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UNITED STATES v. SHULMAN

February 23, 1979

UNITED STATES of America
v.
Max L. SHULMAN, a/k/a "The Major", Defendant



The opinion of the court was delivered by: BRIEANT

MEMORANDUM AND ORDER

By pre-trial motion docketed February 13, 1979 and heard before me on February 16, 1979, defendant has moved for relief pursuant to Rule 12(b)(1) and (2), F.R.Crim.P., dismissing all or alternatively part of the indictment on the separate grounds discussed below.

 The indictment was filed December 18, 1978. It contains two counts. In the second count defendant is charged with the crime of bribery of a public official, in violation of 18 U.S.C. §§ 201(b) and 2. Under that count the Government offers to prove at trial that on or about December 11, 1978, defendant knowingly, wilfully and corruptly caused one Brooks, a professional appraiser of property and private citizen, to deliver and pay the sum of $ 10,000 in cash furnished by defendant to one Rocoff in this District. Rocoff was an Internal Revenue Agent who was assigned to the Valuation Group of the Internal Revenue Service, United States Treasury Department. It is claimed defendant did so with the intent to influence Rocoff in the performance of his official duties, specifically to induce him to place a low (or false) appraisal, for federal estate tax purposes, upon certain assets of the Celia Weinstein Estate. It was stated at the hearing that defendant is one of the executors of the Celia Weinstein Estate, which Estate was liable for federal estate taxes imposed under 26 U.S.C. §§ 2001, Et seq. No objection is made to the form of pleading of Count 2. Defendant conceded at the hearing that Count 2 of the indictment is sufficient on its face to charge the crime referred to therein, which is a 15 year count.

 The indictment also contains Count 1, based on the same facts noted above. By this count, the same defendant is charged with having conspired with the same Brooks, named as a co-conspirator in Count 1, but not as a defendant, and also with the same Internal Revenue Agent Rocoff, also not named as a defendant, but alleged to be a co-conspirator. The purpose of such conspiracy is said to have been to "defraud the United States," and it is alleged that the conspirators would and did defraud the Treasury by deceit, craft, trickery and dishonest means, in the due and proper administration and enforcement of the tax and revenue laws. It is pleaded that as a part of the conspiracy defendant offered approximately $ 10,000 to Rocoff through the agency of co-conspirator Brooks in return for which a low appraisal value would be placed on the taxable assets of the Celia Weinstein Estate. The means pleaded in Count 1 are that the defendant "agreed to pay a bribe of $ 10,000" through Brooks to an IRS official (Rocoff), who in turn had agreed to reduce the IRS appraised value of the Weinstein Estate from $ 10,000,000 to $ 6,000,000. It is not clear from the pleading whether those figures represent the gross, or the net taxable estate. However, the federal estate tax, before state credit, is imposed at 70% At $ 6,000,000 net taxable estate, increasing rapidly above that amount.

 The overt acts pleaded in Count 1 consist of a conversation in Manhattan in September 1978 between Brooks and Rocoff, and a conversation in the Eastern District of New York between defendant and Brooks in which the defendant "agreed that Brooks should see what could be done about bribing and paying off an IRS official and employee to lower the value of the Celia Weinstein Estate." An agreement reached on or about December 7, 1978 is pleaded as overt act No. 3, although agreeing is not by itself an overt act. As the fourth overt act pleaded, it is alleged that on December 11, 1978 in the Eastern District of New York, defendant "counted and gave approximately $ 10,000 in cash" to co-conspirator Brooks, not a federal employee.

 It was conceded at oral argument that there was no item of evidence which could be elicited by the Government at trial in support of Count 1, which was not also properly admissible and available to the Government at a trial on Count 2 only.

 Count 1 is a five year count. It is pleaded based on 26 U.S.C. § 7214(a)(4).*

 The Motion to Dismiss Count 1

 As the first item of relief requested in this motion, defendant seeks to dismiss Count 1, not for redundancy and uselessness, or prosecutorial overkill, all of which are present, but unfortunately not provided for in the Federal Rules of Criminal Procedure. Rather, he seeks to dismiss it for failure to charge an offense.

 The argument in support of the motion is simple and appealing. The statute on its face, and by title, refers to and contemplates punishment of offenses by those officers and employees of the United States, specifically described therein, hereinafter for convenience referred to as "Revenue Agents" or merely "Agents." The statute contemplates that the Revenue Agent being punished thereunder, under subparagraph (a)(4) will have been one who "conspires or colludes with any other person to defraud the United States." It is obvious and was known to Congress when this statute was passed, that most persons who would be tempted or motivated to collude with Revenue Agents for such purpose would be private persons, that is, taxpayers and their representatives. The statute does not, by its express terms, reach such private persons.

 It seems implicit in the statute that a person not employed as a Revenue Agent could be convicted as an aider and abettor under 18 U.S.C. § 2. There is no requirement for an aider and abettor to be within the group whose activities are controlled by a penal statute. For example, in a common law prosecution for rape, a woman could be convicted as an aider and abettor, notwithstanding that, at least at common law, a woman was incapable herself of committing the crime of rape. See People v. Reilly, 85 Misc.2d 702, 381 N.Y.S.2d 732 (Westchester County Court 1976) and cases therein cited.

 There is authority that an aider and abettor who is not a Revenue Agent can be convicted of the substantive crime of violating any subdivision of § 7214(a). United States v. Campbell, 426 F.2d 547 (2d Cir. 1970) holds that a person not a Revenue Agent can violate § 7214(a) as an aider and abettor. See also, United States v. Kenner, 354 F.2d 780 (2d Cir. 1965).

 In this case, however, the Government seeks to carry the point of Campbell one step further, by placing a gloss on the statute to make it a crime for persons not Revenue Agents to conspire with each other (Shulman and Brooks) to cause a Revenue Agent (Rocoff) to violate the statute by conspiring with them.

 There is no reported case of such a conviction, although this statute and its predecessors have existed for a century.

 Bribery of those who farm the taxes has been known throughout recorded history. Such practices led to the French Revolution and contributed to the fall of Rome. The practices said to have occurred here are not unknown in this country. The existence of this century old penal statute is some evidence of that fact. For a feeling of Deja vu see the comprehensive discussion by Circuit Judge Medina in United States v. Nunan, 236 F.2d 576 (2d Cir. 1956), Cert. denied 353 U.S. 912, 77 S. Ct. 661, 1 L. Ed. 2d 665, which describes in detail the activities of defendant Commissioner of Internal Revenue, and the resulting Congressional sub-committee established February 2, 1951 by H.R. 78 to "Investigate the Administration of the Internal Revenue Laws" known as the King Committee. Surely that extensive inquiry was not the first; nor will it be the last. Accordingly, and in view of the historical background, it is surprising that there has been no prior attempt to prosecute a private citizen on a conspiracy count under this section. This notwithstanding the extreme seriousness of such misconduct.

 Dictum in United States v. Grunewald, 233 F.2d 556, 567 (2d Cir. 1956), Rev'd. on other grounds, 353 U.S. 391, 77 S. Ct. 963, 1 L. Ed. 2d 931 (1957), is opposed to the Government's present contentions:

 
"One of these statutes, 18 U.S.C. § 371 (the general conspiracy statute) applies to all persons; the other, 26 U.S.C. § 4047(e)(4) (renumbered now as § 7214), applies specifically to "every officer or agent appointed and acting under the authority of any ...

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