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UNITED STATES v. STEIN

January 27, 1966

UNITED STATES of America
v.
Morris STEIN and Sylvan Scolnick



The opinion of the court was delivered by: HIGGINBOTHAM

 The matter before this Court arises out of a motion made by the defendants, Morris Stein and Sylvan Scolnick, to dismiss the first of a two count indictment brought against them by the United States. They seek also, a bill of particulars in the second count. For reasons which follow, the first count of the indictment must be dismissed, and the request for a bill of particulars denied.

 The defendants are charged with conspiring to conceal assets from a trustee in bankruptcy and the substantive crime of concealment of assets from the bankruptcy court. The conspiracy count arises under Section 371 of Title 18 of the United States Code, and the substantive count under Section 152 of the same title. The indictment, which was returned on February 25, 1965, alleges, inter alia, that the defendants wilfully and knowingly secured assorted merchandise on credit from suppliers with the knowledge that they were unable to pay for them, and that they would be thrown into bankruptcy. It alleges further that the defendant, Morris Stein, went into involuntary bankruptcy, and was adjudicated bankrupt on November 30, 1959. The defendant, Sylvan Scolnick, is alleged to have participated in this scheme from its inception and thus is charged equally with Stein.

 It is the contention of the defendants that count one of the indictment should be dismissed because prosecution under it has been barred by the Statute of Limitations. *fn1" They rely on the ruling of the United States Supreme Court in Grunewald v. United States, 353 U.S. 391, 77 S. Ct. 963, 1 L. Ed. 2d 931, 62 A.L.R.2d 1344 (1957). This contention is strenuously denied by the Government which argues that the prosecutions are timely.

 Although the motion for dismissal of the conspiracy count must be granted, I do not grant it on the basis of the arguments presented by the defendants, for in my judgment, they have misconceived the issues which are involved here.

 I.

 The thrust of the defendants' argument is that the facts in their case are similar in form to those in Grunewald, supra. In the Grunewald case the Supreme Court, relying on its previous opinions in Krulewitch v. United States, 336 U.S. 440, 69 S. Ct. 716, 93 L. Ed. 790, and Lutwak v. United States, 344 U.S. 604, 73 S. Ct. 481, 97 L. Ed. 593, held that after the central criminal purposes of a conspiracy have been attained, a subsidiary conspiracy to conceal may not be implied from circumstantial evidence showing that the conspiracy was kept a secret. The Court held also, that to allow a conspiracy to conceal to be inferred from overt acts of concealment, would result in an "awesome" widening of the scope of conspiracy prosecutions, and extend the life of conspiracies indefinitely.

 The defendants contend that in the instant case they too are being charged with a subsidiary conspiracy to conceal their crime after its main purpose has been accomplished. In their judgment the main purpose of the alleged conspiracy was to secure an adjudication in bankruptcy, thus, they argue that, at the latest, the statute of limitations began to run in November of 1959 when Stein was declared bankrupt. In addition, they urge that since the last overt act pleaded in the indictment occurred on November 4, 1959, any indictment secured after November 3, 1964, was barred by the statute of limitations. To support this proposition the defendants rely on the long established principle, reaffirmed in Grunewald that in a completed conspiracy prosecution the statute of limitations begins to run from the date of the last overt act alleged in the indictment. If this were the posture of the instant case the defendants would of course be correct.

 This, however, is not the posture in which this case rests, for the United States contends that the main purpose of the conspiracy has not yet been accomplished. In effect, the Government alleges a continuing conspiracy. Paragraph 9 of the indictment reads as follows:

 
From on or about January, 1959, to and including the date of the return of this indictment, the defendants, Morris Stein and Sylvan Scolnick, together with diverse other persons whose names are unknown to the Grand Jury, in the Eastern District of Pennsylvania, did unlawfully, knowingly, and fraudulently conspire, combine, confederate and agree together to commit certain offenses against the United States. * * *

 Not only does the Government allege that the conspiracy was still in effect on February 25, 1959, (the date of the indictment), but at oral argument contended that it continues today. *fn2" Thus there is a distinction between the concealment alleged in Grunewald and that in the case before me today. For there the concealment was done to cover up the traces of a completed conspiracy whereas here the concealment alleged, is in furtherance of the objectives of the conspiracy itself - "the successful accomplishment of the crime necessitates concealment." Grunewald 353 U.S. at page 405, 77 S. Ct. at page 974.

 The difficulty with the Government's position lies with its argument on the question of overt acts. Title 18, Section 371, set forth below, *fn3" makes the performance of an overt act a necessity in conspiracy prosecutions. The Government admits this, but contends that in a prosecution of a continuing conspiracy there is no requirement that the overt act alleged occur within the limitation period. Thus, it argues that where an overt act is alleged even beyond that period, the statute is satisfied. It must be noted that in cases, such as this, where a continuing conspiracy is charged, the limitations period is determined from the time of the indictment to a period, in this case, five years earlier. United States v. Schneiderman, 106 F. Supp. 892 (U.S.D.C.S.D. California, Central Division, 1952). Thus, if the Government's contention were correct, the fact that the last overt act alleged, antedated February 25, 1960, would not bar this prosecution, since an over act was alleged.

 The Government's argument is intriguing, however, a careful scrutiny of the cases on this subject, lends no support for this proposition. The overwhelming majority of the cases canvassed, support the proposition that in a conspiracy prosecution, where as here, an overt act must be alleged and proven, that act must be alleged to have occurred within the limitations period. Pinkerton v. United States, 145 F.2d 252 (5th Cir., 1944), United States v. Grodson, 164 F. 157 (D.C.N.D. Illinois, Eastern Division, 1908), United States v. Westbrook, 114 F. Supp. 192 (W.D.Arkansas, Texarkana Division, 1953), United States v. Mathies, 203 F. Supp. 797, (W.D.Pa.1962), United States v. Greater Kansas City Retail Coal Merchants Association, 85 F. Supp. 503 (W.D. Missouri, Western Division, 1949), Huff v. United States, 192 F.2d 911 (5th Cir., 1951), United States v. Cianchetti, 315 F.2d 584 (2nd Cir., 1963). As was said in United States v. Greater Kansas City Retail Coal Merchants Association, supra:

 
It is rudimental law that a conspiracy, once shown to exist, is presumed to continue whenever one conspirator does some act in furtherance of its purpose. United States v. Perlstein, 3 Cir., 126 F.2d 789. In a continuing conspiracy proof of an overt act is necessary only to establish the continued existence of the agreement and to bring the ...

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