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United States v. Rutkin.

decided: December 10, 1953.


Author: Biggs

Before BIGGS, Chief Judge, and GOODRICH and KALODNER, Circuit Judges.

BIGGS, Chief Judge.

The appellant, Rutkin, was convicted on a charge of willfully attempting to evade or defeat a part of his income tax due for the year 1943. See 26 U.S.C.A. ยง 145(b). This court affirmed his conviction, one judge dissenting. See 1951, 189 F.2d 431. Certiorari was granted, and the Supreme Court upheld the judgment of this court. See, 1952, 343 U.S. 130, 72 S. Ct. 571, 96 L. Ed. 833. Rutkin then applied to the trial judge for a new trial on the grounds of newly discovered evidence, Rule 33, Fed.Rules Crim.Proc., 18 U.S.C.A., and of alleged fraud perpetrated on the court below by Reinfeld, the principal witness for the prosecution. Following a hearing, this motion was denied without opinion. Rutkin appeals.

Rutkin's conviction for income tax evasion was based upon his failure to report as taxable income $250,000 in cash received from Reinfeld on May 11, 1943. Rutkin contended that this amount, the receipt of which he acknowledged, represented his distributed share of a capital gain resulting from the sale of the stock of Browne Vintners Corporation. He asserts that he and Reinfeld were two of the beneficial owners of the stock of this corporation. The United States conceded that if this were so, the capital gains tax had been paid prior to the distribution to Rutkin and that therefore there could be no tax liability on Rutkin's part. It was the contention of the United States, however, that Rutkin possessed no interest in the stock of the corporation, the sale of which produced the $250,000 gain, and that Rutkin had in fact extorted this amount from Reinfeld by threatening to kill him and his family.

The evidence given at Rutkin's trial was sharply contradictory - contradictory indeed to the point where the trial judge stated that it was obvious that perjury had been committed. Reinfeld testified for the United States that although he and Rutkin had been partners, prior to the repeal of prohibition, in a bootlegging combine, Rutkin received no interest in the legitimate liquor business represented by the Browne Vintners Corporation, which replaced the combine following the repeal of the Eighteenth Amendment. Reinfeld stated that at no time after the organization of Browne Vintners was Rutkin his partner in any business enterprise or venture; he denied that Rutkin was entitled to a share of the proceeds of the Browne Vintners stock. Reinfeld and his brother-in-law, Holtz, testified to various threats made by Rutkin on Reinfeld's life which, they said, culminated in the payment of the $250,000 by Reinfeld to Rutkin. Rutkin denied making these threats and repeatedly asserted that he had a substantial interest in Browne Vintners, an interest which he said Reinfeld had undertaken to hold for him as a kind of trustee. Rutkin's conviction demonstrates that the jury accepted Reinfeld's testimony. The question now before us is whether the showing made by Rutkin on his motion for a new trial is sufficient to require that the jury verdict be set aside and Rutkin tried again.

The United States and Rutkin have agreed that to warrant the granting of a new trial on the ground of newly discovered evidence, "There must ordinarily be present and concur five verities, to wit: (a) The evidence must be in fact, newly discovered, i. e., discovered since the trial; (b) facts must be alleged from which the court may infer diligence on the part of the movant; (c) the evidence relied on, must not be merely cumulative or impeaching; (d) it must be material to the issues involved; and (e) it must be such, and of such nature, as that, on a new trial, the newly discovered evidence would probably produce an acquittal." Johnson v. United States, 8 Cir., 1929, 32 F.2d 127, 130. This is an accurate statement of the applicable law. See also Evans v. United States, 10 Cir., 1941, 122 F.2d 461, 469; United States v. Hiss, D.C.S.D.N.Y.1952, 107 F.Supp. 128, 136.Rutkin contends that the evidence he presented to the trial judge satisfies all of the requirements.

Rutkin first offered an affidavit of Joseph A. Frayne, executed April 12, 1952, purporting to set forth two conversations between Frayne and Reinfeld. Frayne, according to his affidavit, was at some time Chief of the Fugitive Squad of the Bureau of Internal Revenue of the United States. The affidavit does not set forth the nature of Frayne's employment at the time of his alleged conversations with Reinfeld.It appears that at the time the affidavit was executed Frayne was no longer employed by the United States. Both of the conversations which we have referred to date from a period after the organization of Browne Vintners but prior to the sale of the stock of that company. In each conversation Reinfeld is quoted as stating that Rutkin was his partner. These admissions, if true, would tend to contradict Reinfeld's testimony at Rutkin's trial and to destroy Reinfeld's credibility. Counsel for the appellant in their brief and during the course of the oral argument on the motion for a new trial took the position categorically that the evidence offered by Frayne in the affidavit was not merely cumulative or impeaching, that it brought to the case for the first time evidence that Reinfeld had admitted that Rutkin was actually a partner of Reinfeld and his associates in the Browne Vintners enterprise.*fn1 This position is not borne out by the record of the trial as will appear hereinafter. During the trial evidence was given as to other alleged admissions made by Reinfeld as to his partnership with Rutkin in Browne Vintners. These admissions tended to contradict Reinfeld's testimony at Rutkin's trial that he, Reinfeld, was not Rutkin's partner in that enterprise. This testimony impeached Reinfeld's credibility.

Frayne's affidavit states that the first conversation took place in New York City about the latter part of 1939. At that time Reinfeld is said to have remarked to Frayne in reference to Rutkin's refusal to implicate Reinfeld in the operation of an illegal distillery, an operation for which Rutkin had been jailed, "Well, you can always depend on your partners and your pals." The affidavit further states that Rutkin himself was present when Reinfeld made this remark. We think that Rutkin's presence at the conversation destroys his claim that this is "newly discovered" evidence. Rutkin should have recalled the conversation prior to his trial. Rutkin's failure to remember this episode does not entitle him to retry his case. If lapse of memory alone were sufficient to warrant a new trial, there would be no end to litigation. We note that Rutkin does not rely heavily on this conversation in this appeal.

The second conversation is stated to have taken place about the end of 1940 or the early part of 1941. News of the proposed sale of Browne Vintners Corporation had appeared in the newspapers. Frayne swears that he met Reinfeld and his bodyguard, Zimmy, on a Hudson Tube train and remarked to Reinfeld, "I see by the papers that you are getting rid of the Browne Vintners." Reinfeld is said to have answered, "Yes, my partners will come in for a lot of dough just as soon as the deal is closed. I would like to see my partner, Jimmy Rutkin, get a break and not piss away the money or gamble it away as he usually does when he gets his share." Frayne's affidavit states that Reinfeld asked him, Frayne, if he could arrange to have Rutkin make some sound investments which would protect Rutkin from his spending habits and assure him a regular income. Rutkin was not present at this conversation.

Zimmy, in a separate affidavit, has verified the occasion of the meeting stating that a conversation did take place on a Hudson Tube train between Frayne and Reinfeld at about the time indicated. Zimmy did not overhear the content of the conversation. Zimmy also states in his affidavit that during his association with Reinfeld he had heard Reinfeld refer to Rutkin as his partner on numerous occasions.

In an answering affidavit Reinfeld has denied that he ever told Frayne that Rutkin was a "partner" in Browne Vintners or that Rutkin would receive a share of the proceeds of the sale of that business. Reinfeld has sworn that he never asked Frayne to arrange to have Rutkin make any investments for any purpose whatsoever. Reinfeld did not recall ever meeting or knowing Frayne, although he admitted having heard of him. Reinfeld's affidavit was directed to the statements made by Frayne; it did not refer to the affidavit of Zimmy.

The second conversation alleged to have occurred between Reinfeld and Frayne provides the substantial basis for Rutkin's present motion. We will consider this conversation in the light of the applicable legal principles. We have noted the circumstances under which Frayne came to give his affidavit after Rutkin's conviction and the intrinsic credibility of his averments. We observe that at the hearing on Rutkin's motion for a new trial the court below refused to allow Frayne to give oral testimony or to be examined upon his affidavit. We are aware that the court below heard statements by the Assistant United States Attorney, unsupported by any proof, which tended to challenge Frayne's veracity. But we conclude, as will appear, that the procedure at the hearing below, however summary, did not prejudice Rutkin for, accepting Frayne's affidavit and that of Zimmy at their face value, we conclude that the affidavits do not afford a sufficient basis for a new trial.

Rutkin himself testified at length at his trial as to statements by Reinfeld assuring him that he, Rutkin, was entitled to an interest in Browne Vintners, which interest was being held for him by Reinfeld. But Rutkin's testimony was not the only evidence relied on to establish his status as a "partner" in Browne Vintners. Thus, Bennet, an officer of Browne Vintners from February 1937 to March 1941, testified that Reinfeld introduced Rutkin to him in the fall of 1937 under the following circumstances: "We were riding along and I recall that we were talking in the car about business, and Mr. Reinfeld - I sort of maybe was not so open as I should be and Mr. Reinfeld said that I need have no secrets from Mr. Rutkin, I could speak freely, that Mr. Rutkin was his partner. I recall that." Question: "That Mr. Rutkin was a partner?" Answer: "Yes."

Joseph Davis, a shareholder in Browne Vintners from its inception and an officer of the Corporation from 1937 until its sale in 1940, testified that Rutkin asked him to attend a meeting at the Park Central Hotel in mid-1940. Present at that meeting, besides Rutkin, were Zwillman, Stacher, Reinfeld, Joseph Davis and Harry Davis, all of them acknowledged shareholders in Browne Vintners.Joseph Davis, who was Harry Davis' brother, stated that Reinfeld laid before the meeting his proposal for the sale of Browne Vintners stock, and "asked if I [Davis] would be in favor of selling the company." Question: "Asked you if you were in favor?" Answer: "That's right." Question: "And then what did he [Reinfeld] say?" Answer: (Continuing.) "Then I said I would. He then asked my brother and then he asked Zwillman and Stacher and Rutkin." Question: "He asked each one individually?" Answer: "That's right." Question: "And each one indicated their willingness to sell, didn't they?" Answer: "That's right." Question: "And then it was after that that the company was actually sold?" Answer: "That's right." Harry Davis corroborated this testimony.

Samuel I. Kessler, a lawyer who participated in the conferences held in 1942, to resolve disputes as to the distribution of the proceeds of the sale of Browne Vintners, gave the following testimony: "When I got there, Mr. Reinfeld spoke up and told me that there was a controversy with relation to certain monies to be paid off in the liquidation of Browne Vintners and that Mr. Stacher and Mr. Zwillman were dissatisfied with the amount of money they had received * * *. And then I asked him to identify who all these people were and he mentioned his [Reinfeld's] brother who was there present with him and Holtz, - the [Reinfeld] said, 'You know Holtz.' I said I did. Then when he came to Rutkin, he said, 'Rutkin is here. He has the same claim as the claims that Stacher and Zwillman have and he says he didn't get all his money * * *.'"

But there was more than this to Kessler's testimony in support of Rutkin's position. Kessler further described a later meeting of the participants in the Browne Vintners syndicate.He testified that Reinfeld agreed to pay Rutkin $250,000 in settlement of the latter's alleged interest in the enterprise.*fn2 It may be asserted that Reinfeld's willingness to pay $250,000 to Rutkin was only a compromise of a disputed claim and that Reinfeld was willing to make the settlement to avoid danger to himself or to his family because of Rutkin's threats.But we are of the opinion there was sufficient basis for the jury at Rutkin's trial, if it had believed Kessler's testimony, to have found that Reinfeld had acknowledged Rutkin to be entitled to share in the proceeds of the Browne Vintners sale, and hence Rutkin was, at least to some degree, a joint-adventurer therein.

There is even further evidence in Kessler's testimony in support of Rutkin's position. Kessler testified that following Reinfeld's agreement to pay Rutkin $250,000 in settlement of his share in the Browne Vintners enterprise that Zwillman asked whether taxes had to be paid on the sums promised to Zwillman, Stacher and Rutkin and that Reinfeld stated that the sums to be paid in settlement were "tax free".*fn3 This amounts to an admission by Reinfeld that Rutkin's claim against the Browne Vintners ...

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