U.S. v. McKee

• Decision Date: 29 October 2007
• Docket Number: No. 05-3357.,No. 05-3297.,No. 05-3469.,05-3297.,05-3469.,05-3357.
• Parties: UNITED STATES of America v. Kevin McKEE, Appellant. United States of America v. Inge Donato, Appellant. United States of America v. Joseph Donato, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

506 F.3d 225

UNITED STATES of America v. Kevin McKEE, Appellant.

United States of America v. Inge Donato, Appellant.

United States of America v. Joseph Donato, Appellant.

No. 05-3297.

No. 05-3469.

No. 05-3357.

United States Court of Appeals, Third Circuit.

Argued: November 8, 2006.

Filed: October 29, 2007.

As Amended November 19, 2007.

Eileen J. O'Connor, Assistant Attorney General, John Hinton, III (Argued), Alan Hechtkopf, Gregory Victor Davis, Brian D. Galle, Tax Division, Department of Justice, Washington, D.C., for Appellee, United States Department of Justice.

Peter Goldberger (Argued), Pamela A. Wilk, Ardmore, PA, for Appellants, Joseph Donato and Inge Donato.

Rocco C. Cipparone, Jr., Esq., (Argued), Haddon, Heights, NJ, for Appellant, Kevin McKee.

George S. Leone, Esq., Office of United States Attorney, Newark, NJ, for Appellee, USA.

Before: SCIRICA, Chief Judge, McKEE and STAPLETON, Circuit Judges.

OPINION

McKEE, Circuit Judge.

Defendants, Kevin McKee, Joseph Donato, and Inge Donato challenge their convictions for conspiracy to obstruct a government function, failure to pay federal employment taxes, and failure to file individual income tax returns for certain years. Each defendant makes specific claims regarding his/her conviction, and they collectively challenge the jury instruction on the affirmative acts of evasion element of the tax evasion counts, the sufficiency of the evidence, several evidentiary rulings, and the sentences that were imposed. Since we agree that the district court's jury instruction constructively amended the indictment, we will vacate the Defendants' convictions on the tax evasion charges in Counts 2 through 13 and remand for a new trial on those charges. In addition, we will reverse Inge Donato's conviction on Counts 14 and 16 because the evidence was insufficient to establish guilt beyond a reasonable doubt, and instruct the district court to enter a judgment of acquittal on those counts on remand.¹

I. Background

During the period charged in the indictment, Joseph Donato and Kevin McKee owned and operated McKee-Donato Construction Company ("the Partnership"), a small New Jersey carpentry and home renovation business. Inge Donato functioned as the Partnership's bookkeeper. All three are longstanding members of the Reformed Israel of Yaweh ("RIY"), a small religious sect founded by Leo Volpe that opposes payment of taxes based upon the members' religious opposition to war and the taxes that fund it.

The Partnership employed members of RIY as well as non-members. When providing the Partnership's payroll records to accountants for preparation of quarterly payroll tax returns (IRS Form 941), Inge Donato omitted payroll information for the employees who were members of RIY. Consequently, federal withholding taxes were not deducted from their paychecks. However, the correct payroll information was provided for employees who were not members of RIY, and their taxes were properly withheld from their paychecks. The omission resulted in incomplete and inaccurate quarterly tax returns for the Partnership for the applicable years. The Partnership also failed to withhold or pay employment taxes that should have been collected from RIY-member/employees for those same quarters. In addition, Kevin McKee and Joseph Donato failed to file their individual federal income tax returns for the years 1997 through 2000. As we shall explain, Joseph's failure to file had consequences for Inge, who was also charged with failure to file for those years.

Kevin McKee and the Donatos were each charged separately with conspiracy to defraud the United States (Count 1), and employment tax evasion (Counts 2 through 13). In addition, they were each charged with failure to file their individual federal income tax returns for the years 1997 through 2000, in violation of 26 U.S.C. § 7203. (Counts 14 through 21).² The court granted Inge's motion for judgment of acquittal on Counts 15 and 17, charging her with failure to file for 1997 through 2000, because the evidence did not establish that she had income for those tax years. The court denied her motion for judgment of acquittal on Counts 14 and 16 based upon evidence that we will discuss detail below. The jury returned guilty verdicts against all Defendants on each of the remaining counts, and this appeal followed their sentencing.

II. Discussion.

A. Constructive Amendment to the Jury Instructions

Defendants all contend that the jury instructions on Counts 2-13 were erroneous because they constructively amended the indictment. Defendants concede they did not raise this argument in the District Court, but claim they are nevertheless entitled to relief because the instructions constituted plain error. See Fed. R.Crim.P. 52(b). We agree. United States v. Olano, 507 U.S. 725, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993).

An indictment is constructively amended when evidence, arguments, or the district court's jury instructions effectively "amend[s] the indictment by broadening the possible bases for conviction from that which appeared in the indictment." United States v. Lee, 359 F.3d 194, 208 (3d Cir.2004). We have held that a constructive amendment is an exceptional category of error because it violates a basic right of criminal defendants, the grand jury guarantee of the Fifth Amendment. United States v. Syme, 276 F.3d 131, 154 (3d Cir.2002) (applying United States v. Adams, 252 F.3d 276 (3d Cir. 2001)). "A constructive amendment to the indictment constitutes `a per se violation of the fifth amendment's grand jury clause.'" Id. at 148 (quoting United States v. Castro, 776 F.2d 1118, 1121-22 (3d Cir.1985)). A constructive amendment of the charges against a defendant deprives the defendant of his/her "substantial right to be tried only on charges presented in an indictment returned by a grand jury." United States v. Syme, 276 F.3d 131, 149 (3d Cir.2002) (citation omitted). Thus, where a trial court constructively amends a jury instruction, our plain error analysis presumes prejudice. Id.³

Here, in instructing the jury about conduct that could establish the charged employment tax evasion, the court included failing to report information to the Partnership's account, and falsifying books and records. The court explained:

Various schemes and devices may be used in an attempt to evade or defeat a tax. Affirmative attempts to evade federal employment taxes include, for example, filing false Employers Quarterly Federal Tax Returns (Forms 941), falsifying books and records so as to conceal the payment of wages and the employment taxes due thereon, or failing to report to your accountant all of the wages paid to employees.

Appendix ("App"). 984 (emphasis added).⁴

The superseding indictment charged each of the Defendants with attempted evasion of employment taxes by preparing, signing, and causing the filing of false and fraudulent federal employment tax returns. App. 73, in Counts 2 through 13.⁵ Even though the government introduced evidence that books and records were falsified and information was withheld from the Partnership's accountant, that conduct was never charged in the indictment. Accordingly, the court's instructions had the effect of broadening the indictment to include conduct not charged in the indictment; conduct that government witnesses testified about during the course of the trial.

Defendants argue that the examples of tax evasion explained in the jury instruction but not charged in the indictment improperly broadened the indictment in violation of Stirone v. United States, 361 U.S. 212, 80 S.Ct. 270, 4 L.Ed.2d 252 (1960). There, the Court held that a defendant's Fifth Amendment right to due process includes the right to be tried only on charges returned by a grand jury, and that right is violated if the evidence and jury instructions broaden the possible grounds for conviction beyond that alleged in the indictment. Id. at 218-19, 80 S.Ct. 270.

The government concedes that the jury instructions did not match the charges contained in the superseding indictment. However, the government reminds us that we must assess the jury instruction as a whole and rely upon the "almost invariable assumption of the law that juries follow their instructions." Richardson v. Marsh, 481 U.S. 200, 207, 107 S.Ct. 1702, 95 L.Ed.2d 176 (1987). The government cites numerous cases from other jurisdictions to support its contention that "no constructive amendment arises from the admission of acts not charged in the indictment when the court's instructions to the jury preclude the possibility that the defendant was convicted on those acts." See, e.g., United States v. Gonzalez, 661 F.2d 488, 492 (5th Cir.1981) (no constructive amendment in trial for conspiracy to distribute methaquaalone, despite admission into evidence of other types of illegal narcotics).⁶

However, the problem here is that the jury instructions informed the jury that the Defendants could be convicted on the basis of conduct that was not charged in the indictment, of which they had no notice. The trial court gave a specific instruction on tax evasion that identified the conduct that could satisfy the affirmative act element of the charged employment tax evasion. Nevertheless, the Defendants can not be convicted on the basis of an affirmative act that is included in jury instructions, but not charged in the indictment. Syme, supra.

The language we have italicized in the above-quoted jury instruction, though only intended as examples of offending conduct, plainly referred to particular evidence in the case and therefore allowed the jury to convict the Defendants for uncharged conduct. Accordingly, the court's instructions improperly amended the indictment. See, e.g., United States v. Thomas, 274 F.3d 655, 670 (2d Cir.2001) (constructive amendment occurs when the terms of the indictment are effectively modified by the court's actions such that "there is a substantial likelihood that the...