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United States v. Clancy

March 24, 1960


Author: Steckler

Before HASTINGS, Chief Judge, SCHNACKENBERG, Circuit Judge, and STECKLER, District Judge.

STECKLER, District Judge.

Thomas D. Clancy and James F. Prindable, two of the named defendants, were convicted in the district court of making a false statement of a material fact to agents of the United States Treasury Department, Internal Revenue Service, in violation of 18 U.S.C. § 1001; of willfully attempting to evade a substantial amount of wagering excise taxes due and owing by virtue of Chapter 35, subchapter A of the Internal Revenue Code of 1954 (26 U.S.C. § 4401), in violation of 26 U.S.C. § 7201; and of conspiring to violate that subchapter, in violation of 18 U.S.C. § 371. Donald Kastner, the other defendant, was convicted on the latter two counts, but was found not guilty of the false statement count. Trial was by jury.

Defendants raise numerous points on appeal, all of which can be classified under the following broad headings:

1. The legality of the search and seizure of defendants' books and records.

2. Whether the district court erred in overruling defendants' motions to dismiss the indictment on the grounds that the grand and petit juries were illegally drawn and constituted.

3. Whether the court committed reversible error in refusing to ask certain questions on the voir dire examination of petit jurors.

4. Whether the court erred in admitting certain exhibits into evidence, and in admitting testimony as to statements of individual defendants without cautionary instructions to the jury.

5. Whether the court erred in refusing to order the production of reports of federal agents for use by the defendants during cross-examination, pursuant to 18 U.S.C. § 3500.

6. Whether the court erred in refusing to order acquittal both before and after the verdict.

7. Whether the court erred in instructing the jury and in refusing to give certain instructions tendered by defendants.

8. Whether the court erred in refusing to grant a new trial after hearing evidence of possible misconduct on the part of a petit juror.

In order to resolve these issues, a somewhat detailed analysis of the record is essential.

There is evidence in the record that the defendants, Thomas D. Clancy, James F. Prindable and Donald Kastner, were partners in the North Sales Company, and as such were engaged in accepting wagers, principally on horse races, in East St. Louis, Illinois. The defendants, doing business as the North Sales Company, by Thomas Clancy, applied for and received the special tax stamp for the fiscal year ending June 30, 1957 as required by 26 U.S.C. § 4411. In the special tax return and application for registry-wagering, the business address of the company was designated "at Large - 2401 Ridge Ave. - E. St. Louis, Ill." However, when the application was produced at the trial by a government witness, the words "at Large" had been penciled through.*fn1 The defendants filed monthly tax returns of wagers accepted by them and paid the tax reported to be due thereon to the District Director of Internal Revenue at Springfield, Illinois. Defendants received a letter from H. J. White, District Director, dated April 17, 1957, which informed them that a recent examination of their tax liability for the years January, 1955 through December, 1956, indicated that no change was necessary to the tax reported and that the returns would be accepted as filed.

The record indicates that during March, April, and early May of 1957, federal agents of the Internal Revenue Service observed activities which led them to believe that a gambling operation was being conducted on the premises located at 2300 and 2300A State Street, East St. Louis, Illinois. The first floor of the premises was occupied by a business known as "Zittel's Tavern," and the second floor, 2300A, was an apartment. According to the affidavit for search warrant, Agent Johnson placed wagers with "Heine" and "Murphy" at Zittel's Tavern, the latter being a bartender there, and observed Heine walk to a doorway behind the bar which leads upstairs over the men's toilet and place money envelopes in a stairwell area and close the door. Heine later picked up an envelope from behind the door which contained Agent Johnson's winning from a prior bet. Johnson also observed scratch sheets, racing forms, money and 4-inch by 6-inch paper pads on the bar, back bar, under the bar, on tables, in the stairwell and in the safe. Agent Mueller observed a man carrying a sack, similar to sacks furnished by banks to carry money, enter the tavern, speak to Murphy, the bartender, and go behind the bar and through a door which leads upstairs. Agent Yerly observed Charles J. Kastner, Jr., brother of the defendant Donald Kastner, and the defendant Prindable, both well known bookmakers, enter Zittel's Tavern at 7:09 and 7:17 a. m., respectively, on May 1, 1957. Agent Ryan entered the tavern shortly after Charles J. Kastner, Jr. on that morning and saw Prindable enter and go behind the bar and through a door that leads upstairs. Agent Buescher interviewed two well known bookmakers in Collinsville, Illinois, and was told by them that they picked up horse bets and ordinarily received telephone bets at Blaha's Tavern in Collinsville. Agent Busch examined a transcript of toll calls pertaining to Blaha's Tavern, using Illinois Bell Telephone records, and established that between August 11, 1956 and January 25, 1957, twenty-one (21) telephone calls were made between Blaha's Tavern and 2300A State Street, East St. Louis. The telephone at 2300A State Street was subscribed to by one John Leppy. Agent Yerly examined the application for the occupational tax stamp of Charles J. Kastner, Jr. and Prindable, which stated that their business address was 2401 Ridge Avenue.*fn2 Joseph M. Heckelbech, Chief of the Collection Division in the office of the District Director at Springfield, examined the records in his custody and determined that no gambling stamp had been issued to John Leppy, Henry D. Zittel, or any other person at 2300A State Street; and that no wagering excise tax returns had been filed by anyone at that address.

Upon this evidence, Agent Johnson applied to the district court for two search warrants, one for the first floor, and the other for the second floor of the building at 2300 and 2300A State Street. (Here on appeal we are concerned only with the search of the second floor, 2300A.) The part the other agents performed in the investigation was set forth in their separate affidavits which were, by reference, made a part of Agent Johnson's affidavit for the search warrant for the second floor. In addition, Agent Edwards corroborated much of the statement of Agent Yerly. The affidavit of Agent Johnson for the search warrant for the second floor states, in part, that he is positive the premises.

"* * * are being used in the conduct and carrying on of a 'Wagering Business,' * * * against the laws of the United States, that is to say, the offense of wilfully attempting to evade and defeat a tax imposed by t he Internal Revenue Laws * * * and the payment thereof, to wit, the special tax of $50 a year to be paid by each person engaged in the business of accepting wagers * * *; and the offense of wilfully failing to prepare and file with the district Director * * * the Special Tax Return and Application for Registry-Wagering (Form 11-C) * * * in the name of the operator of said business, namely, one John Doe * * *."

The district court, satisfied that there was probable cause to believe that a wagering business was being conducted on the premises described in violation of the said laws of the United States, issued the search warrants requested on May 5, 1957. The second floor warrant was addressed to "any Special Agent of the Intelligence Division of the Internal Revenue Service of the United States of America," and authorized the seizure of:

"* * * divers records, to wit books, memoranda, tickets, pads, tablets and papers recording the receipt of money from and the money paid out in connection with the operation of a wagering business on said premises, such files, desks, tables and receptacles for the storing of the books, memoranda, tickets, pads, tablets and papers aforesaid, and divers receptacles in the nature of envelopes in which there is kept money won by patrons * * * and divers other tools, instruments, apparatus, United States currency and records * * *."

On May 6, 1957, Agent Kienzler, accompanied by several other agents, executed the second floor search warrant and seized defendants' notes, books and records, currency in excess of $2,160, racing forms, scratch sheets, telephone bills, a check book, and several metal boxes. Defendant Donald Kastner was present in the apartment when the search was made and informed the agents that he, Clancy, and Prindable were partners in the North Sales Company and that the partnership had a tax stamp, which Clancy took care of. Agent Kienzler testified that he did not personally determine at that time whether the North Sales Company actually had a tax stamp, but obeyed the command of the warrant in searching and seizing the items described. Apparently no arrests were made at the time of the raid.

Subsequently, information obtained from the seized records was presented to a grand jury which, on July 25, 1957, returned a five-count indictment against the defendants. The first three counts charged Clancy, Kastner and Prindable severally with making false statements to agents of the Internal Revenue Service in violation of 18 U.S.C. § 1001.*fn3 Count IV charged each defendant with an attempt to evade a substantial amount of wagering excise tax during the fiscal year ending June 30, 1957. In support of this count specific unlawful acts were alleged.*fn4 Count V was the conspiracy count and alleged substantial y the same acts as Count IV.

The defendants pleaded not guilty on July 30, 1957, and on August 14th following, filed a joint motion to dismiss the indictment and a motion for return of property and to suppress evidence. As far as relevant here, the motion to dismiss was based upon an allegation that the members of the grand jury were not "selected, drawn or summoned according to law." The motion to suppress attacked the affidavit of Agent Johnson as based on hearsay; the warrant's description of the articles to be seized as too general; the existence of probable cause; and the seizure of allegedly private books and papers. Defendants also filed a motion to inspect the transcript of evidence and record of the foreman of the grand jury.

In an entry dated July 25, 1958, the district court denied all three of the above motions. The court held, inter alia, that the charges in respect to the grand jury were mere "naked allegations"; that probable cause did exist; and that the items seized were specifically described in the warrant and were not private books or papers, but rather "property used in the commission of crime."

On May 8, 1959, defendants filed an amended motion to dismiss with an affidavit of the jury commissioner, Bohlen J. Carter, attached.In the affidavit the jury commissioner states that names of prospective jurors were solicited from various persons, including school superintendents. When the juries were drawn, he and the clerk, Douglas H. Reed, separately took a handful of cards from the box and sorted them according to the distance they lived from the place at which the grand and petit juries were to function, namely East St. Louis, Danville, Cairo, or Benton, Illinois. Only those thought to live within a reasonable distance would be selected.*fn5 The other names would be placed back in the box. Carter also stated that he did not know how many names were in the box, but estimated about 200 or possibly 400 to 500. Defendants complained that the grand jury was not selected according to law, 28 U.S.C. § 1864, and that it was not selected by chance, but by "whim and caprice."

The court denied the amended motion to dismiss on the grounds that the grand jury had been properly drawn; that even if there were irregularity, defendants had failed to show prejudice or the violation of any constitutional rights; and that the motion was filed too late according to local rules.

During the course of the trial, the court admitted the search warrant and return (Government Exhibit 29a) and the various records and articles seized in the raid (Government Exhibits 54 through 112) into evidence. Defendants objected on the basis of an illegal search and also on the ground that relevancy and materiality had not been shown. Agent Kienzler merely stated that these were the articles seized in the raid. Later, however, the chain of custody of the exhibits was established and Agent Mochel testified that he had used Exhibits 54 through 79 to determine that the total amount of bets actually placed with defendants in March, 1957, was $103,441.30.

Defendants also objected to the admission into evidence generally of statements allegedly made by them individually to government agents. Defendants claim that such statements were admissible only as against the one making them, since a conspiracy had not yet been established, and, as to the statements of defendant Kastner, that any conspiracy, if it had existed, was terminated when the statements were made.

Agents Buescher and Mochel testified that they interviewed Clancy on December 13, 1956 in the office of Press Waller. They testified that during the interview Clancy identified the other defendants as partners in the North Sales Company; stated that they had no particular place of business; and that they had only two agents. The agents also testified that Clancy stated that they did not use the telephone, but went from place to place accepting wagers. The statement made by Clancy during this interview with respect to not ...

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