U.S. v. Hurley

• Decision Date: 02 December 1991
• Docket Number: 90-1693,Nos. 90-1690,s. 90-1690
• Citation: 957 F.2d 1
• Parties: UNITED STATES, Appellee, v. Edmund M. HURLEY, Defendant, Appellant. UNITED STATES, Appellee, v. Charles R. BURNETT, Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 1

957 F.2d 1

UNITED STATES, Appellee, v. Edmund M. HURLEY, Defendant, Appellant.

UNITED STATES, Appellee, v. Charles R. BURNETT, Defendant, Appellant.

Nos. 90-1690, 90-1693.

United States Court of Appeals First Circuit.

Heard Dec. 2, 1991.

Decided Feb. 14, 1992.

Rehearing Denied March 11, 1992.

Albert F. Cullen, Jr., Boston, Mass., for appellants.

Robert L. Ullmann, Deputy Associate U.S. Atty., with whom Wayne A. Budd, U.S. Atty., and F. Dennis Saylor, IV, Sp. Counsel to Asst. Atty. Gen., Boston, Mass., were on brief, for appellee.

Before SELYA, Circuit Judge, COFFIN, Senior Circuit Judge, and CYR, Circuit Judge.

COFFIN, Senior Circuit Judge.

Appellants Hurley and Burnett were charged in a 15-count indictment with participating in a sophisticated scheme to launder more than $5 million in illicit drug proceeds through the use of offshore front companies. The district court granted their motions for judgment of acquittal on most of the charges, leaving the jury to consider only two counts against Hurley and three against Burnett. The jury returned guilty verdicts solely on a charge of conspiracy to defraud the IRS in violation of 18 U.S.C. § 371. On appeal, each appellant challenges his conviction on sufficiency and due process grounds. We affirm.

I. Background

We shall recount the intricate factual backdrop of this case relatively briefly at this point, leaving for later discussion those additional facts necessary for full disposition of defendants' claims. Consistent with our responsibility in reviewing convictions for sufficiency of the evidence, we consider the facts in the light most favorable to the government. See Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979); United States v. Maraj, 947 F.2d 520, 522 (1st Cir.1991).

Hurley and Burnett are both lawyers who spent substantial periods of time working for Salvatore "Mike" Caruana, a highly successful drug smuggler who earned millions of dollars from the unlawful importation and distribution of marijuana and hashish between 1978 and 1981. Caruana became a fugitive in March 1984, and still has not been apprehended. In 1987, however, federal agents executed search warrants at five locations in Massachusetts and Connecticut where Caruana had stored documents and computer files detailing investment activities associated with his drug profits. The records show that several Panamanian and Bahamian companies were set up in 1979 and 1980 for Caruana's use. None of the public records reveal Caruana's ownership. ¹

The indictment alleged that, from at least early 1979 to 1987, first Hurley, and then Burnett, knowingly assisted Caruana in a money laundering scheme that allowed him to hide and profitably invest $5 million of his illegal earnings. Defendants and others accomplished this deception, according to the government, through the network of front companies set up in Panama and the Bahamas, which made loans and investments in unusual ways, such as through the transfer of large amounts of cash. On two separate occasions in which defendants were involved, for example, Caruana transferred $100,000 in currency from briefcases to borrowers. In other transactions, after Caruana fled, checks drawn on Panamanian accounts were made out in the names of third parties for actual use and deposit by Caruana. The cash transactions allowed Caruana to produce facially legitimate income from drug profits that were not originally reported, while the third-party checks enabled him to retrieve funds when necessary in a manner that concealed that he was the recipient of such income.

Hurley's legal work for Caruana began in the late 1970s, and extended at least through the fall of 1982. After that time, he remained connected to Caruana primarily as a recipient of investment earnings that he forwarded to the Bahamas. Burnett first worked with Caruana in 1982 and continued to perform services for him until 1986. During this time, Caruana became a fugitive from justice, and Burnett maintained secret communications with him by means of a computer and code name.

A grand jury indicted Hurley, Burnett and five co-defendants, including Caruana, in March 1989. All seven defendants were charged with conspiring to defraud the IRS in violation of 18 U.S.C. § 371. Defendants Hurley and Burnett also were charged with conspiracy to racketeer as well as the substantive crime of racketeering, 18 U.S.C. § 1962(c), (d), and twelve counts of foreign travel in aid of racketeering, 18 U.S.C. § 1952. Trial began a year later for appellants and two co-defendants. Following presentation of the government's case, the court granted defendants' motions for judgment of acquittal, except for the conspiracy to defraud and racketeering conspiracy counts against both defendants, one Travel Act count against Burnett and two counts against a third defendant not a party to this appeal. The jury returned guilty verdicts only against Hurley and Burnett on the conspiracy to defraud charge.

On appeal, defendants make two arguments: first, they claim that the indictment was improperly vague because it broadly charged a conspiracy to defraud the IRS rather than alleging violations of specific IRS requirements and, second, they contend that the evidence was insufficient to prove a knowing agreement to deceive the IRS.

II. Defective Indictment

Hurley and Burnett were convicted under 18 U.S.C. § 371, which prohibits two distinct types of conspiracies: conspiracies to commit a specific offense against the United States and conspiracies to defraud the United States, or one of its agencies, "in any manner or for any purpose." Count 1 of the indictment charged defendants under the second, broader clause, alleging that they conspired "to defraud the United States by impeding, impairing, obstructing and defeating the lawful functions of the [IRS] in the ascertainment, computation, and collection of income taxes owed by Salvatore M. Caruana."

Relying primarily on United States v. Minarik, 875 F.2d 1186 (6th Cir.1989), defendants argue that Count I was defective in that it charged a generic conspiracy to defraud the United States rather than a conspiracy to commit a specific tax offense--an error that they claim invalidates their convictions. In Minarik, the Sixth Circuit affirmed a district court's grant of judgment notwithstanding the verdict for two defendants whom it concluded had been charged improperly under the defraud clause. Among other things, the appeals court was concerned that the broad "conspiracy to defraud" language of the indictment overstated the defendants' duty to disclose information to the IRS. See id. at 1195. The court thus held that, where the object of an alleged criminal agreement is covered by a specific criminal statute that "closely defin[es]" a citizen's duties, the government must prosecute under the "offense," not the "defraud," clause of § 371. See id. at 1194-96.

Appellants claim that, like the defendants in Minarik, they had no general responsibility to assist the IRS in its effort to collect taxes, and they therefore could be convicted under § 371 only if they violated a specific tax provision that would trigger the statute's offense clause. Prosecution and conviction on the non-specific conspiracy to defraud charge, they argue, violated their due process rights.

For several reasons, we find this argument unpersuasive. First, Minarik 's holding has been narrowly limited to the facts of that case, even by the circuit in which it was issued. See, e.g., United States v. Mohney, 949 F.2d 899, 903 (6th Cir.1991); ("Minarik ... created a limited rule to remedy the particular concerns raised by the facts of that case."); United States v. Sturman, 951 F.2d 1466, 1473-74 (6th Cir.1991); United States v. Bilzerian, 926 F.2d 1285, 1301 (2d Cir.1991); United States v. Reynolds, 919 F.2d 435, 439 (7th Cir.1990). These courts have recognized that the primary problem in Minarik was not that the government charged defendants under the defraud clause, but that it repeatedly shifted its theory of the case and thus "used the defraud clause in a way that created great confusion about the conduct claimed to be illegal," Minarik, 875 F.2d at 1196. See Reynolds, 919 F.2d at 439; Bilzerian, 926 F.2d at 1301. In this case, there has been no such confusion; the government consistently has maintained that defendants sought to deceive the IRS through the money-laundering activities in which they participated.

Second, the facts in Minarik are distinguishable in a critical respect from this case. In Minarik, the conspiracy had a narrow object--concealment of assets upon which the IRS was empowered to levy--and arose from a single event (the sale of a house). This object was explicitly proscribed by a particular statute, 26 U.S.C. § 7206(4). In this case, however, the government alleges that defendants participated in a longstanding and wide-ranging scheme to deceive the IRS regarding the amount and source of Caruana's assets. We borrow the language of the Sixth Circuit, which distinguished a similar complex conspiracy from the circumstances present in Minarik, a case from its own circuit:

This large conspiracy involved many events which were intended to make the IRS impotent. No provision of the Tax Code covers the totality and scope of the conspiracy. This was not a conspiracy to violate specific provisions of the Tax Code but one to prevent the IRS from ever being able to enforce the Code against the defendants. Only the defraud clause can adequately cover all the nuances of a conspiracy of the magnitude this case addresses.

Sturman, at 1473.

Finally, we reject defendants' contention that, because money laundering was legal at the time they acted, they had no duty to refrain from such conduct and could not be prosecuted for it under § 371's defraud clause. Our caselaw makes it clear that lawful activity may furnish the basis for a conviction under § 371, see ...