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United States v. Olgin

October 2, 1984

UNITED STATES OF AMERICA
v.
GERALD OLGIN, MARILYN OLGIN, JEROME SHAPIRO, JAMES F. O'BROCTA JAMES F. O'BROCTA, APPELLANT



On Appeal from the United States District Court for the Western District of Pennsylvania.

Author: Adams

Before: ADAMS, BECKER, Circuit Judges, and SAROKIN, District Judge*fn*

Opinion OF THE COURT

ADAMS, Circuit Judge

James O'Brocta has been convicted of conspiring to defraud the United States by impeding the Internal Revenue Service's efforts to ascertain and collect revenue in violation of 18 U.S.C. § 371 (1982). He has also been convicted of three counts of willfully assisting in the filing of and subscribing to false corporate income tax returns in violation of 18 U.S.C. § 7206 (1982).*fn1 O'Brocta was sentenced to concurrent terms of imprisonment on the conspiracy and the substantive counts; these terms were suspended by the trial judge, and concurrent periods of probation were imposed for each count. A fine was also imposed.

O'Brocta argues on appeal that the evidence adduced against him at trial is insufficient to support a conviction for conspiracy and that the trial judge's comments during the charge so tainted the jury's verdict as to deprive him of an adequate opportunity to defend himself. We cannot agree with O'Brocta's contentions and the convictions will therefore be affirmed.

I.

O'Brocta is president of a salvage company whose business is the buying and selling of scrap metal. Between 1975 and 1978, O'Brocta regularly sold scrap to Penn Iron and Metals Company. Gerald Olgin, the president of Penn Iron, testified at O'Brocta's trial that, when a seller of scrap asked for payment in cash, the firm would write a check to a fictitious payee, cash the check, and pay the seller. O'Brocta frequently received payment under this scheme, and he frequently personally cashed the checks drawn to the order of fictitious payees. O'Brocta did not include in his corporate records the receipts from sales of scrap to Penn Iron paid by such checks or cash. Although O'Brocta was responsible for the preparation of the corporate tax returns of his salvage company, he did not inform his accountants of the sales to Penn Iron, which were, consequently, not reported on the tax returns filed by the corporation for 1976, 1977, and 1978.*fn2

O'Brocta's primary defense at trial was that he lacked the mens rea required for a criminal conviction because he believed that the failure to report cash payments was not improper and would not affect the computation of his tax liability. To support the latter contention. O'Brocta attempted to show that he used the cash received from Penn Iron to purchase scrap for his own business. He claimed that he never recorded these purchases and, consequently, that the cost of goods sold, as reported on the allegedly inaccurate returns, was understated by the same amount as the report of gross receipts. Thus, O'Brocta argued, he did not intentionally violate a known legal duty in understating gross receipts because he believed that he had fulfilled his legal obligation by accurately stating gross profits and correctly computing the income tax owed on this amount.

On appeal O'Brocta argues that the trial judge deprived him of the right to convince the jury that he lacked the intent necessary to conspire or to commit the substantive crimes. He charges that the trial court erred in not allowing him to elicit certain testimony from various witnesses and that this error was compounded by the characterization of his defense as "spurious" in the judge's remarks to the jury. Finally, O'Brocta maintains that the conspiracy conviction cannot stand because the government has failed to prove that the IRS was actually impeded by the system of cash payments made to him or his corporation by Penn Iron.

II.

The most troubling aspect of this appeal is the claim that the trial judge interfered with O'Brocta's attempt to persuade the jury of his innocence by characterizing his defense as spurious. That remark was made during the recitation of the jury instructions:

There is a particular statute or two particular sections of the same statute that make the giving of the false information a violation of the law, regardless of whether there was any income tax to be paid or due, regardless of whether the United States suffered any loss or not. No pecuniary loss, no monetary loss, need be suffered by the United States. The violation of the statute is complete if it is shown that the Defendant deliberately and with knowledge that it was contrary to law gave false account of any material item on the report. Gross receipts are material. There has been an admission here the gross expenditures were also falsely reported and an argument made that they should cancel each other out, and that is spurious, of course, in that it omits the consideration of inventory. If money is paid out to acquire goods, then those goods go into inventory, and so a false statement of any one of these things throws all the rest of the material on the return out of whack and unable to be understood.

App. at 548.

Immediately after these remarks, the judge explained that the jury must determine whether the defendant had "acted willfully, in the sense that he knew what he was doing was contrary to law, and he knew that the statements were false." "No one should be convicted," the judge emphasized, "if he acted by mistake or inadvertence or some other reason. He has to know what he was doing and know that it was contrary to the requirements of law."*fn3 App. at 548-49. These remarks repeated an earlier and more specific reference to the intent requirement of the statutes under which O'Brocta was being prosecuted:

Do the facts which have been drawn before you, are the things which were done, consistent with a certain state of mind, which is the issue in this case? There is no dispute, there is no denial, that the tax return in question for the three years was false. The Defendant admits that it was, when it say [sic], "Total Receipts," that the total receipts weren't there, and that is undisputed. There is no dispute that the Defendant did not record all the receipts that he got. The dispute here is as to his state of mind, because that is an element of the crime for which he is charged, that he knowingly and willfully gave false information.

App. at 528.

The most explicit or at least the most complete explanation of the elements of the crimes with which O'Brocta was charged came later:

If you find beyond a reasonable doubt, from all the evidence in the case, that the Defendant willfully signed the tax returns for 1977 and '78, that the return was false as to a material matter, and that he knew that the false return was false, then the offense is completed. . . . With respect to the '76 return, you must find that the Defendant aided or assisted in or procured or advised the preparation of a return, that the return was false as to a material matter, and that the Defendant did it willfully, that is, knowing that it was contrary to law, knowing that it was false. . . .

The terminology as used in this statute means that the acts are done voluntarily and purposefully, and not because of a mistake or accident or some other innocent reason. . . .

So remember that the critical element in this case, and the only one in real dispute, is the mental state of the Defendant, that it must be shown that he willfully did the act, knowingly doing something which he knows the law forbids. . . . If the evidence leads you to conclude that the Defendant acted in good faith in order to conform to the law, that would not meet the test of willfulness. The Government must prove the Defendant's conduct in supplying the allegedly false information to his accountant was willfully done, with the specific intent to violate what he knew his legal duty to be. He must be shown to have acted voluntarily and intentionally to violate a known duty. The evidence must show that James O'Brocta knew that his conduct was unlawful, that a particular act or failure to act here was a violation of the law.

You may consider all these matters. You may consider if he acted because he, in truth and honesty, believed that his offsetting of purchases would offset the cash received not reported, made his act without any tax consequences. Then, you may consider that in connection with the willfulness.

Is there evidence here which raises a doubt that he acted willfully about any fact by which is shown in the evidence to excuse that state of mind? Did he, in good faith, believe that the method of offsetting expenses that he has testified to rendered it unnecessary for him to give truthful reports? Then, you may consider that for the purpose of determining whether he acted willfully.

So, in summation, a conviction of willful violation of the tax laws must shown an intentional violation of a known legal duty, which the Government ...


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