U.S. v. Mastropieri

• Decision Date: 20 July 1982
• Docket Number: 1061,Nos. 1060,D,s. 1060
• Parties: 82-2 USTC P 9484, 11 Fed. R. Evid. Serv. 1154 UNITED STATES of America, Appellee, v. Eugene MASTROPIERI, Herbert Pate and Carolyn Pate, Appellants. ockets 81-1017, 81-1019.
• Court: U.S. Court of Appeals — Second Circuit

Page 776

685 F.2d 776

82-2 USTC P 9484, 11 Fed. R. Evid. Serv. 1154

UNITED STATES of America, Appellee, v. Eugene MASTROPIERI, Herbert Pate and Carolyn Pate, Appellants.

Nos. 1060, 1061, Dockets 81-1017, 81-1019.

United States Court of Appeals Second Circuit.

Argued May 25, 1982.

Decided July 20, 1982.

James D. Harmon, Jr., Asst. Atty.-in-Charge, U. S. Dept. of Justice, E. D. N. Y., Edward R. Korman, U. S. Atty., E. D. N. Y., and Thomas P. Puccio, Atty.-in-Charge, U. S. Dept. of Justice, Organized Crime Strike Force, E. D. N. Y., Brooklyn, N. Y., for appellee U. S.

William Sonenshine, New York City, for appellant Eugene Mastropieri.

William I. Aronwald, Bartels, Pykett & Aronwald, White Plains, N. Y., for appellants Herbert and Carolyn Pate.

Before MOORE, FRIENDLY and OAKES, Circuit Judges.

FRIENDLY, Circuit Judge:

In this trial before Judge Mishler and a jury in the District Court for the Eastern District of New York, Herbert Pate, his wife Carolyn, and his attorney, Eugene Mastropieri, were convicted of a number of offenses growing out of the alleged filing of false income tax returns (or, in one instance, failure to file a return) by the Pates for the years 1971, 1972, 1973, 1974 and 1975. The trial was on three separate indictments, 78 Cr. 219, 79 Cr. 238 and 80 Cr. 174.

The first indictment was limited to charging the Pates with willfully and knowingly attempting to defraud the United States by filing an income tax return which substantially understated their income for 1971, in violation of 26 U.S.C. § 7201 and 18 U.S.C. § 2. The second indictment charged the Pates with willfully and knowingly attempting to evade income taxes by failing to file a return for 1972, in violation of 26 U.S.C. § 7201 and 18 U.S.C. § 2. The third indictment began with a count charging the three defendants with conspiring with each other and one Fiore B. Acovino ¹ to defraud the United States in violation of 18 U.S.C. § 371, by obstructing the lawful functions of the Internal Revenue Service (IRS) in the assessment and collection of revenue. Count Two charged that Herbert Pate had endeavored to obstruct the due and proper administration of the internal revenue laws by causing Dennis Ilich to state falsely to IRS agents that he had given the Pates $10,000 in cash, in violation of 18 U.S.C. §§ 1505 and 2. Counts Three and Four charged Herbert Pate with suborning Dennis and Daisy Ilich, respectively, to give false testimony before a grand jury that was investigating the charges of tax evasion by the Pates, in violation of 18 U.S.C. § 1622. Count Five charged the Pates with tax evasion for 1973 in the same manner as the first indictment had charged in respect of 1971 and additionally charged Mastropieri with aiding and abetting their attempt. Count Six charged that Herbert Pate had violated 26 U.S.C. § 7206(1) by including in his 1973 income tax return the amount of $6,450 as income as a process server when he knew he had not received any such income. Counts Seven and Ten were the analogues of Count Five with respect to 1974 and 1975 income and Count Eight was the analogue of Count Six with respect to 1974 income. Count Nine charged that Mastropieri had violated 26 U.S.C. § 7206(1) by claiming as a 1974 deduction the process server income reported by Herbert Pate for that year.

All three defendants were convicted on all counts in which they were named, except that Herbert Pate was acquitted of suborning the perjury of Dennis Ilich and Carolyn Pate was acquitted of tax evasion for 1972. Herbert Pate was sentenced to concurrent five year terms of imprisonment on the conspiracy and tax evasion counts to run concurrently with three year concurrent terms of imprisonment on the false return counts, all to run consecutively to five year concurrent terms of imprisonment on the obstruction and subornation counts. Mastropieri was sentenced to concurrent three year terms of imprisonment on each count on which he was convicted. Carolyn Pate was placed on probation for two years. The Pates and Mastropieri appeal on a multitude of grounds. We affirm.

I. The Facts

The Government's proof on the tax evasion counts was primarily that during the tax years 1971-75 the Pates had made investments in real estate, a corporation, an investment fund, and an insurance policy, and had made various other expenditures, including $7,723.25 for Herbert Pate's attendance at a North Carolina weight reducing clinic in 1974, of a size far beyond what could be accounted for by their resources on January 1, 1971, and the amounts they had reported as income plus non-taxable receipts such as loans, gifts or inheritances, less normal living expenses. ²

The predicate for this analysis was an effort to determine the Pates' financial position as of January 1, 1971. IRS Special Agent Conlisk canvassed 47 banks, 71 brokerage firms and 13 lending institutions in the vicinity of the Pates' residence. ³ In addition, Conlisk searched the local property records of Bronx, Nassau, Queens, Kings and Suffolk Counties "for the years during the investigation and prior to 1967" ⁴ and failed to disclose any real property purchased or sold or any mortgages given or received under the names of Herbert or Carolyn Pate, the last name Bidmead (Herbert's former surname) or Ilich (Carolyn's maiden name) other than the properties discussed below. He checked records of the Savings Bond division of the United States Treasury Department covering the period "1947 or 1952" through 1975 and found no bonds issued in any of the Pates' names. He checked records of the IRS to determine whether the Pates had been named as recipients on gift tax returns. He checked County Clerk records to determine whether the Pates had received any funds from judgments or inheritances. He also interviewed unnamed friends and relatives of the Pates to determine whether they had loaned or given any money to the Pates, and received a generally negative response. A similar investigation was made with respect to Acovino except that the starting point was January 1, 1972.

From this analysis and his examination of the 32 separate bank accounts used by the Pates and Acovino, Conlisk determined that the Pates had no cash on hand as of January 1, 1971; that Acovino had $3,724.75 on hand as of January 1, 1972; that the Pates had received relatively small amounts of funds from nontaxable sources; but that the Pates had made expenditures in the tax years 1971-75 of over $292,730.70 ⁵ as compared with reported income of $35,082.24 and Acovino had expended in the tax years 1972-74 over $338,624.45.

In establishing a January 1, 1971 starting point for the Pates, the Government relied not only on Agent Conlisk's investigation but also on an interview on July 13, 1970, between Herbert Pate and a state probation officer, Sanford Eisler, in which Pate told Eisler that he had no financial assets except a small sum in his checking account. During this same interview, in filling out a questionnaire requiring him to "(l)ist all other properties such as bank accounts, life insurance, automobile, stocks, bonds, real property, etc., owned by you and your dependents", Pate responded "life insurance $10,000 myself and wife owned since 1968."

As heretofore noted, see note 2 supra, the Government's principal proof of expenditure was not of a gradual increase of net worth, see, e.g., Holland v. United States, 348 U.S. 121, 130, 75 S.Ct. 127, 132, 99 L.Ed. 150 (1954), or of ordinary payments in excess of reported income, see, e.g., United States v. Bianco, 534 F.2d 501 (2 Cir.), cert. denied, 429 U.S. 822, 97 S.Ct. 73, 50 L.Ed.2d 84 (1976), although some such payments were proved, but instead centered on four transactions, each involving considerable sums of money, in each of which the Pates had taken much trouble to conceal the fact or the extent of their participation. We shall discuss these in connection with the tax years in which they occurred.

1. 1971 and the purchase of 559 West Beech Street

Total 1971 expenditures of $44,972.04 for the Pates, as against reported income of $5,827.39, included life insurance premiums, rental of a summer house, the purchase of an automobile, and residence payments totalling $13,410.74. However, the major expenditure was $31,561.30 for the purchase of a house at 559 West Beech Street in Long Beach, Long Island. On July 10, 1971, a contract to purchase the house was made by Mrs. Pate (using her maiden name, Carolyn Ilich) and her sister-in-law, Barbara Sacchitello. Barbara and her husband Peter lived in Port Washington, Long Island, with their children. An attorney was given $4,500 to make the down payment. On July 23 and August 16 Barbara deposited $5,000 and $8,000 into her bank account. The $5,000 was cash, allegedly provided by her husband; the $8,000 was a check drawn on a savings account in the name of Carolyn Bidmead. On July 26 Barbara deposited in a second account $5,500 allegedly provided by her since-deceased father-in-law. At the closing on July 26 two checks on these accounts drawn to Peter Sacchitello in the amounts of $13,000 and $5,000 were used to pay part of the purchase price. Additional funds were supplied by two checks, in the amounts of $7,385 and $444, drawn on accounts of Carolyn Ilich.

There is no basis for doubting that the two last-mentioned checks and the $4,500 down payment came from the Pates. The checks were signed by Carolyn Ilich/Pate, and a receipt for the down payment bore the notation "deposit from Ilich". The case with respect to the two checks, totaling $18,000, signed by Peter Sacchitello is only a little less clearcut. The Government's proof began with the fact that the Sacchitellos were a couple of modest means: he worked for ConEd and his wife testified, "I (was) working, but not what you would call a job." Nonetheless, in the two months before the purchase of the house the Sacchitellos deposited $18,500 in various bank accounts; the Sacchitello checks...