856 F.2d 187 (4th Cir. 1988), 87-5078, U.S. v. Cox
|Docket Nº:||87-5078, 87-5081.|
|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, Court of Appeals for the Fourth Circuit|
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 (See FI CTA4 Rule 36 regarding use of unpublished opinions)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.
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.
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.
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...
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