856 F.2d 187 (4th Cir. 1988), 87-5078, U.S. v. Cox

• Citation: 856 F.2d 187
• Party Name: UNITED STATES of America, Plaintiff-Appellee, v. Emory E. COX, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Max B. WILLARD, Defendant-Appellant.
• Case Date: August 26, 1988
• Court: United States Courts of Appeals, U.S. Court of Appeals — Fourth Circuit

Page 187

856 F.2d 187 (4th Cir. 1988)

UNITED STATES of America, Plaintiff-Appellee,

v.

Emory E. COX, Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellee,

v.

Max B. WILLARD, Defendant-Appellant.

Nos. 87-5078, 87-5081.

United States Court of Appeals, Fourth Circuit

August 26, 1988

Editorial Note:

This opinion appears in the Federal reporter in a table titled "Table of Decisions Without Reported Opinions". (See FI CTA4 Rule 36 regarding use of unpublished opinions)

ARGUED: June 21, 1988.

W.D.Va.

AFFIRMED.

Appeal from the United States District Court for the Western District of Virginia, at Roanoke. James C. Turk, Chief District Judge. (CR-86-61-R)

Joseph L. Anthony (Gardiner, Moss & Rocovich, P.C., on brief), for appellant.

Alan Hechtkopf (Gary R. Allen, Robert E. Lindsay, Bruce Morton, Department of Justice; William S. Rose, Assistant Attorney General; John Perry Alderman, United States Attorney, on brief), for appellee.

Before JAMES DICKSON PHILLIPS and ERVIN, Circuit Judges, and BUTZNER, Senior Circuit Judge.

PER CURIAM:

Emory Cox and Max Willard challenge their convictions on nine and thirteen counts, respectively, of a multi-count indictment charging tax law violations. Count I charged Willard, Cox, and one Raymond Jackson with conspiracy to defraud the United States, in violation of 18 U.S.C. § 371. Counts II-IV charged all three defendants, counts V-VIII charged Cox and Willard, and counts IX-XIII charged Jackson and Willard, with aiding and assisting in the filing of false Forms 941, employment tax returns, in violation of 26 U.S.C. § 7206(2). ¹ In a joint jury trial all three defendants were found guilty on all counts, and Cox and Willard appealed, raising numerous assignments of error. We affirm.

I

Cox and Jackson were majority shareholders of Kennedy Coal Corporation (Kennedy), a Sub-Chapter S corporation which they formed in 1976. Cox continued with Kennedy after Jackson sold his shares in early 1981. During the relevant tax years, 1979-1982, Kennedy paid its workers through a bifurcated procedure. The miners were paid $60 per day as straight wages. This payment was made by check on a bi-weekly basis with the appropriate income and FICA (social security) taxes withheld from the check. These same miners also received a "bonus" payment of $3.00 for every cut of coal over ten cuts mined by their shift on a given day. This same bonus was also given to workers on non-production shifts in the amount earned by the production shift. The total bonus often exceeded $300 per month for a given bi-weekly period. However, if a miner missed any part of an eight hour day during the two-week period, that miner forfeited his or her entire bonus for that period. The evidence of record also reveals that both Cox and Jackson told the miners on numerous occasions that the bonuses were "tax free" or that the tax had been "taken care of."

Initially, the bonus payment was made by check, but on approximately October 26, 1979, Kennedy began making the payments in cash. The miners would pick up their cash bonus at the time they collected their regular paychecks. The cash was enclosed in an envelope with nothing but the miner's name written on the outside and sometimes a notation reflecting the amount enclosed written on the inside. Overtime payments were also included in the envelope. Neither social security nor income tax withholdings were ever made by Kennedy with regard to these bonus payments nor, apparently, were withholdings made with regard to the overtime payments. The W-2 forms given to the miners for the relevant period did not include the bonuses and overtime amounts, nor were these amounts reported on Kennedy's Forms 941, the employer's quarterly tax reports to the IRS. ² Forms 1099, which must be filed for amounts paid to independent contractors in excess of $600 in a calendar year, see 26 U.S.C. § 6041(a) (1982), were not filed until after the IRS began its investigation of Kennedy's tax practices. The miners themselves did not report the income on which withholdings had not been made and several were later assessed penalties in addition to the overdue income taxes on these amounts.

Testimony and evidence of record, which the jury was entitled to believe, reveals that Cox, Jackson, and Willard met together during October 1979 and that after this meeting the change to cash bonus payments was initiated and that they informed Barbara Harris of the change. Prior to the change, the bonus checks to the individual miners were signed by either Cox or Jackson and misclassified on Kennedy's books in categories such as mine supplies, or repair and maintenance. After October 1979, the system Kennedy used to disguise the bonuses became even more complex. Checks signed by either Cox or Jackson were drawn on the Grundy National Bank and made payable to the Cumberland Bank, where they were cashed. The cash was then used to make up the bonus payments and the checks were misclassified on the books again as being for supplies, repairs, or maintenance. As the bonus amounts increased, often exceeding $10,000 in a two week period, Cox or Jackson would cash two separate smaller checks in order to avoid IRS reporting requirement on checks cashed in excess of $10,000.

The procedure at RBJ Coal Company (RBJ) was much the same as that at Kennedy. In early 1981, when Jackson sold his shares in Kennedy, he acquired a 60% ownership interest in RBJ. At that time, Gary Blankenbeckler was retained as accountant for the newly activated corporation. Blankenbeckler had also been employed by Kennedy sometime prior to that company's retention of Willard's firm, Michael Graham Associates, in 1980. RBJ followed the same bifurcated wage/cash bonus procedure as had Kennedy with the accompanying nonwithholding, nonreporting, and misclassifications on the records. Blankenbeckler testified that he prepared RBJ's Forms 941 for the second and third quarters of 1981 without including the bonus amounts in the totals. He testified that he had repeatedly told Jackson that this procedure might eventually lead to trouble with the IRS because all the other companies for which he worked that paid cash bonuses did report such amounts on their Forms 941. In October 1981, Blankenbeckler was told to turn the RBJ books over to Willard. He did so and testified that at the time he warned Willard of his misgivings about the bonus procedure. Willard continued to follow the procedure, however, preparing Forms 941 for RBJ for the fourth quarter of 1981 and the first two quarters of 1982 without reporting the amounts paid out in cash bonuses.

The foregoing evidence having been adduced during the government's case, the defendants moved for acquittal on the conspiracy and aiding and assisting counts. The court denied this motion as to the conspiracy count against Cox and Jackson and took the motion under advisement as to all of the remaining counts. The defendants then rested without putting on evidence and the jury returned verdicts of guilty as to all three defendants on all counts of the indictment. Following denial of the defendants' post-verdict motions for acquittal or new trial, Cox and Willard took these appeals.

II

Appellants' initial contention is that the district court erred in reserving its ruling on their motion for acquittal on the conspiracy and aiding and assisting counts because the evidence at the close of the government's case was "not sufficient to present a jury question as to [their] guilt," United States v. Godel, 361 F.2d 21, 24 (4th Cir.1966). Where, as here, the only evidence is that embodied in the government's case, this challenge becomes a general challenge to the sufficiency of the evidence to sustain the convictions. Cf. id. (harmless error to reserve ruling on motion for acquittal where evidence at close of government's case is sufficient to sustain conviction). The acquittal motion having been denied as to Cox on the conspiracy count, Cox has separately challenged the sufficiency of the evidence to sustain his conviction on that count. Accordingly, we now assess the sufficiency of the evidence to sustain Cox and Willard's convictions on all counts as charged, considering only whether there is substantial evidence, viewed in the light most favorable to the prosecution, to support the verdict. Glasser v. United States, 315 U.S. 60 (1942); United States v. Samad, 754 F.2d 1091, 1096 (4th Cir.1984) (citing Glasser). Guided by this standard, we find sufficient evidence in the record from which a reasonable jury could find Cox and Willard...