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UNITED STATES AMERICA v. FRANK (06/03/85)

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT


June 3, 1985

UNITED STATES OF AMERICA
v.
FRANK, ANTHONY JOSEPH W. B. GIBSON COMPANY, AN AGGRIEVED THIRD PARTY, APPELLANT IN NO. 4606; UNITED STATES OF AMERICA V. FRANK, ANTHONY JOSEPH GIBSON & GIBSON, AN OHIO PARTNERSHIP, APPELLANT IN NO. 84-3607

Appeal From the United States District Court For the Western District of Pennsylvania (Erie) D.C. Criminal No. 83-00106.

Hunter, Sloviter, Circuit Judges, and Cohen,*fn* District Judge

Author: Hunter

Opinion OF THE COURT

HUNTER, Circuit Judge:

1. The issue in this case is whether the district court had jurisdiction to make a determination as to the entitlement to $250,000 in proceeds from a check held as evidence in a bribery prosecution. Because we believe that on the facts of this case the district court retained authority over the check even though the check was converted to cash by the Internal Revenue Service ("IRS"), we reverse and remand for proceedings consistent with this opinion.

2. The facts of this case are undisputed. The IRS brought a federal criminal tax prosecution against Anthony J. Frank and two of his closely-held corporations, Brimar Construction Company ("Brimar") and Antone Construction Company ("Antone"). In April of 1983, Mr. Frank began to negotiate with Revenue Officer Quigley, and eventually made an offer to settle with the IRS for $250,000.

3. During the course of the negotiation, however, Agent Quigley became suspicious of Mr. Frank's intentions, and anticipated that a bribe offer would be forthcoming from Mr. Frank. Agent Quigley reported this to his superiors and conducted all further negotiations while wired for sound.

4. Frank did, in fact, give Agent Quigley an Oldsmobile. As part of his continued investigation of the bribery, however, Agent Quigley pretended to come to an understanding with Mr. Frank as to the delivery of a check for $250,000 to the IRS, in exchange for a clause in the settlement agreement releasing all other parties as well as Mr. Frank from an past tax obligations.

5. On June 12, 1983, Mr. Frank met with Agent Quigley and finalized the "agreement." From the beginning, however, Mr. Quigley had neither the authority nor the intent to settle Mr. Frank's tax liabilities for the $250,000. Thus, when Mr. Frank handed over the check, Mr. Quigley sprang the trap and Mr. Frank was arrested for bribery. For reasons not here relevant, the district court granted Mr. Frank's motion for judgment of acquittal in the criminal case.

6. We come, then, to the money. After the Frank acquittal, Gibson and Gibson and W.B. Gibson filed motions for return of the check, asserting that the $250,000 in fact belonged to them.*fn1 In their motion, the Gibson entities argued that the district court had the authority either under Federal Rule of Criminal Procedure 41(e), or the court's ancillary jurisdiction over evidence, to order the money returned to the court. The district court rejected the Gibson contention and held that it lacked jurisdiction to entertain the motion, taking the position that it was powerless to order the money returned once the evidence was converted to cash proceeds. We now reverse.

7. At the outset, it is important to remember how the IRS got the money. The $250,000 check was turned over by Frank on the representation of Agent Quigley that the IRS would deliver a final agreement releasing Frank and all third parties from liability. The delivery of the check was the cornerstone for Frank's arrest for bribery. The $250,000 check was, be definition, evidential, and it never lost its evidential characteristic, even though the IRS converted the evidence to cash proceeds.

8. Because the evidential character of the check may be traced through to its proceeds, it is clear that the district court has jurisdiction in this case to order the proceeds returned to the court for a determination as to entitlement to the proceeds. In United States v. Premises Known as 608 Taylor Avenue, 584 F.2d 1297, 1302 (3d Cir. 1978), we held that a court has the inherent power to order evidence returned at the conclusion of criminal proceedings, unless the evidence is subject to forfeiture. Because Frank was acquitted, there is obviously no question of forfeiture, and the IRS was obligated to return the check, without conversion, at the end of the proceedings.

9. Although the IRS argues that the evidential character of the check was negated when it simply converted the check to cash proceeds and placed those proceeds in the Treasury, such a position is untenable. The IRS, merely by converting the form of evidence, may not frustrate the district court's authority to control the disposition of evidence used in criminal prosecution. For these reasons, we hold that the district court does have jurisdiction to determine who is entitled to the check's proceeds, and we reverse and remand for proceedings consistent with the opinion.


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