Opinion ID: 3003170
Heading Depth: 2
Heading Rank: 1

Heading: Presbitero’s Appeal

Text: Presbitero appeals his conviction for willfully filing materially false corporate tax returns in violation of 26 U.S.C. § 7206(1). Pursuant to this section, it is a felony to Willfully make[] and subscribe[] any return, statement, or other document, which contains or is verified by a written declaration that is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter.
Presbitero first argues there was an impermissible constructive amendment of the indictment, which occurs when the permissible bases for conviction are broadened beyond those presented to the grand jury. See United States v. Blanchard, 542 F.3d 1133, 1143 (7th Cir. 2008); see also Stirone v. United States, 361 U.S. 212, 216-19 (1960). “[T]he allegations in the indictment and the proof at trial Nos. 07-1129, 07-1610, & 07-1712 7 must match in order ‘to insure that the defendant is not subject to a second prosecution, and to give the defendant reasonable notice so that he may prepare a defense.’ ” Blanchard, 542 F.3d at 1143 (citations omitted). Presbitero takes exception to the government’s argument at trial that he willfully filed false tax returns by including amounts attributable to fictitious subcontractors—a theory, he argues, not charged in the indictment. We begin with our standard of review. The govern- ment maintains that Presbitero failed to raise a timely objection in the trial court on the constructive amendment of the indictment grounds he now raises, and that our review on this point should, therefore, be for plain error only. See United States v. Khilchenko, 324 F.3d 917, 920 (7th Cir. 2003). We agree. First, Presbitero’s counsel did not make a constructive amendment of the indictment objection during the jury instruction conference, as he contends. During the discussion of a proposed instruction, Presbitero’s counsel took issue with the fact that although the indictment alleged that multiple lines on the tax return were false, the government argued it only had to prove, for each count, that one of the lines alleged was false. There was no mention of a constructive amendment to the indictment. And there was also no mention of the complaint Presbitero now makes—that the government argued at trial that the subcontractors were fictitious. Presbitero’s objections at the jury instruction conference did not preserve his constructive amendment argument. Presbitero did raise a constructive amendment argument in a post-trial motion, but it did not preserve his 8 Nos. 07-1129, 07-1610, & 07-1712 current argument either. The argument in his post-trial motion addressed an entirely different theory, one alleging that a witness’s testimony before the grand jury differed from that given at trial, and it also came too late. See United States v. Hughes, 213 F.3d 323, 328 n.7 (7th Cir. 2000), vacated on other grounds, 531 U.S. 975 (2000). So, our review is only for plain error. Plain error review means that we will reverse only if there was an error, that was plain, that affected the defendant’s substantial rights, and that affected the fairness, integrity, or public reputation of the judicial proceedings. United States v. Folks, 236 F.3d 384, 390 (7th Cir. 2001). When the argument is that a constructive amendment of the indictment occurred, plain error occurs if the amendment constitutes a mistake so serious that the defendant probably would have been acquitted had there not been a mistake. United States v. Ackley, 296 F.3d 603, 606 (7th Cir. 2002). There was no plain error warranting reversal here. The indictment’s second and third counts are the relevant ones. Count Two charged that with respect to the PDC tax return for the fiscal year ending April 30, 1997: defendant PRESBITERO falsely represented and caused to be represented on line 2 and on Schedule A, line 8, of said Form 1120 that the “cost of goods sold” for Presbitero Drywall, Inc., was $5,415,290; and falsely represented and caused to be repre- sented on Schedule A, line 5, and on said Form 1120 that “other costs” were $2,577,546. In fact, as PRESBITERO then and there well knew and be- Nos. 07-1129, 07-1610, & 07-1712 9 lieved, the “cost of goods sold” and “other costs” were less than the sums reported. Count Three alleges, regarding the fiscal year ending April 30, 1998 tax return: that defendant PRESBITERO falsely represented and caused to be represented on line 2 and on Schedule A, line 8 of said Form 1120 that the “cost of goods sold” for Presbitero Drywall, Inc. was $3,918,803; falsely represented and caused to be represented that on Schedule A, line 5, and on said Form 1120 that “other costs” were $1,540,370; and falsely represented and caused to be represented on a supporting schedule that costs for “sub-con- tractors” were $1,478,121. In fact, as PRESBITERO then and there well knew and believed, the “cost of goods sold”, “other costs”, and costs for “sub- contractors” of Presbitero Drywall, Inc., were amounts less than the amounts reported. As Presbitero emphasizes, Counts Two and Three did not explicitly allege that the tax returns were false because the subcontractors did not exist. That does not mean, however, that a constructive amendment occurred when the government contended at trial that the subcontractors were fictitious. The government argued the subcontractors did not exist in support of the indictment’s allegation that the deductions on line 5 of schedule A were too high. PDC’s accountant testified that he prepared the deductions that appeared on line 5 based on the sums of the hundreds of checks made out to the six subcontractors, and the returns’ supporting 10 Nos. 07-1129, 07-1610, & 07-1712 schedules identified the source of the amounts on line 5 as payments to subcontractors (along with much smaller amounts for tool rental and scrapping). The government’s position at trial was that each line 5 was false because it reflected deductions for millions of dollars in payments to six subcontractors that did not exist, which was consistent with the indictment’s allegation that the amount on this line was false and too high. Put simply, the amounts on line 5 were too high if there were no sub- contractors. Presbitero also contends that the government did not prove the charge in the indictment that the amounts on the “other costs” lines (line 5) and “costs of goods sold” lines (line 8) were “[i]n fact” “less than the sums reported.” He points out that line 8 on schedule A is a total line summing the amounts on several lines, including line 3 for “cost of labor” and line 5 for “other costs.” So, he maintains, if the deductions actually reflected payments to employees that should have been taken on line 3 (“cost of labor”), the amounts on the total lines (line 8) were still accurate. The jury was not permitted to convict Presbitero upon a finding that only the total line was wrong, though. Instead, to account for this potential problem, the jury received an explicit instruction that it had to find line 5 false in order to convict Presbitero on Counts Two and Three. That instruction was consistent with long-standing case law that generally, “when a jury returns a guilty verdict on an indictment charging several acts in the conjunctive, . . ., the verdict stands if the evidence is sufficient with respect to any of the acts charged.” Turner v. United States, 396 U.S. 398, 420 (1970). Nos. 07-1129, 07-1610, & 07-1712 11 And a section 7206(1) conviction does not require the government to prove an actual tax deficiency. United States v. Peters, 153 F.3d 445, 461 (7th Cir. 1998); see also Boulware v. United States, 128 S. Ct. 1168, 1178 n.9 (2008) (noting that Courts of Appeals unanimously hold that section 7206(1) does not require proof of a tax deficiency). The jury also received an instruction that to convict on Counts Two and Three it had to find the return “false as to a material matter, as charged in the Count.” Read together, the instructions directed the jury that it needed to find line 5 on schedule A false in the manner charged in the indictment to convict him. See United States v. Evans, 486 F.3d 315, 324 (7th Cir. 2007) (stating that appellate court gives deference to specific wording of jury instructions as long as they contain offenses’ essential elements). Moreover, Presbitero could not have been terribly surprised that the government argued the returns were false by virtue of including amounts attributable to fictitious subcontractors, nor does he explain how his ability to prepare his defense was impaired. See Blanchard, 542 F.3d at 1143 (noting that one of the principal concerns behind the prohibition on constructive amendments is the impairment of a defendant’s ability to prepare his defense). The government filed a proffer pursuant to United States v. Santiago, 582 F.2d 1128 (7th Cir. 1978), overruled on other grounds, Bourjaily v. United States, 483 U.S. 171 (1987), well before trial that clearly maintained the six subcontractors were fictitious. In addition, Count One’s charge of a conspiracy to impede the functions of the Internal Revenue Service alleged that the six entities were fictitious and contained numerous paragraphs 12 Nos. 07-1129, 07-1610, & 07-1712 explaining why, including that the defendants had created false invoices for more than 800 checks written to the fictitious corporations. There was no constructive amendment of the indictment warranting a new trial here.
Presbitero also argues that insufficient evidence supports the jury’s decision to find him guilty of violating 26 U.S.C. § 7206(1). A defendant seeking to reverse a conviction based on insufficient evidence faces a heavy burden, with our inquiry being whether “any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.” United States v. Brandt, 546 F.3d 912, 915 (7th Cir. 2008) (quoting United States v. Farris, 532 F.3d 615, 618 (7th Cir. 2008)). Sufficient evidence supported Presbitero’s conviction. A conviction under section 7206(1) requires proof that: (1) a person made or subscribed to a federal tax return which he verified as true; (2) the return was false as to a material matter; (3) the defendant signed the return willfully and knowing it was false; and (4) the return contained a written declaration that it was made under the penalty of perjury. United States v. Peters, 153 F.3d 445, 461 (7th Cir. 1998). Presbitero contests the second and third requirements. “[A] false statement is ‘material’ when it has ‘the potential for hindering the IRS’s efforts to monitor and verify the tax liability’ of the corporation and the taxpayer.” Peters, 153 F.3d at 461 (quoting United States v. Greenberg, Nos. 07-1129, 07-1610, & 07-1712 13 735 F.2d 29, 32 (2d Cir. 1984)). “The focus of 7206(1) is clearly on the taxpayer’s intent.” Id. Presbitero maintains on appeal that the tax returns were not false as to a material matter because, he says, the deductions on the returns were for payments made to independent contractors. Payments to independent contractors, he points out, would not carry with them the tax obligations imposed upon a company when it pays employees. Presbitero never argued his independent contractor theory at trial, however, and instead repeatedly referred to the workers as employees. He also did not ask for a jury instruction on his current independent contractor theory. Alternative explanations are generally not enough to win a challenge to the sufficiency of the evidence. United States v. Humphreys, 468 F.3d 1051, 1054 (7th Cir. 2006). Here, there was plenty of evidence from which the jury could have concluded that Presbitero helped make up six purported subcontractors. Witnesses testified that drywall businesses did not operate out of the listed addresses and none of the entities ever filed a tax return. Presbitero’s own assistant made out the invoices that purportedly came from the six entities, on invoices that Presbitero had ordered himself. Taking millions of dollars in deductions for payments to subcontractors that did not exist would impede the IRS’s ability to determine the company’s tax liability. Moreover, if the jurors thought that the proceeds from the checks went to employees, taking deductions for payments to “subcontractors” meant that the company was not fulfilling the tax obligations it would have for employees. 14 Nos. 07-1129, 07-1610, & 07-1712 Even if the deductions were for payments to inde- pendent contractors, as he now asserts, Presbitero still signed false tax returns because the deductions at issue were taken for payments to subcontractors. The “purpose behind [section 7206(1)] is to prosecute those who intentionally falsify their tax returns regardless of the precise ultimate effect such falsification may have.” United States v. DiVarco, 484 F.2d 670, 673 (7th Cir. 1973). Therefore, it is not a defense to a charge of willfully and knowingly filing a fraudulent tax return that the amount fraudulently deducted could have been deducted for some other reason. United States v. Helmsley, 941 F.2d 71, 92-93 (2d Cir. 1991); United States v. Bliss, 735 F.2d 294, 301 (8th Cir. 1984). We also disagree with Presbitero’s contention that no rational jury could have found the drywall installers were employees instead of independent contractors. Velasquez hired and fired the workers, gave out the work assignments and schedules, and set the rate of pay. Foremen employed by PDC supervised the work at the site, and PDC purchased and provided the drywall. In addition, no worker received a Form 1099 from PDC. See Bennett v. Dep’t Employment Sec., 530 N.E.2d 541, 544 (Ill. App. Ct. 1988) (finding drywall installers were employees where plaintiff set wages, provided materials, imposed deadlines, and could discharge if work unsatisfactory). Also, from the testimony regarding a lack of seasonal fluctuation in the checks cashed at the currency exchange, the jury could have concluded that all the proceeds from the checks were not used to pay workers of any sort for installing drywall, meaning that costs were less than the sums reported on the returns as the indictment had alleged. Nos. 07-1129, 07-1610, & 07-1712 15 Presbitero also contests the sufficiency of the proof that he signed the return willfully and knowing that it was false. Again, he faces a steep uphill battle, as our only question is whether there was sufficient evidence to support the jury’s conclusion that he did. See Brandt, 546 F.3d at 915. As we discussed, the jury had plenty of evidence from which it could conclude that Presbitero, the owner of the company, went to great lengths to make it seem that his company was paying millions of dollars to subcontractors. That evidence bears on his knowledge of the falsity of the returns he signed that took deductions for subcontractors, as does the fact that he brought the canceled checks to his accountant specifically so that the accountant could prepare the company’s tax returns and other reports. Moreover, the jury heard that employee wages carry with them additional consequences that matter to the IRS, including withholding requirements and Social Security taxes. From all the evidence it heard, the jury could have believed that one reason Presbitero wanted to take deductions for “subcontractors” was to defraud the IRS and that doing so would have impeded the IRS had it attempted to look into his pay scheme. The jury therefore could have found that he signed the returns willfully and knowing that they were false, and sufficient evidence supported the jury’s verdict.
Presbitero also argues that he was deprived of his right to the due process of law when the government prosecuted him in this case after unsuccessfully charging and trying 16 Nos. 07-1129, 07-1610, & 07-1712 him with ERISA and mail fraud violations in an earlier case because, he says, the government took inconsistent positions in the two cases. The indictment in the earlier case charged that Presbitero and Presbitero Drywall Company underreported the total hours worked by drywall installers and the total fringe benefit contributions due for PDC from January 1995 through August 1997, thereby defrauding a carpenters’ trust fund and causing false reports to be filed with the Department of Labor. A jury convicted the company on four ERISA counts. Presbitero, individually, was acquitted. We review Presbitero’s due process claim de novo. See United States v. Eshkol, 108 F.3d 1025, 1027 (9th Cir. 1997). As support for his argument, Presbitero directs us to decisions from other circuits that found due process violations where the government took fundamentally opposite positions in different trials involving the same crime. See Smith v. Groose, 205 F.3d 1045 (8th Cir. 2000) (finding due process violation where state used “inconsistent, irreconcilable”theories to secure convictions against two defendants in different trials for the same offenses and stating, “[t]o violate due process, an inconsistency must exist at the core of the prosecutor’s cases against defendants for the same crime”); Thompson v. Calderon, 120 F.3d 1045, 1058 (9th Cir. 1997) (en banc), rev’d on other grounds, 523 U.S. 538 (1998) (stating “it is well established that when no new significant evidence comes to light a prosecutor cannot, in order to convict two defendants at separate trials, offer inconsistent theories and facts regarding the same crime”); see also Abbate v. United States, 359 U.S. 187, 197-200 (1959) (Brennan, J., specially concurNos. 07-1129, 07-1610, & 07-1712 17 ring). Not everyone agrees that the due process clause prevents the government from arguing inconsistent theories. See United States v. Frye, 489 F.3d 201, 214 (5th Cir. 2007) (stating “a prosecutor can make inconsistent arguments at the separate trials of codefendants without violating the due process clause” but finding inconsistencies not material to the conviction) (citation omitted); see also Bradshaw v. Stumpf, 545 U.S. 175, 190 (2005) (Thomas, J., concurring) (stating that the Supreme Court “has never hinted, much less held, that the Due Process Clause prevents a State from prosecuting defendants based on inconsistent theories”). This case does not present us with the opportunity to decide whether we would agree with Smith and Thompson. Notably, unlike in those two cases, the two trials did not involve the same underlying crime. The indictment in the first case alleged that false statements or omissions were made in ERISA-related documents as part of a scheme to defraud a carpenters’ union. This case, on the other hand, alleged tax fraud based on deductions taken in the company’s corporate tax returns. In addition, the government did not take fundamentally opposite positions in its two prosecutions. The government’s position in the first case was that PDC employees installed the drywall for PDC and that PDC understated the number of hours worked by those employees in its monthly reports to the union fringe benefit funds. See, e.g., United States v. Presbitero Drywall Co., Inc., No. 02 CR 165, 2003 WL 1562280, at -3 (N.D. Ill. Mar. 24, 2003) (memorandum opinion resolving post-trial motions). The defen18 Nos. 07-1129, 07-1610, & 07-1712 dants maintained in the first case that subcontractors had performed the work and that the company did not have to report hours worked by subcontractors to the union funds. The government then demonstrated that the subcontractors did not exist. In this case, the government’s position was that the six subcontractors did not exist. As a result, it maintained, Presbitero was guilty of filing false corporate tax returns because he took deductions on the basis of non-existent subcontractors. The government contended in both trials that the subcontractors did not exist. There is no fundamental conflict in these positions. Finally, although Presbitero’s brief asserts that the amount of work actually performed was the central issue in each prosecution, the amount of drywall installed was not the issue here; rather, the question was whether six subcontractors that the government maintained were fictitious had installed the drywall.
Presbitero also argues that he was prohibited from cross examining IRS Special Agent Helene Seltzer regarding bias toward him because of his earlier acquittal on ERISA and mail fraud charges, and, therefore, that his Sixth Amendment right to confront the witnesses against him was violated. Cross examining a witness to establish bias implicates a core value of the Sixth Amendment’s Confrontation Clause. See United States v. Martin, 287 F.3d 609, 620 (7th Cir. 2002). Before trial, the government moved to bar any reference to Presbitero’s prior acquittal. The district court granted Nos. 07-1129, 07-1610, & 07-1712 19 the motion but said that if the defense wanted to use the prior acquittal to show a government witness’s bias, the defense should “see me ahead of time to get me to reconsider that ruling . . . I will reconsider it once the facts are brought to me.” Presbitero did not raise the issue again during trial and did not ask the district court to allow him to raise his prior acquittal for bias purposes while Special Agent Seltzer was on the stand. Special Agent Seltzer testified about summaries she prepared of the 800 or so checks PDC made out to the six subcontractors. She also testified that computer searches she ran yielded no evidence that the six subcontractors existed other than their incorporation in 1993 and dissolution in 1994. During her testimony, she also said there were no seasonal fluctuations in the value of checks cashed each week and that it was unusual for a business to cash checks at a currency exchange, for which a fee must be paid, instead of depositing them into a corporate checking account. Presbitero argues on appeal that Special Agent Seltzer was biased because Presbitero was acquitted in the earlier case during which she also testified as a government witness. Had he asked the district court during the trial whether he could explore potential bias with this witness, as the court had instructed, the district court could have evaluated the request and made a determination in light of the evidence presented. His failure to do so means that our review is at the least forfeited, with our review for plain error. See United States v. Anderson, 450 F.3d 294, 299 (7th Cir. 2006); cf. United States v. Irby, 558 20 Nos. 07-1129, 07-1610, & 07-1712 F.3d 651, 656 n.4 (7th Cir. 2009) (noting that plain error review might not be appropriate if defendant had strategic reasons for not raising claimed Confrontation Clause violation at trial). We find no plain error here. That Special Agent Seltzer also testified in a previous case where Presbitero was acquitted does not necessarily mean she was biased in this one. Significantly, Special Agent Seltzer’s testimony mainly summarized factual data, so it was readily subject to verification if inaccurate; it was not the type of testimony readily susceptible to bias. Any error in limiting cross examination was harmless. See United States v. Smith, 454 F.3d 707, 714 (7th Cir. 2006) (harmless error analysis applies to errors arising under Sixth Amendment Confrontation Clause).