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United States v. Goldman

March 10, 1941

UNITED STATES
v.
GOLDMAN ET AL.



Appeal from a judgment of the District Court for the Southern District of New York.

Author: Chase

Before SWAN, CHASE, and CLARK, Circuit Judges.

CHASE, Circuit Judge.

The appellants were indicted in the Southern District of New York, for conspiring, contrary to the provisions of 18 U.S.C.A. § 88, to commit an offense against the United States by receiving or attempting to obtain money for acting or forbearing to act in a bankruptcy proceeding in violation of 11 U.S.C.A. § 52, sub. b. After trial by jury in that court, they were all convicted and sentenced. This appeal followed.

The appellants seek reversal of the judgment on the ground that error was committed in denying their motion to dismiss and later to set aside the verdict for insufficiency of the evidence; and also rely upon errors in the denial of a motion to suppress evidence; in the introduction of evidence; and the denial of a motion to inspect memoranda made by witnesses for the government.

The evidence was clearly sufficient to make a prima facie case as follows:

One Hymowitz, who was the proprietor of a small drygoods store on the Bowery in New York City, was convicted of some offense relating to the use or possession of relief tickets issued by the City of New York and was imprisoned. His mother and sister engaged Robert Hoffman, an attorney and distant relative, to undertake to settle his business affairs with his creditors. They both had claims against Hymowitz for loans made him but were willing to waive them to further an effort to settle in a way sufficiently satisfactory to the merchandise creditors to enable Hymowitz to go back into business when he had served his sentence.

Hoffman saw Hymowitz in prison and obtained his signature to a general assignment for the benefit of creditors, dated March 22, 1937, under which one Kolman, a lawyer associated with Hoffman, was the assignee. Hoffman then was retained by the assignee and the assignment proceedings were begun in the state court. A letter was sent to all creditors explaining the financial situation of Hymowitz. It was estimated, as therein stated, from information obtained from him and from an appraisal that the cost of his stock in trade was from $2,200 to $2,500; that there were Emergency Relief Bureau Vouchers on which about $250 could be realized and that "the City is also indebted to Paul Hymowitz in the further sum of approximately $200 in connection with other relief vouchers." The liabilities were given as about $2,500 and the co-operation of creditors was asked in aid of a stated "purpose to see that a thorough and proper administration is had and that creditors shall realize as close to one hundred per cent of their claims as possible."

The assignee engaged an auctioneer and made arrangements to hold a public sale of the property at the store of the assignor on April 5, 1937, after due notice given.

That sale was never held, however, because the appellants acted in concert to prevent it in the following way: Martin M. Goldman, who was a partner in the law firm of Goldman, Malter and Goldman in New York City and in which his brother Theodore Goldman another appellant was a partner, arranged with Hoffman in behalf of a creditor who was a client of his firm for a meeting of creditors on the afternoon of March 25, 1937 at the offices of the Dry Goods & Furnishings Association of which one Kandell, a defendant whose motion to dismiss was granted, was in charge.

At about 1 o'clock on that afternoon and before the meeting of creditors was to be held Theodore Goldman and Kandell called at the office of Hoffman where they met him and one Wishbow, the auctioneer who was to conduct the sale for the assignee, and proposed that blank forms they had brought along be executed to make Kandell a co-assignee and retain Goldman as co-attorney for the assignees. Hoffman was unwilling to consent though pressed to do so to avoid the possibility of the assignment proceedings being made abortive by the filing of an involuntary petition in bankruptcy and to make everything go smoother as creditors might feel that Hoffman and the assignee were too closely connected with the debtor to represent them adequately. Hoffman explained that it was a small matter which needed no additional attorney or assignee and persisted in his refusal.

The meeting of the creditors was held later that afternoon with some present; some represented by Kandell; and some by Martin M. Goldman. Hoffman explained the situation and asked the creditors to cooperate. Goldman advocated a private bulk sale of the goods and apparently all but Hoffman and Wishbow agreed. During the meeting Hoffman and Wishbow were asked to withdraw while further discussion was had and while they were in another room Martin M. Goldman joined them and told them that he would like to make some money out of it; that he could arrange to have a buyer, either he or Kandell would obtain, purchase the goods in bulk at private sale who would pay enough to allow for a 40% settlement with creditors and for some expenses and in addition some $400 to be kept secret and divided among Kandell, Goldman and Hoffman. Hoffman did not agree and when he suggested to Goldman that the creditors at the meeting would not accept a settlement at such a percentage Goldman said they would each get $10 to "shut their mouths."

This proposal to Hoffman, not being accepted, Martin M. Goldman, Theodore Goldman and Schulman decided that an involuntary petition in bankruptcy should be filed and the proposed sale by the assignee stayed. Theodore Goldman then prepared an involuntary petition using a blank form and making only general allegations of acts of bankruptcy which left the petition demurrable and subject to dismissal, if no motion to amend was made, merely upon motion without notice to creditors other than those petitioning. Schulman was made the attorney of record for the petitioning creditors.

A stay of the assignee's sale was obtained ex parte and served upon Hoffman on the morning of April 5th, the day the sale was to be held. He moved to vacate the stay but his motion was denied after a hearing the same morning before the district judge who issued the stay order, Schulman having appeared with creditors in opposition. After the hearing Hoffman went to the office of a referee in bankruptcy and told the referee what he thought the defendants were trying to do. The referee called in a representative of the Federal Bureau of Investigation to whom Hoffman explained the situation and thereafter Hoffman acted under the instructions of the Bureau. He pretended to be willing to "do business" with Schulman and at a meeting on April 7, 1937 in Schulman's office at which Martin M. Goldman was present the matter was discussed. Meanwhile the Federal Bureau of Investigation had been informed of the time and place of that meeting and had been permitted by the custodian of the building to enter Schulman's office without his knowledge and to install a dictaphone with an outlet in an adjoining vacant room. representatives of the Bureau were in that adjoining room to record the conversation at the meeting of Schulman, Martin M. Goldman and Hoffman, but the dictaphone didn't work ...


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