United States District Court, W.D. Pennsylvania
MEMORANDUM ORDER DENYING DEFENDANT'S MOTION FOR
JUDGMENT OF ACQUITTAL OR, IN THE ALTERNATIVE, MOTION FOR NEW
TRIAL (DOC. NO. 233)
J. Schwab United States District Judge.
Steven J. Lynch (“Lynch”), a highly skilled tax
attorney and sophisticated businessman, was found guilty of
16-counts of willful failure to pay over withheld employment
taxes in violation of 26 U.S.C. § 7202, of a 29-count
Superseding Indictment,  on September 9, 2016. The evidence at
trial fairly established that Lynch possessed superior
knowledge of tax and corporate laws which he used to keep
Internal Revenue Service (“IRS”) agents from
being able to collect taxes due for several entities that
make up the Iceoplex - - a collection of businesses related
to an indoor ice skating rink - - by shifting assets and
employees among several entities.
period of more than ten years, Lynch kept the IRS at bay,
with promises to pay the withheld employment taxes owed, and
with partial payments, some made involuntarily on the rare
occasion when the IRS was able to successfully levy a bank
account or by applying refunds due to Defendant from his
personal tax returns. He structured the Iceoplex entities to
keep employees in companies with minimal assets which
resulted in the IRS being unable to collect unpaid
liabilities; and, he kept Iceoplex assets in other companies
that were then able to receive large loans from banks that
were unaware the other Iceoplex entities owed millions of
dollars in unpaid employment taxes. Trial testimony
established that Lynch told IRS agents that he would make
more payments toward the unpaid tax liabilities when he was
able to secure funds, but instead, Lynch used funds from the
loans obtained to pay other creditors and to make capital
improvements to his businesses.
deliberating over four days for a total of 19 hours, which
exceeded the total trial time of 17.5 hours, the Jury
returned a verdict in this case which shows a careful
count-by-count analysis. The Jury found that the Government
proved beyond a reasonable doubt each element of the crimes
charged at Counts 13 through 19 and 21 through 29, but
acquitted Lynch on all other counts. Doc. Nos. 203, 208.
now moves for judgment of acquittal under Federal Rule of
Criminal Procedure 29 or, in the alternative, for a new trial
under Federal Rule of Criminal Procedure 33. Doc. No. 235.
For the reasons set forth herein, the Court will DENY these
Federal Rule of Criminal Procedure 29
Rule of Criminal Procedure 29 provides that a defendant
“may move for a judgment of acquittal . . . after a
guilty verdict, ” for “any offense for which the
evidence is insufficient to sustain a conviction.” When
reviewing a post-verdict motion for judgment of acquittal
under Rule 29, a district court “must review the record
in the light most favorable to the prosecution to determine
whether any rational trier of fact could have found proof of
guilt beyond a reasonable doubt based on the available
evidence.” United States v. Smith, 294 F.3d
473, 476-77 (3d Cir. 2002). District courts must be careful
“not to usurp the role of the jury by weighing
credibility and assigning weight to the evidence, or by
substituting [their] judgment for that of the jury.”
United States v. Brodie, 403 F.3d 123, 133 (3d Cir.
2005) (citing United States v. Jannotti, 673 F.2d
578, 598 (3d Cir. 1982) (en banc).
Federal Rule of Criminal Procedure 33
Rule of Criminal Procedure 33 permits a court to
“vacate any judgment and grant a new trial if the
interest of justice so requires.” When reviewing a Rule
33 motion, the district court must exercise its own judgment
in assessing the Government's case, but can order a new
trial “only if it believes that there is a serious
danger that a miscarriage of justice has occurred--that is,
that an innocent person has been convicted.” United
States v. Silveus, 542 F.3d 993, 1004-05 (3d Cir. 2008)
(quoting United States v. Johnson, 302 F.3d 139, 150
(3d Cir. 2002)).
Elements of 26 U.S.C. § 7202 as Set Forth in the Jury
each of the time periods specified in the Counts for which
Lynch was found guilty by the Jury, the Government had to
prove beyond a reasonable doubt:
1. That Mr. Lynch had a duty under Title 26 of the United
States Code to collect, account for, and pay over taxes from
the wages of employees;
2. That Mr. Lynch failed to collect, or to truthfully account
for, or to pay over the taxes; and,
3. That Mr. Lynch acted willfully.
Jury Instructions, Doc. No. 165.
means a voluntary and intentional violation of a known legal
duty. Doc. No. 165. Conduct is not willful if done through
negligence, mistake, accident, or due to a good faith
misunderstanding of the requirements of the law. Id.
A “good faith belief” is one that is honestly and
genuinely held. Id. A belief need not be correct or
objectively reasonable to be held in good faith. Id.
To find that a defendant acted “willfully, ” the
evidence must prove beyond a reasonable doubt that the
defendant acted with a purpose to disobey or disregard the
law. Id. There is no requirement, however, to prove
that a defendant had any evil motive or bad purpose other
than the purpose to disobey or disregard the law.
Sufficient Evidence Exists to Support a Finding of
Defendant's Willfulness for the Counts on which Defendant
argues that the evidence presented at trial was insufficient
to establish that he “willfully” failed to pay
the employment taxes and that “overwhelming evidence of
[his] good faith” was not refuted by the Government.
Doc. No. 235, pp. 9-13. Lynch contends that his good faith
was shown by: his accurate and timely-filed quarterly
employment tax returns (Form 941s); his payment of a portion
of the taxes due; his so-called “prior course of
dealings” preceding the quarters for which he was
indicted and during which he paid employment taxes late;
mistakes made by the IRS in applying payments made to the
several employer-company accounts and filing liens in an
attempt to collect the taxes owed; and, finally, the
undisputed evidence that Lynch always stated that he intended
to pay the employment taxes. Id.
the evidence in the light most favorable to the prosecution,
the Court finds that the following evidence presented at
trial supports the Jury's verdict finding a willful
failure to pay the employment taxes for the counts for which
Lynch was convicted.
Lynch never disputed that the employment taxes at issue were
unpaid. In fact, Defendant's own expert witness submitted
a report showing that the taxes still due - - with interest,
penalties, and fees - - totaled $2, 743, 127.00 for all
quarters between March of 2008 and March of 2015. Doc. No.
201, pp. 44-49; Doc. No. 225, pp. 209-213 (Defendant's
expert David Kaplan testified about his calculations of the
amounts owed and paid for all of the employer-companies).
the Counts for which Lynch was convicted are for a two-year,
nine month time period between the quarter ending June 31,
2012, and the quarter ending March 30, 2015. Doc. No. 212.
Evidence at trial from which a rational factfinder could
conclude that Lynch acted willfully during that time period
• Lynch's failure to make any timely payments toward
the taxes related to Counts 13-19 and 21-29. See
Doc. No. 201, pp. 44-49; and Exhibit G-96.
• The IRS's notice to Lynch in April of 2010 that
his actions, such as paying other creditors (including
himself), would meet the standard for willfulness.
• The FBI's interview of Lynch in March of 2011,
during which he was notified that he was the subject of a
criminal investigation for willful failure to pay employment
taxes. Doc. No. 223, p. 216-218. After the FBI interview,
Lynch made full, timely payments for three subsequent
quarters and substantial partial payments for two more
subsequent quarters before failing to make any payment
towards the taxes owed for the quarters related to the Counts
for which he was convicted. See Doc. No. 201, pp.
• Lynch's failure to pay employment taxes owed after
receiving a $6.5 million loan for several Iceoplex entities
in 2013; instead, he paid other creditors and made capital
improvements to the Iceoplex property. Jt. Exh. 211; Doc. No.
224, pp. 10-12. See United States v. Boccone, 556
Fed.App'x 215, 239 (4th Cir. 2014), cert.
denied,135 S.Ct. 169 (2014) (“The intentional
preference of ...