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United States v. Egenberg

decided: March 26, 1971.


Medina, Hays and Anderson, Circuit Judges.

Author: Hays

HAYS, Circuit Judge:

This is an appeal from a judgment of the United States District Court for the Southern District of New York convicting appellant on twenty-two counts charging unlawful payment of gratuities in violation of 18 U.S.C. § 201(f)(1964) and on three counts for filing false statements in violation of 18 U.S.C. § 1001 (1964) and 26 U.S.C. § 7206(2)(1964). The court imposed a two-year sentence of imprisonment and a $100 fine for each of the twenty-two gratuity counts; a five-year sentence and a fine of $10,000 on the first of the false-statement counts; and a three-year sentence and a $2000 fine on each of the remaining false-statement counts. The prison sentences are to run concurrently.

We affirm the convictions.

Appellant Egenberg, a certified public accountant, represented a number of European musicians and singers before the Alien Tax Section of the Internal Revenue Service. Among the services he rendered was the preparation of Departing Alien Income Tax Returns (Form 1040C) as well as the ordinary year-end returns (Form 1040B). By stating in connection with Form 1040C that he did not intend to return to the United States before the end of the year, an alien taxpayer could secure an immediate refund of any excess in taxes withheld.

In the returns he filed appellant grossly inflated his clients' deductions for such expenses as outlays for commissions, secretary-interpreters, coaching, publicity, voice training, accompanists, gratuities, copyright fees, as well as the expenses of travel, hotels, and meals when engaged for a specific performance. In order to assure that these returns would not be questioned Egenberg made payments to Vincent Fontana, Solomon Gordon and Raphael Pacello, Alien Tax Section technicians whose duty it was to examine the returns. In 1964 when a new policy required taxpayers to substantiate deductions, appellant began submitting as such substantiation forged or altered documents.

Appellant's unlawful activities were discovered when Vincent Fontana confessed in late 1964 that he had participated in widespread corruption in the Alien Tax Section. Fontana remained in his position by arrangement with the Inspection Service of the Internal Revenue Service and reported in a daily log evidence of graft that came to his attention. This cooperation led to the arrest of the appellant and tax technicians Gordon and Pacello in January 1966.

Fontana testified that during the period from January 1965 to January 1966 he examined at least thirty returns prepared and filed by the appellant and that appellant made ten cash payments to him during the same period. Fontana testified that he accepted deductions which he knew were excessive and which were unsubstantiated and that he did not question appellant's representation that such Metropolitan Opera regulars as Tebaldi, Konya, Nilsson, Tucci, and Stratas did not intend to return to the United States later during the year 1965. Twenty of the thirty returns examined by Fontana showed a net loss.

Gordon testified that Egenberg paid him between $500 and $600 in six or seven payments during 1965 and that Egenberg had made similar payments every year since 1960. At least twenty returns submitted by Egenberg during 1965 were examined by Gordon.

In exchange for favorable treatment of the returns he had filed, appellant allowed Pacello to use his credit cards. During 1965 at least fifteen returns filed by Egenberg were examined by Pacello. About half of them showed net losses.

The return filed by appellant for Sixten Ehrling, permanent musical director of the Detroit Symphony Orchestra, showed gross income from January 1, to April 15, 1965 of $14,492.08 with expenses totalling $13,081.22. Ehrling testified that his commissions were 20 per cent of gross income, not the 30 per cent reported by appellant, that his publicity expenses were $10.61 not $1,575 and that he had no expenses for a secretary interpreter or accompanist claimed by appellant to have been $575 and $340. Egenberg indicated in connection with filing Ehrling's Form 1040C that Ehrling did not intend to return to the United States after April 15, 1965, although Ehrling was at that time under obligation to conduct the Detroit Symphony Orchestra at special appearances during the summer and during its regular 1965-1966 season in the fall.

The return filed by appellant for Jonathan Vickers, noted Metropolitan tenor, for the period from February 20 to June 15, 1965, showed gross income of $32,525 from the Metropolitan Opera Company with total expenses of $13,638.75 consisting principally of a commission figured at 30 per cent of gross income and a publicity charge of $2876.60. Vickers testified that he had never seen the return and had not signed it, that his commissions were 10 per cent of his gross income, and that he had no publicity expenses whatsoever during the period.

The government also introduced the testimony of Margot Fonteyn, Joseph Witt, Adriano Petronio, Renata Tebaldi, Dandor Konya, and Raina Kabaiwanska to show that their returns claimed deductions for expenses which they had never incurred.

The appellant testified in his own behalf at the trial, admitting that he had made some payments to Fontana, Gordon and Pacello, but claiming that it was necessary to do so in order to prevent delay and interference in the processing of his clients' returns. He maintained that ...

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