U.S. v. Romano

• Decision Date: 17 July 1991
• Docket Number: D,No. 1373,1373
• Citation: 938 F.2d 1569
• Parties: -5234, 91-2 USTC P 50,471 UNITED STATES of America, Appellee, v. Benedetto ROMANO and Giuseppa Romano, Defendants, Benedetto Romano, Defendant-Appellant. ocket 90-1723.
• Court: U.S. Court of Appeals — Second Circuit

Page 1569

938 F.2d 1569

68 A.F.T.R.2d 91-5234, 91-2 USTC P 50,471

UNITED STATES of America, Appellee, v. Benedetto ROMANO and Giuseppa Romano, Defendants, Benedetto Romano, Defendant-Appellant.

No. 1373, Docket 90-1723.

United States Court of Appeals, Second Circuit.

Argued May 8, 1991.

Decided July 17, 1991.

Michael T. Cornacchia, Asst. U.S. Atty. E.D. New York (Andrew J. Maloney, U.S. Atty. E.D. New York, Emily Berger, Asst. U.S. Atty., of counsel), for appellee.

Murray Appleman, New York City (Stephen Latzman, of counsel), for defendant-appellant.

Before PRATT, MINER and ALTIMARI, Circuit Judges.

GEORGE C. PRATT, Circuit Judge:

Defendant-appellant Benedetto Romano appeals from a judgment of conviction entered in the United States District Court for the Eastern District of New York, Joseph M. McLaughlin, Judge, after a bench trial on stipulated facts, on one count of income tax evasion in violation of 26 U.S.C. Sec. 7201. Romano was sentenced to a term of imprisonment of 18 months, a fine of $30,000, and a special assessment of $50. We reverse the judgment of the district court and remand for dismissal of the indictment.

BACKGROUND

On November 17, 1983, Benedetto Romano and his wife Giuseppa Romano were driving across the Peace Bridge from Buffalo, New York, to Ontario, Canada. Upon reaching the Canadian end of the bridge, they stopped at the customs station, and were referred to "the secondary yard" for inspection by Canadian customs official Bruce Mehlenbacher. Upon opening the trunk of the car and seeing two bags, Mehlenbacher examined one of the bags and noticed a large sum of cash. When asked how much money was in the bag, Romano responded "several thousand dollars". Upon learning from Romano that he had not complied with United States currency reporting requirements, see 31 U.S.C. Sec. 5317, Mehlenbacher contacted American customs across the bridge and asked if they wanted Romano sent back. Receiving an affirmative response, Mehlenbacher refused the Romanos entry into Canada and ordered them back across the bridge.

At the United States side, the Romanos were stopped and questioned by immigration officer Samuel Tiranno, who had been alerted by the American customs supervisor. Tiranno asked the Romanos about their citizenship and then asked if they had anything in their car. Romano responded that there was money in the car. When asked "how much?", Romano at first told Tiranno that it was $30,000 or $35,000, and every time Tiranno asked, the amount would go up a little bit. When Tiranno indicated that he needed a definite amount, Romano finally told him there was over $300,000 in his car.

At that point, Romano was directed to the secondary customs station where customs official Joseph Rappa asked Romano to fill out Customs Form 605B (baggage declaration) and Customs Form 4790 (report of international transportation of currency in excess of $10,000). After Romano complied, the officials seized all the money in the trunk, pursuant to 31 U.S.C. Sec. 5317. An exact count revealed a total of $359,500, mostly in $10 and $20 bills. While there is nothing precise in the record to establish it, the officials seized the money presumably because Romano had not filled out the monetary declaration before crossing the Peace Bridge toward Canada. The declaration he filled out, however, referred to both exporting and importing the money.

At this time, the Internal Revenue Service ("IRS") also served Romano with an IRS Form 3552, a termination assessment, for $169,973 as income tax due, based on the currency in his possession on that date. A termination assessment informs the person notified that his or her tax year is terminated as of a certain date and calculates the income tax due. The resulting tax liability becomes due immediately, and the IRS files a tax lien to secure payment of the tax debt. The IRS uses a termination assessment when it discovers that a person possesses an inappropriate amount of cash presumed to be taxable income from a previously undisclosed source and it fears that the collection of taxes may be thwarted if the person puts the cash or herself beyond the government's reach. The filing of a termination assessment does not relieve the taxpayer of her obligation to On the same day, the IRS also filed an IRS Form 668-A (notice of levy) with the District Director of Customs in Buffalo, thereby making demand on the Customs Service and attaching a portion of the seized money. The next day, the IRS filed a notice of the tax lien in the County Clerk's Office in Erie County. The IRS also sent to Romano, by certified mail, a copy of a Notice of Termination Assessment, dated November 22, 1983.

prepare, sign, and file a true and correct income tax return for that year.

The government subsequently instituted a civil forfeiture proceeding in the Western District of New York, to forfeit to the government the entire $359,500 in cash seized from the trunk of Romano's car. Understandably, Romano opposed the forfeiture. After a bench trial, the district court denied the government's petition for forfeiture, finding that the government had not presented proof that the claimant actually knew about the currency reporting statute. United States v. $359,500 in United States Currency, 645 F.Supp. 638 (W.D.N.Y.1986).

On the appeal by the government, however, we held that actual knowledge need not be proven in a civil forfeiture proceeding, and we remanded for a determination of whether Romano could be charged with constructive knowledge of the reporting requirement. United States v. $359,500 in United States Currency, 828 F.2d 930 (2d Cir.1987). Upon remand, Romano invoked the fifth amendment during his deposition, and the court consequently stayed the civil forfeiture proceeding pending the outcome of this criminal case which had been instituted against Romano on April 8, 1988.

In a six-count indictment, Benedetto and Giuseppa Romano were jointly charged by a grand jury in the Eastern District of New York with three counts of income tax evasion for the years 1981, 1982, and 1983, in violation of 26 U.S.C. Sec. 7201; one count of willful failure to file a return for the year 1983, in violation of 26 U.S.C. Sec. 7203; and two counts of filing false returns for the years 1981 and 1982, in violation of 26 U.S.C. Sec. 7206(1). On December 7, 1989, with the government's consent, the court dismissed all of the counts against Giuseppa Romano; it also dismissed all of the counts against Benedetto Romano except Count Three, which charged him with income tax evasion for the calendar year 1983. On June 8, 1990, based on the stipulated facts, the district court found Romano guilty of income tax evasion.

DISCUSSION

The indictment charges that, in violation of 26 U.S.C. Sec. 7201, Romano and his wife

[o]n or about October 15, 1984, * * * did knowingly and wilfully attempt to evade and defeat a large part of the income tax due and owing by them to the United States for the calendar year 1983, in an amount in excess of One Hundred Thousand Dollars ($100,000.00), by concealing and attempting to conceal from the Internal Revenue Service the nature and extent of their income and the location thereof.

In order to prevail on this charge of tax evasion, the government must prove the existence of three elements--(1) a substantial tax debt; (2) willfulness; and (3) an affirmative act by the defendant made on or about October 15, 1984, with the intent to evade or defeat a tax or payment of it. Sansone v. United States, 380 U.S. 343, 351, 85 S.Ct. 1004, 1010, 13 L.Ed.2d 882 (1965); United States v. Koskerides, 877 F.2d 1129, 1137 (2d Cir.1989). We address each of these elements in turn.

1. Substantial Tax Debt

We agree with the district court that the first element of the crime of evasion was satisfied. The district court found a substantial tax debt based on Romano's possession of the $359,500. That sum was inconsistent with his prior income tax filings and was presumably earned income in 1983. Because Romano has conceded that the money is his, he owed to the government tax on that money as soon as the IRS served him with its termination assessment, and he continues to owe the money until the tax due is paid or is otherwise dispelled. Since the termination assessment The district court properly rejected Romano's argument that no tax debt could exist because "the government" had already seized the entire $359,500 and had brought a civil forfeiture proceeding to retain it. It was the customs service, not the IRS, that held the money. Even though the IRS had filed with customs a notice of levy for the assessed tax due, that levy would be effective only if Romano is eventually successful in the forfeiture action. If he loses on the forfeiture and the government or some third party ends up as "owner" of the currency, the tax owed by Romano would not be satisfied out of that fund. Under these circumstances the district court correctly held that there was a substantial tax debt notwithstanding the forfeiture.

was served on November 17, 1983, Romano's tax debt arose on that day; and since he has yet to satisfy that debt, he also had a tax debt on October 15, 1984, the date on which Romano is charged in the indictment with evading taxes.

2. Willfulness

We next consider willfulness. Satisfaction of the willfulness requirement is closely connected with the affirmative act element. See United States v. Stone, 702 F.2d 1333, 1339 n. 4 (11th Cir.1983). Evidence of affirmative acts may be used to show willfulness, and the defendant must commit the affirmative acts willfully to be convicted of tax evasion. In this case, if the affirmative act element is...