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United States v. Allied Stevedoring Corp.

decided: February 4, 1957.

UNITED STATES OF AMERICA, APPELLEE.
v.
ALLIED STEVEDORING CORP., JOHN WARD, JOHN POTTER AND MICHAEL BOWERS, APPELLANTS.



Author: Hand

Before CLARK, Chief Judge, and HAND, Circuit Judge.

HAND, Circuit Judge.

The defendants appeal from a judgment convicting them under ยง 145 (b), Title 26, U.S.Code, of attempting to "defeat and evade" the income tax for the year 1951 of the Allied Stevedoring Corporation, which we shall speak of as "Allied." The appeals came on to be heard before a panel consisting of the Chief Judge, Judge Frank and me on December 3, 1956, and was submitted upon oral argument and printed briefs, that of the appellee being filed on December 19th. In accordance with the usual practice of this court each of the judges filed a memorandum independently, stating his conclusions in detail upon the points involved. Judge Frank's memorandum is dated January 10, 1957, two days before his death; it takes up seriatim all the thirteen "Points," raised in the appellants' brief, and overrules all but VII(a), and also a part of XI and XII, as to which, so far as he considers them valid, he holds the error to have been harmless. The memorandum concludes: "With some doubt as to point VII(a), supra, I vote to affirm." Section 46(d) of Title 28 U.S.C. provides that "A majority of the number of judges authorized to constitute a court or division * * * shall constitute a quorum"; and even when a judge has resigned after argument, or has died after expressing his dissent, a remaining majority has jurisdiction to dispose of the appeal.*fn1 A fortiori is this true when one judge has died after expressing his concurrence in the disposal adopted by the majority.*fn2

The first question is whether the evidence supports the verdict, and this requires some statement of the way in which the "loading" was done on piers 84, 88, 90 and 92 in 1951, for which year "Allied" filed its return. By "loading" we shall mean both putting goods on the floor of a pier from arriving trucks, or putting them upon waiting trucks from the floor of a pier. These were the only activities of "Allied," the physical loading being done by members of Local Union 824 of the International Longshoremen's Association, as employees. When the trucks came to the piers and were loaded or discharged, payment to "Allied" was made in two ways. One was for the truck driver to sign a printed "slip" on which a foreman of "Allied" set down the goods loaded or unloaded and the amount due. The foreman would then give the "slip" to Potter, "Allied's" vice-president, who would in turn give it to a collector for "Allied," and he would collect from the trucking company and remit to "Allied." The other way was for the truck driver to pay the foreman in cash on the pier, and to take the "slip" with a receipt upon it signed by the foreman. The "slips" so signed the drivers would then take to their employers in settling their accounts.

A part of the payments is undisputed; it is common ground that a witness, named Applegate, would receive from Potter "slips" signed by drivers, and take them to the drivers' employers, usually, though not always, receiving cheques in payment that he would give to Potter. These cheques, together with about $3,700 in cash as will appear, must have made up the $90,000 that "Allied" returned as gross income. The prosecution succeeded in tracing $58,000 of these cheques from the truckers, but not the other $30,000. The conceded expenses of "Allied" were about $90,000, so that to succeed the prosecution was forced to prove much larger gross receipts. Its position was that "Allied" had received large sums in cheques or cash that never got into its $90,000 bank deposit, but that the three individuals kept for themselves. The main outline of its proof was that all four of the steamship lines which were lessees of the four piers in question had "designated" "Allied" as their "public loader" for 1951, in compliance with a notice by the New York Department of Marine and Aviation that "public loaders are permitted * * * only pursuant to your written permission." The prosecution argued that this established prima facie at least, that whatever loading went on upon those piers was done by "Allied." It then put in evidence a great number of "slips" identified as those that had been issued to drivers of truckers and that they had been paid in one way or another. The "slips" had all been printed for "Allied," and bore the number of one of the four piers in question; "Allied's" telephone number was printed upon them and the drivers' names were signed.The argument was that the sum of the amounts contained upon these "slips" was part of the income received in 1951.

The defendants sought to meet this evidence by showing that one, La Magna, a "loader" at South Kearney, New Jersey, had used the same printed "slips" which he procured from someone apparently in the printer's employ. (In all but two instances, however, La Magna had struck out the printed pier number.) In addition several of "Allied's" foremen at the piers testified that they signed "slips" of the same printed issue, for work done by several other "loaders"; for the most part by two, named "Ryan" and "Reilly," who on exceptionally busy days helped out loading on the piers. The driver of a truck would tell the foreman to make out his "slip" in favor of "Ryan" or "Reilly," who would receive and cash it on their own account either on the pier or by cheque from the trucker. The defendants explained this practice, notwithstanding the "designation" of "Allied" as the only "loader" on the four piers, on the ground that the prescribed system was by no means rigidly observed. They therefore insisted that there was no basis for the conclusion that "Allied" had received the sum of all the payments recorded on the "slips." In addition to "Ryan" and "Reilly" some of the foremen also mentioned other supposed "loaders"; e. g ., Hammo, "Bluenose" and others.

In rebuttal of this alleged infirmity in its evidence the prosecution proved that "Ryan" and "Reilly" had disappeared in 1953, to which the defendants retorted that they had probably found it safer to leave after an investigation started of conditions on the piers (the inference being, as we understand it, that it was the part of wisdom for them as unlicensed "loaders" to disappear). Moreover, the prosecution proved that at least on one occasion "Allied's" president, Ward, had procured for the corporation the proceeds of a cheque issued to "Ryan." This evidence was as follows. One Leahy, an employee of "Allied," testified that "Ryan" and "Reilly" had given him cheques to cash which they had received for loading done by them. Leahy was arrested in January 1951, and a cheque for about $700 payable to "John Ryan" was found upon his person.This cheque the detective who had made the arrest took to the defendant, Potter, who told him that the name of the payee was a mistake. Moreover, the defendant, Ward, followed this by a letter to the trucker who had drawn the cheque, declaring: "We are the Union Loaders at Pier 88 * * * and your check should have been made to our name, Allied Stevedoring Co. and to no one else." The endorsement upon this cheque in the name of "John Ryan" was in fact made by one Lussa, who was apparently in the habit of cashing cheques.

Another instance was the testimony of a witness, named Marcel, that a man, whom he merely knew by the name of Murphy, was in the habit of bringing to him "slips" of the issue that we have mentioned which had been delivered to "loaders" at the piers.Marcel paid Murphy 93% of the amount stated and collected the full amount from truckers against whom they were charged. Marcel paid Murphy in cash which Murphy took away, presumably either to pay the "loaders," or to repay himself, if he had already himself cashed them. The prosecution traced $19,300 of such payments made to Marcel, and argued that they were part of "Allied's" income, not only because it was proper to infer so from the fact that "Allied" alone (with the exception of La Magna) had any access to the printed "slips," but also because on fifteen or twenty occasions there had been differences of amount between the "slips" and what the trucker agreed to be the proper charge, and that in these cases he called up Potter on the telephone. Although he did not know Potter's voice, on Murphy's next visit Murphy settled the difference. We agree with the prosecution that from this the jury might have inferred that the "slips" had been issued for "loading" done for "Allied."

Next there are two items, one of about $8,000, the other of $5,000, made up of about $3,700 to the order of "cash" and about $8,000 in cheques to the order of "Ryan" or "Reilly." Of the balance about $700 went to one Sullivan, and about $1,000 were made payable to miscellaneous payees. All this money was received from the truckers in exchange for "slips" in the same name as that of the payees. The cheques, and presumably some cash also, Francis Applegate testified that he collected for the payees.The inference that this money was in fact paid to "Allied" rests upon the fact that it alone was a licensed "loader," and upon the doubts as to the existence of "Ryan" and "Reilly" arising from the evidence we have already detailed. The total of all the payments for "slips" is about $50,000, against which the prosecution acknowledged a credit of about $5,000, leaving $45,000 undeclared.

In addition to these receipts the prosecution proved the receipt of rental from a "loader," named White, for the use of what are called Hi-Lo machines, large machines that raise or lower heavy goods such as rolls of paper-print. The agreed rent to be paid by White was half his earnings and it was collected in cash by one Gallagher, who paid it to Potter or Bowers directly. The amount as shown on White's books was $29,000. White kept a set of books showing his receipts from truckers for the use of the machines, and had an arrangement with an accountant, named Hampson, by which Hampson at White's request examined White's books each week and from them made up for White a set of "double entry books." The objection to the competence of these books on the ground that they were not shown to have been kept in the regular course of White's business is so patently untenable that we shall not discuss it.

From all these circumstances we agree that the jury might properly have found that "Allied" had received over $70,000 that it did not declare. We recognize indeed that this conclusion rests upon the premise that the income actually declared - $90,000 - did not contain any part of this sum, and in support of this the prosecution proved that $58,000 of "Allied's" bank deposit was from cheques that could not have duplicated any of these figures; it gave credit also for $3,700 of cash deposited in the account. Thus at best the bank deposit could have included only $28,000 ($90,000 less $62,000) of the other money traced to "Allied," leaving over $40,000 unaccounted for, a "substantial" sum under any definition of that word.What weight the jury should give to this evidence was for them, and them alone, provided that it satisfied their minds beyond any fair doubt.

Finally, as to the complicity of Ward, Bowers and Potter. The record shows again and again that all these men were deeply involved in the management of "Allied's" business. The corporation paid no dividends, and the expenses consisted of salaries of $6,250 to each of the three, the daily wages of "loaders" and sundry disbursements claimed in the return. Who but these three could have received the sums unaccounted for, it is impossible to conceive.

This completes all we need say as to the sufficiency of the evidence, and we shall from now on proceed to dispose of the succeeding eleven "Points" of the defendants' by their numbers, ...


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