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August 25, 1989


The opinion of the court was delivered by: DITTER


 Defendant was convicted of tax evasion and of assisting or procuring the preparation of false tax returns, violations of 26 U.S.C. ยงยง 7201 and 7206(2). Presently he has moved for a judgment of acquittal or alternatively, for arrest of judgment or a new trial.

 During the tax years of 1982 and 1983, the defendant, Seymour G. Mandell, owned all of the stock of The Freshie Company, a food service and distribution company. At that time he and his wife were involved in the renovation and expansion of their Philadelphia townhouse. Irving Shapiro was retained as their architect, and Robert Lipschutz was hired as the contractor to make the renovations. Documentary evidence showed both submitted bills to The Freshie Company for work done at the defendant's house, and that these bills were drafted to show the work had been performed at Freshie's plant. Lipschutz testified his bills were worded in that fashion at Mandell's direction. *fn1" Despite the existence of an accounting system which provided a method by which defendant's personal expenses could be paid with Freshie monies and the amounts charged to an executive loan account in defendant's name, the invoices to Freshie for the work done at defendant's home were paid by Freshie, but the amounts were not charged to defendant. The evidence also showed that Freshie paid for the rental of coat racks used at defendant's home while the closets were being redone, and that this amount was not charged to him. In addition, defendant approved in writing Freshie's payment of some of these expenses, and none of them was included as income on his personal tax returns for 1983 and 1984. The Freshie Company deducted the payments made to the architect, contractor, and for the coat racks as expense items for 1983 and 1984. It was on the basis of these facts that the defendant was indicted for evasion of his personal income tax for 1983 and 1984 (counts one and two) and with assisting or procuring the preparation or presentation of false tax returns on behalf of The Freshie Company for the same years (counts three and four). At defendant's first trial, the jury was unable to reach a verdict on any count; at defendant's second trial, he was convicted of all charges.

 I. Defendant's Double Jeopardy Argument

 In moving for judgment of acquittal or arrest of judgment, defendant contends that the evidence presented at his first trial was insufficient to support a conviction on any count, and that his retrial was thus barred by the double jeopardy clause of the fifth amendment. Defendant argues that with respect to the first two counts of the indictment, the evidence at the first trial did not show a willful act on his part to evade his personal tax liability. *fn2" Viewing the evidence in the light most favorable to the government, there was sufficient evidence at the first trial from which the jury could have decided that the defendant directed both Shapiro and Lipschutz to draft their bills to show that the work on his house had been performed for Freshie and to submit the bills to Freshie for payment. The evidence also warranted a finding that defendant approved the payment by Freshie of these invoices as well as the invoices for the coat racks, yet never included these amounts as income on his personal tax returns for 1983 or 1984. With regard to counts three and four, *fn3" there was also evidence which would have justified the conclusion that the defendant was aware of the system in place at Freshie to charge him for its payment of personal expenses, that he knew the house renovation invoices would be charged as corporate expenses unless he designated them as personal expenses, and that he also knew Freshie could not legitimately claim deductions for payments it made for the improvement of his residence. Thus, there was sufficient evidence from which the jury could have concluded that defendant acted willfully, as required if there was to be a conviction on counts one and two, and that he knowingly and intentionally caused the preparation of false returns by Freshie, as required if there was to be a conviction of counts three and four. It follows that his retrial on all four counts was not barred by the double jeopardy clause.

 II. Defendant's Motion for Judgment of Acquittal on Count Three

 Defendant also moves for judgment of acquittal on count three of the indictment on the basis that there was insufficient evidence at trial to prove the allegations in that count. Count three of the indictment charges that Mandell aided, assisted, procured, counselled, and advised the preparation of a tax return that falsely represented Freshie was entitled "to claim a deduction of $ 28,500.00 for outside services expenses" for its 1983 fiscal year.

 The problem -- and the basis for defendant's motion for judgment of acquittal -- is that the precise charge in count three, that Freshie's return claimed an improper deduction of $ 28,500 for "Outside Services," was not proven at trial. Rather, the evidence showed only an improper $ 3,000 deduction for "Outside Services." The defendant contends that the difference between the indictment's allegation and the government's evidence amounted to a failure of proof which entitles him to a judgment of acquittal on this count. I disagree. The indictment charges defendant with procuring Freshie's filing of a tax return that was false because it claimed an improper "Outside Services" deduction. At trial, the government proved he had done so. The fact that the evidence showed an improper "Outside Services" deduction of $ 3,000 rather than $ 28,500 does not mean the proof was insufficient to sustain a conviction, nor does it mean that such a variance in proof warrants judgment of acquittal. See United States v. Miller, 471 U.S. 130, 85 L. Ed. 2d 99, 105 S. Ct. 1811 (1985) (conviction for fraudulent scheme narrower than that charged in indictment does not constitute constructive amendment of indictment where scheme upon which conviction was based was included in indictment and offenses charged were not broadened by variance in proof); United States v. Castro, 776 F.2d 1118 (3d Cir. 1985) (variation in proof did not constitute constructive amendment of indictment where variation did not broaden the bases for conviction but instead narrowed the scope of the evidence to prove an offense included in the indictment), cert. denied, 475 U.S. 1029, 89 L. Ed. 2d 342, 106 S. Ct. 1233 (1986). Defendant has also shown no prejudice resulting from the variance in what was charged in the indictment and the proof at trial. Miller, 471 U.S. at 134-35. I will, therefore, deny defendant's motion for judgment of acquittal on count three. *fn4"

 Defendant alternatively moves for a new trial with regard to count three on the basis that there was, as defendant terms it, a fatal variance between the charge in the indictment and the government's proof at defendant's second trial. Defendant contends that because the government introduced evidence with regard to the two false deductions not specified in the indictment, the deductions for "Professional Fees" and "Repairs," there was a fatal variance between the indictment and the proof at trial, thereby justifying the grant of a new trial on count 3.

 Under the fifth amendment grand jury clause, a defendant has the right to be tried only on charges presented in an indictment returned by a grand jury. *fn5" Stirone v. United States, 361 U.S. 212, 217, 4 L. Ed. 2d 252, 80 S. Ct. 270 (1960). See Miller, 471 U.S. at 140-41. A constructive amendment of the charges in an indictment can occur when the evidence at trial establishes the commission of an offense not charged in the indictment. In other words, the proofs may broaden the possible bases for a conviction from those considered by the grand jury. *fn6" Id. at 143. Because a defendant could be convicted on allegations which were neither presented to the grand jury nor charged in the indictment, the constructive amendment of an indictment constitutes a per se violation of the fifth amendment grand jury clause, requiring reversal of a conviction. Stirone, 361 U.S. at 217.

 Count three of this indictment charges defendant with aiding and procuring the filing of a corporate tax return which was false because it improperly claimed a deduction for "Outside Services," not because it improperly claimed deductions for "Professional Fees" and "Repairs." The proofs at trial established improper deductions for all three. In Stirone, one of the offenses proved at trial was not fully contained in the indictment. Since the trial evidence had amended the indictment by broadening the possible bases for conviction from that which appeared in the indictment, the Supreme Court reversed. 361 U.S. at 217. In this case, by presenting evidence of the improper deductions for "Professional Fees" and "Repairs," the government necessarily broadened the charges upon which the defendant was tried and, thus, in effect, amended the indictment. The result was the impermissible addition to the indictment during trial. See United States v. Zauber, 857 F.2d 137, 151 (3d Cir. 1988) ("The unconstitutional amendment occurs when impermissible additions are made to the indictment during trial."), cert. denied sub nom. Scotto v. United States, 489 U.S. 1066, 103 L. Ed. 2d 810, 109 S. Ct. 1340 (1989). The jury, having received evidence that all three deductions were improper, could possibly have based defendant's count three conviction on a charge that was never presented to the grand jury, the falsity of the "Repairs" deduction or the falsity of the "Professional Fees" deduction. Since there is no way to know just which deduction was the basis of the conviction, I conclude that a new trial is ...

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