United States v. Charles Petrunak
856 F.3d 484
| 7th Cir. | 2017Background
- Charles Petrunak, sole proprietor of Abyss Special FX, mailed fake Forms 1099 to two ATF inspectors (Krofta and Vicario) claiming $250,000 payments each after an administrative proceeding led to loss of his explosives license and business.
- Krofta and Vicario reported only actual income; the false 1099s triggered an IRS audit of Krofta and led the IRS to investigate Petrunak.
- Petrunak submitted the fabricated payments as business expenses on Abyss’ corporate return (an S-corporation), generating a $500,000 improper deduction that flowed through to his personal return and produced a long-term loss carryforward.
- Indicted on three counts under 26 U.S.C. § 7206(1) for making and subscribing false IRS forms, Petrunak was convicted by a jury and sentenced to 24 months’ imprisonment.
- At trial Petrunak sought to admit reconstructed corporate meeting “minutes” (made by him, originals destroyed) to show his state of mind and purported IRS advice; the district court excluded them under FRE 803(6).
- Petrunak also contested the Guidelines tax-loss calculation (district court treated loss as 28% of the $500,000 improper deduction = $140,000).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of corporate meeting minutes under business-records exception | Minutes show state of mind and IRS guidance; admissible as business records | Minutes are unreliable: created solely by Petrunak, originals shredded, reconstructed during investigation | Exclusion affirmed — records lacked indicia of trustworthiness and were prepared with an eye toward litigation |
| Calculation of Guidelines tax loss amount | Court should measure loss by government revenue actually owed, not amount of improperly claimed deduction | Loss equals the object of the offense (the improperly claimed $500,000); when deduction carryover prevents precise loss, use §2T1.1(c)(1)(B) formula (28%) | Calculation affirmed — court properly treated tax loss as 28% of $500,000 = $140,000 under the Guidelines |
Key Cases Cited
- Jordan v. Blinn, 712 F.3d 1123 (7th Cir. 2013) (explaining reliability rationale for business-records exception and cautioning against documents prepared with an eye toward litigation)
- United States v. Kielar, 790 F.3d 733 (7th Cir. 2015) (trial-court evidentiary rulings reviewed for abuse of discretion)
- United States v. Black, 815 F.3d 1048 (7th Cir. 2016) (tax-loss calculation reviewed for clear error; §2T1.1(c) applies to fraudulent returns and evasion offenses)