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United States v. Furkin

July 14, 1997

UNITED STATES OF AMERICA,

PLAINTIFF-APPELLEE,

v.

HOWARD (TED) FURKIN,

DEFENDANT-APPELLANT.



Appeal from the United States District Court for the Central District of Illinois. Nos. 94 CR 30014 & 30030 Richard Mills, Judge.

Before BAUER, CUDAHY and MANION, Circuit Judges.

BAUER, Circuit Judge.

ARGUED APRIL 1, 1997

DECIDED JULY 14, 1997

Before us are two direct appeals from separate criminal convictions of Howard (Ted) Furkin. In cause 94-30014, "the gambling case," Furkin was convicted by a jury of conspiracy to defraud the IRS, witness tampering, obstruction of justice, and dealing in unregistered gambling devices. In cause 94-30030, "the gun case," Furkin was convicted by a jury of possession of an unregistered sawed-off shotgun. At a joint sentencing hearing for both cases, Furkin was sentenced to 144 months' incarceration, to be followed by three years of supervised release; he was fined $250,000 plus the cost of incarceration; and he was ordered to pay $2,149,338 in restitution to the IRS. Furkin appeals his convictions in both cases and his sentence on numerous grounds, none of which has any merit. We affirm.

BACKGROUND

Furkin was the sole owner of a corporation called All-star Music. Allstar was in the business of leasing amusement machines, such as pool tables, pinball machines, and jukeboxes, to bars and service clubs. In the early 1980's, Furkin hired David Lanzotti to work at Allstar. Lanzotti convinced Furkin to buy gambling machines and to supply the machines to Allstar's customers in order to avoid being at a "competitive disadvantage." So, the lucrative gambling conspiracy began.

During the 1980's, Furkin purchased gambling machines with cash, using fictitious names, such as Lucky Coin. Neither Allstar's in-house accountant nor its outside accountant was aware of equipment purchases being made with cash. By 1991, All-star had approximately 160 gambling machines at sixty-six different locations.

Lanzotti was the person primarily responsible for all aspects of the gambling machines' operations. He was the main proceeds "collector" for the gambling machines, and he often instructed other employees how to collect on the gambling machines. No records were generated to document the income from the gambling machines or to maintain an inventory of the machines. Marty Crosby, an All-star employee who was trained by Lanzotti to collect on the gambling machines, testified at trial that Furkin told her not to generate any records and to destroy any paperwork pertaining to the gambling machines. All-star stored records for the non-gambling machines on a computer program starting in 1985.

Furkin and Lanzotti, who both filed tax returns for the years in issue (1985 to 1994), knew that income had to be reported to the IRS. However, they filed their tax returns without reporting income from the gambling machines. Crosby testified that Furkin and Lanzotti had conversations during which they talked about not paying taxes on the gambling machine income. Also, in a tape-recorded conversation from December 22, 1992, Lanzotti indicated that he knew taxes were not being paid on the gambling machine income.

In 1991, Furkin and Lanzotti became aware that they were being investigated by the IRS. A grand jury subpoena was issued to All-star in November 1991. Also in November 1991, the IRS sent letters to Furkin's customers disclosing the existence of the pending grand jury investigation. This greatly angered Furkin. Between thirty and one-hundred witnesses testified before the grand jury, including numerous All-star employees and customers.

Furkin and Lanzotti were less than cooperative with the investigating authorities. Furkin made false statements to law enforcement agents. Both Furkin and Lanzotti encouraged bar owners to lie about how much income was generated by the gambling machines. Furkin instructed his employees, including Crosby and Gary Hinkle, to lie to the grand jury, and he had employee Merle Buerkett pressure bar owners to sign backdated leases which misrepresented when and how much income had been generated by the gambling machines. Furkin and Lanzotti made statements to various customers that the lease arrangements had a tax purpose or were necessary due to the IRS investigation.

On March 18, 1993, a search warrant was executed on Allstar's business premises. During the course of the search, law enforcement agents found an unregistered sawed-off shotgun in the closet of Furkin's office. A one-count indictment was returned on September 22, 1994, charging Furkin with possessing an unregistered sawed-off shotgun, 26 U.S.C. sec. 5861(d). A jury convicted Furkin of this charge on April 11, 1994.

Furkin was then charged in a seven-count superseding indictment returned on November 16, 1994. Count 1 charged conducting an illegal gambling business, 18 U.S.C. sec. 1955; Count 2 charged conspiracy to defraud the IRS, 18 U.S.C. sec. 371; Counts 3 and 4 charged witness tampering, 18 U.S.C. sec. 1512(b)(1); Count 5 charged obstruction of justice, 18 U.S.C. sec. 1503; Count 6 charged witness tampering, 18 U.S.C. sec. 1512(b)(2)(A); and Count 7 charged unregistered transactions in gambling devices, 15 U.S.C. sec.sec. 1173(a)(3) and 1176. Count 6 was dismissed before trial. Furkin proceeded to trial on the remaining counts. At the close of the Government's case, he moved for a judgment of acquittal on Counts 2 and 7. The motion was denied. He was convicted by a jury of all counts except Count 4. On June 8, 1995, the district court granted Furkin's post-trial motion for a new trial on Count 1. The motion was granted. Counts 1 and 4 were dismissed on June 15, 1995. Furkin was sentenced on Counts 2, 3, 5 and 7. Following trial, the district court denied Furkin's motion for an acquittal and for dismissal of Count 5.

A joint sentencing hearing for both the gambling case and the gun case was held on December 4 and 5, 1995. Furkin was sentenced to 144 months' incarceration, to be followed by three years of supervised release; he was fined $250,000 plus the cost of incarceration; and he was ordered to pay $2,149,338 in restitution to the IRS. The lengthy prison sentence was the result of numerous adjustments under the Sentencing Guidelines plus an upward departure of two levels for egregious obstruction of justice. Final judgment was entered on December 8, 1995. Furkin appeals from both the gambling conviction and the gun conviction, claiming various errors by the district court at trial and at sentencing. Furkin also raises arguments relating to the sufficiency of the evidence on several counts.

ANALYSIS

I. Sufficiency of the Evidence Regarding Conspiracy to Defraud the IRS

Count 2 of the superseding indictment charged that, from 1985 to 1994, Furkin and Lanzotti conspired to defraud the United States "by impairing, obstructing and defeating the lawful function of the Internal Revenue Service . . . to ascertain, compute, assess and collect income taxes," in violation of 18 U.S.C. sec. 371. This is commonly known as a "Klein conspiracy." See United States v. Klein, 247 F.2d 908 (2d Cir. 1957), cert. denied, 355 U.S. 924 (1958). To sustain a conviction for conspiring to defraud the IRS, "the government has the burden of proving three elements under sec. 371: (1) an agreement to accomplish an illegal objective against the United States; (2) one or more overt acts in furtherance of the illegal purpose; and (3) the intent to commit the substantive offense, i.e., to defraud the United States." United States v. Cyprian, 23 F.3d 1189, 1201 (7th Cir.), cert. denied, 115 S. Ct. 211 (1994) (citation omitted). The "intent" element of sec. 371 requires the government to prove "not that the conspirator was aware of the criminality of the objective, but that the conspirator knew of the liability for federal taxes." Cyprian, 23 F.3d at 1201 (internal quotations and citation omitted). The parties' intent, as well as their agreement, may be inferred from circumstantial evidence concerning the relationship of the parties, their overt acts, and the totality of their conduct. United States v. Marren, 890 F.2d 924, 933 (7th Cir. 1989).

Furkin concedes that the evidence was sufficient to establish that he, alone, defrauded the IRS. His argument focuses, rather, on the lack of evidence as to Lanzotti's involvement in Furkin's scheme. According to Furkin, the only conduct Lanzotti intended to engage in, agreed to engage in, and in fact engaged in, related to illegal gambling activities. He contends that Lanzotti simply collected the proceeds of the illegal gambling operation and turned in the proceeds to the appropriate personnel at Allstar, while having no idea that the income was not being reported to the IRS. It takes two to conspire -- a conspiracy is "a combination or confederation of two or more persons formed for the purpose of committing, by their joint efforts, a criminal act," United States v. Durrive, 902 F.2d 1221, 1225 ...


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