Petition for Writ of Certiorari — Sachs v. United States (No. 510)

-— = Office-Supreme Lourt, U.S.

. FILE COPY dices

|

| OCT 20 1961

JAMES R. BROWNING, CLERK

IN THE

SUPREME COURT OF THE UNITED STATES.

OCTOBER TERM, 1961.

, B10

LEONARD J. SACHS,

Petitioner,

versus

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

To the United States Court of Appeals

for the Fifth Circuit.

HOSEA ALEXANDER STEPHENS,

509 Grant Building,

Atlanta 3, Georgia.

Counsel for Petitioner.

SMITH, FIELD. RINGEL, MARTIN & CARR,

Attorneys at Law,

909 Grant Building,

Atlanta 3, Georgia,

Of Counsel.

PES OD PP el Me

wcities tee dlamielbaias ——

St. Lours Law Pristive Co., Ive., 415 N. Eighth Street. CEntral l-4477.

INDEX.

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measens tor gvaniine the writ ..................... ‘

a gaa ee TILT GATS AI 7 as i I

Appendix 1--Opinion in District Court oo. 000... 1

; Rae BP

Appendix T1—Opinion im Court of Appeals 00... .. YY)

Appendix TT—Analysis of Balanee Sheet dtems= of

Fulton Trouser Comipans as of Feb-

hr es og es os Jo

— Analysis of TIneome & Expense Pens

of Fulton Trouser) Company as of

Pee Ge BOO oe ak ct! wh

Cases Cited.

Boykin v. Huff (App. D.C.). 121 FL 2d sin, si2 oo... 13

Carroll Vocational Institute ve United States, 9 Cin,

ee a I eo vie g'g Ss dew Sh aww es 4

Preidus v. United States (App. Do ©.). 225 FL 2d Sus. og 19

Marvland Casualty Company v. Jones, 274 US. Tae,

og I ET OPIS SER EO ina Ne Bea egg eean yar AL ARO ae 1:

Terry v. United States, S Cir, 151 FL 2d 40... 2

United States ex rel. Starr ve. Mulligan (App. D. ©),

ee wn eh ons S4S s

i

Uuited States v. Borth, 10 Cir, 266 FL 2d 521

United States v. Levin (D.C. Colo), T8n BL Supp ss

United States vo MeNineh, 256 U.S. 495. 2 Law bal

CON SR eae aa Sie Tea eerie eine eg ere

United States v. Moore, 5 Cir. 185 F. 2d 9. aa

United States v. Stark (D.C. Md.), 181 Fo Supp Te

Weinstock v. United States (App. D. C.), 251 Fo 2d oe

Statutes Cited.

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~ Section 231 (False Claims Act)

LRL SP.

IN THE

SUPREME COURT OF THE UNITED STATES.

OCTOBER TERM, 1961.

Oy aces he

LEONARD J. SACHS,

Petitioner,

versus

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

To the United Sta*es Court of Appeals

for the Fifth Circuit.

se

Leonard J. Sachs, your petitioner, prays that a writ of

certiorari issue to review the judgment of the United

“ates Court of Appeals for the Fifth Cireuit. entered in

Ne above entitled case on Angust 24. 1961,

OPINIONS BELOW.

The opinion of the Distmet Court. in reality an order

Werriling petitioner's motion to dismiss (R. Vol. Typ. 10),

has not heen reported. A copy is appended as Appendix 1,

The opinion of the Court of Appeals (ak. Vol. TH, |

has not been reported. A copy is appended as Appencs

il.

JURISDICTION.

The judgment of the Court of Appe als was entered Au

gust 24, 1961. A petition for rehearing was dented ©

September 22, 1961 (R. Vol. IL, p. 419).

Jurisdiction to issue the writ is invoked parstaut

the provisions of Title 28, Section 1254 (1), United Stat

(ode.

‘

QUESTIONS PRESENTED.

I. Whether Small Business Administration is a dept

ment or agency of the United States within the yj UrVies

ot Section 1001, Title 18, United States Code, so) thal

prosecutions may be laid thereunder predicated upot ta!

ments allegedly made to Small Business Admini- tration

with knowledge that same are false.

II. Whether prosecution will lie under Title 18, Sectie’

1001, United States Code, for submission of a financial.

statement containing allegedly false information to a ler

ernment agency in order fo secure a contract for pred

tion of goods after the goods have in fact been pee

accepted, and paid for by the particular Goverts

agency.

III. Whether, in its opinion disposing of petitioner

appeal, the Fifth Cireuit Court of Appeals committe:

prejudicial error in failing to consider and pass Upel a.

of the assignments therein made.

STATUTES INVOLVED.

The chief statute involved is Section 1001, Title 18,

United States Code, which provides

‘Section 1001. Statements or entries generally

‘Whoever, in any matter within the jurisdiction

of any department or ageney of the United States.

kuowingly and willfully falsifies, conceals or covers

up by any trick, scheme, or device a material fact,

or makes any false, fictitious or fraudulent statements

or representations, or makes or uses any false writing

or document knowing the same to contain any false,

fictitious or fraudulent statement or entry, shail be

fined not more than $10,000 or imprisoned not more

than five years, or both. Pune 25, 148. ¢. 640, 62

Stat. 749.7"

Other statutes involved, Lowever, are Sections 633 (a),

638 (a) and 645 (a), Title 15, United States Code, pro-

viding:

Section 633 (a).

‘Tn order to carry out the policies of this chapter

there is created an ageney under the name ‘Small Busi-

ness Administration” (herein referred to as the Adimiin-

istration), which Administration shall be under the

veneral direction and supervision of the President and

shall not be affiliated with or be within any other

agency or department of the Federal Government.”

—<*£ « ¢ 2 @%*

Section 638 (a).

“Whoever makes any statement knowing it to be

false, 2)... for the purpose of influencing in any way

the action of the Administration, 2... under this

chapter, shall he punished by a fine of not more than

Pel oes

$5,000 or by imprisonment for not more than two vous

or hoth.””

Section 645 (a).

“Whoever makes any statement knowing it cob

false, or whoever willfully overvalues amy security. co

the purpose of obtaining for himself or for any ayye

eant any loan, or extension thereof by renewal. deter

ment of action, or otherwise, or the acceptance, releas

or substitution of security therefor, or for the parnes

of infeneing in any way the action of the Ndi

tration, or for the purpose of obtaining money, prom

erty, or anything of value, under-this chapter, shal!

punished by a fine of not more than $5,000 or bs

prisonment for not more than two vears, or hoth ”

STATEMENT OF THE CASE.

Petitioner, along with William Sachs, was indicted

the Northern Distriet of Georgia under an indictment

two counts, each charging violation of Tithe Ts. Sectio

1001, United States Code, the first count being laid sis

respect to the Air Material Command, United States As

Force, and the second count with respect to Smiall Busines

Administration.

Somewhat by way of preanible, count one alleged fh

Vol. I, p. 2) four Georgia corporations, all having a yea!

of business in Atlama, Fulton County, Georgia. designates

in the indictment as ‘‘corporations”* were:

Name Date Organiced

Fulton Trouser Company, Ince. | February 3, 14>

Henry Garnicit Company March 6, Woz

Wiil Manufacturing Company — June 35, 19.0

Federal Sportswear, Ine. July 10, 7452

appellant being President and a Director of Fulton Trouses

and Henry Garment Company and Witham Sachs bere the

Secretary-Treastrer and a Director theree?,

That on or about March 27, 1954. defendants, for the

purpose of obtaining a contract from: the Air Material Con

mand, United States Air Foree, made and used a balance

sheet of Fulton Trouser Company, Ine. as at February 2s,

Hod, and a statement of income, profit and loss for January

1, id. to Pebruary 28, 1254, which did not set forth a true

statment of dts assets, diabilities. finaneial structure and

condition, well knowing said writings and documents were

false, fietitious and fraudulent (RL Vol Top. 3).

The second count, after adopting the preliminary allega-

tious of count one by reference, charged that on or about

April 28, 1954, defendants for the purpose of having the

“corporations” designated as Small Business Concerns by

Small Business Administration, had made and used a let-

ter dated April, 28, 1954, quoted therein in its entirety,

addressed to the Regional Director, Small Business Ad-

ministration, Atlanta, which omitting formal parts stated

R. Vol. 1, pp. 4-5):

“The Henry Garment Company, located at 166 Gar.

nett Street and Fulton Trouser Company, loceted at

-2o Central Avenue are affiliated) companies. The

Henry Garment Company has an average number of

employees of 108. Fulton Tronser Company lias an

average number of 375 employees.

“The Henry Garment Company and the Fulton

Trouser Company have no connection whatsoever with

Will Manufacturing Conipany, Atlanta, Georgia, aud

Federal Sportswear, Atlanta, Georgia.

“This is to certify that there is no financial or or

ganizationnl connection between the twa companies,

Henry Garment Company and Fulton Trouser Cor

pany, Inc., and the two companies, Will Manufaetur-

lag Company and Federal Sportswear.”

patra js

the defendants well knowing said letter: was fo'-

tious, and fraudulent in that the said “eorporation

in faet affiliated with ench other, had finaneral and ore

iwational connections with each other, and were not sy

business concerns as established by law, rules aud resi.

tions of the Smit) Business Administration, as detendunts

well knew,

A timely motion to dismiss count two was filed ho¥

opp. 7) upon grounds averring substantially

(2) No offense against the laws of the Uanited States os.

alleged;

(h) The letter set forth therem, even if made audous

as alleged and if false. fictitious and fraudulent as aise

does not fall within the ambit of Seetion Took. Tor. ts.

United States Code, nor proscribed thereby:

(¢) The designation of the named corporations oss:

business concerns by Small Business Administration is)

the exereise of jurisdiction contemplated by Sector i!

Tithe IS, United States Code, so as to make the wets

therein setoutamaterial within the purview or said <0

(ad) Stnalt Business Administration is not oan agerey:

the United States within the definition of Section !

Tithe 1S. United States Code, and its fumetions ane coe

tions are not protected thereby: and

(e) The making and use of the writing therein set te!

in the manner and form alleged does not eonstity

offense against nor violation of Seetion Tar, Tine o.

United States Code.

This motion was denied by the Distriet Court. is ore

ion being set out hereto as Appendix T.

The case thereafter proceeded to trial, defendants °°

found guilty on each count, and petitioner was coms”

to the eustody of the Attorney General for a period of 1"

vears on each count, said sentences to de acted coneur:

rently CR. Vol. TE. pp. 405-407),

With respect to count two oof the rhclietiedst the deste

here presented is framed hy the laneuagecod the count. the

metion to distulss, and the statutes hereiuberore: cited.

With respeet to count elie of the itedietimernt, however. thy

issae here presented is framed by the evidenee jitroduecd

bY the Govermment whieh miay be briethy saminerized.

Fulton Trouser Company, one of the corporations Joere-

inbefore referred to, submitted a bid to Ade Metertal Cor.

mand, United States Air Fores, for the production of cer-

tain garments and, in connection therewith, subrasitted a

Yuanedal statement as alleged au count ome of the indict.

ment. The purpose of this statement, as expressly testi:

fed to by the witnesses for the Government, was to deter

nine capability to produce the goods so ordered byw the

Government, An agent of the Pederad Bureau oof Tavesti

vation, several vears subsequent to the submission of the

fiaineial statement, undertook am analysis of the statement

from the hooks and records of Falten Tronser CToniparny

wud made certain adjustments thereia. The adjusted

statement ts hereto appended as Appendix TL

It appeared without substantial dispute frome the evi

dence that the goods themselves, contemplated by the eat

tract awarded to Fulton Tronser Compaiy, were produced,

delivered, accepted and paid for by the United States of

America. Likewise, the statenient itself with the adjust.

nents made thereon by the agent of the Pederal Burean

Of Tnvestigation, petitioner contends, showed finaneial

capability to perform the contract and. ii fact. retlected

that the company actnally operated at a profit: for the

periad covered hy the fitianedal statement, although the

‘Wuount of this profit was determined by the PBT agent to

he Jess than that reflected by the statement so submitted

to the United States Air Foree,

REASONS FOR GRANTING THE WRIT.

The opinion entered by the Fifth Ciremt Court of \)

peals fails to clearly distinguish its holding as te con

one of the indictmeut from its holding as to count ts:

the indictment but, on the other hand, tended to consid:

and dispose of the issues as to each of said) comtits collee

tively with the result that the questions presented bere:

were dealt with on a composite basis.

I.

So much of the decision of the Fifth Cirenimt Const o

Appeals as held that the indietment was not subject tet!

attack made upon eount two of same by the motion te

dismiss extended the omnibus fraud statute (Title 18. Sec.

tion 1001, United States Code) to an agency net inte

hy Congress to be included thereunder, specife prove.

having been made in the Aet creating the Smell Pusoes

Administration for penalties to punish | tran -rresste

against it, i. e., Section 633 (a), Section 638 (a). Section

645 (a), Title 15, United States Code.

In sc holding the Fifth Cireuit Court of Appests o>

regarded the decision of this Court in United States Vv

McNinch, 356 U.S. 595. 2 Law Ealition 1007, Wherein!

Court held that a false statement in an application te!

Federal Housing Administration for eredit) msnrine

not actionable under the False Claims Act (31 |. >. |

231) since such is not a claim against the Governmen

Likewise, the Fifth Cireuit Court of Appeals disresin

its own decision in United States v. Moore, 5 (‘ir.. I> F

92, in which it considered Section 80, Tithe Is, Ur

States Code, being the predecessor seetion to the pre

Section 1001, as well as the following:

United States ex rel. Starr v. Mulligan (A). |). |

59 FB. 2d 200, 202 (Application for Civil Serve

Ixamination);:

ons, ae

United States v. Stark (1). Mad). 131 F.Supp. 190,

and

United States v. Levin (1). ©. Colo), 153 FL Sip ss

(Interrogations hy FL OB. DT. Agents):

Terry v. United States, 8 (ir. 131 FL 2d 400 ¢(Pedera!

Housing Adiinistration Credit) Applications) ;

United States v. Borth, 19 (ir, 266 1. 2d S21 CAp-

plication by Veteran tor sickness benetits).

Petitioner submits that the exercise of jurisdiction ean.

terrspolaatered by Section L001, Tithe IS, United States Code,

is tundamentally different from that contemplated ly

Section 641 (e), Tithe 15, United States Code. In Carroll

Vocational Institute v. United States, 5 Cir. 211 I. 2d

oo, 40, the Fifth Cirenit Court of Appeals stated:

Jurisdiction means the right to sayoand the power

to act: .

The decision of the Ritth Cirenit: Court of Ayipeais conn

pletely ignores the foregoing holdings and concepts.

IT.

In permitting the judeiment te -tand as to count one

of the indicgmoent, the Fifth Cirenit Conrt of Appeals ren

dered a decision which is in contlict with the decision of

the Court of Appeals of the District of Columbia in Freidus

v. United States (App. D. (7), 223 F.2d S08. which actually

constituted a physical precedent for the case at bar, its

farts hearing striking similarity to the evidence offered

by the Government against petitioner. The conrt there

enphasized the following matters:

“We think, however, that this highly ed nad statute

tust be construed as requiring admaterie’ falsifiention.

* * > * + * *

“The financial statement submitted was materially

false only af it misrepresented Starrett’s ability te

— oo

repay a loan by misstating profitability, assets,

liabilities.”

The ultimate issue here involved was not abiliry te

repay a loan as none such was sought or granted. Th

concern was only ability to produce goods to fultl

Government contract. The goods so ordered having bee

produced, delivered, accepted and, as the evidence in ti:

instant case indieated, actually overrun and. seh ade

tional goods so accepted and paid for, the talse represeut

tions, if any, contained in the financial statement wer

conclusively demonstrated to be not material within te

purview of Section 1001, Title 18, United States Cove.

-*

The language of the Court of Appeals of the Distru:

of Columbia in the Freidus Case (p. 601), detionstrats

the Jack of such materiality:

“As the Government says, appellant senght ‘ts

arrive at oa financial statement more palatable ts

creditors.’ But that purpose in no way reduces the

Government’s burden under the false statement she

ute; it must still prove that the specified entries ws

objectively false, and were made, wilfully and wo

knowledge of falsity, in a material matter within

jurisdiction of a department or ageney of the ni

States.””

’

The decision of the Fifth Cireuit Court of Appeals ten

likewise conflicts with the decision of the Court oF \

peals of the District of Columbia in Weinstock v. United

States (App. D. €.), 281 F. 2d 669, pointing mp ie

itv'’ in the fellowing language:

Material’ when used in respect ta eviders

often confused with ‘relevant’, but the two tere > hi

wholly different meanings. To be ‘relevant ) mits |

relate to the issue. To be ‘material’ meats 1

| oe

probative weight, i.e. reasonably likely te us

as OE

the tribunal ino making a determination required te

be made. AC statement may be relevant but met mia

terial.

"ee dee Cen gy

Materiality must be jadged by the faets and. cir

cumstances dn the parthouhkur ease. The eolor of an

accused's hair omay be totally imamaterial im one ease,

bui in other circumstances the color ot his hain ras

be net only giateriab but decisively sa’

Ne pretense was qniade by the Government that the i

nanenal statement was sought or desired for any purpose

other than demonstrating the Fulton Prouser Companys

could produce goods to tnllill a Government contiaet. Naw

thesis that it contd not do so was entively disproved bw

the production, delivery. and aeceptanee of the goods

ordered, So far cas the statement itself was concerned,

despite any criticism made of it by the awent of the Bed

eral Bureau of Tnvestigation who undertook to make aed

Metments therein, profits for the period in question were

fied at $17,077.10, or only SLND less than that) shew

on the statement submitted. towit: 200TH 25. The state

ent as submitted. ane the statement as aelpusteed, ~hhaoweed

aodetiert? of $14,206.20,

This Honorable Court has never considered, cdeterteined,

and pronmleated staudards woverning “materiality ae

this word is used in the Frand Statute (Pitle IS. Seetion

IW TS. Cl). and there is here presented a elear oppor:

Mnity fora vardstick to be furnished by whieh prosecu

Tors cand defense counsel may be euided ino the future.

Petitioner submits this is particularly important in view of

the fae that the Departrivercnt of ustiee shows a clear

breferenes fo proscente under Seetion TOOL rather than

Wider the speeifie penalty statutes spelled ont by Congress

Hoestublishing Small Business Administration and wherem

!

Uhter sanctions were imposed.

a. om

III.

The deeision entered by the Fifth Cirenit Court or \

peals in the instant case failed to take motiee Gf arco |

npou all of the assignments of error mace therein. Th

assignments of error presented

(a) Sufficiency of the evidence te support a verter.

cnilty on comit two of the indictment, sene havin 5

erved by motion for judgement of acquittal mor!

the conelusion of all of the evidenee and theres"

motion for judgement of acquittal notwithstanday »

verdict:

(b) Permitting a special agent, Internal Revenue Se

ier, to testify over objection that Fulton Prouser Coie

ewed $34,872.74 in FICA and Withholding Taxes a-

February US, 154. the date of the finamedsl stat.

whieh formed the basis of the proseention on ean on

and thereby on objeetion by the Government sane):

the effort of petitioner's counsel to establish tiat te.

taxes were snbsequenthy paid: and

ce) Admitting into evidenee eertain documents ov)

had been submitted by Fulton Trouser Company te Jar

and Company on November 16. 1995. whiely decane!

certified that as of that date all of the stoek of Will We

nfacturing Company and Federal Sportswear, Pre. wb

owned by petitioner, Leonard .E Sachs, over abjecin-

that these doetanents were never presented to nor cet:

on by any Government Ageney; the date of sare wee e

least six months antecedent to the representation mice |

Small Business Administration on April 28,0 Ped. con

plained of in count two of the indictment; and that |

such documents were admissible in evidence at all

would be only for the limited purpose of tmpeachct’

after petitioner had taken the stand and testified tnt

CAUSE, Which objections were overruled,

The omission of the Fifth Cirenit: Court of Appeals te

netice and rte upon these assignments was timely called

fo tts attention in the petition for rehearing in Ground TL

on pare 4 thereof (Ro Vol TE. pm. 4P). Petitioner submits

this <ttnotion eally for the enxereise of Juriseiet ten hy this

Court as in Maryland Casualty Cempany v. Jones, 27")

PON. Tee, TU) whereia this Pbotersebele Co overt stated:

“Sinec oon the fee of the reeord the failure of tle

(pent Court of Appeals too eonstder the TSST Orr enits

of crror relating te relings at the deatrine is mies

Plaried, and its action appears to have been erreneans,

is quedemient mast be reversed.

Failure to notice and role mpen speeitie assigninerts af

Prror Sanredy presented food court Tor deepsian ahonwnt~ te

cleritayl of right of ppecil it~ to aed Pssdes anil its stitial iN

Boykin v. Huff (App. D000). DET Bo 2d sun, S72:

“The right Gf appeal, theneh statutory. bs motoin

“Ubstantial, and it~ statutery origin dees net make i

Qomatter of sited stall comsecuenee that it a ee

viven or withheld arbitrarily

Petitioner submits that le was entitfed te lave allo ot tits

assignments of error Cobstdercad tie determine as oan

reral perert of thre disposition wt his appeal,

CONCLUSION”

The ruling below extends the omnibus framed statute -

(Nection DOU, Tithe m4, 4B 4":) we on ayeney obvionsty

Nat Intended by Conyvress to be covered therely, aie

ignores the fundamental eencent of “onatertality * so eare

hully spelled out hy Congress in said: statute. The deei

Son is in conthet with deeisions of the Comet of Appeals

tor the Distriet of Columbia herein cited. Likewise, errors

Of law committed by the Trial Judge during the course of

a: en

the proceedings were ignored and net passed upon. Th

petition for a writ) of certiorari: should, therefor:

granted.

Respectfully submitted,

HOSEA ALEXANDER STEPEHENS.

0O Grant Building,

Atlanta 3, Georgia.

Counsel for Petitie:

SMITH, FIELD, RINGEL, MARTIN & CART.

Attorneys at Law,

500 Grant Building,

Atlanta 3, Georgia,

Qf Counsel.

— 15 —

APPENDIX I.

Opinion in District Court.

(Filed in Clerk’s Office Aug. 26, 195s.)

In the United States District Court.

Northern District of Georgia,

Atlanta Division.

United States of America

Vv. ies 286,

‘ 8 . ;

Leonard J. Sachs and &. riininal

Willian Sachs, |

In brief it is alleged, in Count One of the indictment

tthe above stated ease, that at all times pertinent that

the defendant) Leonard J. Sachs was President anda

Director of Fulton Trouser Comp. as, Tne. and Henry

farnert.s coupany, and that the defendant, William Sachs,

Was Secreto ry-Treasurer and a Director of Fulton Trouser

foupany, Ine. and Henry Garment Company, both con-

rerhs bemg alleged to be corporations organized under

the laws of the State of Georgia; that at all times pertinent

the Sriall Business Adiinistration was an independerit

ageney of the United States of America and that the Air

Material Command was an ageneyv of the United States

Air Force; that on or about the 27th day of Mareh, 1954,

the defendants, in a matter within the jurisdiction of the

United States Air Force did, for the purpose of obtaming

a contract from said Air Material Conunand, United

Sates Air Force, knowingly and willfully make and use,

and willfully cause to be made and used, miaterial false

Writings and documents, knowing the same to contain false,

fictitious and fraudulent. statements and entries, to-wit:

Balance Sheet of Fulton Trouser Company, Ine. as at

— 16 —

February 28, 1954, and a Statement of Income, Prent ani

Loss, January 1, 1954, to February 28, 1994, well Knewins

that the same were false, fictitious and fraudulent in tia

same did not set forth a true statement of the asst 4

liabilities, financial strueture and condition of said corpor. }

tions, in violation of *{ 2 and 1001, Title TS, U.S. ©.

Count Two charges that on or about April Is. Mod. io:

defendants, in a matter within the jurisdiction of the

Small Business Administration, an agency of the Unites

States, did, for the purpose of having the above name:

corporations designated by the Sinall Business Adiiinistra-

tion as small business concerns, knowingly and wiiltils

make and use, and willfully cause to be made and ised.

a material false writing and document, knowing the sac

to contain vertain false, fietitions and fraudulent) stat

nents, to-wit: a certain letter (the letter being setoants

hae verba in the indietment and being verified hy tl:

affidavit of William Sachs), dated April 28, 1954, te the

Sniall Business Administration in which it) was stated.

inter alia, that the Henry Garment Company and Pulte:

Trouser Company were affiliated companies with 105 ane

375 employees, respectively; that these two companies ti.

no connection Whatever with Will Manufacturing Com rar

and Federal Sportswear and that there was ne finitcial

‘or oreanizational connection between Henry Garment Cor

pany and Fulton Trouser Company, Inc.. and the two

companies, Will) Manufacturing Company and Peder

Sportswear, the defendants well knowing that such» ritins

and document was false, fictitious and frandulent pn the

said corporations were affiliated with each other, did haw

fpancial and organizational connections and operation with

each other and that the said corporations were net a!

business concerns as established by law and the rites and

reeulations of the Small Business Administration, as‘

7

fendants then and. there well knew. in violation of ;

and 1001, Title 18, ie @ ie

mae. yee

The defendants move to dismiss Count Two of the

indicttuent upon the following grounds:

1. No offense against the laws of the United States

is alleged against defendants or either ef them therein.

2. That the letter set forth, even if made and used

as alleged, and if false, fictitious and fraudulent) as

alleged, dees not fall within the ambit of ©1001, Title

BULA.

+. The desigiation of the named corporations as

small business concerns by the Simall Business Ad-

ministration is not within the exercise of jurisdiction

contemplated by $1001, Tithe TS, U.S. 1, se as. te

inake the writing set out material within the purview

of the statute.

4. The Sinall Business Administration is not an

agency of the United States within the definition of

©1001, Tithe 18, UL S.C.) and its funetions and opera-

lions are not protected thereby.

». The making and use of the writing set forth in

the manner and form alleged does not constitute an

Offense acainst, nor violation of © 1001, Tithe 1s,

: &. €.

n the alternative, defendants move to strike the tollow-

ing language from Count Two:

sé

that the said ‘corporations’ were not small

MMSiINeSss Concerns, a established by law, rules and

revnlations of the Small Business Adiministration. as

the defendants then and there well knew;

on the ground that the same is surplusage. inflammatory

and prejudicial to defendants becanse:

1. The alleged false writing contains no statement

or representation that the corporations were ‘small

meen, Yates

business concerns, as contemplated by law, miles an

regulations of the Small Business Administrations”

” Having such corporations designated by the Sia.

Business Administration as smal business concerns

knowing they were not such ‘tas established by law”,

ete., is not proscribed by § 1001, Title Ts, Us. 0,

and is not an offense thereunder; and

2. Permitting such language to remain in the indict

ment would. be inflammatory and tend to create ins

and prejudice against defendants ino Hie eyes of a

jury upon the trial thereof.

Further, in the alternative, defendants move for ay

order directing that the United States serve and file abe

of particulars containing the followi.e information:

1. As to the Balance Sheet referred to in Connt One:

(a) The respects in which the statement of aes

were not true.

(b) The respeets in whieh the statement of diahi:

ties were not true.

(c) The items and figures contained therein wiite:

are charged to be false and fictitious.

» As to the Statement of Income, Profit and Less >

ferred to in Count One, the information requested

Paragraph 1 (a), (b) and (¢) above.

3 As to Count Two of the Indictment :

(a) The nature of and manner in whieh the corre

rations “were in faet affiliated with each other’:

(b) The nature and kind of “financial and organic

tional connections ‘and operations” said Corporation

el]

had “with each other, and

(ec) Wherein such corporations were not Ths

business concerns, as established by Taw, rules 3

regulations of the Small Business Administration.

eas WO cs

Defendants’ motions are new before the Court for deter:

mination under the Loeal Rules of this Conoet.

That the prosecution here is under the general rand

Statute [TS UL S.C. 2 10D} when the aes allewed are

specifically proseribed by Tithe 15, UL S. 61, 7 688) Ga),

which provides lighter sanctions, furnishes mo e@romnds

for dismissal of the indictment. Ehrieh vo United States,

4Cir., 258 BL 2d 481, 485.

The motion to dismiss Count Two of the indietment is

averrnled and denied.

The allegations of Count Two of the indietment which

defendants move to strike as surplusage under Rule 7 cd),

Federal Rules of Criminal! Procedure, are relevant to the

charge contained in that count of the indietment and are

not subject to be strieken as surplusage, Uinited States v.

Klein (D.C) NL Y.), 124 F.Supp. 4708,

The motion to strike is overruled and denied.

The information sought by the motion for a bill of

particulars, or the means of ascertaining same, appears to

he in possession of, or available te the defendants.

The indietment is sufficiently definite to advise the de-

tendants of the specifie acts with which they are acensed,

The motion for a bill of particulars is overruled ane

denied,

This the 26th day of August, 195s.

Bovd Sloan,

United States District Judge.

— 20 —

APPENDIX II.

Opinion in Court of Appeals.

In the .

UNITED STATES COURT OF APPEALS

or the Fifth Cireuit.

No. . a4).

Leonare ob. Sachs.

Appel

VOTSTES

United States of Amertea,

Aye jet

Aypeal fron the United States Distriet Comm te

Northern Distriet of (ieorgia.

(August 24, 1961)

Berore Pteheson, Rives and Wisdom, Cirenit prides

one Wiliam Sachs, whe is net a party te this apy Me

indieteg im two counts for violation of TS U.S. &..

hOUL. for making and presenting to the United States 4.

Fores and the Small Business Administration certian bu

* 7

Loe

and traudnient documents and statements, Uremig tad

evidence Was disuflicient fo suppor the conviction, Se

points fo the fact that. while the statements and dloeumie’s

were furnished with his authority and some of thet We

his own hand, there is 1e direet evidenee that be |

their contents were fraudulent, and. therefore, the exiden

is ineuflierent to support the convietion.

an

The United States, pointing to the tact thane detenad

witappellant controlled the four corporations imvoived,

tie Fulton Trousce Company, Bederal ‘Sportswear. bine.

Wall Manufacturing Conipanuy, and tlenry Garment €onm

pany, thet the books ot ali of them were kept oat 225 Cen

Trai Avenue, Atlanta, Georgia, where the headquarters of

Filton Trouser Company were located: and that, by fetter

dated: Mareh 27, 154, signed bw Sachs as President, the

aluner sheet, im question, of Fulton as ot February 2s,

Chd and a statement of income, prot and loss for the pe

nod Jannary t, to February 28. 1954. were transmitted to

tie Tnited States Atr Force in couneetion with the pre

urement of a certain coutraet bs Fubtou Ver tive ganz

hachire ot tlving suits for the Ade Porees insists that thie

crretustanee ss dn evidence are suffietent te stppert the

Hudine of the jury, that Sachs was responsthie for tire

ssManece and use of the statements. and that he knew the

talsit\ of their contents.

We agree with the United States that the taet that the

Meures Were tot aetually prepared bx the defendant but

bs Mr. Gertz, the company accountant. is met suflieiens

To support Siebs* claim that the proof fared to eomvie!

nto! the offenses charged. One Orie Dixon. emploved

ov Suehs as general clerk or seeretarsy of Fudan in Pods

avd with hime trom that time thronen Td. was a bese

oi charge of the offiee. ler duties having inereased. Sie

Wis in charge of the staff emoplovees in the office and. had

charge of the books of the four corporations. all of whieh

Were controled by the appellant. Tt owas Omite Dixon wire

Prenaree! the Mareh 27, L054 letter sree be Leonard

Saehs, atone with the balanee sheet and statement of am

rome cattached thereto. She prepared them: amder the

Mirection of Leonard Saens., who gave her a peneried come

Irom whieh toe prepare the statements. The peneiiled copies

Othe balanee sheet and statement of imeome. profit ana

loss were made up by Leonard Sachs trom information

obtained over the telephone from: Mar. Trwin Geert ot

Remillard, Special Agent with the Tuternal Beseui s>

ice, testified: that he had occasion to contaet the aoe.

Sachs in connection with the affairs of Futon: thats.

a statement under oath from: Sachs and also ou

him about the affairs of Federal, Weil, and of

that Sachs stated to him that he controled aud far

wll the policies of the four corporations.

The appellant also stated to Reniullard that?

performed by the accountant firm: of Gutt: [ynisuty cated Ge?

Wis auditing the beoks: and that this firms wonid.

Atlanta and andit the books: and further statedd: (oh ws

that is about all they would de”. |

With the testimony standing thus and the falsity eo -

statements quite plain, we think it clear that the +

Was aiple to support the jury's finding, that Sach-

responsible for the issuance of tne statements. that ts

knew their contents and knew that the statenient-

fale.

In addition to dis attack upon the insufficiencs

evidence, the appellant assigns error to the overriiing ©

appellant's motion te dismiss Count two of the imebetrs

and. ia the alternative, to strike, surplusage tied

and. turther in the alternative, for a Tall of parties

As to these Claims of error, we think it polain thee?

dictmments were not subject to the attacks uper tiie

that there is no sound basis for the claim that mower

to deny the motien for a bul of particulars. 7

within the discretion of the court to grant or ddetve i

In addition to these assignments, appellant are

strovgly that it was error for the court to refuse Toast!

plaintiff’. requested instructions Nos. 4 and 9, which

eflect instructed the jury as to: the effeet which foe

. ,

ie Bare | és".

given to the acts of these in charge of Georgia cory

The charges Were properly refused. the evidenee was all

before the Jury. and the judge’s general charge correctly

sibmatted To the jury the assues tor their determination.

The refusal of the charges of whieh appellatt: comyplatis

Was beterper On the contrary. ait would have been error

tose them beenuse. distead of leaving te the jury the de

rhohation of the faets uuder @emerai austructions. i

would have had the etfeet of coutrofiing and directing the

rh . consideration of the evidernedy The Hatters in VANAN SS

tioty based tee elas wath corporate aets, the responsibility

weder the evidence of the defendant therefor. and umeder

ane evden, which Weis suiftietent Te Conviet, thas eS. Tat

Hie qury’s detertnimation.

Neoreversible error appearing. the idenient is

Adivnrees!,

A true COPY

Test:

Rdward Wo Wadsworth. €lerk,

US. Court of Agpeals.

Fifth Cireuit,

By Gilbert Foo Gauinebean,

iSeal) OS re

New Orleans, Louisiana

et, DY 1961

Judgment.

Extract from the Minutes of Nuenst 24. 1907.

Leonard oJ. Sachs.

No. S575 versus

United States of Amerien.

This canse caine on te be heard on the transeript of the

meord from the United States District Court for the North.

ern District of Georgia, and was argued by counsel:

scien I ce

On Consideration Whereot, it is now here erdercd .

adjudged by this Court that the judgment of the sare Ty.

trict Court im this eause be. and the same ie her

affirmed.

—_—

Tn the United States Court of Appeni-

For the Fifth Cireuit.

No. 18570.

Leonard J. Sachs.

Appellant,

Vs.

United States of America,

Appellee.

Appeal from the United States Distriet) Cor

for the Northern Distriet of Georgia,

ae

(September 22, 1961.)

On Petition for Rehearing.

Jofore Huteheson. Rives and Wisdom, Cireuit: Judges.

Per Curiam:

It is Ordered that the petition for rehearing 1

above entitled and numbered eause. be, and tt ts here’?

Dented.

APPENDIX III.

Analysis of Balance Sheet Items of Fulton Trouser Company

as of February 28, 1954.

Pyaadiarness } Det ‘

Sheet Shooet

~-2S-94 Ther, ~ }) ferences

ASSTTS

drat hs $ 16 N54 Rt 2442) the x fi Sten

Receivable oo. ai TEN a A ret $683.72

: : . as W]e “NS od .*

Recevabte Employer = HW Sepsscch a

é Fixtures -Auto & Trucks- Net... He SPL ie eee

a! Ofer Ee a 2 ES ot)

vanee Tnexpired |. Payor hexee

t ee \ 4h

sar? Tmprovements-Unamortized. Ra ee Po SOs 4

Teta! Assets PIVG DEG LNG PAT se brine os

ABILITIES, CAPITAL & SURPLUS

BIS CPRVAIEY 68 cu ¥ TUATSLIN TB SR ter ss Se NO aaah

Tlet EXpemses rat ees ; Piatyel eae ee Beis ee ae Py ak ee

7 &@ Company —~ Mortguge Se Tah ers

Ginsbers Machine Co. Eis Py Pes)

PAGROIO. oho yw. ae 2h ASI TS AA

ints Payable Henry Garment Co arenes, os T7049

Mait Pavable- Federal Sportswear. Ine, 16.85.35 Tey sansa

Security Taxes... . Ph ik ee ‘ Wiis

“poMnent Insurance oy (304

hnelding Taxes eels Teed Cn Sa

hota? Liabilitie. HQ A As S236, 5510 mate Uast a

‘ta! and Surolus:

heh Stocks Sl Shares Ne Par Common, 3 35.600 00 € 250000)

eT a] Sto K Preferred tr eecte teed Seb chante tras

"Sed Survhis— Defiedt (14.2063 (bf 2G 3

Sts for Period. .. 2b S125 Re we pee $e at

Peta Capital & Surplus. . 8 OL70595 FOS AT se Ses rLee

‘te

Me Eavdtities. Capital & Surptas ENG 18 55 F265 Lad Ne

4) -

Analysis of Income & Expense Items of Fulton Trouser Compiz

as of February 28, 1954.

_

Ahaihscs

Stutemeit ae

of Tmeome Pt

Paé&l. yor q

Sales . F2L3BK.189 52 gy

Cost of Goods So!d:

Inventory 11-54 . 2. 8 84.63-..92 £ aGens

Purchases Net : 40 se 5t 4p vines Ts |

Pavrell fT eae Cor |

Payrell Tunxes G ys Ga “4

Totals : 93 $205,414 42 ee Se |

Less Inventory 2-28-54 QP KONSS aie

Cost of Goods Sald S15EST0SS FPS ats ‘

Gross Profit FOHAGTS NS $ 4!

General & Administrative Experses FH Noo es c Tp

Rent. .... oo ee We COND Ue

Machine Repairs 537.64 freee

Interest .. +5 Obs ;

Taxes—Gerneril HT es

Charity be anes

Depreciation Ke OC PL >

Advertising 3 \% Nn a, : ; Ho} :

‘TrOCKINE. <::- 2). {s4 12 ‘

Ma:hine Parts & Supnlies Swipe eA x Tt S

Fuctory Supplies & Expenses, 2905.14 n

Light, Heat & Power... Loren :

Legal & Audit ..-. Sdn : 2

Travel & Entertaining BNTT 2

Telepuone — i 1,2:2.44 i

Office Supplies. 1.175.601 yrs :

Genera! Expenses ..... bene reece O91 41 tel §

Factors Charges Sqft =

bnsvrance .......- +e! 1.61045 ¥ 4

es CRG. eh -s here ee ae a a een Pha.03

Auto Expenses . 21460) ‘

Machine Rent ....... OEE | ;

Dues & Subscriptions .. 274.69

Amortization of Leasehetd.. RVTa dy

Total Expenses .. 208 44.068... Sse

Profit or Loss 3S QNS1G-25 He SY ie ’

Miscellaneous Income: *

Rent Charged to Hienry aren % rere ce > a

Charess to Wii Manufiectarin (rn. and Te

Federal Sportswear for Factors “¢ harges ee

Charees te Will Manufieturing Co. and

Federal Sportswear for Cutting and ter

Office Expetises eT

Total Misceilaneous Income be ae cae

Pront for Per1od Ge P.210.95, Ca an