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United States v. Shapiro.

January 10, 1939

UNITED STATES
v.
SHAPIRO.*FN*



Appeal from the District Court of the United States for the Eastern District of Wisconsin; Ferdinand A. Geiger, Judge.

Author: Kerner

Before SPARKS, TREANOR and KERNER, Circuit Judges.

KERNER, Circuit Judge.

In this case the appellant, Michael Shapiro, together with the other defendants, Aaron Shapiro and Jack Wallace, was charged by Grand Jury indictment in three counts. The first count charged the defendants with concealing $2762.72 in cash from the trustee in bankruptcy [a violation of Title 11, Sec. 52, Subdiv. (b)(1) of the United States Code, 11 U.S.C.A. § 52(b)(1)]; the second count charged the defendants with transferring other tangible assets worth $2247.75 with the intent to defeat the operation of the Bankruptcy Law (a violation of Title 11, Sec. 52, Subdiv. (b)(6) of the United States Code, 11 U.S.C.A. § 52(b)(6)); and the third count charged the defendants with a conspiracy to conceal $4503.72 in cash and $2247.75 in other tangible assets from the trustee in bankruptcy (a violation of Title 18, Sec. 88 of the United States Code, 18 U.S.C.A.§ 88). The jury found Jack Wallace not guilty, Aaron Shapiro guilty on the conspiracy count and the appellant, Michael Shapiro, guilty on all three counts. The appellant is here on an appeal taken from a judgment which sentenced him to imprisonment on each count, the sentences to run concurrently.

In order to understand the full force of appellant's contentions on this appeal, it will be necessary to state the facts somewhat in detail.

In February of 1934, the Acme Liquor Company, Inc. (hereafter referred to as the "Liquor Company") was created with its main offices in Milwaukee, Wisconsin. It engaged in the wholesale liquor business until June 30, 1935. In the meantime the Acme Wine and Liquor Company (hereafter referred to as the "Wine Company"), with offices in the same building, had been created to carry on a liquor business. On August 24, 1935, the Liquor Company filed a voluntary petition in bankruptcy and filed bankruptcy schedules showing on the asset side accounts receivable in the sum of $500 which were sold at public sale for $17, and accounts and notes payable to the extent of $18,295.95 on the liability side.On September 5, there was appointed the trustee in bankruptcy who then demanded the books of account. Although it had been necessary to make a demand of each item turned over to him, by September 10 he had received most of the books and by September 18 he had obtained the white sales invoices (concerning which more later).

Uncontradicted testimony from the bookkeepers, Goldie Latter and Margaret Cohn, salesman Jack Wallace and truck drivers, Petermann and Leopold, established the routine of selling liquor and the subsequent recording of sales and cash receipts. When an order for liquor came into the Liquor Company, the invoicing of the sale was made in triplicate. The white invoice was the basis of entries in a separate set of books used exclusively for governmental tax and informational purposes. Either the truck driver or the salesman delivered the liquor to the customer who retained a yellow invoice for himself and usually paid at once in cash or by check. The truck driver or the salesman then returned the cash and the pink invoice to the offices of the Liquor Company where entries in the cash receipts book and sales book were made.

From the testimony of Jack Wallace, Aaron Shapiro and the bookkeepers, the following evidence was adduced. Although Aaron Shapiro and Jack Wallace (also salesman for the Liquor Company) had been made presidents of the Liquor Company and the Wine Company, respectively, they had neither invested any capital nor exercised any voice in the management. The appellant, Michael Shapiro, general manager of both corporations, dictated the corporate policies, supervised the office work, and dealt with the salesmen. Although Aaron Shapiro's name was indispensable to the proper indorsement of checks, he would sign indiscriminately at the request of the appellant or the bookkeepers. The appellant directed the bookkeepers personally, suggested book entries to be made and controlled the purse.

On the other hand, the appellant's testimony denied control over cash entries and withdrawals, professed an ignorance of bookkeeping methods, and disclaimed that he was more active in the business of the Liquor Company than his nephew, Aaron Shapiro.

From the testimony of truck drivers and customers of the Liquor Company, salesman Jack Wallace and James E. Nugent (special agent and accountant of the Federal Bureau of Investigation), the following evidence was established in support of the first count. From May 1, 1935 to August 24, 1935, some 201 sales among others had been made in Jack Wallace's Fox River Valley Territory. On these 201 sales the customers paid $2762.72 to Jack Wallace, who in turn mailed or delivered in person the moneys and accompanying pink invoices to the offices of the Liquor Company. This $2762.72, however, was never recorded in the cash receipts book.

On the other hand, the appellant's testimony suggests that the $2762.72 in cash had never been received because Jack Wallace had embezzled over $2000. As against this testimony, Jack Wallace testified that he had admitted to the appellant a withholding of some $800 during a nine month period, produced convincing verification for most of the $2762.72 turned in and exhibited an accounting by Rae Shapiro (appellant's wife), Vice President of the Liquor Company, as to his commissions on sales made in the Fox River Valley Territory. In addition, subsequent to the $800 admission, Jack Wallace, at the suggestion of appellant, was elected president of the Wine Company.

From the testimony of James E. Nugent, Aaron Shapiro and the bookkeepers, the following evidence in support of the second count was established. On June 30, 1935, the Liquor Company transferred in bulk to the Wine Company practically all of its tangible assets such as liquor inventories, furniture and fixtures, and delivery equipment. The transfer was simply made on a sale invoice used by the Liquor Company in billing customers for liquor purchased. The Wine Company in return gave a check for $2247.75 at a time when its bank balance was only $115.88. The Liquor Company did not record the $2247.75 as cash received, but instead used it to repay the $2247.75 account payable to Marcus Shapiro (appellant's brother) which was recorded on the books of the Liquor Company in pencil.

On the other hand, the appellant in his testimony explained that the check was cashed in the office from the Wine Company's cash on hand, that the check was thereupon deposited at the bank to the credit of the Wine Company, and that the $2247.75 in cash was given to Marcus Shapiro. As against this testimony, James E. Nugent testified that the appellant in his first explanation of the repayment to Marcus Shapiro had told him that $2300 had been borrowed from Jack Wallace for that purpose. In addition, the bookkeepers testified that such a large amount of money as $2247.75 had never been received by them as cash to be recorded in the cash receipts books; that the Marcus Shapiro account payable was the only pencil entry in the books; and that the word "Mike" had been erased and the word "Marcus" substituted in its place. The appellant denied that the conversation between James E. Nugent and himself had ever occurred, while Aaron Shapiro testified that at times he carried money to Marcus at the request of the appellant.

From the testimony of James E. Nugent and the bookkeepers, the following evidence was introduced to support the $1741 cash item in the third count. When the Liquor Company made out checks payable to Cash, it was the customary practice to record this as cash received in the cash receipts books. If cash was then used to purchase from a distiller, a debit to inventories and a credit to Cash in the cash disbursement book was recorded. In May of 1935, an analysis of the cash disbursement book and the check register showed that four checks payable to Cash ...


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