U.S. v. Radtke
| Decision Date | 18 July 2005 |
| Docket Number | No. 04-2611.,No. 04-2593.,No. 04-2587.,04-2587.,04-2593.,04-2611. |
| Citation | 415 F.3d 826 |
| Parties | UNITED STATES of America, Appellee, v. Douglas G. RADTKE, Appellant. United States of America, Appellee, v. Scott Christopher Radtke, Appellant. United States of America, Appellee, Michael Thomas Donohoe, Appellant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Counsel who presented argument on behalf of the appellant, Douglas G. Radtke, was Paul C. Engh, Minneapolis, Minnesota. Counsel who presented argument on behalf of appellant, Scott Christopher Radtke, was Donald M. Lewis, Minneapolis, Minnesota. Counsel who presented argument on behalf of the appellant, Michael Thomas Donohoe, was Robert Dino Sicoli, Minneapolis, Minnesota.
Counsel who presented argument on behalf of the appellee was AUSA D. Gerald Wilhelm, Minneapolis, Minnesota.
Before WOLLMAN, LAY, and COLLOTON, Circuit Judges.
Douglas Radtke, Scott Radtke, and Michael Donohoe appeal their convictions for conspiracy to defraud the United States and the IRS, mail fraud, and federal tax law violations. They also appeal their sentences. We affirm.
The appellants' convictions resulted from their actions during the 1990s in connection with two corporations — Radtke Construction Company ("RCC") and Scaffold Services, Inc. ("SSI"). Douglas Radtke incorporated RCC in 1971 to perform construction work for the Department of Housing and Urban Development. He bought SSI, a scaffolding supply company, in 1974. During the 1990s, Douglas Radtke owned all of RCC and part of SSI, and was CEO of both companies. RCC was party to collective bargaining agreements with several unions, including the Carpenters and Joiners Union ("Union"). SSI was not party to any such agreements. Douglas Radtke's son Scott Radtke was vice-president and minority owner of SSI. Michael Donohoe was a field operations manager with SSI.
Beginning in 1992, SSI and RCC began intermittently paying employees for services performed on an ad hoc basis with checks written directly from the companies' "accounts payable" bank accounts, rather than through the companies' payroll system. These checks, referred to by all parties as "cash checks," withheld no taxes or union benefit payments. Until 1998, whether to pay an employee with a cash check or through the normal payroll system was decided on a case-by-case basis after the work had been performed.
In the early 1990s, Douglas Radtke hired Rita Galston to be SSI's controller. She was promoted to chief financial officer in 1997. Galston testified at trial that she had believed at the time she worked for SSI that paying workers who were not "regular employee[s]" of the company ("casual workers") without withholding taxes was permissible, so long as the payment amount did not exceed $600 in any given year. Many of the cash checks used to pay SSI and RCC employees were approved by Galston. Because of the supposed $600 ceiling on the dollar amount of the cash checks, casual workers who received cash checks totaling more than $600 were paid in checks made payable to relatives or friends. When workers who were on the regular payroll of SSI or RCC were paid in cash checks, a substitute name was always used.
At trial, evidence was presented regarding specific instances in which cash checks were paid in these substitute names. Galston testified that Douglas Radtke expressly authorized the use of cash checks to compensate his son Marc on two occasions. One time, the compensation was for driving a truck for SSI, and the check was made out in the name of Marc's wife, Damita. The second cash check paid to Marc Radtke, according to Galston, was made out in the name of his mother, Diane Radtke. A former SSI employee testified that Scott Radtke told him to submit a social security number and name not his own in order to receive payment over $600. Donohoe acknowledged that he was paid several times with cash checks made out to persons other than himself.
In 1997 and 1998, the use of cash checks at SSI became more regular with respect to a particular project. SSI won a contract to provide scaffolds for an inspection and repair project at Hennepin Energy Resource Company ("HERC") in 1997. The job at HERC involved a scaffolding system new to SSI. According to project manager Scott Such, Douglas Radtke, fearing it might take more time than expected to assemble the scaffolding, asked several workers including Such if they would be willing to receive payment in the form of cash checks for their work on the job. The savings SSI achieved through its non-payment of withholding taxes on the amounts paid by cash checks reduced the risk of a loss to the company on the HERC job.
SSI continued to perform services for HERC in 1998, but it became difficult to persuade workers to sign on for the "dirty, unpleasant job." (D. Radtke Br. at 14). According to Galston's testimony, Scott Such, the SSI project manager in charge of the HERC job, eventually approached her about the possibility of paying all of the workers at the job in cash checks as a means of persuading enough of them to participate. Galston believed that, because of the dollar amount of the HERC job (between $20,000 and $40,000 for labor in 1998), she could not authorize the use of cash checks for all of the workers without Douglas Radtke's approval. She testified that she and Such approached Douglas Radtke with the proposal, and that she told him of the "upside and downside of paying cash on a job this size." (T. Tr. at 290). The upside, according to Galston, was the savings to SSI despite compensating workers at a higher level. The downside of which Galston says she informed Douglas Radtke involved penalties and interest that would be assessed for SSI's failure to pay taxes or union benefits on the employees' pay, if the company's actions were discovered.
Galston testified that she did not recall specifically informing Douglas Radtke that using cash checks would be "against the law," (T. Tr. at 291), but claimed she told him that "from a risk standpoint, basically, one unhappy employee blowing the whistle would bring this to light." (Id. at 292). According to Galston, Douglas Radtke thought about the proposal for between five and ten minutes before approving it, saying he "felt that his employees were loyal to him and that none of them would ... turn him in." (Id.).
Galston's testimony was not uncontroverted at trial. Although Scott Such recalled discussing with Douglas Radtke the use of cash checks for himself and two other workers on the HERC project in 1997, he did not have any recollection of the April 1998 meeting recounted by Galston. Similarly, Douglas Radtke presented evidence indicating that he was traveling out of state during the time that Galston recalled meeting with him in April 1998.1
After the 1998 HERC job, use of cash checks at SSI and RCC continued to increase. Galston testified that she did not seek approval from Douglas Radtke to use cash checks on later jobs because she felt that "he'd approved the risk involved. . . with doing this." (T. Tr. at 304). Galston stated that she sought approval from various other SSI employees, including Scott Radtke, for use of cash checks on large jobs after 1998. (Id. at 306).
In 1999, SSI won a contract to erect scaffolding for a government-financed project at the Minneapolis-St. Paul International Airport. The contract for the job called for a certified payroll. The certification would require SSI to attest that proper withholding had been accomplished. Not realizing this until after the job had been completed, SSI paid some workers in cash checks. When faced with a certification requirement that would force her either to report amounts paid with cash checks, revealing that no withholding had taken place with respect to those amounts, or to underreport the hours worked, Galston testified that she chose to exclude some of the hours worked for cash checks.
Testimony was unanimous at trial that cash checks were the subject of a discussion between Galston, Such, and Douglas Radtke occurring after the HERC job, but the nature of the discussion differed in the recollections of various witnesses. According to Galston, the discussion was prompted by Such's request to use cash checks on a large job. Galston felt obligated to bring to Douglas Radtke's attention the fact that workers not on the regular payroll of SSI or RCC would not be covered by workers' compensation insurance if they were paid only in cash checks. She also remembered Douglas Radtke stating "very loud[ly]" at one point "no more cash this year." (T. Tr. at 806).
Douglas Radtke, by contrast, recounted hearing a discussion between Galston and Such regarding the use of cash checks on an upcoming job. Douglas Radtke testified that he "became very angry" and "got right in the middle of the discussion," telling Such to refrain from using cash checks because workers paid in this manner would not be covered by workers' compensation, and any injured worker would "end up suing us." (T. Tr. at 1542-43).
Scott Such described a conversation in which Douglas Radtke ordered him to "back the cash payroll down to just our main employees" so that he would not "end up in jail." (T. Tr. at 816). An RCC-employed carpenter testified that Such told him that Douglas Radtke had said the cash payroll was to be discontinued. Donohoe also testified to hearing Douglas Radtke yell "no more cash this year," or "no more cash."
SSI and RCC ceased their use of cash checks as calendar year 1999 drew to a close. On February 29, 2000, IRS agents executed a search warrant at the companies' offices, seizing documents and interviewing employees.
A grand jury indicted the appellants, along with Marc Radtke, Rita Galston, and ...
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