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United States v. Rutkin.

decided: May 23, 1951.


Author: Mclaughlin

Before MCLAUGHLIN, STALEY and HASTIE, Circuit Judges.

MCLAUGHLIN, Circuit Judge.

Appellant was convicted of wilfully attempting to defeat and evade income and victory taxes.*fn1 He claims error by the trial court in the charge; in refusing to grant his motion for judgment of acquittal; and in connection with certain defense testimony.

Admittedly the sum of $250,000 was paid appellant by one Reinfeld. It was charged that the payment was made as the result of extortion. Appellant contended that it was in final settlement of his asserted interest in Browne Vintners Company and therefore not reportable income by him because the corporation had already paid the capital gains tax on the money.

Reinfeld, the principal Government witness, testified that in 1926, during the prohibition era in this country, he and five other men were engaged in what he called a "High seas venture". This was a bootlegging operation which, as described, consisted in putting "a boat out there beyond 12-mile limit and different people come and buy whiskey. We only sold it to boats with foreign registration." The enterprise continued until 1932. In 1929 appellant came into the group. According to Reinfeld appellant did not contribute any money, "He just wanted to be a partner and we took him in." Asked the reason for so doing, Reinfeld said, "Well, we were afraid that we will get some interference and trouble." Later he gave as the reason "Because we were afraid of him" and repeated, "If we didn't take him in, we would have probably encountered some trouble."

Reinfeld testified that Rutkin was to receive 3% of the profits. A few months later, said Reinfeld, one of the other members of the organization "said he was going to quit because he had some arguments with Rutkin and he is afraid". The person did quit and gave his 3% share to Rutkin. In 1930 another group, consisting of Abner Zwillman, Joseph Stacher, Joseph Davis, Harry Davis and two others, purchased 50% of the enterprise. The undertaking was liquidated in 1933 and there was an accounting "as to what each partner had." Reinfeld stated that not only was nothing coming to Rutkin but that he was $35,000 overdrawn. He went on to say that in October 1933, the members of the original venture, with the exception of Rutkin, organized the Browne Vintners Company. In 1940 this was sold to Distillers Seagrams, Ltd. for seven and a half million dollars. Reinfeld's testimony is to the effect that Rutkin never had any interest in Browne Vintners. In 1936, Reinfeld stated that Rutkin asked him for $60,000 saying that he had 6% in the old company and that he still had 6% in Browne Vintners. Reinfeld testified that he answered, "Jim, you haven't got any money." Reinfeld said that, nevertheless, he gave him the $60,000 because he liked him and because Rutkin had convinced him that "He is going to be a success." At that time Rutkin signed a document which, among other things, stated that he sold, signed and transferred to Reinfeld all of his "* * * right, title and interest in and to six percent of the issued and outstanding shares of capital stock, preferred and common, as of October 1, 1936, of Browne Vintners Co., Inc., a New York corporation, which represents any and all of such shares of capital stock in the said Browne Vintners Co. Inc., that I am entitled to." As to this, Reinfeld testified that Rutkin delivered it to him saying that "* * * he was paid out in full according to what claims he was making and I decided to recognize the claims and pay him out in full." In 1939, Reinfeld obtained a job for appellant with Browne Vintners at $15,000 a year. Rutkin stayed in this from six to eitht months. During that period, as Reinfeld narrates it, Rutkin was in trouble in Boston and Reinfeld paid a lawyer named Kessler $2500 to help him or for helping him. Rutkin lost his job because of the Boston incident. About a year later Reinfeld saw him and gave him $2,000 or $3,000 to help him out.

Reinfeld said that in 1941 he gave appellant $10,000 on representations from the latter that he wished to purchase a tavern. Rutkin came back in a week or ten days for more money and at that time Reinfeld accused him of losing the $10,000 at the race track. "And that was our first trouble", says Reinfeld. There was an argument and Reinfeld told Rutkin that he was not going to give him another cent; that he was finished.

Reinfeld testified that in late October or early November 1942 Rutkin came to his office at Browne Vintners and started off by saying to him, "Where is my money? * * * You all done well, you all made a lot of money, what about me?" Reinfeld states he answered, "What do you want from me now that you threw all your money away?I haven't got your money." Rutkin insisted that Reinfeld give him $100,000 to pay his debts. There was an argument and Reinfeld said that Rutkin threatened him. Asked to tell about this in detail Reinfeld said, "Well, he had his hand in his pocket (indicating) and said that he would kill me if I did not give him the money in three days." Then, said Reinfeld, Rutkin "run out". Reinfeld stated that because of the incident he cancelled some appointment that he had and that he "was disgusted and discouraged with business and everything."

A couple of weeks later Rutkin again came in to Reinfeld's office, pushed the latter's secretary aside, and told Reinfeld "That if I don't give him that money that he is going to kill me." At that time Rutkin's demand went up to $150,000. Reinfeld was then asked, "What happened to you about this time, if anything?" He answered, "Well, I took sick."

A week or two later Rutkin came to Reinfeld's New York hotel room and saw him there. Reinfeld said he doesn't remember what Rutkin said but that it was "nothing bad". As Rutkin was leaving, Reinfeld followed him to the door and then, Reinfeld states that Rutkin "opened the door and started to walk out. He turned around and put a gun on me saying 'you get well and give me that money'". At that time his figure was $200,000. He said, "Get me $200,000 or I will kill you." Sometime later, no specific date being fixed, at a time when Reinfeld states he was just getting well, his testimony is that Rutkin telephoned him, told him he was sick and started to apologize. Rutkin sounded over the telephone as though he were crying. Reinfeld says that he felt badly about this and agreed to go to Rutkin's hotel to see him. He did go to the hotel. He states that Rutkin told him that he had not slept since he had been up to see Reinfeld and that Rutkin said further that he must have been crazy or something. Reinfeld stated that he felt very sorry for Rutkin and said, "Let's forget the whole thing." Rutkin told him that he owed $4,000 for room rent and some other things and asked him for money. Reinfeld went out and obtained $5,000 and brought it back to him. Then, says Reinfeld, "* * * he told me if I could only give him another $5,000, how much he will think of me and all that. So I gave him another $5,000 at about 5 or 6 o'clock that afternoon."

Within a month, at the home of his brother-in-law, Reinfeld saw Rutkin again. Reinfeld's story is that he expected to there meet Zwillman's group and settle some disputed money matters with them. Rutkin was present with that group. The dispute with the group was quietly disposed of by agreeing to pay Zwillman $358,000. Then Kessler, the above referred to attorney, who was also present and who had handled the settlement of the dispute, asked about Rutkin. Reinfeld states that he asked what was Rutkin's claim and that Kessler replied that Reinfeld and Rutkin had been friends a long while and told Reinfeld to "give him some money and get through with it". Reinfeld and Rutkin went into another room. Reinfeld states that Rutkin, at first, wanted half a million dollars and finally said that he would take $250,000. Reinfeld explains agreeing to this by saying, "I wanted to get rid of him anyway and get this off my mind because I carried it long enough. I was a sick man so I agreed". Reinfeld, his brother-in-law, and a third person, obtained both the settlement money for Zwillman and the cash for Rutkin from two safe deposit boxes and thereafter the $250,000 was given Rutkin.Reinfeld said that the money was paid Rutkin because of Rutkin's above described course of conduct in which he had threatened to kill Reinfeld if the latter did not give him first, $100,000, then $150,000 and $200,000, then up to $500,000 and that the $250,000 was a compromise figure. The cash was actually paid over to Rutkin May 11, 1943 in exchange for a general release from him in favor of Reinfeld, the latter's brothers, Browne Vintners Co., Inc., and others.

Appellant's first point concerns that part of the charge when the District Judge instructed the jury that "If that money was extorted and was paid as the result of threat, then it was taxable income and Rutkin was under the duty of reporting that tax." It is urged that the Court failed to define the word "extortion" and that this is reversible error "* * * because the Court thereby failed in its duty to charge all the material elements of the offense."

Appellant cites as supporting his proposition, Screws v. United States, 325 U.S. 91, 107, 65 S. Ct. 1031, 89 L. Ed. 1495; United States v. Noble, 3 Cir., 155 F.2d 315; United States v. Max, 3 Cir., 156 F.2d 13; United States v. Levy, 3 Cir., 153 F.2d 995. Those decisions are not in point on the particular problem. Extortion was not the offense for which appellant had been indicted and tried. It was merely the method allegedly employed by Rutkin to obtain the $250,000 and Reinfeld was explicit in his testimony that his payment to Rutkin "was the result of extortion" and in detailing the facts to show just what he meant by the use of that term. Appellant's story that he received the $250,000 to close out his share in the "High seas venture" which he contended had carried over into the Browne Vintners Company, was also in evidence and before the jury. The record fails to reveal the slightest reason for inferring that the jury could have possibly misunderstood the clear language of the charge which precisely outlined the contradictory versions of the circumstances under which Rutkin received the money and their effect, if believed, upon the basic question at issue, namely, the guilt or innocence of the defendant under the indictment. Cf. Graham v. United States, D.C. Cir., 187 F.2d 87, 90.

Appellant then advances to what is his main argument on this phase of the appeal. He asserts that the above quoted sentence from the charge is error because, under the circumstances as there outlined by the Court, the $250,000 received by Rutkin was not taxable and there was no necessity for showing its receipt in Rutkin's income tax report. The Supreme Court opinion in Commissioner of Internal Revenue v. Wilcox, 327 U.S. 404, 66 S. Ct. 546, 90 L. Ed. 752 is offered as upholding this theory. That decision held that embezzled money does not constitute taxable income to the embezzler. In Wilcox it was conceded that the sum in question had been embezzled by the defendant who had been convicted of that offense in a state court.The employer at all times held the embezzling employee-taxpayer liable to return the full amount of money he had wrongfully taken. All right, title and interest in the money rested with the employer. The Court held that a taxable gain under ...

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