U.S. v. Noske
| Decision Date | 15 August 1997 |
| Docket Number | 96-1999,96-1997,Nos. 95-3235,96-2001,95-3254,96-2006 and 96-2008,96-2004,s. 95-3235 |
| Citation | 117 F.3d 1053 |
| Parties | -5190, 97-2 USTC P 50,538 UNITED STATES of America, Appellee, v. Joan M. NOSKE, Appellant. UNITED STATES of America, Appellee, v. James L. NOSKE, Appellant. UNITED STATES of America, Appellee, v. James L. NOSKE, Appellant. UNITED STATES of America, Appellee, v. Joan M. NOSKE, Appellant. UNITED STATES of America, Appellee, v. John B. ELLERING, Appellant. UNITED STATES of America, Appellee, v. Imelda M. SPAETH, Appellant. UNITED STATES of America, Appellee, v. Laverne SCHERPING, Appellant. UNITED STATES of America, Appellee, v. Loren SCHERPING, Appellant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Virginia Villa (argued), Minneapolis, MN, for Appellant Joan Noske.
Robert Malone (argued), St. Paul, MN, for Appellant John Ellering.
Nancy L. Vanderheider (argued), Minneapolis, MN, for Appellant Imelda Spaeth.
Daniel L. Gerdts, Minneapolis, MN, argued (John C. Brink, on the brief), for Appellant Lavern Scherping.
Thomas G. Dunnwald (argued), Minneapolis, MN, for Appellant Loren Scherping.
Paul G. Morreim (on the brief), Eagan, MN, for Appellant James Noske.
William Whitledge, Washington, DC, argued (Robert E. Lindsay and alan Hechtkopf, on the brief), for Appellee.
Before McMILLIAN, BEAM, and FAGG, Circuit Judges.
James L. Noske, a law school graduate and financial planner, and his sister, Joan M. Noske, an accountant and tax return preparer, sold services promoting the use of business trusts and supposedly tax-exempt corporations to help many individuals hide income and assets from the Internal Revenue Service (IRS). Basically, the Noskes helped their clients facing tax assessments transfer assets to one of the Noskes' "nonprofit" corporations in a "sale" for no consideration. The transfer made it appear as though the client no longer owned the property, preventing the IRS from levying on it to satisfy outstanding tax liabilities, but the clients continued to exercise full control over the property. The Noskes also helped clients seeking to reduce or avoid federal income tax form a business trust, which conducted no business activity, name the Noskes' "nonprofit" corporations as trustees, and transfer all income-producing property to the trust. Through a contribution of trust shares to one of the purported nonprofit corporations and other maneuvers, the arrangement effectively evaded the assessment and payment on 60% of the clients' income. With the help of Imelda M. Spaeth from the early 1980s through the early 1990s, and John B. Ellering from 1988 through 1993, the Noskes obtained third parties to sign often-blank documents as officers of the Noske corporations. Joan Noske filed income tax returns for the trusts, showing distributions to Noske corporations and the clients.
The Noskes' clients included brothers Loren and Laverne Scherping, owners and operators of a dairy farm in Minnesota. After the IRS decided the Scherpings owed a tax deficiency, the brothers purported to convey their farm to a trust formed with the help of the Noskes, naming Noske corporations as trustees. The Scherpings also transferred all their farm personal property, including equipment and livestock, to a Noske corporation. The Scherpings retained full control over their farm, however. When the Tax Court decided the income earned from the farm was taxable to the Scherpings individually rather than the Noske corporation, Joan Noske helped the Scherpings sell the cattle to avoid an IRS levy. In cashing the cattle purchasers' checks, Joan Noske deliberately evaded requirements that banks report currency transactions over $10,000 by breaking the transactions down into smaller amounts.
For their parts in the scheme, the Noskes, Spaeth, and Ellering were charged in Count I of the indictment with conspiracy to defraud the United States by impeding the IRS. The Government also charged the Noskes and the Scherpings with conspiracy to evade income taxes assessed against the Scherpings in Count II of the indictment, and with income tax evasion in Count III. Joan Noske and the Scherpings were also charged with several counts of structuring a monetary transaction for negotiation of the cattle proceeds. The Noskes, Spaeth, and Ellering were convicted of all charges against them. The Scherpings were found guilty of conspiracy to evade income taxes, but acquitted on the other charges. The Noskes, Spaeth, Ellering, and the Scherpings appeal. Having carefully examined their many arguments, we affirm.
The Noskes contend their prosecution on the conspiracy counts violates double jeopardy because the IRS had already imposed civil tax penalties against them for promoting abusive tax shelters. See 26 U.S.C. § 6700 (1988) (). The Noskes have not been punished by assessment of the § 6700 penalties, however, because the penalties are remedial rather than punitive in nature. The Noskes were jointly assessed a penalty of $490,174, representing 20% of the income derived from their abusive activity. As the district court found, this is not overwhelmingly disproportionate to the Government's damages. See United States v. Halper, 490 U.S. 435, 439, 109 S.Ct. 1892, 1896, 104 L.Ed.2d 487 (1989) (). Although no final tally has been calculated, the district court found the Government had incurred "obviously substantial" costs and "significant expenses" because of the Noskes' behavior, including lost tax revenue and costs of investigation and prosecution over a ten-year period. At bottom, the penalties imposed do not exceed what could reasonably be regarded as compensation for the Government's damages. See id. "[T]he Government is entitled to rough remedial justice," id. at 446, 109 S.Ct. at 1900 regardless of the precise amount needed for compensation. See Thomas v. Commissioner, 62 F.3d 97, 101 (4th Cir.1995) (). The district court concluded, and we agree, that the penalty serves the remedial goal of reimbursing the Government.
The Noskes also contend the Government's evidence against them included or was derived from information and records they provided to three particular IRS agents under a written immunity agreement in effect between 1983 and 1985. The district court held a five-day hearing on the immunity issue and concluded the Noskes had been granted derivative use immunity. After reviewing the 1994 indictment, the sources of information that led to the indictment, and the information provided under the grant of immunity, the district court held the Government had shown the information used to obtain the indictment was derived from legitimate, independent sources, and the information provided by the Noskes to the three agents was not used, directly or indirectly, in obtaining the indictment. Having reviewed the record, including the district court's lengthy report and addenda, we conclude the district court committed no error. See United States v. Wiley, 997 F.2d 378, 381 (8th Cir.1993).
Next, the two conspiracy counts do not subdivide a single criminal conspiracy into multiple violations of the same offense in violation of double jeopardy. Although the two counts charge violations of the same statute, 18 U.S.C. § 371, the totality of the circumstances reveals the counts address separate agreements. See United States v. Okolie, 3 F.3d 287, 290-91 (8th Cir.1993). Count I charged the Noskes, Spaeth, and Ellering with conspiracy to defraud the United States, and the evidence showed they agreed to provide sham entities and record keeping services that permitted clients to hide their own tax liabilities. Count II charged the Scherpings, who were not members of the Count I conspiracy, and the Noskes with conspiring to evade the payment of the Scherping's tax liabilities. The evidence established the Scherpings were motivated to evade only their own tax liabilities, rather than to provide general tax evasion services like the Noskes, Spaeth, and Ellering. See United States v. Rosnow, 977 F.2d 399, 405-06 (8th Cir.1992). In sum, the two conspiracy counts address separate agreements with separate objects among different people, not a single agreement to commit two crimes. See United States v. Thomas, 759 F.2d 659, 662 (8th Cir.1985).
The district court did not abuse its discretion in denying motions by Spaeth and the Scherpings for severance. Joinder was proper under Fed.R.Crim.P. 8(a), and Spaeth and the Scherpings have not shown actual prejudice warranting severance under Fed.R.Crim.P. 14. See United States v. Delpit, 94 F.3d 1134, 1143 (8th Cir.1996). Acquittals of some defendants on some charges and a defendant charged only with count II show the jury was able to compartmentalize the evidence. See id. at 1144; United States v. Nevils, 897 F.2d 300, 305 (8th Cir.1990). Further, any risk of prejudice was reduced by the district court's instructions, which directed the jury to consider each offense and its supporting evidence separately, and to analyze the evidence with respect to each individual without considering evidence admitted solely against other defendants. See Delpit, 94 F.3d at 1144.
The district court also did not abuse its discretion in refusing to admit evidence of the Scherpings' willingness to pay what they believed was the correct amount of their income tax liabilities for 1979 through 1983. See id. at 1146 (standard of review). Under a Tax Court ruling, the Scherpings were legally obligated to pay a higher amount than they allegedly believed was correct. The Scherpings' willingness to pay an amount less than they legally...
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