U.S. v. Schramm, 94-3619
| Decision Date | 30 January 1996 |
| Docket Number | No. 94-3619,94-3619 |
| Citation | 75 F.3d 156 |
| Parties | UNITED STATES of America v. Ronald SCHRAMM; Anthony DeCello; Oleg Vinokurov, a/k/a Alex; Michael Zubinsky, a/k/a Steve; Ashok Tyagi; Aminderjeet S. Aulakh, a/k/a Andy; Amarbir Singh, a/k/a Sonny; Michael Dubinski, a/k/a Steve; Anthony DeCello, Appellant. |
| Court | U.S. Court of Appeals — Third Circuit |
W. Thomas McGough, Jr. (argued), Reed, Smith, Shaw & McClay, Pittsburgh, PA, for Appellant.
Bonnie R. Schlueter, James H. Love (argued), Office of United States Attorney, Pittsburgh, PA, for Appellee.
Before: BECKER, ROTH and LEWIS, Circuit Judges.
Anthony DeCello appeals from a conviction for conspiring to commit mail fraud for the purpose of avoiding Pennsylvania's Fuel Use Tax. In his appeal, DeCello raises four issues: (1) that there is insufficient evidence to support his conviction; (2) that the evidence adduced at trial established a prejudicial variance with the conspiracy charged in the indictment; (3) that his prosecution for conspiring to commit mail fraud violates principles of federalism; and (4) that the district court erred when it admitted a copy of his 1992 tax return at trial.
Because we agree with DeCello that there is insufficient evidence to support the jury's verdict, we need not address the remaining three issues. For the reasons which follow, we will reverse DeCello's conviction.
DeCello was indicted along with six co-defendants for criminal conspiracy in violation of 18 U.S.C. § 371. The conspiracy count alleged a single conspiracy with two objects: (a) to defraud the United States regarding federal diesel fuel excise taxes, and (b) to use the United States mail in an effort to defraud the Commonwealth of Pennsylvania with respect to the state's Fuel Use Tax, a tax imposed on the sale of diesel motor fuel.
The conspiracy involved a scheme in which wholesalers and retailers attempted to avoid paying federal and state taxes imposed on what is known as "number two" fuel oil. Except for small variations in additives, "number two" fuel oil can be used as either home heating oil or diesel fuel. If used as diesel fuel, it is subject to a Federal Excise Tax of 20.1 cents per gallon. The Commonwealth of Pennsylvania imposes an additional 10.35 cents per gallon Oil Franchise Tax at the wholesale level, and an additional 12 cents per gallon Fuel Use Tax at the retail level. In contrast, when used as home heating oil, "number two" fuel oil is not subject to any taxes.
The fuel taxes are collected and reported by the respective sellers in the chain of commerce. Wholesale distributors of diesel fuel are required to collect the federal excise tax and the Commonwealth's Oil Franchise Tax, while retailers are required to pay a Highway Fuel Use Tax to the Commonwealth. Retailers must also file monthly fuel use tax reports which include, among other information, the name of all diesel fuel wholesale suppliers and the amount of diesel fuel purchased from each supplier during each reporting period.
Both federal and state law allow registered wholesale participants to buy and sell number two fuel oil in tax-free transactions. For example, wholesalers of diesel fuel are required to register with the Internal Revenue Service for Form 637 ("Registration For Tax Free Transactions"). This allows a registered wholesaler to sell diesel fuel to another registered wholesaler without paying the federal excise tax. Retailers and unregistered wholesalers, on the other hand, are not authorized to obtain Form 637. Consequently, any sale of diesel fuel to a retailer or to an unregistered wholesaler is subject to excise taxes.
The Commonwealth of Pennsylvania's excise tax law is subject to a similar registration system. All retail sales of diesel fuel are subject to Pennsylvania's Fuel Use Tax.
The conspiracy in this case allegedly involved fuel wholesalers and retail truck stops attempting to escape the federal and state taxes imposed on diesel fuel. According to the Government, the conspiracy accomplished this by having the wholesalers invoice deliveries of taxable diesel fuel as nontaxable sales of home heating oil. The retailers who accepted delivery of this fuel paid in cash, kept the transactions off their official books, adjusted the oil meters, mingled the untaxed oil with oil that had been taxed and acquired from other wholesalers, and filed false tax returns. In this way, both the wholesalers and retailers avoided paying their respective taxes. By avoiding these taxes, the wholesalers were able to undercut the prices charged by legitimate wholesale competitors. The retailers were then able to purchase diesel fuel at lower prices and keep the transactions entirely off their books.
This particular scheme was the brainchild of Leon Uzdin, who began his operations in the Philadelphia area, and expanded them westward to the Pittsburgh area. According to the indictment, Anthony DeCello participated in Uzdin's operation in several ways: first, by recruiting haulers to deliver the fuel to the participating truck stops; second, by picking up the payments from the truck stops; and third, by delivering the cash payments to the scheme's principals. In return, according to the indictment, DeCello received a commission and expenses. Finally, when Uzdin's relationship with a fuel supplier began to sour, DeCello helped recruit a new fuel source.
DeCello and Uzdin initially met with Terry Tyhonas, a hauler recruited by DeCello. At that meeting, DeCello asked Tyhonas to furnish "[s]ome fuel with a paper and some fuel without a paper." (i.e., with and without tax). After Tyhonas turned them down, DeCello found Ronald Schramm, president of Judy Oil Co. Schramm agreed to furnish the fuel oil and invoice the sales to Main Line as home heating oil. This relationship continued for almost a year, during which Judy Oil furnished Uzdin with approximately eight million gallons of diesel fuel. For his efforts in recruiting Schramm, DeCello was promised a commission of one cent per gallon.
All of the participants allegedly filed false tax returns during the scheme. Judy Oil filed quarterly federal excise tax returns which omitted all of the taxable sales that were occurring between Judy Oil and the various retailers involved in the scheme. The retailers involved filed federal and state income tax reports which omitted untaxed deliveries and sales of diesel fuel. In addition, DeCello filed a federal income tax return in 1992 in which he allegedly omitted payments and commissions obtained from Uzdin.
Five of DeCello's six co-defendants entered guilty pleas to the conspiracy charge. DeCello and Schramm proceeded to trial. The jury convicted DeCello on the conspiracy charge, and convicted Schramm on conspiracy and other charges. Through special verdict forms, the jury concluded that Schramm conspired to defraud the United States and, as we will develop more fully below, that DeCello conspired to commit mail fraud. DeCello's post-trial motions were denied and this appeal followed.
The district court had jurisdiction over this matter pursuant to 18 U.S.C. § 3231. We have jurisdiction under 28 U.S.C. § 1291.
The principal issue before us is whether there was sufficient evidence to support the jury's conclusion that DeCello entered into an agreement and knew that the agreement had the specific unlawful purpose charged in the indictment, particularly, to evade and defeat Pennsylvania's Fuel Use Tax. United States v. Scanzello, 832 F.2d 18, 20 (3d Cir.1987). Our review of this issue is circumscribed by the fundamental principle that:
[i]t is not for [an appellate court] to weigh the evidence or to determine the credibility of witnesses. The verdict of a jury must be sustained if there is substantial evidence, taking the view most favorable to the Government, to support it.
Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 (1942). A verdict will only be overturned "if no reasonable juror could accept the conclusion of the defendant's guilt beyond a reasonable doubt." United States v. Coleman, 811 F.2d 804, 807 (3d Cir.1987). Consequently, a "claim of insufficiency of the evidence places a heavy burden on an appellant." United States v. McGlory, 968 F.2d 309, 321 (3d Cir.1992) (quoting United States v. Gonzalez, 918 F.2d 1129, 1132 (3d Cir.1990)).
Nonetheless, the government must prove each element of a conspiracy beyond a reasonable doubt, and we have noted that "the sufficiency of the evidence in a conspiracy prosecution requires close scrutiny." United States v. Coleman, 811 F.2d 804, 807 (3d Cir.1987). There must be substantial evidence establishing "a 'unity of purpose,' intent to achieve a common goal, and an agreement to work together toward that goal." McGlory, 968 F.2d at 321 (quoting United States v. Wexler, 838 F.2d 88, 90-91 (3d Cir.1988)). Although all of the elements of the government's case, including the existence of the agreement, may be proven entirely through circumstantial evidence, United States v. Kapp, 781 F.2d 1008, 1010 (3d Cir.1986), "there must be evidence tending to prove that defendant entered into an agreement and knew that the agreement had the specific unlawful purpose charged in the indictment." Scanzello, 832 F.2d at 20.
The indictment charged DeCello and his co-defendants with a single conspiracy which sought to accomplish two purposes. One purpose, set forth in paragraph 18(a) of the indictment, was to:
[d]efraud the United States Department of the Treasury and the Internal Revenue Service, a department and agency of the United States, by impeding, impairing, obstructing, and defeating the lawful government functions of the Department of the Treasury and the Internal Revenue Service in the ascertainment, computation, assessment, and collection of the revenue; to wit, federal diesel fuel...
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