Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

United States v. Fahey

decided: December 6, 1974.

UNITED STATES OF AMERICA, APPELLEE,
v.
THOMAS M. FAHEY, APPELLANT



Appeal from a judgment of conviction entered upon a jury verdict after trial before MacMahon, J. District Judge, sitting by designation in the Northern District of New York. Defendant was convicted of willful and knowing attempt to evade and defeat his federal income tax for two years by omitting money received as salary from his tax returns. The Court of Appeals held that there was sufficient evidence that appellant knew money received from a partnership was income and that he deliberately omitted it from the returns.

Friendly, Feinberg and Gurfein, Circuit Judges.

Author: Gurfein

GURFEIN, Circuit Judge:

Thomas M. Fahey appeals from a judgment of conviction*fn1 entered on July 19, 1974 after a trial before Hon. Lloyd F. MacMahon and a jury on two counts of income tax evasion for the calendar years 1966 and 1967 in violation of 26 U.S.C. ยง 7201.*fn2

Defendant, a hospital administrator by training and profession, conceived the idea in late 1964 of converting an existing structure of a hospital that was being abandoned into a large nursing home. The hospital board agreed to sell the hospital to Fahey if he could procure the necessary financing. The Marine Midland Bank of Syracuse indicated that it would enlist several banks in a participating mortgage if Fahey could find partners to provide equity capital and if he could obtain the required regulatory approvals from local, state and federal agencies.

Fahey then arranged with Culotti Construction Company ("Culotti") for that company to place him on its payroll as soon as a partnership acceptable to the bank would be formed, on the understanding that the Culotti firm would receive the construction contract.

On November 23, 1964 a partnership acceptable to the bank was formed consisting of Fahey, Theodore G. Metzger, Walker McKinney and Dr. George Simpson. Under that agreement a general partnership was formed. The partners were to share in profits and losses in the following percentages: Fahey, 45%; Metzger, 5%; McKinney, 42.5%; Simpson, 7.5%. There was to be no drawing or salary to any partner. An option on the hospital property was taken by the partnership.

Fahey went on the payroll of Culotti in December 1964 and started to work on architectural changes and governmental approvals. He continued on the Culotti payroll throughout 1965.

During 1965 two new partnership agreements were executed, one in January and one in November.

The January agreement was drafted as a limited partnership. Under that agreement, with McKinney as the general partner, the profit percentages remained the same, but Fahey and Metzger were not to be responsible for losses, the burden falling 85% on McKinney and 15% on Simpson. It provided: "Thomas Fahey or his successor as administrator shall be paid a salary of $20,000 per year. . . . Such salary, for purposes of division of partnership's net profits and losses, shall be treated as an expense of the partnership."

Although the limited partnership agreement was signed on January 4, 1965, Fahey was not paid by the partnership in 1965 and he remained on the Culotti payroll that whole year.

The state regulatory authorities refused to accept a limited partnership as the operator of a nursing home, and, accordingly, the general partnership was reestablished on November 5, 1965. This agreement (Ex. 19) continued the profit and loss provisions of the January agreement with again a provision for a salary of $20,000 to appellant in the language previously quoted. Appellant continued, nevertheless, to draw his salary from Culotti.

On April 6, 1966 appellant wrote to McKinney that since Culotti could no longer justify his salary he would require that the partnership assume the expense of his "salary" until July, noting that if Culotti had been able to continue the "salary" it would have been added to construction expense "so that the net expense would have been the same but would have come out of another pocket." (Ex. 28, A 460).

McKinney agreed to contribute capital to the partnership and appellant began to draw monthly checks to himself from the partnership, beginning in April 1966 while ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.