843 F.2d 989 (7th Cir. 1988), 87-1822, United States v. Eckhardt

Docket Nº:87-1822.
Citation:843 F.2d 989
Party Name:UNITED STATES of America, Plaintiff-Appellee, v. Ralph A. ECKHARDT, Defendant-Appellant.
Case Date:March 29, 1988
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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843 F.2d 989 (7th Cir. 1988)

UNITED STATES of America, Plaintiff-Appellee,

v.

Ralph A. ECKHARDT, Defendant-Appellant.

No. 87-1822.

United States Court of Appeals, Seventh Circuit

March 29, 1988

Argued Dec. 4, 1987.

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[Copyrighted Material Omitted]

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Howard E. Gilbert, and Michael D. Richman, Chicago, Ill., for defendant-appellant.

Bobbie McGee Gregg, Asst. U.S. Atty., Anton R. Valukas, U.S. Atty., Chicago, Ill., for plaintiff-appellee.

Before COFFEY and KANNE, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

ESCHBACH, Senior Circuit Judge.

On July 2, 1986, defendant-appellant Ralph A. Eckhardt, a promoter of tax shelters, was charged under a ten-count indictment with wire fraud, 18 U.S.C. Sec. 1343, mail fraud, 18 U.S.C. Sec. 1341, perjury, 18 U.S.C. Sec. 1621, and submitting false statements to the government, 18 U.S.C. Sec. 1001. Eckhardt initially pled not guilty and sought to dismiss the indictment on the grounds that (1) the indictment was time-barred, (2) the delay in bringing the criminal charges against him violated his due process rights under the fifth amendment, and (3) he had been granted "equitable immunity" from prosecution. The district court rejected all three arguments and denied his motion to dismiss.

On March 2, 1987, Eckhardt pled guilty to four counts of the indictment 1 pursuant to a written conditional plea agreement. Under the plea agreement, Eckhardt reserved the right to appeal from the trial court's order denying his earlier motion to dismiss the indictment. He now appeals from that order of the district court, raising the same three arguments on appeal. Eckhardt also raises the argument for the first time on appeal 2 that the indictment does not state a cognizable charge of wire-fraud under the standard announced by the Supreme Court in McNally v. United States, --- U.S. ----, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987). We affirm the judgment of the district court and find further that Count I of the indictment does sufficiently allege the offense of wire fraud under McNally.

I. Background

Many tax shelter schemes perpetrate a fraud on the government by inducing taxpayer-investors

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to claim tax deductions to which they are not legitimately entitled. The tax shelters promoted by Ralph Eckhardt, however, perpetrated an additional fraud on the taxpayer-investors themselves. Eckhardt represented to taxpayer-investors that they could obtain favorable tax treatment by investing in breeding cattle herds which he would purchase and manage on their behalf. The taxpayer-investor was required to make only a small, or in some cases no, down payment. According to Eckhardt, the balance of the investment would be financed by loans taken out in the names of the investors and secured by the herds of cattle. The taxpayer-investor was also required during the first two years to pay Eckhardt an annual maintenance fee for managing the herd. Taxpayer-investors were told that they could deduct the business expenses and depreciation associated with the cattle-breeding operation on their tax returns.

Eckhardt did, in fact, take out loans in the names of the investors, but the proceeds of these loans were not used to purchase cattle; they were used to purchase certificates of deposit in Eckhardt's name. The loans, in turn, were secured by the certificates of deposit, not by cattle. Eckhardt perpetuated his fraud by sending investors false annual "Income and Expense Statements" purporting to represent the financial status of the taxpayers' investment in the herds of cattle. The taxpayer-investors thereafter filed a series of false federal income tax returns on the basis of the information provided by Eckhardt in these statements.

Eckhardt's fraud was discovered in the course of an Internal Revenue Service ("IRS") investigation of two of the taxpayer-investors, Dr. Morton Rosen and Dr. Robert Wheeler. In December 1979, the IRS disallowed farm losses and investment credits claimed by Drs. Rosen and Wheeler on their 1975, 1976, and 1977 income tax returns. Drs. Rosen and Wheeler then petitioned the United States Tax Court challenging the IRS disallowance.

On August 2, 1982, Eckhardt was subpoenaed in the Rosen and Wheeler Tax Court proceedings to produce documents and appear for a deposition regarding the tax shelter investment program. Prior to the taking of his deposition, Eckhardt agreed to meet with Rosen and Wheeler's attorney, Alan Segal, and with IRS staff attorneys Stephen Morrow and David Baier on August 24, 1982 in State Center, Iowa to show them the cattle Eckhardt had allegedly purchased for Drs. Rosen and Wheeler.

Eckhardt then sought to purchase cattle for delivery in time for his meeting with the attorneys. He arranged for one herd of cattle to be delivered on or about August 11, 1982. On or about August 20, 1982, Eckhardt placed a collect telephone call from State Center, Iowa to Attorney Segal in Chicago and rescheduled their cattle-viewing visit for August 31, 1982, so that he would have an opportunity to purchase a second herd of cattle prior to their meeting. About the same time, he mailed a letter to Drs. Rosen and Wheeler informing them that the meeting had been postponed. He then ordered a second herd of cattle which was delivered on August 27, 1982. At the cattle viewing on August 31, Eckhardt told Attorneys Morrow and Segal that the cattle on the farm were the herds of cattle he had purchased for Drs. Rosen and Wheeler in 1974, 1975, and 1976.

Eckhardt was deposed on September 21, 1982. During that deposition, Eckhardt made the following false statements: (1) that the cattle shown to the attorneys on August 31, 1982 were the property of Drs. Wheeler and Rosen and that the cattle had been moved from two separate pastures which Eckhardt was renting, (2) that the records he provided to Drs. Wheeler and Rosen represented accurate inventories of their respective herds of cattle, (3) that monies borrowed in Dr. Rosen's name from Decatur County State Bank in 1975 and 1976 were applied as a down payment on herds allegedly purchased for Dr. Rosen in 1974 and 1976, (4) that a representative of the Decatur County State Bank had been sent to count the number of cattle because the loan was partially secured by the herd, and (5) that the proceeds of Dr. Rosen's loan were paid to American Land and Cattle

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Industries, one of the companies Eckhardt allegedly used to purchase cattle. In fact, there were no herds of cattle purchased on behalf of Dr. Rosen and the proceeds of the Decatur County State Bank loan were used to purchase certificates of deposit in Eckhardt's name.

On September 27, 1982, Eckhardt submitted false documents to the IRS, entitled "Wheeler Tally Sheets" and "Rosen Tally Sheets," which purported to be accountings for cattle purchases and sales made on behalf of Drs. Wheeler and Rosen.

On November 19, 1982, Eckhardt testified before the Tax Court in the Wheeler and Rosen proceedings. Eckhardt falsely testified before the court that the loan from Decatur County State Bank was used to purchase...

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