United States v. William E. McLaughlin

William McLaughlin appeals his conviction, after trial by jury, of eight counts of making and subscribing a false federal tax return in violation of 26 U.SiC. § 7206(1). McLaughlin was sentenced to one year’s imprisonment and a $5,000 fine on each count. The custodial sentences were to run concurrently. We reverse.

I.

In 1971, McLaughlin, a licensed residential framing contractor in California since 1959, set up a new residential framing company in Orange County, California. He became a signatory to a collective bargaining agreement between the Carpenter’s Union and the area framing contractors. The contract established a payment scale which placed a ceiling on the. hourly compensation paid to carpenters. The Union wanted the ceiling as a means of preventing piecework by more highly skilled carpenters. In a booming housing market, however, a shortage of available carpenters developed, and skilled carpenters could command pay at higher than scale. Some area contractors initiated a system by which an additional amount above scale, agreed upon by the parties, was paid to carpenters through a second check. The second check system served to disguise the piecework arrange ment between…