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State v. Sweet Distributing

Court of Appeals of Ohio, Eighth District

September 5, 2013


Criminal Appeal from the Cuyahoga County Court of Common Pleas Case No. CR-567353

ATTORNEYS FOR APPELLANTS: Mark Marein Steven L. Bradley Marein & Bradley.

ATTORNEYS FOR APPELLEE: Timothy J. McGinty Cuyahoga County Prosecutor, James D. May Assistant Prosecuting Attorney The Justice Center.

BEFORE: E.T. Gallagher, J., Keough, P.J., and Blackmon, J.



(¶1} In this consolidated appeal, defendants-appellants, Samir Elaloul ("Elaloul") and Sweet Distributing, Inc. ("Sweet Distributing") (collectively referred to as "appellants"), appeal their tampering with records convictions. We find merit to the appeal and reverse the convictions.

(¶2} Appellants were charged in a 90-count indictment with engaging in corrupt activity, aggravated theft, possession of criminal tools, and conspiracy. The indictment also charged appellants with numerous counts of tampering with records, money laundering, intent to avoid payment of tax, and unlawful transportation of tobacco products. The state alleged that appellants defrauded the state of Ohio of excise tax revenue by creating fraudulent tax returns.

(¶3} Under Ohio law, tobacco wholesalers are required to file monthly tax returns and pay a 17 percent inventory tax on other tobacco products ("OTP") acquired during the month. Wholesalers may claim a full tax credit against the 17 percent tax for all sales that the wholesaler made to out-of-state customers during the month. The monthly tax returns include a schedule A, which lists inventory acquired during the month, and a schedule B, which lists all sales made to out-of-state customers during the month. The returns are due to be filed one month after the month being reported.

(¶4} Beginning in April 2009, Sweet Distributing began selling OTP to Royal Wholesale Distributing ("Royal Wholesale"), which was incorporated and had its principal place of business in Pennsylvania. From April 2009 through December 2009, Sweet Distributing claimed tax credits for its sales to Royal Wholesale as an out-of-state customer. Elaloul discovered that Royal Wholesale was not a legitimate Pennsylvania company when its principal, Hashem Al-Hamid ("Al-Hamid"), was arrested for tax-fraud in February 2010.

(¶ 5} It is undisputed that appellants filed state tax returns for every month from April 2009 through January 2010. Appellants were convicted of tampering with records for allegedly falsifying information on their January 2010 tax return. Elaloul testified at trial that he did not claim credits for sales made to Royal Wholesale in January 2010 because he had learned that Royal Wholesale was involved in a tax-fraud scheme. Appellants argued they did not claim credits because they did not want to knowingly claim credits for out-of-state sales that they learned were being distributed in Ohio.

(¶6} A jury acquitted appellants of all counts except Counts 12 and 21, which alleged that appellants prepared and uttered a false record in violation of R.C. 2913.42. These two counts specifically identified the record in question as the January 2010 "State of Ohio excise tax reporting forms." Although these charges were identified as third-degree felonies in the indictment, the court granted appellants' motion to reduce them to first-degree misdemeanors pursuant to State v. Pelfrey, 112 Ohio St.3d 422, 2007-Ohio-256, 860 N.E.2d 735.

(¶7} Appellants filed post-verdict motions for acquittal and for a new trial, arguing that the verdicts were against the manifest weight of the evidence. Appellants also moved to dismiss Counts 12 and 21 because they failed to state an offense under R.C. 2913.42. The court denied these motions and sentenced appellants to fines of $1, 000 each and sentenced Elaloul to community control sanctions. Appellants now appeal and raise three assignments of error.

(¶8} We find the first and third assignments of error dispositive of this appeal. In the first assignment of error, appellants argue the evidence is insufficient to sustain a conviction under R.C. 2913.42 for the crimes alleged in Counts 12 and 21. Count 12 alleges that appellants prepared a false 2010 tax return. Count 21 alleges that appellants uttered the false 2010 tax return. In the third assignment of error, appellants argue that R.C. 5703.26, which governs the falsification of tax records, precludes the state from prosecuting them for tax-fraud under R.C. 2913.42.[1] We agree.

(¶9} R.C. 2913.42(A) prohibits anyone from knowingly falsifying and uttering false records "with purpose to defraud." Similarly, R.C. 5703.26 prohibits anyone from knowingly making, presenting, or filing a fraudulent tax return with the Ohio department of taxation with intent to defraud the state. R.C. 5703.26 further states that "[w]ith respect to such acts or conduct, no conviction shall be had under any other section of the Revised Code." Appellants assert that based on this language, R.C. 5703.26 is the exclusive provision in the Ohio Revised Code under which the filing of false tax returns may be prosecuted. Therefore, they ...

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