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January 24, 1961


The opinion of the court was delivered by: Campbell, Chief Judge.

This cause, consisting of a one count indictment, having come on for trial upon the stipulations, exhibits and briefs of the parties is presently before me for disposition. The indictment charges concerning the defendant Isidore Goodman that "during the year 1953 * * * owed to the United States of America income tax in the amount of $4,457.48 and who by law was required to pay such income tax on or before March 15, 1954 * * * then and there did willfully fail to pay such tax; in violation of Section 145(a) of the Internal Revenue Code of 1939, Section 145(a), Title 26, United States Code, presently Section 7203 of the Internal Revenue Code of 1954, Section 7203, Title 26, United States Code".

Prior to the assignment of this cause to my calendar from that of the Honorable Win G. Knoch upon his elevation to the Seventh Circuit Court of Appeals, several motions were heard and ruled upon by Judge Knoch. On April 18, 1957, he denied defendant's motion to dismiss the indictment in a memorandum order. On May 24, 1957, in a memorandum order, he denied defendant's motion for bill of particulars. On June 6, 1957, in a memorandum order, he granted and denied various motions of defendant for discovery. On July 25, 1958, in a memorandum order, he denied defendant's motion to suppress evidence based upon an alleged unlawful search and seizure.

The defendant now makes as part of his defense, three trial motions: (1) that the evidence in government exhibits 61 through 68 (transcriptions of the books and records of the law firm of Perlman, Goodman, Hecht and Chesler) should be suppressed, as having been taken by unlawful search and seizure; (2) that all testimony and exhibits relating to extra-indictment years should be stricken as immaterial and irrelevant; and (3) that government exhibits 101, 102, 103 and 104 should be stricken on the ground that they are incompetent, immaterial and irrelevant.

As to defendant's first motion, Judge Knoch has, in his able memorandum order of July 25, 1958, denied the same motion as a pre-trial matter after full hearing and consideration of the briefs of the parties. Defendant now urges that I "re-appraise" Judge Knoch's finding in light of the evidence now before me.

The facts surrounding the alleged unlawful search and seizure may be summarized from the testimony of five witnesses.

Bernard T. Hecht in abstract testified that: "I first met the Agents on August 8, 1955, when they came to the firm office. Our office had a general policy to cooperate with the Internal Revenue Service. I inquired specifically of the Agents for their identification and Mr. Sheehy showed me his credentials. I asked him to wait just a minute and I went inside and talked with my partners. Other than Mr. Goodman, my partners are Attorneys Chesler and Perlman. The three of us decided that we should make the books available to the Government. I went in and talked with Mr. Goodman. I told him that Sheehy and Conarchy were there. He objected to our showing them the books. I told him we were going to show them the books. He said, `Well, I object, but go ahead and do what you want to do.' I then returned to the outer office, introduced the agents to our bookkeeper, and instructed her to make available to the agents our books and records and a place at which to work. A day or so later, I introduced Mr. Goodman to the agents and left him talking to them." (Stipulation of Government's Witness "I").

Miss Margaret Code testified as follows: "On August 8, 1955, I was introduced by Mr. Bernard Hecht to Mr. Michael J. Sheehy and Mr. Kyran P. Conarchy as Special Agents of the Internal Revenue Service. Thereafter, and for some period of time, these two men came to the firm office, where they usually used the large conference room and from time to time I assisted them in selecting the books and records of the firm which they used and in carrying them into the conference room, and by explaining to them data supporting the entries which had been made in the various journals. Occasionally during the time when they were there, and when the large conference room was not available, Mr. Hecht gave them a large table at which to work, across from the entrance to Mr. Goodman's office." (Stipulation of Government's Witness "J").

The testimony of Isidore Goodman, the defendant, as to what happened is as follows: "Mr. Hecht was familiar with my tax difficulties even prior to 1950. I did not know of any general policy of our firm of cooperating with the Internal Revenue Service. When Agents Sheehy and Conarchy first came into the office, Mr. Hecht did not speak to me at the same time he spoke to the other members of the firm. He went into conference first with Chesler and Perlman without me. They agreed among themselves that they would supply the Government agents the books and records regardless of what I might say. Hecht testified that he asked the agents' permission to tell me that they were examining the books. He then introduced Miss Code and instructed her to make available our books and records." (Stipulation of Defendant's Witness "V").

The testimony of Special Agent Michael J. Sheehy is abstracted as follows: "When Agent Conarchy and I went to the office of the firm on August 8, 1955, I was met in the reception room by Bernard T. Hecht, a member of the firm. I identified myself to him and told him my purpose. He conducted us into a large conference room and had us wait there while he sought approval of Mr. Goodman to review the books and records of the firm. When he returned, as a result of what he told us, I understood that we had the approval not only of Mr. Goodman, but of all of the members of the firm, to proceed with reviewing the books and records of the firm. He then introduced us to the bookkeeper and told her to see that we had whatever we wanted of the books and records. We worked on the books from day to day at a place set up first in the conference room. We worked without interference, interruption, or restriction. On August 11, we talked with Mr. Hecht. He left and returned with Mr. Goodman. We identified ourselves to Mr. Goodman and asked him if he had any objection to talking with us at that time. He was cordial and cooperative. He sat down with us and we discussed fully with him the nonpayment of his income taxes. I told him that the records of the firm which we had reviewed showed that he had earned substantial income during the years which he had not paid. I asked him why. He stated that he liked to live high, that he did a lot of entertaining and that his living costs were high. I told him that I noticed many of the firm checks over a period of time, and particularly during the years 1951 through 1954, were going into the American National Bank and Trust Company and reflected amounts of his withdrawals from his distributive share of the firm. He told me that he maintained a bank account there under the name of his son. I asked him why and he said in order to avoid an Internal Revenue levy on his income; that by having the checks made payable directly to himself and depositing them directly in this account, an Internal Revenue levy would not withhold his funds from him. I turned to Agent Conarchy and asked if he had any questions of Mr. Goodman, and he said he did not. Whereupon, Mr. Goodman asked, `Is that all, gentlemen?' I said, `Yes'. Mr. Goodman replied, `Very well and goodbye, gentlemen', and he left. During the first phase of our investigation, Mr. Goodman was represented by Attorney Bernard Sokol, and later by Attorney Edward J. Calihan. While Mr. Sokol was the attorney, everyone was congenial to me and Mr. Conarchy as we went and came in and out of the office. In the mornings when Mr. Goodman would see us, he would speak saying, `Good morning', and, on one occasion when we were entering the office in the morning, he held the office door open for us to enter. Part of the time I worked at a table just outside his office door. Later while Mr. Calihan was his attorney, I discovered that certain work sheets were missing. One of the members of the firm, not Mr. Goodman, told me that they were in Mr. Calihan's office, Mr. Goodman's attorney. In a short time, these work sheets were made available to me for us." (Stipulation of Government's Witness "R").

The testimony of Special Agent Kyran P. Conarchy confirms that of Agent Sheehy and goes on to explain an interesting circumstance as follows: "We went into the firm office on August 8, 1955. On August 22, 1955, Attorney Sokol came to our office, that is the Office of the Intelligence Division of Internal Revenue, and introduced himself to us as the attorney for Isidore Goodman. We had a conversation, and, as a result of this conversation, we looked through the records in our office and found the original of a General Power of Attorney appointing Mr. Sokol and signed by Isidore Goodman. This Power of Attorney was dated August 19, 1955, three days earlier. It authorized Mr. Sokol to act for and on behalf of Mr. Goodman in connection with all matters involving taxes for the years 1945 through 1953. With this General Power of Attorney was a copy of a Power of Attorney for each of the years 1945 through 1953. The original of these yearly Powers of Attorney were located by us in our office a few days later, on August 30. As a result of our conversation with Mr. Sokol and these Powers of Attorney, we continued on our examination of the records of the firm with what we considered blanket authority from Mr. Goodman's attorney. A year later, on August 14, 1956, we had a conversation with Mr. Sokol and he forwarded to the Internal Revenue Service a letter stating that he no longer was acting as counsel for Mr. Goodman and withdrawing the Powers of Attorney which had been filed with us." (Stipulation of Government's Witness "U").

There is no dispute among the witnesses as to what happened. It is clear that when the Agents arrived on August 8, 1955, at the office of the firm of Perlman, Goodman, Hecht and Chesler, they were met by Mr. Bernard T. Hecht of the firm in the reception room. They identified themselves as Special Agents of the Internal Revenue Service, investigating the willful failure to pay taxes of Isidore Goodman. They asked to see the records of the firm. Mr. Hecht acknowledged his understanding of their mission and asked them to wait in the conference room while he conferred with Mr. Goodman. He went inside the suite and talked first with Mr. Perlman and Mr. Chesler. The three of them concluded that in this instance the firm should follow its established practice of full disclosure to and cooperation with the Internal Revenue Service. He then conferred with Mr. Goodman and advised him of this decision of the other members of the firm. Mr. Goodman objected but said, "Go ahead and do what you want to do". In other words, Mr. Goodman did not agree with the other three members of the firm that there should be full disclosure, but he did assert that the action of the firm should be unitary and reflect the decision of the majority. His subsequent conduct confirms the fact that his reservations had, by his own decision, been subordinated to the desires of the majority of the firm. He at no time ever communicated an objection to the Agents, nor asked that any of his partners communicate such objection, and his every act was in resignation to the firm's decision to permit a full review of the firm's records. On one occasion, he conferred with the Agents while they were reviewing the firm's records and answered questions which they asked him concerning matters they found in the records. He was at all times cordial in his conduct towards them. During the early stages of their investigation, his attorney, with Power of Attorney signed by him, confirmed for him a policy of full disclosure, and under this confirmation the Agents proceeded with a review of the records of the firm for more than a year after their first appearance at the firm's office.

Based upon these findings, I conclude as Judge Knoch has already done, that defendant voluntarily waived any claim to privacy he might otherwise have had with regard to government exhibits 61 through 68. Zap v. United States, 328 U.S. 624, 628, 66 S.Ct. 1277, 90 L.Ed. 1477. Though United States v. Sferas, 7 Cir., 210 F.2d 69 does not involve transcription of books and records of a law firm, I hold that the principle there stated, namely, that where two persons have equal right to the use or occupancy of premises, either may give consent to a search, and any evidence disclosed can be used against either, is applicable here. Mr. Hecht, the partner in control of the premises gave the agents express consent to review the firm's books and records. I further find that the rationale of United States v. White, 322 U.S. 694, 64 S.Ct. 1248, 88 L.Ed. 1542 (also see McPhaul v. United States, 364 U.S. 372, 81 S.Ct. 138, 5 L.Ed.2d 136), is here applicable in view of the evidence before me concerning the operation of the partnership. To this extent, In re Subpoena Duces Tecum, 81 F. Supp. 418 is not persuasive.

Accordingly, the motion of defendant to suppress government exhibits 61 through 68 is denied.

As to defendant's second motion, I have before considered and rejected similar arguments. United States v. Bridell, 7 Cir., 180 F. Supp. 268, 273.

Accordingly, the motion to strike all testimony and exhibits relating to extra-indictment years is denied.

As to defendant's third motion, I find, after full consideration of the exhibits in question and the arguments of the parties, that the exhibits are competent, material and relevant.

Accordingly, the motion of defendant to strike government's exhibits 101, 102, 103 and 104 is denied.

The simple issue in this cause is whether or not the failure of defendant to pay his income taxes for the year 1953 at the time required by law was willful. The meaning of the word "willful" was before me in United States v. Bridell, supra, with regard to Section 145(b) of the Internal Revenue Code of 1939, 26 U.S.C.A. § 145(b). There I stated at pages 271 and 272 as follows:

    "As to the meaning of the word `willful,' much has
  been written. In United States v. Murdock,
  290 U.S. 389, at pages 395, 396, 54 S.Ct. 223, at page 226, 78
  L.Ed. 381, the Supreme Court stated:
    "`The revenue acts command the citizen, where
  required by law or regulations, to pay the tax, to
  make a return, to keep records, and to supply
  information for computation, assessment, or
  collection of the tax. He whose conduct is defined as
  criminal is one who "willfully" fails to pay the tax,
  to make a return, to keep the required records, or to
  supply the needed information. Congress did not
  intend that a person, by reason of a bona fide
  misunderstanding as to his liability for the tax, as
  to his duty to make a return, or as to the adequacy
  of the records he maintained, should become a
  criminal by his mere failure to measure up to the
  prescribed standard of conduct.'
    "In Spies v. United States, the Supreme Court
  stated at pages 497, and 498 of 317 U.S. [492], at
  page 367, of 63 S.Ct. [364, 87 L.Ed. 418]:
    "`The difference between willful failure to pay a
  tax when due, which is made a misdemeanor, and
  willful attempt to defeat and evade one, which is
  made a felony, is not easy to detect or define. Both
  must be willful, and willful, as we have said, is a
  word of many meanings, its construction often being
  influenced by its context. * * * It may well mean
  something more as applied to nonpayment of a tax than
  when applied to failure to make a return. Mere
  voluntary and purposeful, as distinguished from
  accidental, omission to make a timely return might
  meet the test of willfulness. But in view of our
  traditional aversion to imprisonment for debt, we
  would not without the clearest manifestation of
  Congressional intent assume that mere knowing and
  intentional default in payment of a tax where there
  had been no willful failure to disclose the
  liability, is intended to constitute a criminal
  offense of any degree. We would expect willfulness in
  such a case to include some element of evil motive
  and want of justification in view of all the
  financial circumstances of the taxpayer.'
    "In Holland v. United States, 348 U.S. 121, at page
  139, 75 S.Ct. 127, at page 137, 99 L.Ed. [150] 731,
  the Supreme Court stated:
    "`A final element necessary for conviction is
  willfulness. The petitioners contend that willfulness
  "involves a specific intent which must be proven by
  independent evidence and which cannot be inferred
  from the mere understatement of income." This is a
  fair statement of the rule. Here, however, there was
  evidence of a consistent pattern of under reporting
  large amounts of income, and of the failure on
  petitioners' part to include all of their

  income in their books and records. Since, on proper
  submission, the jury could have found that these acts
  supported an inference of willfulness, their verdict
  must stand.'
    "In United States v. Glascott, 7 Cir.,
  216 F.2d 487, at page 490, Judge Schnackenberg of our Court of
  Appeals stated:
    "`The key word in this statute is "willful". It is
  an essential ingredient of the crime. Willful is
  distinguished from accidental. Under this statute
  that which is willful is an actual, intentional
  wrongdoing with the purpose of evading the tax. It is
  not established by negligence, however gross.
  Willfulness is a subjective state in most instances.

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