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UNITED STATES v. KLEIN

April 18, 1955

UNITED STATES of America
v.
Hyman Harvey KLEIN, Isidor J. Klein, Albert McLennan, George Norgan, Ellis Rosenberg, Maurice Haas, Irving A. Koerner, Morris O. Alprin and Albert Roer, Defendants



The opinion of the court was delivered by: SUGARMAN

On May 13, 1954 the Grand Jury indicted nine defendants. The First Count charges all nine with having attempted to evade the 1944 income tax of one of the defendants; the Second Count charges all nine with having attempted to evade the 1945 income tax of said one defendant; the Third Count charges all nine with having attempted to evade the 1946 income tax of said one defendant; the Fourth Count charges all nine with having conspired to evade the 1944, 1945 and 1946 income tax of four of the defendants; and the Fifth Count charges seven of the defendants with conspiring to defraud the United States in the exercise of its governmental function of collecting and assessing income taxes by concealing the 1945, 1946 and 1947 net income of three of the defendants named in the first four counts, one of whom is not named in the Fifth Count as a defendant.

On September 17, 1954 another indictment was filed against the said nine defendants which substantially repeated the fourth and fifth counts of the indictment filed on May 13, 1954.

 One of the nine defendants having died and three of them being without the United States, the remaining five came to trial on April 4, 1955.

 At the opening of the trial the United States moved to sever the Fourth and Fifth Counts of the indictment filed May 13, 1954 and to consolidate that indictment with the subsequent indictment filed September 17, 1954. The defendants having consented thereto, there resulted a consolidated indictment containing as the first three counts thereof the first three counts of the indictment of May 13, 1954 and as the Fourth and Fifth Counts thereof the two counts of the indictment of September 17, 1954, upon which consolidated indictment the trial proceeded.

 Under the Fourth Count of the consolidated indictment, it was stated

 '3. It was further a part of said conspiracy that the defendants would file with and cause to be approved by the Office of Price Administration, Washington, D.C. and application To Office of Price Administration for Maximum Prices on Imported Case Goods, in the name of

 R. C. Williams & Co., Inc.

 10th Avenue

 25th to 26th Streets

 New York, New York

 in which it was alleged that the Cost Per Case Contract Price of Harwood's a Blended Canadian Whiskey was $ 19.05 which price was in excess, of the legal maximum price for said whiskey.'

 At a pre-trial conference the United States Attorney agreed that in his opening to the jury he would make reference to the issuance by the OPA of the said order to R. C. Williams & Co., Inc., only by stating that it had been issued in that amount. The trial proceeded to a point where the Government sought to elicit from a witness on the stand testimony leading to the excessiveness of the price allowed in said OPA order above the legal maximum price for said whiskey. At that point the defendants interposed an objection to any testimony in the trial dealing with the propriety of the price fixed in the OPA order and how it was obtained.

 Prior to the trial herein and on October 1, 1954, one of my brethren decided a series of motions addressed to the first indictment by all give defendants now on trial. Among those motions was one to strike out the reference above quoted from the Fourth Count of the indictment. That motion was denied, 124 F.Supp. 476, at page 479, the decision disposing of same stating,

 'Defendants' motions under Rule 7(d) of the Federal Rules of Criminal Procedure (18 U.S.C.A.), to strike as prejudicial surplusage certain allegations and overt acts under the Fourth Count of the indictment, must be denied. A motion made pursuant to this rule will be granted only where it is clear that the allegation complained of is not relevant to the charge contained in the indictment and is inflammatory and prejudicial. See United States v. New York Great Atlantic & Pacific Tea Company, 5 Cir., 1943, 137 F.2d 459. In the instant case the allegations concerning Office of Price Administration controversies in which the defendants were previously involved are relevant because the Government charges that the defendants were engaged in manipulating OPA regulations for the purpose of perpetrating the criminal tax violations charged in the indictment.'

 At the outset it must be determined whether this pronouncement by my colleague is the law of the case binding upon me in determining the defendants' objection and motion to exclude any testimony during the trial with respect to the alleged illegality of the defendants, or any of them, having obtained an OPA price in excess of the legal maximum.

 I believe that I am free to determine this application untrammeled by my colleague's aforesaid ruling and he agrees. On this score, it was said in this district *fn1"

 'The doctrine of the law of the case is based on orderly procedure and convenience. It has high sanction and may fairly be described as the rule which requires a judge in a pending litigation to follow the interlocutory decision of a co-ordinate judge in that litigation on the same, or substantially the same, facts. (Cases cited.)

 'It is, of course, an old saying that circumstances alter cases. For that well-known reason the doctrine of the law of the case has to be confined to the application of a legal principle to the same, or substantially the same, state of facts. If the facts are substantially changed by an appropriate judicial procedure, as, for example, by a new trial, or, in the present instance, by the evidence adduced before me on the present motion, the doctrine of the law of the case is not to be enforced (cases cited) for, if it were enforced on such a substantially new pattern of facts, absurd results might often follow.'

 The determination on the motion to strike the third paragraph of the Fourth Count of the indictment was addressed only to that relief and was predicated on affidavits alone. That ruling, in that context, does not restrict a later ruling by the trial judge upon the admissibility of evidence during a trial before a jury.

 The problem here posed is not easily solved. It involves the discriminate weighing of the relevancy of the collateral charge against the prejudice if any that the admission of the disputed testimony may visit upon the defendants. Many decisions have been written which have, in the main, obscured rather than clarified the applicable test. The resultant seeming conflict is in part attributable to the dissimilarity of precise facts between the cases although it has been said that the judicial personality also plays a leading role in the end result. *fn2"

 After confessing that 'it is hopeless to attempt to reconcile the precedents under the various heads' Dean Wigmore observes

 '* * * far too much depends on the tendency of the Court in dealing with a flexible principle. One Court will be certain to exclude everything that is not too clearly probative for even technical quibblers to oppose, and sometimes will exclude even that. Another Court will accept whatever has real probative value. Something, however, may perhaps be gained by realizing as to the former, that it is not the law, nor precedent, nor principle, nor policy, that will account for such rulings, but merely a rooted inclination to take the stricter view and a preference to err in favor of criminals and against innocent victims.'

 Dean Wigmore's assessment of responsibility, while it has not gone unchallenged, *fn3" has had the salutary effect of cautioning judges to approach the problem without maudlin sympathy for defendants. It is in that frame that the instant objection and motion are appraised.

 From the abundance of cases treating with the subject a classic statement of the test to be applied is that of Judge Learned Hand: *fn4"

 'In short, that if evidence is relevant to prove one crime, it does not become inadmissible because it also proves another. Such is indeed the law; yet, here as always, the competence of evidence in the end depends whether it is likely, all things considered, to advance the search for truth; and that does not inevitably follow from the fact that it is rationally relevant. As has been said over and over again, the question is always whether what it will contribute rationally to a solution is more than matched by its possibilities of confusion and surprise, by the length of time and the expense it will involve, and by the change that it will divert the jury from the facts which should control their verdict.'

 The first axiom of admissibility is that none but facts having rational probative value are admissible. *fn5" Thus a fact to be admissible must be agreeable to reason and intelligence and be sensible and must serve to prove the charge levelled against the defendants. It is difficult to see how the fact that if these defendants, or one or some of them, fraudulently procured an order from the OPA, allowing them to charge in excess of the ceiling price for the whiskey here involved, that fact can in any wise serve to prove that these defendants collaborated in the filing of a false income tax return by one of them and conspired to evade the income taxes of a number of them.

 To permit the Government to embark upon the proposed 'trial within a trial' would work irreparable harm to the defendants, even if that testimony were relevant to the charge upon which they now stand trial. It is bad enough that they stand before the bar of justice charged with being tax evaders and conspirators. To permit them to be painted before the jury as war profiteers and ceiling price violators to boot, when the latter charge is, if at all, only remotely connected with the charge upon which they now stand trial, would result only in inflaming the jury against them. Furthermore, the suggested OPA violation occurred over a decade ago and the defendants now find themselves shorn of the proof to fairly resist this subordinate charge.

 It is beyond cavil that the alleged OPA misdeeds have not the remotest connection with the First, Second, Third and Fifth Counts of the Indictment and are not even mentioned therein. As to the Fourth Count of the indictment, wherein mention is made thereof, it appears clear that whatever this proof may contribute rationally to a solution of the crime charged is by far outweighed by the confusion, length of time and expense that its injection will involve, and the clear chance that it will confuse, divert and, in all ...


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