United States v. Floyd

• Decision Date: 07 January 2014
• Docket Number: 12–2231.,Nos. 12–2229,s. 12–2229
• Citation: 740 F.3d 22
• Parties: UNITED STATES of America, Appellee, v. Catherine FLOYD, Defendant, Appellant. United States of America, Appellee, v. William Scott Dion, Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

740 F.3d 22

UNITED STATES of America, Appellee,

v.Catherine FLOYD, Defendant, Appellant.

United States of America, Appellee,

v.William Scott Dion, Defendant, Appellant.

Nos. 12–2229, 12–2231.

United States Court of Appeals,First Circuit.

Jan. 7, 2014.

Joan M. Griffin, for appellant Floyd.

John M. Goggins, for appellant Dion.

Damon William Taaffe, Attorney, Tax Division, U.S. Dep't of Justice, with whom Kathryn Keneally, Assistant Attorney General, Frank P. Cihlar, Chief, Criminal Appeals & Tax Enforcement Policy Section, Gregory Victor Davis, Attorney, Tax Division, and Carmen M. Ortiz, United States Attorney, were on brief, for appellee.

Before HOWARD, SELYA and STAHL, Circuit Judges.

SELYA, Circuit Judge.

Over two centuries ago, Benjamin Franklin famously wrote that “in this world nothing can be said to be certain, except death and taxes.” Apparently unwilling to accept this conventional wisdom, defendants-appellants Catherine Floyd and William Scott Dion devised and participated in elaborate conspiracies to defraud the United States of tax revenues (or so the government alleges). A jury validated the government's allegations, and the defendants, ably represented, now pursue several claims of error. After careful consideration of this asseverational array, we affirm.

I. OVERVIEW

This case began when a federal grand jury, sitting in the District of Massachusetts, indicted the defendants (who are husband and wife) and five others on a multiplicity of charges. The defendants and one such coconspirator, Charles Adams, were tried jointly.¹ Following a 17–day trial, a jury convicted the defendants of one count of conspiracy to defraud the United States of payroll taxes (count 1), one count of conspiracy to defraud the United States of income taxes (count 2), and one count each of endeavoring to obstruct and impede the Internal Revenue Service (IRS) (counts 4 and 5).

The government's case in chief centered on two schemes allegedly orchestrated by the defendants. The first involved the evasion of payroll taxes by third-party employers. We limn its mechanics.

Employers are required to withhold Social Security, Medicare, and federal income taxes from their employees' paychecks and to remit those payroll taxes to the IRS, along with matching contributions for Social Security and Medicare. See26 U.S.C. § 3402. These remittances, and the forms that accompany them, have a dual purpose: they generate revenue for the Treasury and supply information about the tax liabilities of employers and employees. Notably, these withholding requirements generally apply only with respect to employees, not with respect to independent contractors.

It is trite but true that where there are taxes, there are individuals who seek to evade them. The government alleges (and the jury found) that the defendants and others set up and operated a series of entities to facilitate this kind of fraud.

One of these entities was Contract America—a company that Adams ran. Instead of paying its employees directly, a client firm would funnel money to Contract America, which then paid the client's employees (or those of them who agreed to participate in the fraud) under the table. Through this contrivance, both the client firm and the participating employees were able to hide from the IRS.

Tax evasion is a dangerous tango, and not all employees want to dance. The government alleges that the defendants complemented the services of Contract America by operating a front company (Talent Management) to work with employees who wanted to stay on the straight and narrow. A firm using this service would funnel money to Talent Management, which would comply with the withholding requirements before paying the affected employees. This made it look as if Talent Management was actually employing the workers and allowed the client firm to remain invisible.

The second scheme involved the provision of sub rosa “warehouse banking” services. In this operation, the defendants commingled their own funds and the funds of many clients in nominee bank accounts. The purpose of this commingling was to confound the IRS about the source of the funds.

The defendants executed the warehouse banking scheme through a company called Your Virtual Office (YVO), its successor Office Services, and related entities. Clients delivered funds to the defendants, who deposited the funds into a constellation of accounts that the defendants controlled. On request, the defendants would use the deposited funds to defray a client's expenses or to deliver cash. A software program would track the flow of funds.

Even after the defendants closed their warehouse banking operation, they urged a coconspirator (Gail Thorick) to continue the business. Thorick did so, through a firm called Calico Management.

As a capstone to the indictment, the government charged the defendants with endeavoring to impede the IRS by concealing their ill-gotten gains. The nub of these charges is the government's contention that the defendants operated their warehouse banking scheme so as to obstruct the IRS's assessment of their personal tax liability.

II. ANALYSIS

On appeal, the defendants argue that there was insufficient evidence to support their convictions; that certain evidence should have been suppressed; that they should not have been tried jointly with Adams; and that the IRS's failure to comply with the Federal Register Act should have engendered dismissal of counts 4 and 5. In addition, Dion alone challenges his sentence. We examine these assignments of error sequentially.

A. Sufficiency of the Evidence.

“We review preserved objections to evidentiary sufficiency de novo.” United States v. Gobbi, 471 F.3d 302, 308 (1st Cir.2006). In conducting this tamisage, we “must canvass the evidence (direct and circumstantial) in the light most agreeable to the prosecution and decide whether that evidence, including all plausible inferences extractable therefrom, enables a rational factfinder to conclude beyond a reasonable doubt that the defendant committed the charged crime.” United States v. Ortiz de Jesus, 230 F.3d 1, 5 (1st Cir.2000) (internal quotation marks omitted). We will uphold the jury's verdict as long as it “is supported by a plausible rendition of the record.” United States v. Ortiz, 966 F.2d 707, 711 (1st Cir.1992).

The defendants challenge the sufficiency of the evidence across the board. We proceed count by count.

1. Count 1: The Payroll Tax Conspiracy. Count 1 implicates 18 U.S.C. § 371, which criminalizes any conspiracy “to defraud the United States, or any agency thereof in any manner or for any purpose.” To sustain a conviction under this statute, “the government must furnish sufficient evidence of three essential elements: an agreement, the unlawful objective of the agreement, and an overt act in furtherance of the agreement.” United States v. Hurley, 957 F.2d 1, 4 (1st Cir.1992). It also must establish “the knowing participation of each defendant in [the] conspiracy.” United States v. Mubayyid, 658 F.3d 35, 57 (1st Cir.2011). But the government need not show an explicit agreement. See United States v. Muñoz–Franco, 487 F.3d 25, 45–46 (1st Cir.2007). Nor must it prove its case by direct evidence. See United States v. Frankhauser, 80 F.3d 641, 653 (1st Cir.1996); United States v. David, 940 F.2d 722, 734 (1st Cir.1991). A combination of direct and circumstantial evidence, or circumstantial evidence alone, may suffice. See United States v. Santiago, 83 F.3d 20, 23 (1st Cir.1996).

The defendants concentrate their attack on the evidence of agreement and unlawful purpose. Specifically, they assert that they did not operate Contract America; that they had no agreement with Adams to achieve Contract America's unlawful ends; and that the companies with which they were actively involved appropriately remitted payroll taxes.

The record contains several pieces of evidence that blunt the force of these assertions. Each principal played a role in achieving the common purpose. The evidence showed that Floyd structured the Contract America entity and served as its president, treasurer, and director. She was also the signatory on Contract America's bank account and gave Adams's then wife Marie Jones (an unindicted coconspirator) a stamp bearing her (Floyd's) facsimile signature to use on outgoing Contract America checks.

Adams ran the day-to-day operations of Contract America (for a time, alongside Jones). A post office box application listed him as a director of Talent Management.

Dion, who was denominated as a trustee of Contract America in a corporate document, oversaw Talent Management. Jones testified that Talent Management was “designed to work hand-in-hand” with a firm called American Contracting Services (ACS), which Dion had helped to operate and which provided the same battery of services as Contract America.

The record includes evidence that although Talent Management remitted payroll taxes, its operation was nonetheless unlawful. Talent Management named itself as the employer of record on the relevant payroll tax forms in order to shield the actual employers' identities from the IRS. Drawing inferences favorable to the verdict, a rational jury could find that Talent Management was a vital, if complementary, component of the payroll tax scheme.²

It is, moreover, relevant that both defendants profited from participation in the unlawful scheme. Jones testified that the defendants received a percentage of the fees that Contract America charged, paid to them through their consulting firm Business Management Services (BMS). Receipt of a share of a conspiracy's proceeds may be probative of the recipient's participation in the conspiracy. See United States v. Aleskerova, 300 F.3d 286, 293 (2d Cir.2002); see also United States v. Pressler, 256 F.3d 144, 153 (3d Cir.2001); United States v. Dadi, 235 F.3d 945, 950 (5th Cir.2000).

The defendants suggest that receipt of a share of the revenues of a conspiracy is...