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State v. Kendall

Supreme Court of Maine

October 4, 2016

STATE OF MAINE
v.
JOHN KENDALL

          Argued: June 8, 2016

         On the briefs:

          Thomas F. Hallett, Esq., Hallett, Zerillo & Whipple P.A., Portland, for appellant John Kendall

          Janet T. Mills, Attorney General, Gregg D. Bernstein, Asst. Atty. Gen., and Elizabeth Weyl, Stud. Atty., Office of the Attorney General, Augusta, for appellee State of Maine

         At oral argument:

          Thomas F. Hallett, Esq., for appellant John Kendall

          Gregg D. Bernstein, Asst. Atty. Gen., for appellee State of Maine

          Panel: SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and HUMPHREY, JJ.

          HJELM, J.

         [¶1] John Kendall appeals from a judgment of conviction for three counts of theft by misapplication of property (Class B), 17-A M.R.S. § 358(B)(4) (2015); one count of conspiracy to commit intentional evasion of tax (Class D), 17-A M.R.S. § 151(1)(D) (2015) and 36 M.R.S. § 184-A(2) (2015); and three counts of failure to collect, account for, or pay over withholding tax (Class D), 36 M.R.S. § 184 (2015), entered in the Unified Criminal Docket (Cumberland County, Warren, J.) after a jury trial. Kendall contends that on the charges of theft by misapplication and failing to collect, account for, or pay over withholding taxes, the evidence is insufficient to support the convictions and the court instructed the jury incorrectly; and that the court abused its discretion by admitting evidence of country club memberships purchased by a company he owned and used exclusively by his wife and him.[1] We affirm the judgment.

         I. BACKGROUND

         [¶2] When the evidence is viewed in the light most favorable to the State, the jury was entitled to find the following facts beyond a reasonable doubt. See State v. Dorweiler, 2016 ME 73, ¶ 2, ___ A.3d ___.

         [¶3] Kendall was the president and owner of Chipco International, Inc., a poker chip manufacturing business, from 1987 to 2013. In those capacities, Kendall oversaw and was integrally involved in Chipcos business operations, including payroll; controlling and managing Chipcos finances, including the businesss taxes; and communicating and negotiating with the Maine Revenue Services (MRS). Under Maine law, Chipco was required to withhold income tax from employee wages and, on a quarterly basis, pay over those withholdings to the State Tax Assessor. Kendall signed Chipcos employee withholding tax returns when they were filed with the State, and he directed another member of Chipcos management team to file the returns without submitting the required payment. On multiple occasions from 2007 to 2012, Chipco failed to pay the Assessor required withholding taxes totaling more than $150, 000 as those payments became due.[2]

         [¶4] During that period, Kendall directed Chipco employees to pay some of Chipcos business expenses with the employee tax withholdings. He also directed that Chipco money be used to pay for some of his personal expenses such as mortgage payments and legal fees arising from a personal bankruptcy proceeding. Further, at Kendalls direction, Chipco purchased corporate country club memberships used only by Kendall and his wife.

         [¶5] In 2009, Kendall instructed members of Chipcos management team to apply for unemployment compensation benefits. Four of those employees-all of whom later pleaded guilty to charges of theft by deception and tax evasion-received unemployment benefits while continuing to work for Chipco. Kendall directed Chipcos finance manager to pay those employees "off the books, " meaning that Chipco did not identify them as employees and did not turn over withholding taxes for them to the State Tax Assessor, even though they continued to work for Chipco, which paid them the same net amount they earned previously. Kendall also attempted to evade the MRSs collection efforts by withdrawing funds immediately after they were deposited into Chipcos accounts, and by transferring Chipco funds into bank accounts owned by another Chipco employee, by his wife, and by other corporations.

         [¶6] Because of Chipcos failure to pay over its employee withholding taxes, Kendall received many communications from the MRS. On behalf of Chipco, he was in regular contact with the MRS for roughly five years, never challenged the MRSs tax assessments, and entered into payment plans, which Chipco did not fulfill. As he directed the use of withholding funds for other business obligations and the use of corporate money for his own expenses, he advised the MRS that Chipco did not have enough money to pay the overdue withholding amounts but promised to satisfy the debt as soon as possible.

         [¶7] In August 2013, Kendall was indicted for three counts of theft by misapplication of property (Class B), 17-A M.R.S. § 358(B)(4) (Counts 1-3); one count of conspiracy to commit intentional evasion of tax (Class D), 17-AM.R.S. § 151(1)(D) and 36 M.R.S. § 184-A(2) (Count 4); three counts of failure to collect, account for, or pay over withholding tax (Class D), 36 M.R.S. § 184 (Counts 5-7); and one count of making and subscribing a false statement in a Maine income tax return (Class D), 36 M.R.S. § 5333 (2015) (Count 8). He entered pleas of not guilty.

         [¶8] The court held a seven-day jury trial in March 2015. In a motion in limine, Kendall requested that the court exclude evidence about the country club memberships that Chipco paid for and that he and his wife used exclusively, arguing that evidence of affluence was unfairly prejudicial. SeeM.R. Evid. 403. The court denied the motion and ruled that, subject to limitations, the State could present such evidence.

         [¶9] The jury returned guilty verdicts on all counts. Having moved unsuccessfully at trial for a judgment of acquittal, Kendall filed a renewed, post-trial motion for a judgment of acquittal. The court denied the motion as to Counts 1-7, but granted it as to Count 8. The court then imposed the following concurrent sentences: on the three charges of theft by misapplication, forty-two months to the Department of Corrections, all but ten months suspended, three years of probation, and restitution of $51, 663 payable to the MRS;[3] on the charge of conspiracy to commit tax evasion, six months ...


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