Day School Operators Cash Deposits and Expenditures Lead to Tax Fraud Convictions U. S. v. DORSEY, U.S. App. LEXIS 19978 (3rd Cir. 2012)
U. S. v. DORSEY, U.S. App. LEXIS 19978 (3rd Cir. 2012)
Troy and Monnie Dorsey, the owners and operators of the Day School for Children in New Castle, Delaware, reported adjusted gross incomes of $15,697, $3,742, and $10,341 on their joint federal Income tax returns for the years 2004, 2005, and 2006, respectively.
At the same time, the Dorseys possessed large quantities of cash: the government introduced bank records showing that, from 2004 to 2006, Troy Dorsey deposited over $346,000 in cash into the couple's account. The deposits all were made in increments of less than $10,000, i.e., below the threshold that triggers a bank's obligation to report suspicious currency transactions to the IRS.
In late 2007, the Dorseys used postal service money orders to make two deposits totaling almost $40,000 towards the purchase of a $716,000 house. At trial, the government offered, and the District Court admitted: (1) a buyer's affidavit the Dorseys completed in September 2007 in connection with the home purchase, certifying that they had a combined annual income of $168,000 (compared to the $10,341 in adjusted gross income the Dorseys reported on their 2006 tax return), and (2) copies of the small-denomination (mostly $1,000) postal money orders the Dorseys used to make deposits on the house.
On appeal, the Dorseys challenged the sufficiency of the evidence supporting their conspiracy and tax-fraud convictions; urged that trial testimony by the IRS's Special Agent that was inconsistent with the agent's testimony at sentencing and fatally undermined their convictions; and contended that the District Court abused its discretion in admitting the evidence related to their 2007 house purchase. Troy Dorsey also argued that the government improperly used the postal money orders to prove the intent element of the structuring charges.
The Court rejected all of the arguments made by the Dorseys and affirmed the convictions on all counts.
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