U.S. v. Goldberg

• Decision Date: 26 February 1997
• Docket Number: No. 96-1132,96-1132
• Citation: 105 F.3d 770
• Parties: -804, 97-1 USTC P 50,208, 46 Fed. R. Evid. Serv. 404 UNITED STATES of America, Appellee, v. Richard GOLDBERG, Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

Page 770

105 F.3d 770

79 A.F.T.R.2d 97-804, 97-1 USTC P 50,208,

46 Fed. R. Evid. Serv. 404

UNITED STATES of America, Appellee, v. Richard GOLDBERG, Defendant, Appellant.

No. 96-1132.

United States Court of Appeals, First Circuit.

Argued Sept. 6, 1996.

Decided Feb. 3, 1997.

Rehearing and Suggestion for Rehearing En Banc Denied Feb. 26, 1997.

Morris M. Goldings with whom David R. Kerrigan and Mahoney, Hawkes & Goldings were on brief, Boston, MA, for appellant.

Michael Kendall, Assistant United States Attorney, with whom Donald K. Stern, United States Attorney, Boston, MA, and Kevin J. Cloherty, Assistant United States Attorney, was on brief, Washington, D.C., for the United States.

Before BOUDIN, Circuit Judge, BOWNES, Senior Circuit Judge, and LYNCH, Circuit Judge.

BOUDIN, Circuit Judge.

Richard Goldberg was convicted of two counts of conspiracy to defraud the Internal Revenue Service, 18 U.S.C. § 371, and eight counts of aiding and assisting the filing of false income tax returns, 26 U.S.C. § 7206(2). Goldberg's appeal is now before us. We begin by describing the factual background and proceedings in the district court.

In the years prior to his indictment in 1995, Goldberg was involved in several businesses in and around Boston. His ventures included a billboard company, Logan Communications, and a partial interest in a "Park 'N Fly" lot located in East Boston near Logan Airport. Goldberg also owned and operated Liverpool Lumber, Inc., which Goldberg used as a management company for various of his other enterprises.

In or around 1988, Goldberg became aware that the Commonwealth of Massachusetts planned to take all or part of the East Boston Park 'N Fly lot by eminent domain as part of its Third Harbor Tunnel project. The planned taking not only threatened Goldberg's profitable parking business, but also his billboard company, since many of its signs were located on the parking lot's land. Goldberg began an intense lobbying effort against the proposal in 1988, eventually spending over $1 million of his and his partners' money to oppose the tunnel plans.

Two of those hired to oppose the project--community activist Robert A. Scopa and consultant Vernon Clark--were named as co-conspirators in the two separate conspiracies for which Goldberg was ultimately convicted. Taking the evidence most favorable to the verdict, the facts pertaining to the two different conspiracies were as follows.

Scopa Conspiracy. From 1990 to 1995, Goldberg employed Scopa to help organize the East Boston community against the tunnel project and to perform other services. But Goldberg never paid Scopa in Scopa's own name. Instead, Goldberg had his Liverpool Lumber company issue paychecks to three successive "straw" employees, none of whom worked for Goldberg and all of whom agreed to hand the money over to Scopa.

To reflect the "wages" of the straw employees, Goldberg directed his bookkeeper at Liverpool Lumber to prepare various W-2, W-3, and W-4 reporting statements, which were then filed with the IRS. These documents falsely described wage payments to straws who had performed no work for Liverpool Lumber. The straws, in turn, falsely included the phantom wages from Liverpool on their own individual returns. Reporting the money on the straws' returns instead of Scopa's resulted in a loss of about $150 to the Internal Revenue Service.

The government claimed at trial that the scheme was devised so that Scopa would seem to be unemployed and thus could continue to collect monthly benefits under a disability insurance policy. Evidence also indicated that Scopa sought to hide the payments in order to preserve his status as an "independent" activist in the East Boston community and to prevent an extramarital affair from being discovered by his wife. The district court later found that Scopa, but not Goldberg, was motivated by all of these objectives.

Clark Conspiracy. In the course of opposing the Third Harbor Tunnel project, Goldberg also retained Vernon Clark, a lobbyist in Washington, D.C., who performed various services to this end. Goldberg's companies owed Clark a substantial sum of money in 1991 for work performed in opposition to the tunnel project. Rather than pay the bill directly, the two men agreed with others to a more complicated method for Goldberg to discharge his debt to Clark.

At the time, Clark was having a secret affair with a woman named Patricia McNally. The pair occasionally spent time in a Maine beach house of which McNally was part owner. Clark sought to fund an expansion of the beach house without his wife's knowledge. Goldberg agreed to pay the money he owed to Clark to a landscaping company owned by John Lango, McNally's brother-in-law, who would in turn construct the beach house expansion.

Goldberg arranged for the preparation of two separate $10,000 invoices to Park 'N Fly from Lango, dated October 15, 1991 and January 1, 1992, respectively. The invoices were ostensibly for landscaping services, although Lango performed no work for any of Goldberg's companies. At Goldberg's direction, the invoices were paid by Park 'N Fly. Lango testified at trial that the payments were structured in two installments so as to reduce his taxes on the transaction.

The triangular flow of money and services involved the plainly foreseeable preparation and filing of several false tax documents. In due course, Park 'N Fly sent forms 1099-MISC, one for each $10,000 payment, to the IRS and to Lango. The forms falsely listed the payments as non-employee compensation to Lango. Lango in turn reported the payments as income on his own income tax returns in 1991 and 1992. Clark did not report the money. The foreseeable tax loss to the IRS based on this scheme was about $3,000.

A federal grand jury indicted Goldberg on April 6, 1995 for offenses relating to the above activities. The indictment charged Goldberg with two counts of conspiring to defraud the United States government, 18 U.S.C. § 371, several counts of aiding and assisting the filing of false income tax returns, 26 U.S.C. § 7206(2), and several counts of mail fraud based on his alleged efforts to conceal his employment of Scopa from the latter's disability insurer. 18 U.S.C. § 1341.

After moving unsuccessfully to dismiss the indictment, Goldberg waived his right to a trial by jury. Goldberg's trial before the district judge took eight days, and on September 6, 1995, the court announced its findings. The court found Goldberg guilty of conspiring to defraud the government and of aiding and assisting in the preparation of false tax returns, but acquitted him on the mail fraud charges on the ground that his motive to help defraud the insurer had not been proved beyond a reasonable doubt.

At Goldberg's sentencing in December 1995, the district court made guideline calculations (described below) but then departed downward two levels and sentenced Goldberg at the bottom of the range. The result was a ten-month sentence--five months to be served in prison and five in community confinement--as well as three years of supervised release and a $20,000 fine. Goldberg now appeals, challenging his convictions and sentence.

The most important and difficult issues on appeal relate to Goldberg's conviction for conspiracy under 18 U.S.C. § 371 to defraud the IRS. This type of conspiracy is known as a Klein conspiracy, taking its name from an earlier case involving a complex scheme designed to escape taxes. United States v. Klein, 247 F.2d 908 (2d Cir.1957). Goldberg argues that the district court misunderstood the crime's "purpose" element and that the evidence did not support a conviction.

The defraud clause of Section 371 criminalizes any conspiracy "to defraud the United States, or any agency thereof in any manner or for any purpose." 18 U.S.C. § 371. Such conspiracies to defraud are not limited to those aiming to deprive the government of money or property, but include conspiracy to interfere with government functions. See, e.g., United States v. Tarvers, 833 F.2d 1068, 1075 (1st Cir.1987). The crime with which Goldberg was charged, therefore, was that he conspired to interfere with the proper functioning of the IRS, through the filing of false tax documents.

It is commonly said that in such a conspiracy the fraud has to be a purpose or object of the conspiracy, and not merely a foreseeable consequence of the conspiratorial scheme. Dennis v. United States, 384 U.S. 855, 861, 86 S.Ct. 1840, 1844, 16 L.Ed.2d 973 (1966); 1 Sand et al., Modern Federal Jury Instructions § 19.02 (1990). Consider, for example, the case of a band of bank robbers. All know that the agreed-upon robbery will generate "income" that none of the robbers will report. Yet it would be straining to describe interference with the IRS as a purpose or object of the conspiracy. E.g., United States v. Vogt, 910 F.2d 1184, 1202 (4th Cir.1990).

This requirement of purpose accords generally with conspiracy doctrine, United States v. Alvarez, 610 F.2d 1250, 1256 (5th Cir.1980), but it is especially important under the defraud clause of section 371. There are not many financial crimes without some implications for false reporting in someone's tax filings, if not for tax liability itself. If section 371 embraced every foreseeable consequence of a conspiracy, many joint financial crimes having no other federal nexus--and perhaps many non-criminal acts as well--would automatically become federal conspiracies to defraud the IRS.

The "purpose" requirement, however, is easier to state than to apply. The laundering of drug money, for example, normally involves the deliberate concealment of the money's origin. The primary purpose is almost always to avoid detection of the underlying crime; but can a jury also find an implied secondary objective to conceal income from the IRS? We have held, on specific facts, that a jury could draw such an inference and also find a violation of section 371. E.g., United States v. Cambara...