Pisello Found Guilty on Two Counts of Income Tax Evasion

Reputed organized crime figure Salvatore Pisello was found guilty on two counts of income tax evasion Friday in U.S. District Court in Los Angeles. The verdict was handed down by U.S. District Judge William J. Rea, who presided over the non-jury trial.

Pisello faces a maximum of a $100,000 fine and five years in prison on each of the counts, which cover income for 1984 and 1985. Earlier Friday, Judge Rea dismissed a third count of tax evasion for the year 1983. “We’re pleased with the verdict, and that’s all I have to say,” said prosecutor Marvin L. Rudnick, a special attorney in the Los Angeles office of the Justice Department’s Organized Crime Strike Force. Pisello would not comment following the judge’s decision.

Pisello’s attorney, David Hinden, had argued throughout the trial that most of the unreported income was in the form of loans and was therefore not taxable as income. Judge Rea strongly disagreed, saying he found no evidence of any written loan or interest payment agreements and “no intent” on the part of Pisello to ever repay the money he obtained. “The evidence is that he never paid one dollar back to any of these people.”

Friday’s conviction is Pisello’s second for tax evasion in recent years. Identified by authorities as a member of New York’s Gambino crime family, he was convicted on similar charges the same court in 1984 and was sentenced to two years in prison. The prosecutor in the previous case was also Rudnick, whose investigation into Pisello’s business dealings in the record industry sparked a two-year federal grand jury investigation into suspected payola practices and organized crime infiltration of that industry.

Although the two-week trial was repeatedly described by both the prosecution and defense as a “simple tax-evasion case,” much of testimony had to do with the sometimes-byzantine world of record-industry business practices.

Payments at Both Ends

Between 1983 and 1985, Pisello functioned as a middleman between MCA Records and a number of smaller companies in a series of deals that earned him nearly $600,000. According to the government, Pisello failed to report about $450,000 of those earnings on his income tax returns. Instead, he sought to conceal the money by converting it into cash and cashier’s checks and then passing it through sham companies that he set up in Los Angeles, Las Vegas and New York.

In some instances, Pisello collected a payment at both ends of a deal. For his help in negotiating a distribution agreement between MCA and tiny New Jersey-based Sugar Hill Records, and the subsequent sale of Sugar Hill’s catalogue of master recordings to MCA, Pisello was paid $126,000 by MCA and more than $214,000 by Sugar Hill.

According to trial testimony, Pisello flew to the East Coast every month to hand-deliver MCA’s distribution check to Sugar Hill--totaling more than $2 million in 1984. With each delivery, he extracted a cash payment from Sugar Hill’s owners, according to testimony. In some of the most provocative testimony during the trial, the chief financial officer of MCA Records testified that, in early 1985, he accepted three undated $60,000 checks from Pisello as a guarantee against $180,000 that the company had advanced to Pisello on a number of business deals in 1984.

Testifying under a grant of immunity, MCA Senior Vice President of Finance Dan McGill said he put the checks in his drawer and never attempted to cash them because Pisello had told him at the outset that they were worthless.

Judge Rea pointedly mentioned the undated checks in announcing his verdict, saying he found it “interesting” that Pisello had given the checks to McGill after the executive told Pisello that the record company “was being audited by Price Waterhouse and they needed something to reflect that they were making some effort to collect” the advances. He noted that the company apparently “made no effort to institute legal proceedings against (Pisello) to recover on these transactions.”

In his closing arguments Friday, prosecutor Rudnick seemed to be pointing a finger at the record industry when he said: “The lesson learned from this trial is that when you have business deals made in a corrupt atmosphere, it breeds unreported income and tax evasion.”

He said Pisello’s ability to negotiate the deals was “not because of his background in the record business but for some other unexplained series of events that cast a cloud over the testimony at this trial. Why is this man getting all this money? Where did all these people get the idea that this was the man to pay for these deals?”