Petition for Writ of Certiorari — Rosenblum v. United States

IN THE

Supreme Court of the Unite

ny LMORE CROPL

OLE

- Ocroser Term, 1949.

Nos 253- 370

LOUIS H. ROSENBLUM,

Petitioner, Appellant below,

vs.

UNITED STATES OF AMERICA,

Respondent, Appellee below.

MAX STRYK,

Petitioner, Appellant below,

vs.

UNITED STATES OF AMERICA,

Respondent, Appellee below.

JACOB WEISS,

Petitioner, Appellant below,

vs.

UNITED STATES OF AMERICA,

Respondent, Appellee below.

SEPARATE AND SEVERAL

PETITION AND BRIEF FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT.

ALBERT Warp,

318 Insurance Bldg.,

Indianapolis, Indiana,

~ Wim B. H

Republic Bank Building,

Dallas, Texas,

Attorneys for Petitioners.

INDEX.

PAGE

Petition for Writ of Certiorari...................... 1-24

I. Summary Statement of the Matter Involved... . 2-13

If. Basis of This Court’s Jurisdiction............ 13-14

III. Questions Presented.............. 0. cece ceees 14-15

EUR OUR in coke dab kb vk bi kdb us KER KA KS 14

MP aUATCE LAE SRL aT A sk Pik n chs ce ean ce 14

MEE DUAR aKh ch cK eaear betel iskakh abe ve 15

We h b is ks Saisie bak cane skews cae 15

IV. Reasons Relied on for the Allowance of the

ES IES CI Cea aie ane en eR 16-23

kas ike Sa wae kas wave ce xecak deus 16-19

EUR Seven Gee eee ee mre Le 19-20

I Ua 0 de 6 i5.204 wi dhe dc hae Old wv vbiad 20-22

Is a kak Cod. Geo ts da kc nid deen adh cece 22-23

PEER awh brads Gc daadd.s an viccaae van 23-24

Brief in Support of Petition...................0005. 25-45

Reference to Opinions Below................... 25-26

EE ee ee ee ae

Federal Rules of Criminal Procedure Involved ..

Statement of the Case................... cc cece 27

Specification of Errors to be Urged.............. 27

Summary of Argument........................

Seeseesesesseeeseesteses es eevesensesseses

eeeeeeeeeseeeeeeeeeeseeevsensec40us

i a ak ce ie a kate ce cosh ak 37-39

OM cent lv sc epetic ee iron ceie? 39-44

CE wcacstardicactcel csr ee

ii

APPENDIX.

Opinions of the several Judges of the Court of Appeals

ce Tt ip ey es re i-xxi

Honorable Otto Kerner, Circuit Judge.......... i-vxii

Honorable J. Earl Major, Chief Judge....... _, XVii-xviii

Honorable F. Ryan Duffy, Circuit J udge....... X1X-Xxi

List or AUTHORITIES.

oe re 19, 33

Beck v. United States, 33 F. 2d 107 (8 C. 8 re 22

Brown v. United States, 150 U.S. 98................. 21

Capone v. United States, 56 F. 2d 927................ 34

Castellini v. United States, 64 F. 2d 636 (6 C. A.)....23,39

Cataneo v. United States, 167 F. 2d 820 (4 C. OS ere 43

Cave v. United States, 159 F. 2d 464................. 34

Cole v. Arkansas, 333 U.S. 196..................5. 16, 33

Collenger v. United States, 50 F. 2d 345 (7C. #.)..... 21

Commissioner v. Wilcox, 327 U. S. 404............... 31

Daeche v. United States, 250 Fed. 566 Oe ek Se 21, 22

DeJonge v. State of Oregon, 299 U. 8. 353............ 16

DeLuca v. United States, 299 Fed. 741 (2 C. , re 23, 39

Dodge v. United States, 258 Fed. 300 (Cert. Den. 250

We PIE in.0% be 9 53-055<505 cheat owcaneenl 19, 33

Doyle v. Mitchell Bros. Co., 247 U. S.179......... 18, 19, 36

Duncan v. United States, 68 F. 24 136 (9 C. A.)....... 22

Edgerton v. United States, 143 F. 2d 697 (9 C. A.)....19, 33

Eisner v. Macomber, 252 U. S. 189. bith Secmemthes s kick 19

iii

Forte v. United States, 94 F. 2d 236 (C. A. D. C.)..... 21

Fox v. United States, 45 F. 2d 364 (7 ©. A.).......... 21

Gleckman v. United States, 80 F. 2d 3% (8 C. A.),

ere eee 20

Goff v. United States, 257 Fed. 294 (8 C. A.)......... 22

gordnier v. United States, 261 Fed. 910 (9 C. A.)...... 22

Gulotta v. United States, 113 F. 2d 683 (8 C. A.)..... 21, 39

Heitman v. United States, 5 F. 2d 887 (9 C. A.)....... 16

Jordan v. United States, 60 F. 2d 4 (4C. A.)......... 22

Kirsch v. United States, 174 F. 2d 595 (8 C. A.)...... 20, 36

Kotteakos v. United States, 328 U. S. 750. . .18, 21, 23, 34, 39

Krulevitch v. United States, 336 U. S. 440........ 21, 23, 39

Kutler v. United States, 79 F. 2d 440 (3 0. A.)........ 16

Lane v. United States, 34 F. 2d 413 (8 C. A.)......... 21

Logan v. United States, 144 U. S. 263, 309............ 21

Martin v. United States, 264 Fed. 950 (8 C. A.)........ 22

McElroy v. United States, 164 U.S. 76.............. 23, 39

McMullen v. United States, 96 F. 24.574 (C. A. D. C.)..

MeWhorter v. United States, 281 Fed. 119 (6 C. A)...

Morgan v. Devine, 237 U. S. 632................0005 19, 33

Naftzger v. United States, 200 Fed. 494 (8 C. Bedetitz. 22

Nicola v. United States, 72 F. 2d 780 (3 C. A.)........ 20

Oseanyan v. W. R. Arms Co., 103 U. S. 261........... 17

Rakes v. United States, 169 F. 2d 739 Lie 's Papeete 43, 44

Roma v. United States, 53 F. 2d 1007 gt ky hearers 21, 39

Rose v. United States, 128 F. 2d 622................. 34

Singer v. United States, 58 F.2d 74 (30. A.)......... 16

Spies v. United States, 317 U.S. 492.......... 16, 19, 20, 32

iv

Stewart v. United States, 12 F. 2d 524 CA). J Wx.: 19

Stratton’s Independence v. Howbert, 231 U.S. 399.. . 19, 36

Tingle v. United States, 38 F. 2d 573 (OR oe 22

United States v. Britton, 107 U.S. 655............... 16

United States v. Carll, 105 U.S. 611................. 16, 32

United States v. Cruikshank, 92 U. 8.542......... 16, 32, 33

United States v. Denny, 165 F. 2d 668 pt SRR 19

United States v. Hess, 124 U.S. 483................. 16, 32

United States v. Murdock, 290 U. S. 389............. 18, 19

United States v. Norris, 281 U.S. 619............... 19, 33

United States v. Schenck, 126 F. 2d 702 2S As) AG: 20

United States v. Tuffanelli, 131 F. 2d 890 (7 C. A.)...17, 44

FeperaL Ruues or Crrmrnab PROCEDURE.

skbiiuaroaea tas Rogeees ues ne 22, 27, 29, 39, 40, 43

Rule 8(b) Federal Rules of Criminal Procedure .....

PASS Whhd VAADNS ROWLEAAL A heb acds nk 22, 27, 29, 39, 40, 43

Rule 13 Federal Rules of Criminal Procedure.........

c$eedantaanbahanh&) dbbh dike oh le cbatentlie £ 22, 27, 29, 39, 40

Rule 23(c) Federal Rules of Criminal Procedure. .... 17, 27

Rule 29(a) Federal Rules of Criminal Procedure. . . .17, 27

Rule 52(a) Federal Rules of Criminal Procedure......

POHANG Chis wd 04646 AS OMEN Mek hea ek ee 18, 27, 34, 40

Rule 52(b) Federal Rules of Criminal Procedure ...27, 40

v

ConsTITUTION oF THE UNITED STatzs.

SE ELE TEP OR OTOTTE TE ICT 18

EE eee eat mene dt 18

Sixteenth Amendment............................. 28, 36

STaTurTes.

Title 26 U. S. C. A., Section 21(a)............ 18, 27, 35, 36

Title 26 U. S. C. A., Section 22(a)........... '.18, 27, 35, 36

Title 26 U. S. C. A., Section 22(e)............ 18, 27, 35, 36

Title 26 U. S. C. A., Section 22(f)............ 18, 27, 35, 36

Title 26 U. S. C. A., Section Sei ess ocKe 18, 27, 35, 36

Title 26 U. S. C. A., Section | Sap 18, 27, 35, 36

Title 26 U. S. C. A., Section ___. |. Pp aree 18, 27, 35, 36

Title 26 U. S. C. A., Section I cap Seaauaee 18, 27, 35, 36

Title 26 U.S. C. A., Section 41...................... 27

Title 26 U. S. C. A., Section SERRA Ay eit e 27

Title 26 U. S. C. A., Section Meriks cid 4c bee 18, 35

Title 26 U. S. C. A., Section ee 27

Title 26 U. S. C. A., Section MIS bcs £k ks Can cenit 13, 17

Title 26 U. 8. C. A., Section 117 .................... 30

Title 26 U. S. C. A., Section EM Ges tk Vets ok veo 20

Title 26 U. S. C. A., Section | EE aa 2, 20

Title 28 U. S. C. A., Section Mik khccine'ccaks Ka 13, 26

IN THE

Supreme Court of the United States

OcrosEr Term, 1949.

OD cc

LOUIS H. ROSENBLUM,

Petitioner, Appellant below,

vs.

UNITED STATES OF AMERICA,

Respondent, Appellee below.

MAX STRYK,

Petitioner, Appellant below,

vs.

UNITED STATES OF AMERICA,

Respondent, Appellee below.

JACOB WEISS,

Petitioner, Appellant below,

vs.

UNITED STATES OF AMERICA,

Respondent, Appellee below.

SEPARATE AND SEVERAL PETITION

FOR WRIT OF CERTIORARI.

To the Honorable, the Supreme Court of the United States:

Your petitioners, Louis H. Rosenblum, Max Stryk and

Jacob Weiss, hereinafter designated as defendants, sep-

arately and severally petition for a writ of certiorari to

the United States Court of Appeals for the Seventh Circuit

to review and reverse the decision of that Court of June

13, 1949 (petition for rehearing overruled August 24, 1949),

affirming the judgments of the District Court of the United

States for the Southern District of Indiana, convicting each

defendant of a violation of Section 145(b), Internal Reve-

nue Code, Title 26, U. S. C. A., in the case against each

defendant as above entitled, and each respectfully repre-

sents as follows:

I.

SUMMARY STATEMENT OF THE MATTER INVOLVED.

1. By a separate indictment against each defendant,

the Grand Jury in the Southern District of Indiana, Indi-

anapolis Division, on the 19th day of September, 1947,

charged each defendant separately with attempting to de-

feat and evade a large part of his income and victory tax

for the calendar year 1943, by filing and «ausing to be filed

with the Collector of Internal Revenue, at Indianapolis,

Indiana, a false and fraudulent income and victory tax

return by understating the amount of his income as there-

in specifically set out. (Rosenblum, R. 3, 4; Weiss, 5, 6;

Stryk, 7, 8.)

2. For example, in the indictment against Rosenblum

(R. 3, 4), the Grand Jury specifically charged that his net

income for said calendar year was $210,397.21,

‘“derived as follows:

Gross Income:

_.. eer ere $ 34,562.50

i) 145,022.72

Interest on Government

obligations ......... 285.86

Capital Gain ......... 28,715.60

Other Income ........ 4,109.97

Total Income ..... $212,696.65”’,

3

from which certain itemized deductions were subtracted,

leaving the alleged net income of $210,397.21, upon which it

was charged that he owed a tax of $157,760.36.

3. The three indictments in form were identical as that

set out for Rosenblum in 2 above, except for the imma-

terial variances as between the three defendants in the

amounts of gross income and deductions. (R. 3-7.) There

was no charge as to Weiss that he had received any un-

reported ‘‘Capital Gain’’ and the Government completely

abandoned the charge of ‘‘Capital Gain’’ contained in the

Rosenblum and Stryk indictments and this item is not an

issue in these proceedings. (R. 53, 56, 87, 88.)

Kach of the defendants, on or before March 15, 1944, had

filed separate individual income tax returns (Government’s

Exhibits A-1, A-2 and A-3) for the year 1943. (R. 85.)

The itemization in the individual tax returns was identical

with the breakdown in the separate indictments, with the

only material difference between the returns as filed and

the three indictments being the addition in the indictments

of the item of ‘‘ Dividends” in the amount stated.

4. On motion, the Court ordered the United States At-

torney to file a bill of particulars as to each indictment,

and to show therein

(1) The name or names of the corporation or cor-

porations from which the alleged dividends had been

received?

(2) The date of the payment or the receipt of such

dividends?

(3) Whether such dividends consisted of money, in

kind, stock or other evidence of benefit?

(4) How is it determined that the figure or figures

is or are dividends, that is, did the corporation or cor-

porations have earnings or profits sufficient to justify

the amount it paid and at the time it paid the alleged

dividend or dividends?

and

(5) As to Rosenblum and Stryk—what sale, trans-

fer or exchange gave rise to the item of ‘‘Capital

Gain’’ included in the alleged gross income charged

in the respective indictments? (R. Rosenblum, 36, 37,

52; Weiss, 40, 41, 52; Stryk, 44, 45, 52.)

5. In response, the Government’s Bills of particulars

informed the defendants that no corporate dividends were

received by any of the defendants, and that no effort to

prove dividends received from a corporation would be made

on the trial against any of the defendants, and that no

capital gain would be shown or proven to have been re-

ceived by either Rosenblum or Stryk. (Rosenblum, R. 53;

Weiss, R. 54, 55; Stryk, R. 55, 56.)

In the Bills of particulars, the United States Attorney

further stated that ‘‘The word ‘dividends’ used in the in-

dictment is used in its broad sense of a division of money

among two or more people,’’ and that the money described

as dividends in the indictment represents a division of

money received by the defendant from a joint venture in

which he and the other defendants had participated. (R.

53, 54, 55.) In explanation of this, the United States At-

torney informed the trial court (R. 257, 258): ‘‘The Grand

Jury could not have been charging them with getting divi-

dends because people who are not stockholders can’t get

dividends of corporations, and the Grand Jury knows that.

* * * Now, it is my contention that the Grand Jury,

knowing that these men were not stockholders of the corpo-

ration (except defendant Stryk was a stockholder of one of

the corporations) used the word in the common language,

and I don’t think there is any objection to doing that.’’

6. At the trial, the Government admitted that there was

no falsity in the tax return of any defendant except as

to the item of ‘‘Dividends’’ shown in each indictment in

the breakdown of ‘‘Gross Income’’. (R. 87, 88.) It ad-

5

mitted that it had no evidence to prove that either Rosen-

blum or Stryk had received any ‘‘Capital Gain’’ which

they did not report. (R. 87, 88.)

The Government also admitted and announced at the

commencement of the trial that it did not intend to charge

the defendants with the receipt of ‘‘Dividends’’ from any

corporations which they did not report. (R. 87, 88.)

The defendants thereupon moved the trial court to find

for the defendants upon such admissions. (R. 88, 89.) The

court denied such request. (R. 89.)

7. At the close of the Government’s evidence, and be-

fore the defendants had rested, the trial court at R. 255-

259, in discussing the charge in the indictments, the receipt

of ‘‘Dividends’’, and the nature of the proof offered by

the Government as to money collected, stated at R. 259,

«* * * can it be said that those moneys thus collected

amounted to dividends?’’

‘‘Now, that becomes a very material question upon the

substantive counts.’’

At R. 261, in discussing what is, and what is not a divi-

dend as defined by the income tax statute, the trial court,

in response to defendants’ insistence that there was an

entire failure of proof as to the receipi of ‘‘Dividends’’ as

defined by the Internal Revenue Code, siated: ‘‘ Well that

is the question of the case.’’

At R. 262, while the separate motions for acquittal were

pending, the trial court further said that he preferred not

to pass upon these motions at this stage of the proceedings.

8. After the Government had abandoned the offense

charged in the indictments (the receipt of dividends) the

Government, over the objections of the defendants (R. 88,

89, 255, 256, 257, 258 and 259), proceeded to try the defend-

ants for the receipt of money in a ‘‘ Joint Venture.’’ (Opin-

6

ion of trial judge, R. 276; Opinion of Circuit Judge

Kerner, R. 392; Opinion of Chief Judge Major, R. 398.)

9. The testimony of Government witnesses, supple-

mented by the Exhibits received as part of their cross.

examination, proved conclusively that in the joint venture

defendants suffered a loss and had no net income which

they failed to report (Government’s Exhibits A-13, A-14

and Defendants’ Exhibit 6) and that their individual tax

returns as filed in March, 1944, were true and correct (R.

116, 117, 119, 120), that is to say, defendants had no more

tax liability than was disclosed by their said returns.

10. The defendants had a complete defense to the

charge of having received non-reported dividends. When

the Government admitted that the defendants did not re-

ceive ‘‘Dividends’’, the defendants did not feel that they

were called upon to auswer a different charge and one

not contained in the indictments. (R. 256, 257.) The opin-

ions of both the trial court and the Court of Appeals show

conclusively however that the defendants were found guilty

of a charge other than the receipt of net income from unre-

ported ‘‘Dividends’’ (R. 276, 279, 392, 398) and that the

trial proceeded upon the alleged receipt of gross receipts

from a joint venture. (R. 392, 398.) The trial court held

(R. 280): ‘*This was an illegal joint enterprise’’ and that

the theory of trial and the nature and relevancy of the

proof mattered not, stating at R. 278, 279:

«<* * * it is impossible to see how they (defend-

ants) could be prejudiced by the government's label-

ing the income as ‘dividends’ or ‘profits from a joint

venture’ instead of merely labeling it as ‘other in-

come.’ Furthermore, I am of the opinion that profits

from a joint venture are not inaptly called dividends.

The phrase is fully descriptive also of corporate profits

divided by the people who in fact own and control the

corporation. Any possible prejudice to the defend-

ants is seen to be even more remote if we consider the

7

fact that defendants’ principal defense is that the

money received was merely gross income from which

they should be allowed to deduct expenses which ex-

ceeded the income. If defendants were relying on the

government’s original theory of joint venture, as they

now claim they were, why did not they attempt to rebut

the government’s case by introducing evidence of the

expenses which they assert were incurred in the sale

of the whiskey? Such evidence would have been ad-

missible under the joint venture theory, but not under

the dividend theory.’’

11. Despite the structure of the three indictments and

the declarations of the United States Attorney that he

did not intend to prove the receipt of dividends by the de-

fendants, the Government was permitted over the objec-

tions and protests of defendants to go into two whiskey

transactions. With one of these, referred to at the trial

as the ‘‘Beam’’ transaction, the defendant Weiss had no

connection. (R. 395.) Weiss, however, was found guilty

of and stands convicted of the receipt of income from this

source. (R. 277, 280, 281, 392, 398.) At the trial it was

stipulated by the government and the defendants that the

money which was not accounted for in the tax returns

“were gross amounts received in cash by Louis H. Rosen-

blum in the transaction from purchasers’’ of whiskey.

(Government’s Exhibit Z.)

12. Without going into the details of the whiskey trans-

actions in this Petition, it suffices to point out that the

sums received by defendant Rosenblum in the whiskey

transactions were gross income against which, as provided

in Sections 21, 22 and 23 of the Internal Revenue Code,

the defendants were entitled to various set-offs and deduc-

tions. The whiskey cost the defendants $466,039.32. (De-

fendants’ Exhibit 6.) In computing the alleged tax, the

government allowed the defendants no cost for the whiskey.

(R. 234.) Expenses were paid out in making the sales

in the sum of $145,506.07 as shown in Government’s Ex-

hibits A-13 and A-14 introduced by Government’s wit-

ness Richardson (R. 121, 122); the Government allowed

$8,746.70 of such expenses and disregarded $136,759.37

thereof. (R. 234.) The cost of the whiskey amounting to

$466,039.32 and expenses of $145,506.07 totalled $611,545.39

and exceeded the gross receipts and there was no net in-

come from the whiskey transactions.

In the hypothetical question and answers of the Govern-

ment’s tax expert, witness Ruggaber, it was made to ap-

pear as though the Government was allowing $25,698.99 of

defendants’ expenses (R. 234-238), whereas on cross-ex-

amination the witness submitted Government’s Exhibits

Y-1 and Y-2 on which were detailed the items aggregating

the gross figures assumed and wherefrom, upon interroga-

tion, it was developed unequivocally (R. 240, 241, 245, 246,

and 247), that of the said $25,698.99 only $8,746.70 was al-

lowed as defendants’ expenses and that the difference of

$16,952.29 was an over-statement of that amount in the

$586,178.97 assumed as the gross income of the defendants

in the hypothetical question and answer. The questions

and answers were objected to by defenaants as being in-

complete, inaccurate, and failing to assume the Record

facts of the defendants’ whiskey costs and all of their

expenses and that it was incompetent and irrelevant to the

indictment charge of ‘‘Dividends’’, and for the further

reason that as to defendant Weiss, it assumed and sought

to charge him with moneys collected on the ‘‘ Beam’? trans-

actions with which he had no interest or relation.

The finding of guilt overlooks the fact that the only

proof in the Record is as to gross receipts. The court dis-

regarded the deductions and refused to give effect to

Government’s Exhibits A-13 and A-14, the expenses of the

defendants in the joint venture, when the Government of-

fered no proof to the contrary and nothing to question the

9

verity of that which such Exhibits (A-13 and A-14) proved.

But if this evidence of cost and expenses is not further

substantiated in the Record, the fault lies entirely with the

Government. The defendants were not called upon to meet

this kind of a charge—and they should not have been penal-

ized, as they were, after the trial (R. 279), for failure to

go forward with proof which was available and which they

were prepared to introduce if they had not been misled by

the trial court and the proceedings at the trial. They as-

serted, and still assert, that upon the trial they were only

called upon to defend the offense as set forth specifically in

the indictment and could not be compelled to meet a differ-

ent charge. Since the charge in the indictment was not

proved and the Government by its own witnesses and evi-

dence had shown that defendants had no net income upon

which they failed to pay a tax, the defendants were entitled

to rest without introducing further evidence.

13. The trial court encouraged the defendants in their

position by holding throughout the trial that there was

no issue of fact because there was no evidence to show

that defendants received ‘‘Dividends’’; the Government

admitted that the only issue was whether or not the money

received by the defendants from a joint venture in whiskey

could, as a matter of law, be said to be ‘‘ Dividends’’ within

Section 115(a) of the Internal Revenue Code; the issue

was one of law as to the meaning of the word ‘‘Dividends”’

—and this issue, the court said he would not decide until

after the evidence was in. (R. 88, 260, 261.) Having de-

cided after the trial was over that dividends meant some-

thing different from the Congressional definition, due

process was denied to defendants and each stands convicted

of a charge not laid in the indictments.

The position of the trial court, stated early in the trial,

is shown by the following statement:

*‘The Court: Of course your objection, Mr. Ward,

raises a legal question, and a question which I shall

10

determine upon all of the evidence. I am not going

to pass at this stage of the case, upon this question of

what constitutes dividends and what does not consti-

tute dividends under a proper construction of the acts

of Congress. That question I shall reserve until the

conclusion of the evidence. I see that you are going

to have controversy all through this lawsuit about

whether anything in the indictment can be reached

under the designation of dividends.’’ (R. 89.)

There was no evidence that any corporation had any

earnings or profits out of which dividends could have been

paid.

14. Concurrent with the return of the foregoing indi-

vidual substantive indictments against defendants, the

Grand Jury returned an indictment charging defendants

(R. 8) with having conspired to attempt to evade and de-

feat income and victory taxes due for the calendar year

1943, by filing and causing to be filed with the Collector

at Indianapolis, Indiana, false and fraudulent returns.

The conspiracy indictment, over the objections of the de-

fendants (R. 63), was consolidated for trial, upon motion

of the District Attorney, with the foregoing individual

substantive indictments.

The Court of Appeals reversed all three convictions on

the conspiracy indictment. (R. 400, 401, 402.)

The record shows that evidence which was erroneously

received on the basis of the conspiracy charge, and which

caused the reversal thereof (R. 398 to 402), was erro-

neously considered and relied upon by both courts below

to convict the defendants on the substantive indictments.

The statements by one or another of the defendants,

made long after the commission of all acts charged in the

indictments or relied upon by the Government as constitut-

ing the offenses charged had been completed, were erro-

neously relied upon and held by both courts below to be

ll

binding upon the other defendants over the separate ob-

jections of the several defendants that such statements

were hearsay as against the defendant not making then

(R. 88, 89, 95, 145, 151, 162, 170, 193, 214, 223, 225, 229

and 230.)

The vice of this procedure is aggravated by the fact that

the trial court failed to differentiate between the proof

relevant to the substantive offense and that relevant to the

conspiracy charge (R. 399), and the trial court was power-

less to prevent the abuse which resulted from getting evi-

dence into the record which was wholly inadmissible on

any theory, but which he admitted solely upon the conspir-

acy charge. (R. 95, 225 and 401.) Such procedure was an

abuse of judicial process (R. 400) and destroyed a fair

administration of justice to these defendants. (R. 401.)

15. The statement of defendant Rosenblum of March

21, 1944 (Government’s Exhibit X-1) relating to ‘‘Beam’”’

transactions with which defendant Weiss (R. 393) had

no connection—and no interest—was received in evidence

against all the defendants (R. 244) notwithstanding the

same was made in the absence of both defendants Weiss

and Stryk.

The evidence of Siemion (R. 146-150), Ackerman (R.

151), Hicks (R. 155), and Palffy (R. 159), as to records of

Gary Wine & Liquor Corporation, and conversations and

transactions had by such witnesses with Rosenblum con-

cerning the sale of ‘‘Beam’’ whiskey, all in the absence of

Weiss, were admitted over the objection of Weiss that he

had no connection with the ‘‘Beam’’ whiskey sales and all

of such evidence was hearsay as to him. (R. 95, 145, 151.)

The statements U-1, U-2, U-3, V-1, V-2, V-3, V-4, V-5,

A-8, A-9, A-10 and A-11, allegedly made by the different

defendants at different times in 1945 and 1946, in connec-

tion with settlement negotiations with the Government

agents were erroneously received in evidence and relied

12

upon to convict the defendants. (R. 114, 115, 116, 117, 118,

119, 120, 221, 223, 224, 225, 229, 231, 232, 233, 279, 281,

395 and 396.)

16. The indictments which charged the substantive of-

fense against each defendant did not allege that the de-

fendants had participated in the same act or transaction

or in the same series of acts or transactions constituting

the separate offenses charged. (R. Rosenblum, 3, 4; Weiss,

5, 6; Stryk, 7, 8.)

17. Trial by jury was waived (R. 72), and trial before

Judge Lindley, resulted in conviction of each defendant as

to the substantive offense against him and as to the con-

spiracy charge, and each defendant was sentenced to im-

prisonment of three years on the substantive offense and

fined $10,000.00, and each was given a cumulative sentence

of two years and fined $10,000.00 on the conspiracy charge,

and assessed with one-third of the costs. (R. Rosenblum

295, 296, 298; Weiss, 296, 298; Stryk, 297, 299.)

18. Each defendant filed a motion for acquittal at the

close of the Government’s evidence, for the reason that

the evidence was insufficient to sustain a conviction against

him of the offense charged in the indictment. (R. Rosen-

blum, 269, 271; Weiss, 270, 271; Stryk, 270, 271.) Such

motions were overruled. (R. 271, 272, 273.) A similar mo-

tion was filed by each defendant at the close of all the

evidence. (R. Rosenblum, 272, 274; Weiss, 272, 274; Stryk,

273, 274.) These were all overruled. (R. 283, 284.) Each

defendant filed a motion in arrest of judgment, which was

overruled. (R. Rosenblum, 287, 288, 291, 292, 295; Weiss,

289, 294, 296, 298; Stryk, 290, 293, 294, 297.) Hach defend-

ant, within five days after judgment, filed a renewed motion

for acquittal, which was overruled. (R. Rosenblum, 284,

285, 287, 288, 291; Weiss, 285, 287, 290, 291; Stryk, 286,

287, 291.)

19. Each defendant took a separate appeal from his

—

13

judgment of conviction to the Court of Appeals for the

Seventh Circuit; notice of such appeal, statement of points,

and supersedeas bond having been made and filed on August

23, 1948. (R. Rosenblum, 300 to 309, bond, 357-358; Weiss,

309 to 318, bond, 359-360; Stryk, 319 to 328, bond, 362-363.)

20. By written stipulation, approved by the Court of

Appeals, all of the cases were presented upon the one

printed Record and the printing of the exhibits dispensed

with. (R. 380, 381.) The defendants herein have accord-

ingly caused this petition to be accompanied by one cer-

tified transcript of ‘Record in the cases, including the pro-

ceedings in said Court of Appeals.

21. In the Court of Appeals for the Seventh Circuit the

cases were heard by Chief Judge J. Karl Major and Circuit

Judges Otto Kerner and F. Ryan Duffy; each judge wrote

a separate opinion, a copy of which, for convenience, is set

out in the Appendix to the brief filed in support of this

petition as Exhibit ‘‘A’’.

II.

BASIS OF THIS COURT’S JURISDICTION.

The judgment of the Court of Appeals affirming the judg-

ment of conviction of each defendant was rendered on June

13, 1949. (R. 403, 404, 405.) Each defendant filed a peti-

tion for rehearing in said Court on June 23, 1949. (R. 405.)

Each petition for rehearing was denied by the Court of

Appeals on August 24, 1949. (R. 406.)

On September 20, 1949, Mr. Chief Justice Fred M. Vinson,

for cause shown, upon the application of counsel for defend-

ants, ordered that the time for filing petition for certiorari

in these causes be extended to and including October 7, 1949.

The jurisdiction of this Court is invoked under Section

1254(1), Title 28, United States Code, Judiciary and Judi-

cial Procedure, Effective September 1, 1948,

14

This petition is presented by the separate and several

petitioners who were defendants in, and parties to, the said

criminal causes as hereinbefore set out.

III.

QUESTIONS PRESENTED.

One.

Serious error was committed in convicting the defend.

ants of a charge not contained in the indictments. Failure

to give an accused notice of the precise offense to be met—

the heart of due process—cannot be argued away as mere

differences in verbiage. The trial court thought likewise

during the trial—and the seriousness of the error is pointed

up by him in the following sentence from his decision—

‘*Such evidence would have been admissible under the joint

venture theory, but not under the dividend theory.’’ (R.

279.) This is precisely what the defendants believed—and

they made timely objections to the introduction of evidence

at variance with the indictment—and refused to be drawn

into a trial of a different offense.

Two.

There was an utter failure of proof of corpus delecti. The

conviction of each of the defendants of the charge made

against him was serious error. No competent evidence was

introduced showing that any of the defendants had a net

income for 1943 upon which he did not pay the proper tax.

The defendants suffered a loss in their 1943 whiskey trans-

actions. The Court of Appeals erred in not ordering the

discharge of each defendant upon his several motions for

acquittal.

15

Three.

It was prejudicial to the substantial rights of defendant

Weiss to receive and consider the testimony of Witnesses

Ackerman, Hicks, Palffy and Siemion, and substantial and

prejudicial error was committed against all of the defend-

ants by the trial court in admitting in evidence and in

considering the statements, and the amended returns of the

several defendants, made in the absence of one or the other,

all of which were made long after the commission of all acts

which the Government claimed constituted guilt of the sev-

eral crimes charged.

The reversal by the Court of Appeals of the convictions

on the conspiracy indictment automatically rules out the

mass of evidence admitted into the Record solely because

of the claim of conspiracy. Absent such testimony no evi-

dence is left to support the convictions.

Four.

The Court of Appeals erred in not reversing the several

judgments of conviction because of the prejudice to the

fundamental rights of each defendant which flowed from

the erroneous consolidation of all four indictments for trial.

The illegal consolidation of the four indictments for trial

was a prejudicial abuse of judicial discretion.

The trial court failed to differentiate as to the proof rela-

tive to the several crimes charged. (R. 399.) He was power-

less to prevent the abuse of getting evidence into the Rec-

ord which would have been inadmissible, except for such

consolidation. (R. 401.)

The defendants were denied a just and fair trial.

16

IV.

REASONS RELIED ON FOR THE ALLOWANCE OF THE WRIT.

Question One.

The Government admitted the truthfulness of the individ-

ual tax returns filed by each defendant separately in March

1944, covering the year 1943, except it disputed the omission

from such returns of the item descriptively charged in the

separate indictments as ‘‘ Dividends’’; and the Government

further admitted that as to the item specifically charged as

‘*Dividends’’ it had no evidence, and would offer no evi-

dence, to show that any of the defendants had received any

‘*Dividends’’ from any corporation. (R. 53-56, 87, 88, 258.)

A.

It was therefore a denial of due process to try, and to

convict, the defendants of having had gross receipts from

dealings in buying and selling whiskey, upon indictments

which specifically charged that they had received ‘‘Divi-

dends’’ which were wrongfully omitted from their returns.

In affirming the convictions, the Court of Appeals has

decided a federal question in a way in conflict with the

applicable decisions of this Court in Cole v. Arkansas, 333

U.S. 196 ; DeJonge v. State of Oregon, 299 U.S. 353 ; United

States v. Cruikshank, 92 U. S. 542; United States v. Carll,

105 U. S. 611; United States v. Hess, 124 U. S. 483; United

States v. Britton, 107 U. S. 655; Spies v. United States, 317

U. 8. 492, 499.

Such decision of the Court of Appeals is in conflict with

the decisions of other Courts of Appeals on the same matter

in Singer v. United States, Third Circuit, 58 F. 2d 74, 75;

Kutler v. United States, Third Cireuit, 79 F. 2d 440, 442;

Haitman v. United States, Ninth Circuit, 5 F. 2d 887; it is

17

in conflict with its own decision in United States v. Tuf-

fanelli, 131 F. 2d 890, 892. (7 C. A.)

The trial court should have discharged the defendants

when the District Attorney announced in open court that he

had no evidence to convict the defendants of having received

corporate dividends as charged in the indictments. The

failure of the Court of Appeals to order the discharge of

the defendants is a decision of a federal question in con-

flict with the applicable decision of this Court in Oscanyan

v. W. R. Arms Co., 103 U.S. 261, and Rules 23(c) and 29(a)

of the Federal Rules of Criminal Procedure; Section 115(a)

Internal Revenue Code.

By such decision, the Court of Appeals has so far de-

parted from the accepted and usual course of judicial pro-

ceedings, and so far sanctioned such a departure by a lower

court, as to call for an exercise of this Court’s power of

supervision.

The defendants were deceived and misled by the bills of

particulars and the holding of the Court throughout the

trial that the issue was one of law as to the meaning of the

word “‘Dividends’’ as defined by Congress in Section 115 (a)

Internal Revenue Code, which he would not decide until

after the evidence was in. (R. 88.) They gave up their

right to a trial by jury when the District Attorney alleged

in his bills of particulars that there was no evidence to show

that any of the defendants had omitted dividends from his

return; the decision of the Trial Court at R. 259, that the

“dividend’’ charge in each indictment ‘“‘became a very

material question upon the substantive counts’’ prejudi-

cially deceived them as to whether any evidence should be

introduced. Under the unusual circumstances in these

cases, the specific charge in the indictments, the bills of

particulars, the statements of the United States Attorney,

18

and the rulings of the Court during the trial, the convic.

tion of the defendants upon the joint venture theory was a

violation of the rights guaranteed them by the Fifth and

Sixth Amendments to the United States Constitution.

In deciding otherwise, the Court of Appeals has miscon-

strued and misapplied Rule 7(c) and Rule 52(a) of the

Federal Rules of Criminal Procedure, and such decision

presents an important question in the administration of the

criminal law. None but a Grand Jury can bring in an

indictment—and it does not lie within the power of a court

or District Attorney to change it. The lower courts have

sought to escape this rule of fundamental law by treating

the variance from the indictment as a mere matter of label-

ling. In fact the variance is one of substance under the

Internal Revenue Code. If a dividend is received the tax-

payer is allowed no offsetting deductions, but if money is

received in a commercial transaction, the statute allows

deductions of costs and expenses before taxable income can

be said to arise, Sections 21, 22, 23, 51(a) Internal Revenue

Code.

Such decision of the Court of Appeals is a decision upon

a federal question in conflict with the decision of this Court

in Kotteakos v. United States, 328 U. S. 750; Fiswick v.

United States, 329 U. S. 211; Doyle v. Mitchell Bros. Co.,

247 U. S. 179, and United States v. Murdock, 290 U. S. 389.

C.

It was prejudicial error to consider the indictments in

the sense that they had been altered or amended by the

deletion or omission therefrom of the specific words and

figures ‘‘Dividends, $145,022.72’’, as to Rosenblum, and the

similar words and figures as to Weiss and Stryk, and the

convictions will not protect each defendant against another

prosecution for the same offense.

In deciding otherwise, the Court of Appeals has decided

a federal question in a way probably in conflict with the

19

applicable decisions of this Court in Ex Parte Bain, 121

U.S. 1; United States v. Norris, 281 U. S. 619; Morgan v.

Devine, 237 U.S. 632.

Such decision of the Court of Appeals is in conflict with

the decisions of other Courts of Appeals on the same mat-

ter in Edgerton v. United States, Ninth Circuit, 143 F. 2d

697; Dodge v. United States, Second Circuit, 258 Fed. 300,

305 (certiorari denied, 250 U. S. 660); Stewart v. United

States, Ninth Circuit, 12 F. 2d 524; see also its own decision

in United States v. Denny, 165 F. 2d 668, 671, with a sepa-

rate opinion by each, Circuit Judge Kerner, District J udge

Lindley and Circuit Judge Minton.

Reasons as to Question Two.

A.

No reason nor explanation is in the Record why defend-

ants’ cost and all of the expenses were not properly deducti-

ble from the gross receipts. The Court of Appeals erred in

deciding that defendants should stand convicted of attempt-

ing to evade the payment of income taxes on moneys de-

rived from dealings or transactions involving the purchase

and sale of intoxicating liquors, when there was no evi-

dence to show that defendants realized a gain from those

transactions. Defendants should have been allowed the cost

of the liquor, and the expenses of selling the same; no cost

was allowed and only a small part of the expenses of sale

were deducted from the gross receipts by the Government.

The decision of the Court of Appeals in not allowing

such cost, and the full amount of expenses, is a decision of

a federal question in a way in conflict with the applicable

decisions of this Court in Doyle v. Mitchell Bros. Co., 247

U.S. 179; United States v. Murdock, 290 U. S. 389; Strat-

ton’s Independence v. Howbert, 231 U. 8. 399; Eisner v.

Macomber, 252 U. S. 189; Spies v. United States, 317 U. 8.

492.

Such decision of the Court of Appeals is in conflict with

decisions of Courts of Appeals of other Circuits in Gleck-

man v. United States, 80 F. 2d 394, Eighth Circuit, cer-

tiorari denied, 297 U. S. 709; United States v. Schenck, 126

F. 2d 702, Second Circuit; Nicola v. United States, 72 F. 24

780, Third Circuit; Kirsch v. United States, 174 F. 24 595,

Eighth Circuit.

Said decision of the Court of Appeals for the Seventh

Circuit has so far departed from the accepted and usual

course of judicial proceedings and so far sanctioned such a

departure by a lower court as to call for an exercise of this

Court’s power of supervision.

The only competent proof in the Record was that defend.

ants received gross income in their whiskey dealings in

1943 which they did not report in their returns. If this

was wrong and the same amounted to a crime, it was a mis-

demeanor and a violation of Section 145(a) of the Internal

Revenue Code, Title 26, United States Code, and was not

the felony of which defendants each stand convicted under

Section 145(b) of said Internal Revenue Code.

It was error of the Court of Appeals to fail to order the

discharge of each of the defendants and its decision is a

decision of a federal question in conflict with the decision of

this Court in Spies v. United States, 317 U. 8. 492.

Reasons as to Question Three.

A.

The Court of Appeals erred in deciding that statements

and amended returns of the several defendants, being state-

ments made in the absence of the others, could be received

and considered in evidence as admissions against all of the

defendants.

21

The admissions, declarations and acts of those severally

charged with the commission of a crime, but jointly tried,

made before or after such crime has been committed in the

absence of the others, cannot be used against anyone but

the declarant and cannot be used against him, unless there

is other substantial extrinsic evidence which proves corpus

delecti, and there is no such extrinsic, independent proof in

this Record.

The admission of the evidence of Ackerman, Hicks, Palffy

and Siemion against defendant Weiss was exceptionally

prejudicial, as it related solely to transactions concerning

sales of the ‘‘Beam’’ whiskey by Rosenblum, at least three

months before Weiss had any connection with any of the

whiskey transactions; the doctrine of relation back to

establish a crime, or to connect one with a crime, is un-

known to our criminal law, and such evidence and his

conviction thereon was very prejudicial as to Weiss.

Such decision of the Court of Appeals is a decision by it

upon a federal question in a way in conflict with applicable

decisions of this Court in Krulevitch v. United States, 336

U.S. 440, 445-446 ; Fiswick v. United States, 329 U. S. 211,

215, 217; Kotteakos v. United States, 328 U. S. 750; Brown

v. United States, 150 U. S. 93, 98; Logan v. United States,

144 U. S. 263, 309.

The decision of the Court of Appeals upon these ques-

tions is in conflict with former decisions of the Seventh

Cireuit in Fox v. United States, 45 F. 2d 364; Roma v.

United States, 53 F. 2d 1007; and Collenger v. United

States, 50 F. 2d 345, 348; such decision is in conflict with

the decisions of other Courts of Appeals on the same mat-

ter in Lane v. United States, 34 F. 2d 413 (8 C. A.) ; Gulotta

v. United States, 113 F. 2d 683 (8 C. A.); Forte v. United

States, 94 F. 2d 236 (C. A. D. C.); Daeche v. United States,

22

250 Fed. 566 (2 C. A.); Jordan v. United States, 60 F. 2d

4 (4C. A.) ; Martin v. United States, 264 Fed. 950 (8 C. A.);

Tingle v. United States, 38 F. 2d 573 (8 C. A.); Nafteger

v. United States, 200 Fed. 494 (8 C. A.); Goff v. United

States, 257 Fed. 294 (8 C. A.) ; Duncan v. United States, 68

F. 2d 136 (9 C. A.) ; Gordnier v. United States, 261 Fed. 910

(9 C. A.); McWhorter v. United States, 281 Fed. 119, 121

(6C. A.) ; Beck v. United States, 33 F. 2d 107, 112 (8 C. A.),

The decision of the Court of Appeals on iaese questions

has so far departed from the accepted and usual course of

judicial proceedings, and so far sanctioned such departure

by a lower court, as to call for an exercise of this Court’s

power of supervision.

Reasons as to Question Four.

A.

The consolidation of the four indictments for trial was

illegal and a prejudicial abuse of judicial discretion be-

cause there is no allegation in either of the substantive

indictments that the defendants had participated in the

Same act or transaction or in the same series of acts or

transactions constituting the offenses charged. Rules 8 and

13, Federal Rules of Criminal Procedure, make the allega-

tions in the indictments the test by which consolidation

shall be determined.

Such consolidation became extremely prejudicial to the

defendants because of the abandonment by the Government

of the ‘‘dividend”’ theory charged in the indictment, and

its adoption of the ‘‘joint venture’’ theory set out in the

bills of particular; the issue became confused; the proof

relative to the separate charges of each defendant became

hopelessly intermingled and the trial court was unable to

23

differentiate between the proof relative to the several

charges, and he did not prevent the abuse which flowed

from getting evidence into the Record which would have

been inadmissible except for such unlawful consolidation

(R. 399, 401) and was confused into relying upon such evi-

dence as proof of the guilt of all of the defendants as to

all of the alleged offenses.

The Court of Appeals should have reversed the convic-

tions, and its decision, as to paragraph A, is a decision of

a Federal question in a way in conflict with the applicable

decision of this Court in McElroy v. United States, 164 U. S.

76.

Its decision is in conflict with decisions of other Courts

of Appeals on the same matter in Castellini v. United

States, 64 F. 2d 636, Sixth Circuit, and DeLuca v. United

States, 299 Fed. 741, 744, Second Cireuit.

As to paragraph B, the decision of the Court of Appeals

is a decision of a federal question in a way in conflict with

Kotteakos v. United States, 328 U. 8. 750; Fiswick v. United

States, 329 U. S. 211 and Krulevitch v. United States, 336

U. S. 440, 445, 446.

It is in conflict with the decision of the Court of Appeals

for the District of Columbia in McMullen v. United States,

96 F. 2d 574.

The decision of the Seventh Circuit is in violation of

Rule 8(b) of the Federal Rules of Criminal Procedure, and

such decision presents an important question in the ad-

ministration of the federal criminal law.

WHEREFORE, your petitioners separately and severally

pray that a writ of certiorari issue to the United States

Court of Appeals for the Seventh Circuit commanding said

Court to certify and send to this Court, on a day to be

designated, a full and complete transcript of the Record

and all proceedings of said Court of Appeals had in these

24

causes, to the end that these causes may be separately and

severally reviewed and determined by this Court; that the

several Judgments of the Court of Appeals against each

defendant be reversed; and that each petitioner may be

granted such other and further relief as may seem proper.

Dated: Indianapolis, Indiana, October 6, 1949.

Louis H. Rosensium,

Max Srryx,

Jacos WEIss,

Petitioners.

By: AuBert Warp,

318 Insurance Building,

Indianapolis, Indiana,

Wit B. Harrew,

Republic Bank Building,

Dallas, Texas,

Attorneys for Petitioners.

25

IN THE

Supreme Court of the United States

Octoser TERM, 1949,

BNE feeds cast

LOUIS H. ROSENBLUM,

Petitioner, Appellant below,

vs.

8

UNITED STATES OF AMERICA,

Respondent, Appellee below.

MAX STRYK,

Petitioner, Appellant below,

vs.

UNITED STATES OF AMERICA,

Respondent, Appellee below.

JACOB WEISS,

Petitioner, Appellant below,

vs.

UNITED STATES OF AMERICA,

Respondent, Appellee below.

BRIEF IN SUPPORT OF PETITION.

Opinions Below.

The Opinion of the United States Court of Appeals for

the Seventh Circuit has not been Officially reported, but

& copy thereof is in the printed record, Opinion by Circuit

26

Judge Kerner being on pages 386 to 398; Chief Judge

Major, pages 398 to 400, and Circuit Judge Duffy, pages

400 to 402; for convenience, a copy of the Opinion of each

Judge is set out in full in the Appendix hereto as Exhibit

¢é A’’.

The Opinion of the District Judge has not been officially

reported, but a copy thereof is in the printed Record on

pages 275 to 282.

Jurisdiction.

The Judgment against each defendant by the Court

of Appeals now sought to be reviewed was entered on

June 13, 1949. (R. 403, 404, 405.) Each defendant filed

a petition for rehearing in the Court of Appeals on

June 23, 1949 (R. 405), which were all denied on August

24,1949. (R. 406.) Issuance of the Mandate of the Court

of Appeals was stayed by it on August 26, and September

23, 1949.

On September 20, 1949, Mr. Chief Justice Fred M.

Vinson, for cause shown, upon the application of counsel

for defendants, ordered that the time for filing Petition

for Certiorari in these causes be extended to and including

October 7, 1949.

The Jurisdiction of the Supreme Court is invoked under

Section 1254(1), Title 28, United States Code, Judiciary

and Judicial Procedure, effective September 1, 1948.

The foregoing Petition is presented by the separate and

several petitioners who were the defendants in and parties

to said Criminal Causes as in said Petition set out.

27

Statutes Involved.

The following sections of the Internal Revenue Code,

Title 26, Unifed States Code, as the same were in effect

at the applicable period, are involved in these proceedings :

Section 21(a), Section 22(a), Section 22(e), Section 22(f),

Section 22(n), Section 23(a), Section 23(b), Section 23(e),

Section 23(i), Section 41, Section 48(a), Section 51(a),

Section 53(a), Section 115(a), Section 117, Section 145(a),

Section 145(b).

Federal Rules of Criminal Procedure for District Courts

Involved.

The Federal Rules of Criminal Procedure for the Dis-

trict Courts of the United States, effective March 21, 1946,

which are involved in defendants’ Petition are as follows:

Rule 7(c), Rule 8(a), Rule 8(b), Rule 13, Rule 23(c), Rule

29(a), Rule 52(a), Rule 52(b).

Statement of the Case.

A statement of the case is included in the preceding

Petition under Title I thereof, ‘‘Summary Statement of

the Matter Involved.’’

Specification of Errors Intended to be Urged.

It is intended to urge as errors each specification in the

foregoing Petition under Titles III and IV thereof, en-

titled ‘‘Questions Presented’’ and in the ‘‘Reasons Relied

on for the Allowance of the Writ.’’

SUMMARY OF ARGUMENT.

One.

Kach indictment charged that each defendant had omitted

‘*Dividends’’ from his 1943 income tax return; no other

item was in dispute; the Government admitted that it had

no evidence to prove that any defendant had received any

corporate dividends which he had failed to report; the de-

fendants requested the Court to find that the Government

had no evidence to prove the charge as laid in the in-

dictments, which the Court refused to do, but permitted

the District Attorney to introduce evidence concerning

whiskey transactions in which the Government claimed the

defendants had engaged as participants in a joint venture.

Such charge was not made in either indictment, and each

defendant was denied due process in that he was wrong-

fully tried upon and convicted of an offense not charged

against him.

Two.

The Government failed to show that any of the defend-

ants had any net income for 1943 upon which he did not

pay his tax, and there was a failure of proof of corpus

delecti; the defendants sustained a loss in the 1943 whiskey

transactions; the trial court erroneously placed the bur-

den upon the defendants of proving their innocence.

In contravention of the Sixteenth Amendment the Court

allowed neither cost nor expenses of the whiskey bought

and sold.

Three.

The receipt in evidence of the hearsay statements of the

several defendants, and their amended tax returns, all

made long after the commission of all acts claimed by the

29

Government to constitute the offenses charged, was prej-

udicial to the individual rights of each defendant in the

substantive charges. The reversal by the Court of Ap-

peals on the conspiracy indictments automatically rules

out this mass of incompetent evidence which was admitted

into the record solely because of the claim of conspiracy

in the consolidated trial, and such evidence was not ad-

missible on any theory as to either the substantive or the

conspiracy charges.

The admission of the evidence of witnesses Ackerman,

Hicks, Palffy and Siemion was clearly hearsay as to Weiss,

and very prejudicial as to him.

The admission of Government’s Exhibit X-1, transcript

of statement of Mr. Rosenblum of March 21, 1944, was

prejudicial as to Weiss and Stryk, and it was hearsay as

to them.

Four.

The cases below were illegally consolidated for trial in

violation of Rules 8 and 13 of the Federal Rules of Criminal

Procedure.

Two judges of the Court of Appeals decided that the

substantial rights of the defendants were prejudiced by

the procedure in the trial court and reversed the con-

victions on the conspiracy indictment because the trial

court could not differentiate between the proof relative

to the various charges against the several defendants (R.

399) ; he could not prevent the prejudice resulting to the

substantial rights of the several defendants which flowed

from the erroneous consolidation of the causes, and the

admission of incompetent testimony (R. 401) ; such preju-

dicial error cannot be confined to the conspiracy charge;

it likewise prejudicially affected the substantial rights of

the several defendants as to the substantive charges, and

these causes should be reviewed.

ARGUMENT.

Question One.

The defendants respectfully contend that it was a denial

of due process to convict them of having received gross

amounts in cash from buying and selling whiskey that were

not accounted for in their tax returns, upon the separate

indictments which definitely charged that they had re-

ceived ‘‘Dividends’’ in a specific amount which were

omitted from their individual tax returns. Such procedure

of the Government was an abandonment of the charge laid

in the indictment, and an entire failure of proof, and if the

matter is treated or regarded merely as a variance, it was

of such a substantive character as to mislead the defend-

ants in the preparation and presentation of their defense,

and such conviction would not protect them against another

prosecution for the same offense. ~

The trial court and the Court of Appeals have miscon-

strued and misapplied Rule 7(c) of the Federal Rules of

Criminal Procedure, which requires that the indictment

shall be a plain, concise and definite written statement of

the essential facts constituting the offense charged.

Under this Rule, an indictment cannot be used as a trap

to ensnare a defendant, and then, after his trial is over,

convict him on a charge or theory not properly or plainly

outlined in such indictment.

Section 115(a) of the Internal Revenue Code, Title 26

United States Code, defines the word ‘‘Dividends”’ as a

distribution by a corporation out of earnings or profits;

the term ‘‘capital gain’’ is also defined by Section 117 of

the Internal Revenue Code; both of these terms were used

31

by the Grand Jury in the indictments charging Rosenblum

and Stryk with a violation of Section 145(b), and the word

‘“‘Dividend’’ was used in the indictment against Weiss.

The charge was that the defendants had received ‘‘Divi-

dends’’ which they failed to report; this could not mean

anything except corporate dividends as defined by Section

115(a) of the Internal Revenue Code; this is a proper

charge, as dividends are taxable to the person who re-

ceives them; but if, as the trial court said, they organized

corporations and diverted from the corporation part of

the moneys received for the liquors, such money belonged

to the corporation and was not defendants’ money. Em-

bezzled moneys are not income to the embezzler. Com-

missioner v. Wilcox, 327 U. S. 404.

If the moneys belonged to corporations, before these

could be said to be dividends from such corporations, it

was incumbent upon the Government to prove that such

corporations had sufficient ‘‘earnings or profits’’ remain-

ing after the proper deductions, and the provision for all

taxes to be paid by the corporation. Section 115(a) In-

ternal Revenue Code. No such proof was made.

The Government admitted that the returns as filed by

the defendants correctly listed all items of income except

the item alleged in the indictments as ‘‘Dividends’’, and

admitted it had no evidence to prove that any of the

defendants had received corporate dividends which he

failed to report.

Furthermore, the Government stipulated with ihe de-

fendants that the moneys which it claimed they had omitted

from their several income tax returns for 1943, ‘‘were

the gross amounts received in cash by Louis H. Rosenblum

in the transactions from purchasers’? of liquor (Govern-

ment’s Exhibit Z); by such admission it is estopped from

now asserting that the evidence supported the theory of

32

the prosecution as laid in the indictments; such admission

is an abandonment of the issue tendered by the indict-

ments.

Throughout the trial defendants objected to proof

offered by the District Attorney to show receipt of moneys

from a joint venture.

When the Government rested, defendants filed their mo-

tions for judgments of acquittal on each of the substan-

tive indictments (R. 252) and when they pressed their

motions that the Government had failed to prove the

charges laid in the substantive indictments, that there

was a total failure of proof of the charges made, and there

was no evidence to sustain the charge of omitting ‘‘Divi-

dends’', the court said:

‘‘Now, that becomes a very material question upon

the substantive counts.’’ (R. 259.)

‘*T prefer not to pass upon this motion as to the

substantive counts at this stage of the proceedings.

riteiveote Ef

The court did not decide the question thus presented by

the defendants until after the trial. (R. 283.)

The failure of Congress to define the manner by which

the evasion might be accomplished, placed the duty and

the burden on the Government of having an indictment

returned which definitely contained all of the elements

necessary to constitute the offense intended to be punished;

Spies v. United States, 317 U. S. 492, 499; United States

v. Carll, 105 U. S. 611; United States v. Cruikshank, 92

U. S. 542; United States v. Hess, 124 U. 8. 483; such essen-

tial averments must be proved before a conviction can

be had.

No authority exists for a change of the charge as laid

against defendants in the indictments, except it be done by

-—

the Grand Jury; courts are powerless, under our system

of justice, to allow or permit a defendant to stand con-

victed upon a charge not laid in the indictment, but con-

tained in averments c’ a bill of particulars. Ex Parte Bain,

121 U. S. 1; Edgerton v. United States, 143 F. 2d 697 (9

C. A.); Cole v. State of Arkansas, 333 U. S. 196; United

States v. Cruikshank, 92 U.S. 542.

The decision in Ex Parte Bain, 121 U. 8S. 1, 13, forbids

the conviction of the defendants upon a charge not laid in

the indictment, and forbids any change where the chawze is

one of substance, and such change cannot be made on

with the consent of the defendants, United States v. N orris,

281 U. S. 619. Nor is it necessary that the indictment itself

be changed by physically striking therefrom the word

“*Dividends’’; it is prejudicial error to consider the indict-

ments in the sense that they have been altered by the omis-

sion of the term ‘‘Dividends’’ therefrom: Edgerton v.

United States, 143 F. 2d 697 (9 C. A.); Dodge v. United

States, 258 F. 300, 305 (2 C. A.).

The Court of Appeals erred in deciding that each defend-

ant would be protected against another prosecution for the

same offense; the test of identity of offenses is whether the

same evidence is required to sustain them; evidence to sus-

tain the conviction in these income tax cases on the theory

that defendants had omitted dividends from their tax re-

turns would not sustain the changed theory of the Govern-

ment that they had received either gross or net income from

a joint venture which they did not report. M organ v. Devine,

237 U. S. 632.

The Court of Appeals was in error in deciding that ‘‘It

is sufficient to charge a defendant with acts coming within

the statutory description in the substantial words of the

statute’’; this does not decide the question we present; we

admit the indictments are sufficient; defendants claim they

33

34

were deceived by the use of the statutory words in the in-

dictments, the statements of the trial court that such words

were material, the admission by the Government that it had

no evidence to prove the crime charged, and the later con-

viction upon an issue not presented by the indictments;

these questions were not decided by the Court of Appeals;

the cases of Capone v. United States, 56 F. 2d 927; Rose

v. United States, 128 F. 2d 622; or Cave v. United States,

159 F. 2d 464, cited by the Court of Appeals in sup-

port of decision (R. 388), are not decisive of the questions

raised by the defendants herein; neither of such cases con-

tains the element of abandonment of the charge made in the

indictment, nor the element of change of theories by the

Government and the trial court, nor the element of deception

resulting therefrom which caused defendants to waive their

right to a jury trial, and deceived them as to the introduction

of evidence.

These are elements of the offense as charged which

affected the substantial rights of the defendants; they go

directly to questions which are highly important in the

administration of the federal criminal laws; they involve

a construction by this Court of its Rules 7(c) and 52(a),

Federal Rules of Criminal Procedure and the procedure

below prejudicially affected the substantive rights of the

defendants and it cannot be justified under Rule 52(a) as

being harmless and immaterial; Kotteakos v. United States,

328 U. S. 750; Fiswick v. United States, 329 U. S. 211-218.

Question Two.

Notwithstanding the definite charge in the indictments,

the Government undertook the prosecution of the defend-

ants upon the theory that they were jointly engaged in

selling and dealing in whiskey in 1943, from which it claims

they received gross partnership receipts not accounted for

in their several income tax returns.

-——

Such theory created a presumption, and the court will

take judicial notice, that the defendants had costs in con-

nection with acquiring such whiskey, and expenses in selling

it. (Sections 21, 22, 23 and 51a, Internal Revenue Code,

Title 26, United States Code.) Such presumption, and the

facts created by such judicial notice, placed upon the Gov-

ernment the additional burden of establishing beyond a

reasonable doubt that the gross receipts from such sales

and dealings in property exceeded the cost and reasonable

and necessary expenses in acquiring and selling the same.

The Government failed to make such proof. The trial court

wrongfully decided that this burden was upon the defend-

ants (R. 279), and held that they should have rebutted the

Government’s case by introducing evidence of the expenses

which they asserted were incurred in the sale of the

whiskey, as such evidence would have been admissible

under the joint venture, but not under the dividend theory.

The trial court placed upon the defendants the burden of

proving their innocence, and admitted that the cases had

been tried by him upon inconsistent theories requiring

different evidence to sustain convictions. (R. 279.)

35

The Court allowed the defendants no costs for the

whiskey.

The Court of Appeals erred, to the serious prejudice of

each defendant, upon the vital fact of defendants’ whiskey

cost. It stated in error that an inference could have been

assumed by the trial court that such cost might have been

claimed by another taxpayer in its tax returns. Such an

inference is nowhere assumed by the trial court (R. 275-

282) and would have been a violent assumption of a fact

without any Record foundation or basis.

The Court of Appeals, without Record foundation or

basis, and without any of the objections stated in its foot-

note on R. 397 having been made or suggested at the trial

36

(R. 121, 122), erred to the serious prejudice of each de-

fendant by summarily dismissing consideration of defend-

ants’ expenses as shown in Government’s Exhibits A-13

and A-14; it was manifest error for the Court of Appeals

to state that the expenses shown by such Exhibits were

items of expenses which defendants’ accountant stated he

was instructed not to include in the Gary Corporation costs

when he was making up its return. (R. 397, 102, 103, 104,

121, 122, and Government’s Exhibits A-4, A-5, D-1, D-77,

D-78.)

Defendants were prejudiced by the court’s acceptance,

over defendants’ objections, of hypothetical questions and

answers by the Government’s tax expert, which were incom-

plete, failed to take into consideration any cost and, with-

out any explanation, only a few expenses. The defendants

thereby suffered substantial prejudice, for the questions

and answers assumed as true, facts definitely disproved by

the Government’s own evidence. Kirsch v. United States,

174 F. 2d 595 (8 C. A.)

The Sixteenth Amendment to the Constitution does not

permit, and Congress never intended, that gross receipts

from the sale of property should be subject to an income

tax. Stratton’s Independence v. Howbert, 231 U. 8. 399;

Doyle v. Mitchell Bros. Co., 247 U. 8. 179. In Title 26,

United States Code, Sections 22 and 23, Congress set up the

statutory formula to compute income taxes, which is that

the cost of the goods sold shall be deducted from the gross

receipts received from the sale and, in computing net in-

come, the statutory deductions such as ordinary and neces-

sary expenses, interest, taxes, salaries, etc., shall be al-

lowed. The net taxable income must be computed according

to the statutory provisions, and this has not been done in

these cases. The Government has ignored the formula,

refused to allow the cost of the merchandise and the statu-

tory deductions and credits, and there is no evidence that

37

defendants had any gain in 1943 in their liquor trans-

actions; they had a loss.

-

Question Three.

The error in receiving in evidence and considering state-

ments and the joint venture and amended returns of the

several defendants, each of which was made long after the

commission of all acts which the Government claimed con-

stituted the offenses charged, was extremely prejudicial to

the individual rights of each defendant.

The prejudice is pointed up by Government’s Exhibit

X-1, transcript of statement of Mr. Rosenblum of March

21, 1944, not made in the presence of either Weiss or Stryk;

this statement was used against all of the defendants by

Judge Kerner (R. 395), together with the evidence of

Ackerman, Hicks, Palffy and Siemion as to ‘‘Beam’’ whis-

key transactions which were had with Rosenblum, with

Weiss not present, and concerning transactions which it is

admitted Weiss had neither knowledge nor participation

(R. 393), and to which testimony Weiss made timely objec-

tions because such evidence was hearsay as to him.

It was a violation of the fundamental rights of Weiss

and Stryk to have Rosenblum’s statement of March 21,

1944, considered against either of them for any purpose;

the testimony of Ackerman adopted by J udge Kerner as

showing Rosenblum’s receipt of side payments of $78,230.00

and $35,000.00, from Ackerman, is very prejudicial to

Weiss ; the Ackerman transactions were not included in the

Stipulation (Government’s Exhibit Z) at the trial. At R.

393, Judge Kerner said:

‘‘Nor was there anything in the stipulation or testi-

mony of the purchaser connecting Weiss with any of

the transactions involved in the sale of the Beam

whiskey.”’

38

Judge Kerner (R. 395, 396) recites further from the

hearsay statements of each defendant (Government’s Ex-

hibits X-1, U-1, U-2, U-3, V-1, V-2, V-3, V-4 and V-5) and

relies upon these to affirm the convictions. The trial court

relied on all of these statements for the conviction of all

of the defendants on all of the charges. (R. 244, 280, 281,

392.)

Both courts also erroneously considered the partnership

or joint venture and the amended individual returns (R.

277, 281, 392, 396); these were hearsay and especially

prejudicial because they were clearly and admittedly in-

accurate and untrue, were not intended to reflect correctly

the defendants’ tax liability (R. 101, 105, 115, 116, 119,

120), and were wholly foreign to the charge made in the

indictments that the defendants had received ‘‘Dividends”

which were allegedly omitted from their tax returns. (R.

88, 89.)

The defendants repeatedly objected to the introduction

of such evidence, and in response to such objections, the

trial judge always assured defendants’ counsel that such

hearsay evidence was being admitted and would be consid-

ered only as applying to each individual defendant con-

cerned, and ‘‘against him solely and without prejudice

to the others until and unless by PROPER evidence, a

conspiracy is shown.’ (R. 95.)

But the trial court failed to differentiate between the

proof relevant to the substantive offenses and that rel-

evant to the conspiracy charged; it was impossible for him

to prevent the abuse to the defendants’ rights which fol-

lowed the introduction of said incompetent evidence. (R.

399, 401-402.)

Said several statements cannot be used against any of

the declarants for any purpose until, and when, by inde-

So

39

pendent extrinsic evidence, ‘‘corpus delicti’’ as to him,

has been established.

Krulevitch v. United States, 336 U. S. 440.

Fiswick v. United States, 329 U. 8. 211.

Kotteakos v. United States, 328 U. S. 750.

Roma v. United States, 53 F. (2d) 1007 (7 C. A.).

Gulotta v. United States, 113 F. (2d) 683 (8 C. A.).

Question Four.

There is no allegation in either indictment that the de-

fendants were engaged in the same act or transaction, nor

in two or more acts or transactions connected together;

these allegations must be in the indictments before there

can be a consolidation, over objections, of separate in-

dividual indictments; Rule 13, Federal Rules of Criminal

Procedure. Clearly, the three defendants could not be

joined in a single indictment for having separately filed

false individual income tax returns, unless it is alleged in

the separate indictments that they ‘‘have participated in

the same act or transaction or in the same series of acts

or transactions constituting an offense or offenses.”’ Rule

8, Federal Rules of Criminal Procedure. There is no such

allegation in either indictment. In DeLuca v. United

States, 299 F. 741 (2 C. A.), it is said:

“The statute makes the test what appears on the

face of the bills themselves. It does not depend in any

degree upon the order in which the prosecutor in-

tends to bring them to trial.’’

This principle was approved in Castellini. v. United

States, 64 F. 2d 636 (6 C. A.), and is based upon McElroy

v. United States, 164 U. 8. 76. Rules 8 and 13 still pro-

hibit consolidation unless the allegations in the indict-

ments show the defendants were engaged in the same

acts, or series of acts, or transactions connected together

40

and such consolidation cannot be built upon the mere

assertions of the United States Attorney.

These cases present a typical example of how the funda-

mental rights of a defendant may be extremely prejudiced

by departing from the Rules of this Court relating to

consolidation of criminal actions.

The manifest unfairness to the defendants in the pro-

ceedings below started with the filing of the bill of particu-

lars by the United States Attorney wherein he abandoned

the well defined ‘‘Dividend’’ charge in each indictment.

(R. 53, 54, 55.)

Then, he obtained the consolidation order, over the ob-

jections of the defendants. (R. 63.)

He realized that there were no allegations in the in-

dictments which would authorize a consolidation of sepa-

rate indictments against three individuals for filing a

false individual income tax return, and he endeavored to

supply such essential allegations by his written motion.

(R. 62.)

Early in the trial, when the Government admitted that

it had no evidence to prove that either defendant had re-

ceived any corporate dividends which he omitted from his

return (R. 88), the court declined to make a finding as

required by Rules 23(c) and 29(a) Federal Rules of

Criminal Procedure requested by the defendants that the

Government had no evidence to prove the dividend theory

as charged in the indictment; he said he would not pass

at that stage of the case upon what constitutes dividends

under the Act of Congress, but he would reserve that until

the conclusion of the evidence; he said he could see that

there was going to be controversy all through the lawsuit

about whether anything in the indictment can be reached

under the designation of dividends. (R. 89.)

Thereafter, and through the trial, the defendants were

——

caught between the contention of the District Attorney

that he had no evidence to show that either defendant

had received_any corporate dividends which he failed to

report, and the position of the court that the allegation

in the indictments as to dividends ‘‘becomes a very mate-

rial question upon the substantive counts.”’ (R. 259.)

41

The resulting prejudice to the defendants was highly in-

creased because of the wrongful consolidation, as the court

admitted the hearsay evidence including all of the fore-

going statements and returns on the conspiracy charge,

and then he failed to differentiate between the proof rel-

evant to the substantive offenses and that relevant to the

conspiracy charge (R. 399); he was powerless to prevent

the abuse which followed the hearing and consideration of

such inadmissible evidence in the causes as improperly

consolidated. (R. 401.)

When the defendants on their motions for acquittal,

urged that they were not prepared to try the substantive

counts upon the proposition that the Government was en-

titled to show anything upon those counts except ‘‘Divi-

dends’’ in the statutory sense as defined by Congress, and

they ought then be acquitted (R. 257), the District Attor-

ney urged upon the court his position that:

With one exception, the defendants were not rec-

ord stockholders of any of these corporations: that

the Grand Jury could not have been charging them

with getting dividends because people who are not

stockholders can’t get dividends of corporations, and

the Grand Jury knows that.

*‘The Court: Yes, but they said dividends.”’

The United States Attorney:

‘They said dividends, but dividends, Your Honor,

in the dictionary means a division of profits. Web-

ster’s Dictionary says that it is a division, that which

is to be divided. It tells the Latin derivation of it.

42

A sum of money for division, one of the divisions so

made.

Specifically—especially it defines a dividend of cor-

porations, a dividend or profits of a firm or a corpora-

tion as a preferred stock paid, a dividend, distribu-

tion of shares, or apportionment of a firm. Now, it

is my contention that the Grand Jury, knowing that

these men were not stockholders, of the corporation,

used the word in the common language, and I don’t

think there is any objection to doing that.’ (R. 257,

258.)

Mr. Harrell, for the defendants, insisted that,

“‘EKarnings to the corporation and money should

have gone into it, but after it became the assets, well,

we will properly say of the corporation, then the cor-

poration should have, with its expenses and deductions

against its operation, have shown net earnings out of

which these moneys should have gone; otherwise, it

is not a dividend as defined by statute.”’

“The Court: Well that is the question of the case.”

(R. 261.) (Emphasis supplied.)

The court never changed his legal position so announced

during and at the close of the trial that the allegation as

to the omission of ‘‘Dividends’’ was a very material one

(R. 259), and that it ‘‘is the question of the case’’, until

he later found the defendants guilty and filed his memo-

randum opinion (R. 275-282), wherein he decided that

evidence of expenses incurred in the sale of the whiskey

would have been admissible under the joint venture theory,

but not under the dividend theory, and decided that the

convictions could rest on Rule 52 of the Federal Rules

of Criminal Procedure. (R. 279.)

This was a gross miscarriage of justice, caused by the

wrongful consolidation of the causes for trial. As Circuit

Judge Duffy points out (R. 400), it was an abuse of judi-

cial process to charge conspiracy when practically the

—

same offense had been charged in substantive counts; he

said the courts have protested vigorously against the

current and perhaps growing habit of indicting for con-

spiracy in addition to the substantive offenses, and that

such procedure often constitutes a serious threat to the

fair administration of justice, and the Senior Circuit

Judges have been pointing out the dangers of such prac-

tice since 1925. (R. 401.)

Chief Judge Major concluded that the conspiracy charge

had to be reversed because of the failure of the court to

differentiate between the proof relative to the substantive

offenses and that relevant to the conspiracy charge. (R.

399.)

Circuit Judge Kerner was careful to assert that ‘“We

are not to be understood as approving generally of the

practice (of consolidation), but it is clear that these

indictments could have been included in one indictment

of four counts. See Rule 8(a) and (b) Federal Rules of

Criminal Procedure’’. (R. 389.) But this Rule does not

authorize consolidation unless there are proper allegations

in the indictments; which question, though presented by

defendants, was not decided by the Court of Appeals;

Cataneo v. United States, 167 F. 2d 820 and Rakes v.

United States, 169 F. 2d 739, cited by the Court of Ap-

peals (R. 389) do not decide the question defendants

present by their petition; there was no claim in either of

said cases, as there is here, that there had been an abuse

of judicial process in returning a conspiracy indictment,

in addition to substantive indictments, and because of a

wrongful consolidation thereof, the trial court was power-

less to prevent the abuse of getting into the record evi-

dence which would not have been admissible, except for

such erroneous consolidation (R. 401), and by reason

thereof the trial court was unable to differentiate between

the proof relevant to the substantive offense and that

43

44

relevant to the conspiracy charge. (R. 399.) It should

be observed that in Rakes v. United States, 169 F. 2d 739,

the court said that

‘*The several offenses charged in this indictment

were not only similar but were based on transactions

constituting parts of a common plan, clear upon the

face of the indictment.’’ (Emphasis supplied.)

That this question of improper consolidation is an im-

portant one in the administration of the federal criminal

law is accentuated by the divided opinion of the Seventh

Circuit in its case of United States v. Tuffanelli, 131 F. 2d

890, 893, 894, where Circuit J udge Kerner warned that

“it is not good practice to join in an indictment counts

charging distinct offenses against separate defendants”’,

and Circuit Judge Major vigorously contended that

‘*It is poor consolation to a defendant who is forced

to trial, improperly joined with other defendants, for

a reviewing court merely to disapprove ‘the practice

followed’ with an expression of doubt that his rights

have been prejudiced.’’

Such question of improper consolidation should be set

at rest by the decision of this Court; two judges of the

Court of Appeals have held that the substantial rights of

the defendants were prejudiced by the failure of the trial

court to give them a fair trial on the conspiracy charge;

such error cannot possibly be confined to the conspiracy

indictment; it affected the rights of all of the defendants

in all of the cases. Error being clearly shown in the rec-

ord, and it further appearing that the error is of such a

character that its natural effect is to prejudice defend-

ants’ substantial rights, the conviction cannot be sus-

tained.

—

This Court should grant the writ as prayed for by each

defendant, and upon review reverse the judgments of the

lower courts.

45

Conclusion.

Respectfully submitted,

ALBERT WarD,

318 Insurance Bldg.,

Indianapolis, Indiana,

Wituram B. Harretu,

Republic Bank Bldg.,

Dallas, Texas,

Attorneys for Petitioners.

cc

APPENDIX.

SaaEiEEEEEeeel

EXHIBIT A.

In THE Untrep States Court or APPEALS

For the Seventh Circuit.

Nos. 9718-9723. | October Term, 1948, April Session, 1949.

THE UNITED STATES OF AMERICA, +

Plaintiff-Appellee,

v8.

LOUIS H. ROSENBLUM,

Defendant-Appellant.

THE UNITED STATES OF AMERICA,

Plaintiff-Appellee, | Appeals from the United

vs. States District Court for

> the Southern District of

MAX STRYK, Indiana, Indianapolis Di-

vision.

Defendant-A ppellant.

THE UNITED STATES OF AMERICA,

Plaintiff-Appellee,

vs,

JACOB WEISS, :

Defendant-Appellant.

June 13, 1949,

Before Masor, C. J., and Kerner and Durry, JJ.

Kerner, J. These are appeals from judgments of con-

viction and sentence under four separate indictments.

Three indictments charged that defendants wilfully and

ii Appendiz.

knowingly attempted to defeat and evade income tax lia-

bility for the year 1943; the fourth charged that defend-

ants conspired with each other, each to evade his own as

well as his co-defendants’ income taxes for the year 1943

in violation of Sec. 37 of the Criminal Code, 18 U. S. C. A.

Sec. 88 now Sec. 371. The indictments were consolidated.

A jury was waived and the cases were tried by the court.

Defendants present numerous alleged errors, but

grouped together, in substance, they present for considera-

tion the following contentions: That the court erred (1)

in failing to dismiss the indictments when the United

States Attorney announced he had no evidence to prove

that each defendant had received corporate dividends

which he failed to report, (2) in consolidating the causes

for trial, (3) in overruling motion to dismiss the conspir-

acy indictment; and (4) that there was no evidence of

any wilful intent to evade the tax.

First: The three separate indictments for the substan-

tive offense were based on Sec. 145(b) of the Internal

Revenue Code, 26 U. S. C. A. See. 145(b), which provides

that any person who wilfully attempts in any manner to

evade or defeat any tax imposed by the chapter or the

payment thereof shall be punished as therein specified.

They charged each defendant with having wilfully and

knowingly attempted to defeat and evade a large part of

the income and victory tax due and owing by him to the

United States of America for the calendar year 1943, by

filing and causing to be filed a false and fraudulent income

and victory tax return. In his return Rosenblum stated

that his net income was $36,658.89 and the tax due thereon

$18,490.95, whereas, as he then and there well knew, his

net income was $210,397.21, upon which net income he owed

the United States of America $157,760.36; Weiss stated

that his net income was $28,051.04 and the tax due thereon

—

$12,380.74, whereas his net income was $149,018.86 and

the tax thereon was $113,032.04; and Stryk stated that his

net income was $37,683.62 and the tax due thereon $18,-

829.26, whereas his net income was $211,421.95 and the tax

thereon was $158,066.80. The returns in the indictments

were alleged to be false in that Rosenblum omitted from

the statement of his gross income ‘‘Dividends, $145,-

022.72’; Weiss omitted ‘‘Dividends, $120,967.72’’; and

Stryk omitted ‘‘ Dividends, $145,022.74.”’

The record discloses that in response to defendants’ re-

quest, the Government, some seven months before the

actual trial of the cases, filed a bill of particulars in each

case. Except for the different amounts and names, they

were substantially the same. In the Rosenblum case it was

said there would be no effort to prove that the $145,022.72

listed as dividends under the heading gross income repre-

sented corporate dividends; that this money represented

dividends or a division of money received by the defend-

ant from a joint venture or joint enterprise in which he,

Max Stryk and Jacob Weiss were participants; and that

said $145,022.72 was received from the sales of intox-

icating liquors.

Appendix. iii

Based upon this state of the record, defendants contend

that the court should have dismissed the indictments. They

argue that the word ‘‘dividends’’ used in describing the

gross income which defendants failed to report, is a ma-

terial and necessary part of the indictment, is descriptive

of the offense, and must be proved as charged. In other

words, to permit evidence that defendants received money

as their share of over-ceiling prices from the sale of

whiskey, which they failed to report in their income tax

returns, would create a fatal variance between the indict-

ment and the proofs to be adduced.

We cannot accede to this contention. We state our rea-

sons briefly. A variance is not regarded as material un-

iv Appendix, —

less it is of such a substantive character as to mislead the

accused in preparing his defense or place him in second

jeopardy for the same offense. Berger v. United States,

295 U. S. 78, and United States v. Ragen, 314 U. S. 513.

In the state of this record, there can be no question as to

each defendant being protected against another prosecu-

tion for the same offense, and it is clear that he was not

surprised in any way by the character of the evidence to

be adduced. Here, the gravamen or the essential in.

gredient of the charge was the wilful attempt to evade and

defeat the tax. The statute says that every attempt to

evade or defeat the payment of income tax is a violation

of the law. It is sufficient to charge a defendant with acts

coming within the statutory description in the substantial

words of the statute. Capone v. United States, 56 F. 2d

927; Rose v. United States, 128 F. 2d 622; and Cave v.

United States, 159 F. 2d 464. In our case, the character

of the offense with which each defendant was charged,

was not changed by the use of the word ‘‘dividends.’’ The

indictment set forth the facts which made up the charge

against each. He was still charged with a wilful attempt

to evade and defeat the payment of his income tax. Hall

v. United States, 168 U. S. 632; Mathews v. United States,

15 F. 2d 139; Jones v. United States, 72 F. 2d 873; Panella

v. United States, 140 F. 2d 71; and Ferrari v. United States,

169 2d 353. Hence, that part of the indictment which gave

the break-down of the gross income and allowable deduc-

tions was surplusage or a mere defect or imperfection in

form which did not tend to the prejudice of each defend-

ant, and as such, need not be proved.

Second: The ground urged for reversal is that the

court erred in consolidating the four indictments for trial.

We are not to be understood as approving generally of

the practice, but it is clear that these indictments could

have been included in one indictment of four counts. See

Appendiz. v

Rule 8(a) and (b) Federal Rules of Criminal Procedure,

18 U. S. C. A. following Sec. 687. In such a situation, the

question of consolidation is vested in the sound discretion

of the trial judge and his decision will be reversed only

upon a clear abuse of that discretion. Cataneo v. United

States, 167 F. 2d 820, and Rakes v. United States, 169 F.

2d 739. No error was committed in consolidating the cases.

We think the court exercised a wise and sound discretion.

Third: Defendants contend that the conspiracy indict-

ment should have been dismissed because (a) it did not

state facts sufficient to constitute an offense against the

United States; (b) it failed to allege whether the conspir-

acy was to commit an offense against the laws of the

United States or to defraud the United States; and (c) it

was vague and indefinite, and failed to set out the manner

in which the alleged conspiracy would be accomplished.

A conspiracy is a partnership in crime. United States

v. Socony-Vacuum Oil Co., 310 U. S. 150, 253. A combina-

tion of two or more persons by concerted action to accom-

plish a purpose either criminal or otherwise unlawful

comes within the accepted definition of conspiracy. United

States v. Hutto, 256 U. S. 524, 528. And the fact that in-

come fraudulently concealed is derived from an illegal

joint enterprise in no way militates against the further

charge of conspiracy. It is not the form of the combination

or the particular means used but the result to be achieved

that the statute condemns. American Tobacco Co. v.

United States, 328 U. S. 781, 809.

A conspiracy to commit a crime is a different offense

from the crime that is the object of the conspiracy. And

the parties may be punished for their agreement to commit

a crime as well as for the completed crime—even though

the substantive offense is charged as an overt act in the

conspiracy indictment.

*«* * * For two or more to confederate and combine

vi Appendix.

together to commit or cause to be committed a breach

of the criminal laws, is an offense of the gravest char-

acter, sometimes quite outweighing, in injury to the

public, the mere commission of the contemplated

crime. It involves deliberate plotting to subvert the

laws, educating and preparing the conspirators for

further and habitual criminal practices. And it is

characterized by secrecy, rendering it difficult of de-

tection, requiring more time for its discovery, and

adding to the importance of punishing it when discov-

ered.’’ United States v. Rabinowich, 238 U. 8. 78, 88.

In Pinkerton v. United States, 328 U. S. 640, the defend-

ants were indicted for violation of the Internal Revenue

Code. The indictment contained ten substantive counts

and one conspiracy count. Each of the substantive offenses

found was committed pursuant to the conspiracy. The

Pinkertons contended that the substantive counts became

merged in the conspiracy count and that only a single sen-

tence could be imposed. The Supreme Court, however, re-

fused to accept the proposition that the substantive of.-

fenses were merged in the conspiracy. The contrary ap-

plies also. In that case, at page 643, the Court said: ‘It

has been long and consistently recognized by the Court

that the commission of the substantive offense and a con-

spiracy to commit it are separate and distinct offenses.

The power of Congress to separate the two and to affix

to each a different penalty is well established.’’

In our case the indictment charged that the defendants

*‘On or about the first day of January, 1942, and con-

tinuously thereafter until the return of this indictment

* * * unlawfully, knowingly, wilfully, and feloniously con-

spired * * * together, with each other, and with other

persons to the Grand Jurors unknown, to attempt to evade

and defeat large parts of the income and victory taxes due

and owing and to be due and owing by them, said defend-

ants and each of them, to the United States of America

Appendiz. vii

for the calendar year 1943 by filing and causing to be filed

with the Collector of Internal Revenue * * * false and

fraudulent income and victory tax returns wherein each

of said defendants would state that his taxable net income

for income and victory tax purposes for said calendar

year was far less than it actually was, and that the income

and victory tax due from him for said calendar year was

far less than the amounts actually due the United States

of America on that account.’’ The indictment also enumer-

ated 23 overt acts averred to have been committed in fur-

therance of and for the purpose of carrying into effect the

purpose of the conspiracy.

We conclude that the indictment stated facts sufficient

to constitute an offense against the United States. It was

not vague or indefinite. It clearly set forth all the neces-

sary facts to constitute an offense against the United

States. See Capone v. United States, supra, and Jelke v.

United States, 255 Fed. 264.

The point is also made that the defendants may not be

convicted upon statements made by them after the alleged

conspiracy has ended, and Fiswick v. United States, 329

U. S. 211, is cited. The argument is that the evidence

failed to show any unit of design and purpose or that

there had been a combination of the minds of the defend-

ants to file false individual income tax returns for 1943,

and that the court based the conviction upon statements of

the defendants made long after the alleged conspiracy had

come to an end. We disagree. The District Court, in

disposing of this contention, said:

‘Obviously the facts constitute beyond all doubt

proof of a conspiracy. These three men * * * planned

and carried out a scheme whereby, through their

dummy corporations, their implements and tools, they

were to and did receive $500,000 in un-accounted for

income. This is the very essence of a conspiracy.”’

Viii A ppendiz.

To this it will be enough for us to say that we have ex-

amined the record, and that it discloses evidence of a con-

spiracy between the defendants from early in 1943 when

the defendants first conceived the idea of selling whiskey

at over-ceiling prices up to the time when they filed their

income tax returns in March, 1944, This will appear more

clearly later on.

Fourth: Defendants’ main contention is that the evi-

dence was insufficient to sustain the conviction.

In the trial court, defendants admitted that they each

had received over-ceiling payments from purchasers of

whiskey which had not been reported in their original indi-

vidual tax returns, and they contended that later in

amended returns they reported income from their joint ven-

ture and paid the tax thereon. But they argued that these

amended returns were erroneous; that the over-ceiling pay-

ments represented gross income, and if their legitimate

expenses were deducted they actually suffered a loss on

their illegal transactions.

The trial judge found that the defendants in fact owned,

controlled and manipulated the affairs of the corporations

as their tools for the realization of over-ceiling sales of

whiskey which they diverted from the corporations to their

own resources. This was an illegal joint enterprise. It

was reported later as a joint enterprise and each defendant

in his amended return accounted for what he then admitted

he had received from the joint enterprise and received an

additional assessment, which was paid. (There is nothing

in the record to indicate that the tax paid was accepted in

full payment of the liability or that it represented any com-

promise.) The court found that the evidence clearly showed

a flagrant attempt to defeat taxes on some $500,000 of gross

income.

Since the trial judge found the defendants guilty, we

—

must take that view of the evidence, with inferences reason-

ably and justifiably to be drawn therefrom, most favorable

to the Government and accept as true all facts which the

evidence reasonably tended to prove.

Appendiz. ix

In the year 1943 defendants had very extensive dealings

in wholesale whiskey sales in two different series of trans-

actions involving whiskey obtained from two different

sources. In both, sales were made through regular trade

channels of corporations licensed to carry on such sales,

with accurate records of all receipts and expenditures by

the corporation used, showing sales at regular ceiling prices

as established by Office of Price Administration. However,

in both sets of transactions, in addition to the ceiling prices

received by the corporate sellers, the defendants who owned

or controlled these corporate distributors also received side

payments in cash representing over-ceiling charges for the

whiskey. The two corporate distributors through which

all sales were channelled were:

1. Gary Wine and Liquor Corporation of Indiana.

Rosenblum and Stryk bought all the stock in this cor-

poration in 1939. Weiss was its attorney.

2. P. and M. Corporation of Illinois. The record

stockholders of this were S. Prosterman who was rec-

ord owner of 98 shares, and L. Mitteldorf, a brother-in-

law of Rosenblum, who owned the remaining two

shares.

Gary had handled whiskey distributed by J. Beam Com-

pany which required it to build up certain reserves of aged

whiskey, represented by warehouse receipts. At the end of

1942, Gary had 547 barrels in reserve. Early in 1943, it

bought 1,500 additional barrels, making small payments

from corporate funds, and for the balance, Rosenblum and

Stryk gave their personal notes in order not to impair the

credit standing of the corporation.

The facts relating to the sales of this Beam whiskey were

x Appendiz.

established largely by stipulation. From April 19 to J uly

27, a total of 210 barrels and 6,584 cases of whiskey were

sold through Gary for total invoices of $159,826, and Rosen-

blum and Stryk received a total of $99,799 in cash as side

payments for these same sales. Four sales not covered by

the stipulation were established by the evidence of the pur-

chasers as follows:

—Paid checks—

For regular Cash

Bought invoice Expense onside

Ackerman 215 bbls. $13,144 $59,125 $78,230

“i 100 7,040 30,000 35,459

Palffy 30 2,354 9,535 22,604

Ruby 114 6,313 24,000

The first three payments were made to Rosenblum or Stryk,

but the fourth was to a different party, and there was no

testimony to show that either of them received it. This

last cash payment was made to Gardner, an officer of Beam

which held the whiskey in warehouse. Nor was there any-

thing in the stipulation or testimony of the purchaser con-

necting Weiss with any of the transactions involved in the

sale of the Beam whiskey.

In 1943 negotiations were started for the purchase of the

capital stock of a corporation which owned a large quantity

of whiskey. These negotiations were carried on by Weiss

who paid $50,000 for an option to buy Judge and Dolph,

Ltd. of Wisconsin, engaged in the wholesale liquor business

in Milwaukee and having franchises from the Seagram,

Frankfort, and Fleishmann Companies. The stock of this

corporation was owned by a holding company, Judge and

Dolph of Illinois, which was in turn a subsidiary of Wal-

green Drug Company. Weiss assigned his option to a

newly formed corporation, Staple, Inc., incorporated as a

holding company with himself and his wife as stockholders.

Staple, Inc. paid the $370,000 balance of the $420,000 pur-

_—

chase price agreed upon for the sale of the entire capital

stock of Judge and Dolph, Wisconsin. The parties also

agreed to and-did pay off a $140,000 indebtedness to J udge

and Dolph, Illinois. On August 2, 1943, Staple took over

Judge and Dolph, Wisconsin with all its assets including

its franchises, permits, licenses, accounts receivable, and

2,431 barrels and 5,037 cases of whiskey. The $50,000 paid

by Weiss for the option was supplied by Rosenblum and

Stryk from the proceeds of the side or over-ceiling pay-

ments on their sale of the Beam whiskey, and $334,000 of

the $370,000 (paid by Staple, Inc.) was supplied by advance

deposits for the sale of the Judge and Dolph whiskey. The

balance was loaned by Weiss. (The business of J udge and

Dolph, Wisconsin was later carried on under the name of

Milwaukee Liquor Corporation, and Weiss moved to Mil-

waukee to operate the business. )

Appendiz. xi

In order to market the Judge and Dolph whiskey the

defendants arranged for the organization of the second dis-

tributor corporation, P. & M. of Illinois. A three-party

contract was entered into between P. & M., Weiss, and

Staple, Inc., providing for reimbursement for the purchase

price of the Judge and Dolph, Wisconsin stock and for the

bottling and sale of the whiskey. Although Prosterman

and Mitteldorf were the record stockholders, Prosterman

never had physical possession of the stock—98 of the one

hundred shares of which stock were in his name. Rosen-

blum asked Prosterman to head the company and said he

would be in a position to supply the liquor for it to handle.

The arrangement was that Prosterman and Mitteldorf were

to receive a commission for selling the whiskey at OPA

ceiling prices. However, they made no sales themselves,

referring all potential purchasers to Rosenblum. They

never had either whiskey or certificates at their place of

business. Sales were channelled through the corporation,

and Prosterman and Mitteldorf received commissions there-

xii Appendiz.

for which were paid to them by the corporation out of its

receipts for sales at regular ceiling prices. The corpora-

tion’s bank account of $10,000 was opened by Prosterman,

Mitteldorf and Stryk—with the latter supplying the cash

for it.

The defendants stipulated that sales of the whiskey ac-

quired from Judge and Dolph, Wisconsin in the amount of

25,990 cases and 45 barrels were made through P. & M. for

a total of $529,249 invoice price and that Rosenblum re.

ceived an additional $313,036 in cash. During the year 1943

Rosenblum received the following amounts in cash as side

payments on the sale of wiskey: $99,799, Beam, as stipu-

lated; $136,293, Beam, as testified by purchasers; and

$313,036, Judge and Dolph, as stipulated, or a total of at

least $549,128. (This excludes an additional side payment

to one Gardner which was not shown to have been turned

over to Rosenblum and which—$24,990—Gardner testified

was the regular invoice price to P. & M.) No report, as

we have already observed, was made of the receipt of this

over half million dollar income from the sale of whiskey

in any of the original tax returns of Rosenblum, Stryk, or

Weiss for the year 1943, and their accountant who made out

their returns testified that they told him nothing about it at

that time.

In March, 1944, Rosenblum appeared before the Alcohol

Tax Unit apparently in connection with an investigation

then being conducted in Ohio relating to the Ackerman pur-

chases. He then made a statement as to his dealings in the

315 barrels of Beam whiskey for which the record shows

his receipt of side payments of $78,230 and $35,000 in cash

paid by Ackerman. He denied these cash payments—ide-

nied that he or Stryk had received any payment except the

checks for the regular invoice price for the two lots of

whiskey. Later, in May and June, 1945, Weiss alone first,

and then Weiss and Rosenblum, and Weiss and Stryk,

Appendiz. xiii

appeared before the Intelligence Unit of the Bureau of

Internal Revenue to testify as to their dealings in whiskey.

In the first of these interviews, on May 16, Weiss described

his early relations with Rosenblum and Stryk and his vir-

tual partnership with them in the Gary business. This close

relationship he said led up ‘to their approaching him when

they were considering the purchase of Judge and Dolph,

Wisconsin, and his participation in negotiations leading to

the purchase. He stated that in working out the details of

the contract there was discussion that ‘‘there must be

‘justification’ for this whole picture in case inquiry should

be directed against this transaction by the authorities, and

on this basis many of the details * * were worked out * *,

We had agreed in our conversation * * that we would pay

that price which eventually would be computed out, but that

any dollars and cents * * actually was to be reduced or

increased to an even dollar figure so that the tracing would

be difficult. * *”’ ;

Subsequently, Weiss stated that the ‘‘total price paid for

the 116,509.83 gallons of whiskey (5,037 cases) paid by us

to Judge and Dolph of Illinois $403,869.62 * * in addition

to which we were to purchase the stock of the corporation

for its net worth value which subsequently developed to be

$30,068.88, and we agreed to pay off $140,000 * * owed by

Judge and Dolph of Wisconsin to Judge and Dolph of

Illinois.’

Weiss further stated that in addition to the $50,000

Rosenblum and Stryk handed to him to pay for the option,

they gave him $75,000 in federal bonds to secure a loan to

use in paying the $140,000. ‘The money so received from

Mr. Rosenblum and Mr. Stryk totalled $160,000.’

During the course of the same series of interviews Rosen-

blum admitted the receipt of $363,000 in cash in excess of

the P. & M. invoice prices which amounted to $974,279 on a

series of sales. This $363,000 he said was paid over to

ee

xiv Appendiz,

Staple, Inc., to be used in payment of the whiskey and capi-

tal stock of Judge and Dolph, Wisconsin and in reduction

of the debt. He also stated that although he did not repre-

sent P. & M. in any way and had nothing to do with its

operations or any share in its profits, he could guarantee

delivery by it of any orders he took for the sale of liquor—

that there was no agreement as to that, but an understand-

ing.

Stryk stated that they intended to report the income for

tax purposes but ‘‘it became such a hot potato we didn’t

know how to. We intended to do it this year (1945). At

that time we didn’t know how to work it out.”’ In case of

a sale by Milwaukee Liquor Corporation, he ‘‘got a third

of it.” He denied ever handling any of the overceiling

cash but admitted putting packages given him by Rosen-

blum which he knew contained money into his safety deposit

box.

In June, 1945, Weiss was living in Milwaukee and gave

as his occupation ‘‘chairman of Milwaukee Liquor Corpo-

ration.’’ (This was the successor to Judge and Dolph

of Wisconsin which was, thus, still operating as a whole-

sale wine and liquor business.) He said he also maintained

a law office in Indianapolis for ‘‘sketchy or remnant prac-

tice of law.’’

As a result of the investigation and interviews, Weiss,

Rosenblum and Stryk all filed a delinquent partnership

return for the year 1943, setting up gross receipts of

$512,510 and ordinary net income of $142,279. The mer-

chandise on which this was based was the 2,431 barrels

and 5,037 cases of whiskey for which the net cost was

stated to be $389,931. An explanation of the filing was

attached to the return stating that it was to make clear

that the transactions by Staple, Inc., were in fact those of

Rosenblum, Stryk and Weiss.

—

Appendiz. xv

Defendants cite the case of Spies v. United States, 317

U. S. 492. They claim that the evidence fails to show that

defendants knew that they owed a tax and that without

justifiable excuse they failed to report it. They insist that

something more is required than the doing of the act pro-

scribed by the statute. There must be proof of an evil

motive to accomplish that which the statute condemns.

To be sure, to establish its case the Government must

prove not only an attempt to wilfully defraud it but also

that a tax in addition to what the taxpayer had already

paid remains due and owing, Gleckman v. United States,

80 F. 2d 394, and Tinkoff v. United States, 86 F. 2d 868, but

it is not necessary to prove an evasion of the entire amount

alleged in the indictment; the proof is sufficient if it shows

any substantial portion of the tax liability to have been

wilfully evaded. United States vy. Schenck, 126 F. 2d 702.

See also United States v. Johnson, 319 U. 8. 503, 517. Nor

is direct proof of wilful intent necessary. It may be in-

ferred from the acts of the parties, and such inferences

may arise from a combination of acts. Battjes vy. United

States, 172 F. 2d 1, 5.

Defendants assert that they are entitled to their costs of

the whiskey, $466,039.32, and their expenses in selling it,

$145,506.07, and when these items are allowed, they had

a loss of $99,035.37. They also claim that two exhibits?

identified by the Government but introduced over the ob-

jection of the district attorney, show expense items for

which they were not given credit. Hence they argue there

was no evil motive or want of justification.

In this connection we note that P. & M., in its return,

reported a gross income of $974,279 against which it

1. These exhibits A-13 and A-14 were schedules which defendants’ ac-

countant stated showed items of expense which he was instructed not to

include in the Gary Corporation costs when he was making up its return.

The items were not verified—there was nothing to indicate their source or

accuracy—no basis was laid for their allowance, and the accountant did not

profess to know anything about the authenticity or the truth of the items.

xvi Appendiz.

charged $840,961 as cost of goods. The only goods that

P. & M. sold was the Judge and Dolph whiskey, hence the

trial court could infer that the item of $840,961 included

all legitimate charges in addition to the original cost of

the goods.

The question of wilfulness is one of fact to be determined

by the jury or the trial judge from all the circumstances,

Spies v. United States, supra, 499; Mazfield v. United

States, 152 F. 2d 593; United States v. Lange, 161 F. 24

699; and Battjes v. United States, supra. So here, we have

a deliberate omission from the return of income which each

defendant subsequently admitted knowing should have been

included in his return—a deliberate falsification of the

return, and not just the default in filing return or paying

tax which the court held, in Spies v. United States, supra,

was insufficient of itself to sustain a charge under See.

145(b). A fraudulent return is always an attempt to

evade a tax. Rick v. United States, 161 F. 2d 897, 898.

After investigation started, each defendant filed an

amended return disclosing a part of the income previously

omitted. Under similar circumstances, the court, in Cave

v. United States, supra (decided after the Spies case),

held that the Government was not required to prove more

than that there was wilfully unreported income to sustain

a conviction under the statute. See also Murray v. United

States, 117 F. 2d 40.

We conclude that there was sufficient evidence to sustain

the court’s finding that each defendant was guilty of an at-

tempt to evade payment of his income tax by means of filing

a false and fraudulent return. The writer is of the opinion

that the court could infer that defendants who unquestion-

ably acted in concert in their black market operations, also

combined in their attempts to evade payment of taxes, and

that intent to evade such taxes was one of their motives in

concealing the income they received from the over-ceiling

Appendiz, xvii

prices of the sale of whiskey and omitting it from their

returns. However, my colleagues do not agree, and have

filed separate opinions as to the indictment charging con-

spiracy. Hence the judgments of conviction as to the

three indictments charging the substantive offenses will

be affirmed, and the judgment as to the indictment charg-

ing conspiracy will be reversed.

Masor, C. J. I concur in Judge Kerner’s opinion in all

respects except as it relates to the indictment which

charges conspiracy, and as to this charge I would reverse.

The substantive offense charged in each of the indict-

ments other than the conspiracy indictment was that the

defendants ‘‘did wilfully and knowingly attempt to defeat

and evade.’’ Not only was the case tried, but the convic-

tion on these substantive offenses rests, on the theory that

the defendants were engaged in a joint enterprise. Thus

the government justifies the variance between the proof

and the allegation of the indictments on the ground that

the income described in the indictments as ‘‘dividends”’

was received as the fruits of a joint venture. The consoli-

dation of the indictments for trial over the objection of the

defendants is also justified, in part at least, upon the same

premise. And throughout the memorandum of findings by

the lower court runs the thought, both tacit and express,

that the defendants were tried and that they were con-

victed as partners engaged in a joint venture or enter-

prise. It therefore seems plain that the defendants in

the substantive indictments have been convicted as partici-

pants in a joint enterprise designed to “attempt to defeat

and evade.’’ In the conspiracy indictment they have been

convicted of concerted action ‘to attempt to evade and

defeat.’’ Any difference between concerted action to com-

mit an act and participation in a joint enterprise to com-

mit the same act is not discernible to me. ‘‘A conspiracy

is a partnership in crime.’’ United States v. Socony-

xviii Appendiz.

Vacuum Oil Co., 310 U. S. 150, 253. And in my view, a

joint enterprise conducted for an illegal purpose is like.

wise a partnership in crime. I think the judgment pre-

mised on conspiracy should be reversed because under the

peculiar circumstances of the case it embodies the same

crime as that based on the substantive charges.

A more conclusive reason for reversal, however, arises

from the failure of the court to differentiate between the

proof relevant to the substantive offense and that relevant

to the conspiracy charge. I understand the government

to concede that the conspiracy came to an end in March

of 1944, when the defendants filed their alleged false and

fraudulent returns for the calendar year 1943. In any

event, the filing of such returns are the latest overt acts

alleged (see overt acts 21, 22 and 23). Such being the

situation, the admissions, statements and acts of the indi-

vidual defendants made or performed after the termination

of the conspiracy were not admissible and cannot be con-

sidered as proof of that charge. Fiswick, et al. v. United

States, 329 U. S. 211, 215-217. The record unmistakably

discloses, however, that the strongest and most convincing

proof which the government offered related to statements

made by the individual defendants in conferences with

government officials which finally culminated in the filing

of amended returns some two years after the termination

of the conspiracy. Assuming this evidence was proper

as admissions against interest, as I think it was, it could

properly be considered only as to the substantive offense.

The record shows conclusively, however, that this character

of proof was utilized in support of the conspiracy charge.

In the absence of such proof, I doubt if there is any proper

support for the conspiracy conviction but, whether so or

not, the fact is that this damaging testimony, inadmissible

on the conspiracy charge, was relied upon to convict and is

here relied upon by the government to sustain such convic-

tion.

Appendix. xix

Durry, Circuit Judge. As I disagree in part with the

opinion of Judge Kerner and am not in entire agreement

with the opinion of Chief Judge Major, a brief separate

opinion seems in order.

Viewing the evidence in the light most favorable to the

government, together with all reasonable inferences to be

drawn therefrom, I agree that the judgments of convic-

tion must be affirmed in so far as they relate to the three

indictments on th» substantive offenses. However, as to

the indictment charging conspiracy, I think there must be

a reversal.

I can well understand the difficulty Judge Major has in

ascertaining any real difference between the charges con-

tained in the three indictments alleging substantive

offenses aud the charge in the conspiracy indictment. At

best only a very fine line can be drawn between the charges

that these defendants participated in a joint adventure to

attempt to defeat and evade the federal income tax and the

charge that by concerted action they agreed to attempt to

defeat and evade such tax. This is the kind of a case,

in my opinion, where it is an abuse of the judicial process

to charge conspiracy when practicaliy the same offense

has been charged in substantive counts.

I recognize that the old doctrine of merger of con-

spiracy in the substantive crime has not obtained in this

country (Pinkerton, et al. v. United States, 328 U. S. 640,

650), and that it is only an identity of offenses which is

fatal (Gavieres v. United States, 220 U. S. 338, 342); yet

the facts in this case bring it at least within the shadow

of the rule stated in the Pinkerton case, supra (p. 643):

6c# * *

There are, of course, instances where a

conspiracy charge may not be added to the substan-

tive charge. One is where the agreement of two per-

sons is necessary for the completion of the substan-

tive crime and there is no ingredient in the conspiracy

which is not present in the completed crime, * * *”

xx Appendix.

Nevertheless I am convinced, albeit reluctantly, that

under the Supreme Court cases cited by Judge Kerner the

conspiracy indictment was good as against the attack made

that it was practically identical to the indictments charging

substantive offenses, and thus did not adequately charge

the crime of conspiracy. In the Pinkerton case, supra, the

court said (p. 644): ‘‘Moreover, it is not material that

overt acts charged in the conspiracy counts were also

charged and proved as substantive offenses.’’ In that case

the court held in effect that conspiracy is equivalent in

law to aiding and abetting. The substantive offenses here

charged were attempting to defeat and evade the tax. The

charge that the defendants entered into an agreement to

make such an attempt was a statement of a separate offense

under the decisions cited.

Courts have protested vigorously against the current

and perhaps growing habit to indict for conspiracy in addi-

tion to the substantive offense, and have pointed out that

such procedure often constitutes a serious threat to a fair

administration of justice. Krulewitch v. United States,

336 U. S. 440, 445-446. As far back as 1925 the Confer-

ence of Senior Circuit Judges pointed out the dangers of

such practice. And any judge with trial court experience

knows that the charge of conspiracy in an indictment is

often used at the trial for the purpose of getting evidence

into the record which would otherwise be inadmissible, and

that the trial judge is often powerless to prevent such

abuse. As was stated in the Krulewitch case, supra (p.

453), ‘‘But the order of proof of so sprawling a charge

is difficult for a judge to control.”

Whenever in the estimation of the trial judge the con-

spiracy count has been added to the indictment for the

purposes hereinbefore stated, he can dampen the prose-

cutor’s enthusiasm for such practice by imposing a sentence

on the conspiracy count which will be concurrent with that

Appendix. xxi

imposed on the substantive count or counts; but he cannot

entirely avoid the evil of opening the door at the trial for

evidence inadmissible except for the conspiracy charge.

I agree with Judge Major that the conviction for con-

spiracy was based almost entirely on statements made by

defendants long after the termination of the conspiracy

and upon the amended tax returns filed by the defendants

nearly two years after the conspiracy had ended. Certainly

such statements and the filing of the amended returns were

not made pursuant to and in furtherance of the objectives

of the conspiracy.

The only possible basis for the consideration of such

evidence on the conspiracy charge was the theory adhered

to by some courts (see: United States v. Krulewitch, 167

F. (2d) 943, 948; United States v. Goldstein, 135 F. (2d)

359; Murray v. United States, 10 F. (2d) 409) that there

necessarily was an agreement among the alleged con-

spirators to conceal the violation after as well as before

the illegal plan is consummated. I believe this theory has

now been definitely discarded. Krulewitch vy. United

States, 336 U. 8. 440, 443.