Summary
In United States v. Austin-Bagley Corp., 31 F.2d 229, 233-34 (2d Cir.), cert. denied, 279 U.S. 863, 49 S.Ct. 479, 73 L.Ed. 1002 (1929) the Court of Appeals for the Second Circuit held that communicative or assertive testimony with respect to corporate records could be compelled, even though it resulted in self-incrimination.
Summary of this case from In re Grand Jury MatterOpinion
No. 167.
March 11, 1929.
Appeal from the District Court of the United States for the Western District of New York.
The Austin-Bagley Corporation and others were convicted of conspiracy to violate the National Prohibition Act (27 USCA), and they appeal. Affirmed.
The indictment alleged that the defendants had conspired to violate the act, "in that they would * * * sell * * * alcohol for beverage purposes" which was "fit for use for beverage purposes and specially denatured alcohol, * * * contrary to and otherwise than as authorized by the National Prohibition Act. * * * For a better understanding of the character and scope of said * * * conspiracy * * * reference is hereby made to the following specifications of things which * * * some of the defendants were to do * * * in * * * carrying out the said * * * conspiracy." Fingerhood, one of the defendants, was to become associated as general sales manager with the Waterloo Company, a distillery authorized to make and denature alcohol. He was to take general supervision of it under permits to sell completely denatured alcohol, but to sell and ship specially denatured alcohol under false billings to persons who had no permits to buy. He was to report this to the authorities as completely denatured alcohol, and to ship it as such, but to arrange with the Standard Solvents Company, another corporation, to make false records that it had received corresponding amounts of completely denatured alcohol, which they were to pretend to sell. There was, however, no express allegation that the purchasers were to use the specially denatured alcohol for beverage purposes. The other defendants were to play prearranged parts in this plan not necessary to state in detail.
The evidence was such as allowed the jury to find the following facts: W.H. Long Co., a corporation at Portchester, N.Y., had a permit to denature 50,000 gallons of alcohol a month. Of its 1,000 shares of stock, 559 were owned by Boris Fingerhood, the defendant Fingerhood's brother, and 101 by Bauer, another defendant, its president, and Fingerhood "exercised general supervision" over its affairs because of his brother's interest. In 1924 the Treasury had ruled that, if a distillery owned a denaturing plant, the latter might withdraw unlimited amounts of alcohol from the former, and Fingerhood said that "there was something in there that was for him."
The Waterloo Distilling Company operated a distillery in Seneca county, some 50 miles west of Syracuse, N.Y., and was owned by a number of Italians. In March, 1925, being in need of funds, Fingerhood lent them $10,000, for some undisclosed reason, and in the same month sold them all the stock of the Long Company, so that they should have an appurtenant denaturing plant in New York, though they already had one at Waterloo. The necessary funds, $50,000, were provided by Fingerhood's wife, who took a note of the company with the shares as security. The Long Company apparently played no part in the subsequent conspiracy, and was important only as showing how the defendants became connected with the enterprise at Waterloo. In the following May, Fingerhood organized the Austin-Bagley Company, with 750 shares, of which he originally held 250, and his attorney, one Harper, who had advised him in the transaction, 150. Before the following March, Fingerhood had acquired 650 of the shares, and Labate, one of the owners of the Waterloo Company, held the remaining 100; whether there were subsequent changes in ownership does not appear.
Shortly after its organization the Waterloo shareholders sold all their shares to the Austin-Bagley Company, except for some trivial holdings to qualify directors, and received in exchange $145,000 of its bonds. The Waterloo Company was then in straits, and its only substantial asset was its permit to make alcohol and run a denaturing plant. The investment of the shareholders had been the same as the face of the bonds.
The events relied on by the prosecution to show the execution of the conspiracy did not begin for over a year, or until October, 1926. By that time Harper, Fingerhood's lawyer, had been made prohibition administrator for the district comprising the Waterloo distillery, to which he assigned one Hoyt Chamberlain, a prohibition agent, whom Harper's predecessor, Roberts, had just suspended in the preceding August. On October 10th Harper transferred one Takel, who had for long been an official gauger at the Waterloo denaturing plant, to the distillery, and put another official, Jackson, in his place, who had been a minor agent of the Collector at the distillery. On October 4, 1926, Bauer became president of the Waterloo Company; Labate was its other director and its secretary and treasurer.
Bauer had already procured quarters in Syracuse for a corporation organized in the preceding August, called the Standard Solvents Chemical Corporation, of which a defendant Joseph Beck was put in charge, who with another defendant, Ralph Beck, had been a laborer with the Long Company. Ralph Beck organized another corporation in June, 1926, which did business also in Syracuse, ostensibly buying from the Standard Company. The defendant Lagier, who had been a truckman in New York, came to take charge of the trucking for the Waterloo Company and procured quarters for his drivers. He had charge of three Mack trucks which the Long Company had formerly used and these were housed in the Waterloo garage.
For the three months of October, November, and December, 1926, the official reports of the Waterloo Company showed the shipment of 3,894 drums of completely denatured alcohol to the Standard Company, 649 in October, 1,654 in November, and 1,591 in December. The Standard Company recorded on its books up to November 23d the receipt of 2,061 drums from the Waterloo Company (as against 2,151 reported by that company), and that of these it had in turn sold 1,219 to R. Beck Co. There were then found at its warehouse 740 drums, which did in fact contain completely denatured alcohol. Ralph Beck reported that he had sold the 1,219 drums to customers, of whom after some hesitation he produced a list. These were all separately called to the stand, and each denied that he had bought any alcohol of Beck.
Between October 11 and October 15, 300 drums of what purported to be completely denatured alcohol were shipped as machinery, scrap, or rags, from Seneca Falls, through the connivance of the local agent, whom the shipper corrupted. This agent, one Felter, swore that Fingerhood was the person who shipped some of these, but the identification was weak and seriously impaired. Felter also swore that Bauer had been present on one occasion. Some of these cars were seized and found to contain specially denatured alcohol. Similar falsely billed alcohol was also shipped from Cayuga and Geneva, and a large number of drums from Syracuse. In some cases the trucks delivering these were identified by their numbers as being the Mack trucks of the Waterloo Company; several of the cars were seized and found to contain specially denatured alcohol. The shipper's signature on a number of the bills of lading was identified as Lagier's, and in at least one case as Bauer's. The records of the Waterloo Company showed corresponding shipments of completely denatured alcohol upon the dates when the drums were shipped from these various stations. The drums found were of a make of which the Waterloo Company bought about 8,000 during 1926. Apparently, though the evidence as to this is not wholly clear, the maker sold no other drums to alcohol companies in New York.
Upon the trial the district attorney repeatedly called for the production of the minutes of the corporations indicted along with the defendants, of which some of them were officers. As the defendants' counsel demanded identification of these books, the government called to the stand the defendant Fingerhood, and over his objection proved that he was secretary and treasurer of the Austin-Bagley Company, and that the documents were authentic. Joseph Beck it also called, who said that he did not have the books of the Standard Company; on cross-examination by his own counsel he accounted for their nonproduction. Lagier it called, who said that he was not an officer of Bijou Forwarders, Inc., one of the defendants, whose books were desired.
The defendants were not arraigned at the beginning of the trial, or until the prosecution had rested its case, when the error was for the first time discovered by a motion to dismiss the case for that reason. As the defendants then stood mute, a plea of not guilty was entered by the court. All had demurred to the indictment before the trial opened, and the demurrer had been overruled. 24 F.2d 527.
The defendants Jackson and Chamberlain, the agents in charge at Waterloo, were indicted along with the rest. The theory of the prosecution was that the specially denatured alcohol could not have been made, nor could it have been shipped as completely denatured, except with their complicity, and that they were therefore necessarily parties to the conspiracy. The jury, however, acquitted them, and the defendants assert that the verdict for this reason was inconsistent and irregular.
Certain other objections were raised upon this appeal which are dealt with in the opinion.
Louis Marshall, of New York City, for appellant Fingerhood.
Lewis Landes, of New York City, for other appellants.
Richard H. Templeton, U.S. Atty., of Buffalo, N.Y. (Harold E. Orr, Asst. U.S. Atty., of Buffalo, N.Y., of counsel), for the United States.
Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.
The indictment is drawn with such prolixity and confusion that it is hard to understand the pleader's meaning. It alleges that the accused conspired to violate the National Prohibition Act by making and selling alcohol fit for beverage purposes and specially denatured alcohol. That would scarcely be enough, but for the specifications, which allege that the plan was to sell specifically denatured alcohol as completely denatured, to persons not authorized to receive it, and to report the sales falsely. While it nowhere expressly appears that these sales were for beverage purposes, as forbidden by section 4 of title 2 (27 USCA § 13), though the facts would amply have justified that conclusion, a crime was nevertheless alleged, because section 15 of title 3 (27 USCA § 85) punishes by fine and imprisonment a violation of any regulations promulgated by authority of section 13 (27 USCA § 83). Regulation 61 as it stood in 1926 was violated by the acts specified; for example, articles 101 and 102 required the details of all shipments of specially denatured alcohol to be reported, and article 110 required all persons using it to have a permit. The violation of such regulations is a crime, if the statute imposes penalties in such case, though Congress does not of course itself enact them. U.S. v. Grimaud, 220 U.S. 506, 31 S. Ct. 480, 55 L. Ed. 563; U.S. v. Smull, 236 U.S. 405, 409, 35 S. Ct. 349, 59 L. Ed. 641; Avent v. U.S., 266 U.S. 127, 131, 45 S. Ct. 34, 69 L. Ed. 202. Again Congress may, so far as appropriate to the prohibition of the use of alcohol for beverage purposes, regulate the sale of industrial alcohol. Selzman v. U.S., 268 U.S. 466, 45 S. Ct. 574, 69 L. Ed. 1054. Hence the indictment laid a crime, regardless of whether there can be spelled from it a charge of selling specially denatured alcohol for beverage purposes, which perhaps we might not be able to do even under § 32 of Title 2 (27 USCA § 49). The overt acts need not themselves be crimes, when broken from their context. Felder v. U.S., 9 F.2d 872, 874 (C.C.A. 2).
The proofs were adequate, and indeed overwhelming, to show a far-spread conspiracy systematically to evade the National Prohibition Act; they constituted exactly the situation which the conspiracy statute is designed to reach, and which amply justified a recourse to it. It is quite true that, except for Felter's testimony, no evidence directly connected Fingerhood with the diversion of any alcohol, and it is indeed unlikely that he took that part in the enterprise. However, such proof was unnecessary, for his position rendered it probable that he would have left such details to subordinates, and the case against him had far too great strength to require the testimony of a convicted freight agent. As things stood in the autumn of 1926, he and Labate were the sole owners of the Austin-Bagley Company shares, and therefore indirectly owned substantially all the shares in the Waterloo Company. Whether or not Fingerhood was sales manager, the jury might have found him to be the directing head of the Waterloo Company, however he might avoid the firing line. To suppose that such wholsesale and elaborately concealed deliveries of easily "cleaned" alcohol would be contrived without his active connivance would have seemed to us preposterous, had we sat upon the panel. The subordinates could have had no incentive of their own to initiate or carry on the traffic; the profits could not go to them except as they might share in the collections, which the company alone could make. The whole scheme was devised with extraordinary cunning and audacity, even to the amazing extent of securing the installation of Fingerhood's lawyer, Harper, as prohibition administrator. How an intelligent jury could have acquitted any of the defendants we cannot conceive.
Unfortunately they did just that in the case of Chamberlain and Jackson, and this inconsistency is one ground of the appeal. If the verdict had left only one defendant who could be guilty, undoubtedly it could not stand. Feder v. U.S., 257 F. 694, 5 A.L.R. 370 (C.C.A. 2). There must be other possible conspirators, not acquitted, for a conspiracy is an agreement. Browne v. U.S., 145 F. 1, 13 (C.C.A. 2). The verdict must not itself deny the existence of the essential facts. But it is not a variance to fail to convict all those indicted, though strictly the agreement laid is then not the agreement proved. Breese v. U.S., 203 F. 824, 831 (C.C.A. 4). Even so, the appellants argue that a scrutiny of the evidence discloses that in the nature of things they could not have been engaged in the venture, unless Jackson and Chamberlain were also in it as their privies.
Upon that assumption there undoubtedly results a rational inconsistency between the verdicts; the conviction finds that the appellants have done what they could not have done alone; the acquittal, that their inevitable accomplices did not share in it with them. If we were limited to a rational reconciliation, we might perhaps have to say that neither finding could stand, because, as we could not choose between them, the doubt would infect both. But we are not so limited; the verdict in either case may have been the result of considerations not rational at all. With that possibility, so far as it touches the acquittal, we are not concerned, because the appellants have no vested right in the punishment of their fellows, however guilty. We need only consider whether there is any indication that the jury was improperly moved to convict, and upon that question the acquittal throws no light whatever. There is not the slightest reason to assume that they convicted the appellants as part of a bargain to acquit the agents; this may have been the case, but it does not appear. So we have nothing to do with the rational enmeshing of the two findings; each was made separately, each need only bear its own defects. The problem is precisely similar to that when the verdicts upon two counts are logically inconsistent. Marshallo v. U.S., 298 F. 74 (C.C.A. 2); Steckler v. U.S., 7 F.2d 59 (C.C.A. 2); Seiden v. U.S., 16 F.2d 197 (C.C.A. 2); Carroll v. U.S., 16 F.2d 951 (C.C.A. 2).
The remaining questions affect the conduct of the trial, of which the most important was the calling of the defendants Fingerhood, Joseph Beck, and Lagier to tell their official positions in the corporations defendant, and in Fingerhood's case to identify the corporate books as a condition to their admission. That the production of the books and documents could be compelled, even if they contained entries incriminating the accused, is now well-settled law. Wilson v. U.S., 221 U.S. 361, 31 S. Ct. 538, 55 L. Ed. 771, Ann. Cas. 1912d 558; Wheeler v. U.S., 226 U.S. 478, 33 S. Ct. 158, 57 L. Ed. 309; Grant v. U.S., 227 U.S. 74, 33 S. Ct. 190, 57 L. Ed. 423. Though they be in their very possession, even their property, it makes no difference; it is the semipublic character of the documents themselves which removes their inviolability, the fact that they record corporate transactions. However, the availability of the documents does not necessarily determine that of the testimony by which they may be authenticated. Conceivably it might be possible to force their production, and yet their possessor be protected from proving by his oath that they were what they purport to be. In some cases, as, for example, when they are authenticated by the corporate seal, this might be unnecessary, but usually something of the sort must appear.
While, therefore, we do not disguise the fact that there is here a possible, if tenuous, distinction, we think that the greater includes the less, and that, since the production can be forced, it may be made effective by compelling the producer to declare that the documents are genuine. In Heike v. U.S., 227 U.S. 131, 33 S. Ct. 226, 57 L. Ed. 450, it is true that the testimony of the accused was given upon a hearing in a separate proceeding inquiring into a different crime, and the plea in effect claimed immunity for any other crime, in the proof of which the books produced might become a necessary link. Nevertheless, it would seem that the testimony was privileged, since it did directly incriminate the witness, though in another matter, and that the immunity was necessary to avoid it. Unless that case is to be disposed of on the theory that no such immunity was claimed, it necessarily held that the privilege did not exist. Hence it appears to us that the case determines that testimony auxiliary to the production is as unprivileged as are the documents themselves. By accepting the office of custodian the holder not only exposes himself to producing the documents, but to making their use possible without requiring other proof than his own. All questions of immunity and the supposed misconduct of the district attorney in repeatedly demanding the documents in the jury's presence fall with the privilege. For this at any rate Heike v. U.S. is direct authority; "we see no reason for supposing that the act offered a gratuity to crime" (page 142 [33 S. Ct. 228]).
The judge declined to charge that circumstantial evidence could sustain a conviction only in case it excluded innocence "to a moral certainty," language which perhaps may be necessary in New York. People v. Bennett, 49 N.Y. 139; People v. Fitzgerald, 156 N.Y. 253, 50 N.E. 846; People v. Razezicz, 206 N.Y. 249, 99 N.E. 557. We cannot agree that there are any inexorable formulas on the subject; it is enough that the judge shall in substance tell the jury that they must be satisfied beyond any reasonable chance of mistake. This caution we agree he must give, but to translate such an admonition into a rigid ritual is to forget the actual determinants of a verdict and to mistake shadows for reality.
The corrected charge, after exception as to the testimony of the witness Felter, while certainly not too clear, was enough to avoid any limitations inferable from what had gone before. The failure to arraign the defendants till the close of the prosecution's case might have been serious before Garland v. Washington, 232 U.S. 642, 34 S. Ct. 456, 58 L. Ed. 772; but that decision must be taken as overruling Crain v. U.S., 162 U.S. 625, 16 S. Ct. 952, 40 L. Ed. 1097. Cornett v. U.S., 7 F.2d 531 (C.C.A. 8); Rossi v. U.S., 278 F. 351 (C.C.A. 8). The complaint of the judge's failure to inquire whether the defendants had any reason why sentence should not be imposed is indeed tabula in naufragio. U.S. Code, tit. 28, § 391 (28 USCA § 391).
It is peculiarly unreasonable to complain of the way in which Bauer's signature was procured as a basis for comparison. The prosecution's handwriting expert, Darby, was being cross-examined as to whether Bauer had signed one of the bills of lading falsely billing alcohol, a document as to which he had not testified on his direct. The context is not clear as to why he asked the defendant's counsel to ask Bauer to write his name; but nobody objected, and apparently the counsel did ask Bauer, and Bauer complied. It is curious that at this day such an event should be seriously urged as error.
The case was amply proved, and the trial was free from any but the most formal mistakes. The crime was elaborately devised down to the last detail; the proof has made it patent, and the penalty is light, considering the offense. It would be shocking if justice should miscarry because of any of the reasons put forward.
The failure of the appellee to give folio citations in its brief has much increased our labor; we should have refused to receive it, had we known of the omission in season. The index to the record should have been alphabetical.
Judgment affirmed.