reside in the following states, with the income tax rates
indicated: California (1% to 6%), Delaware (1 1/2% to 8%),
Massachusetts (7.38%) and New York (2% to 10%).
No doubt there are investors who purchased du Pont having in
mind that, while they were acquiring an interest in the
leading company in the chemical industry, they were also
acquiring shares of stock in the leading company in the
automotive industry. It would be grossly unfair to impose such
a penalty on thousands of innocent persons. Section 7 of the
Clayton Act is not a "penal statute". This is simply a
remedial section. It contains no penal sanctions such as there
are relating to certain other sections of the antitrust laws.
There are approximately 185,000 stockholders of record of du
Pont. There are, of course, in addition many others whose
stock is held in the name of banks or brokerage firms or who
are beneficiaries of trusts owning du Pont stock. All of these
persons would be taxed on the same basis as if they were
direct owners of du Pont stock. Testimony and exhibits were
introduced by Dr. Benjamin Tepping of National Analysts, Inc.,
an independent statistical research organization. This
organization conducted a survey of du Pont stockholders for
the purpose of determining the tax-paying characteristics of
such stockholders and of estimating the additional income
taxes that would be payable if the Court were to accept the
Government's proposal. The National Analysts' survey was
conducted on the basis of probability sampling. This is a
method of sampling by which on the basis of data obtained from
a sample of the group under examination estimates can be made
as to the result that would be obtained if a complete census
of the entire group had been undertaken. The particular
utility of probability sampling is that through the use of
mathematical formulae the margin of error between the results
of the sample and the results that would be obtained from a
complete census can be ascertained.
Dr. Tepping was able to include within his survey the
individual holders of some 16,000,000 shares of du Pont stock
(out of a total of some 45,000,000 shares) and to estimate for
such holders the effective rate of tax and the additional
taxes that would be payable if the Government's proposed
judgment were accepted by this Court. In addition Dr. Tepping
stated as his expert opinion similar estimates for the owners
of an additional 9,000,000 shares of du Pont stock, basing
these estimates very largely upon an extension of the results
obtained in the sample survey. His testimony, in summary, was
that these two groups of individual owners of du Pont stock
would pay income taxes at the rate of between 55% and 60% if
the Government's proposal were accepted and that the
additional income taxes payable by such owners upon receipt of
the General Motors shares in accordance with the Government's
plan would total as much as $1,000,000,000 over the ten year
period if the General Motors stock were to have a value of
approximately $50 a share and would total approximately
$770,000,000 over the same period if the General Motors stock
were to have a value of about $40 a share.
The Court is satised that the National Analysts' survey was
conducted on an objective basis and that the procedures used
were in accordance with accepted standards recognized in the
field of statistical surveys. The evidence shows that care was
taken to simplify the questionnaires used to the extent
possible in light of the fact that the subject matter — Federal
income tax — is inherently complicated. At the trial the
Government moved to exclude the testimony of Dr. Tepping and
the exhibits introduced by him on the ground that the
underlying data constituted hearsay evidence. The Court
overruled the motion and at the conclusion of the trial it was
renewed by the Government.
If the issue before the Court were the precise amount of
income taxes to be paid by the du Pont stockholders in the
aggregate or by individual classes of du Pont stockholders,
there might be merit to the Government's contentions. But that
is not the issue. The court is satisfied that the estimates
are sufficiently reliable to indicate the order of magnitude
of the income taxes that would be occasioned by adoption of
the Government's proposal. Accordingly, the Government's
motion is overruled. In this connection the Court observes
that in its reply brief with respect to this motion the
"It has never been any secret throughout this
proceeding that the proposed distribution of
General Motors stock would be taxable to the
stockholders. A bill has been introduced in the
Congress concerning this matter. This is a matter
of law so obvious that the Court is not even
required to take judicial notice of it. If the
only use to be made of these survey results were
to allow the Court to consider them for whatever
they are worth, the Government would not object."
The practical question before the Court is whether it will
be better able or less able to frame a decree to carry out the
mandate of the Supreme Court by excluding Dr. Tepping's
testimony and evidence. To this question the Court believes
there is but one answer. It cannot perceive how the interests
of the Government can be prejudiced by acceptance of this
testimony on the basis and for the purposes described above.
Moreover, there is ample precedent for the use of such
evidence. The magnitude of the taxes occasioned by the
Government's proposal is certainly an important element in
this case and all of the parties, including the Government,
should be anxious to provide the Court with the best available
information. The evident care and objectivity with which the
survey was conducted, and which were not criticized by the
Government's own statistical expert, assure a high degree of
trustworthiness. The record discloses that various agencies of
the Government itself have used surveys of this type and
indeed have employed this same organization, National
Analysts, Inc. Support is also found for the competence and
trustworthiness of sample evidence in the following court
decisions: United States v. Aluminum Company of America,
D.C.N.Y. 1940, 35 F. Supp. 820, 823-824; United States v.
United Shoe Machinery Corp., D.C.Mass. 1953, 110 F. Supp. 295,
305-306; United States v. E.I. Du Pont De Nemours & Co.,
D.C.Del. 1953, 118 F. Supp. 41; United States v. National
Football League, D.C.E.D.Pa. 1953, 116 F. Supp. 319; State
Wholesale Grocers v. Great A. & P. Tea Co., D.C.N.D.Ill. 1957,
154 F. Supp. 471. It further appears that in only one recent
case has such sample evidence been rejected and in that case
certain survey findings offered by the Government were
excluded because they utilized arbitrary methods and
classifications not recognized in the industry under study.
United States v. Brown Shoe Co., Inc., D.C.E.D.Mo., Civil No.
10527(3), 1958. Neither of these objections has application
to the survey of the National Analysts.
Mr. David M. Kennedy, Chairman of the Board of the
Continental Illinois Bank and Trust Company of Chicago and
also Chairman of its Trust Committee, presented an estimate
that beneficiaries of trusts in its Trust Department holding
du Pont stock were on the average in the 50% to 60% bracket.
Mr. Thomas H. Beacom, Vice President in charge of the trust
Department of the First National Bank of Chicago, estimated
that the beneficiaries of the trusts in his bank holding du
Pont stock would be taxable at an average rate of 51.7%.
Whatever disagreement may be had with these estimates
regarding the tax brackets of individual and trust beneficiary
stockholders of du Pont, there can be no doubt that du Pont
stock, selling for $200 a share or more (now $250 a share), is
held in many instances by people of substantial income, and
the tax impact would be very serious as to them. Seventeen
individual stockholders of du Pont and General Motors in
various walks of life testified regarding their family
holdings, their taxes and their intention as to selling or not
in case the Government plan were put into effect, as
Witness Residence Status Holdings or bracket Intention
Paul H. Ponca City, Retired 50 du P. $60 Sell both
Kuhns Okla. Cont. Oil 60 G.M.
F.A. Christensen Wash., D.C. Retired 600 du P. 47% — Sell both
Mfrs. Rep. $1,126
A.B. Moran Detroit, Investment 964 du P. 47% — Sell G.M.
Mich. broker $2,074.80
Claude E. Beaumont, Insurance 250 du P. 59% — Give away du
Holland Tex. agent 630 G.M. $761 P. to children
Mrs. W.C. Poughkeepsie, Wife of 15 du P. 30% Keep both
Bedell N.Y. surgeon 33 G.M. $21.52
Wm. F. Schererville, Du P. Dept. 131 du P. 26% — Sell G.M.
Schwenke Ill. supervisor $187
(about to retire)
Harold A. Highland, Du P. 41 du P. 26% — Keep both
Roscoe Ind. engineer $57
Raymond J. Griffith, Du P. Asst. 62 du P. 22% — Keep both
Govert Ind. Supt. $75
Norman R. Lansing, Du P. Chem. 30 du P. 22% — Keep both
Wallner Ill. Engineer $35
Henry L. Jersey City, Tax accountant 40 du P. 30% Sell 30 du P.;
Payte N.J. (retiring) 341 G.M. sell G.M.
undecided as to
Maxwell Fall River, Auctioneer 60 du P. 22% Sell both
Turner Mass. 210 G.M.
Elizabeth Chicago, Writer 630 du P. 30% Sell G.M.
Babbitt Ill. $896
Walter F. Greybull, Geologist 60 du P. 34% Undecided
Pond Wyo. 300 G.M.
Leon A. St. Petersburg, Retired 160 du P. 22% Undecided
Miller Fla. engineer 126 G.M. $158
Richard C. Louisville, Manufacturers 692 du P. 43% Sell G.M. to
Peter Ky. agent 412 G.M. plus 8% Ky. pay tax
Archie J. Chicago, Bank asst. 66 du P. 34% Sell G.M.
Marschak Ill. vice pres.
Harvey H. Chicago, Investment Trustee for 84% Sell du P.
Orndorff Ill. banker elderly woman $4,636.80
of 1,000 du P.