U.S. v. Enstam
| Decision Date | 31 July 1980 |
| Docket Number | No. 79-5537,79-5537 |
| Citation | 622 F.2d 857 |
| Parties | 6 Fed. R. Evid. Serv. 521 UNITED STATES of America, Plaintiff-Appellee, v. Raymond A. ENSTAM and Ralph Oliver Holley, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Emmett Colvin, David L. Botsford, Dallas, Tex., for defendants-appellants.
John T. Bannon, Jr., Washington, D. C., for plaintiff-appellee.
Appeals from the United States District Court for the Northern District of Texas.
Before TUTTLE, RANDALL and TATE, Circuit Judges.
The two defendants in this case were indicted under 18 U.S.C. § 371 for knowingly conspiring "to defraud the United States by impeding . . . the lawful Governmental functions of the Internal Revenue Service . . . in the . . . computation . . . and collection of . . . income taxes." Both defendants were convicted, and each now appeals on various grounds, including, inter alia, sufficiency of the evidence and improper evidentiary rulings. Although we were initially seriously concerned about the sufficiency of the evidence, we are now convinced that none of the defendants' contentions merit reversal. Therefore, we affirm both convictions.
The two defendants, Raymond Enstam and Ralph Holley, were indicted, along with several others, as co-conspirators in a complicated money "laundering" scheme . Money illegally received from cocaine sales was first taken out of the United States to a corporation in the Grand Cayman Islands, part of the British West Indies. This corporation, Esmeraldas y Mariposas (E & M), then returned the illegal money in the form of fictitious loans to American corporations that had been created for the purpose of receiving these loans. As a result of this scheme, income otherwise taxable, albeit illegally obtained, was disguised as the proceeds of a non-taxable loan. The defendants argue that the object of the conspiracy was only to disguise the true source of the income and that there was no intent to impair the computation or collection of taxes. However, the record reveals that at least one of the objects of the conspiracy, if not the only object, was to impede the assessment of taxes. 1
Several persons were involved in this conspiracy. Harold Oldham, a cocaine dealer, created the scheme. He was indicted along with the defendants, but he fled the jurisdiction prior to trial. Raymond Enstam, one of the defendants, was Oldham's lawyer. Prior to the advent of the conspiracy, Oldham asked Enstam to incorporate Oldham's Moroccan investment group in Morocco, but Enstam eventually recommended incorporation in the Grand Cayman Islands. Once the conspiracy had begun, it was Enstam who created the American corporations that were to receive the fictitious loans from E & M. The other defendant, Ralph Holley, allegedly received several of these fictitious loans from E & M through Brittle Oaks, Inc., of which Holley was president. Another co-conspirator, Paul Hodgson, pled guilty prior to trial and testified for the government.
Much of the testimony at trial came from two undercover agents, Agents Clayton and House, who had infiltrated the conspiracy. These agents purchased some cocaine from Oldham, they created a corporation through Enstam, and they went with Enstam to the Grand Cayman Islands to bring $50,000 that the agents supposedly wanted "laundered." The agent's testimony, together with that of co-conspirator Hodgson, formed the main basis of the government's case against Enstam. With respect to Holley, the agents' testimony was important, but much of the evidence was documents that provided circumstantial evidence of Holley's participation in the conspiracy.
Having briefly outlined the persons involved and the details of the conspiracy, we turn to the issue that has most concerned us whether the evidence is sufficient to support these two convictions. The defendants attack the sufficiency of the evidence on two grounds: 1) that there was insufficient evidence to show the existence of the conspiracy alleged in the indictment (i.e., a conspiracy to defraud the United States by impairing the assessment and collection of income taxes); and 2) that even assuming the existence of such a conspiracy, there is insufficient evidence to prove that either one of them knowingly joined such conspiracy.
The evidence reveals no substantial issue as to whether income taxes were due on the monies (profits) sent to the Grand Cayman corporation and returned to the United States in the form of fictitious loans. The issue before us, therefore, is whether the evidence reasonably permitted the jury to find that the defendants knowingly conspired with others, in the terms of the indictment, for the purpose of "defraud(ing) the United States by impeding . . . the Internal Revenue Service . . . in the . . . computation . . . and collection of . . . income taxes."
The record is replete with evidence that there was a conspiracy to launder illegally obtained money. However, in brief and at oral argument, the defendants convincingly argued that the object of the conspiracy was to hide the source of the money but not to impede the collection or assessment of income taxes. At oral argument, government counsel was unable to point to any substantial evidence supporting the existence of the conspiracy alleged in the indictment. Our review of the testimony, however, reveals that there was indeed sufficient evidence to support a finding that one of the objects of the conspiracy was to impair or impede the computation or collection of taxes.
In assessing the sufficiency of the evidence, we must view it in the light most favorable to the government. Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 (1942). When viewed in this light, the testimony leaves little doubt in our mind that the conspiracy alleged in the indictment was in fact proved.
Agent Clayton testified that the purpose of the scheme was to prevent the IRS, in the event of an audit, from having any questions about where the money had come from and that Oldham had told him that the scheme was "IRS-tested foolproof." Agent Clayton also testified that Enstam had told him that he and Agent House should try to make their corporation look as legitimate as possible so that they could obtain a company car, receive a salary, receive yearly bonuses, and arrange for "business" trips abroad. 2
Agent House similarly testified that the scheme was designed to protect them in the event of an audit, that Oldham had said that even the head of the IRS would not be able to figure out the scheme, and that Enstam had told them that they could get the money back from the corporation via a salary and new cars and write these things off as business expenses. House further testified that Enstam had said that House and Clayton could pretend to pay interest on the fictitious loan, get this interest back in the subsequent fictitious loan, and still deduct the interest from their federal income taxes. 3
The testimony of the two agents strongly indicates that the object of the conspiracy was to obstruct the functioning of the Internal Revenue Service. Nevertheless, the defendants argue that the object was only to hide the true source of the income, which they assert is not unlawful. Without deciding whether the defendants' assertion is accurate, we think that there is sufficient evidence in the record for a reasonable juror to conclude beyond a reasonable doubt, United States v. Barrera, 547 F.2d 1250, 1257 (5th Cir. 1977), that one of the objects of the conspiracy was to impede the computation of income taxes.
We recognize that there is some ambiguity in the testimony of the two agents as to whether the only intent was to hide the source of the income. However, Enstam advised them concerning two different ways to evade taxes reporting bogus business deductions and deducting fictitious interest payments. The jury could thus reasonably have found from the evidence that the purpose of the conspiracy was to permit the recipients of the laundered cash to report the proceeds as income only when or if received by them as "income" from the corporation in short, that the conspirators' taxable income (thus laundered by the loan) would only be reported to the extent that it was used in a non-deductible non-business fashion. Further, the jury could reasonably have inferred that even the part of the income that was to be reported would probably not be reported in the appropriate taxable year. All of these considerations, when combined with the repeated references by the co-conspirators to their fear of the Internal Revenue Service, lead us to the conclusion that there was sufficient evidence for the jury to find that one of the objects of the conspiracy was to thwart the effective functioning of the Internal Revenue Service.
To the extent that any ambiguity remains regarding the object of the conspiracy, this ambiguity is resolved by the testimony of Paul Hodgson, himself one of the conspirators. Hodgson admitted that the scheme had been presented to him as a "tax dodge," although he testified that he had only wanted to legitimize the money by hiding its source. Nevertheless, even Hodgson admitted that he intended to pay income tax only "(t)o a degree that (he) would be covered with the IRS." 4
The trial judge charged the jury that it is not a crime to conceal the source of income as long as the income is in fact reported, 5 and it was forcefully contended at oral argument that at most the evidence showed a conspiracy to hide the illegal source of the laundered money. Our review of the evidence, however, has convinced us that there was sufficient evidence for a reasonable juror to conclude beyond a reasonable doubt, United States v. Barrera, supra, that the conspirators did not intend to report all the laundered income, nor necessarily to report any part of it in the year in which tax...
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