United States v. Woodman, Robert ( 2004 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 04a0134n.06
Filed: November 29, 2004
Nos. 03-3593, 03-3615, 03-3710
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
UNITED STATES OF AMERICA, )
)
Plaintiff-Appellee, )
)
v. )
) ON APPEAL FROM THE UNITED
CARL WOODMAN, ROBERT WOODMAN, ) STATES DISTRICT COURT FOR THE
and JAMES WOODMAN, ) NORTHERN DISTRICT OF OHIO
)
Defendant-Appellants. )
)
Before: KEITH, CLAY, and COOK, Circuit Judges.
COOK, Circuit Judge. Defendants Carl, Robert, and James Woodman appeal their
convictions of crimes related to tax evasion. All three argue the evidence presented at trial was
insufficient to support their convictions. Carl Woodman adds two other arguments—that he was
denied due process and a downward sentencing departure. We conclude that sufficient evidence
supported the convictions, that Carl Woodman was not denied due process, and that the district court
did not err in refusing to depart downward.
I. Background
Nos. 03-3593, 03-3615, 03-3710
United States of America v. Woodman
Thomas Warholic and Defendant Carl Woodman created WeShare, Inc., as a charity for the
homeless. From 1992 through 1995, WeShare collected over $600,000 per year in donations from
which Warholic and Defendants drew salaries. WeShare also funneled sums to Warholic and
Appellants through other “shell corporations” (as described by witnesses at trial) they formed and
used primarily for their personal benefit, rather than any business purpose.
Defendants’ jury convictions arise out of this scheme. All three were convicted of
conspiracy to defraud the United States. Additionally, the jury convicted Carl and James Woodman
of failure to file income tax returns and Robert Woodman of filing a false income tax return.
II. Sufficiency of the Evidence
Where a defendant argues that the prosecution did not present sufficient evidence to support
his conviction, this court must affirm the verdict if we conclude, after reviewing the evidence in the
light most favorable to the prosecution, that a rational trier of fact could have found the essential
elements of the crime beyond a reasonable doubt. United States v. Martin, 897 F.2d 1368, 1373 (6th
Cir. 1990). The court may not weigh the evidence or assess the credibility of witnesses. United
States v. Jackson, 55 F.3d 1219, 1225 (6th Cir. 1995).
A. “Loans rather than income” defense
Defendants argue that the government presented insufficient evidence to convict them
because the payments they received through their scheme were loans, not income. While the jury
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United States of America v. Woodman
could have reached that conclusion, sufficient evidence supported their contrary conclusion that the
payments were income, not loans. Though Thomas Warholic testified that Defendants considered
their payments from WeShare to be loans, the circumstances of the payments lacked any of the usual
indicia of a repayment obligation. WeShare’s bookkeeper testified that she issued checks for
“consulting fees” to Robert and Carl Woodman, without characterizing these payments as loans.
Warholic testified that Defendants planned for WeShare to eventually forgive the putative loans and
pay the taxes on them at that time. But other testimony from Warholic casts doubt on whether the
taxes would ever be paid. For example, he agreed that he “felt funny” about “avoiding taxes”
through the plan. And when asked, “The plan was not ever to rip off Uncle Sam was it, just
designed to delay?” he testified, “I think I knew deep down I was doing it.”
With this evidence considered in the light most favorable to the government, the jury could
have concluded beyond a reasonable doubt that the payments to Defendants were not loans, but were
instead a means to permanently avoid paying taxes.
B. Conspiracy to Defraud the Government
Defendants were convicted of conspiracy to defraud the government under 18 U.S.C. § 371.
The elements of conspiracy are: (1) the conspiracy described in the indictment was willfully formed,
and was existing at or about the time alleged; (2) the accused willfully became a member of the
conspiracy; (3) one of the conspirators thereafter knowingly committed at least one of the overt acts
charged in the indictment, at or about the time and place alleged; and (4) such overt act was
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United States of America v. Woodman
knowingly done in furtherance of some object or purpose of the conspiracy as charged. United
States v. Miller, 161 F.3d 977, 985 (6th Cir. 1998). “A conspiracy may be inferred from
circumstantial evidence that can reasonably be interpreted as participation in the common plan.”
United States v. Beverly, 369 F.3d 516, 532 (6th Cir. 2004) (internal quotes and citations omitted).
Here, the testimony of IRS employees and related exhibits showed that Defendants avoided
paying taxes through a common scheme, using shell corporations. James Woodman argues that
insufficient evidence existed to support his conspiracy conviction because he did not join WeShare
until after the alleged conspiracy began. But the government presented evidence that he failed to
report money he received from WeShare, just like the other defendants. This was sufficient to allow
the jury to infer a common scheme and convict him along with the others.
C. Failure to File Under 26 U.S.C. § 7203The testimony of IRS employees showed that Carl and James Woodman each had an
obligation to file a tax return and failed to do so. The jury could have found that Carl Woodman’s
failure was willful because Warholic’s testimony showed that he and the others engaged in their
scheme for the purpose of avoiding taxes. The jury also could have found that James Woodman’s
failure was willful because he filed a tax return in previous years, and therefore knew of his legal
obligation to do so.
D. Filing a False Return Under 26 U.S.C. § 7206(1)
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To prove this offense, “the government need only prove that a defendant willfully made and
subscribed a return, that the return contained a written declaration that it was made under penalties
of perjury, and that the defendant did not believe the return to be true and correct as to every
material matter.” United States v. Tarwater, 308 F.3d 494, 504 (6th Cir. 2002). An IRS witness
testified that, for tax year 1995, Robert Woodman filed Form 1040, which includes a statement that
the filer signs it under penalty of perjury. Another IRS witness testified that Robert Woodman listed
his income on this form as $5700 when it was actually $19,200, and that Robert understated his tax
liability by $2025 as a result. Because Warholic’s testimony and other evidence could allow the jury
to conclude that the loans were really income, the jury could also conclude that Robert did not
believe his return to be true.
III. Due Process
Carl Woodman alleges that WeShare entered into an agreement with the IRS to pay deficient
payroll taxes in installments, that the IRS lost or destroyed this agreement, and that this violated his
right to due process. The government violates due process if, in bad faith, it fails to preserve
evidence that would have been potentially useful to a criminal defendant. Illinois v. Fisher, 124 S.
Ct. 1200, 1202 (2004). Because the agreement at issue pertains to WeShare’s tax liability, not Carl
Woodman’s, we doubt its potential usefulness. But regardless, Carl identifies nothing in the record
that suggests that the government acted in bad faith.
IV. Downward Departure
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Carl Woodman also argues that the district court should have granted him a downward
departure after applying the United States Sentencing Guidelines, because of his alleged diminished
capacity and “overstated” criminal history. This court cannot review a refusal to grant a downward
departure unless the district court (1) improperly computed the guideline range; (2) was unaware of
its discretion to depart downward; or (3) imposed the sentence in violation of law or as a result of
the incorrect application of the Sentencing Guidelines. United States v. Cooper, 348 F.3d 493, 495
(6th Cir. 2003). The conditions for review of the district court’s decision are not met here—the
district court considered Carl Woodman’s arguments and concluded that “the case hasn’t been made
for a downward departure.”
V. Conclusion
We affirm Defendants’ convictions and Carl Woodman’s sentence.
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Clay, Circuit Judge, concurring. I concur in the majority opinion. I write separately to
highlight certain facts that demonstrate the sufficiency of the evidence underlying the most
significant charge in this case, Defendants’ conspiracy to defraud the United States of tax revenue
by classifying income from WeShare as loans that would never have to be repaid, in violation of 18
U.S.C. § 371.
The evidence showed that Carl Woodman was a co-owner of WeShare and that Robert
Woodman was responsible for WeShare’s payroll tax withholdings as well as its bookkeeping. By
1995, James Woodman was WeShare’s general manager, responsible for, inter alia, signing all
payroll checks. IRS Special Agent Perry Mastrocola testified that his investigation of WeShare
uncovered a four-year history of monetary transfers from WeShare to all three Defendants, either
directly or indirectly through numerous shell corporations that Defendants owned or controlled:
WAR (by Thomas Warholic); CCPA (by Robert Woodman); WJC (by Warholic and Carl
Woodman); Creative Marketing Management (by Warholic and Carl Woodman); Basic
Telecommunications Auditors, Inc. (by Robert Woodman); Basic Business Auditors (by James
Woodman); and Basic Bookkeeping (by James Woodman). Sharon Hemsath, a former WeShare
employee, testified that Carl Woodman and/or Robert Woodman had instructed her to write checks
to these various companies as payment for their “consulting fees.” They then used these payments
for personal expenses.
The evidence further showed that Defendants schemed together to avoid their personal
income tax obligations by classifying payments from WeShare directly, or indirectly through the
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Nos. 03-3593/3615/3710
above-described corporations, as loans instead of as salaries. Defendant Warholic testified that,
upon the suggestion of Robert Woodman, WAR, Inc. “was a company put together so that [he] could
keep track of the money [he] was making from WeShare and put together to avoid paying taxes
actually.” Warholic further explained that he, Robert Woodman, and Carl Woodman had a meeting
in which it was agreed that their income from WeShare would be booked as loans. Although
Warholic added that Woodman said that at some point they would pay taxes on these loans,
Warholic noted that he did not think of the payments as loans because they would not have to be re-
paid until some uncertain date in the future. In addition, Robert Woodman stated that, at the time
the taxes would be paid, WeShare (not Defendants themselves) would pay Defendants’ personal tax
liabilities on their behalf.
The jury could have found this evidence sufficient to show that Carl Woodman, Robert
Woodman, and James Woodman, along with Warholic, conspired to defraud the United States of
tax revenues. Carl, Robert, and James Woodman all had significant control over WeShare’s
financial affairs: Carl was a co-owner; Robert controlled the payroll taxes and bookkeeping; and
James was the general manager. All of the defendants also owned or controlled the bank accounts
of at least one corporation that, according to Warholic, Robert Woodman had advised that they set
up in order to receive these alleged loans from WeShare. The jury could have concluded that
Defendants knew that they were not receiving loans from WeShare or related corporations because
there were no loan agreements, no requirement that Defendants pay interest, and no evidence that
Defendants had to pay these “loans” back at any point in time. Thus, the jury rationally could have
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concluded that Defendants intended to deprive the United States of tax revenue that attached to their
income from WeShare.
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