U.S. v. Turoff, Docket Nos. 460
| Decision Date | 14 July 1988 |
| Docket Number | 463 and 464,87-1278,Docket Nos. 460,87-1382 and 87-1383 |
| Citation | 853 F.2d 1037 |
| Parties | -5236, 57 USLW 2131, 88-2 USTC P 9526, 26 Fed. R. Evid. Serv. 435 UNITED STATES of America, Appellee, v. Jay TUROFF, Alan Silver and Harriet Silver, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Second Circuit |
Roger B. Adler, New York City, for defendants-appellants.
Ephraim Savitt, Asst. U.S. Atty., E.D.N.Y. (Andrew J. Maloney, U.S. Atty., John Gleeson, Asst. U.S. Atty., E.D.N.Y., of counsel), for appellee.
Before NEWMAN and CARDAMONE, Circuit Judges, and GRAY *, District judge.
On these appeals from criminal convictions for tax conspiracy and tax fraud, appellants raise a number of issues. The principal one is that it is impermissible to join in a single indictment multiple offenses involving tax and mail fraud schemes charged against the several defendants. Fed.R.Crim.P. 8(b) permits joinder of defendants if they participated "in the same series of acts or transactions constituting an offense or offenses." Rule 8(a) states that for joinder of offenses the acts or transactions must either constitute a "common scheme or plan" or be otherwise "connected together."
It has long been settled law that the joint trial of charges against several accuseds when they are not for the same act or transaction, or for connected acts or transactions, or provable by the same evidence is prejudicial. See McElroy v. United States, 164 U.S. 76, 79-80, 17 S.Ct. 31, 32-33, 41 L.Ed. 355 (1896). Also well-recognized is the proposition that joint trials serve the public interest in economy, convenience, and the prompt trial of the accused. See United States v. Lane, 474 U.S. 438, 106 S.Ct. 725, 732, 88 L.Ed.2d 814 (1986). The former is supported by considerations of fairness to defendants, and the latter by the need for the efficient administration of criminal justice.
The phrase "connected together" is not defined in Rule 8 and in this case--as in most joinder determinations--how it is defined suggests the outcome because the phrase takes its meaning from the frame of reference in which it is placed. If defined broadly everything may be connected, but when the reference is narrowed the number of events connected to each other is reduced. For example, if the frame of reference for stars is the solar system, all the visible stars are related, but if the reference is "Casseopia," then only those in that constellation are connected. In that same way choosing the definitional frame of reference dictates whether joinder is proper in a given case. Hence, in deciding joinder under 8(b) the test posited must be broad enough to maintain "efficient" justice, yet not so all-encompassing as substantially to prejudice the accuseds. Such is our task on this appeal.
The charges against Jay Turoff and Alan and Harriet Silver revolved around two fraudulent schemes: (1) a plan by appellants and others to exploit Turoff's power as the New York City Taxi and Limousine Commission Chairman to foster the production and marketing of an electronic meter for New York City medallion taxicabs--the basis for the mail fraud charges--and (2) an arrangement by appellants to obtain accounts at Hyfin Credit Union which allowed them to earn substantial taxable interest that the credit union did not report to the Internal Revenue Service (IRS) and the appellants did not declare as income on their federal tax returns. To understand the interrelationship between these schemes, it is necessary to set forth the complex facts in some detail.
The illegal combination began on November 7, 1979 when Turoff, who was then Chairman of the New York City Taxi and Limousine Commission (Taxi Commission), met with Edmund Lee, Treasurer of the Hyfin Credit Union (Hyfin or Credit Union), at Hyfin's Brooklyn offices. Turoff controlled the regulation and licensing requirements of the nearly 12,000 medallion taxicabs in New York City; Lee controlled the finances of the third largest state-chartered credit union in New York State. During that meeting, Lee explained that Hyfin generally did not report sizable deposits to the IRS and that if Turoff opened an account at Hyfin, the interest earned (called "dividends" in the credit union context) would not be reported. The Credit Union had not reported interest income to the IRS since 1980. Lee also explained that Turoff would be able to deduct as interest expense the payments he made on Hyfin loans. Subsequently, Lee opened account # 69510 in Turoff's name with Turoff's initial deposit of $10,000. At the same time, Turoff obtained a $10,000 loan from Hyfin. Over the next five years Turoff made a number of sizable deposits into his account, but he never reported the substantial interest income generated to the IRS. In return for these benefits, Turoff supplied Lee with confidential Taxi Commission lists of medallion taxi owners, which enabled Lee to review and approve loan applications by taxi owners more quickly than competing loan institutions.
In 1981, two developers demonstrated to Turoff their prototype electronic taxi meter that met mayoral commission specifications for an accurate, permanently affixed meter that would discourage taxi owners from underreporting revenues. Turoff described the meter to a friend, Herman (Hy) Schwartz, and urged him to develop and market a competing electronic taxi meter. Turoff told Schwartz that he could guarantee a market by mandating the installation of such meters in every medallion taxicab in New York City.
Excited by this prospect, Schwartz sought financing from the Silvers, friends of Turoff who owned a Brooklyn printing business. Schwartz and the Silvers formed a new company, Electronic Compumeter, Inc. (Compumeter) and Harriet Silver became Compumeter's president. The new company's stock was divided into three equal parts--one to Mrs. Silver, one to Schwartz, and one unissued. On September 12, 1982 Schwartz formally advised Turoff that Compumeter had developed an electronic taxi meter and requested Taxi Commission testing of a prototype.
On May 11, 1983 the Taxi Commission unanimously approved the Compumeter prototype. On the same day, Turoff brought Alan Silver to Hyfin's offices and introduced him to Lee. Lee suggested that Silver open a Hyfin account to expedite the processing of loans if a financing arrangement for Compumeter production costs could be agreed upon. Silver said that he wanted the "same deal Jay [Turoff] has." Lee understood this to mean a nonreported interest account. Account # 415990 was then opened for Alan Silver in trust for Harriet Silver with an initial deposit of five dollars. Lee also advanced Silver a $10,000 Hyfin loan. The Silvers later opened other interest-bearing joint and individual accounts at Hyfin.
Lee, Alan Silver, and Hy Schwartz then agreed upon the following scheme: Lee would advance Hyfin funds for Compumeter's production costs without the usual formalities; Silver and Schwartz would pay Lee a $100 "commission" for every meter sold. To advance this conspiracy, Turoff backed a December 9, 1983 Taxi Commission order requiring the installation of electronic meters in all medallion taxis by June 1984.
Lee opened eight Hyfin accounts (accounts # 1000, # 940, # 950, # 960, # 970, # 980, # 990, # 930) in 1983 and 1984 to be used as internal control accounts through which disbursements of Hyfin funds were funnelled for Compumeter's manufacturing costs and for financing taxi owners' purchases. Because the laws governing credit unions prohibit corporate loans, these accounts were all opened in the name of Harriet Silver, who executed signature cards for them. By April 1984 Compumeter's production progress and sales were proceeding more slowly than expected. Compumeter had received 1,500 purchase orders and total sales of no more than 3,000 meters were anticipated. When Turoff demanded to be paid for his role in the scheme, Lee transferred $30,000--$10 per meter--from Harriet Silver's Hyfin account # 960 into Turoff's account # 69510.
While Lee handled the Compumeter financing, the Silvers made significant deposits to their newly opened personal accounts. On October 11, 1983 a joint account, # 457150, was opened in the Silvers' names. On February 22, 1984 accounts # 510050 and # 510060 were opened in the names of Harriet Silver and Alan Silver, respectively. As of December 31, 1984 the closing balance on these three accounts totalled $205,577.97. The $6,947.40 interest on the funds in these accounts earned in 1984 was not reported to the IRS by Hyfin or the Silvers. That failure is the basis for the charges of making false statements on their joint tax return against the Silvers in Count Eighteen of the indictment. Hyfin's statements for account # 69510 reveal that Turoff earned interest income of $19,437 during the years 1982 through 1985. Although Turoff deducted almost all the interest expenses charged to his loans, he did not declare interest income from account # 69510 on his tax returns for the four relevant years. His false statements on those returns account for the indictment charges against Turoff in Counts Fourteen through Seventeen.
The jury rendered its verdict on April 10, 1987 after a two-month trial of Turoff, the Silvers, and a fourth codefendant in the United States District Court for the Eastern District of New York (Glasser, J.). Appellant Jay Turoff was found guilty of conspiracy to defraud the United States in the collection of tax revenues in violation of 18 U.S.C. Sec. 371 (1982) (Count Thirteen), and making false statements in his federal income tax returns for the tax years 1982 through 1985 in violation of 26 U.S.C. Sec. 7206(1) (1982) (Counts Fourteen through Seventeen). Turoff...
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