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United States v. Rooney

decided: January 10, 1989.


Appeal from a judgment of conviction of conspiracy and false statement entered by the United States District Court for the Southern District of New York, Louis L. Stanton, Judge, for participation in a scheme in which "contributors" took back 90% cash rebates of checks they wrote to a charity and claimed charitable deductions for the checks' face amounts. Affirmed.

Oakes and Newman, Circuit Judges, and Mukasey, District Judge.*fn*

Author: Oakes

OAKES, Circuit Judge:

This case involves a tawdry, though profitable, tax fraud scheme involving gifts to charity. The charity accepted checks from "contributors" and returned to them cash equal to 90% of the face amount of each check. The contributors then claimed a charitable deduction for the full amount of the check, and the charity kept its 10% cut. The charity profited by 10% of the face amount of the gifts, and the contributors profited by taking unlawful tax deductions for the other 90%.

Patrick Rooney contributed to this scheme through his corporation in 1980 and personally in 1983, and he profited at the expense of the internal revenue. He was convicted of two counts in a three-count superseding indictment. The first count charged conspiracy with a branch of the charity, the second count (on which he was acquitted*fn1) charged tax evasion, and the third count charged the filing of a false statement (regarding his charitable contributions) on his 1983 joint tax return. Rooney was sentenced in the United States District Court for the Southern District of New York, Louis L. Stanton, Judge, to four months' imprisonment on the false statement count. Judge Stanton suspended imposition of sentence on the conspiracy count, placed Rooney on probation for a term of three years, and ordered him to pay a $50,000 fine and to perform 300 hours of community service.

On appeal, Rooney argues that the evidence was insufficient to prove venue on the false statement count and that the trial court erred in taking the issue of venue away from the jury; that there was a fatal variance between the single conspiracy alleged in the indictment and the proof, which he claims demonstrated the existence of multiple conspiracies, and that prejudice resulting from evidence introduced on the conspiracy count required a new trial on the false statement count; that the Government obtained the superseding indictment, which added the conspiracy count, solely to gain the admission of prejudicial evidence, thereby abusing prosecutorial responsibility and necessitating a new trial on both counts; and that his prison sentence unconstitutionally punished him for demanding a trial. We affirm.

The Bernice Leavitt-Joseph Toonkel Memorial Branch of the American Cancer Society New York Division, Inc. ("Leavitt-Toonkel") raised money for several years by holding casino night dinner dances at hotels in Manhattan. Approximately two weeks before the annual autumn dinner dances, contributors would write checks to the Society. With the connivance of Leavitt-Toonkel fundraising personnel, contributors could pick up cash in an amount equal to 90% of the face value of each check the day before or the day of the dinner dance. Thus, the supposed contributor would donate 10% of the amount of the check, but retain a check to substantiate a claim for a charitable deduction in the check's full amount. The scheme worked so well, with so many contributors contributing such large amounts, that for the 1983 dinner dance $1,450,000 in cash was shipped by armor car to the Pierre Hotel for distribution to the contributors, one of whom was appellant Rooney.

Rooney, an accountant, was then a principal in the brokerage firm of Rooney, Pace, Inc., and he had learned about the scheme in 1980 from his partner, Randolph Pace. Pace advised Rooney that he was writing a personal check and thought they should write a corporate check as well. Pace did so, with Rooney's approval, in an amount of $10,000. After Leavitt-Toonkel returned $9,000 in cash, Pace and Rooney apparently shared the cash by adjusting their respective expense account allowances, and their corporation took a $10,000 deduction.

In 1983 Rooney wrote a $50,000 personal check to the American Cancer Society. The day before the dance, Rooney's chauffeur picked up $45,000 in cash at the Pierre Hotel, where the dance was to be held. On Rooney's 1983 personal income tax return he deducted the full amount of the $50,000 check.

After the Leavitt-Toonkel scheme was reported to the authorities, Rooney attempted to fabricate a defense to the investigation by "reminding" some friends who had participated in the scheme and attended the dinner dance that he had gone to the party, received chips and gambled extensively, making his contribution by losing money. Of course, gambling losses, even those sustained at events run by charitable organizations, are deductible only against gambling gains, but Rooney's argument, had it been founded on the truth, would have been that he had not acted with criminal intent. The trouble was that there was proof that Rooney had not attended the dance, and he could not get his friends to testify otherwise. Moreover, there was proof that at most $21,000 in cash was used to purchase chips at the affair and that Leavitt-Toonkel's total gambling profit for the evening was between $40,000 and $43,000, so Rooney's losing $45,000 was quite unlikely.


A. Venue

Rooney claims first that there was insufficient evidence of venue in the Southern District for the false statement count because he signed the false tax return and mailed it from Southampton, New York, in the Eastern District. He concedes that the return was prepared by his accountant in the Southern District, but he claims not to have taken an active role in the preparation of the return, arguing that he merely sent all his checks to his accountant, who determined that this particular deduction should be taken. The district court relied on the continuing offense statute, which states that "any offense . . . begun in one district and completed in another, or committed in more than one district ... may be . . . prosecuted in any district in which such offense was begun, continued, or completed." 18 U.S.C. § 3237(a) (Supp. IV 1986). The court found that the signing of the return completed a crime that had begun with the accountant's preparation of the return in Manhattan. But Rooney argues that his accountant made a wholly independent, albeit erroneous, evaluation of Rooney's financial records, so Rooney did not violate the statute until he read and signed the return in Southampton.

Rooney was convicted of violating section 7206(1) of the Internal Revenue Code, which states that anyone who "[w]illfully makes and subscribes any return, statement, or other document . . . under the penalties of perjury . . . which he does not believe to be true and correct as to every material matter" is guilty of a felony. 26 U.S.C. § 7206(1) (1982) (emphasis added). Rooney emphasizes that section 7206(1) ...

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