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UNITED STATES v. HARPAUL

October 29, 1998

UNITED STATES OF AMERICA, against CHANDRADUTT HARPAUL, also known as "Ronnie," and SEWDUTT HARPAUL, also known as "Mike," Defendants.


The opinion of the court was delivered by: SPATT

MEMORANDUM OF DECISION AND ORDER

 SPATT, District Judge.

 Should tax evasion and mail fraud counts of conviction be grouped pursuant to United States Sentencing Guideline § 3D1.2? This is the esoteric yet novel issue which confronted the Court at the time of sentencing the defendants. Surprisingly, this issue is one of first impression in this Circuit, and the Court looked to other Circuits for guidance. This opinion follows.

 I. BACKGROUND

 The defendants, Chandradutt Harpaul, a/k/a "Ronnie," and Sewdutt Harpaul, a/k/a "Mike," are brothers who co-owned six Sizzler franchise restaurants, located in New York and New Jersey. Information from a confidential informant revealed that the defendants evaded a total of $ 249,967.00 in taxes at their Howell, New Jersey restaurant for tax years 1990, 1991, 1992 and 1993. The defendants accomplished this by regularly "skimming" the currency receipts earned during the luncheon business from the currency receipts earned during the rest of the day. On a daily basis, the skimmed receipts were placed into an envelope, together with the register tape reflecting the amount of funds taken. The defendants provided books and records of the Howell Sizzler, omitting the true gross receipts, to their corporate accountants, who used these false records as a basis for the corporate income tax returns. The defendants failed to inform the corporate accountants about the skimmed cash and, consequently, they filed false corporate income tax returns for tax years 1990 through 1993. Since the defendants did not inform their personal income tax return preparers about the skimmed cash, they also prepared and filed false personal income tax returns during these years.

 The Howell Sizzler was a franchise restaurant of the parent corporation, Sizzler Restaurants International, Inc (the "Franchiser"). Under the franchise agreement, the defendants were required to pay 7 1/2% of gross receipts, after sales tax, to the Franchiser on a monthly basis. The mail fraud charge stems from the defendants' mailing to the Franchiser monthly payment checks from June 1990 through August 1993, accompanied by a prepared invoice detailing the breakdown of the franchise payment. The mailed invoices did not reflect the true gross receipts for the Howell Sizzler, but rather, were based on the altered records which the defendants used as a basis for the false tax returns.

 On August 29, 1997, the defendants were convicted, upon their pleas of guilty, of: (1) knowingly and willfully attempting to evade income tax for the tax year 1993, in violation of 26 U.S.C. § 7201; (2) mail fraud, in violation of 18 U.S.C. § 1341; and (3) conspiracy to commit these crimes, in violation of 18 U.S.C. § 371.

 II. DISCUSSION

 At issue is the defendants' objection to the Pre-sentence Investigation Report, which states that the tax evasion and mail fraud counts cannot be grouped together under the United States Sentencing Guidelines § 3D1.2.

 Guideline § 3D1.2 dictates that "all counts involving substantially the same harm shall be grouped together. . . ." See generally United States v. Bove, 155 F.3d 44, 49 (2d Cir. 1998). The Guidelines identify four circumstances constituting "substantially the same harm":

 
(a) When counts involve the same victim and the same act or transaction.
 
(b) When counts involve the same victim and two or more acts or transactions connected by a common criminal objective or constituting part of a common scheme or plan.
 
(c) When one of the counts embodies conduct that is treated as a specific offense characteristic in, or other adjustment to, the guideline applicable to another of the counts.
 
(d) When the offense level is determined largely on the basis of the total amount of harm or loss, the quantity of a substance involved, or some other measure of aggregate harm, or if the offense behavior is ongoing or continuous in nature ...

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