United States v. Fassnacht, John ( 2003 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 02-3059 & 02-3060
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
JOHN FASSNACHT
and VINCENT MALANGA,
Defendants-Appellants.
____________
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 01 CR 63—Blanche M. Manning, Judge.
____________
ARGUED FEBRUARY 27, 2003—DECIDED JUNE 6, 2003
____________
Before KANNE, DIANE P. WOOD, and EVANS, Circuit
Judges.
KANNE, Circuit Judge. John Fassnacht and Vincent
Malanga appeal their convictions for obstructing justice in
violation of 18 U.S.C. § 1503. They argue that the obstruc-
tion offense was neither properly charged in the indictment
nor sufficiently proven at trial—basically, that the obstruc-
tion charge was included by the government as an after-
thought, tacked on to the primary charges of tax evasion
and conspiring to impede the Internal Revenue Service. We,
however, find that the indictment provided sufficient notice
of the conduct for which Fassnacht and Malanga were being
2 Nos. 02-3059 & 02-3060
charged and that the government presented sufficient evi-
dence at trial for a rational jury to have found the defen-
dants guilty of obstruction of justice. We affirm the convic-
tions.
HISTORY
Donald Newell and Vincent Malanga were partners and
each fifty-percent shareholders in the Chicago-based invest-
ment firm of LaSalle Portfolio Management, Inc. (“LPM,
Inc.”). LPM, Inc. advised clients on investment decisions
and invested client funds in return for management and
incentive fees. Newell, as President of LPM, Inc., worked
from its Chicago office, handling all administrative aspects
of the firm. Malanga served as Vice President, and was the
sole LPM, Inc. representative in the New York office, re-
sponsible for trading on behalf of its clients.
In the early 1990s, Malanga and Newell began to discuss
the possibility of setting up an investment fund in Ber-
muda, which would allow foreign investor clients to avoid
United States tax obligations on income generated from
their investments. They enlisted the services of John
Fassnacht, a certified public accountant knowledgeable in
international financial transactions, to help set up the
Bermuda entity. In February 1993, with the help of
Fassnacht and a Bermuda law firm, LaSalle Portfolio
Management, Limited (“LPM, Ltd.”) was formally incorpo-
rated in Bermuda. By January 1994, Newell and Malanga
were each twenty-five-percent shareholders in LPM, Ltd.,
while Edmond Burke, a Swiss investment advisor recom-
mended by Fassnacht (but whom neither Newell or
Malanga had ever met or spoken with), held fifty-percent of
the Bermuda entity.
In early 1994, LPM, Inc. was due to receive an incentive
fee of $1.35 million from one of its foreign clients, the Abu
Nos. 02-3059 & 02-3060 3
Dhabi Investment Authority (“ADIA”) for services per-
formed by LPM, Inc. in 1993 (ADIA had been a client of
LPM, Inc. since 1990). Rather than receive the incentive fee
directly, Newell and Malanga directed ADIA to deposit the
fee in an LPM, Ltd. bank account in Bermuda. LPM, Inc.’s
1994 tax returns failed to include the $1.35 million fee as
income. In turn, the individual 1994 tax returns for Newell
and Malanga failed to include as income their portions of
the $1.35 million fee.1
Most of the $1.35 million fee sat in the Bermuda bank
account for some 18 months. In February 1996, Malanga
was planning to purchase a new home and needed a portion
of the incentive fee to put toward a down payment. At a
February 13th meeting in New York, Malanga discussed his
need for the money with Fassnacht and Newell. The three
agreed to forward $400,000 to Malanga, and on February
15th, that money was transferred to Malanga’s real estate
attorney.
Also in early 1996, Newell discovered that LPM, Inc. em-
ployee Angela Dancisak had been embezzling funds from
both LPM, Inc. and LPM, Ltd. Shortly thereafter, Dancisak
was fired under less than amicable conditions. Dancisak
then contacted the IRS to provide information about LPM’s
Bermuda operations and the $1.35 million incentive fee
diverted to LPM, Ltd.
Apparently aware that Dancisak—a disgruntled former
employee with intimate knowledge of LPM, Inc.’s financial
affairs—posed a risk of disclosing damaging information to
government authorities, Newell, Malanga, and Fassnacht
began discussing how to defend their tax treatment of the
1
As a Subchapter S corporation, LPM, Inc.’s income was reported
but not taxed at the corporate level. Income to the corporation was
distributed annually to the shareholders (in this case, Newell and
Malanga), who were responsible for paying tax on that income.
4 Nos. 02-3059 & 02-3060
$1.35 million incentive fee. Newell testified that in a
January 15, 1996 telephone call in which all three individu-
als participated, Fassnacht inquired whether “it would have
been feasible to have paid someone a finder’s fee for intro-
ducing LaSalle to the people at ADIA.” Newell testified that
he agreed to prepare a scenario “describing what would
have had to have happened for this to have actually hap-
pened.” They discussed using Edmond Burke as the “finder”
who would have introduced LPM, Inc. to ADIA. According
to this scenario, the LPM principals would testify that they
reached an agreement with Burke in 1989 for him to assist
in opening and managing the ADIA account in return for a
one percent fee up to $1 million, plus a twenty-five-percent
bonus if certain benchmarks were met. Newell clarified,
however, that such a sequence of events “did not actually
happen,” and that there was no factual basis for any part of
the scenario he had prepared.
Based on the information provided by Dancisak, the IRS
opened a federal grand jury investigation (number 96 GJ
258) into whether LPM, Inc. and LPM, Ltd. had acted to
avoid paying taxes due on the $1.35 million ADIA incentive
fee. IRS Criminal Investigation Division Special Agent
Kristine Tice served as the case agent (or lead agent) for the
grand jury investigation. As part of this investigation, on
March 26, 1996, IRS agents executed a search warrant at
LPM, Inc.’s Chicago offices. Also on that day, the IRS
sought to interview partners Newell and Malanga. Newell
initially refused to talk to the agents, but Malanga was
interviewed in New York by two IRS agents who identi-
fied themselves as special agents with the IRS Crimi-
nal Investigation Division. According to Special Agent
Lawrence Egan, Malanga told the agents during that inter-
view that Burke was a marketing representative for LPM,
and in that capacity had introduced ADIA to LPM. He also
told the agents that the $1.35 million incentive fee from
ADIA was directed to the Bermuda account to pay Burke
Nos. 02-3059 & 02-3060 5
for his services and to help set up an offshore account for
foreign investors. Malanga stated that he had received no
part of the $1.35 million incentive fee.
On April 1, 1996, a grand jury subpoena was served on
Fassnacht by Special Agent Egan; the subpoena requested
that Fassnacht provide any and all records relating to LPM,
Inc.; LPM, Ltd.; Donald Newell; and any entity owned or
controlled by Newell. Fassnacht provided one document in
response to the subpoena. Also on the day the subpoena was
served, Fassnacht was interviewed via telephone by Special
Agent Tice, who testified at trial that she also introduced
herself as a Special Agent with the IRS Criminal Investiga-
tion Division. She testified that during her interview of
Fassnacht, he told her that Burke had introduced ADIA to
Newell, for which he was due a finder’s fee of approximately
$1 million, and that the $1.35 million incentive fee was
directed to LPM, Ltd.’s account in Bermuda to be used to
pay Burke’s finder’s fee.
After his initial refusal to cooperate with the IRS agents,
and upon advice of counsel he retained after the search of
LPM, Inc.’s offices, Newell began recording his telephone
conversations with Malanga and Fassnacht without their
knowledge. He later agreed to cooperate with the govern-
ment and continued recording conversations using govern-
ment-provided equipment. Newell’s testimony and the
recorded conversations were major elements of the govern-
ment’s case at the subsequent trial of Fassnacht and
Malanga. Newell himself was tried and convicted on two
counts of filing a false tax return (on behalf of himself
and LPM, Inc.) and was sentenced to 30 months imprison-
ment. He testified at the trial of Fassnacht and Malanga
under a grant of immunity from further prosecution.
Fassnacht and Malanga were ultimately charged by the
grand jury in a five-count indictment. Count One alleged
that the two defendants had conspired to commit tax eva-
6 Nos. 02-3059 & 02-3060
sion, Counts Two and Three alleged attempts to evade
income tax due in connection with Newell’s and Malanga’s
1994 federal income tax returns, and Count Four alleged
obstruction of justice with respect to the grand jury investi-
gation into the alleged tax evasion. Fassnacht was sepa-
rately charged in Count Five with making false statements
to an IRS agent. At the close of the government’s case-in-
chief, the district court granted the defendants’ joint motion
for a directed verdict on Counts Two and Three. The jury
found Fassnacht and Malanga guilty on the charge of ob-
structing justice (Count Four), not guilty on the charge of
conspiring to defraud the IRS (Count One) and, with respect
to Fassnacht only, not guilty on the charge of making a
false statement to an IRS investigator (Count Five).
Pursuant to Federal Rule of Criminal Procedure 29,
Fassnacht and Malanga moved for a judgment of acquittal
on the obstruction of justice charge, the only count on which
they were convicted, arguing that (1) Count Four of the in-
dictment was vague and confusing, and the government had
failed to cure this problem by providing further particulars,
and (2) the evidence presented at trial was insufficient to
support a guilty verdict on the obstruction charge. The
district court denied the defendants’ motion, and sentenced
each defendant to serve one year and one day in federal
custody.
Fassnacht and Malanga now appeal their convictions, ar-
guing first that the obstruction of justice count of the indict-
ment was constitutionally deficient (and that the district
court erred in failing to correct that deficiency by granting
their motion for a bill of particulars). Further, they argue
that the evidence offered at trial was insufficient to support
their convictions for endeavoring to obstruct the grand jury
investigation. For the reasons set forth below, we reject
both arguments and affirm the convictions.
Nos. 02-3059 & 02-3060 7
ANALYSIS
Fassnacht and Malanga were convicted under the
“Omnibus Clause” of 18 U.S.C. § 1503, the federal obstruc-
tion of justice statute. This clause, known as the statute’s
“catch-all” provision for its broad language, provides in rele-
vant part that “[w]hoever corruptly . . . endeavors to influ-
ence, obstruct, or impede, the due administration of justice,
shall be punished as provided in subsection (b).” 18 U.S.C.
§ 1503(a) (2003).
A. The Sufficiency of the Indictment
The first argument raised by Fassnacht and Malanga is
that the indictment under which they were charged was
constitutionally defective in failing to provide adequate no-
tice of the offense conduct for which they were being tried.
They contend that Count Four of the indictment, charging
them with violating the federal obstruction of justice stat-
ute, failed to identify specific acts that were directed at ob-
structing the grand jury investigation. We review the suf-
ficiency of an indictment de novo. United States v. Smith,
230 F.3d 300, 305 (7th Cir. 2000).
The Fifth Amendment guarantee of the right to indict-
ment by a grand jury, its protection against double jeop-
ardy, and the Sixth Amendment guarantee that a defendant
be informed of the nature of the charges against him
establish the minimum requirements for an indictment. See
United States v. Hinkle, 637 F.2d 1154, 1157 (7th Cir.
1981). For an indictment to be legally sufficient, it must ac-
complish three functions: it must state each of the elements
of the crime charged; it must provide adequate notice of the
nature of the charges so that the accused may prepare a
defense; and it must allow the defendant to raise the judg-
ment as a bar to future prosecutions for the same offense.
See Smith, 230 F.3d at 305; see also Russell v. United
8 Nos. 02-3059 & 02-3060
States, 369 U.S. 749, 763-64 (1962). We have cautioned that
the sufficiency of an indictment is to be reviewed practi-
cally, with a view to the indictment in its entirety, rather
than in any “hypertechnical manner.” Smith, 230 F.3d at
305 (quotation omitted).
The indictment here meets the first test of sufficiency by
including each of the elements of the obstruction charge.
Count Four asserted in part that the defendants had “cor-
ruptly endeavor[ed] to influence, obstruct, and impede the
due administration of justice”—language which parallels
that of the Omnibus Clause of § 1503. See id. (“[I]t is gener-
ally acceptable for the indictment to ‘track’ the words of the
statute itself, so long as those words expressly set forth all
the elements necessary to constitute the offense intended to
be punished.” (citing Hinkle, 637 F.2d at 1157)).
Fassnacht and Malanga note, however, that “an indict-
ment that tracks the statutory language can nonetheless be
considered deficient if it does not provide enough factual
particulars to ‘sufficiently apprise the defendant of what he
must be prepared to meet.’” Id. (quoting Russell, 369 U.S.
at 763); see also Hinkle, 637 F.2d at 1158 (holding an indict-
ment legally insufficient when it failed to inform the defen-
dant of “the gravamen of the alleged offense”). Fassnacht
and Malanga argue that, in their case, the government
failed to include within the indictment references to any
specific acts aimed at obstructing the grand jury investiga-
tion into their tax affairs. This, they contend, compromised
their preparation of a defense to the obstruction charge.
While it is true that an indictment must do more than
recite the statutory elements, this does not mean that the
government is required to provide “every factual nugget
necessary for conviction.” Smith, 230 F.3d at 306. Rather,
the indictment need only “provide some means of pinning
down the specific conduct at issue.” Id. at 305 (citation
omitted). We again caution against reviewing the suffi-
Nos. 02-3059 & 02-3060 9
ciency of an indictment in a “hypertechnical manner,” id. at
305 (quotation omitted); in determining whether an indict-
ment provides sufficient information to enable the prepara-
tion of a defense, “the presence or absence of any particular
fact need not be dispositive of the issue.” Id.Count Four of the indictment did, in fact, provide a
number of factual details to which Fassnacht and Malanga
could have looked to determine the conduct on which the
government intended to rely. That count first realleged and
incorporated the twenty-six factual paragraphs contained
in Count One; those paragraphs detailed the defendants’
actions in allegedly conspiring to hide income in an offshore
company and then to cover up that effort to evade paying
taxes on that income. Particularly relevant to the obstruc-
tion charge in Count Four, Paragraph 9 notes that on or
about March 26, 1996, a federal grand jury began an inves-
tigation into the alleged tax evasion scheme. Paragraphs 11
through 13 assert that the defendants concocted fictitious
explanations, supported by false documents, in an attempt
to cover up their alleged tax evasion. Paragraphs 14 and 15
point to interviews of Malanga and Fassnacht, conducted by
IRS Criminal Investigation Division special agents, in
which both made false statements regarding their activities
(both interviews occurred on or after the date the grand
jury investigation began). Paragraphs 16 through 25 detail
further efforts by both defendants to stick with, refine,
and support (with false documents) their initial ficitious ex-
planation—again, all after the grand jury began its investi-
gation.
Fassnacht and Malanga correctly point out that nowhere
in the indictment does it refer to an act or endeavor specif-
ically aimed at the grand jury investigation. In their brief,
they also correctly note that a conviction under § 1503 re-
quires the specific intent to influence a judicial proceed-
ing—an intent to impede an IRS investigation alone, or
10 Nos. 02-3059 & 02-3060
mere knowledge of an ongoing grand jury proceeding with-
out an intent to influence its investigation, is insufficient to
support a conviction under the obstruction-of-justice stat-
ute. They contend that the government’s failure to allege
any acts specifically aimed at obstructing the grand jury
render the indictment defective.
Fassnacht and Malanga ask too much from the indict-
ment. After all, “[t]he defendant’s constitutional right is to
know the offense with which he is charged, not to know the
details of how it will be proved.” United States v. Kendall,
665 F.2d 126, 135 (7th Cir. 1981) (citing United States v.
Freeman, 619 F.2d 1112, 1118 (5th Cir. 1980)). Once the
elements of the crime have been specified, an indictment
need only provide enough factual information to enable the
defendants to identify the conduct on which the government
intends to base its case.
In noting the existence of the grand jury investigation as
well as the defendants’ continuing reliance on their ficti-
tious explanation for their treatment of the incentive fee in
an attempt to cover up their perceived wrongdoing, the fac-
tual averments incorporated from Count One provided suf-
ficient guidance for Fassnacht and Malanga to determine
the conduct for which they were being charged. Count Four
itself additionally specified the time period in which the
defendants allegedly acted (“[f]rom approximately March
26, 1996 and continuing thereafter until in or about May
1996”) and the object of their actions (identifying “Federal
Grand Jury investigation 96 GJ 258 in the Northern Dis-
trict of Illinois”). Given this information, we believe that
Count Four of the indictment “sufficiently narrowed the
category of behavior” which Fassnacht and Malanga would
be called to defend, Smith, 230 F.3d at 306, and was
therefore constitutionally sound.
Nos. 02-3059 & 02-3060 11
B. The Motion for a Bill of Particulars
Given the general sufficiency of the indictment, we be-
lieve that the district court did not abuse its discretion in
denying Fassnacht’s and Malanga’s motion for a bill of par-
ticulars. The choice to grant or deny such a motion is com-
mitted to the discretion of the trial court, and a decision
denying a bill of particulars will be reversed only if it can be
shown that the trial court abused its discretion in doing so.
Kendall, 665 F.2d at 134.
The test for determining whether a bill of particulars
should have been granted is similar to the test for deter-
mining the general sufficiency of the indictment, as dis-
cussed above: that is, “whether the indictment sets forth the
elements of the offense charged and sufficiently apprises
the defendant of the charges to enable him to prepare for
trial.” Id. (quotation omitted). An indictment which includes
each of the elements of the offense charged, the time and
place of the accused’s conduct which constituted a violation,
and a citation to the statute or statutes violated is sufficient
to pass this test. See id.; United States v. Roya, 574 F.2d
386, 391 (7th Cir. 1978).
In this case, Fassnacht and Malanga moved for a bill of
particulars, pursuant to Federal Rule of Criminal Procedure
7(f), contending that they were entitled to know what
specific acts the government believed they undertook in
violation of § 1503. In denying the motion, the district court
found that “[t]aken as a whole, the indictment is sufficiently
specific and informative to apprise each of the defendants
of the nature of the charges and to enable them to prepare
a defense.”
Given our disposition of the defendants’ challenge to the
sufficiency of the indictment, we do not believe the district
court abused its discretion in reaching its assessment.
Count Four of the indictment indicated the statute under
12 Nos. 02-3059 & 02-3060
which the defendants were being charged, set forth each of
the elements constituting a violation of that statute, and
provided sufficient details regarding the defendants’ con-
duct for which they were being charged.2 Given this infor-
mation, the district court was within its discretion in deny-
ing the defendants’ motion for the bill of particulars.
C. Sufficiency of the Evidence
Fassnacht and Malanga next contend that the district
court should have granted their motion for a judgment of
acquittal because, they argue, the evidence presented at
trial was insufficient to sustain their convictions for ob-
struction of justice. We review the denial of a motion for a
judgment of acquittal de novo. United States v. Hach, 162
F.3d 937, 942 (7th Cir. 1998). In reviewing the district
court’s decision, we take the evidentiary basis for the jury’s
verdict “in the light most favorable to the government . . .
and will uphold the conviction if ‘any rational trier of fact
could have found the essential elements of the crime beyond
a reasonable doubt.’” United States v. Granados, 142 F.3d
1016, 1019 (7th Cir. 1998) (quoting Jackson v. Virginia, 443
U.S. 307, 319 (1979)). We will overturn the jury’s verdict
“only if the record contains no evidence, regardless of how
it is weighed, from which the jury could find guilt beyond a
reasonable doubt.” Id. (citations omitted). “Proving that no
2
We further note that “a bill of particulars is not required when
information necessary for a defendant’s defense can be obtained
through ‘some other satisfactory form.’ ” United States v. Canino,
949 F.2d 928, 949 (7th Cir. 1991) (quoting WRIGHT, FEDERAL
PRACTICE AND PROCEDURE: CRIM 2D. § 129, at 436-48 (1982)). The
government in this case provided the defendants with extensive
pretrial discovery, giving them full access to all documentary evi-
dence in the government’s possession, thus further obviating the
need for a bill of particulars. See id.
Nos. 02-3059 & 02-3060 13
such evidence exists presents a nearly insurmountable
hurdle to the defendant.” Hach, 162 F.3d at 942 (quotation
omitted).
To prove an obstruction of justice charge under § 1503,
the government must show, beyond a reasonable doubt,
that there was a pending judicial proceeding, that the de-
fendant was aware of that proceeding, and that the defen-
dant corruptly intended to impede the administration of
that judicial proceeding. United States v. Maloney, 71 F.3d
645, 656 (7th Cir. 1995). Fassnacht and Malanga claim that
the evidence presented at trial, aimed primarily at proving
a scheme of tax evasion, was insufficient to support a guilty
verdict on the obstruction of justice charge. Our examina-
tion of the record, however, convinces us that there was suf-
ficient evidence to sustain the jury’s verdict.
The dispute in this case essentially comes down to the
question of the intended object of Fassnacht’s and
Malanga’s obstructive efforts. The defendants argue that
the government offered evidence which showed that, while
they were aware of the grand jury proceeding, they only
acted with an intent to mislead the IRS investigation. The
government contends that there was sufficient evidence
from which the jury could have concluded that the grand
jury investigation was an object of the defendants’ efforts.
We agree with the government.
This Court has previously held that conviction under
§ 1503’s “corruptly endeavors” language requires, as an ele-
ment of the offense, the specific intent to impede, obstruct,
or interfere with a judicial proceeding. See United States v.
Bucey, 876 F.2d 1297, 1314 (7th Cir. 1989); see also United
States v. Schwarz, 283 F.3d 76, 107 (2d Cir. 2002). In
United States v. Aguilar, the Supreme Court explained that
to prove specific intent, the government must demonstrate
some kind of “nexus” between the action taken by the
accused and the judicial proceeding: “the act must have a
14 Nos. 02-3059 & 02-3060
relationship in time, causation, or logic with the judicial
proceedings . . . . In other words, the endeavor must have
the ‘natural and probable effect’ of interfering with the due
administration of justice.” 515 U.S. 593, 599 (1995) (cita-
tions omitted).
On the other hand, “if the defendant lacks knowledge that
his actions are likely to affect the judicial proceeding, he
lacks the requisite intent to obstruct.” Id. The Second
Circuit phrased the intent element this way: “the con-
duct offered to evince that intent must be conduct that is
directed at the court or grand jury and that, in the defen-
dant’s mind, has the ‘natural and probable effect’ of ob-
structing or interfering with that entity.” Schwarz, 283 F.3d
at 109 (citing Aguilar, 515 U.S. at 599). Mere knowledge of
a judicial proceeding is not enough to support a conviction
under § 1503. See id. at 107 (“[K]nowledge of an existing
grand jury investigation or the foreseeability of such an
investigation, by itself, is not enough to sustain a conviction
under § 1503.”).
A grand jury investigation constitutes the “due adminis-
tration of justice” for purposes of § 1503, but an IRS inves-
tigation, standing alone, does not. See Aguilar, 515 U.S. at
599; United States v. Ryan, 455 F.2d 728, 733 (9th Cir.
1972) (“[A]n investigation by the Internal Revenue Service
or by any other governmental agency would not constitute
a judicial proceeding.”). The Supreme Court emphasized
this distinction in Aguilar: “[t]he action taken by the ac-
cused must be with an intent to influence judicial or grand
jury proceedings; it is not enough that there be an intent to
influence some ancillary proceeding, such as an investiga-
tion independent of the court’s or grand jury’s authority.”
515 U.S. at 599.
Given this distinction, the Supreme Court warned that it
did not believe that “uttering false statements to an investi-
gating agent . . . who might or might not testify before a
Nos. 02-3059 & 02-3060 15
grand jury is sufficient to make out a violation of the catch-
all provision of § 1503.” Id. at 600. Under Aguilar, there-
fore, there is a significant difference between an accused
who provides a false statement to an investigator with the
knowledge that the evidence will be provided to the grand
jury (or an accused who provides false evidence directly to
the grand jury), and an accused who simply makes false
statements to an investigative agent. See id. at 601. If an
accused makes a false statement to an investigating agent
without the knowledge that the agent will forward that
information to the grand jury, it is “far more speculative”
whether the false statement will have the “natural and
probable effect” of obstructing justice. Id. Such speculation
is insufficient to support a conviction under § 1503.
Further complicating the distinction between judicial
proceedings and investigative efforts, we have held that an
investigation by a government agency undertaken in direct
support of a grand jury investigation constitutes the “due
administration of justice.” For example, in United States v.
Furkin, the defendant failed to report income from certain
gambling machines on his federal tax returns and was con-
victed of conspiracy to defraud the IRS; he was also con-
victed of obstruction of justice under § 1503 for his efforts
to impede the criminal investigation into his tax evasion.
119 F.3d 1276, 1278-79 (7th Cir. 1997). In challenging his
conviction under § 1503, Furkin argued that the evidence
against him indicated, at most, an intent to impede the IRS
investigation, but not the grand jury investigation. Id. at
1282. We disagreed, noting that the evidence demonstrated
that “Furkin was also aware that the IRS was integrally in-
volved in the grand jury investigation . . . . The IRS investi-
gation was not some ‘ancillary proceeding’ unrelated to the
grand jury investigation. Indeed, the IRS investigation and
the grand jury investigation were one and the same, and the
evidence established that Furkin understood this fact.” Id.
at 1282-83 (emphasis added); see also Aguilar, 515 U.S. at16 Nos. 02-3059 & 02-3060
600 (noting that obstruction of an investigation by FBI
agents may constitute a violation of § 1503 if “the agents
acted as the arm of the grand jury”).
Like the situation in Furkin, there was sufficient evidence
presented in this case for the jury to have rationally
concluded that Fassnacht and Malanga were aware of the
grand jury investigation into their tax returns and that
they understood that the IRS agents were “integrally in-
volved” in that grand jury investigation or, at the least, that
the IRS agents would provide to the grand jury the in-
formation they garnered from the defendants.
The government presented evidence that in January
1996, Fassnacht, Malanga, and Newell began to concoct a
cover story to obscure any wrongdoing with regard to their
handling of the $1.35 million incentive fee, after realizing
that terminating Dancisak presented the risk that she
might go to the authorities with information about LPM’s
finances. Newell testified that Fassnacht suggested a sce-
nario in which LPM, Inc. would say that it had entered into
an agreement with Burke, for the payment to Burke of a
finder’s fee with respect to the investment work done for
ADIA. (Tr. at 197-200.) The three individuals met several
times in early 1996 to review false documents prepared by
Fassnacht or Newell and to refine the details of their cover
story.
There was evidence offered by the government that while
the efforts to create a cover story began before the com-
mencement of the grand jury investigation, once Fassnacht
and Malanga became aware of the grand jury investigative
efforts, they continued to rely on that cover story, making
false statements to investigating agents and preparing false
documents to back up their story.
First, there was sufficient evidence for the jury to have
concluded that Fassnacht and Malanga were aware that a
federal grand jury, and not just the IRS, was investigating
Nos. 02-3059 & 02-3060 17
their tax affairs. Special Agent Lawrence Egan testified
that he served Fassnacht with a subpoena from the grand
jury on April 1, 1996. (Tr. at 763.) On April 2, Fassnacht
was recorded in a telephone conversation with Newell dis-
cussing the documents requested in “the subpoena I re-
ceived.” (Tape Tr. 4/2/96 11:15 AM at 2.) Malanga was tape-
recorded in an April 3 call with Newell discussing
Fassnacht’s postponed grand jury testimony. (Tape Tr.
4/3/96 5:30 PM at 5 & 13.) And when Newell was asked on
direct examination whether the grand jury was mentioned
during his April 23 meeting in Newark with Malanga and
Fassnacht, Newell testified: “I believe it was.” (Tr. at 287.)
There was also extensive evidence offered recounting
Fassnacht’s and Malanga’s efforts to refine and maintain
their cover story. For example, in an April 2 recorded tele-
phone call between Newell and Fassnacht, Newell asked if
Fassnacht was sticking with the finder’s fee cover story:
“Just, just so we don’t uhh contradict each other or are you
sticking one fee, the finder’s fee.” Fassnacht replied, “Yep,
yep.” (Tape Tr. 4/2/96 11:45 AM at 5.) Later in the April 2
Newell-Fassnacht phone call, Newell asked Fassnacht if he
“want[ed] me to stick to the story, the finder’s fee contract
(inaudible) is in fact a valid contract.” Fassnacht replied,
“[A] verbal contract is fine. I provided you with draft basi-
cally of alternatives to use.” (Tape Tr. 4/2/96 11:45 AM at
7.)
On April 13, Malanga was recorded in a telephone call
with Newell, in which Newell said that it would “be nice to,
you know, to know whether he’s [Fassnacht] still proposing
we stick with it, the Burke cover story.” Malanga replied,
“Well, I think that’s the story . . . .” (Tape Tr. 4/13/96 5:20
PM at 8.) In a tape recorded telephone conversation be-
tween Newell and Malanga following an April 15 dinner
meeting, Newell expressed concern with Fassnacht’s state-
ment that Burke would “set up just whatever cover story
you guys want. All, all he asks is twenty percent.” Malanga
18 Nos. 02-3059 & 02-3060
replied, “Well he said ten percent really.” (Tape Tr. 4/15/96
11:00 PM at 4.) In an April 18th call, Malanga asked Newell
about his meeting with accountants earlier that day. Newell
told Malanga twice that he “stuck to the story” and that the
accountants asked to see any documents corroborating the
story, “[l]ike the finder’s fee agreement and any, any backup
to, like invoices and stuff.” Malanga’s reply: “Ha, ha, tis a
tangled web we weave.” (Tape Tr. 4/18/96 9:08 PM at 4.)
The government also presented evidence that Fassnacht
and Malanga participated in the creation of false documents
to support their cover story. At the end of an April 18 call
with Malanga, Newell suggested that they “put our, our
case together, get whatever documentation uhh John
[Fassnacht] or Ed [Burke] or whoever can get us and see
how the story fits together.” Malanga agreed: “All right.”
(Tape Tr. 4/18/96 9:08 PM at 6.) On April 19, Newell and
Fassnacht had a telephone conversation in which Fassnacht
assured Newell that he would get documentation to back up
the finder’s fee story. When Newell tells Fassnacht that
“I’ve been sticking to our story,” Fassnacht replies: “Good.”
(Tape Tr. 4/19/96 8:03 AM at 2.)
Newell testified at trial that at the April 23 meeting he
had with Fassnacht and Malanga, held at the Admiral’s
Club at Newark Airport, Fassnacht produced “documents
that had been prepared which evidenced a loan agreement
between LPM, Limited, and Dr. Malanga, and that would
be the rationale for the $400,000 payment in February [for
Malanga’s house].” Newell testified that Malanga signed the
note and gave it back to Fassnacht. (Tr. at 274.)
Newell also testified that at the April 23 meeting,
Fassnacht instructed him to “think through a script . . .
which would in some logical fashion provide a story that
would explain how Ed Burke introduced us to ADIA.”
Newell prepared such a chronology and later delivered it to
Fassnacht. (Tr. at 276-77, 295.) Some time later, when IRS
Nos. 02-3059 & 02-3060 19
agents executed a warrant authorizing the search of
Fassnacht’s belongs at JFK Airport prior to Fassnacht
boarding a flight to Bermuda, the agents found the chronol-
ogy prepared by Newell among Fassnacht’s belongings;
Fassnacht had promised to deliver the chronology/script to
Burke. (Tr. at 820-21.)
Taking this evidence in the light most favorable to the
government, as we must when reviewing the denial of a mo-
tion for judgment of acquittal, we believe that a jury could
have rationally concluded that Fassnacht and Malanga in-
tended that their conduct would have the “natural and
probable effect” of impeding the investigation by the grand
jury.
The evidence offered at trial—including Newell’s testi-
mony, the tape-recorded conversations, and other documen-
tary evidence—indicated that after Fassnacht and Malanga
became aware that a federal grand jury was involved in the
investigation of their tax returns, they continued to stick
with the finder’s fee cover story, repeatedly making false
statements to the IRS Criminal Investigation Division
agents and creating fictitious documents to back up their
false statements. References to the grand jury interspersed
among the defendants’ conversations in which they contin-
ued to refine their cover story provide a rational basis on
which the jury could have concluded that the defendants
were more than merely aware of the grand jury investiga-
tion, but that the grand jury was in fact an object of their
obstructive efforts. In addition, even if it believed that the
defendants’ obstructive efforts were primarily aimed at
the IRS agents, the jury was entitled to make the rational
inference that Fassnacht and Malanga understood that
the IRS agents were acting as the “arm of the grand jury,”
and that impeding the agents’ efforts necessarily meant
obstructing the grand jury. See Aguilar, 515 U.S. at 600.
To the extent that Fassnacht and Malanga argue that the
evidence was insufficient because Newell’s testimony at
20 Nos. 02-3059 & 02-3060
trial was tainted because it was given under a grant of im-
munity, or because the recorded conversations were unre-
liable because “Newell was in a position in these calls to
direct the conversation in order to advantage himself with
the Government,” those arguments go to the weight the jury
should have given the evidence, something we are precluded
from reviewing. We simply note that the evidence presented
at trial does in fact provide a basis for the jury’s verdict. A
rational jury could have found the requisite “nexus” be-
tween the statements and actions of the defendants and the
grand jury’s work—one could certainly posit “a relationship
in time, causation, or logic with the judicial proceedings.”
Aguilar, 515 U.S. at 599.
In sum, we believe that it was rational for the jury to
have concluded that “in the defendant[s’] mind[s],” their ad-
herence to the fictitious explanation for the diversion of the
incentive fee to the offshore account would have “the ‘nat-
ural and probable effect’ of obstructing or interfering with”
the grand jury. Schwarz, 283 F.3d at 109 (citing Aguilar,
515 U.S. at 599). We therefore reject the defendants’ con-
tention that there was insufficient evidence presented at
trial for a rational jury to have reached guilty verdicts on
the § 1503 charges. The district court’s decision to deny the
defendants’ motion for a judgment of acquittal was correct.
CONCLUSION
For the foregoing reasons, we uphold the guilty verdicts
reached by the jury. The convictions of both Fassnacht and
Malanga are AFFIRMED.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—6-6-03