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United States v. Saft

July 5, 1977


Appeal from a judgment of the District Court for the Southern District of New York, Lawrence W. Pierce, Judge, convicting appellant upon three counts of an indictment on a plea of guilty after denial of a motion to withdraw the guilty plea. Affirmed.

Friendly, Timbers and Meskill, Circuit Judges.

Author: Friendly

FRIENDLY, Circuit Judge:

This appeal concerns the propriety of a ruling by Judge Pierce, in the District Court for the Southern District of New York, refusing to allow appellant, Howard E. Saft, to withdraw his plea of guilty and entering a judgment of conviction upon it. We affirm.

Appellant is an experienced businessman, born in 1923. He was president and chief executive officer of Adlay Jewelry, Inc. (Adlay) and owned 75% of its stock. Adlay's business consisted principally of retail sales of jewelry at concessions in department store chains located in the metropolitan New York area and in other parts of the country.

On April 21, 1976, Saft, along with Norman Fialkow and Edward Weizer, respectively a member and an employee of Adlay's accounting firm, Chaikin & Fialkow, were indicted by a grand jury in the Southern District of New York. The indictment contained 23 counts. Count One charged all three defendants with conspiring, along with deceased co-conspirator Leon Chaikin, to file false financial statements for Adlay and its subsidiaries for the years 1971 through 1973 with banks and other lending institutions, causing them to loan over $5 million to Adlay and its subsidiaries, in violation of 18 U.S.C. § 371. Counts Two through Eight charged Saft and his two co-defendants with having filed false financial statements with four New York banks in connection with bank loans and other extensions of credit, in violation of 18 U.S.C. §§ 1014 and 2. Counts 9 through 21 charged Saft and his co-defendants with mail fraud, in violation of 18 U.S.C. §§ 1341 and 2. Count 22 charged Saft with income tax evasion with respect to an excess of $100,000 in unreported taxable income for the 1973 calendar year. Finally, Count 23 charged co-defendant Fialkow with perjury before the grand jury in violation of 18 U.S.C. § 1623.

The conspiracy count of the indictment outlined the nature of the scheme to violate §§ 1014 and 1341. Paragraph 11 of that count stated:

The objects of the conspiracy were (i) to prepare and distribute and to allow and to cause the preparation and distribution of financial statements of ADLAY and its subsidiaries which were false and misleading; (ii) to conceal the true state of affairs at ADLAY and its subsidiaries, including the amounts actually owed creditors, and the fact that SAFT was secretly taking out of ADLAY and its subsidiaries hundreds of thousands of dollars for his own use and for his own purposes; (iii) to submit false and misleading financial statements for ADLAY and its subsidiaries and other false and misleading information to various banks, other lending institutions and creditors; and (iv) to thereby fraudulently cause the unsuspecting banks, other lending institutions and creditors to loan or otherwise advance over $5 million to ADLAY and its subsidiaries.

Paragraph 12 detailed the means by which the conspiracy was carried out, alleging in part that the defendants and their co-conspirators knowingly prepared financial statements for Adlay that falsely stated that inventories had been taken under the supervision of Chaikin & Fialkow; that incorrectly valued inventories; that understated certain liabilities and overstated certain asset accounts; and that understated amounts owing from Saft. The conspiracy count went on to charge that as a result of the false financial statements, four banks - Bank Leumi Trust Company of New York, Empire National Bank, National Bank of North America and American Bank & Trust Company - had made loans to Adlay aggregating approximately $4,755,000. As indicated, the substantive counts Two through Eight charged the defendants with making various false financial statements "for the purpose of influencing the action" of the banks with respect to making loans to Adlay or changing their terms. It appears from the Government's sentencing memorandum in the district court that Adlay went into bankruptcy in June 1974 and the banks lost over 80% of their loans.

Count 22 of the indictment, headed "Income Tax Evasion", charged:

On or about the 15th day of April 1974, in the Southern District of New York, HOWARD E. SAFT, the defendant, who during the calendar year 1973 was married, unlawfully, wilfully and knowingly did attempt to evade and defeat a large part of the income tax due and owing by him and his wife to the United States of America for the calendar year 1973, by preparing and causing to be prepared, by signing and causing to be signed, and by filing and causing to be filed with the Internal Revenue Service, an income tax return on behalf of himself and his wife, wherein it was stated that he and his wife had $33,810.23 taxable income for the year 1973 and that the amount of income tax due and owing thereon was $9,626.30, which return was false and fraudulent, as he then and there well knew, in that their taxable income for the year 1973 was in excess of $140,000, and that for year 1973 there was due and owing to the United States thereon an income tax of in excess of $90,000.

The Government contended that the undeclared income consisted of moneys which Saft had siphoned out of Adlay.

Saft, represented by retained counsel, had originally pleaded not guilty on April 29, 1976. On May 5, at his request, Saft was assigned counsel, David L. Fox, Esq.; subsequently an accountant was appointed to render financial assistance for Saft's defense at public expense.

After plea negotiations between his counsel and the prosecutor, Saft sought leave on September 28, 1976, a few days before trial was set to commence, to withdraw his not guilty plea and to plead guilty to two of the false statement counts, Three and Six,*fn1 and the tax evasion count, 22, with the remaining counts to be dismissed on sentence. Judge Pierce thereupon conducted a meticulous examination of Saft.

At the outset, after hearing defense counsel's application for entry of the guilty plea, the district court elicited from Saft that he was 53 years old, that he was the founder of Adlay, and that he held a Bachelor of Science degree from Columbia University. During this inquiry the court also determined that Saft had received a copy of the indictment and had read it. Nevertheless, the district court instructed the clerk to read aloud the pertinent counts. The clerk did so and asked whether the defendant ...

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