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UNITED STATES v. RE

June 2, 1970

UNITED STATES of America
v.
Gerardo A. RE, a/k/a Jerry A. Re, Gerard F. Re, and Charles A. Casagrande, a/k/a Charles A. Grande, Defendants


Frederick van Pelt Bryan, District Judge.


The opinion of the court was delivered by: BRYAN

FREDERICK van PELT BRYAN, District Judge:

Defendants, Gerardo A. Re, Gerard F. Re and Charles A. Casagrande, move pursuant to Rule 41 Fed.R.Crim.P. to suppress certain documents which they claim were illegally and unconstitutionally obtained by federal agents from their accountant, Louis Blois, and to dismiss the indictment pending against them which they contend was obtained in part on the basis of such documents.

 The pertinent facts were developed at an evidentiary hearing before me and are as follows:

 In early 1961 James Irving, a special agent of the intelligence division of the Internal Revenue Service, was assigned to do a preliminary investigation of the Res with a view to uncovering possible criminal violations of the internal revenue laws. In the Fall of 1961 Irving was assigned to the office of the United States Attorney for the Southern District of New York to assist in an investigation of a scheme by the Res to sell unregistered stock in Swan-Finch Corporation. Irving worked under the direction of Assistant United States Attorneys Morrison and Liman and one of his functions was to investigate tax consequences of the Swan-Finch transactions.

 In the first or second week of January 1962 a grand jury was empanelled to investigate alleged wrongdoing by the Res in connection with Swan-Finch stock transactions. This investigation had both securities law and tax law aspects and consequently special agents from the SEC as well as Irving from the IRS were assigned to assist the United States Attorneys in connection with the presentation of the case to the grand jury.

 On January 22, 1962 Assistant United States Attorney Morrison prepared a subpoena duces tecum which directed Louis Blois, a certified public accountant who had done accounting work for the Res, to appear and produce forthwith before the grand jury in the United States Courthouse for the Southern District of New York "any and all books, records, documents and other papers, including, but not limited to, retained copies of tax returns, State and Federal, supporting papers and work papers" for the defendants and several partnerships in which they had an interest for the period 1954 to date. Morrison gave the subpoena to Irving with instructions to serve it on Blois the next morning. The subpoena was actually dated January 9.

 On January 23, 1962 at 8:00 A.M., Irving and Agent Jedlowski of the SEC arrived at and were admitted to Blois' apartment at 34 King Street, Manhattan. Irving served the subpoena and informed Blois that he was required to appear that morning before the grand jury and to bring with him the documents called for in the subpoena. Blois explained that he had not informed his employer that he was doing work for the Res and that this would be discovered if he did not appear at work that morning. In addition, Blois had been recovering from a protracted illness and had been warned by his physician to avoid any excitement. In view of these facts, Irving telephoned Assistant United States Attorney Liman and requested him to come to Blois' apartment. After Liman arrived, he too told Blois that he would have to appear before the grand jury that morning and said he would call Blois' employer and explain that fact to him. Irving then told Liman that Blois had been working for the Res without the knowledge of his employer and assured Liman that Blois was acting in good faith. Liman suggested to Blois that his appearance before the grand jury that morning could be excused if he agreed to turn over the papers, called for in the subpoena, to Irving that evening and not to tamper with any of the records. Blois readily consented and the government agents left. There were no instructions given to Blois not to communicate with the Res or with anyone else or to treat what was occurring as confidential.

 The forthwith subpoena was used because Blois was a relative of the Res and it was feared that if Blois was given more time to comply he would contact the Res with the substantial possibility of document tampering. Liman testified that the idea for the forthwith subpoena originated with Morrison and that he knew of no instances in which it had been used on previous occasions by the United States Attorney's office. Irving, as a special agent of the Internal Revenue Service, had the power under 26 U.S.C. § 7602 to compel the production of books and records in aid of a tax investigation and such administrative process required at least ten days' notice. However, once an IRS agent was assigned to the United States Attorney's office to aid in an investigation, it was the general practice not to use his power under 26 U.S.C. § 7602 and it was not used in this case.

 On January 23, 1962, at 10:00 A.M., the grand jury which had been scheduled to hear the testimony of Blois met. Because of Blois' absence the testimony of a witness from the SEC was substituted.

 On the evening of January 23, Agent Irving again arrived at the Blois apartment, in accordance with the arrangements made that morning. Blois turned over the papers called for in the subpoena to Irving, who in turn gave Blois a receipt. Irving brought the documents to his office that evening and the next morning delivered them to the United States Attorney's office. He worked with the papers at the United States Attorney's office for many weeks after that. Copies of the papers were made available to Blois' attorneys on request.

 The grand jury indicted the Res in connection with the Swan-Finch stock transactions on April 2, 1962. The instant indictment, growing out of alleged criminal violations of the internal revenue laws and apparently unrelated to the Swan-Finch stock transactions, was handed down by a different grand jury on June 22, 1965. Apparently the papers produced by Blois were never submitted to the Swan-Finch grand jury.

 The papers turned over to Agent Irving by Blois included Blois' work sheets, schedules of income and expense, brokerage statements, cancelled checks, correspondence, retained copies of Federal and New York State individual income and partnership tax returns relating to the defendants and their partnership interests in Re & Re, Re, Re & Sagarese, and the White King Turkey Farm, for the period 1954 to 1960. Most of this material, however, consisted of accountant's work papers in Blois' handwriting. The United States Attorney in charge of presenting the tax case against these defendants to the grand jury has filed an affidavit stating that of the papers obtained from Blois on January 23, 1962 only his workpapers were used at all before the grand jury and only to the extent of preparing two exhibits.

 Defendants have attempted to show that Blois' work sheets belonged to them pursuant to an oral agreement between themselves and Blois. The evidence on this point does not support their contention and I find that no such agreement was ever made or existed and that the workpapers were the property of Blois. As far as the other documents which were obtained from Blois, the Government apparently concedes that they belonged to the Res.

 Defendants have also attempted to show that Gerard Re had some sort of possessory interest in Blois' apartment. They have failed to do so. At most the evidence shows that when Blois was away on vacation he would leave a key to his apartment with Gerard Re so that, if necessary, the latter could use the materials which Blois kept there. However, one of the other occupants of the Brownstone apartment building where Blois lived would have to open the lobby door which was locked and for which Re did not have a key. Such visits were quite infrequent. Moreover, at the time the subpoena was served Blois was not on vacation and there is no showing that Re then had a key or the authority to use it. No contention is made that any of the defendants were in Blois' apartment at the time the subpoena ...


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