Shotwell Mfg. Company v. United States

PETITIONER:Shotwell Mfg. Company
RESPONDENT:United States
LOCATION:Bay County Circuit Court

DOCKET NO.: 16
DECIDED BY: Warren Court (1962-1965)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 371 US 341 (1963)
ARGUED: Oct 11, 1962 / Oct 15, 1962
DECIDED: Jan 14, 1963

Facts of the case

Question

  • Oral Argument – October 15, 1962
  • Audio Transcription for Oral Argument – October 15, 1962 in Shotwell Mfg. Company v. United States

    Audio Transcription for Oral Argument – October 11, 1962 in Shotwell Mfg. Company v. United States

    Earl Warren:

    Number 16, Shotwell Manufacturing Company, et al., Petitioners, versus United States.

    Mr. Christensen.

    George B. Christensen:

    Mr. Chief Justice, if it please the Court.

    The tragic tale that’s unfolded by this record is I think one that with tax your credulity where we not able to document it, so well as we assert we have documented it.

    And once it’s understood it’s a — not only tragic but it’s a dark and frightening tale but for two things, those two things are first, your decision in the Jencks case in 1957 that gave us the tools to work with at least to start the investigation by the production of witness statements and that ultimately led to grand jury testimony that disclosed how this record at least upon the remanded proceeding had been put together.

    And that in turn led us to the evidence of the perjury that had been offered against the citizens we represent upon their original jury trial.

    And of course the second thing that relieves the tragedy of this case that we assert brings a blush of shame to American jurisprudence is the right to apply here for certiorari and fortunately to have obtained it.

    Now, the case is complicated.

    I fear that you are going to have the greatest of difficulty in following the facts.

    Basic to an understanding of it, I think is this, this was a criminal indictment or evasion of a portion of the income taxes of the Shotwell Manufacturing Corporation, a corporation, for the years 1945 and 1946 indictment alleged some $500,000 of gross income or of net income was unreported and that the resulting tax by the time of trial, they claim they had there shown time of trial not $500,000 but approximately $454,000.

    Now that mind you is the year 1953 when the trial took place.

    Now, there’s a greatest difference between that figure and something that had occurred years before and which was in large part, subject to Justice Harlan’s opinion when we were here the first time.

    Bearing in mind that this alleged evasion is assumed to have occurred in 1945 and 1946 and that the prosecutors delayed until the last day before the statute ran in 1952 before pitching in an indictment.

    The fact is that in early 1948 when the Treasury so-called “voluntary disclosure program” was in effect.

    These petitioners went to Ernie Sauber then assistant deputy collector in Chicago and made a voluntary disclosure.

    Now, mind you, here is where mentally you have to shift gears and you get in to some of the confusion in which this entire case evolves.

    The Shotwell Company made candy.

    It made a variety of candy that instead of using corn — instead of using cane sugar, used corn syrup as its principal sweetener.

    And in the year 1945, after the V-E Day, the fact was, and there is no dispute about this, that the Office Price Administration’s price ceilings upon corn, raw corn, corn in the bin in the hands of the farmer, became totally out of balance with respect to the price on hogs.

    And it was of course far more profitable then for a farmer instead of selling his corn to feed it and sell his hogs and there came a time in the late fall of 1945 and I speak from the record that any time I depart from the record, I will tell you so.

    When cash corn virtually disappeared from the greatest corn market in the world, the Chicago Board of Trade, the Commodity Credit Corporation either in late 1945 or early 1946, I forget which itself went out on the so-called black or gray market and began paying anywhere from 25 cents to 50 cents a bushel upward for corn.

    Well, what went on, I don’t but obviously, the war was over, the period of price controls was about over.

    They were not adjusted until some time in about June 30th, 1946.

    That is near enough when the ceiling upon corn was removed, it became plentiful and after that, there became plenty of corn syrup and on we went in our way.

    Now, during that time, it is our contention that to get cash, it did not show upon Shotwell’s books so that we wouldn’t be caught by the OPA inspectors.

    We sold some candy.

    A character by the name of Lubben whom you’ve met before, not merely in your first go-around with this case but in the Long and Giglio cases arising out of New York.

    We sold candy to him in which he paid in addition to the ceiling invoice price of the candy, a premium per pound.

    A great dispute as to what the amount of that premium was.

    We then took that cash, didn’t record it, said nothing about it and we used that in turn to pay elevator operators or so-called “bird dogs”, you would pay them the premium price upon corn and they would sell and then make corn available to corn products refining, Hubinger, Penick and Ford, whoever the corn refiner was.

    George B. Christensen:

    They grind the corn and they in turn would sell you corn syrup at ceiling.

    Now, this has all been done secretly.

    As the fellow Lubben fell into the greatest of difficulties as he well could with the characters he was associated with that reflected by your record in United States versus Long and Giglio and Justice Brennan knows that experience with Mr. Lubben in New Jersey that led to a disbarment there and a rectification of a distillery swindle he got into later on.

    He wanted a loan and my corporate client sends its outside auditor.

    He used to take a look at Lubben’s books and to see what shape he was in.

    Should we loan him some money?

    He’d go into the candy business.

    This auditor, a gentleman by the name of Busby, an auditor, a public accountant of unquestioned integrity, went out there and he came back and he saw our clients Harold Sullivan and Byron Cain and he said he’s in hopeless shape, don’t loan in any money and what’s more?

    His books would indicate that he’s been paying you some over ceiling premiums back in 1945 and 1946.

    And you never told me anything about that.

    I made your tax returns.

    What are you guys been up to?

    And Lubben had with him on this trip, and this becomes crucial, Shotwell’s own comptroller or head bookkeeper, a fellow by the name of Graflund.

    Earl Warren:

    I thought he was Busby.

    George B. Christensen:

    I beg your pardon, thank you sir.

    Busby had with him this gentleman by the name of Graflund.

    And Graflund on this trip, told him yes and as he put it in testifying to United States grand jury, “I didn’t spare the horses in telling you.”

    They returned to Chicago on the 11th of January and Busby goes to his clients and says, “What are you been up to?”

    So you’re in tax difficulties and this is a fine kettle of fish and they say to one in substance, “Look, we took the money in.

    We spend it for corn, what’s the tax problem?”

    He said, “The tax problem is this, that under Treasury regulations, what you acquire or receive is premium payments, is gross income that you must account for.

    What you may have spent over ceiling for raw material cannot be taken as part of the cost of goods or any other, for our purposes, let’s say, deductible item.

    You are going to be taxed upon the gross amount.”

    He then told them about the voluntary disclosure program.

    Busby is not a lawyer and he had never made a voluntary disclosure although he knew about it.

    And the essence of the voluntary disclosure program and you will find at the back end of both our petition for certiorari in our main brief, the official statements of it.

    It never came out in a regulation but pronouncements from the Secretary of Treasury as the general counsel of the Treasury and they were in substance, you’ve got something wrong with your tax return.

    Come in and tell us about it.

    You’ll be taxed, you may get civil penalties but there will be no criminal prosecution.

    This is the way to avoid going to jail.

    George B. Christensen:

    It was part of a concerted right during those years to get in money, tax money, resulting from precisely transactions of this kind.

    It was feared that much of it would escape taxation.

    They said, Busby find out how to do it.

    Busby went to Sauber, he talked with him without disclosing the name of his client, simply finding out what to do and putting it up as a hypothetical case.

    And then he went on and reported to his clients, “Yes, we can do it, it will be all right.

    All right, go in and disclose and tell them who we are.”

    And that was done.

    Now, I’m not trying to be precise on dates.

    I will get to that and that was part of the controversy when we were here before.

    They said, “We don’t know what we did with this money.

    We can’t prove it.

    We didn’t want to know too much about these people, it was dirty business.”

    And the deputy collector said, “As Treasury regulations at that time 1948 required, you will get no credit for a dime that you spend over ceiling no matter how you documented or proved it.

    It makes no difference whether you know what you did with this money or who you paid it to you aren’t going to be able to take it as a deduction or an offset or as a part of your cost to goods.

    Don’t bother to file an amended return, you apparently haven’t got accurate records, assemble such information as you can, from memory, from notes, from what you can gather here, there and the other places, an agent will be out to investigate and turn it over to him.”

    Potter Stewart:

    Whose words are you paraphrasing now, the deputy collector?

    George B. Christensen:

    Well, I am — the Deputy Collector’s words, the words of Busby who testified with the same conversations and the words of Cain upon the original suppression hearing in 1952.

    They’re all to the same general effect, Mr. Justice.

    Earl Warren:

    No contradictory testimony on that?

    George B. Christensen:

    I say not.

    No contradictory testimony.

    The Government claim before it had circumstances inconsistent with that.

    Byron R. White:

    What did you say the date was?

    George B. Christensen:

    January to March of 1948.

    Byron R. White:

    The Secretary had several conversations or with one?

    George B. Christensen:

    It occurred over three conversations, possibly four.

    My memory isn’t sharp enough to answer that any more accurately than that Mr. Justice.

    He first went in and put it hypothetically.

    How do I do this?

    What do I do?

    George B. Christensen:

    And he went back and he reported to Cain and Sullivan, “This is what you can do and it will probably be alright.”

    They said, “Alright.”

    Go in and disclose.

    He went in and ultimately he took Cain who was the president of the company and the two of them talked.

    Now —

    Earl Warren:

    Cain and Sullivan were told?

    George B. Christensen:

    Cain was the president of the corporation.

    Earl Warren:

    Oh yes.

    George B. Christensen:

    And Sullivan was the general counsel and treasurer or vice president, I forgot which.

    And they or their families were the principal stockholders of the Shotwell Company.

    Now, this was done and then they prepared.

    I don’t know whether you have before you the petitions for certiorari but we’re talking about suppressing of documents and the copies of these documents that appear in the photo stacks or the Xerox copies at the back end of the petitioner for certiorari are the most legible reproductions of it.

    These are what are known as the disclosure documents, this with some others but this is illustrated.

    (Inaudible)

    George B. Christensen:

    Those were filed in August of 1948 when the agent came out.

    Now, they told him, “We don’t know what to do”.

    William J. Brennan, Jr.:

    (Inaudible)

    George B. Christensen:

    Yes.

    William J. Brennan, Jr.:

    (Inaudible)

    George B. Christensen:

    Yes, I am.

    Now they told him, “We don’t know.

    We don’t have any records and we know this fellow Lubben is going to claim everything and of course they knew that whatever they said about these transactions would be checked by the Treasury with whatever Lubben claimed and we know we had trade deals with this fellow in which he would go out and locate some fellow who had an oversupply of chocolate or milk or whatever it may be and we trade him some candy at ceiling for him making oral goods.

    We will disregard all of that.

    We will consider that on every town the candy we saw Lubben, we got the highest possible rate of overage that he ascribes to it.

    We will try to make such a computation and when we come up with that, we’ll say, that’s our best recollection and you tax us, you tax us.”

    So they prepared these things.

    They got to hold to some of Lubben’s record in January or February.

    They found Lubben who’d gotten in difficulty, had some of his records in the hands of a public accountant, (Inaudible) in New York.

    They got his things.

    They got themselves together but they weren’t dragged, didn’t go on all the time, Busby who was in charge of it, went away on vacation.

    George B. Christensen:

    And finally along in June, the Treasury began investigating Mr. Lubben in New York.

    New York Treasury agents began investigating Lubben.

    And so New York said to its brothers in Chicago, “Go out and see what Shotwell’s record show about Lubben.”

    That was on the 21st day of June 1948.

    John M. Harlan II:

    Who is the agent that was involved in that?

    George B. Christensen:

    That was a fellow by the name of Sam Krane and he also then, at a subsequent date, he came, the chief agent for the intelligence section who investigated our case.

    But on June 21, 1948, Sam Krane was simply running an errand for his counterparts in New York to get confirmatory information from Shotwell for the use of the New York agents in investigation.

    John M. Harlan II:

    What was the official relationship between Krane and Lima — agent Lima who came into the picture later?

    George B. Christensen:

    Well, agent Lima —

    John M. Harlan II:

    Lima —

    George B. Christensen:

    That’s the way he pronounced it.

    Agent Lima is simply an ordinary agent.

    Krane is in the so-called detective intelligence section they worked in different departments.

    Now, they prepared these things then Cain finally said to his people “get together”.

    They owned an interest in the Belden-Stratford Hotel.

    He said, “Get out to the factory.

    Come out to the hotel.

    Let’s sit down and everybody get together and get this over with.

    There’s going to be an agent out here and I want to know where we stand.”

    In the meantime, early in June and this came out on the remanded hearing you ordered.

    Harold Sullivan had been in a hospital and there was another fellow from the Treasury and he’d known for quite awhile was a room or two away from him.

    And on the 4th of June, Harold is getting early to leave the hospital and this fellow Horrigan had just come in.

    They had the same doctor and he said, “Look, I’ve got your friend Horrigan down the hall,” and Harold said, “Well, I’ll go down and say goodbye to him before I go.”

    And he gets in there and he loans him a portable radio and he says, “What’s the trouble with this fellow Sullivan?

    Why doesn’t he send an agent out to investigate?”

    And Horrigan says, “Well, I’ll jog him up.”

    And so Horrigan calls up Sullivan and says, “What are you doing?”

    Sullivan is in here complaining to me.

    He says, “Oh well, you know things take time.”

    Or that is — I haven’t got it quite right but that is substantially it.

    George B. Christensen:

    Now, in any event, they prepared these computations and you will see if you examine, they start out sales is recorded in the Shotwell records and down there, if it please the Court, is every transactions, every sale ever called in to question in this case.

    And down there, there may be a clerical error here and there but for all practical purposes on there is every scrap of information of our books digest.

    William J. Brennan, Jr.:

    (Inaudible)

    George B. Christensen:

    Yes.

    William J. Brennan, Jr.:

    (Inaudible)

    George B. Christensen:

    Yes.

    That would be — now, if I may, I’m not referring on each one of the sheets Mr. Justice Brennan.

    If I may, let me switch over before I answer that to the other side of the sheet.

    And you’ll see that as headed “memo taken from Lubben record”.

    Now, you’ll recall, I told you they tried to find out what Lubben —

    William J. Brennan, Jr.:

    (Inaudible)

    George B. Christensen:

    Well, I’m looking at 86 but it’s the same on 87.

    It’s —

    William J. Brennan, Jr.:

    (Inaudible)

    George B. Christensen:

    And they took the way that Lubben appeared to reflect on such records as he had his counterpart at these transactions.

    Now, then if I may go back to get to your question, you’ll see under memo taken from Lubben record, his record, and you compare that with our figure on the first line of the page I’m looking at is $2600 item.

    Lubben showed it as a $6100 item.

    And then we show he added some $34,000.

    Now, that is taken — that difference is translated into pounds and that furnishes the per-pound figure shown on Shotwell on recorded per-pound upon the assumption of Lubben’s claims, you would add that much per-pound.

    Now, bearing in mind and it’s found that Lubben’s testimony was exaggerated on the new hearing you ordered.

    And Lubben was charging off —

    William J. Brennan, Jr.:

    (Inaudible)

    George B. Christensen:

    Certainly.

    William J. Brennan, Jr.:

    (Inaudible)

    George B. Christensen:

    Yes sir.

    William J. Brennan, Jr.:

    (Inaudible)

    George B. Christensen:

    Added from Lubben records.

    William J. Brennan, Jr.:

    (Inaudible)

    George B. Christensen:

    Yes.

    Those were — see this is in 1943 or 1944 whether our records weren’t in existence.

    George B. Christensen:

    These were sales he showed he’d receive from us that didn’t — weren’t reflected on our records.

    William J. Brennan, Jr.:

    Would that mean that you have (Inaudible)

    George B. Christensen:

    $16,336.

    William J. Brennan, Jr.:

    (Inaudible)

    George B. Christensen:

    I beg your pardon.

    Well, judge, that is — that’s the total of the whole page, I think.

    No, I don’t know.

    William J. Brennan, Jr.:

    (Inaudible)

    George B. Christensen:

    I’ll get an explanation for that.

    I can’t make that for you at the moment.

    Arthur J. Goldberg:

    Mr. Christensen, before you viewed the record, did you consider it to show the events, the legend you made out by Shotwell as far as to Sullivan?

    George B. Christensen:

    I’m coming to that, if I may, Mr. Justice Goldberg.

    Now, accepting our thesis for a moment that by taking his figures that from the very first moment, we told Sullivan and everybody were wrong but we said, “We want this immunity.

    We want no fight with this man.

    We contest his figures.

    We’re going to have a tax hearing or some kind and these people did not want any record in Chicago.

    They’d been in the black market even to this extent.

    We’ll take whatever he said.”

    And by — to that extent and for purposes of a civil settlement in gaining immunity, saying, “We’ll take Lubben’s figures.

    They then show in this first sheet at 85 is a summary or a recapitulation of the big sheets.

    They show on there accounts receivable or income that was far greater than the truth.

    Now, they knew they weren’t going to get any credit for whatever they’d spend out and they couldn’t make a truthful account having been willing to confess or admit or say for this purpose, “Alright, we’ll take his figures”.

    They couldn’t make an accurate account of disbursements.

    If you pay me a thousand dollars and I admit I got $5,000, I can’t show anybody in God’s world from now to the end of eternity how I spent that other $4,000.

    These figures were never filed as a deduction, as an amended return or any benefit claim on them whatsoever as you read Judge Nordbye’s opinion, you will find that it is the bottom half of this so-called cash account down here that is used to condemn our people.

    Those figures were never filed with the Government.

    These were part of Busby’s work papers turned over to agent Lima when pursuant to the disclosure he came to make his own investigation.

    My people went ultimately as this investigation went on and on and on and they say, “Who do you pay this black market money to?

    Who should buy it for and from?”

    The Court of Appeals found the first time they were wanting us to turn the informer.

    George B. Christensen:

    Now, when we confess upon Shotwell and disclose on Shotwell, we are not required to turn informer on our suppliers.

    Or if you accept Judge Nordbye’s theory which we thoroughly contest, that some of this money found its way into the personal pockets of the corporate officers for which they have never been indicted or at a jury trial.

    The corporation is not obliged to turn informer upon those corporate officers.

    John M. Harlan II:

    Were all these transactions in cash, the receipts, the Lubben receipts?

    George B. Christensen:

    Yes, yes.

    John M. Harlan II:

    The disbursements for black markets supplies —

    George B. Christensen:

    Yes.

    John M. Harlan II:

    — that you described all in cash.

    George B. Christensen:

    All in cash.

    Lubben would pay him cash.

    They’d accumulate cash.

    There was a dentist the Board of Trade as you will recall is in an office building downtown where they got a lot of people in that office, there was a dentist doctor.

    His name was Dr. Dowell we first heard about it.

    This dentist was an operator in this field.

    You can get an envelop with a lot of bills in it and take it down to Dr. Dowell and Dr. Dowell would say there’s going to be Northern Pacific car number so and so, Burlington car so and so, so and so and so and so.

    They will show up a week from now at corn products refining.

    Pays a ceiling price, corn products will pay the ceiling price you get.

    That was that kind of an operation.

    Arthur J. Goldberg:

    (Inaudible) were not turned over to the Government.

    Were they not facts?

    George B. Christensen:

    If I said it an unqualified fact and I did not mean to.

    Yes, they were.

    They were turned over to Agent Lima.

    And they were turned over to the intel — they were turned over to Agent Lima approximately the 1st of August when he came out to commence his investigation and when the intelligent people got in at some six to eight weeks later, they had some of them and more of the work papers that went with them but they were not turned in Mr. Justice as a claim for deduction.

    They were not turned in as being true.

    They are saying, “Here’s what we put together and here’s the basis on which we did it.”

    William J. Brennan, Jr.:

    And he says what you suggested (Inaudible)

    George B. Christensen:

    That’s right.

    (Inaudible)

    George B. Christensen:

    Your guess is as good as mine.

    George B. Christensen:

    We say that Judge Nordbye’s — they won’t make any findings.

    William J. Brennan, Jr.:

    (Inaudible)

    George B. Christensen:

    1945 and 1946 of the indictment years on.

    William J. Brennan, Jr.:

    (Inaudible)

    George B. Christensen:

    They’re saying this.

    Cain said, “I didn’t spend or just drop down the line or two”, Judge.

    He said, “I didn’t spend $45,000 for chocolate”.

    That’s what they’re talking about.

    I’m going to say —

    Arthur J. Goldberg:

    Mr. Christensen, before you leave or start (Inaudible)

    George B. Christensen:

    Well, now, you’ve asked two or three questions.

    Number one — number one, there’s no question of false statement in this case.

    We weren’t indicted.

    Number two, these were turned over for what they were worth and they were turned over with every perjury agent, saying, why they put the disbursements on there at all.

    Cain says, “Well, I hope they’ll think I’d paid out something.”

    Everybody said at that time, “You’re going to get no credit for whatever you put down there.”

    We can’t do it in the perjury regulations quoted in our brief wouldn’t let it.

    Arthur J. Goldberg:

    Doesn’t the record show that payment made (Inaudible)the settlement tax liability on the basis of the statement?

    George B. Christensen:

    No sir.

    Arthur J. Goldberg:

    Because you didn’t put it in the record.

    George B. Christensen:

    I say it doesn’t show whatnot by any stretch of the imagination, not by any stretch of the imagination, not remotely by that.

    This fellow, Lima said, he made out of $20,000 payment after he’d sworn to the grand jury that he didn’t and we finally drop it out and we ask him, “How did you arrive at the $20,000?”

    “Was it for 1945 or was it for 1946?”

    “I don’t know.”

    “Was it for both years?”

    “I don’t know but it was $20,000.”

    John M. Harlan II:

    Am I wrong in thinking that there is something in the record to indicate that Shotwell reserved the right to contest the Treasury Department ruling or position at that time?

    George B. Christensen:

    Correct, you’re correct.

    John M. Harlan II:

    That these disbursements that were not deductible.

    George B. Christensen:

    We have that right.

    John M. Harlan II:

    You have that right.

    So the figures did have some —

    George B. Christensen:

    But if we — had we done that — had we done that Justice Harlan, we of course would add to come in with a claim for a refund.

    Prove document completely and precisely, every penny that we claimed as an offset.

    And I want to and I’m going to sit down in just two or three minutes because I do wish to save some time for rebuttal and my brother Kirby have some time to speak.

    And I haven’t yet gotten to the issues about which we complain so bitterly in our petition and in our brief.

    You sent this case back on the basic ground that all these the Government had told you and I am painting with the wide brush, I understand, but time permits me to do no other way.

    The Government came in here and they told you, we are going to prove that no disclosure was made.

    This is all an utter perjurious fabrication.

    We are going to prove to you and to any court that Mr. Busby never reveal — that Mr. Graflund never revealed these transactions to Mr. Busby in January of 1948, so he could not have made a disclosure.

    We are going to prove to you that Huebner threatened to tell the truth on the stand in 1952, so they kept him off the stand and so forth and so on.

    Judge Nordbye return to a pretty harsh opinion against us but he finds that that claim to this Court was false that Busby did reveal, that Busby did reveal, that Graflund did reveal to Busby in January 1948 which was the genesis of this disclosure.

    When Huebner got on the stand and had to face cross-examination, he gave not one syllable of this conspiracy of perjury that he’d been kept off the stand.

    And at the time, the representations were made to this Court that nothing like this had taken place, the United States prosecutors had in their possession sworn grand jury testimony by this fellow Graflund.

    Yes, I told Busby all about this in January and I didn’t spare the horses in telling.

    They had Agent Lima saying, “I never heard of a $20,000 settlement.

    I never heard of any corruption in this case.

    I never heard of an 870 form which is the form you use to close a case out with.

    That was all in the possession of the Treasury Department and the prosecutors in the field at the time we were up here some years ago having these heeded arguments.

    And we finally dragged it out.

    Fortunately, by starting under Jencks and progressing to the grand jury next.

    I can’t say what you would have done that you control what the actual facts were in 1957 when we argued this case before.

    I doubt whether you would render this remand.

    But at least you were entitled to know.

    And as American citizens, my client were entitled to have the United States deal fairly with it and say that either these affidavits that they have now given us after months and months and months of refresher courses and I used the term of the witness, Lima, are false or their repeated sworn statements obtained by us before this very grand jury our perjury that lie behind this case.

    I’ve only scratched the surface of it.

    You are going to have a hard time with the briefs.

    I would like to save the rest of my time.

    John M. Harlan II:

    You’re saying in effect, and I want to make sure I understand.

    You’re saying in effect the former Solicitor General either consciously misrepresented the situation in the —

    George B. Christensen:

    I’m not saying that.

    John M. Harlan II:

    — Court or overreached the Court.

    George B. Christensen:

    I’m not saying that.

    John M. Harlan II:

    Well, what is your point then?

    George B. Christensen:

    I’m saying at some point in the Department of Justice and certainly the prosecutors in the field have the knowledge.

    I would make no claim against the Solicitor General.

    He may have been a little indulgent with his boys and taken too much on faith.

    Quite certainly, the Solicitor General would not come in here remotely.

    I don’t think and dream this.

    The record is silent on it.

    I am making no charges whatsoever against the Solicitor General.

    I am making charges against some of the man in the field who heard this very evidence, who’d obtained it and filed an affidavit that no disclosure had been made and nothing like this took place.

    Now, where the lapse came, I don’t know but it can.

    Tom C. Clark:

    What did Judge Nordbye said about —

    George B. Christensen:

    I beg your pardon.

    Hugo L. Black:

    What did Judge Nordbye said about the disclosure?

    George B. Christensen:

    Judge Nordbye said the disclosure was made.

    He says that it was made before June 21.

    The Government told you, they’d show nothing was done before June 21 and says necessarily it was made before June 4.

    He quibbles about the date but he says the disclosure was made.

    He says it was made in about the way we say it was but because the corporate officers in disclosing on Shotwell didn’t say as he believes the fact to be and as we say is not the fact and in any event is immaterial to Shotwell’s taxes that the corporate officers got some so-called constructive dividends and should have disclosed upon themselves personally that this was not in good faith and therefore we forget about it.

    That, as I understand it is the gist of Judge Nordbye’s reason.

    Thank you.

    Earl Warren:

    Mr. Kirby.

    William T. Kirby:

    I speak for the petitioner, Harold Sullivan who is a lawyer in Chicago and during all the years, the question was engaged in a substantial law practice and acting as a master in chancery.

    Now, he — the proof is very plain that Harold Sullivan, the petitioner, did not prepare the tax returns in question and did not see that.

    Indeed, he became a vice-president of the company only after the return which is Count 1 of the indictment was filed.

    Now when —

    William O. Douglas:

    Is there a separate brief of your claim?

    William T. Kirby:

    No sir.

    William T. Kirby:

    It’s 0.5 of the general brief.

    When this case was here before, it was pointed out that the case was now going to be sent back for a limited area of inquiry and that the merits of the first verdict with respect to any of the petitioners were not being reached.

    And this Court said at that time, that verdict clearly must stand or fall on the sufficiency of the evidence already introduced on the trial.

    And it pointed out that no questions of substances of the petitioners not yet been reached but could be reached and it’s those points with respect to Harold Sullivan that I address myself.

    John M. Harlan II:

    In relation to the suppression issue.

    William T. Kirby:

    I address myself with respect to Harold Sullivan on two points as to the merits of the trial.

    Our subsection 5 of the general brief has captured that Sullivan did not have a fair trial.

    Suppression question has basically been treated by Mr. Christensen.

    My point on the suppression issue is very simple.

    You did not want to reach the question of whether these documents were constitutionally inhibited until you got to the question of whether the documents came in as a part of a disclosure.

    It went back down to Judge Nordbye and Judge Nordbye said, “Yes, these documents came in as a part of the disclosure and indeed they say it was used in the disclosure recap.”

    It’s what he found but he said, “I’m not satisfied with the truth of it.”

    But of course in Rogers versus Richmond, you decided that truth or falsity does not decide the question of constitutional permissive use.

    But that’s another question.

    They think constitutionally, these documents cannot be used.

    That’s in the other portion of the brief.

    But with respect to Harold Sullivan, the only truth about Harold Sullivan, the trial is exceedingly limited.

    This was a trial four defendants that lasted several weeks with 75 witnesses but when it was over, Judge Nordbye asked — he reserved the question of the motion of acquittal for Sullivan and he pondered that six weeks after the jury trial.

    He asked for briefs and he only asked for small portions of the testimony of two witnesses to be written up out of the 75.

    And the only testimony that runs through Judge Nordbye’s whole opinion denying the acquittal of Sullivan is that this man Lubben said that he had gone to Sullivan’s office on February 14, 1946 and he tendered some checks and Sullivan said, “I don’t want checks, we want cash.”

    And as Lubben so testified, he produced check forms dated February 14, 1946 but with the names of the payees’ cut out.

    That’s to prove his case.

    Now, that’s all there is about Sullivan.

    Accordingly, when you go to Judge Nordbye’s careful written opinion, that’s all there is.

    Now, I point out that the next morning, Lubben took the stand and referring to divine guidance recanted, said he wasn’t there in February, it was in the fall.

    Well, in the fall?

    He could have been there about February 14 checks and this poisonous point, “he didn’t want checks, he want cash” couldn’t have occurred in the fall.

    Now, this Court, therefore have this to Sullivan an instance where the whole case as to Sullivan is upon an alleged extrajudicial admission uncorroborated therefore the corpus delicti cannot be established with the U.S. versus Smith and U.S. versus Collin.

    But not only is this an extrajudicial admission which is uncorroborated.

    It’s recanted the very next morning and I say with all respect that as you said that verdict must stand or fall on the evidence that was in then, as to Sullivan, it must fall.

    William O. Douglas:

    I wasn’t clear whether the recanting related to the date of the conversation or to the existence of any conversation.

    William T. Kirby:

    The mechanics of the recanting were, he said, I had “a conversation” in the fall.

    He never gave the context or the text of it so I say that it’s a recantation in full.

    At least it is no corroborated extrajudicial admission of that substance that is needed to supply that one thing to hold Mr. Sullivan.

    Now, at the very least, further, and as an additional point with respect to Sullivan, this case presented a problem which is often occupied the attention of this in other courts where you have a number of man in a long complicated trial in evidences admissible against some but not others.

    And then the question is, has the one against to whom the evidence was not admitted can protect so that his faith is not decided by evidence which is not admitted or admissible against him.

    Judges Learned Hand and Jerome Frank and a number of the justices of this Court have taken the view that where the evidence is vital and dramatic, it is impossible for the jury to perform the mental gymnastics of just simply striking it from their mind.

    And some fine opinions have been written where it is said that where you have that vital evidence, it just will be transferred inevitably.

    But in any event, this Court has in two cases where the Court gave very strong restrictive instruction that the evidence should not be transferred over to the person against whom that was not admitted.

    In two cases, this Court is permitted the conviction to stand, those being Blumenthal and Delli Paoli.

    That even in Delli Paoli, there was a very strong dissent by Justice Frankfurter for himself and Justices Black, Douglas and Brennan which said that psychologically it was impossible for the jury not to consider that strong dramatic evidence against the other petitioner.

    Now, in this case involved and in two cases where the judge didn’t make that impregnable barrier, convictions were reversed.

    Those two being Anderson and Kotteakos.

    Now, in this case, most of the evidence was never admitted, much of it was never even offered against Sullivan but when it came time to instruct the jury, the judge affirmatively directed them to consider that evidence against Sullivan.

    There was an affirmative misdirection not a mere equivocation.

    For instance, Lubben testified about many conversations out of the presence of Sullivan and Cain and they were highly dramatic with money piled up by motel beds.

    They were not admitted against Sullivan but in the instructions, the jury was told to consider them against Sullivan.

    The claimed oral admissions of Cain where he was asked many, many questions about how he made up some figures, they were not offered against Sullivan, they were not admitted against Sullivan but in the charge of the jury, the judge very vividly recall them and told the jury to consider them against Sullivan.

    Now, the documents —

    Byron R. White:

    All these over objection?

    William T. Kirby:

    Yes, indeed over objection and the good judge said to me when I made the objection, he said, “Didn’t I tell the jury that when the documents were admitted that they weren’t to be considered?”

    I said, “Yes, Your Honor but you are now telling them just the opposite.”

    With all respect in the world, he told me to hurry on.

    Byron R. White:

    (Inaudible)

    William T. Kirby:

    Yes, he did.

    Byron R. White:

    That those were to be considered evidence (Inaudible)

    William T. Kirby:

    That’s exactly true.

    It’s exactly what he said.

    However, where you have an abstract to destruction, and that abstract to destruction generally something that occurs out of the presence of the defendant is not admissible against him.

    But then as the judge, you recite details of evidence and important evidence, indeed the so-called Exhibit 185 Series, the Government time after time has said it’s one of the two legs upon which the conviction stand.

    William T. Kirby:

    Those were not even admitted against Sullivan or offered against him and Judge Nordbye described them in particular and he said those could be used to determine the intent of Sullivan to violate the tax law.

    And in Kotteakos, it was pointed out that if you have an equivocal and unilluminating instruction but then you have misdirection, then this risk that this evidence will be transferred over against the defendant is surely there.

    Byron R. White:

    (Inaudible)

    William T. Kirby:

    I — this was not a conspiracy case.

    The Government in a footnote says that in a conspiracy case, they might have been able to put it in a conspiracy case.

    But I don’t think sir that we can — I don’t think that we can say that much of this evidence under any circumstances would have been admissible against Sullivan.

    From a deep familiarity of the record, I assure you especially some of the most crucial evidence which they didn’t even proffer against Sullivan.

    So we have here a case of affirmative misdirection which certainly produced equivocation.

    The Government and the court below said, well, we gave one good instruction and that should satisfy it.

    Gentlemen, it satisfies none of the tests of the leading cases and I humbly submit that at least as to Sullivan there must be a reversal.

    Thank you.

    Earl Warren:

    Mr. Howard.

    Joseph M. Howard:

    The Court please, I will handle the second, third, fourth and fifth questions in the briefs and Mr. Oberdorfer will take the first question, the question of the suppression of evidence of the voluntary disclosure.

    The jury found these defendants guilty after six weeks trial with very lengthy evidence about 3,000 pages of the transcript printed.

    Judge Nordbye found that the voluntary disclosure, the alleged voluntary disclosure was false.

    He found that after two lengthy hearings, one before the trial and the other one after this Court had remanded the case.

    He found that the unrecorded receipts which had been disclosed by the voluntary disclosure had not been spent for raw materials as had been claimed in the alleged voluntary disclosure.

    Judge Nordbye also found that there was an attempt to fix this case by some sort of mechanisms within the revenue service.

    I like to give just a brief summary of the facts to support those two findings of the jury and of the — of Judge Nordbye.

    At the trial, the evidence showed that corporation through its officers had received $400,000 in black market receipts during the years 1945 and 1946.

    And that those receipts had not been reported on the returns.

    There’s plenty of evidence of this, direct evidence not only from Lubben of his payments but also from others who had made payments for Lubben.

    And there was a wealth of documentary evidence to support that to corroborate the testimony that Lubben gave as to this approximately $400,000 in payments.

    The defense was that the taxpayers had received that is that the corporation had received only $150,000 and the defense further claimed and put on evidence to support it that they had spent all of that.

    The evidence was not different.

    There was no evidence of any specific payment at all it was very general.

    The issues that went to the jury then were how much did the corporation get in the first place.

    Did it get $400,000 or did it get $150,000?

    And the second issue was where did it go?

    Did it go in payments for raw material as the defendants claim or did it go someplace else?

    Joseph M. Howard:

    There was a sharp conflict in the evidence on this, the evidence on both sides.

    It was purely a question of credibility which group of witnesses was the jury going to believe or the jury believed the Government’s witnesses and convicted the defendants.

    On the voluntary disclosure, the evidence at those hearings showed that sometime early in 1948, the defendants began worrying about these 1945 and 1946 returns.

    William J. Brennan, Jr.:

    May I ask you, Mr. Howard?

    Joseph M. Howard:

    Yes sir.

    William J. Brennan, Jr.:

    Am I right that the inflection of voluntary disclosure in view of the proceeding (Inaudible)

    Joseph M. Howard:

    The jury was allowed to consider everything that came before them as to the voluntary disclosure and there was a great deal.

    They were instructed that they could consider that as to the intent of the defendants whether or not they had acted in good faith.

    The instruction was given at the requests of the defense and in substantial, almost, well, it was very substantially as requested by the defense and there was no objection.

    William J. Brennan, Jr.:

    (Inaudible)

    Joseph M. Howard:

    Criminal intent, that’s right.

    They began to worry about this early in 1948 and the reason for that was that Lubben was beginning to have tax troubles himself.

    Lubben’s tax troubles dated back as far as 1945 or certainly in February 1946 when he filed his income tax return and included only a partial payment and gave certain reasons why he had not paid the full thing.

    The Treasury began to investigate him at that time.

    And as Judge Nordbye found in his opinion, Shotwell, people knew that when Lubben began having tax troubles, their day of reckoning was not far away.

    Consequently, some time before June 21, 1946 — 1948 Busby and Cain went in to see Mr. Sauber who was at that time a high official in the Chicago Office of the Revenue Service and this is Judge Nordbye’s finding on the — after the supplemental hearing.

    Sauber told them to make a complete computation of the receipts and the disbursements.

    Now, the other side has challenged our statement that he wanted — that Sauber told them to make a computation of both receipts and expenditures.

    But that is the testimony of Sauber at the original suppression hearing.

    It’s the testimony of Busby at the trial and it’s the testimony of Graflund who quotes Cain at length and saying that this is what Sauber told them to do.

    The testimony of Graflund at the suppression hearing or at the supplemental hearing after the case went back.

    On June the 21st, Agent Sam Krane arrived on an errand asking for records of the corporations dealings with Lubben.

    There was, as the record shows, immediate consternation.

    William J. Brennan, Jr.:

    How long was it from the disclosure?

    Joseph M. Howard:

    That’s uncertain.

    Judge Nordbye finds that the conversation with Sauber was not in January as Busby and Cain testified.

    It was not in March as Sauber testified.

    It was some time later and that the March date was in arbitrarily hooked up date between Busby, Cain and Sauber.

    That’s his finding.

    He says he cannot pin it down exactly but it was sometime before June 21 when Agent Krane came in.

    Arthur J. Goldberg:

    Mr. Howard, am I correct in assuming that the Government pointed to as well as to petitioner that the timeliness of the disclosure is not involved?

    Joseph M. Howard:

    That’s right.

    Judge —

    Arthur J. Goldberg:

    You accept the finding that existed —

    Joseph M. Howard:

    Right sir.

    Arthur J. Goldberg:

    — at the time — sometime before Krane visited.

    Joseph M. Howard:

    Right sir.

    He made his finding — we’re not concerned with that.

    Arthur J. Goldberg:

    No quarrel with that point?

    Joseph M. Howard:

    No sir, no sir.

    When the case was here before, we thought we had proof that it had not occurred at that time.

    All of that proof was put before him and he made his finding.

    After — immediately after Krane’s visit on June the 21st, there were a number of frantic conferences among the defendants as to what should be done.

    And at that time as Judge Nordbye found, they first began to exert themselves to collect the figures on the attempted voluntary disclosure.

    Very shortly after also, Cain with a New York attorney by the name of Grace at a meeting with Lubben and his attorney whose name was Davidson in a night club outside of New York, the Riviera Club.

    And Cain told Lubben and Davidson that he was attempting to settle a case by political contacts and he mentioned a member of the Cabinet.

    And I might say that the investigation that has been made as shown no connection of that member of the Cabinet with this case whatsoever.

    There’s other evidence in the record that Cain was a notorious name-dropper and that he was likely to say that he had gone all the way to the top.

    So I want to make it clear that although that name is in there, nothing has been shown to connect him with in any way at all.

    At any rate, Cain said, he was trying to settle it in this manner and he urged Lubben to go to South America and stay there for two years to keep out of the way.

    Grace said that he was going to pay a visit to the office of Dan Bolich who was the Internal Revenue agent in charge in New York.

    He was in charge of the fraud cases.

    And this Court knows of Mr. Bolich through the Grunewald case where he appears very prominently and in fact, he was a defendant.

    After the meetings in New York, Cain called the various interested members or officers of the corporation together in the Belden-Stratford Hotel in Chicago in order to work out the figures which were to be submitted to the Revenue.

    Those figures showed receipts of $400,000 and they also showed expenditures of $400,000.

    I’m using it in a very approximate term.

    Cain admitted that those expenditure figures were merely plug figures and there is considerable evidence in the record that the officers of the corporation tried to work out the expenditures and the most they could come to is about $125,000 or $150,000.

    And Cain said, “Sauber told us we had to have this in here and we’ve got to make the figures matched”.

    He said, “Give me a piece of paper and I’ll work it out.”

    And in about two minutes, he scribbled down the figures which we have at the bottom of this exhibit to show the so-called expenditures.

    John M. Harlan II:

    Does the record show why Sauber insisted on the figures in view of the then policy of the department that these figures were not deductible?

    Joseph M. Howard:

    No sir.

    The record simply shows that Cain said or I mean Sauber said, “Prepare the figures on the receipts and on the disbursements and I will then send an agent.

    I will see to it that an agent comes out to make an audit to determine how much you actually owe”.

    I think —

    John M. Harlan II:

    (Inaudible)

    Joseph M. Howard:

    Sauber himself did not testify to that, no sir.

    At a later date, other officials in the Revenue said that they would refuse to close the date or close the case until they found out where that actually went until they got the proof.

    After the figures had been completed, agent —

    William J. Brennan, Jr.:

    Mr. Howard.

    Joseph M. Howard:

    Yes sir.

    William J. Brennan, Jr.:

    I wanted to — did the $400,000 (Inaudible)

    Joseph M. Howard:

    No, not exactly, no sir.

    I’m —

    William J. Brennan, Jr.:

    That figure comes close with the figures at the trial.

    Joseph M. Howard:

    It comes pretty close to it.

    That was the figure at the trial, yes sir.

    William J. Brennan, Jr.:

    (Inaudible)

    Joseph M. Howard:

    Well, I think that’s — the total of the trial, the total proof there was about $450,000.

    William J. Brennan, Jr.:

    450?

    Joseph M. Howard:

    That’s right.

    And the total on the sheets is slightly different, so I was using $400,000 just as an approximate figure.

    Arthur J. Goldberg:

    Mr. Howard, (Inaudible)

    Joseph M. Howard:

    Yes sir.

    Arthur J. Goldberg:

    (Inaudible)

    Joseph M. Howard:

    He says that it may have been very probably exaggerated, yes sir.

    He doesn’t give any details because he says in the amount that we’re — it is something that we’re not concerned with on this particular —

    Arthur J. Goldberg:

    The stated amount, there’s no doubt about that —

    Joseph M. Howard:

    Well, he doesn’t say that.

    He just says that it may very well have been exaggerated.

    Joseph M. Howard:

    After this, Agent Lima came to the plant and talked to Busby and was handed just the top sheet, just the summary.

    He wasn’t given the entire set of papers.

    He was told by Lima that he could have all of the papers if he could come to an agreement that the figures on this summary were acceptable to the revenue.

    So Lima went back to his office and he prepared a draft of reports at the instructions of Johnson who was his superior.

    And in that report, he allowed deductions for all of these unclaimed expenditures, unreported expenditures which under the policy of the department at that time were not being allowed.

    John M. Harlan II:

    Was that before the case that was decided against the department?

    Joseph M. Howard:

    Yes sir.

    John M. Harlan II:

    Ultimately, it was held, was it not?

    Joseph M. Howard:

    That was — ultimately, it was held that they should have been allowed.

    The first —

    John M. Harlan II:

    That decision came after this episode, is that right?

    Joseph M. Howard:

    Came after this episode, that’s right.

    First decision —

    John M. Harlan II:

    Had there been any court decisions —

    Joseph M. Howard:

    To that?

    John M. Harlan II:

    — after that time?

    Joseph M. Howard:

    At that point, there had not been, no sir.

    It was in dispute and ultimately, the first decision was the Sullenger decision in the Tax Court which is cited in our case and that was followed up by three or four Circuit Court cases.

    And finally, just before the trial, the Commissioner acquiesced in and of itself.

    He allowed all of these claimed expenditures although he had been presented with no substantiation for them whatsoever.

    And it’s been admitted all along they can’t be substantiated.

    And he came up on the draft of his report with a $20,000 deficiency.

    Shortly after this, Cain told Huebner and Graflund that he had settled the case for $20,000

    William J. Brennan, Jr.:

    Now, this was only in 1945?

    Joseph M. Howard:

    1945 and 1946, yes sir.

    William J. Brennan, Jr.:

    (Inaudible)

    Joseph M. Howard:

    Those are the allowed expenditures, I believe, Your Honor.

    William J. Brennan, Jr.:

    (Inaudible)

    Joseph M. Howard:

    Well, he allowed — he disallowed those I think.

    Those that you’ve got there are those that he disallowed.

    Joseph M. Howard:

    He said, he would not allow them.

    What he allowed —

    William J. Brennan, Jr.:

    (Inaudible)

    Joseph M. Howard:

    Oh, I’m —

    William J. Brennan, Jr.:

    (Inaudible)

    Joseph M. Howard:

    Yes, that’s right, that’s right.

    He was proposing to allow almost all of those expenditures.

    All of the claimed expenditures for raw materials he was allowed.

    There were a few others in there that he disallowed, exactly why it’s never been explained but they were a very minor amount of the claimed expenditures.

    William J. Brennan, Jr.:

    (Inaudible)

    Joseph M. Howard:

    Right, right sir, that’s right.

    Cain told Graflund and Huebner that he could settle it for $20,000, and shortly after that, he asked Huebner for $10,000 to take care of the fix of the case.

    Well, this was in the late summer of 1948 and about this time, somebody in the Revenue Service apparently got suspicious of the case and a fraud investigation was began, and thereupon followed the destruction of quite a number of records.

    Lima’s draft of a report was destroyed within the Revenue Service on the instructions of his superior, Johnson who is by the way a defendant in the other case which is pending in Chicago at the present time.

    Cain directed that Graflund destroy a record which Mrs. Merrill had kept of the so-called corn box.

    Money was coming into the corn box and being paid out for the raw materials according to the general testimony at the trial.

    The record had been kept to that and Cain ordered it destroyed.

    Graflund had kept a record of money which was transferred from that corn box to a safety deposit box in the bank.

    This was all the black market receipts.

    Cain destroy — or Cain directed him to destroy that record.

    Finally, sometime later, when the revenue agents were already working in the plant, Revenue Agent Mammel, whose name was mentioned throughout the record, discovered that there had been some studies of inventory.

    And he asked for those and Cain at that point directed that they’d be destroyed and they were.

    Graflund went down to the plant on a Saturday afternoon and destroyed them also.

    As to the second point which is the charge that we submitted false affidavits to this Court when the case was here before.

    Arthur J. Goldberg:

    Mr. Howard, before you get to that, could you advise me of whether in your opinion the inhibit further through (Voice Overlap) did it had false statement about the alleged exhibit which constitute a basis for the prosecution provided by Section 145 (b) or the general section on false statement?

    Joseph M. Howard:

    Yes sir.

    It could.

    Arthur J. Goldberg:

    It could.

    Joseph M. Howard:

    Yes.

    Arthur J. Goldberg:

    The Government could have proceeded —

    Joseph M. Howard:

    Could they?

    Arthur J. Goldberg:

    — so elected to prosecute, on those — on those statutes.

    Joseph M. Howard:

    Right, right, it was another offense, separate offense.

    Arthur J. Goldberg:

    And that the material document, the material false statement be served (Voice Overlap).

    Joseph M. Howard:

    Right, right but of course that occurred to us during the course of the proceedings but we saw no reason to begin a new prosecution when we have this one in the stage that it was.

    As to the contention that we submitted false affidavits to this Court and that we withheld evidence from the Court when the case was here before, so far as the false affidavits are concerned, they are the affidavits of Mr. Yaden, Mr. Russo, Mr. Huebner and Mr. Graflund.

    All of which were submitted to the Court at one time or another in support of the motion to remand.

    When the case went back before Judge Nordbye, all of the witnesses testified as we said they would.

    There wasn’t any material variance.

    There were some things that they did not testify to.

    But as to the statements that we made to the Court as to what witnesses would testify, I think it’s clear from the record that they did testify as we said they were going to.

    And Judge Nordbye heard those witnesses and saw them on the stand.

    And he has found that nothing that was submitted in the affidavits to this Court was false.

    He found that there was one mistake in the statement of Graflund that he had not told Busby about the black market dealings in January.

    As to —

    Earl Warren:

    That’s a rather important thing, wasn’t it?

    Joseph M. Howard:

    Yes sir, it was.

    That’s right.

    It was crucial to our argument on the timeliness part of it.

    And as to that, he found that Busby had made a mistake.

    He also found —

    Earl Warren:

    Busby had made a mistake?

    Joseph M. Howard:

    I’m sorry, Graflund, yes sir.

    That Graflund had made a mistake.

    He also found specifically that he had done it honestly.

    And he says in at least two points in his opinion that he was satisfied that Graflund was trying to tell the truth.

    He may have been mixed up on that one point where he was trying to tell the truth.

    Earl Warren:

    Was that the only thing that Judge Nordbye questioned?

    Joseph M. Howard:

    The only thing that — so far as I know Your Honor, when we filed a brief here before, we included in it a summary of what our witnesses would testify to when the case got back before Judge Nordbye.

    So far as I know, that’s the only thing in which he has found that we were mistaken.

    William J. Brennan, Jr.:

    (Inaudible)

    Earl Warren:

    Yes.

    Joseph M. Howard:

    Yes sir.

    That was part of it.

    There were two parts —

    William J. Brennan, Jr.:

    (Inaudible)

    Joseph M. Howard:

    That’s right, that’s right.

    William J. Brennan, Jr.:

    Well do you have this — I forgotten whether the affidavits or the (Inaudible)

    Joseph M. Howard:

    We have the testimony of a man as I recall it now of a man name Irvin who was going to testify about a meeting that he had have with the defendants and that was the basis of — a part of our position when we were here before on the timeliness.

    Now, Irvin had a stroke before the trial — before the rehearing and in fact died a short time later, so he was not available to us.

    Later on, after we had filed those claims, Graflund did change the testimony that he had given to us earlier.

    After the — I’ll use the word “refresher courses” that we had given the —

    William J. Brennan, Jr.:

    Just before arguing to — the same that you were arguing (Inaudible)

    Joseph M. Howard:

    I’m not sure.

    Yes, he did, yes sir.

    William J. Brennan, Jr.:

    No one told you about it?

    Was that it in Graflund’s affidavit?

    Joseph M. Howard:

    It was in Graflund’s affidavit.

    Not the change, no, the fact that the testimony that he had not talked to Busby about this in January was in his affidavit.

    We said nothing about the change.

    William J. Brennan, Jr.:

    Well, I think that the affidavit that he handed to you was he had not (Inaudible)

    Joseph M. Howard:

    Right.

    William J. Brennan, Jr.:

    It was on that affidavit that he actually decided to (Inaudible)

    Joseph M. Howard:

    Right.

    That’s right, that’s right.

    William J. Brennan, Jr.:

    (Inaudible)

    Joseph M. Howard:

    That’s right.

    Before the remand, he said that but he had at that time talked to Busby and in — no.

    He was saying that he had not talked to Busby at the time the case was here before until June, until some time after Sam Krane had appeared in the Court.

    And that’s the posture in which the case was in at the time it came before you in the Court.

    William J. Brennan, Jr.:

    But the time he filed the affidavit, when did you finally — in relation to this time, he decided that has been remanded, when did he tell you he doesn’t know, “I was wrong” and I said (Inaudible)

    Joseph M. Howard:

    It was before the remand because that was the effect of his affidavit.

    Byron R. White:

    Was there — is there any (Inaudible) the affidavit that’s up here?

    Joseph M. Howard:

    Yes sir, yes sir.

    Byron R. White:

    (Inaudible)

    Joseph M. Howard:

    Found against his story.

    That’s right, that’s right, I’m sorry.

    Earl Warren:

    Well, if it was beforehand, why weren’t we advised of this change?

    Joseph M. Howard:

    Because Your Honor, this was a question of credibility of the witnesses and we after a long thorough investigation of all of these witnesses, had concluded that the story that was being told to us at that time was the true story.

    Earl Warren:

    Even though —

    Joseph M. Howard:

    And the —

    Earl Warren:

    — the man whose affidavit you presented to us had repudiated his affidavit?

    Joseph M. Howard:

    Oh no, he hadn’t repudiated his affidavit.

    He had repudiated his earlier story.

    The story he — what he had said in the first place was that he had talked to Busby in January.

    And then he — certain things were brought to his attention and he changed his testimony.

    He said, “I didn’t talk to him until Sam Krane had appeared at the plant.”

    That was what was put into the affidavit that was submitted to this Court.

    Earl Warren:

    And that’s what he testified to before Judge Nordbye.

    Joseph M. Howard:

    That’s what he testified to before Judge Nordbye, that’s right.

    Earl Warren:

    I see.

    Joseph M. Howard:

    Judge Nordbye found that he was mistaken but that he is honestly mistaken.

    And our reason for not submitting the contradictory statements to this Court was that we believe that the story of the witnesses were telling us at that time was a true story and we have examined it over a period of about 18 months and checked it in every way we possibly could and we felt that it was a question of credibility.

    And this Court does not usually pass on questions of credibility if this had been —

    Earl Warren:

    Not that the court below has done it but you were passing on it yourselves, were you not, without giving us both sides of it?

    Joseph M. Howard:

    Well, we were saying, this is what the witnesses will testify to at this time and we submit, I think this is the language that we used in our motion to remand that this Court and the Court of Appeals are not equipped to decide issues of credibility.

    And for that reason, we ask that it’d be sent back so that those questions of credibility could be decided back there.

    Arthur J. Goldberg:

    The matter was presented in affidavit before the Sam Krane affidavit?

    Joseph M. Howard:

    Yes sir.

    Arthur J. Goldberg:

    Then before the remand has been changed, is that correct?

    Joseph M. Howard:

    No sir.

    No, if he had change prior to that time.

    The affidavit that we presented to this Court was what he testified to at the remand.

    He had given us a much earlier statements here that this investigation went long for 18 months and when these people were first called in to be questioned, they had — this was a matter that had happened 10 or 12 years before.

    And the first time they were called in, they were encouraged to give anything that they recalled about the thing.

    Arthur J. Goldberg:

    I understand but I thought you said that the affidavit that happens to be before this Court is definitely not talking about the one that you have reviewed.

    Joseph M. Howard:

    That’s right.

    Arthur J. Goldberg:

    (Inaudible)

    Joseph M. Howard:

    That’s right.

    Arthur J. Goldberg:

    Isn’t that correct?

    Joseph M. Howard:

    That’s right.

    Arthur J. Goldberg:

    And then at some point Graflund changed it, did he change —

    Joseph M. Howard:

    No, he had change before that.

    Arthur J. Goldberg:

    I know but he testified earlier, about January.

    Joseph M. Howard:

    Right.

    Arthur J. Goldberg:

    And then you presented the man in this Court.

    Joseph M. Howard:

    Yes sir.

    Arthur J. Goldberg:

    In which you said that that was wrong and —

    Joseph M. Howard:

    No.

    We didn’t say it was wrong, we said that what he would testify to that is —

    Arthur J. Goldberg:

    Now, we have something different.

    Joseph M. Howard:

    Right.

    Arthur J. Goldberg:

    Now, when did he ever change that?

    Joseph M. Howard:

    No.

    No, He’s stuck to that thereafter.

    Arthur J. Goldberg:

    Thereafter?

    Joseph M. Howard:

    Right.

    He changed only once and he is stand to that story afterward.

    Judge Nordbye found —

    Arthur J. Goldberg:

    He found relief.

    Joseph M. Howard:

    No sir.

    He found that he was mistaken.

    Arthur J. Goldberg:

    (Inaudible)

    Joseph M. Howard:

    That’s right, that’s right.

    He found that he was —

    Arthur J. Goldberg:

    But other (Inaudible)

    Joseph M. Howard:

    That was all in the record.

    Arthur J. Goldberg:

    All of them.

    Joseph M. Howard:

    Sure.

    Earl Warren:

    Mr. Howard, if the jury had come to the conclusion that Judge Nordbye came to that he did not testify but didn’t say accurately if he wish on the date of disclosure, would that in your opinion had been an important fact in this decision?

    Joseph M. Howard:

    Not for the jury, no sir.Of course, all of this was — I can’t see that that would have made —

    Earl Warren:

    Well —

    William J. Brennan, Jr.:

    At the trial is it the Government’s contention that the disclosure that one is made and not made entirely of (Inaudible)

    Joseph M. Howard:

    No, no sir.

    The contention that we had made at the first hearing was that the —

    William J. Brennan, Jr.:

    Not the hearing.

    I’m speaking of what the theory had been.

    What was he doing (Voice Overlap)

    Joseph M. Howard:

    That question —

    William J. Brennan, Jr.:

    — lack of exposure.

    Joseph M. Howard:

    No, that question didn’t come up.

    William J. Brennan, Jr.:

    Well, at the jury I gather with Mr. Christensen an issue of this disclosure to accredit his claim —

    Joseph M. Howard:

    Right, not when —

    William J. Brennan, Jr.:

    (Inaudible)

    Joseph M. Howard:

    That’s right, that’s right.

    William J. Brennan, Jr.:

    Now, what was in the evidence is the date of disclosure of Sauber?

    Joseph M. Howard:

    January.

    The Sauber did not testify at the trial.

    Byron R. White:

    Sauber did not testify?

    Joseph M. Howard:

    No sir.

    Joseph M. Howard:

    Cain and Busby testified at the trial and they said it happened in January.

    Earl Warren:

    Yes, and did you have anyone to testify that it didn’t occur until later?

    Joseph M. Howard:

    No sir.

    Not at that time at all.

    We were not concerned with that point at the trial.

    Tom C. Clark:

    Did that came to your attention later?

    Joseph M. Howard:

    It came to our attention much later, that’s right, when after the petition for certiorari had been filed.

    John M. Harlan II:

    As you have said, the only finding that Nordbye made on the first suppression hearing is that the disclosure is not being made in good faith.

    He didn’t —

    Joseph M. Howard:

    That’s right.

    He did not —

    John M. Harlan II:

    — rule on timeliness at all.

    Joseph M. Howard:

    He did not make any finding as to timeliness at all.

    There had been an argument about it.

    We were saying that the case had been assigned to an agent back in December but he said, it’s not necessary for me to make any finding on that at all because I find that it’s entirely lacking in good faith.

    Hugo L. Black:

    I gather in the Court’s opinion, I’ve just been reading now and it’s also brought out in this case.

    It was rather crucial as to this day what the perjury and the manner indicates that it’s crucial on page 239 of this opinion.

    Joseph M. Howard:

    This is Judge Nordbye’s?

    Hugo L. Black:

    No, this is this Court’s opinion.

    Joseph M. Howard:

    Oh!

    Oh right.

    Hugo L. Black:

    Where this Court has acted?

    Joseph M. Howard:

    Yes sir.

    Hugo L. Black:

    And has acted on the basis Graflund swears quite differently to what some others were insisting that the — no time prior to a meeting held in July 1948 were they ever advised or led to believe by respondents to Shotwell’s black market receipts had been disposed to the Treasury.

    Joseph M. Howard:

    Right.

    Hugo L. Black:

    Because as I understand it, I want to see if I’m wrong, at that very time, the department did have an affidavit from Graflund showing that that was not true.

    Am I right in this?

    Joseph M. Howard:

    That was the affidavit that he had submitted.

    We had other statements.

    Hugo L. Black:

    If these affidavits passed has paid a sharply different picture of the entire facts —

    Joseph M. Howard:

    Yes sir.

    Hugo L. Black:

    That Court is explaining why turning it back.

    Joseph M. Howard:

    Right.

    Hugo L. Black:

    I dissented and I have no right of course.

    Joseph M. Howard:

    Right.

    Hugo L. Black:

    Indeed, they flatly contradict detail and unfold it on behalf of respondents in the District Court.

    That was that they had conferred with the Government to get immunity before June 23rd.

    But this Court as the basis for its remand said, indeed they flatly contradict the detail.

    More specifically, Graflund swears that the first time he discuss the black market transaction, was at Busby’s home in late June 1948.

    Joseph M. Howard:

    Right.

    Hugo L. Black:

    Now, did the Government at the very time this happened — we relied — the Court here relied on that.

    Did the Government have an affidavit from Graflund, showing that Busby was not until late June but back in February?

    Joseph M. Howard:

    We had earlier statements that Busby —

    John M. Harlan II:

    Well, the trial record already showed that, that’s what he testified to at the trial, isn’t it?

    Joseph M. Howard:

    No sir.

    No, he —

    John M. Harlan II:

    In the suppression.

    Joseph M. Howard:

    No, he didn’t say anything about it there at all.

    We did have such statements which he had given —

    Hugo L. Black:

    And the Court’s opinion states Graflund’s affidavit on which we acted —

    Joseph M. Howard:

    Yes sir.

    Hugo L. Black:

    — and placed it at a different date, doesn’t it?

    Joseph M. Howard:

    That’s right, that’s right.

    Hugo L. Black:

    And although —

    Joseph M. Howard:

    You said —

    Hugo L. Black:

    — the Government had an affidavit from Graflund at this very time showing that Graflund was now admitting that the thing had happened in April?

    Joseph M. Howard:

    No.

    No, no.

    No sir.

    What we had were the earlier statements that Graflund had given which were the other way.

    Joseph M. Howard:

    That is that he had talked to Busby on the train and —

    William J. Brennan, Jr.:

    What he was reiterating was the various statements of a January or some other —

    Joseph M. Howard:

    That’s right, that’s right.

    William J. Brennan, Jr.:

    Why he can’t go out with a story that did not happened in June now what you’re telling us —

    Joseph M. Howard:

    That’s correct.

    William J. Brennan, Jr.:

    — he never changed that —

    Joseph M. Howard:

    No sir.

    William J. Brennan, Jr.:

    — even when he got back before Judge Nordbye.

    Joseph M. Howard:

    No sir, he didn’t change it.

    William J. Brennan, Jr.:

    And Judge Nordbye made his finding that he was in error on the record.

    Joseph M. Howard:

    That’s correct.

    William J. Brennan, Jr.:

    (Inaudible)

    Joseph M. Howard:

    That’s correct, yes sir.

    Byron R. White:

    (Inaudible)

    Joseph M. Howard:

    No, no, they didn’t know.

    This Court did not know anything about the earlier statements because we told this Court what we thought Busby would testify to when the case went back.

    What we thought was the truth, Busby had given his earlier statements and we have gone over those and over those and pointed out to him various things.

    And finally, something that was said, some incident stirred his mind and he finally decided that he must have been wrong about the January conference with Busby on the train and decided that it could not have been until June.

    Hugo L. Black:

    That, however, this Court was not told at that time.

    Joseph M. Howard:

    No sir, no sir.

    Because our feeling never even — I handled a good bit of this and it never even crossed my mind that we should submit to this Court all of the various statements that we have.

    Some of which were different from those which we were telling the Court, the witnesses were going to testify to.

    I don’t know how we could have done it.

    Earl Warren:

    But you wanted this to give credibility to his present affidavit, didn’t you?

    Joseph M. Howard:

    No sir, we wanted you to send it — we wanted you to send it back to Judge Nordbye, so that he could determine who was telling the truth about this.

    We didn’t want to —

    Hugo L. Black:

    Which time they were telling the truth but we didn’t know about all the time as to what they’d said.

    Joseph M. Howard:

    Well, Your Honor, we vouched for his testimony as of that moment.

    That is that this is what he would say and that’s what Judge — well, I’m sorry on this one.

    On this particular one, Judge Nordbye found that he was mistaken.

    William J. Brennan, Jr.:

    But he did say it to Judge Nordbye.

    Joseph M. Howard:

    He did say it to Judge Nordbye, that’s right.

    William J. Brennan, Jr.:

    Sworn to Judge Nordbye that that was in June.

    Joseph M. Howard:

    That’s correct.

    William J. Brennan, Jr.:

    Judge Nordbye nevertheless concluded that he was quite mistaken.

    Joseph M. Howard:

    That’s correct.

    But honestly, he emphasizes that but he thought that Graflund was mistaken but that he had made an honest mistake.

    Earl Warren:

    We’ll recess now, Mr. Howard.