we shall require that the government, by way of a limited evidentiary hearing, add some flesh to this skeleton through testimonial and/or documentary evidence of the defendant's breach. Because we find that three of the four alleged breaches, even if proven, would not be material, this hearing may be limited to proof of only one.
First, the issue of whether defendant reported the $5,000.00 finder's fee on his 1977 tax return is neither relevant nor material to the investigation of Gambino which was being conducted in April, 1980. In questioning Skalsky, the government's attorney sought to determine the state of mind of the recipients of this fee. In essence, he sought to determine whether they considered it to be taxable income. (Wilson Affidavit para. 15 quoting transcript of Skalsky's April 15, 1980 Grand Jury appearance). Thus, the government got what it wanted: a series of statements from Skalsky which evinced his belief that the money was "income." Skalsky's statement that he had reported the fee on his income tax is simply not material to the Gambino investigation, even if patently false.
Likewise, the government's third and fourth grounds for alleging a breach, which relate to defendant's October, 1981 Grand Jury appearance, are without merit. At the time of this appearance, defendant had been informed, by the government, of two very important facts: first, that the April, 1980 agreement was no longer of any force and effect; and second, that he had become a target of the Grand Jury investigation. The government urges that "an honest belief [on Skalsky's part] that he had not [previously] breached the agreement would have compelled him to cooperate." (Government's brief at 18). This argument borders on speciousness. Having been informed that his agreement with the government was null and void and that the investigation had turned to him, Skalsky appears to have acted reasonably in asserting his Fifth Amendment rights. The government's allegations of lying to the Grand Jury, in light of the July 10th, 1981 letter voiding the agreement, cannot, for our purposes, be seen as a breach of the agreement.
The government is left with its allegations of breach which relate to Skalsky's and Gambino's real estate dealings in Atlantic City, New Jersey. Because we feel that these allegations of breach, if proven, would be material, thus warranting the government's voiding of the agreement, we shall hold an evidentiary hearing in order to allow the government the opportunity to prove its allegations with testimonial and/or documentary evidence. Although this hearing need not be as extensive as a Kastigar hearing, we shall require that the government prove Skalsky's breach by clear and convincing evidence. See United States v. Smith, 580 F. Supp. 1418, 1422 (D. N.J. 1984).
Materiality, we note, is an issue of law for the Court's consideration. See United States v. Crocker, 568 F.2d 1049, 1056 (3d Cir. 1977). In addition, it is well established that a statement is material "if it has a tendency to influence, impede, or hamper the grand jury from pursuing its investigation." United States v. Lardieri, 497 F.2d 317, 319 (3rd Cir. 1974), on rehearing, 506 F.2d 319 (3d Cir. 1974). In the instant case, the April, 1980 Grand Jury was undertaking an investigation of Skalsky's business associate, Emmanuel Gambino, in order to ascertain whether Gambino should be indicted for tax evasion. Defendant was well aware of the Grand Jury's purpose both at the time he executed the agreement and when he was interviewed by IRS Special Agents. He was also aware that any information which he could provide with regard to money received by Gambino would be helpful to the government's investigation.
The government maintains that Skalsky was asked directly about his and Gambino's ownership interests in two Atlantic City properties. Skalsky allegedly responded merely that they had held options which "never materialized." (Report of Special Agents Gould and Pisker, p. 3, attached as Exhibit 1 to Wilson affidavit). If, as the government maintains, Skalsky and Gambino actually divided a $250,000.00 settlement arising from litigation concerning these properties, Skalsky's failure to inform the Special Agents of this fact would certainly appear to have had a "tendency to influence, impede, or hamper" the Gambino investigation. Lardieri, 497 F.2d at 319.
This Court shall, therefore, hold an evidentiary hearing with the purpose of determining whether or not defendant breached his agreement with the government. Our final decision on the instant motion to dismiss shall await the outcome of the hearing.
DISCLOSURE OF GRAND JURY MATERIALS
By this motion, defendant seeks to compel disclosure of a vast quantity of materials which were presented to the Grand Jury. He urges that his request should be granted, pursuant to Fed. R. Crim. P. 6(e)(3)(C) (i) and (ii), as a result of two prior disclosures by the government to IRS personnel in violation of Fed. R. Crim. P. 6(e)(2).
Defendant's first allegation of violation is premised on a letter to his second former attorney, James C. Schwartzman, Esquire, from Stanley F. Krysa, the Chief of the Criminal Section of the Justice Department, Tax Division, which stated in its entirety, "This is to advise you that the above captioned case has been transmitted to the Internal Revenue Service." (Krysa letter of May 20, 1983, Exhibit C, to defendant's Notice of Motion). In his affidavit, Michael K. Simon, Esquire, who is defendant's son-in-law and the attorney who represented him prior to Mr. Schwartzman, avers that Schwartzman informed him of a conversation he had with Mr. Krysa, who informed him that the letter was an indication that his case had been referred to the IRS for civil prosecution. (Simon affidavit paras. 14-15).
The government concedes that if the Skalsky Grand Jury materials had been referred to the IRS for civil prosecution, such referral would be in violation of Rule 6. See United States v. Sells Engineering, Inc., 463 U.S. 418, 77 L. Ed. 2d 743, 103 S. Ct. 3133 (1983). In response to defendant's allegations, however, the government has presented the affidavit of Stanley F. Krysa, the author of the letter in question. From his affidavit, it becomes clear that this letter was sent in error and that the case was never referred to IRS for civil prosecution. Krysa avers that letters of this type are only sent when prosecution has been declined. (Krysa affidavit para. 5). Furthermore, he avers that prosecution of Mr. Skalsky was never declined. (Id. para. 6). The affidavit of Russell Stewart, who was the Senior Tax Attorney assigned to assist the Grand Jury, confirms this statement. (Stewart affidavit, para. 5, attached as Exhibit 2 to Wilson supplemental affidavit). It is clear that the case was merely sent to the IRS Regional Counsel for referral back to the Strike Force and IRS District Counsel for further information on two issues relevant to the investigation. (Id. para. 4). In light of the hearsay nature of the Simon affidavit, and the explanation provided by the Krysa affidavit, we find that there was no transmittal of defendant's case to the IRS Civil Division in violation of Rule 6(e). We note, as well, the relevant fact that there has been no civil tax proceedings initiated against the defendant with reference to the time periods at issue before the Grand Jury.
The second violation alleged by defendant concerns the disclosure of Grand Jury materials to IRS criminal investigators. Such disclosures can hardly be challenged if, as in this case, they have been made for the purpose of obtaining technical advice regarding the criminal matter being investigated and they satisfy the criteria of Rule 6(e)(3)(A)(i) or (ii). See Sells Engineering, 463 U.S. at 426. Cooperation between various branches of the government in the investigation and enforcement of the criminal statutes, when done in recognition of procedural rules, should be commended and not discouraged. We find that the submissions or disclosures to various IRS criminal investigators and tax specialists are within the ambit of valid Rule 6 disclosures and did not require a court order pursuant to Rule 6(e)(3)(C). We shall, therefore, deny defendant's motion.
The primary concern in the disclosure of Grand Jury materials is that the Grand Jury's secrecy remain intact to the greatest extent possible. Sells Engineering, 463 U.S. at 423-25. When any information is divulged, secrecy is threatened. The enactment of Rules 6(e)(3)(A)(i) and (ii), however, indicates a recognition of the fact that a certain level of disclosure is necessary for the Grand Jury to function properly. Each of the individuals responsible for supervising the disclosed materials has submitted an affidavit describing the actions taken in order to protect the integrity of that material. We are satisfied that these actions have sufficiently protected the interests involved, and therefore hold that these disclosures do not violate Rule 6(e) so as to warrant disclosure to the defendant.
The only grounds alleged by defendant as support for his motion are those discussed above. Because we find no merit to these allegations, we shall deny defendant's motion.
The Court shall enter an order appropriate to both of the motions considered herein.
[EDITOR'S NOTE: The following court-provided text does not appear at this cite in 616 F. Supp.]
This matter having come before the Court on the below enumerated motions of defendant, ROBERT SKALSKY; and
For the reasons stated in the Court's opinion filed this date;
It is on this 26th day of August, 1985 ORDERED that:
(1) defendant's motion to compel disclosure of certain exculpatory and other discoverable material be and hereby is DENIED as being moot;
(2) defendant's motion for a Bill of Particulars be and hereby is DENIED as being moot;
(3) defendant's motion to compel the government to maintain certain handwritten notes and summaries be and hereby is DENIED as being moot;
(4) defendant's motion to compel disclosure of Grand Jury materials be and hereby is DENIED; and
(5) this court shall reserve judgment on defendant's motion to dismiss the indictment pending an evidentiary hearing on the issue of defendant's alleged breach of his agreement with the government;
It is FURTHER ORDERED that said hearing shall be held at a time mutually agreeable to the parties and the Court.