On March 12th, 1953, an indictment was filed against the above-named defendant, charging him with wilfully and knowingly attempting to evade the payment of part of his income tax due and owing for the calendar year 1946, in violation of Title 26 U.S.C. § 145(b). On July 10, 1953, the defendant moved (1) for an order suppressing certain evidence, and directing the return of cеrtain papers and documents described in part in the affidavit filed in support of the motion, (2) for the inspection of the Grand Jury Minutes, and (3) for the dismissal of the indictment.
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The defendant contended that the obtainment and use of the evidence in question was violative of his rights under the 4th and 5th Amendments of the Constitution of the United States. Because of certain express or implied admissions in the affidavit submitted in opposition to the motion, I directed, in a memorandum dated January 5, 1954, D.C.,
Paragraph 678 of the Manual of Instructions for Revenue Agents, relating to the duties of agents in joint investigations, reads as follows: “In joint investigations the Special Agent will be responsible for the criminal features of the case and for the procuremеnt of appropriate proof to establish the criminal charge should prosecution be authorized. The Internal Revenue Agent participating in such investigation will be responsible for the audit features of the case and for the preparation of a record of the proof to supрort the ad valorem addition to the tax. In such an investigation the Special Agent will be responsible for the method of procedure in, and conduct of, the investigation. The Special Agent in charge will.be the officer responsible for a recommendation for or against criminal prosecution and may in his discretion recommend the assertion of an ad valorem addition to the tax in cases where criminal prosecution is not recommended.”'
On July 1, 1948, the day following his assignment to the case, Potts communicated with Obst by telephone, and inquired as to the then status of the previous investigation. Thereafter he mеt and conferred with Obst on October 5, 1948, and on at least five occasions in 1949, in connection with matters involved in the investigation. On these occasions he asked Obst to visit the offices of the Louis Lipshitz Dress Company and make copies of various book entries and records, including the ledger accounts, drawing accounts, capital account, loan account, accounts receivable, accounts payable and total debits and credits by years (pp. 173, 174, 177 S.M.) Potts also instructed Obst to obtain information respecting the accounts of Ruskin Fashion Salon, Anglo-African Shipping Co. and H. T. Stanley Company, threе South African customers of •the partnership.
*522 Pursuant to those instructions Obst visited the offices of the Louis Lipshitz Dress Company on many occasions. Revenue Agent Silverman, testifying for the Government, stated (P. 79 S.M.) that Obst’s records disclosed that he visited the said offices on 79 occasions, 19 of them between June 20, 1949, and July 26, 1949, and 13 of them between March 1, 1949 and March 21, 1949. On those visits he made copies of or extracts from various books, records, and accounts, which had been requested by Potts, part of which were included in the very large collection of papers, consisting of several hundred sheets, which were ■ ref erred to during the hearing аs Obst’s work-sheets, and received in evidence as Exhibit “A”.
The records and information obtained by Obst from the taxpayer’s books were far more voluminous and extensive than the preparation of the “audit features of the case” (See Par. 678 of the Manual of Instructions, supra) required. Agent Silverman, when shown Exhibit A, testified that a routine examination of the taxpayer’s books and records would not produce the extensive information contained in the said Exhibit.
Obst’s daily reports disclosed that on many occasions during 1949 he visited the offices of the Louis Lipshitz Dress Company, after which he would call at the offices of the Intelligence Unit of the Bureau, at 253 Broadway, and at Government offices at 341 9th Avenue, where he would confer with Government agents.
Potts received the list of the partnership’s accounts receivable from Obst in September, 1949. Obst died in October, 1949, and Revenue Agent Sheehan was assigned to replace him. The worksheets (Exhibit A) remained in Sheehan’s custody until February, 1950, when they were given to Potts. The latter admitted (PP. 167, 168 S.M.) that he obtained information from the said worksheets concerning the accounts of and sales to customers of the partnership, and then compared the information so obtained with the customers’ own records. Among those customers were the three South African firms hereinabove named.
In his affidavit, submitted in opposition to the motion herein, Potts stated that he obtained his information relating to the defendant from sources other than Obst. That can hardly be true of the South African accounts, for he testified (P. 304 S.M.) that he asked Obst to look for the accounts of the said firms in the taxpayer’s books and records, and (P. 306 S.M.) that the first lead he received respecting those accounts came from the Obst work-sheets. The Government has claimed, also, that it received its information respecting the three South African accounts through letters from аnonymous sources, but such information could not have related to the matters covered by the indictment, since the letters in question, exhibits in the hearing, were received in May and June, 1945, long prior to the commencement of the tax year, 1946, referred to in the indictment. Potts testified that he visited the New York offices of the said three South African firms in March, April and May, 1950, and it may be assumed that he made use of the information he had obtained relating to their accounts with the taxpayer.
In or about June, 1950, Potts, probably using the list of accounts receivable for that purpose, circularized three hundred customers of the partnership. While the record does not disclose the nature or extent of the inquiries made of the customers, it is probable that they concerned transactions with the partnership.
The Government stated that its case against the defendant is based on unreported sales of the partnership. It was the defendant’s burden to establish that the evidence relating to such sales was illegally obtained. I believe that the defendant has sustained his burden, at least with respect to information concerning the allegedly unreported sales to the three above-named South African firms. It was then the Government’s obligation to prоve that
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the information so obtained did not lead, directly or indirectly, to the discovery of any of the evidence relating to sales to said firms which may have been presented to the Grand Jury. See U. S. v. Coplon, 2 Cir.,
I am satisfied that from June 30, 1948, the day Potts was assigned to the case, he together with Obst, were jointly engaged in the preparation of the case for the criminal prosecution of the defendant, and that they did not inform him, nor did he know, that they were so engaged. Pott’s assignment of Obst, a Revenue Agent, to obtain, without the Defendant’s knowledge and consent, extensive information and extracts from the taxpayer’s books аnd records, far in excess of those required for the customary routine audit of a Revenue Agent, cannot be appreciably distinguished from the obtainment thereof by stealth or subterfuge.
It is difficult to ascertain precisely how much of what Obst learned during his frequent and extensive examinations of the taxpayer’s records was used in the preparation of the' case for criminal prosecution and the resultant indictment, but there is little doubt that the first, and considerable subsequent information relating to the three aforementioned South African accounts came from that source. It is my opinion, therefore, that the еvidence relating to those accounts was obtained in violation of the defendant’s rights under the 4th and 5th Amendments of the Constitution of the United States. If we are to give effect to those rights, we can do no less than to render useless the information and evidence so obtained. In Boyd v. United States,
Another case in point is United States v. Guerrina, D.C.,
The Government contends in its brief that after reargument “Judge Clary in effect reversed that portion of his opinion so much relied upon” by the defendant therein. I disagree. Judge Clary, relying on the cases of United States v. Burdick, 3 Cir.,
By reason of the foregoing the defendant’s motion to suppress is granted as to all evidence relating to the accounts of or sales to Ruskin Fashion Salon, Anglo-African Shipping Co., and H. T. Stanley Company, the three aforementioned South African concerns.
The hearing held herein failed to disclose the nature of the contents of the very numerous sheets which comprised Exhibit A (the Obst work-sheets), or the dates when and the circumstances under which the information therein was obtained. Hence, I am unable to pass upon the application to suppress the use of them as evidence. The Government mаy offer at the trial evidence which, directly or derivatively, had its origin therein. In such an event the trial judge, having an opportunity to see and hear the proffered evidence, will be in a position to determine whether the same, or the information which was the source thereof, was illegally acquired.
Motions for leave to inspect Grand Jury Minutes are rarely granted, and then only upon a clear showing of irregularity or impropriety. This the defendant has failed to provide. Nor have adequate grounds been shown for dismissing the indictment herein. Accordingly the application for items (2) and (3) of the relief sought herein is denied.
Settle order on notice.