APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA (D.C. No. 74-180 Criminal).
Gibbons, Circuit Judge, Markey,*fn* Chief Judge of Court of Customs and Patent Appeals and Weis, Circuit Judge.
Letters written by the United States Attorney to prospective customers of a key government witness constituted Brady material which should have been disclosed to the defendant in this criminal case. The failure of the prosecution to do so requires a new trial on the affected counts. Convictions will be affirmed on other charges of aiding the preparation of false income tax returns by deducting political contributions as business expenses.
The defendant was convicted on four counts of violation of 26 U.S.C. § 7206(2), which in general proscribes aiding or advising preparation of fraudulent income tax returns.*fn1 At the conclusion of the government's case, the court dismissed a conspiracy charge and six substantive counts.
At the trial, there was testimony that the defendant solicited political contributions in the course of his duties as finance chairman for a gubernatorial candidate. Fictitious invoices for advertising services were issued in some instances to disguise the payments as business expenses which were then used as deductions on the contributor's income tax returns. This arrangement was effected through the cooperation of Writers Associates, a small public relations firm which the defendant had engaged to assist in his fund raising efforts. In addition to its customary advertising services, Writers agreed to receive campaign donations and, on some occasions, bill contributors for work which had not been performed.
Count III of the indictment was directed at a $2,000.00 contribution which Hialeah Race Course, Inc. made after receipt of Writers' fictitious bills for advertising. Hialeah later deducted the amount on its 1969 Federal Income Tax return as a business expense.
Count IV charged that Trap Rock Industries, Inc. had given a contribution of $15,000.00 to the campaign after Writers Associates had sent invoices for advertising services not rendered. A witness testified that, in soliciting the funds, the defendant had offered to supply fictitious bills from a public relations firm so that Trap Rock could deduct the contributions as a business expense.
Counts X and XI were based on payments made by Bellante, Clauss, Miller & Nolan, Inc. on separate occasions. Lawrence Bellante, president of the company, testified that in June, 1969 the defendant asked for a campaign contribution. In the course of the conversation, McCrane said that the payment should be made to Bofinger-Kaplan Advertising, Inc. in order to secure a tax deduction. Bellante made a payment of $3,500.00 to Bofinger-Kaplan and deducted part from the corporate income tax. A similar arrangement governed a $2,500.00 payment to Writers Associates.*fn2
The defendant raises a number of diverse issues on appeal and we first address the most serious one, the withholding of Brady material.
E. Lawrence Bellante was a key government witness against the defendant. Without his testimony there could have been no conviction on Counts X and XI. The guilty verdicts on these two counts, of necessity, demonstrated the jury's acceptance of his credibility.
The trial concluded on December 11, 1974. Four days later, an article appeared in the New Brunswick Home News describing the manner in which Bellante had secured a contract to participate in the construction of a new sports stadium in New Jersey. Reporting on an interview with Bellante, the article said:
"Among those who have helped him, he said, is U.S. Atty. Jonathan Goldstein, who has written in his behalf."
The defense immediately brought the matter to the attention of the trial court which then conducted further inquiry. It was discovered that the U.S. Attorney's office had sent a number of letters describing Bellante's conduct in this case to various public and private organizations in New Jersey. The court then ordered production of the letters, eight in all. Six had been sent in the summer and fall of 1973, one in January of 1974, and the last one on January 31, 1975 (some six weeks after the trial concluded).*fn3 The letters, some of which were written at the request of Bellante's attorneys and others at the request of the addressee, are substantially identical. The U.S. Attorney's office wrote that Bellante had been granted immunity and had cooperated with the grand jury. Included was the following paragraph:
"This office brings these facts to your attention for your consideration as to whether Bellante, Clauss, Miller & Nolan, Inc., should be barred from further bidding on state work. On previous occasions we have expressed our concern that individuals that cooperate with the United States Grand Jury pursuant to a grant of immunity should not be penalized for telling the truth. It is in this context that I bring Mr. Bellante's cooperation to your attention for your consideration in reaching a final determination of the matter before you. In the final ...