United States v. Drage
681 F. App'x 654
| 10th Cir. | 2017Background
- Drage, Lester M. Mower, and Adrian A. Wilson operated reverse‑merger schemes using nominee officers and multiple brokerage/bank accounts to receive and move stock and sale proceeds. Drage prepared merger and transfer documents.
- Nominees (e.g., Lisa Valerio) received stock, which was split, reissued, sold, and the proceeds routed through nominee and related accounts, then paid out to Drage, Mower, Wilson, and entities they controlled.
- Large sums (millions) were traced from brokerage sales into co‑mingled bank accounts and then used to pay personal expenses of the three men; Drage and Wilson did not file personal or corporate tax returns from 2000–2006 and Mower failed to file for several years.
- A jury convicted Drage of conspiracy to impede the IRS (18 U.S.C. § 371) and willful failure to file corporate tax returns (26 U.S.C. § 7203). The district court entered a post‑verdict judgment of acquittal on the conspiracy count and conditionally granted a new trial; the government appealed.
- The Tenth Circuit reviewed jurisdiction under 18 U.S.C. § 3731, the sufficiency of the evidence de novo (Rule 29), and the district court’s conditional new‑trial grant for abuse of discretion. The court reversed and remanded with instructions to reinstate the jury’s conspiracy verdict.
Issues
| Issue | Plaintiff's Argument (United States) | Defendant's Argument (Drage) | Held |
|---|---|---|---|
| Jurisdiction to hear government appeal of post‑verdict acquittal and conditional new trial | § 3731 authorizes interlocutory government appeals from orders granting acquittal/new trial after verdict | Appeal premature because sentencing on remaining counts not complete | Court: § 3731 authorizes the appeal despite lack of sentencing; jurisdiction exists |
| Sufficiency of evidence for conspiracy (Rule 29) | Circumstantial evidence—shared scheme, use of nominees, repeated transfers, co‑mingling, parallel non‑filing—permits a rational jury to infer an agreement to impede IRS | No unlawful agreement; many individual acts lawful; mere making IRS’s job harder is insufficient; some returns prepared/reported | Court: Evidence, viewed favorably to government, was sufficient to infer an unlawful conspiratorial agreement to impede IRS; reversed acquittal |
| Appropriateness of conditional new trial (Rule 33) | New trial not warranted because verdict supported by evidence | District court asserted risk of miscarriage of justice based on having heard related trials | Court: District court abused discretion; no miscarriage of justice; deny new trial |
Key Cases Cited
- United States v. Brunetti, 615 F.2d 899 (10th Cir. 1980) (conspiracy to defraud IRS sustainable from coordinated nominee/transfer scheme even if individual acts lawful)
- Hammerschmidt v. United States, 265 U.S. 182 (U.S. 1924) (§ 371 unlawful agreement may be shown by deceit, craft, trickery)
- United States v. Dazey, 403 F.3d 1147 (10th Cir. 2005) (jury may infer conspiracy from coordinated conduct and circumstantial evidence)
- Snell v. Tunnell, 920 F.2d 673 (10th Cir. 1990) (single plan standard for conspiratorial agreement)
- United States v. Hale, 762 F.3d 1214 (10th Cir. 2014) (standard for reviewing sufficiency: view evidence in light most favorable to government)
- Ching Tang Lo, 447 F.3d 1212 (9th Cir. 2006) (post‑verdict Rule 29(c)(2) acquittal reviewed de novo)
- United States v. White, 673 F.2d 299 (10th Cir. 1982) (district court may not weigh evidence when ruling on sufficiency)
- United States v. Martin Linen Supply Co., 430 U.S. 564 (U.S. 1977) (§ 3731 permits government appeals from judgments of acquittal unless barred by Double Jeopardy)
- United States v. Wilson, 420 U.S. 332 (U.S. 1975) (§ 3731 authorizes government appeals from post‑verdict judgments of acquittal)