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UNITED STATES v. DE LORENZO

July 2, 1976

UNITED STATES OF AMERICA
v.
MATTEO DE LORENZO, ALPHONSE ESPOSITO, and MICHAEL PAPPADIO, Defendants



The opinion of the court was delivered by: NEAHER

MEMORANDUM AND ORDER

 NEAHER, District Judge.

 This twenty-two count indictment charges three defendants, Michael Pappadio, Matteo De Lorenzo and Alphonse Esposito, with two separate conspiracies to defraud the United States by filing false individual and corporate income tax returns in the years 1966-1975. The indictment charges that Pappadio, an officer and stockholder of M.B.H. Sales, Inc. (MBH) and Bideo Management Corporation (Bideo), filed tax returns for both corporations for the years in question deducting as a business expense "salaries" paid De Lorenzo and Esposito as corporate employees when in fact they performed no services for either corporation. De Lorenzo is charged with having participated in the conspiracy with Pappadio from January 1966 until January 1973 (Count One); Esposito is charged with participation in the conspiracy with Pappadio from January 1970 until April 1975 (Count Two). Count Three charges Pappadio, as principal, and De Lorenzo as an aider and abettor, with the substantive crime of filing a false tax return for MBH for the fiscal year 1969. Count Four, the only count in which all three defendants are named, charges Pappadio as principal and both De Lorenzo and Esposito as aiders and abettors, with filing a false tax return for Bideo for fiscal year 1970. Counts Five through Thirteen charge Pappadio as principal and both De Lorenzo and Esposito as aiders and abettors with filing false quarterly corporate returns as follows: Count Quarter Corporation Aider and Abettor 5 1st Quarter 1969 MBH De Lorenzo 6 2nd Quarter 1969 MBH De Lorenzo 7 1st Quarter 1970 Bideo De Lorenzo 8 3rd Quarter 1970 Bideo Esposito 9 4th Quarter 1970 Bideo Esposito 10 1st Quarter 1971 Bideo De Lorenzo 11 1st Quarter 1971 Bideo Esposito 12 2nd Quarter 1971 Bideo De Lorenzo 13 2nd Quarter 1971 Bideo Esposito

 Counts Sixteen through Nineteen charge De Lorenzo as principal and Pappadio as an aider and abettor with filing false individual income tax returns for the years 1968-1971. Counts Twenty and Twenty-one charge Esposito as principal and Pappadio as an aider and abettor with filing false individual tax returns in 1970 and 1971.

 Both Esposito and De Lorenzo now move under Rule 8(b) and 14, F.R.Crim.P., for a severance of those counts in which only one of them is charged and for a separate trial on those counts. Pappadio moves to dismiss the entire indictment or in the alternative to dismiss Counts Five, Fourteen and Fifteen. *fn1"

 Discussion

 The theory of the prosecution is that Pappadio, a 50% stockholder in both MBH and Bideo, caused those corporations to avoid income tax rightfully due by listing on its books and records and deducting on its tax returns monies paid to De Lorenzo and Esposito, purportedly as salaries. There is apparently no question that the monies were actually paid by MBH and Bideo and that De Lorenzo and Esposito did report amounts received as income from salaries on their individual tax returns.

 The government contends, however, that "neither De Lorenzo nor Esposito actually performed any legitimate services for MBH or Bideo and were, therefore, not entitled to any such compensation." As explained by the government, the intended results of this scheme were twofold: (1) to permit Pappadio to reduce MBH and Bideo's taxable income, and (2) to provide De Lorenzo and Esposito with a seemingly legitimate source of income. According to the government, De Lorenzo and Esposito aided and abetted Pappadio by filing false individual tax returns which tended to corroborate the salary deductions taken by MBH and Bideo. Pappadio, in turn, aided and abetted De Lorenzo and Esposito by supplying them with W-2 forms reflecting monies paid them, which they attached to their individual returns.

 Severance

 Rule 8(b)

 Defendants De Lorenzo and Esposito contend that their joinder in one indictment was improper under Rule 8(b) *fn2" and that consequently they are entitled to a severance as a matter of law. They argue that since there is no overall conspiracy count, all three defendants cannot be said to have been charged with participation "in the same act or transactions or in the same series of acts or transactions constituting an offense or offenses." Rule 8(b).

 Two or more conspiracies may, however, be properly joined under Rule 8, if they are sufficiently related. United States v. Borelli, 336 F.2d 376, 387 (2 Cir. 1964); United States v. Varelli, 407 F.2d 735, 747 (7 Cir. 1969), cert. denied, 405 U.S. 1040, 92 S. Ct. 1311, 31 L. Ed. 2d 581 (1972). Here, although there is no contention that De Lorenzo and Esposito agreed inter sese to participate with Pappadio to promote both his and their interests, hence the need to allege two separate conspiracies, their individual association with Pappadio's solitary ongoing scheme, as charged, constitutes a sufficient nexus to warrant joinder under Rule 8. Cf. United States v. Crockett, 514 F.2d 64, 70 (5 Cir. 1975).

 The entire scheme centered on Pappadio and the two corporations he controlled, Bideo and MBH. Both Esposito and De Lorenzo are charged separately with substantive counts relating to several of Bideo's 1970 and 1971 quarterly tax returns (Counts Seven-Thirteen) and they are jointly charged with respect to Bideo's 1970 annual tax return (Count Four). Thus, there is a closely-linked factual nucleus, i.e., Bideo's 1970 and 1971 tax returns, around which the balance of the charges rotate. The conspiracies are not in any real sense distinct or independent but are part of a common scheme or plan. United States v. Scott, 413 F.2d 932, 935 (7 Cir. 1969). Stated otherwise, this is not an attempt by the government to try together "numerous defendants who are only loosely connected in a criminal enterprise." United States v. Miley, 513 F.2d 1191, 1195 (2 Cir. 1975).

 Accordingly, the court concludes that the two conspiracies are sufficiently related to warrant joinder in one indictment. *fn3" See United States v. Thomas ...


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