Opinion ID: 6496925
Heading Depth: 3
Heading Rank: 1

Heading: Motion for Acquittal: Counts One and Two

Text: The first two counts charged VanDemark with assisting in the preparation of false corporate returns for 2013 and 2014. VanDemark’s argument begins and ends with Commissioner v. Indianapolis Power & Light Co., which says that a deposit isn’t taxable income No. 21-3470 United States v. VanDemark Page 6 unless “the taxpayer has some guarantee that he will be allowed to keep the money.”3 493 U.S. 203, 210 (1990) (emphasis added). VanDemark claims that the lease agreements tied the Supermarket’s hands. If a customer decides not to purchase the car at the lease’s end, says VanDemark, the customer can demand a refund of the down payment under the contract. And so, the argument goes, the Supermarket lacked the necessary “guarantee,” and the down payments were never taxable as a threshold matter. This argument misses the mark for two reasons. First, the Supermarket issued virtually no refunds across decades. The Supermarket found ways to keep these down payments at its discretion, the contract notwithstanding. And that means the down payments were taxable upon receipt consistent with Indianapolis Power. Second, the Indianapolis Power discussion is a red herring. Under VanDemark’s own theory, the down payments are taxable once customers buy out their cars. At that point, the down payment applies toward the purchase price, and VanDemark cannot credibly claim that he lacks “some guarantee” of keeping it. Indianapolis Power, 493 U.S. at 210. Even when this happened, however, VanDemark failed to report the cash. We begin with the Supermarket’s track record on refunds. Christopher McAfee worked at the Supermarket for no fewer than 30 years. And he testified that, in those 30 years, he saw the down payment refunded “maybe, one, two, three” times total. (R. 72, Trial Tr. (McAfee), PageID 1470.) The record contains additional corroboration as well. A special agent reviewed VanDemark’s ledger books from 2012 to 2014 and found only one refund. What’s more, that single refund wasn’t even issued at the end of the lease under the contract. Instead, VanDemark refunded the deposit the same day the customer paid it. Perhaps the customer changed his or her 3More specifically, the case involved a regulated utility that required customers with weaker credit to provide an upfront deposit. Indianapolis Power, 493 U.S. at 204. The customers could do one of two things with these deposits: apply them toward their bills or recoup them as a refund by showing improved credit. Id. at 204-05. Eligibility for the latter was determined under a fixed formula set by state regulation. See 170 Ind. Admin. Code § 4-1-15 (1988). A customer became eligible by “submit[ting] satisfactory payment for a period of either: (i) nine (9) successive months; or (ii) ten (10) out of any twelve (12) consecutive months without late payment in two (2) consecutive months” or “demonstrat[ing] his or her creditworthiness by any other means.” Id. If the customer satisfied this formula, the utility had to honor its refund request—no ifs, ands, or buts. The Supreme Court held that this watertight refund requirement prevented the utility from having “complete dominion” over the deposits. Id. at 209-10. Thus, the deposits were not taxable upon receipt. As discussed below, the Supermarket’s contracts are anything but watertight. No. 21-3470 United States v. VanDemark Page 7 mind before finalizing the lease, and the Supermarket issued a refund at its discretion.4 In any event, that single refund had nothing to do with the contract. This means that the contract terms forced VanDemark’s hand a grand total of zero times from 2012 to 2014 (and maybe “one, two, three” times in 30 years). Simply put, these numbers belie VanDemark’s Indianapolis Power argument. One way or another, the Supermarket engineered for itself “some guarantee” of keeping the down payments—that much is clear enough.5 Certainly, this conclusion is within a rational jury’s reach. VanDemark’s control is shown in the contract itself and in how VanDemark applied that language. True, the contract requires the Supermarket to refund the down payment if the customer returns the car at the end of the lease. But that’s only if the excess mileage fee and the cost of damages to the car do not exceed the down payment amount. And as the district court emphasized, these variables are couched in significant ambiguities. The Supermarket exploited them to maintain control over the down payments. On excessive mileage, the contract imposes a fee “equal to $.50 per mile for miles to be computed at the end of the lease and balance due.” (R. 59, July, 17, 2020 Op. & Order, PageID 247.) But importantly, the contract fails to specify a base mileage. As a practical matter, this allows VanDemark to define the number of excess miles after the lease ends.6 This theme continues 4McAfee’s testimony suggests that this sort of thing sometimes happened. Customers would not infrequently change their minds before finalizing the paperwork. Asked whether the Supermarket ever issued these same-day refunds at its discretion, McAfee gave an ambiguous answer: “Maybe not. I don’t know. It just depends on the situation.” (R. 72, Trial Tr. (McAfee), PageID 1475.) In any event, McAfee wrote “NO REFUNDS” on the deposit receipts precisely to deter customers from changing their minds mid-transaction in this way. (Id. at PageID 1473-75.) 5VanDemark tries to parry this point by emphasizing that “at the end of the lease[,] customers normally decided to use their deposits towards the purchase of the vehicles.” (Reply at 11.) In other words, in VanDemark’s view, there were virtually no refunds because virtually everyone bought their car in the end. But the numbers still do not add up. True, “90 percent of the people buy [their cars] at the end of the lease.” (R. 72, Trial Tr. (McAfee), PageID 1469.) But that still leaves a massive gap. For the roughly 10 percent of cars that were returned across 30 years, the Supermarket issued only “one, two, three” refunds. (Id. at PageID 1470.) The point stands. 6VanDemark claims that customers were in fact “entitled to a [base] mileage rate of 12,000 miles per year, which is a well-known industry accepted standard annual mileage rate.” (Reply at 11.) And so, VanDemark argues, his hands were tied when it came to the refund. There are two problems with this argument. First, VanDemark’s only evidence here is McAfee’s testimony. And that testimony is shaky to say the least. Asked point blank to confirm “the mileage limit for the cars that you leased,” McAfee responded: “I’m not really positive on it.” (R. 72, Trial Tr. (McAfee), PageID 1469.) Only after the government pressed further did McAfee say: “[J]ust about everybody’s is about 12,000 miles a year.” (Id.) The government then asked McAfee whether he was “guessing it’s No. 21-3470 United States v. VanDemark Page 8 with the second variable. The contract says that damages beyond “ordinary wear and tear” come out of the deposit. (Id.) As for calculating those costs, however, the contract places everything in VanDemark’s hands. It specifies that “a representative from VANDEMARK . . . shall be the sole judge and arbiter as to whether or not any disputed damage is due to ordinary wear and tear or due to some other cause.” (Id. at PageID 247 (emphasis added).) These ambiguities enable the Supermarket to jack up both variables on the back end to prevent a refund if it wishes. The plot thickens even more from here, and not in VanDemark’s favor. VanDemark argues that everything rises and falls with the contract’s refund language. He doesn’t dispute that once a customer converts the lease into a purchase, the refund provision no longer applies. In other words, the down payment is taxable by that point. If only the refund language didn’t tie his hands, no doubt VanDemark would have reported everything—that’s the implication of his Indianapolis Power argument, anyway. This begs the question: When those 2013 and 2014 leases were eventually bought out—whether in 2013, 2014, or later—did VanDemark report the down payments? Not quite. It turns out that at least seven customers (1) began their leases in 2013 or 2014 and (2) bought out their cars within that same window. One of these leases ended in 2013, and the remaining six in 2014. And under VanDemark’s own theory, the down payments for these leases should have appeared on the Supermarket’s 2013 and 2014 returns. But they did not, which means that VanDemark fails his own test. And VanDemark says nothing about the 2013 and 2014 leases that were bought out after 2014. He could have pointed the IRS to those tax returns where he eventually reported the down payments for these leases. That way, his failure to report those payments in 2013 and 2014 becomes a timing issue that falls short of a criminal prosecution. But VanDemark did no such thing. All of this shows that he never intended to report any of the down payments, with or without Indianapolis Power. The district court properly denied VanDemark’s acquittal motion as to Counts One and Two. 12,000 miles a year” or whether he “know[s] that it’s a 12,000 a year.” McAfee deflected: “I don’t remember. I would have to read this whole [contract] to see if it’s in here . . . .” (Id.) The contract, of course, is silent. If anything, this exchange reiterates the significant ambiguities surrounding the base mileage. Second, even if it were otherwise, the contract still leaves VanDemark with his second lever (damage costs), which he can still use to prevent a refund. No. 21-3470 United States v. VanDemark Page 9