The opinion of the court was delivered by: JUDD
(Motions to Dismiss Indictment)
Defendants other than Wisch and Cohen have moved to dismiss the complaint on various grounds.
The court will deal first with defendant Goldstein's motion to dismiss the indictment for failure to comply with allegedly necessary procedures preliminary to submission of the case to the grand jury or, in the alternative, for an evidentiary hearing concerning compliance with regulations, manuals, and practices relating to administrative due process and to his constitutional rights. Defendants Kessler and Jacobson, without expressly raising the same issues, have asked for the benefit of the motions of all other defendants. Since they are not indicted as taxpayers, they would not have the same pre-indictment rights which Goldstein asserts.
Defendant Geller's motion and Ceasar's are based on their assertion that the indictment does not state a federal offense. Defendant Factoroff asserts that he was inadequately advised of his rights before being asked to give testimony to the grand jury. Defendant Jacobson claims lack of speedy prosecution and statute of limitations.
The indictment, in twenty counts, charges a series of interrelated violations of the Internal Revenue Code.
Count One charges Albert Goldstein, the Secretary-Treasurer of Rojo Trucking Corp., Jobie Trucking Corp. and Scotneil Trucking Corp., and Murray Geller, a former Revenue agent of the Internal Revenue Service assigned to auditing the tax returns of the three corporations and of defendant Goldstein, with conspiracy to defraud the United States of income taxes by deducting the salaries of fictitious employees from the corporate income tax returns of the three trucking corporations.
The substantive counts charge Goldstein and various combinations of defendants with filing false income tax returns for various years for the three corporations named in the conspiracy count, a fourth corporation, and Goldstein himself.
Asserted Rights to Pre-Indictment Conferences
Defendant Goldstein claims that he was entitled to a series of four conferences at various administrative levels before the case against him could be presented to the grand jury, that denial of these conferences was arbitrary, and therefore that he has been deprived of due process and equal protection of the laws.
The right to conferences is claimed to exist at the levels of the Special Agent; the Assistant Regional Commissioner, Intelligence; and the Assistant Regional Counsel, Enforcement. Finally, defendant Goldstein claims that any potential prosecution is subject to further review in the Department of Justice, in the Criminal Section of its Tax Division, though it is not clear that he asserts the right to a further conference at this stage. It appears that 50% of prosecutions are declined at the district (Special Agent) level and smaller percentages at each succeeding stage.
The government asserts that the administrative conferences are not a prerequisite to grand jury action, that the regulations which defendant Goldstein relies on were not intended to create legal rights in taxpayers, and that the administrative practice has been not to provide conferences if information must be obtained through grand jury subpoenas rather than simply from the books and records of the taxpayer, and finally, that the grand jury has plenary power to indict.
No conference was offered at the Special Agent's level. The government points out that the Special Agent on the case did not specifically "recommend prosecution," but suggested instead that the case be referred to the Department of Justice for presentation to a grand jury. The grand jury inquiry was begun in November 1970.
Defendant Goldstein was offered a conference with Regional Counsel, Enforcement, in September 1971, concerning proposed criminal action against him, but the letter to him was returned undelivered with a post-office notation, "Moved, Left No Address." An attorney in the Chief Counsel's office at IRS asserts that it is office policy not to make further efforts to communicate with taxpayers concerning a conference after a mailed notice has been returned. Goldstein had no authorized representative at the time. No other defendant was offered any sort of conference.
Law and Regulations Concerning Pre-Indictment Conferences
The conference with the Special Agent is described in a published regulation, which defendant asserts is mandatory in form. The conference with the Regional Commissioner, Intelligence, is described in the same regulations, but is clearly not mandatory. The subsequent conferences are described in internal manuals (for official use only), and in terms of practice or discretion.
None of the cases cited by defendant Goldstein imposes any limits on a grand jury's power to indict or on a United States Attorney's power to present a case to the grand jury, although they do in general terms give certain IRS regulations the force of law.
The statutory basis for defendants' contention is 26 U. S. C. § 7122(a), which in its terms authorizes compromise of criminal cases under the income tax laws, an authority not given in most other criminal cases. The statute provides:
(a) Authorization. -- The Secretary or his delegate may compromise any civil or criminal case arising under the internal revenue laws prior to reference to the Department of Justice for prosecution or defense; and the Attorney General or his delegate may compromise any such case after reference to the Department of Justice for prosecution or defense.
(b) Record. -- Whenever a compromise is made by the Secretary or his delegate in any case, there shall be placed on file in the office of the Secretary or his delegate the opinion of the General Counsel for the Department of the Treasury or his delegate, with his reasons therefor, with a statement of --
(1) The amount of tax assessed,
(2) The amount of interest, additional amount, addition to the tax, or assessable penalty, imposed by law on the person against whom the tax is assessed, and
(3) The amount actually paid in accordance with the terms ...