U.S. v. Root

• Citation: 585 F.3d 145
• Decision Date: 29 October 2009
• Docket Number: No. 08-2888.,08-2888.
• Parties: UNITED STATES of America v. Thomas L. ROOT, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

585 F.3d 145

UNITED STATES of America v. Thomas L. ROOT, Appellant.

No. 08-2888.

United States Court of Appeals, Third Circuit.

Argued June 2, 2009.

Filed: October 29, 2009.

Michael J. Fischer [Argued], Robert A. Zauzmer, Office of United States Attorney, Philadelphia, PA, for Appellee.

Bradley D. Barbin [Argued], Columbus, OH, for Appellant.

Before McKEE, HARDIMAN and GREENBERG, Circuit Judges.

OPINION OF THE COURT

HARDIMAN, Circuit Judge.

Thomas Root appeals his judgment of conviction for tax evasion and conspiracy to defraud the United States following a jury trial. Although Root challenges the venue of the District Court and the sufficiency of the evidence as to the conspiracy count, the principal question of precedential import on appeal is whether the Government may charge a defendant for evading the assessment of taxes for multiple years in a single count.

I.

We review the facts in the light most favorable to the Government because the jury found Root guilty of both charges. United States v. Mornan, 413 F.3d 372, 382 (3d Cir.2005).

A.

A former attorney, Root began working in the mid-1990s as special projects director at Reading Broadcasting, Inc. (RBI), an independent television station in Reading, Pennsylvania. Root worked closely with RBI's Presidents—Micheal Parker and Frank McCracken—reviewing contracts, preparing shareholder correspondence and annual reports, and ensuring the company's compliance with Federal Communications Commission and Equal Employment Opportunity Commission regulations.

Pleased with Root's work, McCracken rewarded Root with additional commissions from a new client, Master Media Enterprises. The commissions were initially paid through RBI's payroll and included in Root's regular salary payments. As a result, taxes on the commissions were withheld and reflected on Root's W-2 forms. Soon thereafter, however, Root wrote to McCracken requesting that his commissions be paid to KGR New Perspectives (New Perspectives), a limited liability company that Root established in Ohio. Around the same time, McCracken— who also was receiving commissions from Master Media sales—requested that his commissions be paid to his own limited liability company (Framco) which Root had formed at McCracken's request. Between 2001 and 2004, RBI paid New Perspectives $94,077.34 and Framco $509,210.43. Because Root and McCracken had requested that the commissions be paid to their respective limited liability companies, these payments were not reflected on their respective W-2 forms.

In January 2002, RBI's bookkeeper, Barbara Williamson, asked McCracken and Root whether she should issue Form 1099s to New Perspectives and Framco to account for the commissions paid to those entities. Both men responded that they did not know whether 1099s were necessary when payments were made to limited liability companies, but that they would look into the matter further. When Williamson inquired a second time some weeks later, McCracken told her that she did not need to issue 1099s to those entities. As a result, RBI never notified the IRS of these payments.

At the same time they failed to inform the IRS of the commissions being paid to New Perspectives, Root and his wife Kathy cited the New Perspectives income on a loan application they submitted when refinancing their home mortgage in 2001. The payments made by RBI to New Perspectives were deposited equally into Kathy's personal account and into a New Perspectives account on which Kathy was the lone signatory.¹ In applying for the loan, the Roots listed as income Thomas Root's RBI salary as well as $3,000 of monthly income from New Perspectives attributable to Kathy Root. Because the bank required the couple to produce verification of the listed income, Thomas Root asked McCracken to sign a "Commission Agreement" between RBI and New Perspectives under which RBI would pay New Perspectives a two percent commission on monthly revenues that RBI collected from Master Media in exchange for sales services. Though Kathy Root signed the agreement on behalf of New Perspectives, the services were performed solely by Thomas Root.

In addition to the payments from RBI, Root received income from two Ohio attorneys, George Ford and Victor Merullo. Root performed legal research and writing services for the attorneys and instructed that they pay him through his sole proprietorship, Legal Information Services Associates (LISA). Ford and Merullo paid Root as an independent contractor but did not withhold taxes or issue 1099s to Root. From 2001 to 2003, Root earned $58,041.91 from Ford and $19,573.85 from Merullo.

Finally, Root performed services for Micheal Parker unrelated to his work at RBI, including setting up companies in connection with Parker's many business ventures. Parker paid Root—either directly or through LISA—a "success fee" or "bonus" for his work and covered his related expenses. Root earned $56,000 from Parker in 2001 and 2002. Parker never issued Root any 1099s in connection with these payments.

B.

In preparing joint tax returns for himself and his wife for the tax years 2001, 2002, and 2003, Root failed to disclose the commissions he received from RBI or the income received from Ford, Merullo, and Parker. Furthermore, New Perspectives did not file tax returns for those tax years. Consequently, Root owed taxes in the following amounts: $11,571 in 2001, $19,619 in 2002, and $6,473 in 2003. After New Perspectives was served with a grand jury subpoena in 2004, Root filed amended returns for 2001, 2002, and 2003, which disclosed the payments made to New Perspectives in those years. Root still failed to disclose the income from Ford, Merullo, or Parker, however.

A grand jury indicted Root on one count of conspiracy to defraud the United States in violation of 18 U.S.C. § 371, one count of tax evasion for the years 2000 to 2003 in violation of 26 U.S.C. § 7201, and seven counts of filing a false return in violation of 26 U.S.C. § 7206(1). The conspiracy count alleged that Root and McCracken agreed to defraud the United States by hiding portions of Root's income from the IRS.

Root, who is a resident of Ohio, moved for dismissal of the tax evasion and false return counts, contending that the Eastern District of Pennsylvania was an improper venue to bring those charges. The Government agreed to dismiss the false return charges and to limit the tax evasion count to the years 2001 to 2003, acknowledging that the alleged evasive acts relating to 2000 occurred exclusively in Ohio. After the Government made those concessions, the District Court determined that venue was proper with regard to the remaining counts and the case proceeded to trial. The jury convicted Root of both tax evasion and conspiracy. Following the verdict, Root moved for judgment of acquittal or, alternatively, for a new trial. The District Court denied both motions.²

II.

Root first argues that his conviction for tax evasion should be vacated and dismissed because it alleged multiple years of evasion in a single count and was therefore duplicitous. "Duplicity is the improper joining of distinct and separate offenses in a single count." United States v. Haddy, 134 F.3d 542, 548 (3d Cir.1998). Whether an indictment is duplicitous is a question of law subject to de novo review. Id. at 547.

A.

To determine whether a count is duplicitous, we must ascertain the allowable unit of prosecution to decide whether the indictment properly charges a violation of the pertinent statute. Id. at 548. To do so, we inquire into Congressional intent by examining the language of the statute. Id.

The tax evasion statute provides:

Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall ... be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ..., or imprisoned not more than 5 years, or both....

26 U.S.C. § 7201.

Section 7201 is silent regarding whether each tax year must be charged separately or whether multiple years can be combined in one count. That question was considered in United States v. Shorter, 809 F.2d 54 (D.C.Cir.1987), where the Government charged the defendant with one felony count of tax evasion that covered twelve tax years. During the relevant time period, the defendant had conducted all of his personal and professional business in cash, avoided the acquisition of attachable assets, and failed to record receipts and disbursements. See id. at 57. The defendant argued that trying him for all twelve years in one count was duplicitous. Id. at 56.

The Court of Appeals for the District of Columbia Circuit disagreed, holding that "tax evasion covering several years may be charged in a single count as a course of conduct ... where the underlying basis of the indictment is an allegedly consistent, long-term pattern of conduct directed at the evasion of taxes for [those] years." Id. The court held that the defendant's activities constituted a continuous course of conduct, and each affirmative act of evasion was intended to evade payment of all taxes owed or anticipated at the time. Id. The court also observed that section 7201 does not directly address whether it is possible to charge a continuing scheme to evade taxes for several years. Rather, the statute merely makes it a felony for any person to "willfully attempt[ ] in any manner to evade or defeat any tax imposed by this title or the payment thereof." Id. at 57 (quoting 26 U.S.C. § 7201). This broad language, the court concluded, supported a finding that a multi-year tax evasion count "may fairly be read to charge but a single scheme and is therefore not duplicitous." Id.

This Court followed Shorter in United States v. Pollen, 978 F.2d 78 (3d Cir.1992), where we upheld the Government's charge of four counts of tax evasion, each of which covered the same seven-year period. In each count, the Government alleged a distinct affirmative act: the...