author: TUTTLE, Circuit Judge: BY THE COURT:

text:
    Grover William SIMS, Second Lieutenant, United States Air Force, 418-66-69TCFV, Plaintiff-Appellant, v. Cecil E. FOX, Brigadier General, Etc., and Dr. John L. McLucas, Secretary of the Air Force, Defendants-Appellees.
    No. 73-2707.
    United States Court of Appeals, Fifth Circuit.
    April 19, 1974.
    Rehearing En Banc Granted July 24, 1974.
    Reginald C. Wisenbaker, Valdosta, Ga., for plaintiff-appellant.
    Hale Almand, Jr., Asst. U. S. Atty., William J. Schloth, U. S. Atty., Sam R. Wilson, Asst. U. S. Atty., Macon, Ga., Dr. John L. McLucas, Sec. of Air Force, Washington, D. C., Earl W. Carson, Asst. U. S. Atty., Macon, Ga., for de-' fendants-appellees.
    Before TUTTLE, BELL and GOLDBERG, Circuit Judges.
   TUTTLE, Circuit Judge:

This appeal raises the question whether the United States Air Force can legally separate a reserve officer for cause by giving him an “honorable” discharge which, however carries with it a “separation designation number 588” signifying a discharge on the ground of “unfitness and/or unsuitability,” without affording such officer an opportunity for a hearing. What is not before the Court is the right of the Air Force to relieve a reserve officer from active duty with an unqualified honorable discharge certificate as a part of a reduction in force without a hearing. Lt. Sims contends that he cannot be discharged on the grounds that he is “unfit” or “unsuitable” and ineligible for recall, and also be deprived of his reserve commission as an Air Force officer without minimum procedural due process.

The facts may be briefly stated. The plaintiff whose military career had been entirely satisfactory was charged in the Georgia Criminal Courts with several misdemeanors involving indecent exposure. By order of the State Superior Court judge he was sent to the Central State Hospital at Milledgeville, Georgia, where he remained for several months for a period of extensive psychiatric care and treatment. Thereafter, on March 22, 1973, the Georgia Superior Court judge signed an order discharging Sims without any adjudication of guilt as to all charges pending against him, which said order completely exonerated him of any criminal purpose.

In the meantime, on January 24, 1973, Sims was notified in writing of the initiation of administrative discharge proceedings under Air Force Regulations 36-2 by the Commander of his wing at the Moody Air Force Base in Georgia. Air Force Regulations 36-2 are entitled “Administrative Discharge Procedures” and the subhead reads “This regulation establishes criteria for identifying officers of the Air Force serving in the active military service who, because of evidence of unfitness or unacceptable conduct, should be required to show cause for retention in the Air Force. It also prescribes procedures for the disposition of cases involving such officers and those cases approved under Air Force Regulations 35-62, Military Personnel Security Program, for further processing under this Regulation.” The January, 1973 notice stated: “I am initiating action against you under AFR 36-2 for the reasons outlined in ¶ 4D(4) of that Regulation.” Paragraph (4) deals with the subject matter that may properly subject an officer to an inquiry under Regulations 36-2. Subparagraph D(4) is entitled “Sexual Perversion” and reads: “This includes but is not limited to: . . . (4) indecent exposure.”

Plaintiff was advised that he could submit written statements within fifteen days and there was attached to the letter an extract of a report of an investigation that had been made by the appropriate Air Force officers. Sims responded on February 7th and stated “I do not desire to comment on the allegations contained in paragraph 2 to the attached letter.” Paragraph 2 contained the allegations as to the indecent exposure already discussed above. Thereafter on February 27, 1973, the Commander Air Training Command recommended to Headquarters U.S. Air Force that plaintiff be given an honorable discharge from all appointments in the United States Air Force. Under the regulations, since Sims was a probationary reserve officer he was not entitled to a hearing before obtaining a discharge as a matter of right. The Commander recommended processing under section E, Air Force Regulations 36-2, which provides for the Secretary of the Air Force, Personnel Board, to review all the documentary evidence, including that submitted by the officer, but without the appearance of the officer or his representation by counsel unless such appearance is determined by the Board to be necessary.

On March 26, 1973, Lt. Sims submitted to the Commander of his wing for forwarding to the Air Training Command a letter expressing his desire to remain in the Air Force and he accompanied this letter with a favorable letter of evaluation relating to his duty performance as well as a report of his psychiatric evaluation at Central State Hospital which contained a statement “The prognosis in this type of disorder with the appropriate treatment, which is primarily psychotherapy, is fairly good, and chances for recurrence of the symptoms are usually nil.” Sims also forwarded a copy of the order of the Superior Court discharging him from the state criminal proceedings.

Following the ex parte consideration of Sims’ file proper Air Force authorities notified his Commanding Officer at Moody Air Force Base to havé him discharged, and such discharge was to be accomplished in the following manner: “Show in orders and item 11(c), DD Form 214 [the discharge certificate] reason and authority: SDN 588, P7, AFR 36-12 and this message.” The discharge was to be accomplished within ten days. Prior to the expiration of this date Lt. Sims filed his suit in the district court, seeking to have the discharge enjoined on the grounds that he was entitled to have a hearing with minimal due process procedures before he could be subjected to this unfavorable action against him. The trial court initially granted a temporary restraining order to stay the discharge long enough for it to consider the Government’s motion to dismiss. After the hearing the court entered an order dismissing the complaint on the ground that no due process requirements would attach to the ordering of an “honorable” discharge. The court granted a stay to afford Sims an opportunity to appeal. Following the filing of an appeal this Court extended the stay but ordered the appeal expedited. Unfortunately, following oral argument we found it necessary to have supplied excerpts from the relevant Air Force Regulations, and further briefing on the question of exhaustion of administrative remedies.

The real crux of this case is pointed up by the statements by the United States calling attention to the fact that the Secretary of the Air Force may give an “honorable discharge” to any member of the Air Force without a hearing. The position of the defendant is that there are many kinds of “honorable discharges” and this particular discharge certificate which the Air Force has ordered given to Sims carries on its face evidence of serious professional or moral misconduct such as would seriously affect his reputation and opportunity for success in civil life. For a young man twenty-three years of age trained as an aircraft pilot, the result may be devastating.

It is clear that the notations which are required to be placed on Sims’ Form 214 (the discharge certificate) even though it is termed an “honorable discharge” make it perfectly plain that he will have been discharged as a result of Board action which had been undertaken because of his “unfitness, unacceptable conduct, or in the interest of national security.” This follows from the fact that the instructions for his discharge directed that the discharge certificate contain an entry at the appropriate place giving “reason and authority SDN 588 P7 AFR 36-12.” Paragraph 37 of Regulation 36-12 deals only with separation as a “result of Board action” as to officers “who fail to meet the standards of conduct and performance prescribed by the Secretary of the Air Force.” It further provides that the designation SDN 588 would identify “action initiated under AFR 36-2” on any of the grounds of unfitness or unacceptable conduct described in that regulation other than of homosexuality which was assigned SDN 587. In other words, any certificate of discharge bearing the designation SDN 588 carries on its face a statement that the officer concerned had been discharged under Air Force Regulation 36-2 dealing only with “unfitness, unacceptable conduct or in the interest of national security.” Moreover, as was readily conceded during oral argument, such a discharge would make such officer ineligible for recall to active duty. Furthermore, the order to discharge Sims “from all appointments in the United States Air Force” means, as we understand it, cancelling his commission in the Air Force Reserve.

Simply stated, an honest inquiry into the basis for Sims’ discharge would demonstrate that he had been given a discharge for reasons that would greatly undercut the status of the discharge as “an honorable discharge.” The question we are to face therefore is whether a lieutenant in the Air Force can not only have his normal period of active duty terminated for cause, and be deprived of his Reserve Commission, but also have his future jeopardized by having to carry as his certificate of release from the service a document which impugns his character or reputation without having at least an opportunity to make an oral presentation and witnesses on his behalf at some kind of proceeding beyond that authorized under prevailing regulations. We of course are not considering, as we have no right to, what the' Air Force Board of Officers, under a proper regulation, should, or would, be likely to do if Lt. Sims had been afforded a hearing in the true sense of the word. We have cited some favorable aspects of his case above merely to show that his contention that he ought to have an opportunity to appear in person to argue his ease either personally or by counsel is not an empty gesture on his part.

The most important matter that Sims would normally wish to present to a™ administrative tribunal would, of course, be the disposition of his criminal case in the Georgia courts, and also the evaluation of his performance of military duties (which was certified by his commanding officer to be unexceptionable), and the prognosis as to his psychological problem made by the Georgia Central State Hospital.

There can be no doubt but that Sims’ discharge is a flawed passport back to civil life. The detriment he will suffer is of sufficient magnitude to create a genuine issue as to whether the Air Force should not be required to provide him with a hearing at which he could personally be present and make at least an effort to stave off the impending threat to his future reputation and security. As the Supreme Court said in Green v. United States, 365 U.S. 301, 304, 81 S.Ct. 653, 655, 5 L.Ed.2d 670 (1961), when speaking of the need for granting an individual accused in a criminal case the absolute right to speak for himself: “The most persuasive counsel may not be able to speak for a defendant as the defendant might, with halting eloquence, speak for himself.” The value to a person facing a loss of a substantial right to speak for himself where no counsel was permitted to speak for him is of course even greater.

Moreover, Lt. Sims had a prospect of enjoying his full tour of duty as a flying officer in the Air Force, subject only to normal procedures that might fortuitously make it necessary for his active duty to be terminated earlier. Here, he was deprived of that expectation of con-tínued service, see McDowell v. State of Texas, 465 F.2d 1342 (5th Cir. 1971) because of alleged misconduct.

Besides, he was to be deprived of his status as a reserve officer, which carries with it intrinsically valuable emoluments for service as a “week-end warrior” if he remained in certain reserve categories.

We do not doubt that such a right as Sims possessed is sufficiently similar to those rights which the courts have held cannot be taken away without procedural due process as to give validity to his contention here. See McDowell v. State of Texas, supra, Hagopian v. Knowlton, 470 F.2d 201 (2d Cir. 1972); Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972). For all that appears in this record he would have continued to serve as an Air Force officer on flying status for a period (which, however, is not made plain in the record before us) but for the action taken because of his acts of indecent exposure which triggered the proceedings commenced against him by the letter of January 24, 1973.

Even if this termination for cause of his Air Force status were not in itself the deprivation of a right entitling him to procedural due process, his discharge in a manner that marked him as unfit to serve was of itself the deprivation of a protected right. Such a right was described by the Supreme Court in Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972). In Roth the Court held that a failure tó rehire a non-tenured teacher was permissible because nothing damaging to Roth’s reputation could be inferred from the state’s action. The Court said:

“In declining to rehire the respondent, [the state] did not make any charge against him that might seriously damage his standing and associations in his community. It did not base the nonrenewal of his contract on a charge, for example, that he had been guilty of dishonesty, or immorality. Had it done so, this would be a different case for ‘where a person’s good name, reputation, honor, or integrity is at stake because of what the government is doing to him, notice and an opportunity to be heard are essential.’ Wisconsin v. Constantineau, 400 U.S. 433, 437 [, 91 S.Ct. 507, 27 L.Ed.2d 515] (1971); Wieman v. Updegraff, 344 U.S. 183, 191 [, 73 S.Ct. 215, 219, 97 L.Ed. 216] (1952); Joint Anti-Facist Refugee Committee v. McGrath, 341 U.S. 123 [, 71 S.Ct. 624, 95 L.Ed. 817] (1951); United States v. Lovett, 328 U.S. 303, 316-317 [, 66 S.Ct. 1073, 1079, 90 L.Ed. 1252] (1946); Peters v. Hobby, 349 U.S. 331, 352 [, 75 S.Ct. 790, 801, 99 L.Ed. 1129] (1955) (Douglas, J., concurring). See Cafeteria & Restaurant Workers v. McElroy, 367 U.S. 886, 898 [, 81 S.Ct. 1743, 1750, 6 L.Ed.2d 1230] (1961). In such a case, due process would accord an opportunity to refute the charge before University officials [footnote not included]. In the present case, however, there is no suggestion whatever that the respondent’s ‘good name, reputation,, honor, or integrity’ is at stake.” 408 U.S. 564, 573, 92 S.Ct. 2701, 2707.

Here, of course, there is precisely the ingredient which was lacking in Roth. The Air Force seeks to discharge Lt. Sims in a manner that denigrates his reputation, honor or integrity because of the nature of the entries on the discharge certificate.

A somewhat similar ease was decided by the Court of Appeals for the Second Circuit when it concluded that the Court could intervene in a threatened expulsion of a cadet at the United States Military Academy and his return to active duty status where the cadet was denied a due process hearing.

The case of Hagopian v. Knowlton, 470 F.2d 201 (2d Cir. 1972), dealt with action of the United States Military Academy “separating” a third year cadet for deficiency in conduct after receiving 107 demerits as of a certain date, 5 demerits in excess of the 102 demerit allowance prescribed as a maximum for the period involved. The order of separation would also subject cadet Hagopian to transfer to active duty in the armed services. The cadet challenged the failure of the academy officials to comport with the minimum due process requirements in the procedures by which the demerits were charged against him, since when these demerits accumulated to the number of 102 this would warrant the termination of his ca-detship by the academy’s academic board. The court held:

“We hold that the existing measures presently available to a cadet for contesting an individual award of demerits are sufficient to meet minimum standards of due process, but that when an accumulation of awarded demerits renders the cadet subject to separation, he must be granted a fair hearing before being separated, including the right to personally appear and to present witnesses and other evidence in his behalf.”

In a carefully considered opinion the court recognized the basic precept that:

“Such important matters, [the provision of rigorous and exacting standards of discipline and behavior and personal decorum for cadets] which are a part of the Army’s conduct of military affairs and the standards adopted by it to prepare men for military operations, should not be interfered with by the judiciary.” Citing Orloff v. Willoughby, 345 U.S. 83, 73 S.Ct. 534, 97 L.Ed. 842 (1953).

As is pointed out in the opinion, the court noted that the academic board had a double function. It was first to determine whether the cadet in question had accumulated an excessive amount of validly awarded demerits over the course of the demerit period. Then, if so, it must then determine whether the cadet’s “potential warrants retention,” so as to allow probation rather than separation. In other words the board had a responsibility of doing more than totalling the number of demerits and then exacting the maximum penalty of dismissal from the academy if they equalled more than 102. The board was charged with the requirement of determining whether the cadet’s character, qualifications and other “potential” warranted his retention as a cadet. Here, too, the hierarchy of the Air Force was required to consider the record of Lt. Sims and make a recommendation to the “character” as well as the “type” of discharge. Moreover, it is undisputed that the board could have rejected the initial recommendation of Sims’ commanding officer that he be discharged from his commission. Such a judgment would necessarily be on much the same standards as that spoken of in Hagopian, i. e. whether Lt. Sims “potential warrants retention” notwithstanding the truth as to the original charges brought against him. Relevant to this judgment would be the factors already mentioned as to the disposition of his case in the state criminal court, the certification as to the outstanding performance of his duties by his superior officer, and the prognosis as to a possible recurrence of his psychiatric problem. As the court in the Second Circuit said :

“Perhaps more importantly, with respect to certain of the demerit awards and especially with respect to the subjective evaluation of the cadet’s potential, the opportunity to personally appear and present his case may affect considerably the credibility which the members of the Academic Board attach to the cadet’s appeal.”

We read the word “credibility,” to cover more than credibility as to the truth or falsity of the original charges.

The court further said:
“The opportunity to bring witnesses to appear in his behalf may also strengthen the impact of his case above the frail impression which a written submission would make.” 470 F.2d 201, 211.

We conclude as did the court in Hagopian and the earlier case of Wasson v. Trowbridge, 382 F.2d 807 (2d Cir. 1967), (a case dealing with the dismissal of a third year student at the Merchant Marine Academy) that at such a hearing:

“The [officer] must be allowed to appear and present evidence, including witnesses, on his behalf. The importance of informality in the proceeding militates against a requirement that the cadet be accorded the right to representation by counsel before the Academic Board.”

We think the case of Pauls v. Secretary of Air Force, 457 F.2d 294 (1st Cir. 1972), in no way conflicts with what we decide here. In that case the particular officers involved had their active service terminated among a group involved in a reduction in force. They were not selected to appear before a. board to answer charges of misconduct for the purpose of determining whether they were to be retained in the service.

Finally, the appellees contend that the trial court did not have jurisdiction of this matter because of the failure of Lt. Sims to pursue available administrative remedies. In its brief filed in this Court the government’s position is far from clear. It states:

“Plaintiff has not exhausted his administrative remedies. He has further administrative appeals under 10 U.S.C. § 1552 (32 CFR 865A) and 10 U.S.C. § 1553 (32 CFR 865B).”

It is apparent that neither of these forms of administrative hearings would be available to Lt. Sims until after his discharge had been completed and his separation both as an active and as a reserve officer had become final. The sections were both enacted initially for the purpose of avoiding a large number of “private” bills in Congress by which formerly discharged service men sought to have the nature or character or type of discharge certificate corrected because of real or imaginary defects in the military system which they felt had prejudiced them. Both sections are rather broad in their language, but, upon request of the court, government counsel undertook to make plain what it contended with respect to the failure of Lt. Sims to pursue his administrative remedies. Counsel conceded that the discharge review board, established pursuant to 10 U.S.C. § 1553 “is not authorized to grant the administrative relief the court apparently is inquiring into.” The government on the other hand contended that the Board for Correction of Military Records established under the authority of 10 U.S.C. § 1552 would permit the Secretary of the Air Force to reinstate Lt. Sims if the Board or the Secretary concluded that he had been improperly discharged.

As we understand it, this amounts to the contention that Sims should accept his discharge containing the final determination by the Air Force Personnel Board that he was unfit to retain his active duty or reserve status in the Air Force and ineligible for recall and thereafter make application to the Board for Correction of Military Records seeking a reinstatement which, if recommended, could be effected only by a discretionary act by the Secretary of the Air Force.

While not called to our attention in the government’s brief, this argument is most strongly supported by these earlier decisions by this Court: McCurdy v. Zuckert, 1966, 359 F.2d 491, cert. den. sub nom. McCurdy v. Brown, 1966, 385 U.S. 903, 87 S.Ct. 212, 17 L.Ed.2d 133; Tuggle v. Brown, 362 F.2d 801, cert. den., 1966, 385 U.S. 941, 87 S.Ct. 311, 17 L.Ed.2d 220; and Stanford v. United States, 1969, 413 F.2d 1048. These cases are all distinguishable. In none of them did the serviceman’s attack on the validity of his discharge (“general” in McCurdy’s case, “undesirable” in Tug-gle’s case, and “dishonorable” in Stanford’s) deal with the issue of procedural due process in the hearings or review procedures which ultimately produced the termination of the services of each.

McCurdy had a full hearing before the Board of Officers at which this Court said “He was ably represented by both military and civilian counsel. After a full hearing, the Board found,” etc. Nothing appears from the per curiam opinion in Tuggle that the airman had been denied a full hearing. In Stanford the court dealt with a challenge to the validity of a court martial which had culminated in a dishonorable discharge. His attack was based on the contention that he had been denied the constitutional right to indictment by grand jury and trial by petit jury. This Court pointed out the fact that the constitution expressly excepts cases arising in the armed forces from the guarantee of indictment and that the Supreme Court had held that trial by jury was not guaranteed in court martial proceedings, citing Whelchel v. McDonald, 1950, 340 U.S. 122, 71 S.Ct. 146, 95 L.Ed. 141.

In this case, the very defect which Lt. Sims asserts here as the basis for his action in the court is one that would prevent the preparation of the kind of record which should be made available for all parties to use at any hearing before the Board for Correction of Military Records. This contention being based upon a procedural defect that goes to the preparation of the record itself is not only a distinguishing characteristic from the prior cases, but it seems clear that it requires a holding that this case presents a proper issue for the court to decide in the present litigation. Without an opportunity to appear before the Personnel Board, it is impossible to see how that Board could adequately appraise Lt. Sims as to his potential for continued service in the Air Force.

Moreover, although perhaps in light of this court’s decision in McCurdy, supra, not sufficient of itself to warrant judicial intervention prior to actual discharge, we may also take judicial notice of the fact that serious interruption of the duties of a qualified flying officer of the Air Force might have a substantially deleterious effect on his future capabilities and opportunities for promotion so that a complete separation from the service for a substantial period of time would jeopardize his future in the service were he ultimately to prevail.

We conclude therefore that this action should not be dismissed for failure of Lt. Sims to await his final discharge, after which he should then seek to have that discharge set aside ánd seek reinstatement from the Secretary of the Air Force rather than undertake to stay the discharge until he had been accorded a hearing with minimum due process as we have outlined above.

The judgment is reversed and the case is remanded to the trial court for further proceedings not inconsistent with this opinion.

ON PETITION FOR REHEARING AND PETITION FOR REHEARING EN BANC

Before BROWN, Chief Judge, and WISDOM, GEWIN, BELL, THORNBERRY, COLEMAN, GOLDBERG, AINSWORTH, GODBOLD, DYER, SIMPSON, MORGAN, CLARK, RONEY and GEE, Circuit Judges.

BY THE COURT:

A member of the Court in active service having requested a poll on the application for rehearing en banc and a majority of the judges in active service having voted in favor of granting a rehearing en banc,

It is ordered that the cause shall be reheard by the Court en banc with oral argument on a date hereafter to be fixed. The Clerk will specify a briefing schedule for the filing of supplemental briefs.

      . This procedure is authorized by sections 27-2727 to 27-2732 Ga.Code Ann. The provisions of this statute are as follows:
      Section 1
      “Upon a verdict or plea of guilty or a plea of nolo contendere [but] before an adjudication of guilt, the court may, in the case of a defendant who has not been previously convicted of a felony, without entering a judgment of guilt and with the consent of the defendant, defer further proceeding and place the defendant on probation as provided by the Statewide Probation Act (Georgia laws 1956 p. 27). Upon violation of the terms of probation, or upon a conviction for another crime, the court may enter an adjudication of guilt and proceed as otherwise provided. No person may avail himself of the provisions of this [Act] on more than one occasion.”
      Section 2
      “Upon fulfillment of the terms of probation, or upon release by the court prior to the termination of the period thereof, the defendant shall be discharged without court adjudication of guilt. Such discharge' shall completely exonerate the defendant of any criminal purpose, shall not affect any civil right or liberties, and he shall not be considered to have a criminal conviction. Should a person be placed under probation under this [act], a record of the same shall be forwarded to the office of the State Probation System and to the Identification Division of the Federal Bureau of Investigation.”

      . This letter commenced by saying “I am initiating action against you under AFR 36-2 for the reasons outlined in paragraph 4D(4) of that regulation.” Paragraph 4D(4) states as follows:
      “(4) When recommendation for action is appropriate. A recommendation for action under this regulation is appropriate when any of the circumstances outlined in this paragraph or similar circumstances exist f)

      “(d) Sexual perversion. This includes but is not limited to :
      “[4] Indecent exposure. ...”

      . For a full discussion of the developing law in cases of this kind see Judicial Review of Military Administrative Discharges, 83 Yale Daw Journal 33.


source: Caselaw Access Project

author: COLEMAN, Circuit Judge:

license: Public Domain

text:
    EXCHANGE SECURITY BANK et al., Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee. Ellen Gregg INGALLS et al., Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.
    No. 73-1335.
    United States Court of Appeals, Fifth Circuit.
    April 19, 1974.
    Robert McDavid Smith, Allen D. Rushton, Birmingham, Ala., for plaintiffs-appellants.
    Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Atty., Tax Div., U.S. Dept. of Justice, Washington, D. C., Wayman G. Sherrer, U.S. Atty., Birmingham, Ala., Wesley J. Filer, Tax Div., Dept. of Justice, Washington, D. C., for defendant-appellee.
    Before BELL, COLEMAN and RONEY, Circuit Judges.
   COLEMAN, Circuit Judge:

The District Court denied plaintiff-taxpayers’ claim for a tax refund. We reverse.

The operative facts begin with the dispute between Robert Ingalls, Jr., president of the family corporation, In-galls Iron Works, Inc. (the Company), and his mother Ellen Gregg Ingalls, over 2,287 shares of company stock. Under a 1943 agreement, the Company had an option to purchase these shares at the death of its owner, Robert Ingalls, Sr. Upon his death in 1951, Mrs. Ingalls became president of the Company. The Company did not exercise its stock purchase option.

In 1952, the son, Robert Ingalls, Jr., took over as president of the Company. The Company then claimed the option to purchase the stock of Mr. Ingalls, Sr. from the estate. The estate resisted the purchase. This resulted in litigation in state court between Robert Ingalls, Jr., and the estate of his father over the ownership of the stock. The purchase price of the stock was placed in escrow by the Company pending the outcome of litigation and the stock was treated as treasury stock.

Two other law suits are also pertinent to this appeal.

Throughout the existence of this closely-held family corporation, Mr. In-galls, Sr. and his wife Ellen used Company money to pay personal obligations. As a result, both the estate of Mr. In-galls and Mrs. Ingalls owed certain sums of money to the Company. In 1956, in Federal District Court, the Company filed Civil Action No. 8450 against Mrs. Ingalls for $48,459, due by account stated in 1951. Mrs. Ingalls counterclaimed that the Company had misappropriated $193,217 of her money. As the result of a resolution of the stockholders, pledging that if Mrs. Ingalls pled the statute of limitations she would be removed as a director of the Company, she did not so defend. The case resulted in a jury verdict in favor of the Company. On appeal, this Court reversed because an account stated had not been proved, Ingalls v. Ingalls Iron Works, 5 Cir., 1958, 258 F.2d 750. On remand, the Company alleged the money was owed on simple account, Mrs. Ingalls • continued her counterclaim and amended her answer to include the statute of limitations.

In 1954, in Federal District Court, the Company filed Civil Action No. 7651 against the estate of Robert Ingalls, Sr. for $188,532 allegedly owing at the time of his death. The estate denied liability and counterclaimed for recognition as owner of the disputed 2,287 shares of stock and for dividends on said stock equal to those paid on other Company stock.

Thus, in both cases, the Company sought judgments totalling $236,991, while Mrs. Ingalls countered for $193,217, and the estate of the deceased senior Ingalls sued to settle the status of the stock.

On March 10, 1959, as the case in Civil Action No. 8450 was ready for retrial, the parties entered into an agreement which settled all pending litigation. This agreement was negotiated and signed in open court in the presence of the United States District Judge. It was signed by Robert Ingalls, Jr., individually and as President of Ingalls Iron Works Company. The Company was represented by its general counsel, staff, and several of its directors. Judge Grooms retained the signed copy of the settlement agreement.

The agreement stipulated that the estate of Mr. Ingalls was the rightful owner of the 2,287 shares of Company stock but future rights to its ownership was restricted in favor of the Company; back dividends on the stock amounting to over $500,000 were waived by the estate except for $175,000 to be paid to appellants’ attorneys for their services; and the Company was forthwith to dismiss with prejudice its suits for the debts owed the Company by the senior Ingalls and his wife. All counterclaims were likewise to be dismissed.

Under the settlement agreement, the indebtedness of Mrs. Ingalls and of the estate of Mr. Ingalls was extinguished. Since valuable rights had been transferred to the Company as a consideration for cancellation of the debts, it was thought that for tax purposes no income had been realized. The cancelled debts were .not reported as gross income for any year. The Internal Revenue Service felt, however, that the appellants had realized income in the full amount of the cancelled debts and for the year 1960 assessed each with a deficiency in reported gross income accordingly.

The assessments were paid and separate suits filed for a refund. Mrs. In-galls is now deceased, and her estate was substituted in her stead. The suits were joined for trial and are so treated on this appeal.

The appellant-taxpayers allege that they are entitled to a refund, with interest, of the taxes paid on the assessed deficiency because: (1) they realized no income as the result of the 1959 agreement; (2) if they realized income, it should be taxed at long term capital gain rates and not at ordinary income rates; (3) if they realized income, it was in the year 1959 and not 1960; and (4) if they realized income, it is dividend income subject to the 4% dividends received credit.

We agree as to Point 3 and do not reach the other issues raised.

Following the March 10, 1959 settlement, the Company allegedly began to doubt its validity on the pretext that Robert Ingalls, Jr. did not have the authority to bind Ingalls Iron Works Company and the agreement had to be ratified by the Company’s Board of Directors. In findings of fact and conclusions of law, filed June 18, 1959, Judge Grooms held that the agreement was a valid and binding contract and ordered its enforcement. In amended findings dated August 18, 1959, Judge Grooms found that the taxpayers had been willing and able to comply with the contract and ordered the Company to immediately pay the $175,000 to the taxpayers. It was further ordered that final judgment with prejudice be rendered in Civil Action No. 7651 and 8450, Ingalls Iron Works Company v. Ingalls, 177 F.Supp. 151 (N.D.Ala., 1959).

The Company appealed Judge Grooms’ enforcement order and this Court in August, 1960 affirmed, simply adopting the opinion below, Ingalls Iron Works Company v. Ingalls, 5 Cir., 1960, 280 F.2d 423. In September, 1960, the Company Board of Directors directed compliance with the March 10 agreement. Thereafter, the Company paid the taxpayers the $175,000. Although it was not until 1961 that the Company charged the debts against retained earnings, it was made effective as of December 31, 1960.

The Government argues that 1960 was the year in which appellants realized the income because it was then that Judge Grooms’ order was affirmed by the Court of Appeals and in obedience thereof the Company directed debts discharged. Taxpayers argue that the income was realized in 1959 when the settlement was made on March 10 or at least in August when Judge Grooms found appellants had performed all their obligations under the contract.

For tax purposes, we view the “substance” and not the “form” of a transaction, Commissioner of Internal Revenue v. Hansen, 360 U.S. 446, 79 S.Ct. 1270, 3 L.Ed.2d 1360 (1959); Haag v. C. I. R., 8 Cir., 1964, 334 F.2d 351. It seems indisputably clear that after the August 18, 1959 District Court order enforcing the March 10 contract, nothing whatever took place but an unsuccessful appeal of that order.

The Supreme Court said in Rutkin v. United States, 343 U.S. 130, 72 S.Ct. 571, 96 L.Ed. 833 (1952):

“An unlawful gain, as well as a lawful one, constitutes taxable income when its recipient has such control over it .that, as a practical matter, he derives readily realizable economic value from it. Burnet v. Wells, 289 U.S. 670, 678, 53 S.Ct. 761, 764, 77 L.Ed. 1439; Corliss v. Bowers, 281 U.S. 376, 378, 50 S.Ct. 336, 337, 74 L.Ed. 916.
“. . . This statutory policy is invoked in the interest of orderly administration. ‘[Cjollection of the revenue cannot be delayed, nor should the Treasury be compelled to decide when a possessor’s claims are without legal warrant.’ [Emphasis added.] National City Bank v. Helvering, 2 Cir., 98 F.2d 93, 96.”

See, also, North American Oil Consolidated v. Burnet, 286 U.S. 417, 52 S.Ct. 613, 76 L.Ed. 1197 (1932). The Supreme Court there held that income was realized when the debtor obtained a claim of right and not at a later time when the litigation had terminated.

As far as the incongruous result envisioned by the government of the taxpayer defending payment suits while simultaneously he was “realizing” income from cancellation of the indebtedness, the fact here is that the appellants were only defending the appeal of a final judgment which reconfirmed a settlement made in the very presence of the Court and which extinguished the debts. This settlement, judicially confirmed, released the debts and gave the appellants a claim of right to the benefit in question. It judicially fixed the time at which realization of income occurred, North American Oil Consolidated v. Burnet, supra, even if one side did try to drag its feet in complying with its agreement.

This leaves only the fact that the Company took no action to remove the debts from its books until 1960. This cannot be the determinative event since the taxpayer in a cancellation of debt situation has no control over and no knowledge of when the Company actually removes the debt from its books. It would be illogical to hold that a taxpayer realized cancellation of indebtedness income only when the creditor actually removes the debt from the books, even though the debtor has a claim of right established in a previous year. The taxpayer could have no way of knowing when the debt had been formally discharged, but he certainly knows when he established a claim of right to the gain received from the extinguished obligation of the debt.

The cases cited by the government are not contrary to our holding here. See Bear Manufacturing Company v. United States, 7 Cir., 1970, 430 F.2d 152, 154-155, cert. denied, 400 U.S. 1021, 91 S.Ct. 583, 27 L.Ed.2d 632 (1971); Shephard v. Commissioner of Internal Revenue, 6 Cir., 1965, 340 F.2d 27, 30, cert. denied, 382 U.S. 813, 86 S.Ct. 29, 15 L.Ed.2d 61 (1965); Allen v. Commissioner of Internal Revenue, 1 Cir., 1941, 117 F.2d 364, 368; Hudson v. Commissioner of Internal Revenue, 6 Cir., 1938, 99 F.2d 630, 632, cert. denied, 306 U.S. 644, 59 S.Ct. 584, 83 L.Ed. 1044 (1939); Cohen v. Commissioner of Internal Revenue, 6 Cir., 1935, 77 F.2d 184, 185-186, cert. denied, 296 U.S. 610, 56 S.Ct. 129, 80 L.Ed. 433. In each of these cases the bookkeeping entry or other corporate activity charging the debts off the corporate books constituted the corporate action which cancelled the debt. In this case, the corporate action which led to the cancellation of the debt occurred upon the execution of the March agreement. Applying the standard of review established in Gibbs v. Tomlinson, 5 Cir., 1966, 362 F.2d 394, we hold that the District Court misapprehended the effect of the latter affirmation of the agreement by the appellate court, the dismissal of the suits, and the subsequent cancellation of the debts on the corporate books. The appellate action merely affirmed the fact that the debts were cancelled by the agreement as accepted by the District Court. Cf. North American Oil Consolidated v. Burnet, supra. The dismissal of the suit was required because the debts had been can-celled by the agreement and court order. By the time the corporation removed the debts from its books, the debts had been terminated and the bookkeeping entries were necessary only to bring the corporate books into line, and had no legal effect one way or the other.

The right to receive cancellation of the debt accrued to appellants in March, 1959, and it was reaffirmed by the judicial order in August, 1959, Texas Trailercoach, Inc. v. C. I. R., 5 Cir., 1958, 251 F.2d 395. At that point it was determined with certainty that the debt could never be inforced, Koehring v. United States, 421 F.2d 715, 190 Ct.Cl. 898 (1970); Helvering v. Jane Holding Corp., 8 Cir., 1940, 109 F.2d 933, cert. denied, 310 U.S. 653, 60 S.Ct. 1102, 84 L.Ed. 1418 (1940). The faint possibility of required revival as a consequence of a future appeal to this Court did not change the actual realization of the gain, James v. United States, 366 U.S. 213, 81 S.Ct. 1052, 6 L.Ed.2d 246 (1961); North American Oil Consolidated v. Burnet, supra; Buder v. United States, 8 Cir., 1966, 354 F.2d 941. Indeed, it is clear that if the debt had been revived, appellants would still have been required to report the realized income and subsequently claim the loss, United States v. Lewis, 340 U.S. 590, 71 S.Ct. 522, 95 L.Ed. 560 (1951).

It should be added that the record demonstrates that the Company contested the settlement on two issues of affirmative compliance on its part, not on the debts in question. Furthermore, due to the statute of limitations, the settlement contract reached in open court, and judicial confirmation, the noncollectibility of the debts was not really in doubt in 1959.

Since appellants did not realize in 1960 the income for which they were assessed a deficiency as of that year, the case is remanded to the District Court for further proceedings not inconsistent with this decision.

Reversed and remanded.


author: RIVES, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. William E. OWEN, Jr., Frederick Morse Allen, Joseph G. Scata, and Julius Grossman, Defendants-Appellants.
    No. 72-3646.
    United States Court of Appeals, Fifth Circuit.
    April 19, 1974.
    Rehearing Denied May 28, 1974.

      Arthur W. Tifford, Miami, Fla. (Court-appointed), for William E. Owen, Jr.
    Theodore J. Sakowitz, Asst. Federal Public Defender, Miami, Fla., for Frederick Morse Allen.
    Milton E. Grusmark, Miami Beach, Fla., for Joseph G. Scata.
    Edward N. Moore, Miami, Fla., for Julius Grossman.
    Robert W. Rust, David Quinn, Sp. Atty., Dept. of Justice, Miami, Fla., John T. Spotila, Appellate Section-Crim. Div., Dept. of Justice, Washington, D. C., for plaintiff-appellee.

      Before RIVES, WISDOM and MORGAN, Circuit Judges.
   RIVES, Circuit Judge:

William E. Owen, Jr., Joseph G. Scata, Julius Grossman, Frederick Morse Allen and seven others were indicted for conspiracy, 18 U.S.C. § 371; substantive violations of the federal mail fraud statutes, 18 U.S.C. §§ 1341, 1342, 1343; and aiding and abetting, 18 U.S.C. § 2. After a jury trial, Owen, Scata, Grossman and Allen all were convicted on the conspiracy count. Also, Scata was convicted on six substantive counts; Owen on five substantive counts; and Grossman on two substantive counts. Scata was sentenced to concurrent four-year prison terms on the substantive counts and to a consecutive two-year term on the conspiracy count. Owen was sentenced to concurrent four-year terms on five counts and to a consecutive one-year term on one count. Grossman was placed on probation for three years and fined $5,000. Allen was placed on probation for four years and fined $3,000. All four convicted defendants appeal.

The government’s theory in this case is that the appellants and others devised and implemented a scheme to defraud suppliers of merchandise, and used the mails and wire communications in furtherance of their scheme. On May 26, 1971, William Owen bought Porter Hardware, Inc., a small hardware store in Miami, for about $5,000. Between May 26 and August 6, 1971, Porter placed orders for substantial quantities of merchandise. The government introduced evidence showing that Porter personnel in placing these orders sometimes used fictitious names. Numerous sellers supplied goods to Porter, many of them relying upon the credit reputation developed by the former owner. Most of the goods delivered to Porter were dissipated, that is, given away, resold at less than cost, and stored for later distribution at various warehouses. Deliveries were not used to replenish or increase the store’s stock of goods. Only about $20 was kept in the store’s cash register and little business was done with walk-in customers inside the store. At least $35,000 worth of merchandise delivered to Porter on credit was never paid for. The government insists that the appellants never intended to pay for the merchandise ordered on credit.

I. Sufficiency of the Evidence to Show a Violation of 18 U.S.C. § 1811 or § 1313.

We first consider whether the acts proved by the government come within the scope of the mail fraud and wire communication fraud statutes. The most recent case in which the Supreme Court has considered .the reach of 18 U.S.C. § 1341 is United States v. Maze, 1974, 414 U.S. 395, 94 S.Ct. 645, 38 L.Ed.2d 603. The Court held that where an individual used a stolen credit card to obtain goods and services from motel operators, the sales slips were mailed by the motel operators to a bank, and the bank in turn mailed the slips to the true owner of the card, the mailings were not so closely related to the scheme as to bring the individual’s conduct within the scope of 18 U.S.C. § 1341.

Count 8 of the indictment in this case charged that certain defendants, for the purpose of executing the scheme, knowingly caused a letter addressed to the Gulf Oil Corporation in Atlanta to be sent and delivered by the U. S. Post Office Department and Postal Service. According to the government’s brief on appeal, this count was based upon the mailing of credit card hardbacks from a service station to Gulf after the use of a Porter Gulf credit card by a Porter employee acting at appellant Scata’s direction. Under the holding in Maze, Scata’s conviction under Count 8 must be reversed. We find nothing to distinguish the situation here from the situation in Maze.

Count 2 of the indictment charged that certain defendants caused the mailing of a letter to Colony Paints in Baltimore, Maryland. This count was based upon a purchase order signed by Owen and given to a Colony salesman. Count 5 alleged that certain defendants caused a letter to be sent to Delta Finance Corp. of Cincinnati, Ohio. Testimony at trial indicated that Porter ordered 100 cameras from Delta by mail. Count 7 alleged that certain defendants caused Atlas Tool and Manufacturing Co. to send a letter to Porter. This count rested upon a mailing to Porter of ten minibike manufacturer’s certificates necessary to license the minibikes under Florida law. Count 12 alleged that certain defendants “transmitted and cause[d] to be transmitted signs, signals, and sounds in interstate commerce by means of a wire communication, that is, a telephone conversation between Miami, Florida, and Brunswick, Georgia.” (R. 14.) By this conversation, Porter ordered paint from Dixie-O’Brien Corporation.

The communications in Counts 2, 5, 7 and 12 are readily distinguishable from the situation in Maze, supra. In Maze, the mailings occurred after the defendant had perpetrated the fraud and obtained the goods or services which were the object of the scheme. By contrast, the communications in these counts were a necessary part of the commercial process which led to Porter’s receipt of marketable goods on credit. The relation of these communications to the scheme sufficed to bring the conduct within the scope of 18 U.S.C. § 1341 and § 1343.

Count 4 of the indictment presents a closer question. Count 4 charged that certain defendants caused Moore-Handley Hardware of Birmingham, Alabama, to send a letter to Porter. This letter confirmed a phone order for a substantial quantity of garbage cans and a number of plastic coolers. It also stated that “Prices are fob Miami with delivery by the manufacturer’s truck. Our terms are 2%-10th Prox, net 30 days.” The letter further stated that “Enclosed is credit form which we ask that you fill out and return in the enclosed envelope.” Unlike the communications involved in Counts 2, 5, 7 and 12, this letter was not, from Porter’s point of view, necessary in order to receive marketable merchandise. This letter was, however, in accord with business practices associated with the sale of goods, and Moore-Handley obviously sent this letter as a part of the transaction which resulted in the shipment of merchandise to Porter. Under these circumstances, the jury could have found that the defendants “caused” the mails to be used, Pereira v. United States, 1954, 347 U.S. 1, 9, 74 S.Ct. 358, 98 L.Ed. 435, and that the mailing was sufficiently closely related to the scheme so as to bring the conduct within the statute. United States v. Maze, supra.

II. Sufficiency of the Evidence as to Individual Defendants.

Appellants do not contend that Porter Hardware was a legitimate business operation during the period from May 26 until August 6. As to Scata, Grossman and Allen, each claims that there was insufficient evidence to support his conviction for conspiracy and for the various substantive offenses.

A. Scata

Scata claims that the evidence discloses only that he was present at the Porter Hardware store from time to time. In support of this contention, Scata quotes the trial judge, who stated the following in denying a motion for judgment of acquittal on one of the substantive counts: “Now, let me say to you with respect to Scata that I recognize that virtually in no instance is there any specific documentary reference to him. But there is evidence to show his fairly regular presence.” (Tr. 1629.) It is true that mere presence at the scene of a crime, or mere association with those involved in a criminal enterprise, is not sufficient to prove participation in a conspiracy. United States v. Falcone, 1940, 311 U.S. 205, 61 S.Ct. 204, 85 L.Ed. 128; United States v. Webb, 6 Cir. 1966, 359 F.2d 558. However, this is not such a case. The record shows that Seata received merchandise from Porter for his personal use. The items he received apparently included brushes and hoses, a machine for making threads on a screw, a battery, a boat hoist, paint for his home, two minibikes, some wood, and other boxes of unidentified goods. The receipt of these items during little more than a two month period, together with his frequent presence at the store, could have led the jury to believe that Scata knowingly encouraged the scheme by taking for his personal use some of the fruits of the fraud.

There was evidence that Scata helped arrange at least one sale of merchandise — a witness testified that he bought a minibike from Porter, and that Scata asked him to come by his house to pick it up. Also, on one occasion Scata told a woman who needed tires to come to Porter Hardware. When the woman came to the store, Scata was present. He took her car keys and gave them to a Porter employee who then used a Porter credit card to get new tires. The woman was never billed for the tires. Included in police informant Snider’s testimony for the government is the following:

“Q. After you began working, Mr. Snider, at Porter Hardware, Inc., did you have occasion at any time to see or talk with the defendant Joe Scata at Porter Hardware, Inc., or elsewhere concerning Porter Hardware’s business ?
“A. Yes. Mr. Scata was in there frequently. I was introduced to him by Bill [Owen] when I started there. Their initial conversation there was basically Mr. Scata was interested in more than anything whether or not I could be trusted as an employee there.” (Tr. 1162-1163.)

From these incidents, coupled with his frequent presence at the store, the jury might reasonably have inferred that Scata was more than merely a bystander at Porter Hardware; that, in fact, he was directly involved in the operation if not the management of the enterprise; and that he was aware of and aided in the conspiracy to defraud suppliers by the use of the mails and wire communication.

Scata urges that the evidence shows no participation by him in the communications which form the basis of the substantive counts of the indictment. The government responds that Seata was an aider and abettor on each of the substantive counts, and that Scata received substantial portions of the merchandise ordered from the various suppliers.

The jury could have inferred from the evidence that there was a conspiracy to defraud suppliers of merchandise, and that Scata was a member of the conspiracy. It follows that the jury could find Scata liable as an aider and abettor in the various substantive offenses. The substantive offenses charged in the indictment result from transactions between Porter Hardware and various suppliers. The individual transactions were merely a part of the general plan. If Seata participated to the extent that he conspired with others in a scheme designed to defraud suppliers, then the jury could properly find that he expected and encouraged the individual communications which constitute the substantive offenses. This would be sufficient participation to make Scata an aider and abettor under substantive Counts 2, 4, 5, 7 and 12.

This result is consistent with Pinkerton v. United States, 1946, 328 U.S. 640, 66 S.Ct. 1180, 90 L.Ed. 1489, where the Supreme Court states that a party to a continuing conspiracy may be responsible for substantive offenses committed by a coconspirator in furtherance of the conspiracy, even though he does not participate in the substantive offenses or have any knowledge of them.

B. Grossman

Grossman urges that the evidence of record was insufficient to submit the question of his guilt to the jury. We disagree.

Police informant Snider testified that Grossman was in the store “some weeks every day. Other times he would be in three or four times a week.” (Tr. 1198.) He overheard Grossman talk with Owen about “certain items that were to arrive at the store that day, and that he [Grossman] was to come back later in the afternoon to check them out, if he wanted to purchase them” (Tr. 1199), and about the fact “that the items that Julie was waiting for had not come in yet” (Tr. 1200). Another witness testified that Grossman, when he came to the store, would sometimes ask: “Well, did you get any new shipments in today, something that I may be interested in?” (Tr. 273.)

Snider also testified concerning a conversation he had with Grossman. Gross-man allegedly said that “he liked my [Snider’s] security because I kept watching for people to see if anybody would be following' us” (Tr. 1204); that “I [Grossman] do not want to be around Porter Hardware in the event or whenever police are called in or if they are called in” (Tr. 1206); and that “he [Grossman] felt that it was getting very warm here” (Tr. 1206). Snider testified that on one particular trip he hauled a truckload of merchandise from the warehouse to Grossman’s home, helped unload it, and received $400 from Grossman for Owen.

Policeman Tucker testified that Gross-man’s vehicle was used on a regular basis at Porter Hardware. Tucker further testified that Grossman stated during an interview that he had been at Porter Hardware many times and had purchased power drills, tools, coolers, caulking compound, screwdrivers, and Polaroid cameras. Grossman also stated that he paid less than wholesale for the items he bought.

The jury could have concluded that Grossman’s comments to Snider about security and about the police revealed a guilty mind. These comments, plus Grossman’s purchases from Porter, including purchases at below the wholesale price of the merchandise, are sufficient to support his conviction on the conspiracy charge. Grossman’s purchases of garbage cans and Polaroid cameras, taken together with the other evidence against him, could have led the jury to infer that Grossman knowingly encouraged the mailings which led two suppliers to send merchandise to Porter Hardware. We therefore conclude that the evidence was sufficient to hold Grossman liable as an aider and abettor under substantive Counts 4 and 5 of the indictment.

C. Allen

Allen claims that there is not the slightest hint in the record of an agreement between him and any other person for the commission of a crime. We view the record differently.

Informer Snider testified that Allen was present at Porter Hardware “very often, two to three times, four times a week and sometimes more. He was there as a buyer of the products which came in.” (Tr. 1180.) Snider further stated that he delivered a truck full of plastic garbage cans to Allen, and that he helped Allen load battery cables, cutlery and other items into Allen’s car for sale to customers. On one occasion Allen explained the Porter operation to Snider as follows: “He told me that items were bought on credit and then sold for cash at half their wholesale price or whatever their billing price was; that this was the going figure.” (Tr. 1188.) According to Snider’s testimony, Allen also suggested burning the insulation from copper wire to sell the copper for about $15,000 as scrap metal.

Policeman Tucker testified that Allen told him that he was a salesman for Porter and had sold aerosol paints, garbage cans, garden hoses, Black and Decker tools, and barbecue (equipment).

From this evidence, the jury could have inferred that Allen knew about the Porter Hardware operation, and that, through his efforts to resell the merchandise, he participated in the scheme to defraud suppliers.

III. Owen’s Claims.

On August 6, 1971, police officers stopped the automobile which Owen was driving, and one officer searched through a paper bag on the front seat of the vehicle. He found a revolver. Owen was thereupon arrested and later charged with violation of 18 U.S.C. App. § 1202(a), possession of a gun by a convicted felon. At the police station, Postal Inspector Conner, who was investigating Porter Hardware, interviewed Owen and told him he was suspected of mail fraud. Conner invited Owen to come to his office at a later date to discuss the situation. Owen went to Conner’s office on August 10 and on a number of later occasions.

The government and Owen apparently agree that, at a hearing on the gun charge on August 12 before the United States Magistrate, government attorney Quinn advised Owen’s counsel, Koste, that in return for Owen’s cooperation and testimony in a mail fraud case, either Owen would not be indicted or, if Owen were indicted and convicted, the government would recommend probation. Koste recalled that Owen was to be “an unindicted coconspirator or an indicted coconspirator.” (Tr. on Motions to Suppress, 429-430.) Owen now claims this indicates he was to be indicted, if at all, on only one count of conspiracy. The gun charge was later dismissed.

Sometime between September 12 and October 9, 1972, Owen’s new attorney, Tifford, spoke with Quinn. According to Tifford, Quinn on this occasion stated that the government would advise the court of Owen’s cooperation, but would not recommend probation. Quinn, in a conference before the judge during the trial, could not recall whether he specifically mentioned a recommendation of probation in his conversation with Tif-ford. Quinn did make clear at trial, however, that so long as the trial continued, the government stood ready to recommend probation if Owen would cooperate and testify.

A. Owen claims first that the agreement in question and certain evidence obtained pursuant to the agreement were “tainted” by being the direct or indirect products of an illegal search, seizure and arrest, and should have been suppressed. The government replies that the search of Owen’s car, the seizure of the revolver, and the subsequent arrest were legal. The government further responds that even if the arrest was illegal, Owen’s cooperation with Conner was voluntary and with full awareness of his rights. We do not pass upon the legality of Owen’s arrest on the gun charge, for it is clear to us from the facts of this case that, even assuming that the arrest was unlawful, any taint arising from the arrest had dissipated by the time Owen agreed to cooperate with the authorities in the mail fraud cáse.

In Wong Sun v. United States, 1963, 371 U.S. 471, 83 S.Ct. 407, 9 L.Ed.2d 441, the Supreme Court held that the statements by one defendant, Toy, made in his bedroom at the time of an unlawful arrest, were the fruits of unlawful action, and should have been suppressed. The Court likewise held that the narcotics taken from another defendant on the basis of Toy’s statements were fruits of illegality, and should not have been admitted. The Court in Wong Sun recognized, however, that the connection between an illegal arrest and a subsequent statement could “ ‘become so attenuated as to dissipate the taint.’ Nardone v. United States, 308 U.S. 338, 341, 60 S.Ct. 266, 84 L.Ed. 307.” 371 U.S. at 491. On the evidence that one defendant had been released on his own recognizance after a lawful arraignment, and had returned voluntarily several days later to make a statement, the Court found that such a dissipation had occurred, and upheld a conviction based in part upon the statement. The Court emphasized that the test of admissibility was not whether the evidence would not have come to light “but for” the illegal actions of the police; “ [r] ather, the more apt question in such a case is ‘whether, granting establishment of the primary illegality, the evidence to which instant objection is made has been come at by exploitation of that illegality or instead by means sufficiently distinguishable to be purged of the primary taint.’ Maguire, Evidence of Guilt, 221 (1959).” 371 U.S. at 488.

This Court has discussed Wong Sun on a number of occasions and has developed several guidelines to help determine when the taint of an illegal arrest is sufficiently dissipated that evidence secured after the arrest is admissible in a criminal trial. Rogers v. United States, 5 Cir. 1964, 330 F.2d 535; Thomas v. United States, 5 Cir. 1967, 377 F.2d 118; Phelper v. Decker, 5 Cir. 1968; 401 F.2d 232; Bretti v. Wainwright, 5 Cir. 1971, 439 F.2d 1042. These guidelines include the proximity of the illegal arrest to the procurement of the evidence; the intervening occurrences between the arrest and the acquisition of the evidence, and the circumstances under which the arrest was made. Phelper v. Decker, supra, 401 F.2d at 237-238.

So far as the record indicates, no one interrogated Owen, or elicited information from him, or offered him a deal while he was in custody on the gun charge. Conner did speak with Owen soon after his arrest on August 6; however, according to Conner’s uncontradict-ed testimony, only the following occurred :

“I told Mr. Owen that we had been conducting surveillance at Porter Hardware, the activities that had been going on there were not legitimate operations; that he concurred that I would want to talk to him further about it and that he would come down to the office.” (Tr. on Motions to Suppress, 372.)

Four days later, after his release from custody, Owen voluntarily visited Conner at Conner’s office. At this time Conner and Owen apparently discussed the possibility of Owen’s cooperation with the authorities in the Porter Hardware case. On both August 6 and August 10, Conner advised Owen of his constitutional rights, including his right to an attorney.

From these facts it seems clear that any taint associated with Owen’s arrest had dissipated by the time Owen agreed to cooperate with the government in its investigation. We note particularly the four-day time lapse between the arrest and the initial discussion, the voluntariness of Owen’s visit to Conner’s office, the lack of oppressive or custodial circumstances at the time that Owen and Conner discussed an agreement, the legal warnings provided by Conner, and the fact of a quid pro quo for Owen’s cooperation.

B. Owen's second contention is that enforcement of the bargain would bar his prosecution. Santobello v. New York, 1972, 404 U.S. 257, 92 S.Ct. 495, 30 L.Ed.2d 427, establishes that when a plea rests in any significant degree on a promise or agreement of the prosecutor, so that it can be said to be part of the inducement or consideration, such promise must be fulfilled. This case might more generally support the proposition that where a prosecutor has made a promise or agreement, the defendant may hold him to it. At trial, however, Owen did not attempt to hold the prosecutor to the original agreement.

When the trial judge asked Tif-ford whether Owen was proposing to testify in return for a recommendation of probation, Tifford replied: “No, Judge, Mr. Owen is of the position that when the Government backed off, his consent was negated.” (Tr. 707.)

Tifford later commented:

“My answer is that Mr. Owen is not testifying, and the part of the reason is that among other things I do not believe the Government can revitalize a promise made after its retracted position taken at trial because of that retraction.” (Tr. 714-715.)

Tifford thus indicated that Owen did not seek specific performance of the plea bargain at trial. To the contrary, he insisted upon his right to undo whatever had been done pursuant to the agreement. Owen cannot now switch fields. He waived whatever rights he had to demand performance of the agreement when he chose to pursue a different strategy.

C. Owen’s third contention is that when the government suggested that it would violate its part of the agreement, he had the right to rescind the agreement, and to suppress any evidence secured by the government as a result of prior cooperation under the agreement. The government theorizes that Owen suffered no prejudice from any temporary repudiation, since at trial the government stood ready to recommend probation if Owen would cooperate and testify.

The trial judge denied Owen’s motion to suppress evidence obtained by the government through Owen’s cooperation under the agreement. In particular, Owen had objected to many exhibits allegedly found after he consented to a search of the Porter Hardware premises. The trial judge in denying Owen’s motion explained that,

“ * * * as I see the evidence and see the proof, the Government stands fast and did at the beginning of the trial on this question of offering a recommendation of probation if Mr. Owen testified. And we are now at the point where Mr. Owen has not testified. And I think it does not reach the level of even having to pass upon it. In other words, I think the Government is ready and Mr. Owen apparently is not.” (Tr. 1602.)

Clearly, Owen was entitled to refuse at any time to cooperate further with the authorities and to refuse to testify at the trial. The difficult question concerns whether evidence obtained through Owen during the period of cooperation should have been admitted, if the government first repudiated the agreement and later offered to reinstate it. A contract analogy suggests that the government’s retraction of its promise entitled Owen at his option to rescind the agreement and to recover (in this case, through suppression) any prior performance under the agreement. Commercial law also suggests that until the government’s next performance was due, it could retract its repudiation, unless Owen had cancelled the agreement, materially changed his position, or otherwise indicated that he considered the repudiation final. In this case Owen claims that his attorney made clear his cancellation of the agreement.

One problem with relying upon a commercial law analogy is that the provisions regarding anticipatory repudiation are based in part upon a desire to allow the nonbreaching party an opportunity to make new arrangements with others as a substitute for the repudiated contract. In the case of an agreement with the prosecutor, there is no other party besides the government with whom the prospective defendant may deal. This undercuts the argument that commercial law principles should be followed insofar as they give a nonbreaching party an absolute right to cancel or rescind an agreement, and a right to recover any part performance, upon anticipatory repudiation by the other party.

The government argues that even if there was an anticipatory repudiation, there was no injury or prejudice to Owen, and thus no reason to allow Owen a right to rescind the agreement. This argument has considerable force in the circumstances of this case. First, the government at trial offered to perform its part of the bargain. In conference with the trial judge, Owen’s attorney did not claim that the government was not offering that which had originally been promised. Therefore, Owen at the time of the trial apparently could have secured exactly that for which he originally bargained. Second, Owen alleges no particular prejudice or injury as a result of the government’s temporary repudiation. Some possible grounds of prejudice were discussed in a conference before the trial judge. Owen’s attorney suggested that Owen had been prejudiced “by virtue of his posture as being a defendant in the case, by certain evidence coming in.” (Tr. 717.) Owen apparently felt that this might prejudice the judge against him. It was also suggested that the government’s action interfered with the trial preparations of Owen and the other defendants. Neither of these claims is made in Owen’s brief on this appeal, and we conclude that both are insubstantial under the circumstances of this ease.

In the absence of any prejudice to Owen, we conclude that the government’s alleged temporary repudiation did not give Owen the right to rescind the agreement at a time when the government was ready, able and willing to perform its part of the bargain.

IV. Other Claims.

A. Appellants contend that the jury selection procedure in operation in the Southern District of Florida at the time of their trial was unconstitutional because it excluded young persons (18 to 21 and 21 to 24), Latin Americans, and new residents (those who had not resided in the district for a year). This Court has considered and rejected these identical claims in a number of prior cases, and we do so again in the circumstances of this case.

The appellants in this case are not in a position to raise the issue considered in United States v. De Alba-Conrado, 5 Cir. 1973, 481 F.2d 1266. After the jurors were sworn, the following occurred :

“MR. GRUSMARK: For the purpose of the motion before the Court, may I be permitted to ask how many are from Dade and Broward Counties?
(Bench conference concluded)
“THE COURT: Those of you who are in Dade County, will you raise your hands, please ?
Those of you who are from Bro-ward County, please raise your hands.
“MR. GRUSMARK: Thank you, Judge.
“THE COURT: Would you agree there is a substantial number from each county?
“MR. GRUSMARK: Yes, sir.” (Tr. 25.)

The record reveals that counsel and the trial judge had agreed that Mr. Grus-mark, Scata’s attorney, would act as primary spokesman for the defendants, and that objections made by him would apply to all. Under these circumstances, Mr. Grusmark’s response to the court’s question, and the failure of any of the other defendants to object to Mr. Grusmark’s response, preclude the defendants from relying upon the argument raised in United States v. De Alba-Conrado, supra.

B. Appellants Owen and Grossman contend that the speed with which the prosecution proceeded to trial, the brevity between the discovery conducted by the government pursuant to court order and the outset of trial, and the manner in which discovery was effected prior to and during the early stages of this trial denied them effective assistance of counsel.

There was a good deal of confusion and difficulty in the disclosure of evidence in this case. The trial judge was alerted to the problems which arose and made continuing efforts to insure that the defendants received all the materials to which they were entitled. The judge insisted, however, that the trial go forward and denied a motion to dismiss based on the government’s failure to produce certain statements.

United States v. Saitta, 5 Cir. 1971, 443 F.2d 830, 831, suggests the law to be applied in examining whether appellants’ claims here would justify reversal:

“Appropriate relief for a violation of the discovery rules lies within the sound discretion of the district court, Gevinson v. United States, 5 Cir., 1966, 358 F.2d 761, 766; Ginsberg v. United States, 5 Cir., 1958, 257 F.2d 950, 956, but we do not reach the question of an abuse of discretion here. It suffices to say that an error in administering the discovery rules is not reversible absent a showing that the error was prejudicial to the substantial rights of the defendant. Hansen v. United States, 8 Cir., 1968, 393 F.2d 763, 770.”

In the instant case, appellants have alleged no specifics about how they were harmed by the trial court’s refusal to grant a continuance. They have not shown prejudice of the sort which might require reversal, even if the trial court had abused its discretion, of which contingency we are by no means convinced.

The judgment of conviction of Appellant Scata under Count 8 of the indictment is reversed. Otherwise, we find no reversible error as to any of the appellants and their respective judgments of conviction are affirmed.

Reversed as to Appellant Scata insofar as Count 8 of the Indictment is concerned. In all other respects, affirmed as to each of the appellants.

      . Count 15 of the indictment.

      . Scata was convicted on substantive Counts 2, 4, 5, 7, 8, 12; Owen on substantive Counts 2, 4, 5, 7, 12; and Grossman on substantive Counts 4 and 5.

      . Uniform Commercial Code § 2-610, § 2-703, § 2-711.

      . Uniform Commercial Code § 2-611.

      . The word “rescind” in this context includes a right to “recover” past performance, in this case through suppression.

      . See United States v. Perry, 5 Cir. 1973, 480 F.2d 147; United States v. Palacio, 5 Cir. 1973, 477 F.2d 560; United States v. Pentado, 5 Cir. 1972, 463 F.2d 355; United States v. Blair, 5 Cir. 1972, 470 F.2d 331; United States v. Gooding, 5 Cir. 1973, 473 F.2d 425.


author: GEWIN, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Robert Shelran HAMILTON, Edward Donald Hamilton, and Clarence Brantley, Defendants-Appellants.
    No. 73-2237.
    United States Court of Appeals, Fifth Circuit.
    April 19, 1974.

      Alex L. Zipperer, Savannah, Ga. (Court-appointed), for Robert Shelran Hamilton.
    Thomas A. Edenfield, Savannah, Ga. (Court-appointed), for Clarence Brant-ley.
    Griffin Bell, Jr., Savannah, Ga. (Court-appointed), for Edward Donald Hamilton.
    R. Jackson B. Smith, Jr., U. S. Atty., Augusta, Ga., Lamar C. Walter, Asst. U. S. Atty., Savannah, Ga., for plaintiff-ap-pellee.

      Before RIVES, GEWIN and RONEY, Circuit Judges.
   GEWIN, Circuit Judge:

On March 19, 1973, a two-count indictment was returned charging appellants, Robert Hamilton, Edward Hamilton and Clarence Brantley in count one with stealing government property in violation of 18 U.S.C. § 641, and Robert Hamilton and Clarence Brantley in count two with wilfully and maliciously setting fire to an occupied government building in violation of 18 U.S.C. § 81. A jury trial was conducted and resulted in a verdict of guilty on all counts. This appeal ensued. We affirm.

I

Appellants make a broad-based attack on the correctness of the proceedings below. At the outset we note that the appellants were entitled to a fair trial but not a perfect one. Most of the specifications of error presented by appellants were never raised by them during their trial. Failure to object to alleged errors in the trial court limits our review of such alleged errors on appeal to a determination of whether “plain error” has been committed. Rule 52, F.R. Cr.P. A reading of the record demonstrates to us that the errors specified by the appellants which were not raised in the trial court do not amount to plain error. Moreover, even if such alleged errors had been preserved, we do not believe they contain merit. Discussion of these issues would only add bulk without substance to the criminal jurisprudence and thus we decline the invitation to write a criminal treatise.

II

A. Sufficiency of the Evidence

First, appellants Edward Hamilton and Clarence Brantley attack the sufficiency of the government’s evidence presented to establish their guilt. Viewing the evidence in the light most favorable to the government, United States v. Glasser, 315 U.S. 60, 62 S.Ct. 457, 86 L.Ed. 680 (1942), sufficient evidence was introduced from which the jury could have reasonably concluded that appellants were guilty beyond a reasonable doubt. All elements of the offenses charged were established by the government’s evidence and no benefit would be gained by a review of the voluminous evidence here. See United States v. Gaviria, 471 F.2d 1181, 1183 (5th Cir. 1973).

B. Motion for a Continuance

On February 19, 1973, a preliminary hearing was conducted to determine whether there was probable cause to hold appellants for the grand jury. All of the appellants were represented by counsel at this hearing. Some two months later and one day prior to trial, a hearing was conducted on appellants’ motion for a continuance of the trial so that they could examine the transcript of the preliminary hearing. The district court expressed its displeasure with this late motion to postpone the scheduled trial, especially since counsel had waited until the eve of the trial to make such a request. The court suggested that counsel listen to the tape recording made of the hearing. Additionally, the government offered to make available to appellants any statements made by prospective government witnesses.

Subsequently it was determined that no transcript of the preliminary hearing had been made and further that through some inadvertence the tape recording of the preliminary hearing was inaudible. Faced with this unexpected occurrence, the district court ordered the government to turn over all of its files to appellants’ counsel for examination prior to trial which was scheduled to commence later that day.

Appellants now claim that reversal is warranted because of the failure of the government to provide a transcript of the preliminary hearing and the denial by the district court of their motion for a continuance. First, it is abundantly clear that appellants have failed to demonstrate the manner in which they were prejudiced by the government’s failure to provide a transcript or the trial court’s failure to grant a continuance. Counsel for appellants were present at the preliminary hearing and apparently were familiar with what transpired at the proceedings. Second, the court ordered the government to provide defense counsel with all the evidence contained in its file. Finally, in a previous hearing to determine whether appellants’ bond should be reduced, defense counsel had been permitted to cross-examine the chief investigating officer used by the government in proving its case against appellants. In these circumstances, we discern no prejudicial restraint or hindrance upon the opportunity of counsel to prepare for the ensuing trial. Indeed, the record demonstrates no surprise on the part of counsel for appellants which could have possibly been cured by access to a transcript of the preliminary hearing. The record fails to reveal any harm or prejudice to appellants resulting from the facts outlined. Thus, it is apparent that the trial court did not abuse its discretion in denying the motion for continuance. United States v. Long, 419 F.2d 91, 94 (5th Cir. 1969).

C. Severance

At trial, Edward Hamilton moved for a severance of his trial from the other two defendants. After a hearing, the court denied his motion. He asserts that his defense was unnecessarily prejudiced by a joint trial with the other two appellants who had been charged additionally with arson under count II. We see no abuse of the trial court’s discretion in failing to grant Edward Hamilton’s motion for severance. Rule 8(b) of the Federal Rules of Criminal Procedure provides that :

Two or more defendants may be charged in the same indictment or information if they are alleged to have participated in the same act or transaction or in the same series of acts or transactions constituting an offense of offenses. Such defendants may be charged in one or more counts together or separately and all of the defendants need not be in each count, (emphasis added).

Edward Hamilton was charged with the theft of government property along with the other two appellants. His conviction arose out of the same series of transactions which resulted in the indictment of the other appellants. The trial court gave careful and clear instructions which allowed the jury to separate the theft charge from the arson charge. United States v. Ayres, 434 F.2d 60 (5th Cir. 1970). A district court’s refusal to grant severance will be reversed on appeal only when it is established that the court has clearly abused its discretion. See United States v. Gray, 462 F.2d 164, 165 (5th Cir. 1972). We perceive no such abuse here.

D. Testimony of Agent Louis Stevens

At the time of his arrest, Edward Hamilton made a full statement to the investigating agent, Louis F. Stevens. Agent Stevens made notes as he received the statement but did not have appellant sign the final document distilled from these notes. During the trial, the government attempted to introduce this unsigned statement but the court refused it admission because the statement referred to the activities of the other co-defendants and thus could violate the strictures of Bruton v. United States, 391 U.S. 123, 88 S.Ct. 1620, 20 L.Ed.2d 476 (1969). An in camera hearing was conducted at which time all references made by Edward Hamilton to his fellow co-defendants were deleted from the statement.

Subsequently, Stevens was permitted to testify concerning the contents of the statement. During the testimony, counsel objected because he believed that Stevens was reading directly from the statement and he asserted that Stevens should exhaust his recollection before being permitted to read from it. The trial court overruled counsel’s objection stating that it believed the statement was the best evidence available concerning the admissions made by Edward Hamilton on the morning of his arrest.

The district court carefully preserved the rights of all the appellants. First, it interrogated both Stevens and Edward Hamilton to insure that the statement elicited from him did not violate his fifth amendment protections. Second, the court required deletion of all references to the other two defendants. Counsel was permitted to fully cross-examine Stevens. In these circumstances, we conclude that no prejudice resulted to Edward Hamilton from Stevens’ reference to the statement during his testimony.

E. Rejection of Tendered Guilty Plea

It was apparently the trial strategy of appellant Brantley to inform the jury that he did not contest the charge of theft. Brantley theorized that letting the jury know that he admitted guilt to the theft charge would provide added credibility to his claim of innocence of the arson charge. At the beginning of the trial, Brantley’s counsel did not give an. opening statement but reserved the right to make an opening statement following the presentation of the government’s case. At the conclusion of the . government’s presentation of its evidence and out of the presence of the jury, Brantley through his counsel tendered a guilty plea to the theft charge. The district court refused to accept the proffered plea because it felt the plea might unduly prejudice the defense of the other appellants. Brantley’s counsel then requested the right to make his opening statement. The court inquired about the contents of this statement and counsel responded that he did not know what he would say. The court then denied the request to make an opening statement.

First, a trial court may refuse to accept a guilty plea within its sound discretion. Santabello v. United States, 404 U.S. 257, 262, 92 S.Ct. 495, 30 L.Ed.2d 427 (1971). In the circumstances outlined, we perceive no abuse of discretion by the district court in refusing the offered guilty plea. Brantley’s guilty plea to the theft charge would have unduly prejudiced the other appellants’ attempted defenses to the government’s charges. Second, an opening statement is a device used to inform the jury of the nature of- the case and a trial court has a right to know what the intended statement will contain. This is especially true in a case of this nature where immediately prior to the tendered opening statement a criminal defendant has attempted to plead guilty to one count of a two-count indictment which charges additional defendants with the same crimes. Counsel was unable to advise the court of the nature and content of his proposed statement. Certainly a trial court has a responsibility to insure that trial strategies of one defendant do not unduly prejudice the other co-defendants. Finally, since the evidence of Brantley’s guilt under the arson count was overwhelming no error could have resulted from the trial court’s refusal to accept the plea. See United States v. Roland, 449 F.2d 1281 (5th Cir. 1971).

Ill

Whether specifically discussed herein or not, we have considered all of the multiple contentions made by the appellants, including those contentions applicable only to one of them and those which are applicable to all. We find no merit in any of the asserted errors. The evidence of guilt is substantial and convincing. Few criminal trials are conducted with exact textbook perfection. Every detail can not be planned with precision and it is often impossible to avoid some imperfections resulting from circumstances which arise unexpectedly. As an appellate court we must review the facts and the law in a careful effort to achieve the ultimate goal of preserving the substantive and procedural rights guaranteed by the Constitution and the law applicable to the facts of the case. We have done so in this case and find no reversible error.

Judgment affirmed.

      . Lutwak v. United States, 344 U.S. 604, 619, 73 S.Ct. 481, 97 L.Ed. 593 (1952); Samuels v. United States, 398 F.2d 964, 971 (5th Cir. 1968).

      . United States v. McGee, 464 F.2d 542, 543 (5th Cir. 1972); United States v. Thomas, 429 F.2d 407, 408 (5th Cir. 1970). Those issues raised by appellants on appeal which were not raised in the trial court include the following claims of error: (1) The district court erred in its instruction on the burden of proof where the government relied on circumstantial evidence; (2) Prosecutorial conduct during the trial amounted to obvious error affecting the substantial rights of the appellants; (3) Clarence Brantley was denied a fair trial because the jury was permitted to view the scene of the crime; (4) The district court’s comments on character evidence were prejudicial; (5) The court’s comments on the guilt of Clarence Brantley amounted to prejudicial error; (6) The court erred in commenting that Clarence Brantley had not taken the stand but further instructing the jury that the Constitution required that no inference of guilt be drawn from such failure; (7) The court erred in failing to instruct the jury regarding the unresponsive statement of a government witness; and, (8) The court erred in using information not disclosed to Robert Hamilton at the time of sentencing him.

      . Apparently one of the attorneys who orally argued on this appeal represented both Ham-iltons at the preliminary hearing. Following that h earing, Robert Hamilton requested new counsel and attorney Alex Zipperer was appointed to represent him.

      . Appellant Brantley also asserts that the trial court erred in denying Ms pre-trial motion for severance. Brantley’s conduct was more closely connected with the charges contained in both counts of the indictment than was the conduct of Edward Hamilton. We see no abuse in the trial court’s order denying severance as to Brantley.