941 F.2d 71 (2nd Cir. 1991), 42, United States v. Helmsley

Docket Nº:42, Docket 90-1012.
Citation:941 F.2d 71
Party Name:UNITED STATES of America, Appellee, v. Leona M. HELMSLEY, Joseph V. Licari and Frank J. Turco, Defendants, Leona M. Helmsley, Defendant-Appellant.
Case Date:July 30, 1991
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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941 F.2d 71 (2nd Cir. 1991)

UNITED STATES of America, Appellee,

v.

Leona M. HELMSLEY, Joseph V. Licari and Frank J. Turco, Defendants,

Leona M. Helmsley, Defendant-Appellant.

No. 42, Docket 90-1012.

United States Court of Appeals, Second Circuit

July 30, 1991

Argued Oct. 16, 1990.

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Alan M. Dershowitz, Cambridge, Mass. (Nathan Z. Dershowitz, Victoria B. Eiger, Dershowitz & Eiger, New York City, Susan Estrich, Sandor Frankel, James J. Daw, Bender & Frankel, Harvey A. Silverglate, Andrew Good, David J. Fine, Silverglate, Gertner, Fine & Good, Boston, Mass., Eric Lieberman, Terry Gross, Elizabeth St. Clair, Rabinowitz, Boudin, Standard, Krensky & Lieberman, Jane Simkin Smith, Daniel R. Williams, Kathleen Sullivan, Cambridge, Mass., Philip G. Cormier, Thomas C. Viles, Sharon Beckman, of counsel), for defendant-appellant.

Cathy Seibel, Asst. U.S. Atty., New York City (Roger S. Hayes, Acting U.S. Atty., S.D.N.Y., Kerri Martin Bartlett, Asst. U.S. Atty., James R. DeVita, Sp. Asst. U.S. Atty., New York City, of counsel), for appellee.

Before OAKES, Chief Judge, and PIERCE and WINTER, Circuit Judges.

WINTER, Circuit Judge:

A jury convicted Leona M. Helmsley of one count of conspiracy, three counts of tax evasion, three counts of filing false personal tax returns, sixteen counts of assisting in the filing of false corporate and partnership tax returns, and ten counts of mail fraud. The convictions concerned a scheme to charge personal expenditures to various business enterprises that she and

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her husband owned or controlled. She was sentenced to four years in prison to be followed by three years of probation, fined over $7 million and ordered to pay restitution of nearly $2 million.

The evidence demonstrating that Mrs. Helmsley, with her husband, charged personal expenditures to businesses through deceptive billings and tax returns was overwhelming, and no sufficiency claim is raised in that regard. Nevertheless, Mrs. Helmsley challenges her convictions and sentence on numerous other grounds. First, she argues that her convictions were obtained in violation of her right against self-incrimination because the prosecution resulted from immunized testimony she had previously given to a state grand jury. Next, she contends that, because evidence of overpayment of taxes offset the government's proof of a tax deficiency, her convictions for tax evasion must be reversed. Mrs. Helmsley also claims that several of her convictions were for crimes not alleged in the indictment, that the mail fraud convictions were invalid, and that prosecutorial misconduct deprived her of a fair trial. Finally, she contests the legality of various aspects of her sentence.

We affirm her convictions. However, her convictions on three counts of filing false personal tax returns and one count of aiding in the filing of a false partnership return must, as lesser-included offenses, be merged with her convictions for tax evasion. We therefore remand to the district court for resentencing on those counts.

BACKGROUND

Throughout the 1980's, Harry B. Helmsley and his wife, Leona M. Helmsley, presided over a network of real estate, hotel and insurance businesses. Based principally in New York City but with operations as far away as Florida and Ohio, these businesses were organized as a series of holding companies, subsidiary corporations, and partnerships directly or indirectly owned and controlled by Mr. and Mrs. Helmsley.

The centerpiece of the organization was a holding company called Helmsley Enterprises, Inc. ("HEI") of which Mr. Helmsley was President and sole shareholder. HEI operated a number of wholly owned subsidiary corporations. Helmsley-Spear, Inc. ("Helmsley-Spear") engaged in real estate and insurance brokerage businesses and acted as managing agent for various commercial office buildings and residential apartment properties in New York City and elsewhere. Many of these properties were owned or leased by other entities in the Helmsley organization. Helmsley Hotels, Inc. ("Helmsley Hotels"), of which Mrs. Helmsley was President, operated several hotels in New York City. Helmsley Hotels also held an interest, usually controlling, in a number of separate partnerships that in turn owned individual hotel, apartment and office properties. These included 230 Park Avenue Associates, 1 166 East 61st Street Associates, Windsor Park Apartments Associates, and Graybar Building Company. Harley Hotels, Inc. ("Harley Hotels"), of which Mrs. Helmsley was also President, was a wholly owned HEI subsidiary based in Cleveland, Ohio that operated hotels and motels outside New York City. DECO Purchasing and Distributing Co., Inc. ("DECO"), another HEI subsidiary, was headquartered in Florida and acted as a centralized purchasing agent for the entire network of Helmsley businesses. Finally, HEI owned seventy-eight percent of the common stock of Realesco Equities Corp. ("Realesco"), which in turn operated a number of wholly owned subsidiaries engaged in New York City hotel and real estate brokerage businesses. The balance of Realesco's stock was held by outside investors.

In addition, Mr. Helmsley held partnership interests in a number of other businesses. These included Middletowne Associates and Garden Bay Manor Associates. 2 Mrs. Helmsley held the balance of the partnership interest in Middletowne Associates,

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while a wholly owned subsidiary of HEI held the balance in Garden Bay Manor Associates.

In June 1983, Mr. and Mrs. Helmsley purchased a twenty-one room mansion known as "Dunnellen Hall" located on approximately twenty-six acres in Greenwich, Connecticut. Soon thereafter, the Helmsleys undertook a major renovation and decoration of Dunnellen Hall. The aspects of the project pertinent to this action included a $2 million addition that enclosed one of two swimming pools and featured a rooftop marble dance floor, four jade art pieces costing $500,000, and an indoor/outdoor stereo system worth over $100,000. The Helmsleys also did extensive gardening and landscaping work at Dunnellen Hall.

Beginning at the end of 1983 and continuing for two more years, the Helmsleys schemed to charge personal expenses associated with Dunnellen Hall and elsewhere to various Helmsley business entities. With the collaboration of Joseph V. Licari, Senior Vice President and Chief Financial Officer of HEI, and Frank J. Turco, Vice President and Chief of Financial Services for Helmsley Hotels, the Helmsleys arranged for hundreds of thousands of dollars of their personal expenses to be paid by companies they directly or indirectly owned and controlled and to be carried on the books of those companies as business expenditures. In this manner, Mr. and Mrs. Helmsley were able to reap two illegal tax benefits. First, by having the companies pay the expenses rather than distribute taxable income to the Helmsleys, the Helmsleys avoided personal income taxes. Second, because the various Helmsley companies involved treated the payment of these personal expenses as business expenditures, the companies enjoyed artificially inflated business expense deductions. The tax returns filed by the Helmsleys and by the various firms reflected the false billing.

At the Helmsleys' behest, Licari and Turco carried out the scheme through the preparation of phony invoices that characterized items for Dunnellen Hall as business-related goods and services. Turco kept careful records of the expense diversions and provided Mrs. Helmsley with monthly summaries of them.

Initially, DECO served as the major purchasing vehicle for the Helmsleys' personal expenses, including lamps, furniture, carpeting and fabric. After DECO's outside accountants discovered irregularities, however, DECO became a conduit, making the purchases itself, but then billing other Helmsley-controlled businesses for reimbursement. Many of the expenses resulting from the Dunnellen Hall addition, the jade art pieces, and the stereo system were thus charged to the other Helmsley businesses. The construction of the addition was financed in part through invoices describing the work as done at various Helmsley Hotel properties. Each of the four jade pieces was purportedly purchased for a different Helmsley hotel, using invoices characterizing the pieces as antique furniture. Part of the cost of the stereo system was charged to the Helmsley Building, 230 Park Avenue in New York City, using phony invoices describing the installation of an electronic security system at that site. In addition, Helmsley-Spear, Helmsley Hotels, Harley Hotels, and subsidiaries of Realesco all were charged with personal purchases.

Meanwhile, a series of events that would bring the Helmsleys' misdeeds to the attention of the government had begun. A New York Post reporter, Ransdell Pierson, had at one time pursued a tip about the misuse of corporate funds by the Helmsleys but had abandoned the quest after finding little hard evidence. However, an investigation into a sales tax avoidance scheme by two jewelers had caused Mrs. Helmsley to make two appearances before state grand juries during which she gave immunized testimony. Some time later, a New York Times article implicated Mrs. Helmsley in the state sales tax avoidance scheme. Pierson's interest was renewed by the Times story, and, tipped by a disgruntled former Helmsley employee named Jeremiah McCarthy, Pierson published an article in the Post on December 2, 1986, stating that the Helmsleys had used false invoices to pay personal expenses with corporate

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funds. This article triggered investigations by both the United States Attorney for the Southern District of New York and the...

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