U.S. v. DeFiore, s. 1206

Citation720 F.2d 757
Decision Date02 November 1983
Docket NumberD,1319 and 1332,Nos. 1206,s. 1206
Parties14 Fed. R. Evid. Serv. 741 UNITED STATES of America, Appellee, v. Paul DeFIORE, Joseph Coppola and Robert Galler, Defendants-Appellants. ockets 82-1447, 83-1014 and 83-1025.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Edgar Paul Boyko, San Diego, Cal. (Miller, Boyko & Bell, San Diego, Cal., and Albert J. Brackley, Brooklyn, N.Y., on the brief), for defendant-appellant DeFiore.

Phylis Skloot Bamberger, Legal Aid Society, Public Defender Services Unit, New York City, for defendant-appellant Coppola.

Max Sayah, Asst. U.S. Atty., Brooklyn, N.Y. (Raymond J. Dearie, U.S. Atty., and Mary McGowan Davis, Asst. U.S. Atty., Brooklyn, N.Y., on the brief), for appellee.

Before NEWMAN and WINTER, Circuit Judges, and MALETZ, Senior Judge. *

MALETZ, Senior Judge:

Defendants-appellants Paul DeFiore, Joseph Coppola and Robert Galler were convicted under a ten count indictment which alleged a scheme to defraud the Department of Taxation and Finance, State of New York, and the Finance Department, City of New York, of substantial cigarette tax revenues. The scheme allegedly involved secretly transporting cigarettes from North Carolina to New York on which no New York cigarette taxes had been paid, and thereafter selling them in New York. Ten telephone calls, corresponding to the ten counts charged in the indictment, allegedly brought the scheme within the federal wire fraud statute, 18 U.S.C. Sec. 1343 (1976). 1 Defendants DeFiore and Galler were convicted on all ten counts, defendant Coppola on all but counts five and eight.

Defendant DeFiore advances essentially five arguments in support of his appeal. He first argues that the wire fraud statute was not intended for the prosecution of schemes designated to violate state tax laws. Assuming the applicability of the wire fraud statute here, DeFiore's second contention is that the evidence offered at trial to prove either a scheme to defraud or use of the wires was insufficient.

The balance of DeFiore's arguments are all addressed to an assortment of alleged trial defects which, he contends, require reversal: (1) a purportedly erroneous supplemental charge by the trial court in response to a jury question, (2) the admission into evidence of prior similar acts by DeFiore predating the commencement of the statute of limitations, and (3) prosecutorial misconduct in the form of leading questions to government witnesses and prejudicial summation.

Defendant Coppola raises two arguments on his appeal. First, he submits, the government failed to adduce sufficient evidence of his knowing participation in the fraudulent scheme. Coppola further contends that voir dire of prospective jurors by the United States magistrate, even though conducted pursuant to local court rule, was violative of the Magistrates Act, 28 U.S.C. Sec. 636, and Article III of the Constitution.

Defendant Galler has filed no briefs, but by letter of counsel has adopted the points raised by his co-defendants.

For the reasons that follow, we reverse the convictions of defendants DeFiore and Galler on counts five and eight of the indictment. In all other respects, the judgments of conviction are affirmed.

I Background

The scheme to defraud was fairly simple in nature. As testified to by John Cox, the president of Piedmont Wholesale Company (Piedmont), a North Carolina wholesale distributor of cigarettes, Piedmont was authorized to affix only North Carolina tax stamps on cigarettes. Nevertheless, in 1974 Cox and DeFiore struck a deal whereby DeFiore and Galler would place telephone orders with Cox for cigarettes to be transported to New York but which were untaxed under New York law. At that time the North Carolina tax on cigarettes was two cents per pack compared to the New York tax of 23 cents per pack. The cost to defendants was slightly higher than the price of cigarettes generally charged by Piedmont, but less than the price of cigarettes in New York. In this way the parties to the scheme would be able to realize a mutual profit.

Initially, DeFiore carried cash--in the range of $20,000--to North Carolina from New York to pay for the cigarettes. Shortly thereafter, at DeFiore's suggestion, Cox opened a bank account at First National City Bank in Brooklyn in the name of Piedmont in order to eliminate the inconvenience of transporting large sums of cash to North Carolina. Two employees of that bank testified that DeFiore made weekly cash deposits to the Piedmont account. Using the bank's customer service number, Cox would verify that a deposit had in fact been made to that account. Telephone toll records of Piedmont reflecting the dates of long-distance calls to the bank coincided with the dates of DeFiore's large cash deposits.

Both DeFiore and Galler ordered cigarettes from Cox. After confirming DeFiore's deposit to Piedmont's account Cox would release the cigarettes. Some packs of cigarettes which Cox sold bore North Carolina stamps, but others bore no stamps whatsoever. Cox testified that as for this latter group, the tax stamps were destroyed, although the North Carolina taxing authorities had been paid the two-cent-per-pack tax. The orders were packed at the Piedmont warehouse in High Point, North Carolina, ten packs of cigarettes to a carton, thirty cartons to a case. Each case was constructed of plain brown cardboard sealed with brown tape, marked only by numbers. There were no distinguishing marks on the cases to indicate to the casual observer that they contained cigarettes. Once packed, the cases of cigarettes were moved from High Point to a barn owned by a Piedmont employee, Howard Sechrest, for subsequent loading and shipment. These loading and shipment operations were not in the normal course of Piedmont's business.

As part of the arrangement between Cox and DeFiore, Cox purchased two vans and a truck. The latter vehicle was ostensibly designed to carry four-inch diameter pipe, but had been specially designed to secretly transport cases of cigarettes. The truck, bearing the marking "Tri-State Plumbing" on the cab door, had a removable side panel which concealed an interior compartment. This truck had been registered to several different persons, including Galler, and was last registered in New Jersey under the name of Tri-State Plumbing Company. The vehicle's certificate of ownership was signed by Joseph Coppola on behalf of Tri-State. A certificate of doing business issued by the State of New Jersey to Tri-State Plumbing Supply Company was also signed by Coppola in the capacity of owner. As it turned out, Tri-State's New Jersey business address on the latter certificate was fictitious.

Once loaded at Sechrest's barn the trucks would be driven to New York. Testimony was adduced that the trucks were unloaded at a warehouse in Brooklyn, and that Galler assisted in the unloading. An agent of the Bureau of Alcohol, Tobacco and Firearms testified that on April 4, 1978 he observed the pipe truck leave the Brooklyn warehouse and cross the Verrazzano Narrows Bridge. On April 6 he observed Coppola driving the truck into the warehouse.

Other evidence of Coppola's involvement shows that on one occasion a Piedmont employee, Wayne Sexton, drove the pipe truck loaded with cigarettes to a truck stop in Warrington, Virginia, where he switched vehicles with Coppola. Sechrest testified that defendant Coppola was present when the pipe truck was loaded at his barn. Coppola was further identified by Sechrest as one of the drivers who picked up cigarettes. The government produced receipts signed by Coppola evidencing that he had stayed at a motel in North Carolina on six occasions in 1978.

Finally, a government witness testified that during 1978 he regularly purchased cartons of cigarettes without New York tax stamps from Galler.

With this background we first consider DeFiore's contention that the federal wire fraud statute may not be utilized to prosecute schemes to defraud a state of taxes due it.

II The Applicability of the Wire Fraud Statute

DeFiore's argument that section 1343 was not intended to cover the fact situation alleged in the indictment is twofold in nature. First, he submits, the wire fraud statute should not apply to schemes to defraud federal or state governments of taxes due them. As a corollary DeFiore adds that the indictment here is a thinly veiled effort to prosecute as a federal offense acts which clearly are a violation of state law.

We find no room for agreement with DeFiore. Indeed, four circuits before us have squarely applied the federal fraud statutes to state tax law violations. See United States v. Melvin, 544 F.2d 767 (5th Cir.1977) (mail fraud in connection with interstate sale of cigarettes); United States v. Brewer, 528 F.2d 492 (4th Cir.1975) (same); United States v. Mirabile, 503 F.2d 1065 (8th Cir.1974) (mail fraud in connection with false state tax return), cert. denied, 420 U.S. 973, 95 S.Ct. 1395, 43 L.Ed.2d 653 (1975); and United States v. Flaxman, 495 F.2d 344, 349 (7th Cir.) ("Just because the State ... was the victim and makes such a scheme illegal does not preclude the Federal Government from prosecuting the perpetrators under ... federal law"), cert. denied, 419 U.S. 1031, 95 S.Ct. 512, 42 L.Ed.2d 306 (1974). Moreover, United States v. Henderson, 386 F.Supp. 1048 (S.D.N.Y.1974), upon which defendant places great reliance, involved the use of section 1343 in connection with a federal income tax fraud prosecution. Cf. United States v. Miller, 545 F.2d 1204, 1216 n. 17 (9th Cir.1976) (Henderson rejected in the context of federal tax violations), cert. denied, 430 U.S. 930, 97 S.Ct. 1549, 51 L.Ed.2d 774 (1977).

Section 1343 on its face is not limited in the manner suggested by DeFiore, nor does it purport to exempt the conduct in which he engaged. It plainly applies to "any scheme or artifice to defraud" in which the jurisdictional means--the wires--are employed....

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