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United States v. Montanari

United States Court of Appeals, Eighth Circuit

July 12, 2017

United States of America, Plaintiff- Appellee,
Bartolomea Joseph Montanari, Defendant-Appellant.

          Submitted: October 21, 2016

         Appeal from United States District Court for the District of Minnesota - St. Paul

          Before LOKEN, SMITH, [1] and COLLOTON, Circuit Judges.

          COLLOTON, Circuit Judge.

         In 2014, a jury convicted Bartolomea Montanari of tax evasion, mail fraud, and wire fraud for conduct relating to the operation of three companies that he owned in Minnesota and Kentucky. The district court sentenced him to 78 months' imprisonment, the bottom of the advisory guideline sentencing range. Montanari challenges the conviction based on the district court's limitation of his cross-examination of a witness, and he disputes the court's calculation of his advisory guideline range. We affirm the conviction and reject most of Montanari's challenges to the sentence, but we vacate the judgment and remand for resentencing based on one guideline computation error acknowledged by the government.


         Montanari owned a real estate business in Minnesota called St. Croix Development, LLC and two businesses in Kentucky related to coal mining, Emlyn Coal Processing, LLC and Montie's Resources, LLC. From around 2004 to 2006, Montanari failed to pay payroll taxes due from St. Croix Development and also failed to file several of the company's quarterly payroll tax returns.

         In December 2008, Minnesota-based IRS revenue officer Dale Mikel was assigned to Montanari's case to collect St. Croix Development's delinquent taxes. In fall 2009, Mikel sent Montanari IRS Form 433-A to obtain financial information about him for purposes of collection. Montanari returned his completed Form 433-A, signed under penalty of perjury, in December 2009.

         In the Form 433-A, Montanari stated that he had "no income currently." He listed St. Croix Development as an "employer, " but did not mention Emlyn Coal or Montie's, although he drew a monthly salary of up to $50, 000 from them. Montanari falsely represented that he had no bank accounts, credit cards, or business assets. He also failed to list multiple luxury vehicles that he owned or a Tennessee home worth over $1.4 million in which he had been living since September 2009.

         Mikel ultimately determined that Montanari was liable for the unpaid St. Croix Development payroll taxes under a trust fund recovery penalty. This penalty is assessed against a person who is responsible for paying withheld employment taxes and willfully fails to pay them. 26 U.S.C. § 6672.

         At around the same time, Emlyn Coal and Montie's developed tax problems in Kentucky. Minnesota businessman David Kloeber had co-owned Emlyn Coal with Montanari from 2007 to 2009. Until Montanari bought out Kloeber's interest in 2009, Kloeber and his employees had managed the taxes of Emlyn Coal and Montie's. After Kloeber's departure in 2009, the companies fell behind in their obligations to pay employment taxes and coal excise taxes. Montanari received numerous notices from the IRS about the outstanding taxes.

         Kentucky-based IRS revenue officer Evelyn McDaniel began investigating Emlyn Coal and Montie's in 2010. In an interview with McDaniel, Montanari said that he was unaware that the companies were failing to pay taxes or to file tax returns. He also stated that the companies were not receiving any revenue. McDaniel ultimately determined that Montanari was liable for unpaid payroll and excise taxes from Emlyn Coal and Montie's under a trust fund recovery penalty.

         In June 2011, Montanari filed a second Form 433-A under penalty of perjury and failed to report bank accounts, credit cards, personal property, and real property. He also did not explain that he transferred funds from Emyln Coal and Montie's to himself for personal expenses. From 2009 until 2012, Montanari withdrew over $1.7 million from Emlyn Coal and Montie's; some of the funds were transferred to a bank account in the name of a shell company called Bella Luca Properties LLC. Montanari spent much of this money on a new home, vacations, and vehicles.

         Around April 2012, Kloeber contacted IRS Special Agent James Shoup regarding Montanari's conduct. Kloeber was acquainted with Shoup through a prior unrelated tax investigation. Shoup began a criminal investigation of Montanari. During a telephone call with Montanari in September 2012, Shoup asked several questions about why Montanari did not use any of the money that he was taking from the companies to pay their employment taxes. Montanari answered that he did not know why. Shoup also inquired about a purchase of a bulldozer by Montie's in 2009. In that transaction, Montanari was suspected of ...

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