U.S. v. Musacchia, s. 967

• Citation: 900 F.2d 493
• Decision Date: 21 March 1990
• Docket Number: 968,D,Nos. 967,s. 967
• Parties: 90-1 USTC P 70,001, 30 Fed. R. Evid. Serv. 71 UNITED STATES of America, Appellee, v. John MUSACCHIA and Joseph Gambino, Defendants-Appellants. ockets 88-1491, 88-1495.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 493

900 F.2d 493

90-1 USTC P 70,001, 30 Fed. R. Evid. Serv. 71

UNITED STATES of America, Appellee, v. John MUSACCHIA and Joseph Gambino, Defendants-Appellants.

Nos. 967, 968, Dockets 88-1491, 88-1495.

United States Court of Appeals,

Second Circuit.

Argued March 6, 1989.

Decided March 21, 1990.

Paula Schwartz Frome (James O. Druker, Kase & Druker, Garden City, N.Y., of counsel), for defendant-appellant John Musacchia.

Charles L. Weintraub (John L. Pollok, Hoffman & Pollok, New York City, of counsel), for defendant-appellant Joseph Gambino.

Alan Hechtkopf, Tax Div., Dept. of Justice (James I.K. Knapp, Acting Asst. Atty. Gen., Shirley D. Peterson, Asst. Atty. Gen., Washington, D.C., Robert E. Lindsay, Atty., Tax Div., Dept. of Justice, Washington, D.C., and Andrew J. Maloney, U.S. Atty., E.D.N.Y., of counsel), for appellee U.S.

Before CARDAMONE and PRATT, Circuit Judges, and LASKER, District Judge ^*.

LASKER, District Judge:

John Musacchia and Joseph Gambino appeal their convictions on one count of conspiracy to defraud the United States by willfully failing to pay gasoline excise taxes in violation of 18 U.S.C. Sec. 371 (1988) and 26 U.S.C. Secs. 7201, 7202 and 7206(2) (1982). Musacchia appeals his conviction on six additional counts of aiding and abetting evasion of such taxes.

Appellants contend that it was reversible error for the prosecution to bolster the testimony of three witnesses by eliciting testimony on direct examination that their cooperation agreements with the government required them to tell the truth. Musacchia also asserts that the statute of limitations bars his prosecution on the six counts charging aiding and abetting of substantive tax evasion offenses under Secs. 7201 and 7202. In supplemental briefing following the Supreme Court's holding in Gomez v. United States, --- U.S. ----, 109 S.Ct. 2237, 104 L.Ed.2d 923 (1989) (holding jury selection by magistrates not authorized under the Federal Magistrates Act), appellants urge reversal because they did not consent to jury selection by a magistrate. For the reasons discussed below, we conclude that the appeals are without merit and affirm.

BACKGROUND

Musacchia owned and operated O.K. Petroleum ("O.K."), a corporation that sold gasoline and heating oil through retail and wholesale outlets in New York State. During the period at issue federal law imposed an excise tax of nine cents on gasoline sold by producers and certain wholesale distributors. In December 1982, O.K. applied for a Registration for Tax-Free Transactions ("Form 637") from the Internal Revenue Service ("IRS"), which would exempt the company from the excise tax. O.K.'s application was never approved. Thereafter O.K. made large purchases of gasoline from two distributors but refused to pay the distributors the money due for federal excise taxes, representing first that the purchases were tax-exempt because O.K. was about to receive, and then that it had received, a Form 637. O.K. also purchased gasoline from General Oil Distributors, Inc. ("General Oil") in 1983 and failed to pay $270,000 in excise taxes by representing that it held a valid Form 637. When General Oil discovered that O.K. lacked a Form 637 it barred all tax-exempt sales to O.K.

Musacchia subsequently devised a "daisy chain scheme" to purchase untaxed gasoline. Under this scheme Rappaport Fuel Company ("Rappaport"), which held a valid Form 637, would purchase tax-exempt gasoline from various suppliers and then create fictitious invoices for sales to transient front companies that were not controlled by appellants, but which they formed for the specific purpose of evading excise taxes. These companies had valid Forms 637 and operated only long enough to allow Rappaport to document the fictitious sales. Rappaport would in fact distribute the gasoline to Musacchia. Two companies that Musacchia controlled, AKA Petroleum ("AKA") and CWM Petroleum ("CWM") paid the distributors for the gasoline purchased by Rappaport. Through this scheme Musacchia purchased more than 8 million gallons of gasoline on which he failed to pay taxes of more than $777,000.

Gambino assisted Musacchia in forming AKA and concealing Musacchia's involvement in the company. Gambino solicited Joseph J. Ribando, Gambino's brother-in-law, to sign on as president of AKA and Luis Cuomo to act as Treasurer. Ribando opened a bank account and mail drop for AKA and signed checks at Gambino's request. He had virtually no other involvement with the company. Cuomo, the treasurer, had even less involvement than Ribando. Both ultimately resigned. Gambino also helped Musacchia to operate the front companies and to persuade Herman DeJonge, the owner of Rappaport, to make untaxed sales to Musacchia.

I. BOLSTERING

During direct examination of Arthur Williams (a principal in CWM), Cuomo, Ribando and DeJonge, the government elicited testimony that cooperation agreements between the witnesses and the government required the witnesses to tell the truth and provided that if they lied on the witness stand they would be subject to prosecution for perjury. Appellants first objected, without stating grounds, to the prosecutor's questions to Ribando and Williams about these "truth-telling" provisions but these objections were overruled by the judge. After the judge overruled Musacchia's objection to the prosecutor's question to DeJonge about the requirement in his agreement that he testify truthfully, defense counsel moved for a mistrial on the ground that the government had improperly bolstered the testimony of Williams, Cuomo and Siegal prior to any defense attack on their credibility. ¹ The judge denied the motion but gave the following curative instruction to the jury:

The government has brought out testimony from several witnesses that I've decided should not have been brought out concerning the possibility of being prosecuted for testifying falsely. So the testimony concerning testifying falsely, I am instructing you to disregard those statements.

Appellants now claim that, despite this curative instruction, the government's deliberate and improper questioning of Williams, Cuomo and Ribando about the truth-telling provisions of their agreements and the court's failure to sustain appellants' timely objections constitute reversible error. ² The government concedes that the defense did not attack the credibility of Ribando, Cuomo and Williams before they testified but argues that even if subject to review, the error alleged by appellants was harmless because: 1) the judge gave a curative jury instruction; 2) defense counsel conceded during their argument for a mistrial that the entire testimony of Ribando and Williams was truthful, and therefore any bolstering was not prejudicial; and 3) Williams' statement was rendered harmless by a subsequent attack on his credibility by Musacchia's counsel and by the peripheral nature of his testimony.

The government argues at the outset that appellants' claim of error resulting from the admission of the cooperation agreement testimony is reversible only if it was plain error, because appellants raised only general objections to the testimony at trial. Appellants reply that their objections were "apparent from the context" under Fed.R.Evid. 103(a)(1), which states that a specific ground for objection need be raised only "if the specific ground was not apparent from the context." Based on a review of the trial transcript, it is clear that appellants' objections were apparent from the context. Defense counsel specifically objected to questions about the truth-telling provisions of the agreements and not to the testimony that the cooperation agreements were entered into by the witnesses. ³ Accordingly, the objections were preserved for review.

This court has consistently held that:

Because of the bolstering potential of cooperation agreements ... we have permitted such agreements to be admitted in their entirety only after the credibility of the witness has been attacked.... [B]olstering aspects [of cooperation agreements] such as promises to testify truthfully or penalties for failure to do so may only be developed to rehabilitate the witness after a defense attack on credibility.

United States v. Cosentino, 844 F.2d 30, 33 (2d Cir.), cert. denied, --- U.S. ----, 109 S.Ct. 303, 102 L.Ed.2d 322 (1988) (footnote and citations omitted); see United States v. Jones, 763 F.2d 518, 522 (2d Cir.), cert. denied, 474 U.S. 981, 106 S.Ct. 386, 88 L.Ed.2d 339 (1985). However, in United States v. Arroyo-Angulo, 580 F.2d 1137, 1146-47 (2d Cir.), cert. denied, 439 U.S. 913, 99 S.Ct. 285, 58 L.Ed.2d 260 (1978), we held that because defense counsel challenged the credibility of a government witness in the opening statement and later in cross-examination and during summation, such challenge was inevitable, and rendered harmless the error in admitting the witness's cooperation agreement into evidence during direct examination.

The government concedes that it was error to question the witnesses about the truth-telling provisions prior to defense challenges to credibility but contends that such error was harmless. Appellants argue that because the prosecutor intentionally bolstered the testimony of its witnesses the error cannot be deemed harmless under United States v. Borello, 766 F.2d 46, 56 (2d Cir.1985), in which the court held that the admission of and reading from the truth-telling portions of a cooperation agreement on direct examination were not harmless error even though the defense subsequently challenged part of Borello's testimony. The Borello court did not find it necessary to engage in harmless error analysis, id. at 58, stating:

[W]e have previously suggested that an Arroyo-Angulo error is harmless if the defendant subsequently attacks the witness's credibility. [United States v. Barnes, 604 F.2d 121, 151 (2d Cir.1979).] The error, however, cannot always be harmless.... [W]here we have spelled out in a series of cases...