, 1968.
U. S. Code Cong. & Admin. News, 1634, 1646-1649.

While Congress was also coricerned with the Escobedo-
Miranda rules (id. at 1650-1660), the Act itself contains

no detailed provisions such as-subdivision (c) dealing
with these and other constitutional exclusionary” ruies-—Cf.__

the detailed proposals fot dealing with Escobedo-Miranda
in American Law Institute, A Model Code of Pre-Arraign-

_ ment Procedure, Tentative Draft No. 1 (1966); ibid,

StuJy Draft*No. -1 (1968); Schaefer, The Suspect and
Society, 39-56 (1966).

[11] Such circumstances referred to in subdivision (b)

~ of section 3001 of title 18 as the time between arrest and

59a

‘

Appendix C

arraignment,. whether the declarant knew the’ nature of
the charge against him, whether he knew of his rights
and whether he had the assistance of counsel, may affect
the “voluntary” nature of a confession and thus its re-
liability. Inclusion of these factors in the statute does .
not foreclose their being: considered by the court:on sep-
arable constitutional issues.

A charge requiring that the jury be satisfied by proot |
beyond a reasonable doubt of its voluntary nature is ap-
parently not required under the Act. Once the court has
passed upon admissibility, if the confession is admitted,
it may be ‘given its natural probative force by the jury.

[12] The Act does not address itself ‘to the burden re-
quired to be satisfied at the hearing before the judge on
the issue of admissibility. Accordingly, that burden re-
mains what it is now, proof beyond a reasonable doubt
if exclusion is required because of a violation of defend-
ant’s vital constitutional or statutory rights. (We need
not now decide what the burden of proof is on the voir
dire where “involuntariness” was not due to official mis-
conduct and only the question ot reliability is raised.)

[13]) The electronic surveillance by the F.B.I. did not
comply with the provisions of Title IIT of the Omnibus
_Crime Control and Safe Streets Act of 1968. P.L. °90-
351, § 801 et seq.; 18 U.S.C. § 2510-et seq. Divulgence at
a trial or to other government agents would, accordingly,

be prohibited by the Act even if it has retroactive effect.
P.L. 90-351, § 802, 18 U.S.G. § 2517.

In short, the Omnibus Crime Control and Safe Streets
Act of 1968 has no: affected the common law rules applic-
able to this case.

60a
Appendia C
3. Has the government met its burden?

The government has established by a preponderance of
evidence and possibly by clear and convincing proof—
though not beyond doubt—that the information obtained
by the F.B.L. from the electronic surveillance was not fur-
_ nished to Intelligence. While the New York office of the
F.B.I. did ignore, in part, Attorney General Robert F.
Kennedy’s insistence on cooperation between all federal
law enforcement agencies in the drive against organized
crime, there may well have been compliance with the At-
torney General’s directive at the highest levels of the
F.B.I. in Washington. There is at least a reasonable
doubt about whether the F.B.I. reports, which included
data obtained through electronic means, were regularly
provided to the Organized Crime Division. The Organ-
ized Crime Division, in turn, then may have passed this
information on to Intelligence through top-level consul-
tations. In this manner, the tainted information might
have filtered up from the New York office of the F.B.I.
to the Justice Department and then back down to the
Intelligence agents in New York.

The only information picked up by the electronic micro-
phones concealed in the Prisco Travel Bureal relevant
to defendant’s income tax prosecution concerned possible
sources of defendant’s income—his involvement in labor
union activities and the carting business and his partial
ownership of the Casa Bianca Restaurant. The court, at
defendant’s first trial found that “Likely sources for de-
fendant’s income during the indictment years are an in-
terest in a restaurant business [Casa Bianea] and serv-
ices as a go-between in labor relations of employers with
unions.’’ United States v. Schipani, 63-CR-237, E. D.
N. Y., October 15, 1965, p. 7.

«Gla
Appendiz C

Two conversations in which the Casa Bianca Restau-
rant was mentioned were monitored. One was between
Clemente and an underworld associate on January 19,
1961 in which it was indicated that Schipani had partial
eontrol of the restaurant. The other took place on Sep-
tember 12, 1961 between Clemente and the defendant in
which Clemente stated that they should have bought out
the Casa Bianca and run it themselves.

This information confirmed what the F.B.I. had strong-
ly suspected back in 1958, namely, that the defendant had
an undisclosed interest in this restaurant. In addition,
shortly after the Schipani investigation began, the Alco-
hol Tax Division surveillance indicated that this would
be a fruitful line of inquiry. The monitored conversa-
tions probably did not furnish the government with any
leads with which to pursue this line of proof. All the
numerous bits of testimony and evidence relating to the
Casa Bianca introduced at the defendant’s trial were ob-
tained through legitimate investigatory techniques.

[14] Nevertheless, the Court finds that the govern-
ment has not established beyond a reasonable doubt that
the evidence of the defendant’s involvement with the
Casa Bianea had an independent origin. The information
concerning the Casa Bianca obtained through the elec-
tronic surveillance would have presumably been furnished
to Intelligence shortly after its investigation began at a
time when it had to decide which avenues of inquiry were
worthy of the limited investigative resources available.
This illegally obtained data may have freshened up the
government’s legitimate leads and caused it to concen-
trate more intensively on them.

62a
Appendia C.

Nor has the government established beyond a reason-
able doubt that the electronic surveillance did not supply
leads for its investigation into the defendant’s labor and
earting activities in addition to the leads it had lawfully
acquired. There were repeated and clear references to
these activities in the surveillance logs. Much of the in-
formation in the logs could not,have been obtained

through normal investigative techniques.

The tainted evidence related to specific sources of in-
come—a restaurant, the cartage industry, and labor union
activities. Evidence of such sources of income will be
suppressed.

Other evidence of defendant’s net worth was proved
‘beyond a reasonable doubt to be untainted. It may be
used by the government provided the entire prosecution
has not been fatally compromised, an issue to which we
now turn. )

B. Entire INVESTIGATION

Defendant seeks to suppress all the government’s evi-
dence on the ground that the entire case has been fatally
blemished by virtue of the fact that the July 17 order to
conduct a saturation investigation of the defendant was
a result of the electronic eavesdropping. This contention
with respect to the government’s decision to focus on de-
fendant’s activities\\raises difficult legal and factual -is-
sues concerning the scope of the so-called “fruit of the
poisonous tree” doctrine and its application to this case.

1. Can a tainted decision to focus abort an entire
prosecution?

[15] The legal question presented is whether an en-
tire prosecution can be vitiated if the government ob-

63a
Appendia C

tains information illegally and on the basis of that in-
formation decided to throw its weight against an individ-
ual, even though the officials in charge of the investiga-
tion are unaware of the illicit source of the data and
proceed in a lawful manner. Not all evidence, the Su-
preme Court has recently told us in Wong Sun, “is ‘fruit

of the poisonous tree’ simply because it would not have ~—

come to light but for the illegal actions of the police.”
Wong Sun v. United States, 371 U. S. 471, 488, 83 S. Ct.
407, 417, 9 L. Ed. 2d 441 (1963). Rather, the test is “wheth-
er, granting establishment of: the primary illegality, the
evidence to which the instant objection is made has been
come at by exploitation of that illegality or instead by
means sufficiently distinguishable to be purged of the
primary taint.’” Ibid.

[16] If illegally secured information leads the govern-
ment: to substantially intensify an investigation, all evi-
dence subsequently uncovered has automatically “been |
come at by exploitation of that illegality.” Ibid. The un-
lawful search has set in motion the chain of events lead-
ing to the government’s evidence. There has then been
“a continuing * * * [and] significant participation by
prosecution officials” in the illegality from the time of the
police misconduct to the time of the discovery of the evi-
dence. Ruffin, Out On A Limb Of The Poisonous Tree:
The Tainted Witness, 15 U. C. L. A. L. Rev. 32, 38
(1967). “The road from ¢he tap to the testimony may
be long, but it is straight.” United States v. Tane, 329 .
F. 2d 848, 853 (2d Cir. 1964). See also Maguire, Evi-
dence of Guilt 246 (1959) (“exelusion of ‘evidence about
secondary discoveries made possible sdlely or facilitated
by the original violation”); Pitler, “The Fruit of the

64a

~ i , Appendia C
Poisonous Tree” Revisited and Shepardized, 56 Calif. L.
Rev. 579,.642-46 (1968).

(17] In the present case, if, as a result. of the elec-
tronic eavesdropping, the government overheard Schi-
pani say “I robbed the ‘X’ bank” and then sought to
prosecute him for that bank robbery after an investiga-
tion touched off by this remark, it is doubtful if the
government could successfully withstand a motion to dis-
miss the indictment. See: Smith v. United States, 120
U.S. App. D. C. 31, 344 F. 2d 545 (1965) (discovery that
crime had been committed as a result of illegal search) ;
United States v. Tane, 329 F. 2d 848 (2d Cir. 1964) (gov-
ernment first learns from wiretapped conversation that
defendant was receiving unlawful payments); United
States v. Coplon, 185 F. 2d 629 (2d Cir. 1950) (if po-
lice “had been set on the [defendant’s] trail” by wiretap-
ping, entire prosecution vitiated); People v. Dentine, 21
N. Y. 2d 700, 287 N. Y. S. 2d 427, 428-430, 234 N. BE. 2d
462 (1967) (Fuld, J., dissenting); ef. United States v.
Hagarty, 388 F. 2d 713 (7th Cir. 1968) (electronic sur-
veillance). See also Broeder, Wong Sun—A Study in
Faith and Hope, 42 Neb. L. Rev. 483, 523 (1962). Simi-
larly, if the government sought to rely upon the testi-
mony of a witness whose identity was revealed by an un-
lawful source, it would not be permitted to do so. See,
e.g., People v. Martin, 382 Ill. 192, 46 N. E. 2d 997
(1942).

[18] The result should not be different if the govern-
ment learns through illegal means that a person is closely
connected with organized crime and then proceeds to
launch an income tax investigation. Discovery of such in-
formation has much the saine effect as overhearing the

Ss

65a
Appendix .C

defendant say “I haven’t paid taxes for the last five
years.” The fact that a general exploratory investigation
of the defendant is already in progress at the time does
not license investigators to use illegal leads. Cf. Williams
v. United, States, 382 P. 2d 48 (5th Cir. 1967); People v.
Dentine, 21 N. Y. 2d 700, 287 N. Y. 2d 427, 480, 234
N. KE. 2d 462 (1967) (Fuld, J., dissenting); People v.
Mills, 148 Cal. 2d 392, 306 P. 2d 1005, cert. denied, 355
U.S. 841, 78 S. Ct. 55, 2 L. Ed. 2d 46 (1957).

The unique circumstances of an income tax investiga-
tion make a decision to focus intensively of critical im-
portance. As opposed to crimes like assault or robbery,’
tax evasion is hidden. There are at least hundreds of
thousands of tax violators whose criminality has not been
revealed. One of the chief problems for the government
is to decide how it is going to utilize its limited tax in-
vestigation forces. The main hope of a tax violator is
that the Internal. Revenue Service will remain ‘unaware
of his existence. Once the government begins to concen-
trate all its enormous resources on a citizen, the chance
of its discovering that he has violated the tax laws is
greatly multiplied. It is difficult to perceive how the gov-
ernment could receive any more valuable information
than the name of a probable tax violator.

“We recognize that this approach to the foeusing de-
cision may be viewed as contrary to that reached by
Judge Learned Hand in the 1942 case of United States
v. Nardone, 127 F. 2d 521 (2d Cir.), cert. denied, 316
U. S. 698, 62 S. Ct. 1296, 86 L. Ed. 1767 (1942). In that
case, Judge Hand declined to apply the “fruit of the —
poisonous tree” doctrine where the information obtained
by wiretapping admittedly “spurred the authorities to
press an investigation which they might otherwise have

~s

* 66a
Appendia C

dropped.” 127 F. 2d at 523. He declared that “the Su-
preme Court [had not] meant to involve the prosecution
of crime in such a tenebrous and uncertain inquiry, or
make such a fetich of the statute as so extreme an appli-
cation of it would demand.” Ibid. 8

The Nardone ease is distinguishable for two reasons.
First, the unique circumstances surrounding an income
tax prosecution, noted ‘above, serve to distinguish Nar-
done—an alcohol smuggling prosecution—from the in-
stant case. 7

Second, it has been undermined by recent decisions of
the Supreme Court and lower federal courts. The test
announced in Wong Sun,.which focuses on police exploit-
ation of the illegality, significantly expands the area
which can be tainted by an unlawful search and seizure.
See, e.g., Smith v. United States, 120 U. S. App. D. C.
160, 344 F. 2d 545 (1965); United States v. Tane, 329 F.
2d 848 (2d Cir. 1964) ; ef. Harrison v. United States, 392
iU. S. 219, 224, 88 S. Ct. 2008, 2011, 20 L. Ed. 2d 1047
(1968) (question whether “petitioner’s trial testimony
was *** impelled by *** wrongful use of his illegally
obtained confessions”). The courts have within recent
years felt it their duty to engage in what Judge Hand
would have described as “tenebrous and uncertain in-
quiry” where constitutional rights are involved. See Har-
rison v. United States, 392 U. S. 219, 88 S. Ct. 2008, 20
L. Ed. 2d 1047 (1968); Smith v. United States, 120 U. S.
App. D. C. 160, 344 F. 2d 545 (1965) (“by contacting
Donaldson, the police created the pressure which impelled
Hardy to turn the transmission over to the police”).

g
In Harrison v. United States, for example, the prose-
cution introduced petitioner’s testimony at-a prior trial

67a
Appendix C

4n which he had denied committing the offense in ques-
tion, but admitted being at the scene; this testimony had
been given after petitioner’s confession—later ruled to be
inadmissible—had been introduced. The Supreme Court
reversed on the ground that the ‘government had not
demonstrated “that the petitioner’s testimony was ‘ob-
tained ‘by means sufficiently distinguishable’ from the un-
derlying legality ‘to be purged of the primary taint’ ”.
392 U. S. at 226, 88 §. Ct. at 2012. The question, the
court declared,

“is not whether the petitioner made a knowing de-
cision to testify, but why. If he did so in order to
overcome the impact of confessions illegally ob-
tained and hence improperly introduced, then his
testimony was tainted.” 88 S. Ct. at 2010 (empha-
sis in original).

The Supreme Court felt it necessary to inquire into the
motives of a defendant to testify at his trial. Federal
courts cannot avoid an inquiry to determine whether the
intensity of the government’s. investigation of a possible
tax violator was substantially affected by illegally elicited
- information.

2. What is the government’s burden of proof on: the
focusing issue?

[19] The exacting standard ‘of beyond a reasonable
doubt is not appropriaie to the issue of whether the in-
tensity of the government’s total investigation’ was sub-
stantially affected by illegal electronic surveillance.
Rather, we think, a preponderance of the evidence test is
called fo \

First, we ate not dealing with an item of evidence, that
“will ultimately be introduced at a trial and relied upon
by the jury. Thus, the consideration that the defendant

‘

| 68a
Appendix C

_ be convicted beyond a reasonable doubt on legally ob-
tained evidence if wot: as important as it is when indi- |
vidual items of evidence. are. considered.

[20] Second, the courts should avoid wherever. pos-
sible making detailed inquiries into the reasons for ex-
ecutive decisions and examining communications among
high officials which are the basis of their exercise’ of
judgment. Cf. 8 Wigmore, § 2378(3) {MeNaughton rev.
1961) ; Gellhorn and Byse, Administrative Law Cases a
Comments,. 617-618 (4th ed. 1960). Not only is this re-
luctance supported by proper respect for the separation
of powers, but by the practical consideration that it is
often impossible for a highly placed official to analyze or
remember the varied emotional and intellectual reasons
' for. a decision. A decisign to intensify an investigation
is one of executive judgment and it would be unrealistic
to require the government to meet a higher burden of
proof than a preponderance.

-3. Has the government met its burden?

[21] The government has established by a prepon-
derance of evidence and possibly by clear and convinc-
ing proof—though not beyond a reasonable doubt—that
the intensity of its investigation’ by Intelligence and the
Alcohol Tax Division was not affected by tainted infor-
mation.

It is highly likely that the government wind have
launched a saturation investigation of the defendant even
if no information had been received from electronic sur-
veillance of the Prisco Travel Bureau. The untainted
F.B.I. report of October 10, 1960 identified the defend-
ant as a powerful underworld figure, associated with /

/
f

- ° 69a

' Appendia C |
X }
many of New York’s mobsters. He was reputed to

have “inherite’” the gambling interests of Joe Adonis
and to have undisclosed interests in three restaurants.

The investigation touched off by Attorney General
Robert F. Kennedy’s organized crime drive soon brought
- additional leads to ‘light through acceptable*investigative
techniques. Defendant had never filed an income tax re- _
‘turn although he obviously enjéyed a high standard of °
living. Immediately after the investigation began, the de- |
fendant appeared so Vulnerable and the likelihood that
an income tax investigation would prove fruitful was so
great, that government agents would naturally focus on
him.

This strong scent of big game probably explains why
Intelligence Special Agent Masetti’s unilateral decision to
switch to an income tax investigation was acquiesced in
by his superiors in Washington. Masetti’s expertise in
income tax fraud is a natural and reasonable explana-
tion of his own decision. While. there does remain a
reasonable doubt about the motives for the switch from
a limited series of investigations on narrow grounds—
wagering tax and aleohol tax forms—to a broad seale in-
come tax investigation, th¢ government has proved by a
preponderance that this décision was not based on ille-
gally obtained evidence. The government’s burden on
this issue has been satisfied. :

The Aleohol Tax Division’s surveillance, which also
resulted from the January, 1961 decision to begin a pre-
liminary investigation, revealed that the defendant was
driving a car registered-in another person’s name, paying
bills in cash, and, of erucial importance, purchasing large
quantities of money orders. This latter lead was first dis-
covered on July 17, 1961—the same date on which In-
telligence was requested to begin a saturation investiga-

70a
Appendia C

tion. ‘These initial lawfully made discoveries fed on each

other. As more leads were uncovered, the intensity of the”

investigation steadily escalated, leading to the uncovering
* of still more evidence. a

The information elicited through electronic surveillance
did not significantly contribute to the progress of the in-
vestigation oF encourage the investigators. Most of the
fnformation obtained from this source was already
‘known /Onlyone F.B.I. report on Schipani was filed be-
tween the timé the electronic surveillance began and the
time the decision was made to launch a saturation in-
vestigation. This report, dated June 15, 1961, revealed
the defendant’s close assgciation with Clemente, his
plans to open: a carting business, and his involvement in
the sale of Puerto Rican sweepstake tickets on the New
York docks. In addition, the suspicion that Schipani had
a partial interest in the Casa.Bianca was confirmed. Al-
though the specifie information concerning Schipani’s
plan_to form a carting company was new, his position as

* 4 rfajor figure in the Brooklyn carting industry had been
known for some time. Possibly, it’is this information, -
plus that furnished ‘by the Alcohol Tax Division, to which
the July 17 saturation order refers when mention is
made of “information supplied * * * by other investiga-

ie agencies.” It cannot be said that these comparative-
ly minor leads—as opposed to those uncovered through
legitimate investigatory techniques by Intelligence and
the Aicohol Tax Division—were responsible for the in-
erease-in the intensity of the Schipani investigation.

CoNCLUSION

All evidence relating to the defendant’s likely sources
of income which was introduced at the first trial is sup-
pressed. The motion is denied in all other respects.

So ordered.

71a

_ APPENDIX D

Memorandum and Order of the United States District
Court (October 14, 1968, Weinstein, D. J.)

(Not Reported)
Appearances:

Joseph P. Hoey, Esq.,
United States Attorney for the Hastete District of
New York
225 Cadman Plaza East
Brooklyn, New York
Attorney for Plaintiff

Eldon F. Hawley, Esq.,
Cono R. Namorato, Esq., |
Trial Attorneys, Department of Justice

Tax Division
Of Counsel .

Jacob P. Lefkowitz, Esq.
150 Broadway

New York, New York

Attorney for Defendant

WernstTeEIN, D.J.

Defendant has made a numberof related motions with
respect to the record in this and the prior trial. They are
decided as follows (the numbers set out below conform
to those in defendant’s brief dated September 30, 1968) :

I (1). The motion to exclude the 1943 “Admission
Summary” is denied. The admission of the defendant
with respect to his assets is relevant.

72a
Appendix D

I (2). The motion to strike the testimony with re-
spect to statements made by Schipani to Agent Maher is
not granted. This evidence is not relied upon by the
Court at this trial. As in the case of Agent Shedd’s tes-
timony referred to below, this testimony is so vague, am-
biguous and lacking in probative force with respect to the
specific years in question, that it is insufficient to show
a source of income. It is not relied upon at all by the
Court, so that defendant’s motion to strike need not be
considered. .

I (3). The motion to strike the testimony of Special
Agent Wynne used to impeach the testimony of the wit-
ness Corwin is granted.

I (4). The motion to strike all the government’s net
worth formulations is denied. 7

I (5). The motion with respect to “3500” materials is
denied. This issue is no longer alive.

II. The defendant’s motion to strike all reference to
defendant’s alleged__background of _ illicit activity is
granted. The Court will not base its decision on defend-
ant’s criminal background, if any.

III. The motion based on defendant’s contentions with
respect to electronic monitoring affecting the defendant
has been adequately dealt with in this Court’s prior opin-
ion. Treating the present motion as one for reargument
in connection with the suppression hearing, the motion is
denied. |

Electronic eavesdropping involving one Tony Ricci has
no bearing in the instant case. At the Court’s request,

Q

73a
Appendix D

the logs relating to that surveillance were examined by
the government. The government has represented that
the defendant’s name was not mentioned, none of his ac-
tivities were mentioned, and the defendant’s voice was not
picked up. Based upon the suppression hearing already
had in this case, it is clear that no leads to evidence used
against the defendant were obtained as a result of elec-
tronic eavesdropping involving Tony Ricci.

IV (1). The motion to suppress proof relating to Schi-
pani’s alleged income from gambling is granted.

IV (2). .The motion to suppress the testimony of Agent
Shedd with respect to defendant’s alleged admissions of
gambling activities need not be ruled upon for the same
reason that the motion with respect to Agent Maher’s
testimony (I (2)) was not considered.

V. Defendant’s motions ‘addressed to the competence
and materiality of the government’s basic proof in sup-
port of the net worth theory are denied. The Court will
deal with the question of whether the government has sat-
isfied its burden of proof in a separate memorandum fol-
lowing receipt of the defendant’s brief analyzing the evi-
dence in the case.

Dated: Brooklyn, New York
October 14, 1968 ©

NU Ba Cl a Eat St oo he Peat ae _
i Na nl at ll yy, a , unene Pd es SE Shh RE, MENGE RA AMR Po ate ONG

74a,

APPENDIX E

Opinion of the United States District Court
(November 8, 1968, Weinstein, D. J.)

(Reported in 293 F. Supp. 156 (1968) )

>.
> a

Unitep States or AMERICA,
Plaintiff,
v.

JosePH F. ScHIPANI,
Defendant.

»
—_-

No. 63-CR-237.

United States District Court
E.D. New York.

Nov. 8, 1968.

Net warth tax fraud case. The District Court, Wein-
stein, J., held that evidence established that taxpayer who
had previously given information indicating lack of any
cash accumulation and whose conduct during pre-indict-
ment years indicated lack of cash hoard did not have cash
hoard to meet living expenses during years covered by
indictment, and that record in net worth tax fraud case
established defendant’s guilt beyond reasonable doubt.

Judgment accordingly.

* * *
Joseph P. Hoey, U. S. Atty., for the Eastern District
of New York, Brooklyn, N. Y., for plaintiff; Eldon F.

Hawley, Cono R. Namorato, Trial Attys., Dept. of Justice,
Tax Division, Washington, D. C., of sonnel:

Jacob P. Lefkowitz, New York City, for defendant.

s

4

shit ie Sk BGs ub G Nt UR Sab RENE ¢ e
2
i=

ine ae
ws
‘ es si

Appendia a

Oprnion a
|

WernstTEIN, District Judge.
I. Dirrerences Between First anp Seconp Tria

This net worth tax fraud case covering the years 1956
through 1960 was tried before the Court essentially on
the record of the first trial. The factual background is
set out in the affirming opinion of the Court of Appeals.
United States v. Schipani, 362 F. 2d 825 (2d Cir. 1966).
‘See also United States v. Schipani, 289 F. Supp. 43
(KE. D. N. Y. 1968), 44 #. R. D. 461 (E. D. N. Y. 1968).

[1] There are two major di@&rences between this and
the first trial. The government must now succeed by ne-
gating all non-taxable sources of income rather than by
establishing particular sources. Evidence on the record
relating to possible sources of income has been sup-
pressed. See United States v. Schipani, 289 F. ee 43
(EK. D. N. Y. 1968).

[2] The second difference is the applicability of the
“presumption”. relied upon by the government in the
earlier phase of the case that the defendant, since he filed
no tax return during the pre-indictment years, earned
less than the minimum sum required for a tax return—
five or six hundred dollars a year. Since he-spent con- —
siderably more than .these amounts, the government ar-
gued that he could have accumulated no net worth dur-
ing this period. Such an inference is inconsistent’ with
the factual pattern described below. It would beat the
defendant’s shield of the presumption of innocence into a
sword for the government. The Court of Appeals
frowned on this approach; the government may not use

2

76a
‘Appendix E

it. United States v. Schipani, 362 F. 2d 825, 829-830 (2d
Cir. 1966).

II. AVAILABILITY oF CasH HOARD

[3] The critical factual question in the case is whether
defendant had acquired a cash hoard prior to the indict-
ment period on which he might have lived during the in-
dictment years. The Court concludes beyond a reason-
able doubt that there was no such cash hoard.

In arriving at this conclusion, the following factors
have been considered: |

1. The government’s thorough investigation which
failed to uncover any traces-of a prior accumulation.

2. The proven expenditures made by the defendant
during the period 1943 through 1955 together with the
inference that the defendant must have made additional
expenditures for living expenses for himself and his fam-
ily.

3. A series of events which corroborate the fact that
the defendant had not accumulated any cash reserve:

(a) The defendant stated in 1943 in connection with an
inquiry of prison authorities that he had assets of only
$1,350.

(b) The defendant negotiated two loans during 1944 in
the amount of $205.00. Such small loans are inconsistent
with the existence of a cash accumulation. Undoubtedly,
the defendant’s $1,350 board had been depleted by his
family’s needs, requiring him to borrow small amounts to
meet living expenses.

17a i
Appendix E

(c) In 1940, the defendant borrowed $51.59 from a life
insurance company to pay a premium. The defendant
made two small payments on the loan in 1942 and 19438,
but did not repay the loan in full until 1947, when he
made a final payment of $55.10. This event suggests that
the defendant was in a precarious financial position from
1940 to at least 1947. The premium involved was rela-
tively small yet the defendant could only make partial
payments in 1942 and 1943, and did not complete the pay-
ment until approximately seven years after the premium
was originally due.

(d) The defendant was delinquent in ‘the payment of
numerous premiums on his insurance policies. On many
occasions it was necessary for the defendant to make ap-
plication for reinstatement of a policy which was “out of
benefit” because the defendant was more than thirty
- days late in the payment of a premium. In connection
with three of his policies, the defendant was more than
thirty days late in the payment of eighteen annual pre-
miums, and he had to make aed applications for re-
instatement.

In addition to life insurance policies, the defendant also
contracted for insurance on his boat and even arranged
for fire insurance on the household effects of his son. He
was obviously a firm believer in the benefits of all types
of insurance coverage. An individual as intelligent as the
defendant would not repeatedly fail to make premium
payments within the thirty day grace period if he had an
available cash accumulation. The amounts due were min--
imal, yet the premiums were repeatedly late, necessitat-
ing applications for reinstatement. Each application, for
reinstatement commenced the running of a new two year

%

78a
Appendix E

“period of contestability.” It is unlikely that anyone
with a cash accumulation would voluntarily allow the
grace period to lapse, thereby giving the insurance com-
pany an additional period within which it could ‘contest
a policy.

(e) In 1955, the defendant «financed the purchase of a
new ear. He was often delinquent in. the payment of

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385604_1251%3A1. Public record. Not legal advice.