USA v. Stadtmauer

Decision Date09 September 2010
Docket NumberNo. 09-1575.,09-1575.
Citation620 F.3d 238
PartiesUNITED STATES of America v. Richard STADTMAUER, Appellant.
CourtU.S. Court of Appeals — Third Circuit

620 F.3d 238

UNITED STATES of America
v.
Richard STADTMAUER, Appellant.

No. 09-1575.

United States Court of Appeals,Third Circuit.

Argued Nov. 17, 2009.
Opinion Filed Sept. 9, 2010.


620 F.3d 239
620 F.3d 240

David Debold, Esquire, Miquel A. Estrada, Esquire, (Argued), Scott P. Martin, Esquire, Gibson, Dunn & Crutcher LLP, David M. Zinn, Esquire, Williams & Connolly LLP, Washington, D.C., Robert S. Fink, Esquire, Kostelanetz & Fink, LLP, New York, NY, Counsel for Appellant.

620 F.3d 241

Ralph J. Marra, Jr., Acting United States Attorney, George S. Leone, Chief, Appeals Division, Steven G. Sanders (Argued), Assistant U.S. Attorney, Office of the United States Attorney, Newark, NJ, Counsel for Appellee.

Before: AMBRO, ALDISERT, and ROTH, Circuit Judges.

OPINION OF THE COURT
AMBRO, Circuit Judge.


+-----------------+ ¦Table of Contents¦ +-----------------¦ +-----------------+

+------------------+ ¦I.¦Background ¦242¦ +------------------+

+----------------------------------------------------+ ¦¦A.¦Richard Stadtmauer and the Kushner Companies¦242¦ ++--+--------------------------------------------+---¦ ¦¦B.¦The Other Players ¦242¦ ++--+--------------------------------------------+---¦ ¦¦C.¦The Alleged Conspiracy ¦243¦ +----------------------------------------------------+

+-----------------------------+ ¦¦¦1.¦The General Ledgers ¦244¦ +-----------------------------+

+-------------------------------------------+ ¦¦¦¦i. ¦Charitable Contributions ¦244¦ ++++----+-------------------------------+---¦ ¦¦¦¦ii. ¦“Non-Property” Expenses ¦244¦ ++++----+-------------------------------+---¦ ¦¦¦¦iii.¦Capital Expenditures ¦245¦ ++++----+-------------------------------+---¦ ¦¦¦¦iv. ¦Gift and Entertainment Expenses¦245¦ +-------------------------------------------+

+------------------------------------------------------------+ ¦¦¦2.¦KC's Internal Financial Statements ¦245¦ +++--+---------------------------------------------------+---¦ ¦¦¦3.¦SSMB's Preparation of the Partnerships' Tax Returns¦246¦ +------------------------------------------------------------+

+------------------------------------------+ ¦¦D.¦Evidence of Stadtmauer's Knowledge¦247¦ +------------------------------------------+

+-----------------------------------------------------------------------------+ ¦¦¦1.¦“Thursday Meetings” ¦247¦ +++--+--------------------------------------------------------------------+---¦ ¦¦¦2.¦“Richard Specials” and Other Special Financial Statements ¦248¦ +++--+--------------------------------------------------------------------+---¦ ¦¦¦3.¦Other Circumstantial Evidence of Stadtmauer's Knowledge of Tax Law ¦249¦ ¦¦¦ ¦and Consciousness of Guilt ¦ ¦ +-----------------------------------------------------------------------------+

+---------------------------------------------------------+ ¦¦¦¦i. ¦Rationale for Private School Tuition Payments¦249¦ ++++----+---------------------------------------------+---¦ ¦¦¦¦ii. ¦The 1996 IRS Audit ¦250¦ ++++----+---------------------------------------------+---¦ ¦¦¦¦iii.¦Dissenting Limited Partners and Executives ¦250¦ +---------------------------------------------------------+

+---------------------------------------------------------+ ¦¦E.¦The Verdict and Stadtmauer's Post-Verdict Motions¦251¦ +---------------------------------------------------------+

+----------------------+ +----+-------------+---¦ ¦II. ¦Jurisdiction ¦252¦ +----+-------------+---¦ +----+-------------+---¦ ¦III.¦Discussion ¦252¦ +----------------------+

+--------------------------+ ¦¦A.¦Willful Blindness ¦252¦ +--------------------------+

+-----------------------------------------------------------------------------+ ¦¦¦1.¦Whether the District Court's Willful Blindness Instruction Applied ¦252¦ ¦¦¦ ¦to Stadtmauer's Knowledge of the Law ¦ ¦ +++--+--------------------------------------------------------------------+---¦ ¦¦¦2.¦Willful Blindness and Cheek ¦254¦ +++--+--------------------------------------------------------------------+---¦ ¦¦¦3.¦Whether the District Court's Willful Blindness Instruction Applied ¦258¦ ¦¦¦ ¦to the Element of Specific Intent ¦ ¦ +++--+--------------------------------------------------------------------+---¦ ¦¦¦4.¦Whether Trial Evidence Warranted the Willful Blindness Instruction ¦259¦ +-----------------------------------------------------------------------------+

+------------------------------+ ¦¦B.¦Lay Opinion Testimony ¦260¦ +------------------------------+

+--------------------+ ¦¦¦1.¦Background ¦260¦ +++--+-----------+---¦ ¦¦¦2.¦Analysis ¦262¦ +--------------------+

+-----------------------------------------+ ¦¦C.¦Prosecutorial Misconduct ¦267¦ ++--+---------------------------------+---¦ ¦¦D.¦Expert Testimony ¦269¦ ++--+---------------------------------+---¦ ¦¦E.¦Restrictions on Cross-Examination¦271¦ +-----------------------------------------+

Following a two-month jury trial in the District Court for the District of New Jersey, Richard Stadtmauer was convicted of one count of conspiracy to defraud the United States (in violation of 18 U.S.C. § 371), and nine counts of willfully aiding in the filing of materially false or fraudulent tax returns (in violation of 26 U.S.C. § 7206(2)). On appeal, Stadtmauer raises many challenges to these convictions. We deal principally with the issue Stadtmauer raises last: whether the District Court erred in giving a willful blindness instruction in this case, including whether the Supreme Court's decision in

620 F.3d 242

Cheek v. United States, 498 U.S. 192, 111 S.Ct. 604, 112 L.Ed.2d 617 (1991), forecloses the possibility that willful blindness may satisfy the legal knowledge component of the “willfulness” element of criminal tax offenses. We join our sister circuit courts in concluding that Cheek does not prohibit a willful blindness instruction that applies to a defendant's knowledge of relevant tax law. We reject also Stadtmauer's other claims of error, and thus affirm.

I. Background 1 A. Richard Stadtmauer and the Kushner Companies

This criminal case stemmed from an investigation of Charles Kushner, a prominent real estate entrepreneur, political fundraiser, and philanthropist in New Jersey. Kushner controls hundreds of limited partnerships, each of which owns and manages a single commercial or residential property. Kushner is the general partner of each partnership and, for most, his siblings (including his brother, Murray Kushner 2 ) and their children are the other limited partners. These partnerships have collectively operated under the name “Kushner Companies” (“KC”). KC is not a registered entity and does not own any properties. 3

In the mid-1990s, Charles and Murray Kushner accused each other of taking more than his fair share out of their common businesses. During the course of the ensuing civil litigation, Murray alerted federal authorities to potential misconduct by his brother and KC. Following an investigation, Kushner pled guilty in 2004 to, among other things, assisting in the filing of false partnership tax returns and federal campaign contribution offenses.

During the course of its investigation of Kushner, the Government indicted several other individuals, including Stadtmauer-a Certified Public Accountant, a law school graduate, and Kushner's brother-in-law. He became an employee of KC in 1985, and eventually rose to become an executive vice president. In this role, Stadtmauer oversaw the operations of KC's residential and commercial properties. Stadtmauer also held a small stake (between 1% and 7%) in many of KC's partnerships. Stadtmauer and Kushner held equal interests (50% each) in Westminster Management, an entity which collected management fees from the other partnerships.

B. The Other Players

Several former KC executives testified against Stadtmauer at trial, including: (1) Chief Financial Officer (“CFO”) Stanley Bentzlin; (2) Chief Operations Officer (“COO”) Scott Zecher; and (3) Alan Lefkowitz, who succeeded Bentzlin as CFO in 2000. Of these three, only Zecher was indicted. 4

KC employed the accounting firm of Schonbraun, Safris, McCann, Bekritsky & Company, LLC (“SSMB”) as its main “outside” accountant. The lead SSMB accountant for KC matters was Marci Plotkin, who served as KC's CFO in the early 1990s before returning to SSMB. 5 Though

620 F.3d 243

Plotkin was technically an employee of SSMB, KC reimbursed SSMB for yearly bonuses it paid to Plotkin 6 and certain of Plotkin's salary increases, and reimbursed Plotkin for the cost of her son's private school tuition. Kushner did not heed Bentzlin's warning that paying Plotkin a bonus would impair her independence and preclude SSMB from issuing financial statements on behalf of KC partnerships.

Marci Plotkin was assisted by (among others) SSMB partner Stanley Bekritsky and Anne Amici, a staff accountant who worked almost exclusively on KC matters. Plotkin, Bekritsky, and Amici were indicted along with Stadtmauer and each pled guilty to conspiring to defraud the United States. Of these three, only Bekritsky testified at Stadtmauer's trial.

C. The Alleged Conspiracy

The Government charged that Stadtmauer, Bekritsky, Plotkin, and Amici conspired to file false or fraudulent tax returns for the 1998-2001 tax years for Westminster Management and eleven other KC limited partnerships: “Oakwood Garden Developers,” “Elmwood Village Associates,” “Pheasant Hollow,” “QEM,” “Mt. Arlington,” and six partnerships with variations of the name “Quail Ridge.” The Government alleged that these partnerships fraudulently claimed four categories of expenditures as fully deductible business expenses 7 on their tax returns 8 : (1) charitable contributions, which generally are not deductible as business expenses; (2) expenditures incurred by one partnership but paid by a different partnership (known as “non-property” expenses); (3) capital expenditures, which generally must be amortized and depreciated over the life of the relevant asset (and thus are not immediately deductible in full); and...

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