UNITED STATES v. SHOTWELL MANUFACTUR ING CO. ET AL. (355 U. S. 233) CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE No. 1. Argued October 17, 1957.-Decided December 16, 1957. In a jury trial in a federal court, respondents were convicted of willfully attempting to evade federal corporate income taxes. The Court of Appeals reversed on the ground that their privilege against self-incrimination had been violated by the admission of evidence obtained as a result of timely voluntary disclosures made by them in good faith in the hope of obtaining immunity from criminal prosecution under a policy then followed by the Treasury Department. After petitioning this Court for certiorari, the Government moved that the case be remanded to the District Court for further proceedings, on the ground that newly discovered evidence revealed that testimony at the trial concerning the timeliness and good faith of respondents' disclosures was perjured and fraudulent. Held: This Court will not review a case on the basis of a record so challenged as being tainted with perjury and fraud; the judgment of the Court of Appeals is vacated; and the case is remanded to the District Court for re-examination in further proceedings on the issues relating to respondents' allegedly voluntary disclosures. Pp. 234–246. (a) This Court will not review a case when the record is challenged, on the basis of newly discovered evidence, as being so tainted with perjury and fraud. Commnist Party v. Subversive Activities Control Board, 351 U. S. 115; Mesarosh v. United States, 352 U. S. 1. Pp. 241-242. (b) Here a convincing showing has been made that newly discovered evidence will show that testimony concerning crucial questions as to the timeliness and good faith of respondents' disclosures was perjured and fraudulent; and this Court will not review the decision of the Court of Appeals until these charges have been resolved. Pp. 242-243. (c) Since respondents were found guilty by the jury, the motion to remand involves no question of double jeopardy. P. 243. [234] (d) The Government's new showing does not relate to an issue submitted to the jury but to a preliminary question relating to the admissibility of evidence; and, since the Court of Appeals set aside the verdict on that point, fair administration of justice requires that the Government have an opportunity to show that that decision was obtained by respondents on a corrupt record attributable to their own fraud. Pp. 243–244. (e) This Court will not sanction a rule which would prohibit appellate review upon a record suspect of taint when the taint might operate to the disadvantage of the defendants, but which would require review when the taint might operate to their advantage. P. 244. (f) Since the charges as to the integrity of the record must be fully aired and the District Court is the proper forum for that purpose, it would be unnecessary and wasteful to remand this case to the Court of Appeais. Pp. 244245. (g) On remand, additional evidence to be presented by both sides will be confined to the issue whether certain evidence admitted at the trial should have been suppressed; and the District Court will make appropriate new findings of fact on that issue and enter appropriate new final judgments on the basis of such findings. Pp. 245-246. 225 F. 2d 394, judgment vacated and case remanded to District Court. Philip Elman argued the cause for the United States. On the brief were Solicitor General Rankin, Assistant Attorney General Rice, Leonard B. Sand and Joseph M. Howard. George B. Christensen argued the cause for respondents. With him on the brief were Howard Ellis and William T. Kirby. MR. JUSTICE HARLAN delivered the opinion of the Court. This case presents an unusual question involving the integrity of a criminal trial in the federal courts. The Solicitor General has filed a motion in this Court to remand the case to the District Court for further proceedings. This motion is based on a proffer of evidence [235] alleged to have come into the possession of the Government after the United States had petitioned for certiorari to review a decision of the Court of Appeals setting aside the conviction of the respondents. It is claimed that such evidence shows that the decision of the Court of Appeals was based upon a perjurious record attributable to the fraud of the respondents. A clear appreciation of both the proceedings in the lower courts and the peculiar circumstances in which the Government's motion arises is essential to an understanding of why we believe the motion to remand must be granted. In 1953 the respondents and Frank J. Huebner, after a jury trial in the United States District Court for the Northern District of Illinois, were convicted of willfully attempting to evade the 1945 and 1946 federal corporate income taxes of the Shotwell Manufacturing Company. Prior to trial they moved for dismissal of the indictment on the ground that their voluntary and timely disclosure of these tax derelictions to the taxing authorities entitled them to immunity from prosecution under the Treasury's former "voluntary disclosure policy." 2 This motion was denied by the District Court after a pretrial hearing. Respondents and Huebner then moved, on the same [236] ground, for suppression of the evidence obtained from them by the taxing authorities as a result of their alleged disclosure. After a further pretrial hearing, the District Court also denied this motion, later filing an opinion in which it found that the disclosure was not made in good faith.3 On appeal, the Court of Appeals affirmed as to the dismissal motion but reversed as to the suppression motion, set aside the convictions, and remanded the case for a new trial. 225 F. 2d 394. The Court of Appeals found that the respondents' disclosure was bona fide, and 'Internal Revenue Code of 1939, § 145 (b), 53 Stat. 63. The Shotwell Company manufactured candy and marshmallows. Cain was President, Sullivan, Executive Vice President and General Counsel, and Huebner, Vice President. Huebner is no longer a respondent here. See notes 6 and 7, infra. 2 Under that policy, first announced by the Treasury Department in 1945, the Department did not refer to the Department of Justice for prosecution cases of intentional income tax evasion where the taxpayers had made a clean breast of things to the Treasury before any investigation had been initiated by the Revenue Service. This policy was set forth in various informal announcements by Treasury officials, but was never formalized by statute or regulation. The policy was abandoned in January 1952. The propriety of this pretrial procedure is not before us. The Court of Appeals did not pass on other contentions made by the respondents in support of a reversal of their conviction. also ruled that the disclosure was timely, an issue which the District Court had not reached.5 The Government petitioned us for certiorari on the suppression issue and the respondents and Huebner crosspetitioned on the dismissal issue. Thereafter, the Government filed its motion to remand, on which, as later amended and supplemented, respond-[237]ents and Huebner joined issue by the filing of answers. Considering that the matters presented by the motion to remand raised an important issue affecting the proper administration of justice in the federal courts, we granted the Government's petition for certiorari, "limited to the issues raised in the amended motion to remand and supplement thereto and the respondents' answer to the amended motion to remand." 352 U. S. 997. We denied the cross-petition for certiorari. 352 U. S. 998. 9 8 For an understanding of the significance of the newly discovered evidence proffered by the Government some knowledge is required of the position taken by the defendants in the District Court on the suppression issue. The substance of that position was presented by Leon J. Busby, Shotwell's accountant, who testified at both the hearing on the motion to suppress and at the trial. He stated that the Shotwell Company in each of the years 1945 and 1946 had received substantial cash payments for black-market candy sales above O. P. A. [238] ceiling prices; 10 that these receipts were not recorded on Shotwell's books and were not reported in its income tax returns; that he first learned of these facts in the course of conversations with H. Stanley Graflund, Shotwell's comptroller, during a trip they took to New York early in January 1948; that immediately upon his return to Chicago he discussed the matter with respondents Cain and Sulli 5 More specifically, the Court of Appeals held that there was an effective voluntary disclosure and that the Government's use of the evidence thereby obtained from the respondents violated their rights under Self-Incrimination Clause of the Fifth Amendment. The District Court simply held that the alleged voluntary disclosure was defective, and did not discuss the Fifth Amendment. In the present posture of this case we do not reach the correctness of these rulings of the two lower courts, or any other question going to the merits of the respondents' conviction. "We deferred consideration of the petition and cross-petitions for certiorari for some months on the basis of representations made by the Solicitor General in his letters of December 6, 1955, and June 1, 1956, which culminated in the filing of the Government's motion to remand. See 351 U. S. 980. As originally filed, the cross-petition was conditional on the Government's petition being granted. After the Government moved to remand, respondents withdrew the conditional limitation, and Huebner withdrew his cross-petition in its entirety. Huebner later withdrew his answer and consented to the Government's motion. Respondents point out that this limitation of our writ in effect amounted to a denial of the Government's petition for certiorari, and therefore that the motion to remand, which was not before the Court of Appeals, must be regarded as an attempt to invoke an original jurisdiction which we do not possess. We shall dispose of respondents' point by vacating our limited writ and granting, nunc pro tunc, the Government's petition for certiorari, without restriction. This removes all question as to our jurisdiction, 28 U. S. C. § 2106; Mesarosh v. United States, 352 U. S. 1, and prejudices neither party because we shall decide only the issues raised by the motion to remand. 'Respondents have made no such showing in opposition to the Government's motion as would justify our questioning the accuracy of the Solicitor General's representation that the Government's proffered evidence is "newly discovered." 10 The Government puts the figure at some $380,000; the respondents' figure is about $160,000. van; that he recommended disclosing the omissions to the taxing authorities; and that, at the direction of respondents, he revealed the entire affair to Ernest J. Sauber, Deputy Collector in Chicago, in a series of conferences beginning in the latter part of January 1948, at one or more of which conferences he was accompanied by Cain. He also testified that thereafter, acting under Sauber's instructions and assurances that only a civil liability was involved, he and his staff, with the assistance of Cain, Huebner and Graflund, conducted an exhaustive investigation over a period of several months to reconstruct the Shotwell figures on the black-market transactions. He said that these figures were furnished in August 1948 to a revenue agent for scrutiny. Sauber and Cain gave similar testimony, except that Sauber fixed Busby's first visit to him at about the middle of March 1948. Cain's explanation of Shotwell's failure to report the black-market receipts in its income tax returns was that he believed such receipts were not taxable since they were used by Shotwell to purchase black-market supplies 11 and therefore gave rise to no profit.12 [239] In support of its motion the Government has filed with the Court the affidavits of Heubner and Graflund, which they executed after the Government filed its petition for certiorari. These affidavits paint a sharply different picture of the entire affair; indeed, they flatly contradict the tale unfolded on behalf of the respondents in the District Court. More specifically: (1) Graflund swears that the first time he discussed the black-market transactions with Busby was at Busby's home in late June 1948, at which time Busby gave no indication that he had previously known of these transactions; 13 (2) Graflund and Huebner swear that at no time prior to a meeting held in July 1948 were they ever advised or led to believe by respondents that Shotwell's black-market receipts had been disclosed to the Treasury; (3) Huebner swears that it was at this July 1948 meeting that Cain first told him that a voluntary disclosure would be made, and that Cain also gave him to understand that it had been "agreed" that the date of the disclosure "would be set at June 15, 1948";14 (4) Graflund and Huebner swear that prior to the middle of July 1948 no work was done by anyone to assemble records or data for the purpose of making a disclosure to [240] the tax authorities, and that the "Except for the amount of $6,000 which was reported in the Shotwell returns. "Although the Treasury policy at the time denied deductibility to such blackmarket expenditures, the courts later held that this kind of expenditure was deductible. See Sullenger v. Commissioner, 11 T. C. 1076. 13 According to Graflund's affidavit, it would appear that the respondents were spurred into action after Sam Krane, a Special Agent of the Internal Revenue Service, visited the Shotwell office on June 21, 1948. The affidavit states that Krane requested records and information relating to Shotwell's transaction with one David G. Lubben, from whom Shotwell had been receiving large sums of money which were not recorded in its regular books; that Graflund made certain records available to Krane and was "criticized" by the respondents for having done so; and that Graflund conferred with Busby within a few days after Krane's visit. In his affidavit Huebner states: "On November 13, 1952, Sauber testified at the hearing on the defendant's motion to suppress evidence that Busy and Cain had contacted him in March, 1948. After hearing Sauber testify, I told Cain I thought the voluntary disclosure date was supposed to be June 15, 1948. Cain said to me, 'Ssshhh! There is nobody that knows anything about this. Keep quiet.'" alleged offsetting payments for black-market supplies were in fact concocted "out of thin air" at the July meeting; and (5) Huebner swears that in July and August 1948 he gave Cain $10,000 which Cain said he needed "to fix the tax difficulty we were in." 15 Huebner says in his affidavit that he was not asked to testify in the District Court "because I had stated I would not lie on the stand." It is obvious that the Government's new evidence casts the darkest shadow upon the truthfulness of the disclosure testimony given by or on behalf of the respondents in the District Court. If true, it indicates that what the respondents have sought to represent in the District Court, the Court of Appeals, and in this Court as a voluntary disclosure, made in a timely manner and in good faith, was instead but a further step in a conspiracy to "fix" Shotwell's tax difficulties, possibly involving the cor-[241]ruption of government officials,16 and certainly entailing an attempt to perpetrate a fraud upon the courts. Were we to undertake to review the Court of Appeals upon a record as suspect as this, we might very well be lending ourselves to the consummation of a fraud which may already have made the Court of Appeals its unwitting victim. In these circumstances it is imperative that the case be remanded to the District Court for a full exploration of where the truth lies before the case is allowed to proceed further. The integrity of the judicial process demands no less. The path to our decision is clearly marked by this Court's actions and pronouncements in two recent cases, Communist Party v. Subversive Activities Control Board, 351 Ú. S. 115, and Mesarosh v. United States, 352 U. S. 1. In each case the Court refused to consider the questions presented for review in the face of a challenge to the integrity of the record based on newly discovered evidence. In Communist Party the Court remanded the case to the Board with directions to resolve the charges of taint, and to make a fresh determination on the merits, if taint were found.17 In Mesarosh the Court, believing that the record clearly demonstrated that a key government witness 15 The Solicitor General represents that if the motion to remand is granted Revenue Agent Joseph M. Lima will testify that on July 30, 1948 he was instructed by his Group Supervisor, Ralph Johnson, to make an immediate audit of Shotwell's 1946 return; that thereafter he was instructed by Johnson to allow (as offsets) over-ceiling purchases totaling more than $300,000, which were wholly unsubstantiated and whose allowance was contrary to the existing Revenue Service policy; and that he then prepared a report showing a tax deficiency for 1945 and 1946 of about $20,000, which report he destroyed at Johnson's direction in September 1948, after the Intelligence Unit of the Service had made inquiries about the case. In this connection Huebner states in his affidavit: "Cain also told me, sometime in about late July, 1948, that he was about to settle the tax case. Shortly thereafter, Cain told me he had settled the tax case for a tax deficiency of $20,000.00. "In October, 1948, Busby told me that there had been a meeting in the fraud division at the Internal Revenue office and that hell had broken loose; that 30me Internal Revenue people had a heck of a time destroying papers that had been made up for the purpose of billing Shotwell for taxes." 16 See note 15, supra. "Section 14 (a) of the Subversive Activities Control Act expressly authorizes courts of appeals to remand cases to the Board for the taking of further evidence. 64 Stat. 987, at 1001-1002. Our authority to act in similar fashion is found in the broad provisions of 28 U. S. C. § 2106, which grants us power incident to our appellate jurisdiction, to "vacate...any judgment" brought "before [us] for review" and to "require such furher proceedings to be had as may be just under the circumstances.” |