United States v. Goldberg

BOUDIN, Circuit Judge.

Richard Goldberg was convicted of two counts of conspiracy to defraud the Internal Revenue Service, . . . and eight counts of aiding and assisting the filing of false income tax returns. . . . Goldberg's appeal is now before us. We begin by describing the factual background and proceedings in the district court.

In the years prior to his indictment in 1995, Goldberg was involved in several businesses in and around Boston. His ventures included a billboard company, Logan Communications, and a partial interest in a "Park 'N Fly" lot located in East Boston near Logan Airport. Goldberg also owned and operated Liverpool Lumber, Inc., which Goldberg used as a management company for various of his other enterprises.

In or around 1988, Goldberg became aware that the Commonwealth of Massachusetts planned to take all or part of the East Boston Park 'N Fly lot by eminent domain as part of its Third Harbor Tunnel project. The planned taking not only threatened Goldberg's profitable parking business, but also his billboard company, since many of its signs were located on the parking lot's land. Goldberg began an intense lobbying effort against the proposal in 1988, eventually spending over $ 1 million of his and his partners' money to oppose the tunnel plans.

Two of those hired to oppose the project--community activist Robert A. Scopa and consultant Vernon Clark--were named as co-conspirators in the two separate conspiracies for which Goldberg was ultimately convicted. Taking the evidence most favorable to the verdict, the facts pertaining to the two different conspiracies were as follows.

Scopa Conspiracy. From 1990 to 1995, Goldberg employed Scopa to help organize the East Boston community against the tunnel project and to perform other services. But Goldberg never paid Scopa in Scopa's own name. Instead, Goldberg had his Liverpool Lumber company issue paychecks to three successive "straw" employees, none of whom worked for Goldberg and all of whom agreed to hand the money over to Scopa.

To reflect the "wages" of the straw employees, Goldberg directed his bookkeeper at Liverpool Lumber to prepare various W-2, W-3, and W-4 reporting statements, which were then filed with the IRS. These documents falsely described wage payments to straws who had performed no work for Liverpool Lumber. The straws, in turn, falsely included the phantom wages from Liverpool on their own individual returns. Reporting the money on the straws' returns instead of Scopa's resulted in a loss of about $ 150 to the Internal Revenue Service.

The government claimed at trial that the scheme was devised so that Scopa would seem to be unemployed and thus could continue to collect monthly benefits under a disability insurance policy. Evidence also indicated that Scopa sought to hide the payments in order to preserve his status as an "independent" activist in the East Boston community and to prevent an extramarital affair from being discovered by his wife. The district court later found that Scopa, but not Goldberg, was motivated by all of these objectives.

Clark Conspiracy. In the course of opposing the Third Harbor Tunnel project, Goldberg also retained Vernon Clark, a lobbyist in Washington, D.C., who performed various services to this end. Goldberg's companies owed Clark a substantial sum of money in 1991 for work performed in opposition to the tunnel project. Rather than pay the bill directly, the two men agreed with others to a more complicated method for Goldberg to discharge his debt to Clark.

At the time, Clark was having a secret affair with a woman named Patricia McNally. The pair occasionally spent time in a Maine beach house of which McNally was part owner. Clark sought to fund an expansion of the beach house without his wife's knowledge. Goldberg agreed to pay the money he owed to Clark to a landscaping company owned by John Lango, McNally's brother-in-law, who would in turn construct the beach house expansion.

Goldberg arranged for the preparation of two separate $ 10,000 invoices to Park 'N Fly from Lango, dated October 15, 1991 and January 1, 1992, respectively. The invoices were ostensibly for landscaping services, although Lango performed no work for any of Goldberg's companies. At Goldberg's direction the invoices were paid by Park 'N Fly. Lango testified at trial that the payments were structured in two installments so as to reduce his taxes on the transaction.

The triangular flow of money and services involved the plainly foreseeable preparation and filing of several false tax documents. In due course, Park 'N Fly sent forms 1099-MISC, one for each $ 10,000 payment, to the IRS and to Lango. The forms falsely listed the payments as non-employee compensation to Lango. Lango in turn reported the payments as income on his own income tax returns in 1991 and 1992. Clark did not report the money. The foreseeable tax loss to the IRS based on this scheme was about $ 3,000.

A federal grand jury indicted Goldberg on April 6, 1995 for offenses relating to the above activities. The indictment charged Goldberg with two counts of conspiring to defraud the United States government, . . . several counts of aiding and assisting the filing of false income tax returns, . . . and several counts of mail fraud based on his alleged efforts to conceal his employment of Scopa from the latter's disability insurer. . . .

After moving unsuccessfully to dismiss the indictment, Goldberg waived his right to a trial by jury. . . . The court found Goldberg guilty of conspiring to defraud the government and of aiding and assisting in the preparation of false tax returns, but acquitted him on the mail fraud charges on the ground that his motive to help defraud the insurer had not been proved beyond a reasonable doubt. . . . Goldberg now appeals. . . .

The most important and difficult issues on appeal relate to Goldberg's conviction for conspiracy under . . . to defraud the IRS. This type of conspiracy is known as a Klein conspiracy, taking its name from an earlier case involving a complex scheme designed to escape taxes. United States v. Klein. . . . Goldberg argues that the district court misunderstood the crime's "purpose" element and that the evidence did not support a conviction. . . .

Goldberg . . . challenges the admission at trial of two out-of-court conversations between Lango and Clark, in which they discussed the false landscaping invoices and the solicitation of Goldberg's participation in the scheme. These statements were admitted, over Goldberg's objection at trial, pursuant to Fed. R. Evid. 801(d)(2)(E), which provides that "a statement by a co-conspirator of a party during the course and in furtherance of the conspiracy" is not considered hearsay.

Goldberg does not dispute that Lango and Clark made the challenged statements during and in furtherance of the conspiracy, but he argues that the statements were not admissible against him because they were made before he joined. He relies heavily on our opinion in United States v. Petrozziello . . . where we said that "if it is more likely than not that the declarant and the defendant were members of a conspiracy when the hearsay statement was made, and that the statement was in furtherance of the conspiracy, the hearsay is admissible."

Although this language has been cited with approval in a few later cases, e.g., United States v. McCarthy . . ., it conflicts with United States v. Baines. . . . Baines expressed the traditional notion that--insofar as hearsay is concerned--a late-joining conspirator takes the conspiracy as he finds it: "a conspiracy is like a train," and "when a party steps aboard, he is part of the crew, and assumes conspirator's responsibility for the existing freight . . ."; accord United States v. Saccoccia. . . .

Frankly, the underlying co-conspirator exception to the hearsay rule makes little sense as a matter of evidence policy. No special guarantee of reliability attends such statements, save to the extent that they resemble declarations against interest. The exception derives from agency law, an analogy that is useful in some contexts but (as the Advisory Committee noted) is "at best a fiction" here. The most that can be said is that the co-conspirator exception to hearsay is of long standing and makes a difficult-to-detect crime easier to prove. . . .

If starting afresh, one might argue that the narrow Petrozziello version of the exception should be preferred, if only because it accords better with the companion rule imposing substantive liability for other crimes committed during the conspiracy; a co-conspirator is held liable for foreseeable acts of others done in furtherance of the conspiracy but only if committed during the defendant's period of membership. United States v. O'Campo . . . Symmetry is at least convenient.

But we are not starting afresh. The broader Baines test describes the traditional approach, United States v. United States Gypsum Co. . . . presumptively adopted by the Federal Rules of Evidence. It is followed in most circuits. . . . Most important, it is the test in most of our own recent cases, including Saccoccia, decided only 19 months ago. This panel is arguably not free, but is in any event not inclined, to depart from Saccoccia. . . .

We review a district court's factfinding at sentencing under a clearly erroneous standard. . . . On the record before us, ample evidence shows that Goldberg superintended the straws' receipt of false tax documents. Goldberg says that Scopa and Clark were the true leaders of the two conspiracies. But a defendant need not be at the top of a criminal scheme to be a manager or supervisor. United States v. Savoie. . . . Here, Goldberg's role was sufficient for the enhancement even if we assume that Scopa conceived of the payroll scheme and may have exercised primary supervision over the straws.

Affirmed.