United States v. Richard Goldberg

Citations: 105 F.3d 770; 1997 WL 33335Docket: 96-1132

Court: Court of Appeals for the First Circuit; February 25, 1997; Federal Appellate Court

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Richard Goldberg was convicted on two counts of conspiracy to defraud the IRS under 18 U.S.C. § 371 and eight counts of aiding the filing of false income tax returns in violation of 26 U.S.C. § 7206(2). His appeal was reviewed by the United States Court of Appeals for the First Circuit. Prior to his indictment in 1995, Goldberg operated several businesses in Boston, including a billboard company and Liverpool Lumber, which served as a management entity for his ventures.

Goldberg became aware in 1988 that the Massachusetts government planned to take part of his Park 'N Fly lot by eminent domain for a tunnel project, prompting him to spend over $1 million lobbying against it. Two individuals, community activist Robert A. Scopa and consultant Vernon Clark, were named as co-conspirators in the fraud schemes linked to Goldberg.

The Scopa conspiracy, which lasted from 1990 to 1995, involved Goldberg employing Scopa to rally opposition against the tunnel project without compensating him directly. Instead, Goldberg used Liverpool Lumber to issue paychecks to three straw employees, who were not real employees and agreed to forward the funds to Scopa. Goldberg directed his bookkeeper to prepare false W-2, W-3, and W-4 forms reporting wages for these straw employees, which were filed with the IRS, resulting in a $150 loss to the government. The scheme aimed to allow Scopa to appear unemployed for disability benefits and to maintain his reputation in the community, while also concealing payments from his wife. The district court determined that only Scopa was motivated by these personal objectives.

Goldberg opposed the Third Harbor Tunnel project and retained lobbyist Vernon Clark, who was owed money for his services. Instead of paying Clark directly, they devised a scheme involving a landscaping company owned by John Lango, Clark's brother-in-law, to create false invoices for landscaping work that was never performed. Goldberg arranged for two $10,000 invoices to be issued to Park 'N Fly, which were paid under the pretense of landscaping services. The payments were structured to minimize tax liabilities, and false tax documents were filed with the IRS, falsely categorizing the payments as non-employee compensation. The IRS faced an estimated tax loss of approximately $3,000 due to this scheme.

Goldberg was indicted on April 6, 1995, for conspiracy to defraud the government, aiding in the filing of false tax returns, and mail fraud. After an unsuccessful motion to dismiss the indictment, he waived his right to a jury trial. Following an eight-day trial, he was convicted of conspiracy and aiding in the preparation of false tax returns, but acquitted of mail fraud due to insufficient proof of motive. At sentencing in December 1995, the court calculated guidelines but imposed a downward departure, resulting in a ten-month sentence (five months in prison, five in community confinement), three years of supervised release, and a $20,000 fine. Goldberg is appealing, focusing on the conspiracy conviction under 18 U.S.C. 371, claiming the court misinterpreted the crime's "purpose" element and that the evidence was insufficient for a conviction.

The defraud clause of Section 371 prohibits conspiring to defraud the United States or its agencies, encompassing schemes that interfere with governmental functions beyond just financial loss. Goldberg was charged with conspiring to disrupt IRS operations by filing false tax documents. For a conspiracy to qualify under this clause, the fraud must be a primary objective rather than a mere foreseeable outcome of the conspiracy. This principle is illustrated with examples, such as bank robbery conspiracies, where the primary aim is the theft, not the resulting tax evasion. The requirement for fraud to be an explicit purpose is especially critical under Section 371 to avoid broadening federal conspiracy definitions to include numerous financial crimes with incidental tax implications. 

Determining what constitutes the primary purpose of a conspiracy can be challenging, as seen in money laundering cases where concealing income from the IRS may be an implied objective. Goldberg argues that conspirators must either aim to thwart the IRS or conceal another crime, referencing cases that support this view. However, the document asserts that a conspiracy can have multiple objectives, and any agreed-upon aim can define its character. The challenge lies in distinguishing between a conspiracy's purpose and its mere consequences. Ultimately, if conspirators agree to falsify IRS documents, this may infer an intent to defraud the government, aligning with the Supreme Court's interpretation in Dennis.

Conspirators in the case may not have had a direct intention to obstruct the IRS or lower tax liability, but the act of filing false tax documents misattributing income is inherently capable of interfering with IRS functions. A distinction between the purpose to file these documents and the purpose to interfere with the IRS is not clearly defined under section 371. The legal framework allows a factfinder to equate these purposes, affirming that mere collateral effects of agreed activities do not constitute the conspiracy's objective. The case would differ if conspirators had merely agreed to pay under the table without filing false documents.

The evidentiary question revolves around whether Goldberg and at least one conspirator shared an intent to interfere with the IRS through the filing of false income reports, requiring a separate analysis for each of the two conspiracies he was convicted of under section 371. For a conspiracy to defraud to exist, there must be a shared illicit purpose among co-conspirators, distinguishing it from innocent third parties who may inadvertently participate.

The district court concluded that the purpose of the conspirators in each instance was indeed to interfere with the IRS, which can be inferred from their actions, particularly the filing of false income-related tax documents. Goldberg's involvement in creating these false documents and the complexity and duration of the schemes reinforce this inference. Although there is no direct evidence of Goldberg discussing the filing of false documents with co-conspirators, the conduct was considered an integral part of the conspiracies, allowing for the inference that others shared this intent.

In the Scopa conspiracy, false W-2s were provided to participants, with one conspirator signing a tax return that incorporated these false documents. In the Clark conspiracy, another conspirator received false 1099 forms and reported them to the IRS, demonstrating a shared knowledge of the scheme's illegal nature. Overall, the evidence supports the trial court's finding of a common purpose among the conspirators to interfere with IRS functions.

The defraud clause of section 371 is susceptible to misuse due to the vague nature of "interfering with a proper government function." A careful examination of the evidence and conduct of the defendants indicates that, while less egregious than in Klein, their actions could still be construed as falling within the scope of section 371. Goldberg contests the trial admission of two conversations between co-conspirators Lango and Clark regarding false invoices, arguing that the statements should not be admissible against him since they occurred before his involvement in the conspiracy. He cites United States v. Petrozziello, which allows hearsay statements if it is more likely than not that the declarant and defendant were part of the conspiracy at the time of the statements. However, this view conflicts with United States v. Baines, which posits that a late-joining conspirator inherits the conspiracy as it exists. The co-conspirator hearsay exception lacks a reliable evidentiary basis and is rooted in agency law, which is often seen as inadequate in this context. While the narrower Petrozziello standard may seem preferable for symmetry with substantive liability for acts committed during the conspiracy, the broader Baines standard aligns with the traditional approach and is widely accepted across circuits. The panel is not inclined to deviate from this established precedent, as reflected in recent case law.

Goldberg appealed the district court's denial of his pre-trial motion to dismiss the indictment based on claims of selective prosecution, arguing that he presented sufficient facts to warrant an evidentiary hearing. He contended that the government targeted him due to his constitutionally protected lobbying against the Third Harbor Tunnel project. The legal standard for requiring a hearing is that the defendant must allege facts indicating selective prosecution and raise reasonable doubt about the prosecution's motives. The court may deny a hearing if the government presents adequate counterarguments and if a hearing is deemed unproductive, with appellate review conducted for abuse of discretion.

Goldberg cited comments made by a prosecutor, the implication of certain initials in prosecution files, and the absence of indictments against some co-conspirators as indicative of selective prosecution. The government refuted these claims, asserting that the alleged comment was never made, clarifying the initials referred to an FBI agent, and providing context for its investigation. The district court characterized Goldberg's claims as nearly conclusory and ultimately denied the hearing, a decision upheld on appeal. The appellate review concluded that the evidence for selective prosecution was weak, with the government's rationale for pursuing Goldberg being well-explained and supported. Consequently, the court found no abuse of discretion in the district court's denial of an evidentiary hearing.

Goldberg's motion for a new trial was denied, with his main argument being that the government failed to adhere to its internal rules for tax prosecutions and did not disclose relevant information. The court ruled that these procedures do not establish substantive rights and found no evidence that the government withheld Brady material that would have been prejudicial. Regarding sentencing, the district court enhanced Goldberg's base offense level from 10 to 14 by adding four levels—two for his role in the offense and two for obstruction of justice—but then chose to depart downward to a level of 12, deeming his conduct outside the typical scope of the Klein conspiracy guidelines. The judge noted that while Goldberg's actions constituted a Klein conspiracy legally, they were more appropriately evaluated under the guideline for aiding and assisting tax fraud. 

Goldberg contested the two-level enhancement for his managerial role, asserting that the only individual he managed was his bookkeeper, who he claimed did not qualify under the guidelines as a culpable participant. However, the district court concluded that Goldberg had a management role related to the submission of false tax documents. The court's factfinding at sentencing is reviewed under a clearly erroneous standard, and there was sufficient evidence to support the enhancement, regardless of whether others were seen as the primary leaders of the conspiracies. The decision was affirmed, and Goldberg received a ten-month sentence, which was the minimum for his adjusted offense level.