ARTHUR J. SCHWAB, District Judge.
Defendant, Steven J. Lynch ("Lynch"), a highly skilled tax attorney and sophisticated businessman who co-owned and operated a collection of businesses that make up the Iceoplex at Southpointe,
Lynch has appealed the Judgment in this case to the United States Court of Appeals for the Third Circuit. Doc. No. 270. He also moves this Court for release pending appeal pursuant to 18 U.S.C. § 3143(b)(1). Doc. No. 269.
The majority of Lynch's arguments were previously raised during pre-trial rulings and within his post-conviction Motion for Acquittal or, in the alternative, Motion for a New Trial, doc. no. 235, which was denied by the Court's Memorandum Order at doc. no. 260 prior to sentencing. His other arguments related to the applicable sentencing factors were thoroughly discussed in the Court's tentative findings and rulings, doc. no. 263, which were adopted as final with modifications at the sentencing hearing, and in the Court's colloquy during the sentencing hearing. The most effective way to understand these numerous prior legal rulings is to read the Court's decisions at doc. nos. 260 and 263, which, for the sake of brevity, are incorporated herein.
For the reasons set forth in those rulings, doc. nos. 260 and 263, and for the reasons that follow, the Court will deny Lynch's Motion for Release Pending Appeal.
Title 18 United States Code Section 3143 provides:
18 U.S.C.A. § 3143.
The primary inquiry at issue here is whether Lynch's appeal raises a "substantial question of law or fact" likely to result in reversal, a new trial, a non-custodial sentence, or a reduced sentence.
Lynch raises several issues related to pre-trial rulings or the evidence presented at trial that he contends raise "substantial" or "fairly debatable" issues.
First, Lynch argues that "overwhelming" evidence of his good faith was presented at trial and was not refuted by the Government. Doc. No. 269, p. 4. However, as previously thoroughly discussed by the Court, the Government presented plentiful evidence of Defendant's continual willfulness which established his guilt to the Jury, and the Jury rejected Defendant's proffered good faith evidence as insufficient. See Doc. No. 260 at pp. 4-7, summarizing the evidence by which a rational factfinder could conclude that Lynch acted willfully during the time period of the Counts for which he was convicted.
The Jury, in its careful and lengthy deliberations, obviously viewed Lynch's conduct as continuous over the quarters between April of 2008 and March of 2015 (often referred to throughout the pleadings as the "Indictment Period"), and determined that his conduct went from non-criminal (or was at least entitled to reasonable doubt of criminality), to criminal willfulness in the quarters after the FBI interviewed Lynch, and he continued to not pay over employee wages withheld for employment taxes. See, id.
Further, the standard of review of this evidence on appeal will require that it is viewed in the light most favorable to the prosecution. United States v. Caraballo-Rodriguez, 726 F.3d 418 (3d Cir. 2013) ("We review the record in the light most favorable to the prosecution to determine whether any rational trier of fact could have found proof of guilt beyond a reasonable doubt.") (internal quotations and citations omitted).
Second, several of the issues raised by Lynch relate to his oft-repeated arguments regarding his status as the "person responsible" to collect, withhold, and pay over employment taxes for the employer-entities and related arguments about the "legal status and separateness" of the employer-companies, related companies, and Lynch. Doc. No. 269, p. 4. Again, these arguments were thoroughly rejected by this Court both prior to trial and when ruling on Lynch's post-conviction Motion for Acquittal or for a New Trial. See Doc. No. 260, pp. 8-10.
Lynch's argument that he could not be the "person responsible" under the statute has been rejected by the United States Court of Appeals for the Third Circuit as "frivolous," and moreover, accepting Lynch's legal theories would render Section 7202 of the tax code meaningless, as it would be possible for any business owner to avoid criminal liability, for failure to pay over employment taxes, merely by setting up shell companies and shifting employees and assets, in the manner in which Lynch did here. Id., citing United States v. Karlin, 785 F.2d 90, 91 (3d Cir. 1986) ("These contentions [that defendant was not a person within the meaning of Title 26] are frivolous and require no discussion.").
Lynch's argument that he was not the "person responsible" to pay over the withheld employment taxes is incredible given the substantial evidence produced at trial. Every witness who testified about Lynch's control of the Iceoplex entities consistently stated that it was Lynch who controlled all of the Iceoplex entities' bank accounts, financial decisions, tax filings, and the corporate structure of the entities. Doc. No. 260, p. 10.
Third, Lynch argues that he was denied his Fifth and Sixth Amendment rights by the Court overruling his objections to certain Government exhibits and witnesses, "forcing" him to enter into pre-trial stipulations, excluding certain evidence he wished to introduce, and by imposing time limitations for the presentation of evidence by both sides at trial. Doc. No. 269, p. 4. Regarding the ruling on exhibits and witnesses, which were almost all decided in pre-trial rulings, the Court relies on those rulings. See Doc. No. 260, pp. 12-18 (citing pre-trial rulings).
As to whether the Court "forced" Lynch to take any position, or stipulate to any fact, document, or witness, this argument lacks any merit. The Court encouraged the Parties to work together to streamline the issues and evidence to be presented at trial, but it did not, and could not, "force" Lynch to enter into any stipulations. Doc. No. 260, pp. 16-18.
In similar fashion, the Court exercised its authority to ensure that the trial proceed in a just and efficient manner by setting reasonable time limits for the presentation of evidence prior to trial — always stating that the time limits could be, and would be, reconsidered as needed. See Doc. No. 260, pp. 16-18; and Doc. No. 195. Lynch used just six and one-half hours of the 20 hours per side that was ultimately permitted and has failed to explain how the initial time limit of 15 hours caused him to be unable to set forth his defense to the Jury. Doc. No. 260, pp. 16-18.
Finally, Lynch complains that the Court lacked impartiality, favored the Government, and "displayed disdain" for Lynch and his Counsel, but fails to set forth any evidence that the undersigned District Judge had a personal bias or an appearance of bias against him or a class to which he belongs. United States ex rel. Perry v. Cuyler, 584 F.2d 644 (3d Cir. 1978); see also, Doc. No. 260, pp. 18-19.
Lynch's remaining arguments relate to sentencing, including: (1) the calculation of the tax loss at issue pursuant to the United States Sentencing Guidelines and the resulting Base Offense Level; (2) Lynch's entitlement to a 2-level reduction for acceptance of responsibility (even though he went to trial); (3) Lynch's personal financial condition; and (4) whether the Court improperly rejected evidence set forth by Lynch at the sentencing hearing. Doc. No. 269, p. 6.
The sentence imposed by the Court was within the applicable advisory guidelines range of 41-51 months, as found by the Court, following review and analysis of the Presentence Investigation Report, the Parties' positions with respect to the sentencing factors, the Parties' sentencing memoranda, the Parties' status reports prior to the sentencing hearing, and testimony, evidence, and argument presented by the Parties at the sentencing hearing, which spanned several hours over two consecutive days. Doc. Nos. 265 and 266 (Minute Entries). As previously stated, the Court filed Tentative Findings and Rulings prior to the sentencing hearing, doc. no. 263, and later adopted those findings and rulings as final, with a modification to the calculation of the tax loss, at the hearing. See 1/11/17 and 1/12/17 Sentencing Hearing Transcripts.
Lynch has argued throughout the case that his conduct in failing to pay over the employment taxes withheld from employees' wages could not be considered "willful," because he always told the IRS that he intended to pay the taxes someday, a day that has never come.
Lynch fails to raise a fairly debatable issue for appeal with this argument. United States Sentencing Guideline § 2T1.6(a) establishes the base offense level for a conviction under 26 U.S.C. § 7202 as the "tax not collected or accounted for and paid over." United States v. Free, 839 F.3d 308 (3d Cir. 2016), cited by Lynch in support of his argument that there is no tax loss, because he did not "intend" there to be a tax loss, fails to support that argument. Free does not address the proper calculation of tax loss under U.S.S.G. § 2T, but rather considered the bankruptcy fraud sentencing guidelines in a case where all creditors received payment in full. Id. There is no legal authority that supports Lynch's argument that unpaid taxes are not a "loss" if the defendant simply states that he did not "intend" for there to be a tax loss because he would pay the taxes someday.
Lynch also argues that the Court's ultimate calculation of the total tax loss inappropriately included the loss associated with acquitted counts and uncharged conduct from the period of time after the Indictment Period to the present (during which Lynch continued to fail to pay over the amounts withheld from employees' wages for employment taxes). Doc. No. 269, pp. 5-6. In support of his argument, Lynch cites to dissents and law review articles that support his position, seemingly conceding that the controlling legal precedent does not support his position. See Doc. No. 269, pp. 5-6 and FN1; see also, Doc. No. 263, pp. 3-4 (citing United States v. Watts, 519 U.S. 148 (1997) and United States v. Ciavarella, 716 F.3d 705 (3d Cir. 2013). To the contrary, the controlling precedent states that District Courts should consider "relevant conduct" including "all acts and omissions . . . that were part of the same course of conduct or common scheme or plan as the offense of conviction[,]" including acquitted counts, dismissed counts, and uncharged conduct. U.S.S.G. § 1B1.3(a)(2); Watts, 519 U.S. 148; Ciavarella, 716 F.3d 705.
For the purpose of Defendant's Motion for Release Pending Appeal, however, Lynch's arguments about the inclusion of conduct related to acquitted counts and uncharged conduct are irrelevant, because these arguments cannot raise a fairly debatable issue that would result in "a reduced sentence to a term of imprisonment less than the total of the time already served plus the expected duration of the appeal process." 18 U.S.C. § 3143(b)(1)(B)(iv). Even a tax loss calculation based solely upon the unpaid taxes in the amount of $793,145, associated with the 16 counts of conviction (without interest or penalties),
Although Lynch put the Government to their ultimate burden of proof at trial, and he continues to contend that, notwithstanding he was the person in full control of the Iceoplex entities, he was not the "person responsible" to pay over the employment taxes withheld from employees' wages, Lynch argues that he is entitled to a 2-level downward adjustment for acceptance of responsibility under United States Sentencing Guideline § 3E1.1. This argument totally lacks merit, but, similar to Lynch's argument against the inclusion of relevant conduct in the tax loss calculation, this argument also fails to support Lynch's Motion for Release Pending Appeal, because a two-level downward adjustment would not result in a reduced sentence less than the expected duration of the appeal process.
Although the Court properly relied upon evidence introduced at trial to find that Lynch had the ability to pay restitution and a fine, based upon the financial statements and valuations of his property, Lynch's financial condition does not impact his Total Offense Level, guideline range of imprisonment, or term of imprisonment in anyway. Accordingly, Lynch's personal financial condition is also irrelevant to whether Lynch is entitled to release pending appeal pursuant to 18 U.S.C. § 3143.
Finally, without citing to any support in the record, Lynch contends that the Court improperly rejected his proffer of trial testimony and evidence at the sentencing hearing. Doc. No. 269, pp. 6-7. To the contrary, the Court did not reject any evidence or testimony offered by Lynch at the sentencing hearing and allowed for the presentation of as many witnesses and as much evidence as Lynch and his Counsel wished to produce. See 1/11/17 and 1/12/17 Sentencing Hearing Transcripts.
Regarding Lynch's argument that the Government failed to meet its burden of proof as to the relevant conduct portion of the tax loss calculation, the Government produced two witnesses at the sentencing hearing who essentially repeated their trial testimony that Lynch made the financial decisions and controlled the bank accounts and corporate structure of the Iceoplex entities. Id. Further, Lynch himself submitted IRS Forms 941 with his signature as "President" of the entities related to the post-Indictment Period relevant conduct as Defense Exhibit 2. This evidence more than meets the preponderance standard required to support the tax loss.
For the reasons set forth, Defendant's Motion for Release Pending Appeal, doc. no. 269, is DENIED.
SO ORDERED.
