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March 23, 1962

William E. MATHIES, Jr. UNITED STATES of America v. William E. MATHIES, Jr., and Marion M. Mathies, his wife

The opinion of the court was delivered by: WILLSON

Defendant, William E. Mathies, Jr., has been indicted at Criminal Action No. 62-1 for violation of Section 152 of Title 18 United States Code, this indictment containing seven counts. In a second indictment, Criminal Action No. 62-2, the same defendant and his wife, Marion M. Mathies, have been charged with conspiracy to violate the same section of the bankruptcy act in a one count indictment which contains some 110 overt acts. Motions to dismiss in both indictments have been filed. Counsel have been heard at oral argument and briefs considered.


 The first two counts in this indictment charge concealment of assets in contemplation of bankruptcy. In the remaining five counts, defendant is charged with giving false oaths in relation to the bankruptcy proceedings. Defendant raises two issues in his motion for dismissal.

 1. The indictment fails to set forth facts sufficient to constitute an offense against the United States in that it fails to adequately identify the property allegedly concealed and fails to state when, how, in what manner and under what circumstances the alleged concealment of property occurred.

 2. The allegations of the indictment fail to plead essential facts and merely allege legal conclusions from which defendant is unable to properly prepare a defense.

 The government in its brief indicates that Counts 1 and 2 were drawn pursuant to the 6th paragraph of Section 152. That paragraph reads:

 'Whoever, while an agent or officer of any person or corporation, and in contemplation of a bankruptcy proceeding by or against such person or corporation, or with intent to defeat the bankruptcy law, knowingly and fraudulently transfers or conceals any of the property of such person or corporation * * *.'

 The first paragraph of the indictment recites the involuntary bankruptcy proceedings filed against Pitt Wholesale Company, Inc., which was adjudicated a bankrupt on February 23, 1960, and thereafter the case was referred to the Referee for further proceedings. The second paragraph alleges that on or about the first day of January, 1958, and continuing thereafter up to and including the time of the finding of this indictment, in this jurisdiction defendant as president of the said Pitt Wholesale Company, inc.,

 The second count realleges paragraph one of Count 1 and then says that during the period from March 1, 1959 to and including the first day of October, 1959, defendant did knowingly and fraudulently with intent to defeat the bankruptcy law conceal and cause to be concealed certain property, that is

 'Merchandise and the proceeds thereof consisting of that merchandise commonly sold in a selfservice department store, commonly sold by Pitt Wholesale Company, Inc. and intended for sale by the Pitt Wholesale Company, Inc. of the approximate value of $ 5,000.00 belonging to the said Pitt Wholesale Company, Inc.'

 The Rules of Criminal Procedure, adopted in 1945, govern the practice in the Federal criminal courts. Rule 7 is headed 'THE INDICTMENT AND THE INFORMATION'. Rule 7(c) is subheaded 'Nature and Contents.' It states that the indictment or the information shall be a plain, concise and definite written statement of the essential facts constituting the offense charged. The point at issue here is whether the essential facts of the alleged offense are charged as required by the Rule and the decisions. The older decisions of the courts on this subject are not to be disregarded because it is believed that the rule is the expression of what the law always has been on the preparation of an indictment. No better summary is found than that in the decision of Rudin v. United States, 254 F.2d 45, 48, (6 Cir. 1958) where the court stated:

 'It is, course, settled law that in order for an indictment to be valid it must allege all of the elements which are necessary to constitute a violation of the statute. But it is not necessary that the indictment follow the exact wording of the statute. * * * The test of the sufficiency of an indictment is that it must sufficiently apprise the defendant of what he must be prepared to meet, and, in case any other proceedings are taken against him for a similar offense, that the record show with accuracy to what extent, he may plead a former acquittal or conviction.'

 In this court's opinion the first two counts in the instant indictment are invalid. These two counts are insufficient for two reasons. The first is that they do not in any way set forth the method of the concealment or how it was accomplished. Secondly, the counts do not sufficiently identify the alleged property concealed. The government's brief and the argument of the United States Attorney do not support the validity of the counts but in fact support their invalidity. For instance, the government's brief says these two counts are based upon an analysis of the purchases and sales of the Pitt Wholesale Company, Inc. for the year 1959 which shows an inventory shortage of almost double the amount alleged in the indictment. It further says that 'an inventory shortage means that Pitt Wholesale should have either had the merchandise or the cash for the said merchandise.' At the oral argument counsel for the government indicated that he would prove the first count by the so-called net worth method, that is, showing the inventory at the beginning of the year, the purchases and the inventory at the end of the year, thus showing a shortage of inventory. But such a method it seems to this court points as well to a fraudulent transfer as it does to a concealment of property in contemplation of bankruptcy. Most logically, such an analysis points to an outright theft of embezzlement of property. In charging a concealment good pleading requires that at least some method be indicated in the count of the indictment the manner in which the concealment was accomplished. In this case it ...

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