text:
    Andrew A. HAGAN, Plaintiff, v. Richard I. KILROY, Donald A. Bobo, Joseph A. Guerrieri, James Kelly, John Leib, L.E. Bosher, John C. Campbell, Charles S. Coleman, Robert M. Curran, William E. Granlund, John R. Jenkins, Francis, T. Lynch, E.J. Neal, Joaquin F. Otero, Richard C. Smith, Gerald Toppen, and others, Defendants.
    No. 83 Civ. 9217 (RLC).
    United States District Court, S.D. New York.
    March 19, 1985.
    Jurón & Minzner, P.C., New York City, for plaintiff; Edward S. Minzner, New York City, of counsel.
    Anderson Russell Kill & Olick, P.C., New York City, Zuckerman, Spaeder, Moore, Taylor & Kolker, Washington, D.C., for defendants; John H. Gross, Nicholas Zoogman, New York City, and Roger C. Spaeder, Washington, D.C., of counsel.
    Abraham, Pressman & Bauer, P.C., Philadelphia, Pa., for defendant Kelly; J. Shane Creamer, Philadelphia, Pa., of counsel.

      Shapiro, Shiff, Beilly, Rosenberg & Fox, New York City, for defendant Lieb; Sidney Fox, New York City, of counsel.
   OPINION

ROBERT L. CARTER, District Judge.

Plaintiff, a member of the Brotherhood of Railway, Airline and Steamship Clerks, Freight Handlers, Express and Station Employees (“BRAC”), Lodge 705 and System Board 86, instituted this action pursuant to Section 501 of the Labor-Management Reporting and Disclosure Act (“LMRDA”), 29 U.S.C. § 501. BRAC is an unincorporated association and labor organization composed of members employed in the transportation industry throughout the United States and Canada. By order dated December 8, 1984, the court granted plaintiff leave to proceed with this litigation.

The International Union known as the Grand Lodge has its principal offices in Rockville, Maryland. The International has an International President, the chief executive officer of the Union, an International Secretary-Treasurer, eleven Vice Presidents and nine Trustees. It also has an Executive Council composed of these above named officers. Subordinate to the Grand Lodge are the various System Board units. System Board 86 has its principal offices in Philadelphia, Pa., and its members service the consolidated rail system (“Conrail”) in the northeastern United States. Each System Board has its own set of officers and trustees distinct from the International. System Board 86’s chief executive officer is its General Chairman. In addition, it has 14 Vice General Chairmen and a Board of Trustees. Each System Board maintains financial independence from the International by maintaining its fund in a separate bank account under the control of System Board officers. There is finally local lodges within each System Board. Plaintiff was a member of Lodge 705.

Defendants are the International President, Secretary-Treasurer, eleven International Vice Presidents, nine International Trustees, the Supervisor-Trustee of System Board 86 and a Vice General Chairman of System Board 86. In the course of a hearing, February 27 — March 1, 1984, when the court made clear that no action could be maintained against defendants J.J. Boyce, Robert Malcolm, Donald Purselley, Grace Vincent, D.D. Wiley and William Woods, International Trustees who took office after the alleged misconduct took place, and that no misconduct was alleged against the International Trustees in any event, plaintiff discontinued the action against the above individuals as well as Arlo Bertsch, Joseph Condo and William Flynn constituting all the International Trustees of the Grand Lodge.

Defendant John Lieb at the time the action commenced had been appointed by Richard Kilroy, International President, as Supervisor-Trustee of System Board 86 pursuant to a trusteeship imposed by the Grand Lodge on System Board 86 pursuant to § 302 of Title III of LMRDA. Before being appointed to this position, Lieb had been a System Board 86 employee. The complaint alleges Lieb misappropriated System Board 86 funds by the submission of false expense statements. Defendant James Kelly, Vice General Chairman of System Board 86, is alleged to have misappropriated System Board funds in the same manner. These are the only defendants affiliated with System Board 86.

Kilroy, the International President and BRAC outside counsel, Joseph Guerrieri, are claimed to have acted to cover up the malfeasance of various officials of System Board 86 by ordering a cosmetic audit of the System Board’s finances. Kilroy, in addition, is alleged to have breached a fiduciary duty to BRAC in accepting a radar detector and a silver plated coffee service from System Board 86 former General Chairman, A1 Archual. The remaining defendants are apparently charged with misfeasance in failing to institute litigation immediately upon plaintiffs demand that action be instituted against Kilroy, Lieb, Kelly, Guerrieri and Donald Bobo, International Secretary-Treasurer.

In June, 1982, Kilroy received an unsigned communication from the Committee for Fair Trade Unionism alleging that Archual and the General Secretary-Treasurer, Robert McKinley, of System Board 86 had misappropriated funds from the union. Kilroy on advice of counsel decided to have an investigation and audit of System Board’s 86 finances. The investigation and audit was authorized on June 25, 1982. Auditors from the International Union were sent to Pittsburg. The auditors completed auditing the bank statements, cash journals and disbursements for 1981 and for the first 6 months of 1982. The audit and investigation proceeded no further because of Archual’s failure to produce his own expense account records.

In October, 1982, Archual, McKinley and 14 Vice General Chairmen of System Board 86 were advised by the United States Attorney’s office in Philadelphia that the grand jury was investigating the financial affairs of the System Board 86. When the government subpoenaed all the financial records of System Board 86 in connection with this investigation, Kilroy suspended the audit to await completion of the grand jury investigation. The grand jury proceedings continued into the spring of 1983.

Under pressure to do so by Kilroy, Archual and McKinley resigned their offices on October 1, 1983. On December 29, 1983, McKinley pleaded guilty to falsifying financial reports submitted to the United States Department of Labor. On February 16, 1984, Archual pleaded guilty to two felony counts of embezzlement of $121,-138.45 from System Board 86. The government has since announced that its investigation has produced no further evidence of criminality.

Kilroy imposed a trusteeship on System Board 86 effective September 7, 1983, and appointed Lieb as Supervisor-Trustee of the System Board and ordered the audit to be resumed.

BRAC’s international convention and election took place July 25-29,1983, and the Kilroy slate defeated its opponents. After being reelected, Kilroy terminated plaintiffs employment as director of the BRAC Community Services Department in Paramus, New Jersey, effective September 1, 1983. Plaintiff protested his removal and requested 74 instead of the offered 50 weeks of vacation pay. He appealed to the BRAC Executive Counsel and filed a charge of age discrimination with the EEOC in October, 1983. His appeal to the Executive Council failed, and the EEOC charge apparently remains in limbo.

After instituting this action, plaintiff moved for a preliminary injunction to prohibit defendants from distributing any more of System Board 86 funds, to bar expenditure of any union funds for defense of any individuals in a criminal proceeding, to bar expenditure of union funds for defense of any defendant in this action and to bar Lieb from disbursing any of System Board funds for legal fees in defense of this action or any criminal action. Defendants’ counsel advised the court that pending determination, Lieb would pay only for essential operational expenses, salaries and that no legal fees would be paid. Plaintiff was not appeased and seeks Lieb’s removal, appointment of a receiver to take custody of System Board 86’s property, an order for a complete financial report monthly to the Executive Council and an order to prohibit outside counsel from any further representation of BRAC officials.

Defendants opposed the motion for preliminary relief, moved to dismiss the complaint on jurisdictional grounds, and to vacate the court’s December 8 order granting plaintiff leave to sue.

At the February-March hearing there was testimony that the silverplated coffee service was presented to Kilroy’s wife by Archual on behalf of the System Board at a meeting of the System Board in October, 1981. The gift was made to Kilroy to commemorate his election to the Brae presidency. The plaintiff was among those present, and no complaint was made by plaintiff or by any other union representative that the gift was not appropriate until this proceeding was commenced. There was testimony at the hearing that it was traditional for the System Board to give a newly elected Grand Lodge President a gift. There was no evidence presented that the gift was paid for with System Board funds, and the coffee service is kept at Grand Lodge offices in Rockville, Md.

The radar detector was acquired by Archual and given to Kilroy. Again there was no proof that the funds used to purchase the device were those of System Board. The detector is installed in a Brae licensed automobile used for union business. Plaintiff in a post hearing brief has alleged the use of a radar detector is illegal under Maryland law. However, it is clear that the court has no role in the enforcement of Maryland law.

On September 23, 1983, after notice, a hearing on the trusteeship was held before the BRAC Executive Council. On the basis of evidence that Archual had received considerable funds as expenses not properly supported by receipts and evidence that the System Board’s financial reports to the Department of Labor had been falsified, the Executive Council unanimously approved imposition of the trusteeship and reported its finding in a memorandum dated September 30, 1983.

On his assumption of duties as Supervisor-Trustee of System Board 86, Lieb advised BRAC counsel that in 1981, while working as an employee of System Board 86, he asked Archual for an increase in salary. Archual conceded that Lieb merited a raise but advised him to take it through as an increase in his expense allowance rather than through a salary increment. As a result Lieb added approximately $150 per month to his expense accounts. He ceased the practice early in 1983, and on his appointment as Supervisor-Trustee ordered the practice discontinued throughout the System Board. The funds he received in this manner were deposited by Lieb in an escrow account, and he requested an opinion from the BRAC General Counsel, William Donlen, as to the propriety of the practice. Donlen, in an opinion dated April 14, 1984, concluded that the practice did not constitute a breach of fiduciary duties by any of the recipients of funds (Lieb and 3 other employees were found to have been compensated in this way), since they had performed services, had engaged in the practice pursuant to instructions from Archual and the amount received was nominal.

On May 22, 1984, Archual was sentenced to a term of probation subject to the condition that he pay back to the union $118,-938.51 in embezzled funds.

Robert McKinley, who had been charged by the government with receiving $1,467.30 through submission of false expense statements and to have split with Archual for their own personal use two union fund checks totalling $23,200 (the two checks were included in the government’s listing of the funds embezzled by Archual), was also sentenced to a term of probation. McKinley, however, was not placed under restitution order by the sentencing judge, but has paid back $3,500 to BRAC. Union auditors uncovered an additional $5,321.20 which McKinley received as expense reimbursements without proper authorization.

Charles Swasy shared in one of the checks ($8,200.00) that Archual and McKinley diverted to their personal use and has admitted to receiving $2,500 through submission of false expense vouchers. He cooperated in the government’s investigation. The union auditors reported an additional $3,351.00 chargeable to him for unauthorized expenditures ($3,100 in attorney’s fees paid by the System Board and $251.00 in unauthorized expense reimbursements). Swasy has paid back $5,851.00. After the criminal proceedings were concluded, Kilroy removed Swasy from his position as Vice General Chairman of the System Board. Kilroy has offered to retain him as staff employee provided he made full restitution, but Swasy declined the offer.

James Kelly former Vice Chairman was not charged with embezzling any funds by the government. Kelly, however, was found by union auditors to have received $7,210.05 in unauthorized expenses, and was asked to pay back $3,651 he received from the union for attorney’s fees. He has repaid $4,371.05. Kelly remains on the Board as a staff employee although no longer an officer.

BRAC filed a notice of claim with Aetna Casualty & Surety Co., the union’s fidelity bond underwriter, on October 6, 1983, to recover all of these funds. On June 22, 1984, and August 30, 1984, Aetna paid BRAC, which in turn paid System Board 86, $335,072.64 which constitutes the amount of funds improperly taken by Archual, McKinley, Swasy and Kelly less the amounts received in voluntary restitution.

Since the hearing in this litigation, BRAC terminated its trusteeship of System Board 86 on May 24, 1984, and new officers and new members of the Board of Trustees have now been elected who are not defendants before the court. BRAC had recovered some $349,894.69, all of which has been turned over to System Board 86. BRAC has initiated a civil action against Archual on the basis of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968, in the United States District Court for the District of Maryland. It has assigned its interest to restitution from Archual under court order to Aetna and has substituted Aetna as the real party in interest in the civil litigation.

BRAC has provided a final audit report and accounting of System Board 86 finances to all of System Board’s officers. That audit shows that the assets of the System Board increased by $66,039.00 under BRAC trusteeship.

Moreover, the System Board’s newly elected General Chairman has retained Peat, Marwich, Mitchell & Co. to scrutinize the expense account statements submitted by him and other senior officers of System Board 86 for a 6 year period dating back from December 31, 1983. In an opinion letter dated July 23, 1984, the outside accounting firm found no deviations from stated BRAC expense policies, and nothing was found to evidence any irregularities.

The Department of Labor on June 15, 1984, upheld the validity of the July, 1983 election.

Discussion

Defendants, sued in their individual capacities, have all moved to dismiss for lack of personal jurisdiction.

The court has neither personal nor subject matter jurisdiction over Joseph A. Guerrieri, an attorney in private practice in the District of Columbia. Guerrieri is neither a BRAC elected official nor one of its key administrative personnel as comprehended by § 501(a) and (b) and as defined by § 402(q) of LMRDA.

Personal jurisdiction must exist as to each defendant in order for this court to invoke § 501(b) of LMRDA to enforce the statutory obligations imposed on union officials and key administrative personnel.

None of these defendants have conducted any activities in this state. Hanson v. Denkla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). None of the defendants are New York residents, nor has any been shown to have significant contacts with or interests in the state. None are doing business or transacting business within the state, and thus none are within the reach of the New York long arm statute. Morrissey v. Curran, 482 F.Supp. 31, 59 (S.D.N.Y.1979) (Motley, J.), aff'd in part, 650 F.2d 1267, 1277 (2d Cir.1981).

Kilroy’s alleged breach of fiduciary duties involved receipt of gifts from the union, his acquiescence in the misappropriation of union funds and authorization of a cosmetic audit. The gifts were given in New Jersey and Pennsylvania, and the alleged misfeasance was in respect of System Board 86’s finances and could have occurred only in Rockville, Md. or Pennsylvania where the System Board’s principal offices are located. The misappropriation and diversion of funds attributed to Kelly occurred in Philadelphia where he is employed. Joseph Guerrieri’s alleged misfeasances in respect of allowing Lieb to continue as Supervisor Trustee had to have occurred in Pennsylvania or Washington. Clearly, none of the diversions occurred in New York.

The injuries complained of occurred outside New York, and no wrongful act has taken place within the state nor has any acts had a significant impact on persons or property within the state. Plaintiff must make a prima facie showing that defendants are subject to personal jurisdiction within the state. Mayes v. Leipziger, 674 F.2d 178, 182 n. 3 (2d Cir.1982); Bialek v. Racal-Milgo, Inc., 545 F.Supp. 25, 33 (S.D.N.Y.1982) (Ward, J.). Although plaintiff is a New York resident and BRAC is bargaining agent for a number of residents of New York who are Conrail employees, these factors are not sufficient to provide a basis for personal jurisdiction over defendants. In sum, the minimum contacts with New York requisite for due process in this forum is lacking. International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945).

Moreover, based on the facts outlined above there appears to be no substance to the charges plaintiff has sought to air in this litigation. The gravamen of the complaint is that defendants violated the fiduciary obligations owed to members of System Board 86. However, the record made in this proceeding established that BRAC defendants have fulfilled their fiduciary responsibilities in every respect, and that as a result, System Board 86 is now in better shape than it has been and is now functioning as a democratic institution.

No good cause for this litigation has been demonstrated as the case law requires. Dinko v. Wall, 531 F.2d 68 (2d Cir.1976), on remand 421 F.Supp. 207 (S.D.N.Y.1976) (Werker, J.), aff'd, 559 F.2d 1202 (2d Cir.1977). On the basis of facts in the record, plaintiff has not shown a reasonable likelihood of success as to his claims and as to material facts alleged, he has failed to show reasonable grounds to credit their existence. Indeed, this record discloses no wrongdoing within the purview of LMRDA by any defendant.

The case is dismissed.

IT IS SO ORDERED.

      . § 501. Fiduciary responsibility of officers of labor organizations reads in pertinent part:
      (a) The officers, agents, shop stewards, and other representatives of a labor organization occupy positions of trust in relation to such organization and its members as a group. It is, therefore, the duty of each such person, taking into account the special problems and functions of a labor organization, to hold its money and property solely for the benefit of the organization and its members and to manage, invest, and expend the same in accordance with its constitution and bylaws and any resolutions of the governing bodies adopted thereunder, to refrain from dealing with such organization as an adverse party or in behalf of an adverse party in any matter connected with his duties and from holding or acquiring any pecuniary or personal interest which conflicts with the interests of such organization, and to account to the organization for any profit received by him in whatever capacity in connection with transactions conducted by him or under his direction on behalf of the organization. A general exculpatory provision in the constitution and bylaws of such a labor organization or a general exculpatory resolution of a governing body purporting to relieve any such person of liability for breach of the duties declared by this section shall be void as against public policy.
      (b) When any officer, agent, shop steward, or representative of any labor organization is alleged to have violated the duties declared in subsection (a) of this section and the labor organization or its governing board or officers refuse or fail to sue or recover damages or secure an accounting or other appropriate relief within a reasonable time after being requested to do so by any member of the labor organization, such member may sue such officer, agent, shop steward, or representative in any district court of the United States or in any State court of competent jurisdiction to recover damages or secure an accounting or other appropriate relief for the benefit of the labor organization. No such proceeding shall be brought except upon leave of the court obtained upon verified application and for good cause shown, which application may be made ex parte. The trial judge may allot a reasonable part of the recovery in any action under this subsection to pay the fees of counsel prosecuting the suit at the instance of the member of the labor organization and to compensate such member for any expenses necessarily paid or incurred by him in connection with the litigation.
      (c) Any person who embezzles, steals, or unlawfully and willfully abstracts or converts to his own use, or the use of another, any of the moneys, funds, securities, property, or other assets of a labor organization of which he is an officer, or by which he is employed, directly or indirectly, shall be fined not more than $10,000 or imprisoned for not more than five years, or both.

      . § 302 provides:
      Trusteeships shall be established and administered by a labor organization over a subordinate body only in accordance with the constitution and bylaws of the organization which has assumed trusteeship over the subordinate body and for the purpose of correcting corruption or financial malpractice, assurinS the performance of collective bargaining agreements or other duties of a bargaining representative, restoring democratic procedures, or otherwise carrying out the legitimate objects of such labor organization,
      29 U.S.C. § 462.

      . § 402(q) provides:
      (q) "Officer, agent, shop steward, or other representative", when used with respect to a labor organization, includes elected officials and key administrative personnel, whether elected or appointed (such as business agents, heads of departments or major units, and organizers who exercise substantial independent authority), but does not include salaried nonsupervisory professional staff, stenographic, and service personnel.


source: Caselaw Access Project

author: HAROLD H. GREENE, District Judge.

license: Public Domain

text:
    UNITED STATES of America v. John A. SHORTER, Jr.
    Crim. No. 84-00421.
    United States District Court, District of Columbia.
    March 26, 1985.

      Joseph E. diGenova, U.S. Atty., Carol E. Bruce, Darryl W. Jackson, Asst. U.S. Attys., Washington, D.C., for prosecution.
    Plato Cacheris, Larry S. Gondelman, Hundley & Cacheris, Washington, D.C., for defense.
   OPINION

HAROLD H. GREENE, District Judge.

Defendant was indicted in one felony count of willful attempt to evade the payment of income taxes due for the years 1972 through 1983, in violation of 26 U.S.C. § 7201, and in six misdemeanor counts of willful failure to pay income tax for each of the years 1978 through 1983, in violation of 26 U.S.C. § 7203. Presently pending before the Court is defendant’s motion to dismiss the tax evasion count. The motion claims (1) that defendant is being charged with acts which are barred by the statute of limitations, and (2) that this count is impermissibily duplicitous because it incorporates twelve separate offenses. The Court has carefully reviewed the grounds advanced by defendant, and it has concluded that the motion must be denied.

I

Statute of Limitations

The statute of limitations for tax evasion is six years. 26 U.S.C. § 6531. Since the indictment in this case was returned in 1984, it bars prosecution for offenses committed before 1978. However, the statute of limitations does not ipso facto rule out prosecution with respect to taxes owing prior to 1978, for the offense of tax evasion is not necessarily committed only in the year when the tax was due and payable. That is so because the existence of a tax deficiency is but one of the two essential elements of the crime, the other being an affirmative act of willful evasion. Sansone v. United States, 380 U.S. 343, 351, 85 S.Ct. 1004, 1010, 13 L.Ed.2d 882 (1965); Spies v. United States, 317 U.S. 492, 63 S.Ct. 364, 87 L.Ed. 418 (1943). An act constituting evasion which occurs during the limitations period brings the prosecution within the statute of limitations even if the taxes being evaded were due and payable prior thereto. United States v. Trownsell, 367 F.2d 815 (7th Cir.1966); United States v. Mousley, 194 F.Supp. 119 (E.D.Pa.1961), aff'd without opinion, 311 F.2d 795 (3d Cir.1963); United States v. Sclafani, 126 F.Supp. 654 (E.D.N.Y.1954), aff'd on other grounds, 265 F.2d 408 (2d Cir.1959); see also, United States v. Malnik, 348 F.Supp. 1273 (S.D.Fla.1972), aff'd on other grounds, 489 F.2d 682 (5th Cir.1974).

It follows that the indictment in this case is not subject to dismissal even with respect to the evasion of taxes due prior to 1978 if it is supported by proof of one or more affirmative acts of evasion committed by the defendant within the past six years if these acts relate to taxes due in earlier years.

The government claims that it will prove acts of evasion occurring within the limitations period which relate to the nonpayment of taxes during the years prior to that period. It is clear that, on this basis, the statute of limitations as such is not a bar.

II

Duplicity

More substantial is defendant’s contention that the indictment is impermissibly duplicitous in that it charges twelve separate offenses — evasion of taxes due for twelve separate years — as a single offense. For purposes of analysis, this argument requires consideration of two questions: first, whether the defendant’s alleged actions may legitimately be regarded as a single, continuous course of conduct and hence as a single offense, and second, whether the defendant would be prejudiced by his prosecution on a single-count basis.

A. Tax Evasion Charges

As a general matter, an indictment is not impermissibly duplicitous even though it alleges more than one offense in a single count if the offenses being charged bear such a relationship to one another that they constitute a continuing course of conduct. See, e.g., United States v. Mangieri, 694 F.2d 1270, 1282 (D.C.Cir. 1982); United States v. Robin, 693 F.2d 376 (5th Cir.1982); United States v. Berardi, 675 F.2d 894 (7th Cir.1982); United States v. Margiotta, 646 F.2d 729 (2d Cir.1981); United States v. Alsobrook, 620 F.2d 139 (6th Cir.1980); United States v. Canas, 595 F.2d 73 (1st Cir.1979); United States v. Girard, 601 F.2d 69 (2d Cir.1979); United States v. Zeidman, 540 F.2d 314 (7th Cir.1976); United States v. Daley, 454 F.2d 505 (1st Cir.1972); United States v. Pavloski, 574 F.2d 933 (7th Cir.1968). That much is conceded by the defendant. However, he argues that, whatever may be true with respect to other types of offenses, this rule does not apply to the evasion of income taxes. That offense, it is said, is time-specific, that is, each offense is tied to a particular year, and the charging of tax evasion in a single count with respect to more than one year is therefore per se impermissibly duplicitous.

A number of decisions are cited in support of this contention; however, none of them is conclusive or even persuasive. Those decisions that involved construction of the Internal Revenue Code at all, by and large merely upheld grand jury decisions to charge evasion in as many counts as there were years; they do not stand for the opposite proposition: that an indictment which charges tax evasion for more than one year is impermissibly duplicitous. The cited decisions would buttress defendant’s argument in this case only if the rule were that conduct which may be charged in several counts must be so charged or be subject to dismissal on duplicity grounds. But that is not the law. To the contrary, it is well established that two or more acts, each of which would constitute an offense standing alone and which therefore could be charged as separate counts of an indictment, may instead be charged in a single count if those acts could be characterized as part of a single, continuing scheme. United States v. Mangieri, supra, 694 F.2d at 1281-82; United States v. Robin, supra, 693 F.2d at 378; United States v. Elam, 678 F.2d 1234, 1250 (5th Cir.1982); United States v. Berardi, supra, 675 F.2d at 898; United States v. Margiotta, supra, 646 F.2d at 733; United States v. Alsobrook, supra, 620 F.2d at 142-43; United States v. Girard, supra, 601 F.2d at 72.

The grand jury, presumably under the guidance of the prosecutor, may charge few or many counts depending upon a variety of factors, and, absent oppression or impermissible duplicity, the decision with respect thereto is within the realm of grand jury and prosecutorial discretion. United States v. Alsobrook, supra, 620 F.2d at 142; United States v. Berardi, supra, 675 F.2d at 898; United States v. Pavlovski, supra, 574 F.2d at 936; United States v. Margiotta, supra, 646 F.2d at 733.

The few cases in which the issue of duplicity has been directly decided, or even discussed, in the context of income tax evasion support this conclusion. At least three courts have found it permissible to charge conspiracy to evade several years’ taxes as one count. United States v. Baker, supra, 262 F.Supp. 657; Lott v. United States, supra, 309 F.2d 115; United States v. Haskell, supra, 327 F.2d 281. And in what is apparently the only decision to have considered directly the issue whether tax evasion itself could be charged in a single count covering more than one year’s taxes, the court held this practice to be proper. United States v. England, 229 F.Supp. 493 (E.D.Ill.1964).

For these reasons, the Court concludes that defendant’s duplicity argument stands or falls not on the narrow basis of tax evasion law but on how it measures up against more general principles. These will now be considered.

B. Continuing Offense Principles

Case law suggests that two factors are critical to the determination whether particular conduct may be charged as a continuing offense in a single count: (1) the language and legislative history of the statute, and (2) the nature of the proscribed conduct. See United States v. UCO Oil Co., 546 F.2d 833 (9th Cir.1976).

Neither the language of the tax evasion statute nor its legislative history shed much light on the question whether it is proper to charge a continuing scheme to evade taxes for several years. The statute makes it a felony for any person to “willfully attempt[ ] in any manner to evade or defeat any tax imposed by this title or the payment thereof.” The Supreme Court has recognized that this language defines a very broad spectrum of conduct, holding that

Congress did not define or limit the methods by which a willful attempt to defeat and evade might be accomplished and perhaps did not define lest its efforts to do so result in some unexpected limitation. Nor would we by definition constrict the scope of the Congressional provision that it may be accomplished ‘in any manner’. By way of illustration, and not by way of limitation, we would think affirmative willful attempt may be inferred from conduct such as keeping, a double set of books, making false entries or alterations, or false invoices or documents, destruction of books or records, concealment of assets or covering up sources of income, handling of one’s affairs to avoid making the records usual in transactions of the kind, and any conduct, the likely effect of which would be to mislead or to conceal.

Spies v. United States, supra, 317 U.S. at 499, 63 S.Ct. at 368. While this language is certainly not conclusive upon the question under consideration here, it does seem to contemplate with respect to this offense the kinds of acts which typically would be committed on a multi-year, continuing-course-of-conduct basis.

Pointing toward the same conclusion is the other principal factor referred to by the UCO Oil Co. court — the nature of the conduct involved. Briefly stated, the government charges the following.

Since at least 1973, the defendant, a prominent criminal defense attorney in the District of Columbia, has conducted all of his professional and personal business in cash, maintaining no bank accounts, office ledgers, or receipts or disbursement journals. He received all his legal fees in cash; he paid his employees’ salaries in cash; he possessed no credit cards; and he never acquired assets (such as real property or automobiles) which could be attached pursuant to a judgment or otherwise. Additionally, defendant never met any of the employer reporting and contribution requirements of federal law; and he never filed estimated income tax returns.

Defendant’s former law partner opened two bank accounts in her own name, but the accounts were, in fact, used by defendant not only for joint office expenses but also for his own personal expenditures. Between 1974 and 1983, a total of over $1.5 million was deposited in these accounts, one-half of which constituted defendant’s income, and defendant spent considerable sums for various purposes, including provisions for his own personal needs, the payment of gambling expenses, and payments to a girlfriend.

Although defendant reported a total income for the twelve years from 1972 through 1983 of $387,438.96 on which there was a tax due, not counting interest and penalties, of $134,866.40, he made only two $2,500 tax payments during that period, both in the context of and to forestall federal or local criminal tax investigations. During that same period, the IRS obtained at least nine civil tax judgments against defendant, but because of his cash method of operation, and his failure to acquire bank accounts or tangible assets, the IRS was never able to collect on any of these judgments.

These activities, should they be proved, could be regarded as evidencing a continuing course of conduct. The establishment and maintenance of a cash method of operation, the establishment and long-term maintenance of accounts for the benefit of defendant in the name of another, and the making of substantial expenditures for many years notwithstanding claims of lack of resources — which are the crux of the government’s case — are not likely to be attributable, consistently with reality only to the year in which a particular act occurred.

The same conclusion emerges from a consideration of the alternatives. If the present indictment were to be dismissed as duplicitous, and the government secured an indictment with twelve felony counts, each attributable to a particular year since 1972, the question would immediately arise as to how the evidence sketched out above was to be treated in the resulting trial.

The government’s theory is — and in a new, multi-count indictment it presumably again would be — that each affirmative act of evasion was intended to evade payment of all taxes known to be owing or which defendant expected to become owing at the time of the affirmative act. Thus, the first count of such a hypothetical indictment presumably would allege evasion of taxes due in 1972. In support of that count, the government would be entitled to introduce evidence of a tax deficiency in 1972 as well as of any and all affirmative acts of evasion after 1978 which may have been intended to evade payment of the 1972 taxes.

In other words, the same evidence that the government apparently intends to produce with respect to the present single-count indictment covering twelve years would be admissible to support the first count (in a twelve-count indictment) charging the evasion of taxes due in 1972, and this same evidentiary pattern could and would be repeated eleven more times, that is, with respect to each subsequent count. The defendant would be no better off in terms of the trial evidence and the jury’s perceptions than he is under the present indictment; he would most likely be worse off. At the same time, such a departure from reality would likely be unnecessarily confusing to the jury.

For these reasons, the Court concludes that tax evasion covering several years may be charged in a single count as a course of conduct in circumstances such as these where the underlying basis of the indictment is an allegedly consistent, long-term pattern of conduct directed at the evasion of taxes for these years.

III

Fairness to Defendant

An indictment should be dismissed as impermissibly duplicitous notwithstanding the considerations discussed above if trial on a single count would be unfair to the defendant. United States v. Alsobrook, supra, 620 F.2d at 142; United States v. Berardi, supra, 675 F.2d at 898; United States v. Pavlovski, supra, 574 F.2d at 936; United States v. Margiotta, supra, 646 F.2d at 733; see also, United States v. Robin, supra, 693 F.2d at 378. In order to determine whether fairness requires dismissal of an indictment which includes in one count what could be several independent charges, the Court must measure that indictment against the purposes of the prohibition against duplicity. These purposes are generally held to be: (1) the prevention of double jeopardy, (2) an assurance of adequate notice to the defendant, (3) the provision of a basis for appropriate sentencing, (4) the danger that a conviction was produced by a verdict that may not have been unanimous as to any one of the crimes charged. United States v. Margiotta, supra; United States v. Pavloski, supra, 574 F.2d at 936; United States v. Starks, 515 F.2d 112, 116 (3d Cir.1975). The Court now considers this case tested against those purposes.

First. In the context of the rule against duplicitous indictments, the double jeopardy threat is acute primarily where the indictment implicitly charges violation of several different statutes which share some common element or elements or where it is not clear what laws are alleged to have been violated. See, e.g., United States v. Elam, supra, 678 F.2d 1234, 1250-51 (5th Cir.1982); United States v. Orzechowski, 547 F.2d 978, 986-87 (7th Cir.1976). In such situations, there is always a danger that the government, having failed in one prosecution, will initiate another, arguing that the object of the new indictment was not encompassed under the earlier charge.

That danger is largely, if not entirely, nonexistent in a case such as this where the indictment is duplicitous, if at all, only because it charges tax evasion with respect to more than one year. Only one statute is involved, and there can therefore be no confusion in that respect. Moreover, it is clear from the indictment itself and from the “bill of particulars” which the prosecution has furnished the defendant (see note 2, supra) that the pending indictment encompasses all acts of income tax evasion by this defendant during the years 1972 through 1983. Upon inquiry by the Court, government counsel reaffirmed that all such acts during these twelve years are included in Count I of the indictment. In short, whether defendant is acquitted or convicted on the felony count of the present indictment, he is protected from a new income tax evasion charge for any of these years on the basis of any act or omission occurring prior to the return of that indictment. For these reasons, the danger of double jeopardy is entirely absent.

Second. The need to provide a defendant with notice of the charges against him raises issues that are similar to those which are presented by the double jeopardy issue. Unlike someone who is charged in a single indictment with violation of what may appear to be several overlapping laws, only a single statute is here involved. Defendant knows from the indictment itself that he is being prosecuted for an alleged violation of that single statute by evading taxes due in twelve specified successive years. If that indictment had been broken down by the grand jury into twelve counts, each relating to one of these years, but otherwise identical in language, defendant would have had no more precise or ample notice of the charges against him than he has under the present indictment. Thus, the alleged duplicity of the indictment does not raise notice problems. If defendant has any such problems, they arise from the fact that the exact means of committing the offense, i.e., what specific actions will be proved by the government are not specified in the indictment. However, as discussed in note 2, supra, such specificity is not required by the law. Moreover, as noted above, the charges have been so fully amplified by the government’s papers and by the discovery it has provided to defendant that lack of adequate notice cannot legitimately be asserted.

Third. A number of decisions suggest that a duplicitous indictment presents the danger that a general verdict of guilty on the count will not disclose the complete range of jury findings, and that this could prejudice the defendant in sentencing. United States v. Starks, supra, 515 F.2d at 116; United States v. Margiotta, supra, 646 F.2d at 733. This concern, once again, would be more of a problem if this indictment contained a single count containing disparate charges arising under different statutes. Where, as here, the alleged duplicity lies in a charge under a single statute by conduct which occurred over a longer period of time, any sentencing and consequent appellate review problems are substantially mitigated.

Furthermore, the sentencing issue is in one sense but a subset of the unanimous verdict problem discussed below. Although defendant has not elaborated on this point, his argument presumably would appear to be that the Court’s sentence, in the event of a conviction, might be dependent upon the number of separate years of evasion which underlay the jury’s verdict. However, as indicated infra, in the event of a guilty verdict, the Court intends to ascertain from the jury what is encompassed by that verdict. Moreover, since the basic prosecution theory is that there was a continuing course of conduct, it is not likely to be decisive on any sentence how many years of evasion were involved in the scheme if a scheme is ultimately proved. Finally, a court is not limited in imposing sentence to the specific facts found by the jury through its verdict, but it may take into account the surrounding circumstances.

Fourth. The most serious issue with regard to fairness is that of a possible lack of unanimity of the jury under the indictment and the proposed evidence in the event of a guilty verdict. It is conceivable, for example, that some jurors might vote for conviction on the basis that defendant took actions to evade federal income taxes in 1980 but not in 1979, while other members of the jury might so vote on precisely the opposite basis. This unanimity problem is exacerbated (1) by the statute of limitations issue, and (2) by the government’s theory that the intentional acts of evasion relate to each and to every failure to pay and that they cannot be allocated to one particular year’s failure. With these complications, it is possible to postulate that some jurors will vote for conviction on the ground that defendant failed to pay taxes in 1973 (outside the statute of limitations) but that in 1982 (during the limitations period) he committed willful, affirmative acts of evasion relating to the taxes owing for the earlier year. Other jurors, in turn, might have entirely different bases for their votes of guilty both regarding the year during which defendant did not pay, the year when he committed the acts of evasion, and the years in which he formed or otherwise possessed and evidenced the intent to evade the payment of taxes.

The Court has concluded that, while for the reasons discussed in Part II above, the prosecution may go forward on the basis of the present indictment, the defendant is entitled to be protected against the danger that, on such an indictment, he will be convicted not on the basis of one unanimous verdict on a single set of facts but under juror votes for conviction which, depending on the particular member of the jury, relate to entirely different years.

Both interests may be accomodated by appropriate jury instructions and special interrogatories to the jury. To this end, the Court intends to instruct the jury in some detail on these issues and to request it to answer special interrogatories.

Initially, the Court expects to instruct the jury that, while it may consider both evidence of a failure to pay taxes and evidence of tax evasion occurring prior to 1978, it may not convict the defendant unless it finds that he took affirmative steps to evade income taxes after 1978, and further that it may not return a guilty verdict unless there is unanimity with respect to at least one act of evasion since that year.

More specifically, the Court intends to instruct the jury that, to return a verdict of guilty on the felony count, it must agree unanimously (1) that during one or more specific years since 1972 the defendant failed to pay his federal income taxes, (2) that after 1978 he willfully committed one or more particular acts which constituted evasion, such as concealing the existence and location of assets, placing assets beyond service of process, or making false statements to agents of the Internal Revenue Service, and (3) that these acts of evasion were part of a course of conduct which had as its purpose the willful evasion of the payment of such taxes. The Court further expects the jury to return, in addition to its verdict on the felony count, answers to specific questions regarding these elements of the offense.

For the reasons stated, the motion to dismiss Count I of the indictment is hereby denied.

      . The Supreme Court in these cases referred to three elements: (1) failure to pay the tax, (2) an affirmative act of evasion, and (3) willfulness. For purposes of the present analysis, it is appropriate to telescope the second and third elements into one.

      . To be sure, the relationship between specific acts of evasion with specific failures to pay taxes is not spelled out in the indictment. Defendant contends that this failure renders the felony count fatally defective, and further that this defect cannot be remedied by a bill of particulars because such a bill would usurp the functions of the grand jury. Motion to Dismiss at 5. This argument lacks merit.
      An indictment is sufficient if it contains the elements of the offense, fairly informs the defendant of the charge against which he must defend, and enables him to plead an acquittal or conviction in bar of future prosecutions. Hamling v. United States, 418 U.S. 87, 117-18, 94 S.Ct. 2887, 2907-08, 41 L.Ed.2d 590 (1974); Russell v. United States, 369 U.S. 749, 763-64, 82 S.Ct. 1038, 1046-47, 8 L.Ed.2d 240 (1962); United States v. Debrow, 346 U.S. 374, 74 S.Ct. 113, 98 L.Ed. 92 (1953); United States v. Haldeman, 559 F.2d 31, 123-26 (D.C.Cir.1976); United States v. Conlon, 628 F.2d 150, 156 (D.C.Cir. 1980), appeal after remand, 661 F.2d 235 (D.C.Cir.1981). See also, Fed.R.Crim.P. 7(c)(1).
      The validity of an indictment in this respect is to be determined upon practical rather than technical grounds. United States v. Guthartz, 573 F.2d 225, 227 (5th Cir.1978); United States v. Haas, 583 F.2d 216 (5th Cir.1978). The test is not whether the indictment might have been drawn with greater certainty and exactitude, but whether it sets forth the elements of the offense and sufficiently apprises defendant of the charges. United States v. London, 550 F.2d 206, 211 (5th Cir.1977); United States v. Haldeman, supra, 559 F.2d at 124.
      In this case, the indictment clearly alleges violation of a cited statute, sets forth all the essential elements of the crime (see supra note 1), and details both the amount of the tax deficiencies and the methods alleged to have been employed by defendant to evade the payment of these taxes. This is sufficient to inform him of the charges against him and to protect him against double jeopardy. Furthermore, with respect to concerns over double jeopardy, it is established that the entire record of'a criminal proceeding, not merely the indictment, is utilized to determine the scope of a previous prosecution. Russell v. United States, 369 U.S. 749, 764, 82 S.Ct. 1038, 1047, 8 L.Ed.2d 240 (1961); United States v. Haldeman, supra, 559 F.2d at 126; 1 Wright, Federal Practice and Procedure § 125 at 233. The record in this case is already clear that this prosecution will bar any further prosecution for tax evasion related to any act of evasion occurring between 1978 and 1983. See also, Part III, infra. Thus, the indictment is legally sufficient to call for a trial on the merits.
      While a bill of particulars cannot cure a defective indictment, Russell v. United States, supra, 369 U.S. 749, 82 S.Ct. 1038, 8 L.Ed.2d 240; United States v. Conlon, supra, 628 F.2d 150 (D.C.Cir.1980), it may be useful to assist a defendant in preparation for trial where the indictment is sufficient but not detailed. United

        States v. Haas, supra, 583 F.2d at 221. In this case, the government’s memorandum in opposition to the motion to dismiss contains a detailed account of its case and provides ample information about the prosecution version of the facts so as to enable defendant to prepare his case. Any lack of specificity has been cured by this detailed accounting of the government’s case and by ongoing discovery, and defendant conceded as much during the hearing on this motion.

      . The question of the statute of limitations in relation to defendant’s claim of impermissible duplicity is explored below.

      . Duplicity is the joining in a single count of two or more distinct and separate offenses. United States v. Mangieri, 694 F.2d 1270, 1281 (D.C.Cir.1982); 1 C. Wright, Federal Practice and Procedure: Criminal § 142 (2d ed. 1982).

      . Income taxes are, of course, due and payable on an annual basis. United States v. Goldberg, 206 F.Supp. 394, 397 (E.D.Pa.1962), aff'd, 330 F.2d 30 (3d Cir.1964).

      . Two of the cases cited arose out of the Immigration and Naturalization Act provision which permits the deportation of individuals convicted of two crimes unless both convictions arise out of the same scheme of criminal misconduct. Costello v. Immigration and Naturalization Service, 311 F.2d 343 (2d Cir.1962), rev'd on other grounds, 376 U.S. 120, 84 S.Ct. 580, 11 L.Ed.2d 559 (1964); Chanan Din Khan v. Barber, 147 F.Supp. 771 (N.D.Cal.1957), aff'd, 253 F.2d 547 (9th Cir.1958). In both cases the individuals were convicted of failure to pay taxes in two separate years, and both times the courts rejected the argument that these two incidents arose out of the same criminal scheme. These decisions do not help defendant, however, not only because the courts there were construing the immigration laws, not the tax laws, but also because of the rationale on which the cases were decided. In Costello, a deportation case involving the well-known mobster, the court stated that charges of tax evasion for two separate years are two separate crimes "in the absence of additional facts to support an inference that the two crimes are related.” In Chanan Din Khan, the court stated that the evidence indicated that defendant’s success in his scheme to defraud in 1947 encouraged a repeat performance in 1948 — not that there was one continuing scheme.

      . United States v. Goldberg, supra, 206 F.Supp. at 397, held that since a willful attempt to evade taxes due in one year is a separate offense from a like attempt to evade for another year, any conspiracy to evade taxes must be charged as a separate offense for each year of the conspiracy. This view was expressly rejected in United States v. Baker, 262 F.Supp. 657, 684 (D.D.C.1966), and Lott v. United States, 309 F.2d 115, 120-21 (5th Cir.1962). See also, United States v. Haskell, 327 F.2d 281, 284 (2d Cir.1964).

      . See United States v. Smith, 335 F.2d 898 (7th Cir.1964); Norwitt v. United States, 195 F.2d 127 (9th Cir.1952); United States v. Johnson, 123 F.2d 111, 119 (7th Cir.1941), rev’d, 319 U.S. 503, 63 S.Ct. 1233, 87 L.Ed. 1546 (1943); United States v. Sullivan, 98 F.2d 79, 80 (2d Cir.1938).

      . Indeed, because of the wide discretion possessed by grand juries and prosecutors in this regard, and because that discretion has in recent years often been exercised in favor of multiple charges, the argument now most frequently advanced by criminal defendants is not duplicity but that the prosecution impermissibly multiplied charges, either to induce a guilty plea to some of them or to expose the defendant to an extended prison sentence. Perhaps because of this phenomenon, there are few recent complaints of, and reported decisions dealing with, duplicity. It may be noted that in this case the government professes that it sought only a single felony count rather than twelve so as not to be accused of oppression of this defendant.

      . That case is of dubious precedental value, however, because the decision of the District Court was reversed on other grounds, the Court of Appeals noting that it was not necessary to discuss the remaining specifications of error. United States v. England, 347 F.2d 425, 436 (7th Cir.1965). In two other cases — Cohen v. United States, 297 F.2d 760, 769-70 (9th Cir.1962), and United States v. Swallow, 511 F.2d 514 (10th Cir.1975) — the courts affirmed convictions where the indictments charged willful evasion for several years in one count, but in neither case was there any discussion of duplicity.

      . The Ninth Circuit in the UCO Oil Co. case noted the legislative history as a factor separate from the statutory language, and it further referred to yet another factor — the appropriateness of multiple punishment for the conduct charged. To the extent that the multiple punishment factor has relevance here, it is of no assistance to defendant. If the indictment had charged twelve separate counts even though there was but a single course of conduct involving a single continuing intent, it could well be argued and held that it was unfair to subject the defendant to multiple punishment therefor. The obverse of the coin, of course, is that a single count covering all twelve years is both more appropriate and not impermissibly duplicitous. See Bell v. United States, 349 U.S. 81, 75 S.Ct. 620, 99 L.Ed. 905 (1955); United States v. Robin, supra, 693 F.2d at 379; United States v. UCO Oil Co., supra, 546 F.2d at 837-38.

      . The legislative history provides no additional clues on this question. See 1954 United States Code Cong. and Admin. News 4572, 5251, and 5343.

      . The court in UCO Oil considered under this rubric not only the words of the particular statute but also the specific conduct being charged in the case there under review. See also United States v. Mangieri, supra.

      . See Opposition to Defendant’s Motion to Dismiss.

      . Nevertheless, on four different occasions between 1975 and 1980, defendant stated that he had neither cash nor bank accounts.

      . The most recent such judgment was secured in 1982, in the amount of $108,105 for the years 1970 through 1975.

      . In 1974 in federal court in Baltimore, defendant pleaded no contest to a criminal tax charge for failure to file income tax returns in 1968 and 1979. He was placed on probation and fined. He paid that fine, but he again failed to pay the tax due.

      . That issue is entirely separate from the question whether defendant’s failure to pay was willful, or whether there were other, legitimate reasons for that failure. Willfulness, obviously, is a matter to be proved by the government at trial.

      . For example, if, as the government apparently claims, defendant established an account in his partner’s name in 1974, with the intention thereafter to use one-half of the funds as his own, the creation of the account would most likely have significance for tax evasion purposes for as long as the account existed and was used for defendant’s personal purposes.

      . The various failures to file estimated tax returns and the failures to pay notwithstanding judgments could more readily be attributed to particular years, but these matters are in a sense subsidiary to what, if the government’s allegations are true, was a continuing scheme or plan.

      . That is, during the limitations period. Acts of evasion occurring between 1972 and 1978 would probably also be admissible, especially where — as in the instance of the establishment of a bank account in the name of another — they had continuing consequences.

      . Additionally, indictment on twelve separate counts would expose the defendant to possible punishment in multiples of his exposure under the present indictment. If the jury were to accept the government’s evidence and conclude that the affirmative act of maintaining a cash lifestyle, say, in 1983 was directed not only at evading taxes due in that year but at all taxes due and assessed in earlier years for which the Internal Revenue Service could otherwise have collected, defendant could be found guilty of twelve felony violations based upon that one affirmative act.

      . It is clear that the Internal Revenue Code has sufficient flexibility to permit a finding that it is violated through a course of conduct. See Sansome v. United States, supra, 380 U.S. at 350-51, 85 S.Ct. at 1009-10, and Spies v. United States, supra, 317 U.S. at 497, 63 S.Ct. at 367, where the Supreme Court stated that:
      [Section 7201 is] the capstone of a system of sanctions which singly or in combination were calculated to induce prompt and forthright fulfillment of every duty under the income tax law and to provide a penalty suitable to every degree of delinquency.

      . During the hearing on this motion the government stated that, inasmuch as it was not charging the defendant with attempting to evade taxes by underreporting, if evidence of underreporting came to light, the defendant conceivably could hereafter be charged with the distinct offense of filing false returns. However, insofar as tax evasion is concerned, government counsel acknowledged that defendant could not, in a successive prosecution, be charged with that offense for the years 1972 through 1983. This concession, in addition to the record of the trial, would be available to the defendant in support of a plea of double jeopardy in any future proceeding. United States v. Haldeman, supra, 559 F.2d at 126.

      . See 18 U.S.C. §§ 3552, 3553, and Fed.R.Crim.P. 32(c). Before sentencing "a judge may appropriately conduct an inquiry broad in scope, largely unlimited either as to the kind of information he may consider, or the source from which it may come,” United States v. Tucker, 404 U.S. 443, 446, 92 S.Ct. 589, 591, 30 L.Ed.2d 592 (1972), and he may even consider evidence of crimes of which defendant was neither tried nor convicted. United States v. Johnson, 507 F.2d 826 (7th Cir.1974).

      . But see, e.g., United States v. Spock, 416 F.2d 165, 180-83 (1st Cir.1969).

      . Although the existence of a course of conduct is not an element of the offense as such, it would be unfair to the defendant and inconsistent with the prosecution’s theory to permit it to rely on the existence of such a course, to defeat the duplicity claim (as augmented by the statute of limitations defense), but then to have this factor ignored when the jury is called upon to make its decision.

      . The parties will, of course, be given full opportunity to submit appropriate instructions and questions.


author: BARRINGTON D. PARKER, District Judge.

text:
    FAMILY TELEVISION, INC., and Keith A. Houser, Plaintiffs, v. The SECURITIES AND EXCHANGE COMMISSION, Defendant.
    Civ. A. No. 84-1721.
    United States District Court, District of Columbia.
    March 29, 1985.
    Paul L. Perito, Frank Koszorus, Jr., Perito, Duerk, Pinco, Washington, D.C., for plaintiffs.
    Linda D. Fienberg, Associate Gen. Counsel, S.E.C., Richard M. Humes, Asst. Gen. Counsel, S.E.C., Washington, D.C., for defendant; John A. Keeffe, Eastchester, N.Y., John R. Bartels, Jr., White Plains, N.Y., of counsel.
   ORDER OF DISMISSAL

BARRINGTON D. PARKER, District Judge.

This case involves an appeal from the action of the Securities and Exchange Commission (“SEC” or “Commission”) denying an application for attorneys’ fees under the Equal Access to Justice Act (“EAJA”), 5 U.S.C. § 504. The claim for fees arises out of a three-year SEC investigation of the petitioners, Family Television, Inc. (“FTI”) and Keith Houser, its president and director. The SEC has filed a motion to dismiss the petitioners’ application on the grounds that their claim is not within the limited scope of the EAJA. For the reasons set out below, the Court determines that the petition lacks merit and should be denied, and that this proceeding should be dismissed.

On May 13, 1981, the SEC initiated an investigation of the petitioners for alleged violations of the registration and antifraud provisions of the 1933 and 1934 federal securities laws and accompanying regulations. On February 6, 1984, the SEC informed FTI and Houser that it was terminating the investigation without recommending any enforcement action. The SEC, however, stated that terminating the investigation did not exonerate the petitioners and did not preclude further future action. See Securities Act Release No. 5310, 1 Fed.Sec.L.Rep. ¶ 4995 [CCH] at 4321, 38 Fed.Reg. 5457.

The petitioners subsequently filed a timely application with the SEC for attorneys’ fees incurred in connection with the investigation. See 5 U.S.C. § 504. The SEC rejected the request on the grounds that the statute provides for attorneys’ fees only in cases of “adversary adjudications,” not in cases of investigations. On June 4, 1984 FTI and Houser filed their present petition, seeking attorneys’ fees in the amount of approximately $385,000.

A.

The threshold issue is whether this Court has jurisdiction to consider the present petition for attorneys’ fees. Section 504(c)(2) of the EAJA provides that “[a] party dissatisfied with the fee determination ... may petition ... to the court having jurisdiction to review the merits of the underlying decision of the agency____” The SEC maintains that the staff decision not to recommend that the Commission file an injunctive action is “committed to agency discretion,” 15 U.S.C. §§ 77t(b), 78u(d), and is therefore unreviewable. See Kixmiller v. SEC, 492 F.2d 641, 645 (D.C.Cir.1974). Compare Medical Committee for Human Rights v. SEC, 432 F.2d 659 (D.C.Cir.1970) (holding SEC decision reviewable when Commission has reviewed staff decision), vacated as moot, 404 U.S. 403, 92 S.Ct. 577, 30 L.Ed.2d 560 (1972). Alternatively, the SEC argues that if its decision is reviewable, proper jurisdiction lies in the Court of Appeals and not in this forum. See 15 U.S.C. § 78y(a).

Contrary to the SEC’s contention, proper jurisdiction rests with this Court. The underlying dispute in this case concerned possible registration and antifraud violations of the securities laws. If the SEC determined that FTI and Houser had been involved in violating securities laws, the Commission could have sought injunctive relief in this Court to prevent further violations. This Court could then have reviewed the merits of the SEC’s action. Under those circumstances, this Court would have jurisdiction to decide the merits of the petition for fees. The fact that the SEC declined to pursue this course does not deprive this Court of jurisdiction over the merits of the petition for fees.

B.

The ultimate question to be decided is whether or not the SEC proceeding was an “adversary adjudication.” EAJA defines an “adversary adjudication” as an “adjudication under [5 U.S.C. § 554] in which the United States is represented by counsel or otherwise____” Section 504(b)(1)(C). Section 554 covers adjudications required by statute to be determined on the record after opportunity for an agency hearing. In turn, these adjudications are defined as the “agency process for the formulation of an order,” 5 U.S.C. § 551(7) (1982), and an “order” is defined as “the whole or part of a final disposition____” Id. § 551(6).

In this case, the SEC staff entered a formal order of investigation against the petitioners. During the course of the investigation, subpoenas were issued to directors of FTI and its business associates to determine the existence of securities registration and antifraud violations. The proceeding did not result in a hearing before an administrative law judge. The SEC’s claims that its action was not required to be on the record after opportunity for hearing and that dropping the investigation was not a final disposition is supported in the record and uncontroverted by the petitioners. In this case, then, the SEC merely conducted an investigation and, therefore, the proceeding was not an adversary adjudication.

This literal interpretation of section 554 “adjudications” is supported by ITT v. Electrical Workers, 419 U.S. 428, 95 S.Ct. 600, 42 L.Ed.2d 558 (1975). There, the Supreme Court considered whether the prohibition in section 554 against commingling prosecutorial and adjudicatory functions had been violated when the presiding officer at an NLRB evidentiary hearing subsequently represented the NLRB’s general counsel at the trial examiner’s hearing. The later hearing was convened to review and recommend enforcement action. In deciding that the evidentiary hearing was not an adjudication, the Supreme Court stated that an adjudication requires “a hearing before an administrative law judge who makes findings of fact and conclusions of law, initially decides the case, and whose recommended decision ‘becomes the decision of the agency____’” Id. at 445, 95 S.Ct. at 610. Further, the Court held that “ ‘[ijnvesigatory proceedings ... which do not lead to the issuance of an order containing the element of a final disposition ... do not constitute adjudication.’ ” Id. (quoting Attorney General’s Manual on Administrative Procedures Act 40 (1947)). It is thus clear that the SEC proceeding in this case did not comprise the requisite elements of an adversary adjudication within sections 504 and 554.

Additionally, the petitioners’ allegations that the SEC investigation was conducted in an abusive and harassing manner does not thereby convert the proceeding into an adversary adjudication. It is true, as the petitioners argue, that EAJA was enacted to protect parties from abusive agency action. See H.R.Rep. No. 1418, 96th Cong., 2d Sess. 14, reprinted in 1980 U.S.Code Cong. & Ad.News 4953, 4984, 4993. The attorneys’ fees provision, however, is expressly limited to adversary adjudications. Id. Congress wanted to protect persons with rights at stake who, but for the EAJA, would be deterred from asserting or defending those rights. Here, the petitioners could have pursued other remedies during the course of the investigation. Investigation targets who do not wish to comply with SEC subpoenas may charge the Commission with harassment when it seeks to enforce the subpoena in the district court. See Sprecher v. Graber, 716 F.2d 968 (2d Cir.1983). The petitioners also could have sought a stay of the proceedings at any point during the two-and-one half-year investigation if they believed that subpoenas directed at them or third parties would cause FTI irreparable harm. See Ayers v. SEC, 482 F.Supp. 747, 751 (D.Mont.1980). The petitioners failed to pursue these remedies and may not now claim relief under the EAJA.

For the reasons stated heretofore, the SEC’s Motion to Dismiss is granted and the plaintiffs’ petition is dismissed with prejudice.

      . Because this Court finds that no adversary adjudication was involved, the remaining threshold requirements in § 504, namely, that the petitioner is a prevailing party in a final disposition and that the United States’ position is “substantially justified," need not be discussed.