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U.S. v. Veksler

filed: August 9, 1995.


On Appeal from the United States District Court for the Eastern District of Pennsylvania. (D.C. Criminal Nos. 93-cr-00147-8, 93-cr-00147-10).

Before: Sloviter, Chief Judge, Scirica and McKEE, Circuit Judges.

Author: Sloviter


SLOVITER, Chief Judge.

Richard McNaughton and Igor Veksler appeal from the judgments of conviction and sentences entered against them by the district court. For the reasons set forth below, we will affirm the district court's orders.


Facts and Procedural History

During 1991 and 1992, McNaughton and Veksler were involved in a scheme to evade federal and state taxes on sales of number two oil, a product that can be used as either home heating oil or diesel fuel. During this period, no taxes were imposed by the federal government or either New Jersey or Pennsylvania on the sale of number two oil for use as home heating oil. In contrast, the United States, New Jersey and Pennsylvania did tax the sale of number two oil when it was to be used as diesel fuel, and imposed that tax on the producer or importer who first sold the oil to a purchaser that did not hold a Registration for Tax-Free Transactions (IRS Form 637).

The tax evasion scheme in which McNaughton and Veksler participated involved the use of "daisy chains," a series of paper transactions through numerous companies, some of which were largely fictitious. In each "daisy chain," the change in characterization of number two oil from tax-free home heating oil to taxable diesel fuel was effected through the use of a "burn company," which would purchase number two oil as tax-free home heating oil and then sell it to another company as diesel fuel. The burn company, which typically held an IRS Form 637, would produce invoices to its purchaser reflecting that the diesel fuel taxes had been paid and that the taxes were included in the price. Although the burn company was liable for the payment of taxes on the oil, it paid no taxes and typically existed for a brief time and then disappeared. The participants in the scheme took commissions on the sales at the step in which each participated.

On September 19, 1993, the United States filed a superseding indictment charging eighteen different defendants with various offenses related to the "daisy chain" operation. Both McNaughton and Veksler were charged with one count of conspiracy. McNaughton was also charged with twenty-three counts of wire fraud, three counts of attempted tax evasion, and RICO conspiracy.*fn1 In addition to the conspiracy count, Veksler was charged with six counts of wire fraud and one count of attempted tax evasion.

On May 23, 1994, after a twenty-day trial, the jury convicted McNaughton on all counts. Veksler was convicted of the conspiracy and wire fraud counts and acquitted on the tax evasion counts. McNaughton was sentenced to a prison term of forty months, five years of supervised release, and a special assessment of $1,400.00. Veksler was sentenced to a prison term of twenty-six months, followed by three years of supervised release. These appeals followed.



A. Appeal No. 94-2079--McNaughton

McNaughton was the president of BELL/ASCO, a Pennsylvania corporation that was in the business of making purchases and sales of number two oil. Prior to April 1, 1992, BELL/ASCO allegedly played a dual role in the "daisy chain" scheme by both supplying number two oil to the chain and buying oil at the end of the chain. After April 1, 1992, BELL/ASCO served only as a supplier and a new company, ASCA/NOVA, purchased oil at the end of the chain. ASCA/NOVA, however, operated from the same office as BELL/ASCO.


Did the district court err in refusing to suppress McNaughton's statement to Perry on December 1, 1992?

On November 24, 1992, the government executed a search warrant at Atlantic Heating and Oil, BELL/ASCO's parent corporation. During the course of the search, McNaughton was interviewed in his office by an FBI Agent and a Pennsylvania Revenue Enforcement Officer. Sometime during the interview, McNaughton left his office to speak with Mr. Thomas Smida, an attorney who had arrived to represent Atlantic in connection with the execution of the search warrant. After conferring with Smida, McNaughton informed the agents that Smida did not want him to make any more statements. Later, Smida was present when an agent elicited background information from ...

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