U.S. v. Presbitero

• Decision Date: 24 June 2009
• Docket Number: No. 07-1712.,No. 07-1610.,No. 07-1129.,07-1129.,07-1610.,07-1712.
• Citation: 569 F.3d 691
• Parties: UNITED STATES of America, Plaintiff-Appellee, Cross-Appellant, v. Ronald J. PRESBITERO, Defendant-Appellant, Cross-Appellee, and Joe J. Velasquez, Defendant, Cross-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

569 F.3d 691

UNITED STATES of America, Plaintiff-Appellee, Cross-Appellant, v. Ronald J. PRESBITERO, Defendant-Appellant, Cross-Appellee, and Joe J. Velasquez, Defendant, Cross-Appellee.

No. 07-1129.

No. 07-1610.

No. 07-1712.

United States Court of Appeals, Seventh Circuit.

Argued February 28, 2008.

Decided June 24, 2009.

As Amended June 26, 2009.

John F. Podliska, Amarjeet S. Bhachu (argued), Office of the United States Attorney, Chicago, IL, for Plaintiff-Appellee, Cross-Appellant.

Marc W. Martin, Chicago, IL, for Defendant, Cross-Appellee Velasquez.

Patrick W. Blagen, Chicago, IL, for Defendant-Appellant, Cross-Appellee Presbitero.

Before ROVNER, WOOD, and WILLIAMS, Circuit Judges.

WILLIAMS, Circuit Judge.

A jury heard abundant evidence that although Presbitero Drywall Company's tax returns contained deductions for payments to subcontractors, the subcontractors did not exist. The jury also heard that the company's owner, Ronald Presbitero, and construction superintendent, Joe Velasquez, went to great lengths to perpetuate the fiction, even having checks made out to the non-existent subcontractors that were cashed every week. Because we conclude a rational jury could have concluded that one reason both Presbitero and Velasquez attempted to make up the subcontractors was to impede the functions of the Internal Revenue Service, we uphold Presbitero's conviction for filing false tax returns and reverse the judgment of acquittal granted to Velasquez for conspiring to defraud the United States. The district court denied the government's request for a leadership enhancement for Presbitero based on its decision to acquit Velasquez, which we are reversing, so we remand Presbitero's case for resentencing.

I. BACKGROUND

Ronald Presbitero was the namesake, president, and sole owner of Presbitero Drywall Company ("PDC"). As the name suggests, PDC was in the business of installing drywall. Joe Velasquez worked as PDC's construction superintendent. At trial, a jury heard that Presbitero signed PDC's corporate tax returns from 1995 through 1998. On each return, the company claimed tax deductions on schedule A, line 5 totaling approximately $5.9 million. James Hughes, the company's accountant, testified that he calculated the deductions by adding the amounts of canceled checks made out from PDC to six subcontractors.

The government maintained at trial that the six subcontractors did not exist. The six entities were all incorporated on the same day. None ever filed a tax return of any sort with the IRS, none paid its annual tax with the Illinois Secretary of State, and the six corporations had all been dissolved (by operation of Illinois statute for failure to pay tax and file an annual report) before PDC issued any checks to them. Residents at several of the entities' listed business addresses also testified that no drywall businesses operated from the listed addresses. In addition, two foremen who worked for PDC during the relevant time said they had not seen subcontractors at job sites during their tenure and that they were not aware of the existence of the six subcontractors. The foremen also testified that drywall work was seasonal, with less work in the winter. IRS Special Agent Helene Seltzer testified that the hundreds of checks made out from PDC to the six subcontractors showed no seasonal fluctuation. The jury also heard that Presbitero ordered blank invoice forms for invoices from the six subcontractors and asked that each invoice look "different." The forms company delivered the blank invoices not to any subcontractors, but to PDC.

Velasquez was in charge of hiring, managing, and assigning PDC's drywall installers. Each week, for several years, Velasquez and others told Presbitero's assistant the number of hours subcontractors had purportedly worked that week. The assistant then prepared checks and gave them to Presbitero, who signed them. She also prepared invoices from the six subcontractors to PDC, but the invoices were never mailed anywhere. Nor did she recall ever receiving a piece of mail, telephone call, or visit from a subcontractor.

Instead of mailing checks to the subcontractors, Velasquez or his sister, father, or one of his children would pick up the checks from Presbitero's assistant. Velasquez had made arrangements with Leonard Sklare whereby Sklare agreed to cash the checks at his currency exchanges every week or two in exchange for a fee of $50,000. Before the checks were taken to one of Sklare's currency exchanges each week, Velasquez often called ahead to tell Sklare the total value of the checks to be cashed to ensure Sklare had enough cash on hand. Velasquez also often took the checks himself to be cashed. The checks were cashed for tens of thousands of dollars at a time.

Presbitero delivered the canceled checks to Hughes, his accountant, so they could be used to prepare the company's financial statements and tax returns. On PDC's tax return for the fiscal year ending April 30, 1997, the company reported "other costs" on schedule A, line 5 of Form 1120 as $2,577,546. That number principally came from the checks made out to the six subcontractors the government maintained were fictitious. On the company's tax return for the fiscal year ending April 30, 1998, line 5 for "other costs" was reported as $1,540,370, and a supporting schedule reported that of that amount, costs for "sub-contractors" were $1,478,121. In addition to explaining how he prepared PDC's tax returns, Hughes also explained that when PDC paid its employees, he would complete payroll tax forms containing amounts withheld from employees. He stated that such reporting did not apply to the employees of a subcontractor because the subcontractor was responsible for those payments.

An indictment charged Presbitero and Velasquez with conspiring to defraud the United States by impeding, impairing, and obstructing the lawful functions of the Internal Revenue Service in the correct determination and collection of revenue and income taxes, in violation of 18 U.S.C. § 371. The indictment also charged Presbitero with two counts of making false tax returns on behalf of PDC, in violation of 26 U.S.C. § 7206(1).

The jury convicted on all counts, returning a guilty verdict against both defendants on the conspiracy count and against Presbitero on the other counts. The district court later granted the defendants' request for a judgment of acquittal on the conspiracy count on the basis that Velasquez lacked the intent to defraud the IRS. Because a conspiracy conviction requires an agreement between at least two persons, Presbitero's conspiracy conviction fell as well. The district court denied Presbitero's request for a mistrial on the other two counts. After calculating the advisory guidelines range of imprisonment as 51 to 63 months, the district court sentenced him to 24 months' imprisonment, two years' supervised release, a fine of $50,000, and 100 hours of community service. Presbitero appeals, and the government brings a cross appeal.

II. ANALYSIS

Presbitero raises several challenges to his convictions for filing false corporate tax returns. In a cross appeal, the government appeals the district court's grant of Velasquez's motion for judgment of acquittal as well as Presbitero's sentence. We address each argument in turn.

A. Presbitero's Appeal

Presbitero appeals his conviction for willfully filing materially false corporate tax returns in violation of 26 U.S.C. § 7206(1). Pursuant to this section, it is a felony to

Willfully make[] and subscribe[] any return, statement, or other document, which contains or is verified by a written declaration that is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter.

1. Constructive Amendment of the Indictment

Presbitero first argues there was an impermissible constructive amendment of the indictment, which occurs when the permissible bases for conviction are broadened beyond those presented to the grand jury. See United States v. Blanchard, 542 F.3d 1133, 1143 (7th Cir.2008); see also Stirone v. United States, 361 U.S. 212, 216-19, 80 S.Ct. 270, 4 L.Ed.2d 252 (1960). "[T]he allegations in the indictment and the proof at trial must match in order `to insure that the defendant is not subject to a second prosecution, and to give the defendant reasonable notice so that he may prepare a defense.'" Blanchard, 542 F.3d at 1143 (citations omitted). Presbitero takes exception to the government's argument at trial that he willfully filed false tax returns by including amounts attributable to fictitious subcontractors—a theory, he argues, not charged in the indictment.

We begin with our standard of review. The government maintains that Presbitero failed to raise a timely objection in the trial court on the constructive amendment of the indictment grounds he now raises, and that our review on this point should, therefore, be for plain error only. See United States v. Khilchenko, 324 F.3d 917, 920 (7th Cir.2003). We agree. First, Presbitero's counsel did not make a constructive amendment of the indictment objection during the jury instruction conference, as he contends. During the discussion of a proposed instruction, Presbitero's counsel took issue with the fact that although the indictment alleged that multiple lines on the tax return were false, the government argued it only had to prove, for each count, that one of the lines alleged was false. There was no mention of a constructive amendment to the indictment. And there was also no mention of the complaint Presbitero now makes—that the government argued at trial that the subcontractors were fictitious. Presbitero's objections at the jury instruction conference did not preserve his constructive amendment argument.

Presbitero did raise a constructive amendment argument in a post-trial motion, but it did not preserve his current argument either. The argument in his ...