U.S. v. Sertich, 95-1471

• Decision Date: 30 September 1996
• Docket Number: No. 95-1471,95-1471
• Citation: 95 F.3d 520
• Parties: -6314 UNITED STATES of America, Plaintiff-Appellee, v. Mark G. SERTICH, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 520

95 F.3d 520

78 A.F.T.R.2d 96-6314

UNITED STATES of America, Plaintiff-Appellee, v. Mark G. SERTICH, Defendant-Appellant.

No. 95-1471.

United States Court of Appeals, Seventh Circuit.

Argued March 29, 1996.

Decided Sept. 4, 1996.

Rehearing and Suggestion for Rehearing

En Banc Denied Sept. 30, 1996.

Diane L. Berkowitz (argued), Office of United States Attorney, Dyer, IN, for Plaintiff-Appellee.

Edith S. Thomas (argued), Brighton, MI, Clyde B. Pritchard, Farmington Hills, MI, for Defendant-Appellant.

Before CUMMINGS, MANION, and EVANS, Circuit Judges.

MANION, Circuit Judge.

On December 23, 1991, Mark Sertich pleaded guilty to conspiracy to evade federal excise tax pursuant to a plea agreement in the Central District of California. He was sentenced to 12 months in prison, a fine, and probation. On November 10, 1993, a week before the relevant statute of limitations expired, Sertich was indicted in the Northern District of Indiana for conspiring to evade federal excise taxes in a conspiracy that predated the California conspiracy. Sertich moved to dismiss the indictment on the grounds it violated his fifth amendment right against double jeopardy, arguing that both charges stemmed from the same conspiracy to which he had already pleaded guilty and been sentenced. The district court found that the two conspiracies were separate, involved different schemes, separate people, separate time periods, and separate locations and denied Sertich's motion. We affirm.

I.

The following facts are undisputed. Mark Sertich entered a plea agreement with the United States Attorney's Office for the Central District of California. He pleaded guilty to an indictment charging him with a single count of violating 18 U.S.C. § 371 (conspiracy to commit excise tax evasion). In doing so, Sertich admitted to participating in a "daisy chain" scheme to evade payment of federal excise taxes on diesel fuel. The indictment detailed such a scheme: one diesel fuel wholesale distributer (Company A) uses a legitimate IRS Form 637 registration for tax-free transactions to purchase fuel "tax free" from a legitimate refinery or another distributer holding an IRS Form 637. Company A then "sells" the fuel tax free to another company holding a fraudulently obtained Form 637 (Company B). Typically, Company B never takes physical possession of the fuel which, rather, is sold "tax paid" or "tax included" to legitimate diesel fuel retailers. Company B is a shell company which pockets rather than pays the excise taxes. When the IRS closes in on Company B, those involved simply disappear because Company B exists only on paper. Company B is typically referred to as a "burn" or "bust out" company.

The indictment charged that "[b]eginning on a date unknown to the Grand Jury and continuing to on or about October 11, 1991, within the Central District of California and elsewhere," Sertich along with Abram Egyazarov, Eugene Slusker, and Samuel Lehtzer, and others known (one of whom was later identified as Richard Allen) and unknown, conspired to defraud the United States by evading "federal diesel fuel excise taxes." The indictment charged that the daisy chain scheme used a petroleum wholesaler, Boland Petroleum, Inc., to purchase diesel fuel tax free (in the role of Company A above) and sell that fuel to a shell company set up by the conspirators. Sertich admitted to concealing the scheme by creating and maintaining false records. The indictment charged overt acts, all occurring in California between July 15, 1991, and October 11, 1991.

The agreement under which Sertich pleaded guilty contained sentencing stipulations and an agreement that "this office" would not prosecute Sertich for "other offenses connected with the activities charged in the indictment, specifically, with respect to activities involving Richard Allen from approximately August 24, 1990 through October 11, 1991 within the jurisdiction of the Central District of California." The district court for the Central District of California accepted Sertich's plea of guilty and sentenced him to 12 months imprisonment, fined him six thousand dollars, and placed him on three years probation.

On November 10, 1993, one week before the statute of limitations would have run, a federal grand jury sitting in the Northern District of Indiana indicted Sertich on a charge of violating 18 U.S.C. § 371. The Indiana indictment charges that beginning "in or about October, 1986, through on or about November 17, 1987, in the Northern District of Indiana and elsewhere," Sertich conspired to defraud the United States by evading the collection of "federal motor fuel excise taxes." The indictment further charged that in April of 1987, Sertich met with a co-conspirator (later identified as Richard Allen) regarding a delinquent debt owed by Allen to Sertich. At the time, Allen owned and operated a company called Poly-Fuels, Inc. and Sertich owned and operated White Fuels, Inc. The two formed a plan to profit from exchanging diesel fuel for gasoline and illegally manipulating the federal and state motor fuel tax on each. Poly-Fuels subsequently "delivered tanker loads of diesel fuel to White Fuels in Detroit, Michigan, and returned to Chicago, Illinois, and Northwest Indiana with tanker loads of gasoline from White Fuels." According to the indictment, from April through November, 1987, White Fuels invoiced Poly-Fuels for 3,356,404 gallons of gasoline with federal excise tax excluded, but delivered only 2,485,148 gallons. From July through October, 1987, White Fuels purchased 884,693 gallons of diesel fuel from Poly-Fuels and included 15.1 cents per gallon excise tax in the price. Sertich never paid the federal excise taxes; they were included on the invoice so that White Fuels could take a credit on its federal excise tax returns for the payments. While perhaps confusing, the indictment charges, and the government presumably is convinced it can prove, that the scheme netted Sertich and his co-conspirators approximately $346,000 in evaded motor fuel excise taxes from April to November 17, 1987.

The government has yet to prove any of these Indiana charges. Sertich challenged the second indictment through a motion to dismiss for violation of double jeopardy in the Northern District of Indiana and a motion to enforce the nonprosecution paragraph of the plea agreement in the Central District of California. Each district court denied Sertich's motion. He appealed both. The United States Court of Appeals for the Ninth Circuit affirmed the Central District's denial of his California motion. United States v. Sertich, 69 F.3d 545 (table), 1995 WL 623745 (9th Cir.1995). We review the Northern District's denial of his Indiana motion. This is a legal question which we review de novo. United States v. Furlett, 974 F.2d 839, 842 (7th Cir.1992).

II.

When a district court denies a defendant's pretrial motion challenging an indictment on double jeopardy grounds, the denial is immediately appealable as a "final order." Abney v. United States, 431 U.S. 651, 662, 97 S.Ct. 2034, 2041-42, 52 L.Ed.2d 651 (1977). Sertich has advanced two arguments supporting his double jeopardy claim. First he argues, broadly, that he was involved with Allen (the unnamed conspirator common to both indictments) in one extended conspiracy to evade federal fuel excise taxes and that after pleading guilty to that conspiracy in California, the United States may not divide the one conspiracy into two and prosecute him again in Indiana. Second, he argues the sentence he received for his California guilty verdict was longer than the sentences received by the other California conspirators because his sentence was based on tax losses that included the losses from the Indiana conspiracy as well as the California conspiracy.

A.

Sertich's primary argument is that the federal prosecutors in Indiana and California carefully divided a single conspiracy into two. To support this position, Sertich argues that he and Allen were primary players in both schemes. Irrespective of the methods employed, the conspiracy's objective was to make money through fuel excise tax fraud and its purpose was to pay off a pre-existing business debt Allen owed to Sertich. Sertich argues that rather than two discrete criminal enterprises, the Indiana conspiracy continued straight through and into the California conspiracy. Even when he and Allen were not actually running a fuel excise tax evasion scheme (in Indiana) they were plotting their next (in California) through a series of meetings that covered what might otherwise appear to be the two-year hiatus between November 1987 when the Indiana operation shut down and late 1990 when he joined Allen's new California company. Sertich argues further that each indictment charged the same statutory offense, conspiracy to evade federal fuel excise taxes. Both indictments charge conspiracies involving other persons, places, and dates "unknown," acknowledging that each was more extensive than specified by the overt acts. Finally, Sertich argues the federal investigation carefully crafted the evidence before the grand juries, and carefully worded the indictments and plea agreement so as to improperly suggest the existence of two conspiracies.

The prosecution of a single conspiracy as two separate conspiracies violates a defendant's right not to twice be tried for the same offense. Braverman v. United States, 317 U.S. 49, 52-54, 63 S.Ct. 99, 101-02, 87 L.Ed. 23 (1942); United States v. Dortch, 5 F.3d 1056, 1061 (7th Cir.1993), cert. denied, 510 U.S. 1121, 114 S.Ct. 1077, 127 L.Ed.2d 394 (1994). A defendant claiming that a second prosecution subjects him to double jeopardy "bears the burden of establishing that both prosecutions are for the same offense." United States v. Chiattello, 804 F.2d 415, 418 (1986). The defendant must set out a prima facie case that the second indictment charges the same offense for which he has already been convicted....