U.S. v. Thayer

• Citation: 201 F.3d 214
• Decision Date: 28 December 1999
• Docket Number: No. 98-1750,98-1750
• Parties: (3rd Cir. 1999) UNITED STATES OF AMERICA, V. WILLIAM H. THAYER, APPELLANT
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 214

201 F.3d 214 (3rd Cir. 1999)

UNITED STATES OF AMERICA,

V.

WILLIAM H. THAYER, APPELLANT

No. 98-1750

U.S. Court of Appeals, Third Circuit

Argued July 29, 1999

December 28, 1999

On Appeal from the United States District Court for the Eastern District of Pennsylvania D.C. Criminal No. 97-cr-00184-1 (Honorable Edward N. Cahn) [Copyrighted Material Omitted] Peter Goldberger, Esquire (argued), Law Office of Peter Goldberger 50 Rittenhouse Place Ardmore, Pennsylvania 19003-2276, Attorney for Appellant.

Ewald Zittlau, Esquire (argued), Office of United States Attorney 615 Chestnut Street, Suite 1250 Philadelphia, Pennsylvania 19106, Attorney for Appellee.

Before: Scirica and McKEE, Circuit Judges, and Brotman, District Judge^*

OPINION OF THE COURT

SCIRICA, Circuit Judge.

Defendant William Thayer appeals his jury conviction and sentence. William Thayer and his wife and co-defendant Josephine Thayer (who has not appealed her conviction or sentence) were convicted on twenty counts of criminal liability for willful failure to pay over federal withholding and F.I.C.A. taxes in violation of 26 U.S.C. S 7202 and 18 U.S.C. S 2; willful filing of false claims against the government, in violation of 18 U.S.C. SS 2, 152; and willful concealment of bankruptcy-estate assets, in violation of 18 U.S.C. SS 2, 152. We will affirm the convictions, but will vacate the judgment of sentence and remand for further proceedings consistent with this opinion.

I. Background

A. Facts

William and Josephine Thayer were sole owners of two corporations, Mobile Inmate Systems Corp. (MIS) and Equipment Leasers of Pennsylvania, Inc. (ELOP).¹ MIS and ELOP both maintained corporate accounts at First Lehigh Bank, as did two other companies owned and operated by the Thayers. In the late 1980s or early 1990s First Lehigh Bank had asked Thayer to consolidate the funds of all four of his companies into one account maintained in MIS' name ("consolidated MIS account"). According to CPA Robert Gillespie, who testified for the Thayers at trial, both MIS and ELOP deposited money into the consolidated MIS account consistent with the bank's request.

Both MIS and ELOP accurately reported their employee federal withholding and F.I.C.A. taxes in IRS Form 941, Employer's Quarterly Federal Tax Return under I.R.C. S 6672(a).² But from 1991 to 1993, MIS failed to pay over the federal withholding and F.I.C.A. taxes withheld from employees' wages in ten quarters. From 1991 to 1994, ELOP failed to pay over the federal withholding and F.I.C.A. taxes withheld in eleven quarters. In July 1991, William Thayer signed IRS Form 2751, "Proposed Assessment of 100 Percent Penalty," accepting personal responsibility for unpaid tax liability and civil penalties for MIS' delinquent Form 941 taxes for two quarters in 1991. In June 1992, the Thayers signed IRS Form 2751 for ELOP's unpaid taxes for the second and fourth quarters of 1991, acknowledging the same personal responsibilities with regard to ELOP.

On their personal income tax returns (IRS Forms 1040) for 1991, 1992, and 1993, the Thayers reported negative or very small adjusted gross income based on losses carried forward and requested refunds for all or most of the money that had been withheld from their salaries in those years. Josephine Thayer testified she expected the IRS to automatically apply the refunds toward the unpaid withholding taxes and never expected to receive a cash payment. No money was sent to the Thayers.

In 1988 William Thayer bought a condominium in Atlantic City. Because he could not meet the purchase price at closing, the deed was held in escrow and Thayer commenced payments toward the purchase price. The sales agreement and deed listed William Thayer as grantee. Thayer made the first two payments on his personal checks, with "Loan to ELOP" written as notations. Subsequent payments were made from the MIS corporate checking account at First Lehigh Bank. At trial, Josephine Thayer testified that the condominium was bought for ELOP's business. CPA Gillespie testified that ELOP had sufficient money in the consolidated MIS account to cover the payments. In 1995, the condominium seller provided a new deed, which stated in one place that Thayer was the grantee and in another that Atlantic County Investments Inc. was the grantee. In late 1996, the Thayers moved into the condominium.

In 1991, MIS petitioned for Chapter 11 bankruptcy. There were 24 creditors, all unsecured, including the IRS and the Pennsylvania Department of Revenue. During the Chapter 11 proceedings, ten payments were made from the consolidated MIS account at First Lehigh Bank for the Atlantic City condominium, totaling approximately $170,800. MIS did not file reports of its operating expenses as required by 11 U.S.C. S 704(8).

B. Procedural History

The Thayers were indicted on four clusters of charges and convicted by a jury on several counts. In Counts 1-21, the Thayers were charged with willful failure to pay over withheld taxes on behalf of MIS (ten quarters, Counts 1-10) and ELOP (11 quarters, Counts 11-21) in violation of I.R.C. S 7201 and 18 U.S.C. S 2. The Thayers were found guilty on the counts charging nonpayment of taxes for the quarters in which trial testimony established the companies had positive cash balances at some point during the quarter. The Thayers were acquitted of willful evasion of income taxes in violation of I.R.C. S 7201 and 18 U.S.C. S 2 (counts 22-24). The government charged the Thayers' corporations had paid for their personal living expenses by making payments on the condominium, thus providing the Thayers with unreported income.

The Thayers were charged with willfully filing false claims (for tax refunds) against the United States in violation of 18 U.S.C. SS 287 and 2 (counts 25-27). The government contended the Thayers had submitted claims for tax refunds with knowledge that MIS and ELOP owed taxes for which they were personally responsible. The jury found the Thayers guilty on all these counts.

The Thayers were also charged with willful concealment of bankruptcy-estate assets in violation of 18 U.S.C. SS 152 and 2 (Counts 28-37). At issue were the payments made for the condominium in Atlantic City out of the consolidated MIS account. The government contended those payments were made with MIS money, and were concealed from the creditors in MIS' bankruptcy proceedings. The Thayers countered that the money, while drawn from the consolidated MIS account, was ELOP's money, not MIS'. The jury found the Thayers guilty on all these counts.

The Thayers filed a motion for acquittal under Fed. R. Crim. P. 29(c) and a motion for a new trial under Fed. R. Crim. P. 33, both of which the District Court denied.³

At sentencing, the court grouped the tax and bankruptcy counts separately. On the bankruptcy counts, two points were added to William Thayer's base offense level for violation of a judicial process under U.S.S.G. S 2F1.1(b)(3)(B). Although Thayer's offense level was 19, the court departed downward six levels. With a criminal history category of III, Thayer's sentencing range was 18-24 months. The court imposed an 18 month sentence, plus three years supervised release and restitution of $149,355.⁴

II. Jurisdiction and Standard of Review

The District Court had jurisdiction under 18 U.S.C. S 3231. We have jurisdiction under 18 U.S.C. S 3742(a) and 28 U.S.C. S 1291.

Where the issues raised on appeal are preserved at trial, or through a timely motion for acquittal under Fed. R. Crim. P. 29(c), we will overturn a jury verdict "only when the record contains no evidence, regardless of how it is weighted from which the jury could find guilt beyond a reasonable doubt...." United States v. Anderson, 108 F.3d 478, 481 (3d Cir. 1997) (internal quotation marks and citations omitted). But issues on appeal which were not raised before the District Court, we will review for plain error. See United States v. Olano, 507 U.S. 725, 731 (1993). A conviction based on insufficient evidence is plain error only if the verdict "constitutes a fundamental miscarriage of justice." United States v. Barel, 939 F.2d 26, 37 (3d Cir. 1991). To the extent that Thayer's argument raises issues of statutory interpretation, we will exercise plenary review. See United States v. Parise, 159 F.3d 790, 794 (3d Cir. 1998); United States v. Hayden, 64 F.3d 126, 128 (3d Cir. 1995).⁵

III. Discussion

A. Withholdings

Thayer appeals his conviction for violations of I.R.C. S 7202, arguing as a matter of law he could not be found guilty of the withholding tax offenses charged. I.R.C. S 7202 penalizes "[a]ny person required under this title to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax...." Thayer claims S 7202 is inapplicable because he was not a person required to pay over withheld taxes and because he truthfully accounted for the unpaid taxes.

1. Person Required to Pay Over Tax

As noted, only a "person required under this title to collect, account for, and pay over" withholding taxes is criminally liable under S 7202. Thayer argues that only employers such as MIS and ELOP who are required to withhold employees' taxes under I.R.C. SS 3402-03 qualify. Thayer contends he was merely an officer and part-owner of the corporations, and not an "employer" as defined by the Internal Revenue Code.⁶ Because this is a question of statutory interpretation, we will exercise plenary review. See Parise, 159 F.3d at 794; Hayden, 64 F.2d at 128.

I.R.C. S 6672(a), applying the same language in S 7202, imposes civil penalties on "any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax." In Slodov v. United States, 436 U.S. 238 (1978), the Supreme Court held that S 6672(a) applies to corporate officers or employees responsible for the collection and paying over of...