USA v. Leif Rozin
OPINION and JUDGMENT filed: AFFIRMED, decision for publication pursuant to local rule 206. John M. Rogers (AUTHORING), Deborah L. Cook, David W. McKeague, Circuit Judges.
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 12a0005p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee, No. 11-3186
LEIF D. ROZIN,
Appeal from the United States District Court
for the Southern District of Ohio at Cincinnati.
No. 05-00139-001—Susan J. Dlott, Chief District Judge.
Argued: October 13, 2011
Decided and Filed: January 6, 2012
Before: ROGERS, COOK, and McKEAGUE, Circuit Judges.
ARGUED: H. Louis Sirkin, SIRKIN, KINSLEY & NAZZARINE CO., LPA,
Cincinnati, Ohio, for Appellant.
Deborah K. Snyder, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: H. Louis
Sirkin, Scott Ryan Nazzarine, SIRKIN, KINSLEY & NAZZARINE CO., LPA,
Cincinnati, Ohio, for Appellant. Deborah K. Snyder, Frank P. Cihlar, Gregory Victor
Davis, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for
ROGERS, Circuit Judge. Taxpayer Rozin, along with others, took business and
individual tax deductions for the cost of so-called “Loss of Income” insurance policies,
although the insurance aspect of the policies was questionable and the policies allegedly
permitted Rozin to get back or maintain control of the premium funds. Rozin was
United States v. Rozin
convicted on three counts of tax-related crimes: subscribing a false tax return under
26 U.S.C. § 7206(1); attempting to evade taxes under 26 U.S.C. § 7201; and conspiracy
to defraud the Government under 18 U.S.C. § 371. These convictions must be upheld
because the Government presented sufficient evidence of the crimes, because Rozin’s
evidentiary argument regarding prior bad acts evidence is without merit, and because
there is no merit to Rozin’s argument that the Government was required by the nature
of the charges to forgo charging him under the general crime of conspiracy to defraud
the United States. Finally, the district court did not err in ordering Rozin to pay
restitution for the personal income taxes of his co-conspirator.
The conspiracy in this case involved the corporate and personal income tax
returns filed on behalf of Rozin, Inc. and its co-owners, defendants Leif Rozin and
Burton “Buddy” Kallick. Through Rozin, Inc., Rozin and Kallick owned a multi-state
retail carpet chain in the 1990s. After two years of negotiations, Rozin and Kallick sold
Rozin, Inc. in 2000, resulting in potentially large taxable profits.
In 1998, while Rozin and Kallick were negotiating the sale of Rozin, Inc., their
long-time insurance broker, Milt Liss, was introduced to Bruce Cohen, another insurance
broker, at a general insurance agents meeting. At the time, Cohen was selling
purportedly tax-deductible “Loss of Income” (LOI) insurance policies offered by
Caduceus Life Insurance Company, a company licensed in the U.S. Virgin Islands. Liss
was unaware of the fact that, at the time that he met Cohen, Cohen’s license to sell
insurance had been revoked.
To market LOI and “return of premium” (“ROP”) insurance products, Cohen
gave Liss various promotional materials, including an opinion letter from a law firm
stating that premiums for the LOI policies were likely allowable deductions, and a twopage flyer entitled, “Tax Court Settlement on ‘Loss of Income’ Policy.” The flyer
described Savage v. Commissioner, an alleged settlement between the IRS and a
Caduceus LOI policyholder.
United States v. Rozin
The LOI policies insured against loss of income due to certain circumstances,
including corporate downsizing, changes in technology, or employee layoffs arising
within one year from the date the policy was issued. The policies did not cover the
following: death; disability; voluntary termination; self-inflicted injuries; proven
criminal acts; negligent or willful misconduct; substance abuse; dishonesty or fraud;
insubordination, incompetence, or inefficiency; conflict of interest; or breach of
employment contract. Because the policies were allegedly tax deductible, they were
especially advantageous for individuals in the highest tax brackets. In 1998, Caduceus
also offered ROP riders in conjunction with the LOI insurance policy. If no claim was
filed on the policy, the rider would enable the purchaser to receive a significant portion
of the premium paid for the LOI policy. If the rider was purchased with the LOI, the
LOI premium would be invested for the policy owner and would be distributed to the
owner, taxable upon receipt, after ten years or at age sixty-five. If the insured died
before the ROP amount became payable, the individual lost his premium. According to
the promotional materials, the ROP rider was not tax-deductible, but the LOI premium
payments were deductible. However, the promotional materials also included a caveat
that if the IRS challenged the deduction, then the individual may owe past taxes due plus
Liss testified that he told Rozin that he had never seen anything like the LOI
policy before. During trial, Liss explained that Cohen’s LOI policy was different
because the ROP rider allowed the policy-holder to “take the money and self-direct it
into an investment or do other things.” In his experience, Liss did not know of any other
policy that allowed the individual to retain control over the funds.
After Liss presented the LOI and ROP policies to Rozin, Liss advised Rozin to
have someone look at the materials to assess the policies. Rozin had Alan Koehler, his
in-house counsel, analyze the legality of the policies. Rozin also asked Thomas Keehn,
a CPA who was the controller for Rozin, Inc., to review the Caduceus Tax Court flyer.
After referring to a handbook for accountants, which suggested this type of policy was
United States v. Rozin
deductible, Keehn shared his findings with Koehler. Keehn was never told anything else
about the policies.
After Koehler and Keehn conducted their research, Rozin, Kallick, and Koehler
met with Cohen to discuss the policies. Cohen assured them that the LOI policies were
tax-deductible, and that if they were not, “the worst thing that would happen would be
that they would have to pay the additional taxes owed plus interest.”
Despite the research conducted by Keehn and Koehler and the meeting with
Cohen, Rozin was still concerned about the legitimacy and viability of Caduceus. On
October 5, 1998, Rozin, Liss, Koehler, and Cohen traveled to St. Croix in the Virgin
Islands to visit Caduceus, meet with its principals, and see the company’s banking
Prior to the trip, Liss, Rozin, and Cohen discussed the three options available
when purchasing the LOI policy. The first option was to leave the funds with Caduceus,
allowing the company to invest the funds until the funds matured after ten years or after
Rozin and Kallick reached the age of sixty-five. The second option was to invest the
funds in a bank and then apply for a loan from that bank to gain access to a percentage
of the premium funds. The third option was to have the ROP funds transferred to Liss,
who would invest the money on behalf of Rozin and Kallick in a series of mutual funds.
Though Liss would be in charge of the account, the funds were left in Caduceus’s name.
Rozin and Koehler decided on the third option.
On October 6, 1998, while Rozin was still in the Virgin Islands, Rozin, Inc.
purchased two LOI policies and riders, with Rozin and Kallick named as the insured
individuals. The premium on each policy was $600,000 and the amount of coverage was
$720,000. If Rozin or Kallick qualified for coverage during the one-year policy period,
the maximum amount that they could receive under the LOI policy was $30,000 per
month for a period of twenty-four months. Rozin paid for the policies with a check
totaling $1,275,787.56. On October 7, 1998, $1,037,400 from the check was wired to
Liss’s corporate account. Both Liss and Koehler earned commissions for their role in
the LOI sale.
United States v. Rozin
Instead of leaving the funds in Caduceus’s name, Koehler used the money in
Liss’s account to open two grantor trust accounts—the Revolution Living Trust and the
Emperor Living Trust—with Koehler as trustee. By placing the funds in the trust,
Caduceus did not have access to the funds. The trusts were revocable by both Rozin and
At the end of 1998, negotiations were ongoing for the sale of Rozin, Inc. After
Rozin and Kallick entered into an agreement to sell Rozin, Inc. in July 1998, Rozin
asked Clark, Schaefer, Hackett & Company, an accounting firm, to advise him regarding
possible tax liabilities from the sale. John Parks, a CPA, determined that the tax liability
resulting from capital gains could be almost $2,200,000.
Around this time, Liss and Cohen presented Rozin and Kallick with Basis Boost,
another product intended to limit the owner’s tax liability. Basis Boost was developed
by Altheimer & Gray, a Chicago law firm, and acted as a tax shelter that artificially
raised a seller’s “basis” in his company for tax purposes and then created an artificial
loss that would be reported with the gain from the sale, reducing the amount of taxes
owed by the seller. At the end of December 1998, Rozin and Kallick gave Liss a check
for $625,000. Though Rozin disputes the purpose of the check, Rozin and Kallick
allegedly told Liss that if the 1998 sale of Rozin, Inc. went through, the money should
be used to purchase Basis Boost. If not, Liss was instructed to buy additional LOI
In early 1999, Rozin asked Keehn to prepare a tax projection including the
$625,000 expense, though no one told Keehn what that expense was. Keehn estimated
that with the additional $625,000 counted as income rather than as an expense, Rozin
and Kallick would each owe approximately $80,000 in additional federal taxes.
In July 1999, Keehn prepared a draft 1998 tax return for Rozin, Inc. During this
time, Rozin, Inc. labeled the October LOI payments as “general insurance” in the
company’s ledger and deducted those expenses in the tax returns.
promotional materials explicitly stated that the ROP rider premiums were not taxdeductible, the entire $1,275,787.56 was listed as a general insurance expense and
United States v. Rozin
treated as a tax deduction. The $625,000 given to Liss for either the Basis Boost or LOI
policies was also counted as a “professional fee.” Prior to filing, Koehler told Keehn to
categorize the $625,000 as an insurance expense. At trial, the Government presented
two balance sheets that showed that Keehn debited $625,000 from the professional fees
account and credited it to the general insurance account. Keehn also changed the federal
income tax return, moving $595,000 from the professional fees category to insurance.
Keehn left $30,000 in the professional fees category to account for the $30,000
When the sale of Rozin, Inc. negotiated in 1998 did not go through, Rozin and
Kallick instructed Liss to use the $625,000 to purchase additional LOI policies during
late July or early August 1999. Four policies, one each for John Downer, then President
of Rozin, Inc., Koehler, Rozin, and Kallick, were purchased. The policies were
backdated to December 1998 so that Rozin, Inc. could claim them as deductions for the
1998 tax year. Cohen, Liss, Rozin, Kallick, and Koehler split a $30,000 commission as
a result of the sale.
At the time Rozin and the others purchased the August 1999 LOI policies,
Caduceus had substituted the ROP riders with a new plan that allowed the premium
funds to be placed in grantor trusts established by Rozin and Kallick and then invested
in reinsurance companies in Nevis, an island in the Caribbean Sea. Under this scheme,
if no claim was made on the LOI policies Rozin and Kallick would be able to access the
funds after twelve months.
After the four August 1999 LOI policies were purchased, $475,000 was wired
to Liss, who then deposited the money in the Revolution Living Trust and Emperor
Living Trust. Reinsurance companies were created, and after the LOI policies expired
Liss was supposed to invest the premium funds in those companies.
In December 1999, Rozin, Koehler, and Kallick purchased two more LOI
policies, for a total of eight policies; these two additional policies were backdated to July
1999. Rozin, Inc. paid almost $1,600,000 in premiums for these policies.
United States v. Rozin
Though the timing is unclear from the record, Rozin also spoke with friends, Dr.
Christopher Lawley and Richard Sparnell, about buying LOI policies and the Basis
Boost product. Rozin, Lawley, and Sparnell belonged to the same golf club. At Rozin’s
urging, Lawley bought a LOI policy, and Sparnell bought the Basis Boost product.
In early 2000, the insurance commission in the Virgin Islands audited Caduceus.
Caduceus told Cohen that the initial funds that had been returned to Liss should have
remained in Caduceus’s name, rather than being placed in the trusts. Caduceus asked
that the funds be placed under its name, or else Caduceus would be forced to unwind the
transactions; however, even under Caduceus’s name, Liss would still exercise
responsibility for the investment. In August 2000, Liss was instructed by Rozin and
Kallick to liquidate the funds and wire the money to an account set up for Caduceus at
a bank in Michigan. Afterwards, Caduceus was to wire the funds back to Liss, who
would then invest the funds in one of the reinsurance companies established by Rozin
and Kallick. However, during this time, the IRS began investigating Rozin, Inc. for
fraud. Liss turned over all information regarding the LOI policies to Martin Horwitz,
an attorney hired by Rozin. Liss testified that Horwitz told him that Rozin and Kallick
had made a claim under the LOI policies and that part of the liquidated funds would be
used to pay the $1,400,000 claim, while the remaining amount was to be invested in the
Shortly before this, in June or July of 2000, Keehn prepared a corporate tax
return for 1999, including a tax deduction for the LOI policies bought in December
1999. However, due to the IRS investigation, the 1999 return was never filed with the
IRS; instead, Keehn gave it to Horwitz.
In 2005, a federal grand jury returned an indictment charging Rozin and codefendants Kallick, Koehler, Liss, and Cohen with conspiracy to defraud the
Government under 18 U.S.C. § 371 (Count One). Rozin was also charged with one
count of subscribing a false tax return, in violation of 26 U.S.C. § 7206(1) (Count Two),
and one count of attempted tax evasion, in violation of 26 U.S.C. § 7201 (Count Six).
United States v. Rozin
Rozin moved to dismiss Count One on the ground that the Government was
precluded from charging Rozin under the general crime of conspiracy to defraud the
United States, where a more specific offense was available to be charged; Rozin relied
in this regard on our decision in United States v. Minarik, 875 F.2d 1186 (6th Cir. 1989).
The district court denied the motion, distinguishing Minarik and relying on United States
v. Damra, 621 F.3d 474, 507 (6th Cir. 2010).
Rozin, Koehler, and Kallick pled not guilty, but Kallick passed away prior to trial
and charges against him were dismissed. Cohen and Liss entered guilty pleas. Rozin
and Koehler were tried, and their trial took thirteen days. Liss was one of the
Government’s key witnesses; his testimony comprised nearly five days of the trial. The
jury convicted both Rozin and Koehler; Rozin was convicted of all three counts.
The district court subsequently denied Rozin’s properly presented motion for
judgment of acquittal. In doing so, the district court held that, examining the evidence
in the light most favorable to the Government, the Government provided sufficient
evidence that Rozin willfully subscribed to a false tax return and willfully attempted to
evade taxes. The district court relied on (1) the lack of a “true business purpose for
purchasing the various LOI policies,” (2) the “dubious nature” of the policies, including
the high premium to coverage ratio, as well as the practice of backdating, (3) Rozin’s
access to and control over the funds, (4) Rozin’s descriptions of the policies to Sparnell
and Lawley as “tax-savings product[s],” and (5) the differences between the policies
Rozin bought and those that were advertised in Cohen’s promotional materials. In
addition, the district court held that Rozin did not have a good faith reliance defense
because he withheld relevant information and had reason to suspect the motives of the
individuals on whom he supposedly relied. The district court also determined that “for
the same reasons [discussed above regarding willfully subscribing a false tax return and
evading taxes] . . . there [was] sufficient evidence that Rozin knew of and intended to
join in a conspiracy to defraud the IRS.”
Rozin was sentenced to one year and one day in prison, followed by three years
of supervised release, 2,000 hours of community service, a $30,000 fine, and $775,294
United States v. Rozin
in restitution. On Rozin’s timely appeal, he challenges the denial of the motion to
acquit. He also argues that the district court improperly admitted evidence of prior bad
acts under Fed. R. Evid. 404(b), that the Government improperly charged Rozin under
the defraud prong of 18 U.S.C. §371, and that the district court erred by ordering Rozin
to pay Kallick’s personal income taxes as restitution. None of these arguments warrants
A. Subscribing to a false tax return and attempting to evade taxes
The Government presented sufficient evidence of Rozin’s willful intent to
subscribe a false tax return and attempt to evade taxes. In considering insufficiency of
evidence claims following a guilty verdict, “the relevant question is whether, after
viewing the evidence in the light most favorable to the prosecution, any rational trier of
fact could have found the essential elements of the crime beyond a reasonable doubt.”
Jackson v. Virginia, 443 U.S. 307, 319 (1979) (emphasis in original). In evaluating the
evidence, “[t]he government must be given the benefit of all inferences which can
reasonably drawn from the evidence, even if the evidence is circumstantial.” United
States v. Adamo, 742 F.2d 927, 932 (6th Cir. 1984) (citations omitted).
Contrary to Rozin’s argument, the Government presented sufficient evidence for
a rational trier of fact to find that Rozin acted willfully when he subscribed a false tax
return and attempted to evade paying taxes. Acting willfully in this context means that
Rozin undertook the “voluntary, intentional violation of a known duty.” Cheek v. United
States, 498 U.S. 192, 201 (1991). Willful intent is an element of both subscribing false
tax returns and attempted tax evasion. In relevant part, 26 U.S.C. § 7206(1) states that
an individual who “[w]illfully makes and subscribes any return, statement, or other
document, which contains or is verified by a written declaration that it is made under the
penalties of perjury, and which he does not believe to be true and correct as to every
material matter” shall be guilty of subscribing false tax returns. Similarly, 26 U.S.C.
§ 7201 states that “[a]ny person who willfully attempts in any manner to evade or defeat
any tax imposed by this title or the payment thereof shall . . . be guilty of a felony[.]”
United States v. Rozin
The Government provided sufficient evidence of willfulness under these
provisions, notwithstanding Rozin’s argument that there was not sufficient evidence that
he knew the corporate and personal tax form documents were false at the time that he
signed them. In rejecting this argument, the district court properly examined the
evidence in the light most favorable to the Government. The district court recognized
the suspicious or “dubious nature” of the LOI policies. Though peddled as “insurance,”
Liss admitted during testimony that the covered risks—corporate downsizing, employee
layoffs, and technological obsolescence—were unlikely to happen to Rozin because he
was an owner of a carpet company. Many of the most obvious causes of loss of income,
such as death, disability, voluntary termination, and breach of contract, were not
covered, and Rozin, Inc. was not under any immediate threat of bankruptcy. In addition,
unlike other legitimate insurance policies, Rozin maintained control of the funds; when
pitching the LOI policies to potential buyers, Rozin described them as “a way to lower
your taxes” while also receiving “a large percentage of that money back.” Finally, the
district court described the high premium-to-coverage ratio as suspect, suggesting
improper motives on the part of Rozin. Willfulness may be established by evidence that
is “entirely circumstantial.” United States v. Fawaz, 881 F.2d 259, 265 (6th Cir. 1989)
(citing United States v. Grumka, 728 F.2d 794, 797 (6th Cir. 1984) (per curiam)).
The district court also properly concluded that backdating the LOI policies
showed willfulness, because there was no reason for such backdating other than to claim
the improper tax deductions.
The district court regarded the practice as highly
suspicious, noting at sentencing that “[a]t some point in time, [Rozin] should have
known something was wrong. Probably when there was the backdating.” According to
the testimony of Steve Rowe, an IRS Revenue Agent called by the Government, “[a]ny
evidence of backdating results in a badge of fraud, meaning the IRS would question the
validity of the policy itself and the deduction.” Though the district court did not
elaborate, the court found “ample evidence” that the policies were backdated and that
Rozin was instrumental in this decision. Liss testified that Rozin knew that the policies
were going to be backdated and that as a result he would receive “no economic benefit
for that period of time.” Backdating served no legitimate business purpose; when the
United States v. Rozin
policies were purchased in August 1999, but backdated to December 1998, only five
months were left on the policy coverage and Rozin had triple coverage during this time.
Though Rozin argues that businesses will backdate policies for a “myriad of legitimate
reasons,” he provides no viable rationale for his actions. Instead, Rozin refers to the
testimony of Mary Blanton, the former administrative assistant of Cohen Insurance, to
support his claim. However, none of the reasons mentioned in her testimony is
applicable to this case. Rozin’s backdating and moving up the policy date permitted
Rozin to have access to his funds even earlier than otherwise, and thus reflected
improper motivation on his part.
Though Rozin maintains that he considered the LOI policies to be a tax-deferred
IRA-type benefit plan, the record shows that he knew that he would have immediate
access to the funds because they were placed in revocable trusts.
undermines Rozin’s assertion that he did not know that the tax deductions were
improper. When selling the LOI policies to friends, Rozin stated outright that about
eighty-five percent of the money would “come back and be held in a trust” that the
individual would “have control over.” Evidence that Rozin knew that he would have
access to most of his money, while reaping the benefits of a large tax deduction, would
permit a rational trier of fact to find that he willfully utilized the LOI policies in order
to evade taxes. This conclusion is bolstered by the fact that none of the policies
described in Cohen’s promotional materials allowed individuals to retain control over
Rozin argues that because he relied on the Savage opinion, three legal opinion
letters, and other promotional materials provided by Cohen, he should not be found to
have acted willfully. However, the materials relied upon by Rozin did not discuss
reinsurance schemes and none of the policies described in Cohen’s promotional
materials allowed individuals to retain control over their funds. In the Savage opinion,
the IRS had specifically “ensure[d] that Mr. Savage had not received his funds back
under the refund of premium clause.” All of the opinions also state that a legitimate
business purpose is needed to legally claim a tax deduction. As the record shows that
United States v. Rozin
the LOI policies were not legitimate insurance purchases, this undermines Rozin’s claim
that he did not know there was anything wrong with the deduction.
Rozin also argues that due to his reasonable reliance on the advice of others, the
Government was unable to negate his good faith belief that the tax returns were correct.
It is true that a defendant who “ha[d] a good faith belief that he was not violating tax law
. . . cannot be found guilty of a tax violation, even if the good faith belief [wa]s
unreasonable[.]” United States v. Abboud, 438 F.3d 554, 581 (6th Cir. 2006). This
argument is however not supported by the record in this case. The elements of a
“reliance defense” include: “(1) full disclosure of all pertinent facts, and (2) good faith
reliance on the accountant’s advice.” United States v. Duncan, 850 F.2d 1104, 1116 (6th
Cir. 1988), abrogated on other grounds, Schad v. Arizona, 501 U.S. 624 (1991); United
States v. Bugai, No. 97-1280, 1998 WL 553168 at *3 (6th Cir. Aug. 21, 1998) (per
curiam). Because Rozin either did not provide full information to those he supposedly
relied upon, or he had reason to believe that the advice provided by these individuals was
incorrect, the district court correctly held that Rozin could not mount a credible good
faith reliance defense. Viewed in the light most favorable to the Government, the record
supports a finding by a rational trier of fact that Rozin did not rely in good faith on the
advice of Keehn, Liss, Cohen, or Koehler.
Because Keehn was not aware of the full facts regarding the LOI policies, Rozin
cannot claim that he relied on Keehn’s advice in good faith. As we explained in United
States v. Garavaglia, 566 F.2d 1056, 1060 (6th Cir. 1977), a defendant who relies on
others to prepare his tax returns “may not withhold information from those persons
relative to taxable events and then escape responsibility for the false returns which
result.” During his testimony, Keehn admitted that he is not a tax specialist, and that he
never discussed the LOI policies with Rozin. In addition, Keehn was never told about
the reinsurance schemes or the trusts, and thus could not have provided an adequate
assessment of the legality of the product. Keehn never attended a meeting about the
scheme and never examined the LOI policy. As Keehn was not fully informed, Rozin’s
claim that he relied on Keehn in good faith does not negate willfullness.
United States v. Rozin
Similarly, Rozin cannot claim good faith reliance on the advice of Liss. In his
testimony, Liss clearly stated that his role was not to provide Rozin with tax advice. In
addition, because Liss received commissions from the sale of LOI policies, his motives
were questionable. Finally, and most importantly, Liss expressed doubt from the outset
and told Rozin that “I don’t know anything about this. I’ve never heard of this kind of
coverage.” Therefore, Rozin should have realized that it would be unwise to rely on
Liss, and a rational trier of fact could have found that any such reliance would not have
been in good faith.
The record also suggests that Rozin did not rely on Cohen, let alone rely on
Cohen in good faith. There is evidence that Rozin did not trust Cohen; for instance,
despite Cohen’s assurances, Rozin was concerned that the company, Caduceus, might
not even exist. Cohen also told Rozin that if the IRS did “challenge the deduction,” the
worst thing that Rozin would have to do would be to pay the taxes owed plus interest.
Noting the possibility that the IRS could challenge the deduction should have raised a
red flag for Rozin, giving him reason to suspect that the information Cohen provided him
was incorrect. In addition, as with Liss, Cohen’s motivations were at least suspect
because he received commissions from the sale of the LOI policies.
Though the district court admitted that Rozin’s relationship with Koehler, his inhouse counsel, was a closer call, the evidence supports a finding by a rational trier of fact
that Rozin did not rely on Koehler in good faith. Like the others, Koehler received a
commission from the sale of the LOI policies. There is also evidence that Koehler and
Rozin were part of a scheme to sell illegal tax products, similar to the LOI policies.
Finally, the district court noted that Koehler, as Rozin’s employee, was “dependent” on
Rozin. Accordingly, the district court correctly found that there was enough evidence
for a rational juror to determine that Rozin did not rely on Koehler in good faith.
There is also no merit to Rozin’s argument that the Government “conce[ded]”
that “purchasing and deducting the LOI policies on the advice of qualified professionals
does not constitute willful tax evasion or the willful filing of a false tax return” because
others who purchased the policies were not prosecuted. First, it is not possible to tell
United States v. Rozin
from the record whether the individuals mentioned by Rozin—Lawley, Sparnell, and
Cohen’s daughter—could have legitimately claimed good faith reliance. Just because
Rozin was not able to meet the standard for a good faith defense does not mean that
others might not meet it. Second, the facts undermine Rozin’s allegations. For instance,
Rozin claims that Lawley, an individual to whom Rozin marketed the LOI policies,
bought the policies but was never prosecuted. However, Lawley never claimed a
deduction on his 1999 tax return, and thus did not partake in an illegal activity. Though
Rozin tries to argue that he also did not claim a tax deduction on his 1999 tax return,
Count Two and Count Six of the Indictment were for the deductions taken during the
1998 calendar year. Rozin’s situation was not analogous to Lawley’s.
Beyond his good faith reliance defense, Rozin provides virtually no other
evidence that he was operating under a misunderstanding of the law or that he made a
mistake. Rozin points to two comments made by the district court during sentencing,
but neither provides much support for his argument that the district court believed that
Rozin made a “mistake” that would negate willfulness. While the district court did state
that Rozin was “a good pe[rson] who just made very, very bad mistakes,” this comment
was likely in reference to Rozin’s alleged decision to partake in an illegal activity.
Similarly, the statement that Rozin is “a good person who just made a very bad
decision,” cannot be read as a dispositive finding that Rozin made a mistake; rather, the
use of the word “decision” indicates a level of knowledge and willingness on the part of
Rozin. These comments do not constitute a finding of lack of willfulness under 26
U.S.C. §§ 7206(1) and 7201.
The Government accordingly provided sufficient evidence that Rozin willfully
subscribed to a false tax return and willfully attempted to evade taxes, and Rozin is
unable to mount a credible good faith reliance defense.
United States v. Rozin
B. Conspiracy to defraud the Government
When viewed in the light most favorable to the Government, a rational trier of
fact could also have found that Rozin willfully participated in a conspiracy to defraud
the Government under 18 U.S.C. § 371. Rozin’s argument that he was a victim rather
than a member of Cohen and Liss’s conspiracy is not supported by the record. Rozin
and Kallick received the greatest benefit from the purchase of the LOI policies and ROP
riders, and Rozin admits that the activity that he participated in was an illegal conspiracy
and “[i]n retrospect, [he] should not have purchased the policies nor signed and filed the
tax returns as they were presented to him.” Once the Government establishes that there
is a conspiracy, “only slight evidence is necessary to connect a defendant with the
conspiracy.” United States v. Hitow, 889 F.2d 1573, 1577 (6th Cir. 1989); United States
v. Betancourt, 838 F.2d 168, 174 (6th Cir. 1988). The Government is only required to
prove that the defendant “knew the object of the conspiracy and voluntarily associated
himself with it to further its objectives.” United States v. Crossley, 224 F.3d 847, 856
(6th Cir. 2000) (internal quotation marks omitted). In this instance, Rozin admitted that
there was a conspiracy, that he should not have participated in it, and that he voluntarily
signed and filed illegal tax returns.
The Government provided enough evidence for a rational trier of fact to find that
Rozin knew of and willingly participated in the conspiracy to defraud the Government.
On this matter, both Rozin and the Government rely heavily on the arguments that they
made under the previous willfulness analysis. Rozin again argues that he thought he was
buying a “super IRA,” which would have been lost if he had died within ten years, and
thus he did not knowingly participate in the conspiracy to defraud the Government.
However, as discussed under II.A, the Government provided sufficient evidence that
Rozin knew that he could exercise control over the funds, and he marketed the LOI
policies on this basis. Similarly, Rozin reprises his good faith reliance defense to
maintain that he could not be a participant in the conspiracy; however, the evidence
shows that Rozin chose to participate in the purchase and backdating of the LOI policies
United States v. Rozin
of his own accord. As Liss testified, “Nobody ever pushed [Rozin] to do anything. . . .
He made his own decisions.”
Rozin’s argument that he did not recognize the criminality of his activities, and
thus could not have willfully engaged in the conspiracy, is similarly unconvincing.
Based on Rozin’s actions discussed under II.A, including the purchase of LOI policies
that had no legitimate insurance purpose, backdating those policies, and setting up a
reinsurance scheme to access his funds more easily, a rational juror could have found
that Rozin both knew of and willingly participated in the conspiracy.
Rozin also asserts that he was not a conspirator because on his tax returns he
listed all expenses related to the LOI policies as well as commissions from the sales.
However, this argument does not help Rozin because whether or not Rozin listed some
smaller expenses on his tax returns is unrelated to whether or not he improperly claimed
the larger tax deductions.
Because a rational juror could have found that Rozin willfully participated in the
conspiracy to defraud the IRS, on the basis of many of the same facts discussed under
II.A, the district court correctly found that the Government provided sufficient evidence
to uphold the jury’s guilty verdict on the conspiracy count.
C. Evidence issues
Though Rozin objects to the trial court’s admission of a wide range of
evidence—including events related to the Basis Boost purchases, “nearly everything
about Rozin’s 1999 taxes,” the commissions received by Rozin, the testimonies of
Sparnell and Lawley, the return of the settlement money from Caduceus, and “essentially
all activities that occurred after the filing of the 1998 tax return,”—the trial court
properly admitted all of these facts as evidence of the crimes charged. Because Rozin
did not object at trial, we review the majority of these claims only for plain error. United
States v. Treadway, 328 F.3d 878, 883 (6th Cir. 2003) (stating standard). However, to
the extent that the disputed evidence was raised by Rozin in a motion in limine, and the
motion was explicitly decided by the district court, Rozin preserved his appeal. United
United States v. Rozin
States v. Brawner, 173 F.3d 966, 970 (6th Cir. 1999). Where Rozin preserved his
appeal, we review the district court’s decision for abuse of discretion. United States v.
Finnell, No. 07-5258, 2008 WL 1976609, at *4 (6th Cir. May 5, 2008). Because the
district court only explicitly ruled on one relevant motion in limine, application of the
abuse of discretion standard is limited to the testimony presented by co-defendant
Koehler. However, it is unnecessary to parse the disputed evidence, as all of Rozin’s
claims fail under both the plain error and the abuse of discretion standards of review.
Though Rozin claims that the district court erred by admitting “prior bad acts,”
this argument fails because the contested evidence was not within the scope of Fed. R.
Evid. 404(b). Rule 404(b) does not apply when “the challenged evidence is ‘inextricably
intertwined’ with evidence of the crime charged,” United States v. Everett, 270 F.3d 986,
992 (6th Cir. 2001), or when the acts are “intrinsic,” or “part of a continuing pattern of
illegal activity.” United States v. Barnes, 49 F.3d 1144, 1149 (6th Cir. 1995). Because
the disputed evidence directly addressed charges in the indictment and elements of the
crimes with which Rozin was found guilty, Rule 404(b) does not apply and thus the
district court correctly found that the evidence was admissible.
Rozin mischaracterizes this case as a “one-year, one-item case,” and then argues
that all of the evidence regarding activities that occurred after the filing of the 1998 tax
return should have been excluded. However, because the indictment alleged an
extensive conspiracy, including events that occurred in 1999 and 2000, this evidence was
central to proving Rozin’s role and thus was properly admitted. Activities after the filing
of the 1998 tax return that were pertinent to proving the conspiracy included, among
other things, purchasing LOI policies in December 1999 and then backdating them to
1998, establishing the reinsurance schemes in 1999 and 2000, and preparing and signing
tax return forms for 1999 that reported $1.7 million spent on fraudulent LOI policies.
Rozin also claims that the 1999 tax return was never filed with the IRS, and
therefore should not be admitted. This argument is unpersuasive. As the Government
points out, Rozin, Inc. was visited by IRS criminal investigators in August 2000, prior
to the filing of the 1999 return. Therefore, the decision not to file a 1999 tax return
United States v. Rozin
claiming the LOI deductions, though one such form had already been prepared, was
likely the result of the IRS investigation and is probative of the ongoing conspiracy.
Rozin also mischaracterizes the district court’s decision to exclude testimony discussing
how much Rozin would have saved if the 1999 tax return had been filed. Rozin alleges
that this proves that “all evidence regarding [the 1999] tax return was irrelevant and
speculative.” However, the district court admitted other information surrounding the
preparation and signing of the 1999 tax return as evidence of the continuing conspiracy,
and the “speculative” nature was limited to the testimony of one witness on this narrow
The decision to admit evidence of the Basis Boost product was also not plain
error or an abuse of discretion. Rozin argues that because he reported all commissions
from the sale of Basis Boost on his tax returns, evidence related to these sales was not
part of the conspiracy charge. However, the indictment describes the sale of these
products as a scheme to “make it appear that the LOI policies . . . were legitimate
insurance policies.” Because these sales were part of the continuing pattern of illegal
activity alleged by the Government, evidence regarding these transactions was
admissible as not within the scope of Rule 404(b). In addition, the Government had the
right to argue that Rozin intended to purchase Basis Boost but then bought four LOI
policies instead, as evidence of backdating. Because the backdating supported a finding
of Rozin’s willfulness, as discussed in II.A, it was not an error for the district court to
admit this evidence.
Finally, as discussed under II.A, the testimony of Lawley and Sparnell was also
properly admitted as evidence of Rozin’s intent to subscribe false tax returns and evade
paying taxes. Rozin’s conversations with both witnesses indicated that he marketed the
LOI policies as a tax-saving device and knew that the policies allowed the holder to
retain access to their funds. As this evidence goes directly to Rozin’s understanding of
the fraudulent nature of the products, and thus the “willful” element of both 26 U.S.C.
§§ 7206(1) and 7201, this evidence was admissible.
United States v. Rozin
However, even if Rule 404(b) should have been applied as Rozin contests, the
evidence of “other bad acts” would still have been admissible because this evidence was
relevant, used for a proper purpose, and not “substantially more unfairly prejudicial than
probative,” under Fed. R. Evid. 403. United States v. Stout, 509 F.3d 796, 799 (6th Cir.
2007). For the reasons discussed above, the evidence Rozin disputes was highly relevant
to this case and probative of Rozin’s intent. Rozin also makes no substantive argument
that he was unfairly prejudiced as a result of its admission. Though indicative of the
ongoing conspiracy, much of the disputed evidence was also incidental to the improper
filing of the 1998 tax return. Thus it is unlikely that the jury was unfairly swayed or that
it convicted Rozin on the basis of the contested evidence alone, as he claims. See United
States v. Henderson, 626 F.2d 326, 339 (6th Cir. 2010).
D. General charge of “conspiracy to defraud the United States”
The Government could properly charge Rozin with “conspiracy to defraud the
United States,” under 18 U.S.C. § 371 despite Rozin’s argument that such a charge could
not be made if conspiracy to commit a more specific crime was available to the
Government. Section 371 criminalizes two categories of conduct: (1) conspiracies to
commit offenses specifically defined elsewhere in the federal criminal code, and
(2) conspiracies to defraud the United States. Rozin argues that because a single
underlying offense, 26 U.S.C. § 7206(2), existed, he should have been charged under
conspiracy to commit this offense instead of the more general “conspiracy to defraud”
prong. The argument relies entirely on our holding in United States v. Minarik, 875 F.2d
1186 (6th Cir. 1989). The holding of Minarik, however, was quite limited:
where the duties of a citizen are as technical and difficult to discern as
they are when a taxpayer, before levy, engages in otherwise legitimate
activities that may make ultimate collection more difficult, we hold that
a Congressional statute closely defining those duties takes a conspiracy
to avoid them out of the defraud clause and places it in the offense
Id. at 1196. Minarik involved the defendant’s structuring of home sale receipts in
amounts less than $10,000 so as to avoid bank reports of cash transactions and thereby
United States v. Rozin
make it harder for the IRS to find and levy upon funds already owed to the Government.
The fraud alleged in this case, in contrast, involves efforts to reduce taxes reported and
paid to the Government.
In upholding the continued viability of the crime of conspiracy to defraud the
United States, we have repeatedly recognized that our court in Minarik “inten[ded] to
limit its holding to the particular facts of that case.” United States v. Mohney, 949 F.2d
899, 902 (6th Cir. 1991). Unless narrowly limited, Minarik would have amounted to a
sharp change in the law theretofore allowing prosecution under the defraud clause
despite the availability of a separate applicable substantive offense. Id. at 902-03. As
we have subsequently explained, Minarik only applies “when the defendant receives no
specific notice of the crimes charged, the violation was too isolated to comprise a
conspiracy to defraud, and the taxpayer’s duties are technical[.]” Damra, 621 F.3d at
First, unlike in Minarik, Rozin was adequately informed of the charges against
him. In Minarik, “there was a great deal of confusion” due to “the Government’s
shifting theories” and “failure to clearly define the intent element in the indictment.”
United States v. Khalife, 106 F.3d 1300, 1304 (6th Cir. 1997). That was not the case
here. In this case, the indictment painstakingly detailed the conspiracy charge against
Rozin, and like in Mohney, 949 F.2d at 904, outlined the conspiracy’s objective, manner
and means, and the overt actions taken by the conspirators. The Government has also
consistently maintained its theory of the case that Rozin was involved in a widespread
and ongoing conspiracy to evade taxes and defraud the Government.
Second, the broad nature of the conspiracy with which Rozin was charged
distinguishes this case from Minarik. United States v. Kraig, 99 F.3d 1361, 1367 (6th
Cir. 1996). In Minarik, the conspiracy was limited to a single event—the sale of a
house—and focused on the “concealment of assets upon which the IRS was empowered
to levy.” Id. Here, as in Kraig, in which we upheld a conviction under the “defraud”
prong of § 371, the conspiracy involved the defendant’s “ongoing involvement in sham
transactions over a number of years.” Id. at 1368.
United States v. Rozin
Third, Rozin’s duties were not as “technical and difficult to discern” as in
Minarik, and thus does not warrant the specific notice provided by a singular offense
charge. See Khalife, 106 F.3d at 1304. Unlike the defendant’s duties in Minarik, which
included “disclosure requirements pre- and post-levy,” Mohney, 949 F.2d at 905, this
court has held that the duty “to file tax returns and not file false returns [is] not ‘technical
and difficult to discern.’” Khalife, 106 F.3d at 1305.
Our limited holding in Minarik does not require the reversal of the conspiracy
count in this case.
E. The restitution award determined by the district court was proper
Finally, Rozin argues that he should not be ordered to pay restitution for codefendant Kallick’s personal income taxes of $384,647 because: (1) there was
insufficient evidence that Rozin conspired with Kallick to defraud the Government,
(2) there was insufficient evidence that Kallick’s tax returns were not proper or not paid,
and (3) it violates Rozin’s due process rights to pay another’s taxes when that money
could be taken from the person’s estate. Because Rozin did not object to the restitution
order at sentencing, we review these claims only for plain error. United States v.
Sosebee, 419 F.3d 451, 457 (6th Cir. 2005) (quoting United States v. Hall, 71 F.3d 569,
573 (6th Cir. 1995)).
Rozin argues that because Kallick passed away prior to the start of trial, there
was insufficient evidence that Rozin participated in a conspiracy with Kallick under
18 U.S.C. § 371. However, this argument fails because under federal conspiracy law,
“even . . . ‘if charges are dismissed against all other coconspirators,’” the remaining
coconspirator can still be convicted. United States v. Kennedy, No. 06-3029, 2007 WL
869259, at *2 (6th Cir. March 21, 2007) (quoting United States v. Sachs, 801 F.2d 839,
845 (6th Cir. 1986)). This is because a dismissal is not the same as an acquittal. United
States v. Suggs, No. 93-5357, 1994 WL 6811, at *6 (6th Cir. Jan. 10, 1994). Thus, even
though the charges were dismissed against Kallick prior to trial, this does not mean that
Rozin could not be found guilty of conspiracy. As discussed above in II.B, there was
sufficient evidence for a rational trier of fact to find that Rozin willingly participated in
United States v. Rozin
a conspiracy to defraud the Government. Once Rozin was found guilty of conspiracy,
under 18 U.S.C. § 3664(h), the district court may make each defendant liable for
payment of the full amount of restitution when multiple defendants contributed to a
victim’s loss. United States v. Williams, 612 F.3d 500, 510 (6th Cir. 2010). Therefore,
upon finding Rozin guilty of conspiracy under Count One, the district court could hold
Rozin jointly and severally liable for the entire restitution amount, including Kallick’s
In addition, the Government provided ample evidence to prove that Rozin could
reasonably foresee that Kallick, Rozin’s partner and co-owner of Rozin, Inc., would
claim his share of the fraudulent LOI policy premium deductions on his tax returns.
Once a defendant has been convicted of conspiracy, that individual is liable not only for
his own acts, but also for “the reasonably foreseeable acts of his co-conspirators.” United
States v. Bogart, 576 F.3d 565, 576 (6th Cir. 2009) (quoting United States v. Collins, 209
F.3d 1, 4 (1st Cir. 1999)). Because Rozin and Kallick jointly decided to purchase the
LOI policies, established trusts in their names, and agreed to the offshore reinsurance
scheme, we cannot gainsay under plain error review that Rozin should have known that
Kallick would also benefit from the conspiracy.
Lastly, Rozin’s argument that there is insufficient evidence that Kallick’s taxes
have not been paid does not affect his substantial rights under plain error review.
Restitution statutes “do not permit victims to obtain multiple recoveries for the same
loss.” United States v. McDaniel, 398 F.3d 540, 555 (6th Cir. 2005). Therefore, to the
extent that any of Kallick’s taxes have already been paid, the IRS will not be able to
collect and Rozin will not be held liable for them.
The judgment of the district court is affirmed.
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