Thursday, April 15, 2010

U.S. v. ROZIN, Cite as 105 AFTR 2d 2010-XXXX, 03/23/2010
UNITED STATES of America Plaintiff, v. Leif D. ROZIN, et al., Defendants.
Case Information:
Code Sec(s):
Court Name: United States District Court, S.D. Ohio, Western Division,
Docket No.: No. 1:05-cr-139,
Date Decided: 03/23/2010.
A. Evidence of Willfulness
Rozin was charged and convicted under Count Two of the Indictment with willful subscription of a false tax return in violation of 26 U.S.C. § 7206(1) and under Count Six with attempting to evade taxes in violation of 26 U.S.C. § 7201. To prove Rozin guilty under Count Two, the Government was required to prove beyond a reasonable doubt that (1) Rozin willfully made and subscribed a tax return; (2) the return was subscribed “under penalties of perjury”; and (3) Rozin did not believe the return to be true and correct as to every material matter. See United States v. Kemp, 156 F.3d 1233, 1998 [82 AFTR 2d 98-5162] WL 415990, at 4 (6th Cir. July 6, 1998) (citingUnited States v. Bishop , 412 U.S. 346, 350 [32 AFTR 2d 73-5018], 93 S.Ct. 2008, 36 L.Ed.2d 941 (1973)). To prove Rozin guilty under Count Six, the Government was required to prove the following three elements beyond a reasonable doubt: (1) willfulness; (2) the existence of a tax deficiency; and (3) an affirmative act constituting an evasion or attempted evasion of the tax.See United States v. Curtis , 782 F.2d 593, 595 [57 AFTR 2d 86-753] (6th Cir.1986).
Rozin argues that he is entitled to acquittal as to both counts because the Government failed to present sufficient evidence of willfulness. Specifically, Rozin argues that the Government failed to prove that at the time Rozin signed and filed the 1998 corporate and personal tax returns he knew that the documents were false and fraudulent and that additional taxes were owing. Rozin also maintains that he reasonably relied on the advice of others, particularly Cohen, Liss, Koehler and Keehn, and that the Government failed to present sufficient evidence to negate his good faith belief that the tax returns were accurate.
The Government, in response, alleges that Rozin highlights particular pieces of evidence and views that evidence in a light most favorable to him. The Government argues that, among other things, evidence demonstrating the fraudulent nature of the LOI policy purchases, the backdating of several of the LOI policies, Rozin's use of grantor trusts to protect his money from Caduceus, Rozin's decision to participate in the reinsurance scheme, and Rozin's filing of a false claim under the LOI policies is more than sufficient to prove willfulness.
Willfulness in the context of 26 U.S.C. §§ 7201 to 7207 means “a voluntary, intentional violation of a known legal duty.” Bishop, 412 U.S. 346, 360 [32 AFTR 2d 73-5018], 93 S.Ct. 2008, 36 L.Ed.2d 941 (1973).
The showing of willfulness can be negated by “a defendant's claim of ignorance of the law or a claim that because of a misunderstanding of the law, he had a good-faith belief that he was not violating any of the provisions of the tax laws.” The defendant's belief or misunderstanding need not be objectively reasonable, and whether it was held in good faith should be determined by the fact-finder.
United States v. Aaron, 590 F.3d 405 [104 AFTR 2d 2009-7832] (6th Cir.2009) (quoting Cheek v. United States, 498 U.S. 192, 202–03 [67 AFTR 2d 91-344], 111 S.Ct. 604, 112 L.Ed.2d 617 (1991)) (internal citations omitted). However, jurors may consider the reasonableness of a belief in determining whether the defendant held that belief in good faith. United States v. Benson, 67 F.3d 641, 649 [76 AFTR 2d 95-6791] (7th Cir.1995).
Examining the evidence in a light most favorable to the Government, the Court concludes that a rational trier of fact could have found the element of willfulness beyond a reasonable doubt. Multiple pieces of evidence prove that there was no true business purpose for purchasing the various LOI policies beyond reducing the taxable income of the company. The policies did not cover loss of income resulting from a number of specified causes, including death; disability due to accident or sickness; employee voluntary termination; self-inflicted injuries; proven criminal acts; negligent or willful misconduct; substance abuse; dishonesty or fraud; insubordination, incompetence, or inefficiency; conflict of interest; or breach of employment contract. The testimony at trial revealed that there was no real risk that Rozin would lose his income from Rozin, Inc. under any circumstances, aside from bankruptcy, that would actually be covered by the policies. Several witnesses also testified that Rozin, Inc. was not under any imminent threat of bankruptcy.
The dubious nature of any insurance purpose for purchasing the LOI policies was also demonstrated through evidence of the extremely high premium to coverage ratio and the backdating of six of the policies. Specifically, the evidence indicated that the maximum potential coverage under the policies was only approximately 1.2 times greater than the premium payments. Considering all eight LOI policies together, Rozin, Inc. spent approximately $3,460,000 for only $4,190,000 in maximum coverage. Moreover, that maximum coverage amount would only be available in the event that the insured met the many contingencies discussed above upon losing employment. Whatever insurance benefit may have existed was further eroded by the backdating of the policies purchased in August and December of 1999. The backdating resulted in the issuance of half-expired policies, covering periods of time that had already lapsed without the occurrence of any event that would trigger a claim. Rozin disputes the Government's claim that those policies were backdated and that Rozin knew of the backdating. However, the Court finds ample evidence, as described in the statement of facts above, that the policies were backdated and sufficient evidence that Rozin knew of and participated in the decision to backdate the policies.
As indicated above, willfulness can be negated through evidence that Rozin had a good faith belief that he was not violating any tax law. Rozin argues that he reasonably relied on the advice of others and that the Government failed to present sufficient evidence to negate his good faith reliance. A defendant may raise the defense of good faith after having acted in reliance on the advice of an attorney or accountant.See United States v. Claiborne , 765 F.2d 784, 798 [56 AFTR 2d 85-6264] (9th Cir.1985). However, in cases where the defendant has relied on the advice of an attorney or accountant, the defense of good faith is not available if the defendant withheld tax information or took steps to mislead the attorney or accountant. See e.g., id. at 798. Instead, the defendant must have handed over all relevant information. See United States v. Masat, 948 F.2d 923, 930 [69 AFTR 2d 92-361] (5th Cir.1991); United States v. Becker, 965 F.2d 383, 387 [70 AFTR 2d 92-5014] (7th Cir.1992);United States v. Bishop , 291 F.3d 1100, 1107 [89 AFTR 2d 2002-2745] (9th Cir.2002).
Viewing all of this evidence in a light most favorable to the Government, the Court finds sufficient evidence of willfulness. Defendant Rozin fails to demonstrate that no rational trier of fact could find the element of willfulness beyond a reasonable doubt. At most, Rozin has shown that there are different ways of interpreting the evidence. However, the fact that a jurorcould have interpreted the evidence differently does not warrant acquittal.
B. Evidence of an Agreement to Participate in a Conspiracy to Defraud the United States
Rozin was charged and convicted under Count One of the Indictment with knowingly conspiring with the four other named Defendants to defraud the United States for the purpose of impeding, impairing, obstructing, and defeating the lawful functions of the IRS in the ascertainment, computation, assessment, and collection of federal income taxes in violation of 18 U.S.C. § 371. Under 18 U.S.C. § 371, it is illegal for “two or more persons [to] conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose.” To prove a conspiracy, the government must establish: (1) the existence of an agreement to violate the law; (2) knowledge and intent to join the conspiracy; and (3) an overt act constituting actual participation in the conspiracy.See United States v. Hughes , 505 F.3d 578, 593 (6th Cir.2007); United States v. Mullins, 22 F.3d 1365, 1368 (6th Cir.1994). “No formal or express agreement is required.” United States v. Hitow, 889 F.2d 1573, 1577 (6th Cir.1989). Rather, ““a tacit or mutual understanding among the parties will suffice.””United States v. Ables , 167 F.3d 1021, 1031 (6th Cir.1999) (quoting United States v. Ellzey, 874 F.2d 324, 328 (6th Cir.1989)). The agreement, whether formal or informal, may be proven through circumstantial evidence.See United States v. Crossley , 224 F.3d 847, 856 (6th Cir.2000).
Once the government proves the existence of a conspiracy, the defendant's “connection to the conspiracy must be shown beyond a reasonable doubt, but the importance of the connection need not be great.” United States v. Betancourt, 838 F.2d 168, 174 (6th Cir.), cert. denied, 486 U.S. 1013 (1988). The government is not required to prove that the defendant “knew every detail [of the conspiracy] or the identity of all the other members involved in the conspiracy.”Crossley , 224 F.3d at 856. It is only necessary for the government to “show that a particular defendant knew the object of the conspiracy and voluntarily associated himself with it to further its objectives.” Id. (internal quotation marks omitted); see also Hitow, 889 F.2d at 1577.
In the instant case, Rozin does not dispute the existence of a conspiracy but claims that he never willfully joined the conspiracy. Instead, Rozin argues that “[t]he evidence taken as a whole clearly indicates that [he] was the object of a conspiracy that may have already been established.... He was, in fact, a buyer of a product that was presented to him as a legal way to invest his money.” (Doc. 278 at 16.) To the contrary, the Court finds for the same reasons as stated above in discussing the evidence of willfulness that there is sufficient evidence that Rozin knew of and intended to join in a conspiracy to defraud the IRS.
For the reasons stated above, the Court DENIES Defendant Rozin's motion for judgment of acquittal.

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