U.S. v. Macchia

• Decision Date: 31 August 1994
• Docket Number: 94-1192,Docket Nos. 94-1161
• Parties: -6233 UNITED STATES of America, Appellee, v. Joseph MACCHIA, Sr.; Lawrence Macchia; George Macchia; Joseph L. Macchia; Viktor Batuner; Michael Varzar, Defendants, John Barberio, and Marat Balagula, Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

Page 662

35 F.3d 662

74 A.F.T.R.2d 94-6233

UNITED STATES of America, Appellee, v. Joseph MACCHIA, Sr.; Lawrence Macchia; George Macchia;

Joseph L. Macchia; Viktor Batuner; Michael

Varzar, Defendants,

John Barberio, and Marat Balagula, Defendants-Appellants.

Docket Nos. 94-1161, 94-1192.

United States Court of Appeals, Second Circuit.

Argued May 11, 1994.

Decided Aug. 31, 1994.

Janet Kay Jones, Washington, DC (Loretta C. Argrett, Asst. Atty. Gen., U.S. Dept. of Justice, Tax Div., Robert E. Lindsay, Alan Hechtkopf, on the brief, Zachary W. Carter, U.S. Atty., Brooklyn, NY, of counsel), for appellee.

William Kunstler, Kunstler & Kuby, New York City, for defendant-appellant Marat Balagula.

J. Shane Creamer, Dilworth, Paxson, Kalish & Kaufman, Philadelphia, PA, for defendant-appellant John Barberio.

Before: NEWMAN, Chief Judge, JACOBS and LEVAL, Circuit Judges.

JACOBS, Circuit Judge:

Defendants-appellants John Barberio and Marat Balagula (collectively, the "defendants"), having previously been convicted for their roles in a five-month scheme to defraud the United States of federal gasoline excise taxes, now interpose the double jeopardy clause of the Fifth Amendment to bar the present prosecution for their roles in a broad-gauge tax evasion conspiracy employing similar techniques on a greater scale, over a period of years that wholly subsumes the period of the first conspiracy.

The United States District Court for the Eastern District of New York (Wexler, J.) conducted a thorough analysis under United States v. Korfant, 771 F.2d 660 (2d Cir.1985), and determined that the two indictments describe distinct conspiracies and therefore do not subject the defendants to double jeopardy. See United States v. Macchia, 845 F.Supp. 953 (E.D.N.Y.1994). We affirm.

BACKGROUND

The facts of this appeal are set forth in every useful detail in Judge Wexler's opinion.

We recapitulate only the facts we deem dispositive.

A. The Tarricone Indictment

In January 1992, a federal grand jury returned an indictment charging Balagula, Barberio and three co-defendants--Arthur Tarricone, Dominic A. Bombace, and John Pabone--with one count of conspiring to evade the federal gasoline excise tax in violation of 18 U.S.C. Secs. 371 and 3623, and two counts of attempted excise tax evasion in violation of 26 U.S.C. Sec. 7201 and 18 U.S.C. Secs. 2 and 3623 (the "Tarricone Indictment").

The Tarricone Indictment described the alleged evasion of over $400,000 in federal gasoline excise taxes between November 1985 and April 1986. At that time, federal law imposed an excise tax of nine cents per gallon on the sale of gasoline, but exempted sales between gasoline distributors holding a Registration for Tax-Free Transactions issued by the Internal Revenue Service on its "Form 637". In tax parlance, a holder of a Form 637 was a "licensed" company; a company without such a form was "unlicensed." Transactions between licensed companies were "tax-free" because the seller was not required to pay the federal excise tax. The one-time payment of the excise tax on any gasoline shipment occurred when it passed from a licensed company to an unlicensed one. In that transaction, the licensed seller incurred the obligation to pay the tax. Since the licensed seller generally included the excise tax in the sales price, such sales were known as "tax included" or "tax paid" transactions. Subsequent sales of the same gasoline were exempt because the one-time excise on that gasoline had been paid.

The defendants named in the Tarricone Indictment evaded the federal excise tax with respect to the sale of some 41 million gallons of gasoline from Arthur Tarricone, Inc. ("AT"), a licensed supplier, to unlicensed purchasers. This was accomplished by false invoices that created a paper trail--or "daisy chain"--of fictitious transactions. Through these fictitious transactions, the gasoline appeared to be sold first to a licensed company, and then, in apparently tax-paid transactions, to unlicensed companies. However, the licensed company that made the paper sale to the unlicensed purchasers was a shell company, consisting of little more than a Form 637 and a rented office. The company existed solely to record the receipt of excise taxes, incur the tax liability to the United States, and eventually collapse. The conspirators called this instrumentality a "burn" company.

The daisy chain outlined in the Tarricone Indictment was set in motion when AT bought a total of 21 barge loads of gasoline from licensed New Jersey wholesalers in tax-free transactions. AT then created invoices reflecting fictitious sales to a burn company that was called Conlo, Inc. ("Conlo"). John Pabone and John Quock had purchased Conlo as a burn company on December 11, 1985, from individuals who had been using Conlo for the same purpose. Since both Conlo and AT were licensed companies, the sales of gasoline to Conlo were, on paper, tax free. In the second step of the daisy chain, Conlo sold the gasoline to Beck Equities, Inc. ("Beck"), an unlicensed shell company also controlled by Pabone and Quock. This transaction triggered Conlo's obligation to pay the federal excise tax. The conspirators then prepared false invoices indicating that Beck had sold the gasoline to unlicensed purchasers and had paid the excise tax to Conlo. At the completion of the daisy chain, Conlo, which was responsible for the federal excise taxes, simply "burned" up--the company and its records disappeared.

There were no sales between AT and Conlo or between Conlo and Beck. In reality, AT sold the gasoline directly to the unlicensed purchasers invoiced by Beck, including Westchester Hudson Petroleum Corp. ("WHPC"), which employed Barberio, and Hamilton Oil Brokers, Inc. ("Hamilton"). Hamilton was officially owned by an unindicted coconspirator named John Byrne, but actually was controlled and operated by Balagula. After receiving the gasoline, Hamilton would turn around and sell it to other unlicensed companies, such as Energy Makers of America, Inc. ("EMA"), a company owned by Balagula, and Shore Line Oil Co., Inc. ("Shoreco"), a company that employed Barberio as a consultant. The invoices reflecting the sales from Hamilton to these companies Count I of the Tarricone Indictment charged the defendants with conspiring to defraud the United States by evading and impeding the collection of federal gasoline excise taxes. The remaining two counts charged the defendants with specific instances of attempted tax evasion. After an eight day jury trial beginning on June 22, 1992, Balagula was convicted on all three counts and Barberio was convicted on the conspiracy count and on one substantive count.

falsely indicated that all excise taxes had been paid.

B. The Macchia Indictment

In June 1993, a federal grand jury returned an indictment against Balagula, Barberio and six co-defendants--Joseph Macchia Sr.; his three sons Lawrence, George, and Joseph; Viktor Batuner; and Michael Varzar. Count I of the indictment charged the eight defendants with conspiring to evade the federal gasoline excise tax in violation of 18 U.S.C. Secs. 371 and 3623. The six additional counts charged them with attempted tax evasion in violation of 26 U.S.C. Sec. 7201 and 18 U.S.C. Secs. 2 and 3623 (the "Macchia Indictment"). Balagula is named in four of the substantive counts, while Barberio is charged only in the conspiracy count.

As detailed in the Macchia Indictment, which is summarized in the following paragraphs, the conspirators used a daisy chain that allowed the defendants to evade over $85 million in federal gasoline excise taxes from the beginning of 1983 through the middle of 1988. According to the "Manner and Means" portion of the Macchia Indictment, a wholesale gasoline distributor called New York Fuel Terminal ("NYFT"), controlled by Joseph A. Macchia and his sons, sold large quantities of gasoline to unlicensed companies without paying the required excise tax.

NYFT sold most of its gasoline directly to unlicensed purchasers through a series of book transfers--the gasoline remained in storage at NYFT's M & Q Terminal in Brooklyn while title passed from NYFT to another company. The remainder of the gasoline was disposed of through barge sales conducted in New York and New Jersey or through book transfers conducted in New Jersey. The unlicensed companies that actually purchased the gasoline from NYFT typically received false invoices indicating that all excise taxes had been paid. According to the indictment, many of the unlicensed companies to which NYFT distributed its bootleg gasoline were controlled by Balagula; the rest were controlled by Batuner and Varzar.

The Macchia Indictment alleges that NYFT used fraudulent invoices and false book transfers to create the appearance that NYFT's sales were simply tax-free sales to licensed companies. The false invoices indicated that NYFT had sold hundreds of millions of gallons of gasoline to roughly 18 licensed companies, including AT and Conlo. Additional invoices were then used to reflect fictitious sales from these eighteen licensed companies to third parties. None of the eighteen companies ever purchased the gasoline from NYFT; nor, for that matter, did they ever resell the "purchased" gasoline to third parties. The false book transfers created the appearance that the gasoline passed through the accounts of several licensed and unlicensed companies before reaching the actual unlicensed purchaser (while in reality the gasoline was transferred directly to the unlicensed purchaser). The Macchia Indictment identifies 55 of these false book transfers, 14 of which reflect "sales" from NYFT to either Conlo or AT. EMA and Hamilton, companies involved in the Tarricone daisy chain, were also the subjects of false book transfers.

The cash that NYFT received from the actual unlicensed purchasers of the gasoline was falsely reported on the NYFT books as having been received from one of the eighteen...