US v. Mauser, S 89 Cr. 293 (GLG).

• Decision Date: 25 October 1989
• Docket Number: No. S 89 Cr. 293 (GLG).,S 89 Cr. 293 (GLG).
• Citation: 723 F. Supp. 995
• Parties: UNITED STATES of America, v. Charles MAUSER, Defendant.
• Court: U.S. District Court — Southern District of New York

723 F. Supp. 995

UNITED STATES of America, v. Charles MAUSER, Defendant.

No. S 89 Cr. 293 (GLG).

United States District Court, S.D. New York.

October 25, 1989.

Benito Romano, U.S. Atty., S.D.N.Y., White Plains, N.Y. (Lisa Margaret Smith, Jane Beaver Wilson, of counsel), for U.S.

Lankler Siffert & Wohl, New York City (John S. Siffert, Sheila B. Rathbun, Karen B. Shaer, of counsel), Saltzman & Holloran, New York City (Michael I. Saltzman, of counsel), for defendant.

GOETTEL, District Judge.

I. Facts

In April of 1985, an investigation of William V. Ischie, and William Blackmore was begun by the Internal Revenue Service ("IRS"). The investigation had both criminal and civil elements. On May 6, 1986, the Justice Department agreed to institute a grand jury investigation of the two individuals, relating to possible tax violations. The investigation primarily focused on a scheme in which Ischie, pastor of the St. German of Alaska Eastern Orthodox Catholic Church and abbot of the St. John of Rila Eastern Orthodox Monastery, solicited donations of "hard to sell" and distressed property to those religious organizations. Property owners expressing interest in making a donation were referred to William Blackmore, a real estate appraiser, who provided inflated appraisals to the donors for the purposes of the donation, and the consequential tax deductions. After donations were made on the basis of the value stated in the appraisal, Ischie usually sold the property at a price far below the value claimed by the property donors. Hundreds of similar donations were identified and reviewed during the course of the investigation. Included among these donations was one by defendant Charles Mauser who donated property located at 4725 Park Avenue, Bronx, New York to St. German in November of 1980. Mauser owned the property in partnership with three others. He and Lew Mauser, his brother, each owned 40% of the property, and Norman Mauser, his nephew, and Marvin Mufson, his son-in-law, each owned 10% of the property.

In 1981, the partnership filed its 1980 partnership tax return which set forth the documentation of the partnership donation of the Park Avenue property to St. German, including a hand-written document summarizing the transaction and a statement placing the value of the property at $235,000. Attached to the return was an appraisal by William H. Blackmore, dated October 29, 1980, declaring the fair market value of 4725 Park Avenue to be $235,000. Mauser's personal 1980 income tax return contained the same documents. Income tax laws and regulations, however, prevented Mauser from taking the entire amount of the deduction on his 1980 return. Rather, the remainder of the charitable deduction was taken over the three subsequent years as a carryover of charitable contribution declared, but not entirely taken, in 1980.

On January 14, 1987, Special Agents John Kees and Alyssa Daversa interviewed Mauser at his office in New Rochelle, New York. The agents told Mauser that they were interviewing him about his donation to the St. German church in the course of a grand jury investigation of Ischie and Blackmore. They explained that he was neither a target nor a subject of that investigation.¹ The agents questioned Mauser about the 1980 donation to St. German, and the subsequent charitable deductions on his 1980, 1981, 1982, and 1983 tax returns. The agents requested, and Mauser produced, documents relating to the donation and the subsequent tax deductions.

At this time, the Government was involved in protracted civil summons enforcement litigation with St. German concerning production of records in various attorneys' possession containing information relevant to any real estate donations and sales conducted by the church and related entities during the years 1980 to 1984. On February 24, 1988, the Second Circuit issued its decision in St. German of Alaska E. Orthodox Cath. Ch. v. United States, 840 F.2d 1087 (2d Cir.1988), ordering the attorneys to produce the records.²

During 1988, the Government received massive amounts of documents from enforcement actions. These documents included correspondence between Mauser and the church's attorneys, correspondence between Mauser and Ischie, and correspondence between Ischie and the church's attorneys relative to the donation. They also included the closing documents for the donation of the Mauser property, copies of appraisals of the property, and the deed reflecting the donation and the subsequent sales.

On March 1, 1988, the United States Attorney for the Southern District of New

York requested that the grand jury investigation be expanded to include Charles Mauser. Mauser was indicted on April 14, 1989³ for conspiring to defraud the United States in violation of 18 U.S.C. § 371 (1982), and for filing false tax returns for the years 1982 and 1983, in violation of 26 U.S.C. § 7206(1) (1982). Earlier indictments had been returned against Ischie and Blackmore, both of whom pled guilty to related offenses. In addition, related charges were filed in the United States District Court for the Northern District of New York against Paul and Michael Gordon, who were convicted after trial.

The defendant has filed the following motions:

1. A motion to dismiss Counts Two and Three of the indictment on the ground that as a matter of law Mauser's tax returns did not contain any material false statement for which a timely prosecution could be brought;

2. A motion to dismiss Count One of the indictment on the grounds that as a matter of law Mauser made no material false statement to the Government and that the indictment fails to allege the requisite element of deceit under 18 U.S.C. § 371 (1982);

3. A motion to compel disclosure of the grand jury minutes or portions thereof, or alternatively, compelling production of the grand jury minutes or portions thereof, for in camera inspection and on inspection, dismissing the indictment;

4. A motion to strike language from the indictment as surplusage;

5. A motion to suppress the statements and documents obtained from Mauser by the Internal Revenue Service Special Agents as well as all leads derived from such statements and documents.

In addition, several discovery motions were filed which were decided by the court at the time of oral argument.

II. Counts Two and Three

Counts Two and Three of the indictment charge that the defendant

unlawfully, wilfully, and knowingly did subscribe under penalties of perjury to his individual income tax returns (Forms 1040) listed below, which were fraudulent and false as to material matters, to wit: the stated fair market value of property located at 4725 Park Avenue, Bronx, New York donated to the Saint German of Alaska Eastern Orthodox Catholic Church.

Count Two covers returns filed for tax year 1982 and Count Three covers returns filed for tax year 1983. The filing of a false return is a violation of Title 26 U.S.C. § 7206(1) (1982) which provides:

Any person who ... willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter ... shall be guilty of a felony....

A violation of section 7206(1) is subject to a six year statute of limitations. 26 U.S.C. § 6531(5) (1982). The defendant's 1982 tax return was signed and dated April 12, 1983. It apparently was received by the IRS and, therefore filed, on or about April 15, 1983. Regardless of the date of actual filing, however, the statute of limitations begins to run on the due date, namely, April 15th. 26 U.S.C. § 6513(a) (1982).⁴ As an initial matter, therefore, we reject any contention that counts two and three of the indictment are barred by the statute of limitations.⁵

The defendant contends that he cannot be prosecuted for making a false statement on a tax return because the only return containing a statement as to the charitable contribution and the market value of the property is found on the 1980 partnership and individual tax returns. Consequently, the defendant argues, a charge based on a statement in those returns is time-barred. Neither the 1982 return nor the 1983 return contain any specific reference to, much less a false statement about, the value of the property donated. Rather, they simply report "carry-over from prior years" and state the maximum figure deductible for 1982 and the small remainder for 1983. The manner in which the deduction was carried over into subsequent years was not a matter of choice for the defendant. Because of limitations imposed by the tax regulations on the amount of deductions for charitable donations that may be taken in a single tax year, the defendant was compelled to spread the excess deduction over the following years.⁶ The Government now tacitly concedes that the 1982 and 1983 returns do not misstate the fair market value of the property as charged in the indictment but argues that the defendant took false tax deductions which are related to or derived from the prior misstatements of fair market value.⁷

The Government has indicated that if this motion is granted it will supersede the indictment at least with respect to tax year 1983 so as to charge the defendant with false charitable deduction carryovers and improper tax deductions. We need not determine whether taking false deductions violates the Internal Revenue Code because that is not what the present indictment charges this defendant with. Rather, he is charged with making a fraudulent and false statement of the fair market value of the property and these returns contain no such statement. Consequently, the motion to dismiss Counts Two and Three of the indictment is granted.⁸

III. Count One

Count One charges the defendant with a conspiracy to defraud the United States by conducting real estate transactions in such a way as to conceal from the Internal...