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UNITED STATES v. LIEBER

March 15, 1979

UNITED STATES of America, Plaintiff,
v.
Herbert LIEBER, Defendant. UNITED STATES of America, Plaintiff, v. Jack OPERMAN, Defendant. UNITED STATES of America, Plaintiff, v. Samuel POPACK and Joseph Popack, Defendants. UNITED STATES of America, Plaintiff, v. Paul ROTHENBERG, Defendant



The opinion of the court was delivered by: MISHLER

MEMORANDUM OF DECISION AND ORDER

The defendants in these proceedings are charged in separate multi-count felony indictments with having violated 26 U.S.C. § 7206(2) by aiding or assisting *fn1" taxpayers in the preparation and presentation of income tax returns which were false and fraudulent as to material matters. More specifically, it is alleged that the defendants "aid(ed), assist(ed), counsel(ed), procure(d), and advise(d)" taxpayers to claim charitable deductions for contributions to various yeshivas when the contributions had not, in fact, been made. *fn2" Each of the defendants has moved to dismiss the indictment naming him, claiming that the Government's prosecution of these charges violates a plea agreement entered into on June 23, 1975, *fn3" pursuant to the terms of which the defendants were to plead guilty to misdemeanor violations under 26 U.S.C. § 7203. *fn4" An evidentiary hearing was held to resolve the factual issues raised by the motion.

Background

 In the summer of 1974, David Satz, counsel to the Prudential Insurance Co. *fn5" advised the United States Attorney for the District of New Jersey that an investigation by Prudential indicated that funds from Prudential's Matching Gifts Program had been misappropriated. The Matching Gifts Program offered a contribution from Prudential to certain designated educational and charitable institutions equal to that made by a Prudential employee. Misappropriation of funds occurred when, pursuant to a fraudulent scheme, Prudential was induced to "match" a gift to a designated donee on the false representation of an employee that he had made a charitable contribution. Employees were solicited by individuals such as Lieber, Operman, Rothenberg and the Popacks to participate in the scheme by offering them a commission from the monies obtained from Prudential. The investigation indicated that solicitors advised the employees to take the contribution as a deduction on their personal returns. The contributions thus obtained by the aforementioned solicitors from the Matching Gifts Program were made to various yeshivas in Brooklyn.

 In approximately August or September 1974, a Grand Jury investigation was commenced. United States Attorney Jonathan L. Goldstein placed Assistant United States Attorney Edward R. Dauber, Chief of the Consumer Frauds Unit, in charge of the investigation. Dauber believed that the evidence indicated possible mail fraud (18 U.S.C. § 1341) and Internal Revenue Code violations. Grand Jury subpoenas were served on the defendants soon after the Grand Jury convened. Nathan Lewin, Esquire, appeared at the office of the United States Attorney shortly thereafter and advised Dauber and Assistant United States Attorney Robert Romano (assigned to present the case to the Grand Jury) that he represented the defendants. Mr. Lewin had a series of meetings with Dauber and Romano concerning the scope of the investigation; Mr. Goldstein was advised of these discussions and attended some of the meetings. Lewin learned that the United States Attorney was interested in examining the books and records of the yeshivas that had received the contributions. Mr. Lewin urged the United States Attorney's office not to subpoena the records of these institutions, raising a First Amendment argument in which he apparently claimed that such an examination might interfere with the right of Jews to practice their religion or chill the right of congregants to freely associate. Mr. Lewin also urged the United States Attorney not to indict the yeshivas as a matter of prosecutorial discretion. It was then apparently agreed that no subpoenas would issue while Mr. Lewin, on his own, attempted to obtain the information that was being sought. Some time about December 1974 and January 1975, Lewin submitted data to the prosecutors culled from the books of ten or twelve yeshivas, indicating that in no case did the contributions received from the Matching Gifts Program amount to more than five percent (5%) of a yeshiva's budget. At that point, the United States Attorney made no decision as to whether or not he should present evidence against the yeshivas or contributors. However, he decided to seek indictments against the solicitors.

 During this period of time, Lewin had also been negotiating for the disposition of possible charges against defendants. He first asked that the prosecutors utilize their discretion and decline prosecution. He indicated that the traditional code which forbade orthodox Jews, including the defendants, from giving evidence against fellow Jews (Mesirah), presented a formidable obstacle to a full investigation and might very well present a First Amendment problem. *fn6" When the prosecutors rejected that suggestion, Lewin suggested a plea to a misdemeanor, possibly based on a tax violation. Some time between January and March 1975, the office of the United States Attorney indicated its interest in the offer and at the same time advised Lewin that approval of such a plea would have to be obtained from the Tax Division of the Department of Justice. Soon thereafter, Lewin called Dauber and advised him that his clients were ready to plead to a violation of 26 U.S.C. § 7207. *fn7"

 In or about April or May 1975, Goldstein called Cono P. Namorato, Chief of the Criminal Section of the Tax Division, Department of Justice, and outlined the facts. He advised Namorato of the difficulty of prosecuting a violation under 18 U.S.C. § 1341 (mail fraud) and the offer of a plea of guilty to 26 U.S.C. § 7207. Namorato advised Goldstein that the Tax Division has "a rather rigid policy" of not using § 7207 and suggested in its stead a plea to 26 U.S.C. § 7203. While there is conflicting testimony regarding the balance of this conversation, the court finds that Goldstein understood that Namorato had authorized the acceptance of a plea to § 7203. *fn8" Dauber then called Lewin and advised him that Namorato authorized a plea to § 7203.

 Dauber and Lewin then discussed the necessity of Lieber, Rothenberg, and Operman executing affidavits in which they would admit their wrongdoing and provide a factual basis for the plea. Dauber also told Lewin that these affidavits were required by the Internal Revenue Service for their files and would be subject to the Service's approval. This was the first time Lewin was advised of the interest of I.R.S. in the plea procedure. *fn9"

 On May 15, 1975, Lewin mailed Dauber drafts of proposed affidavits to be executed by Lieber and Rothenberg. In his covering letter (Defendants' exhibit D), Lewin told Dauber: "The purpose of this submission is to determine whether the form and content of such statements would meet the needs of your office and those of the Internal Revenue Service." Dauber reviewed the affidavits and submitted them to Special Agents Russo and Mulcahy of the I.R.S. On June 11, 1975, Operman's affidavit was mailed to Dauber.

 At a June 16, 1975 meeting at which Romano was also present, Dauber went over the draft affidavits with Lewin. *fn10" Certain changes in the wording of the affidavits were made to conform with the suggestions of Special Agent Russo and the United States Attorney's office. Dauber, by his own testimony, "indicated to Mr. Lewin that the affidavits, the wording that we finally agreed on had been submitted to I.R.S., had been approved." *fn11" (Tr. 152).

 Lewin returned to the United States Attorney's office on June 23, 1975 with Lieber, Operman and Rothenberg. Each defendant entered a conference room and, in the presence of Lewin, Dauber, Romano, and Special Agents Russo and Mulcahy, executed affidavits that generally conformed to the drafts previously reviewed. Russo forwarded the affidavits to I.R.S. Regional Counsel with his report, recommending acceptance of the pleas.

 At the meeting, Lewin presented Dauber with a letter that he had prepared earlier in the day, which stated, in pertinent part (Government's exhibit 5):

 
Pursuant to our discussions over the past months, our clients Herbert Lieber, Jack Operman and Paul Rothenberg, have agreed to plead guilty to one count of violating 26 U.S.C. § 7203 in the District of New Jersey. As a first formal step in carrying out this plea agreement, they will be writing and signing statements today in your office for processing through the Internal Revenue Service. These statements have been shown and discussed with you, and you have indicated that they were, with minor modifications, acceptable to the United States Attorney's Office and to the Internal Revenue Service. It is our understanding that the statements are being written and signed today Exclusively for the purpose of this plea agreement. If, for any reason, the agreement is not fully executed, the statements will be returned and no use whatever will be made of them by any agency of the federal government.
 
It is, further, our understanding that the guilty pleas to a violation of 26 U.S.C. § 7203 will conclude all criminal investigations regarding these individuals insofar as they relate in any manner to charitable contributions solicited by them under Matching Gift Programs. It is also our understanding that no other inquiry, beyond what is contained in their signed statements, will be made of these individuals in relation to any such investigation or any criminal prosecution.
 
You have advised me that upon processing of these statements, informations will be filed against our clients and they will be called upon to plead before a United States Magistrate, who will impose sentence.

 Although not reflected in the letter, it apparently was also agreed that in order to minimize publicity, the defendants would await the preparation of pre-sentence reports and be sentenced at the time the plea was offered. Dauber read the letter and said, "That's fine." (Tr. 268).

 At this point, Lieber, Operman and Rothenberg understood that the plea bargain agreement had been consummated. The United States Attorney understood that he had entered into an agreement to accept a plea to a § 7203 charge in full satisfaction of any possible charges against the three defendants arising out of the Matching Gifts Program. *fn12" The procedures by which pre-sentence reports are prepared began to be implemented. *fn13"

 Regional Counsel rejected the recommendation of Agent Russo and directed an investigation into the activities of the defendants and others to determine the possibility of bringing felony charges. On September 24, 1975, when Goldstein learned of Regional Counsel's decision, he wrote and asked the Tax Division to ...


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