Enhanced Sentence Page2

---

[ Back ] [ Next ]

   

 [2000-1 USTC ¶50,256] United States of America , Plaintiff-Appellee v. William L. Mounkes and Correen Kay Mounkes, Defendants-Appellants

(CA-10), U.S. Court of Appeals, 10th Circuit, 99-3096, 99-3098, 2/22/2000 , 204 F3d 1024. Affirming an unreported District Court decision

[Code Sec. 7203 ]

Crimes: Tax evasion: Failure to report income: Reconstruction of income: Bank deposits and expenditures method: Pre-reconstruction income cash-on-hand.--Married owners of an educational materials corporation were properly convicted of willfully attempting to evade personal and corporate income taxes after the IRS used the bank deposits and cash expenditures to reconstruct their unreported income. Evidence establishing the amount of their pre-reconstruction cash on hand was sufficient to support the verdict; the figures were provided in a written statement by the taxpayers and corroborated by corporate balance sheets and tax returns.

[Code Sec. 7203 ]

Crimes: Tax evasion: U.S. Sentencing Commission Guidelines: Enhanced sentence: Obstruction of justice: Perjury: Testimony: Materiality: Willfulness: Constitutional safeguards: Right to testify.--A corporate owner convicted of tax evasion properly received an enhanced sentence under the 1992 U.S. Sentencing Commission Guidelines for obstruction of justice predicated on his perjury at trial. The trial court expressly concluded that his testimony was false, material, and intended to affect the outcome of the trial. His contention that the trial court failed to evaluate his testimony in a light most favorable to him was meritless. Moreover, his constitutional right to testify on his own behalf did not include the right to commit perjury; thus, enhancement of his sentence for perjury did not impinge on constitutional safeguards.

[Code Sec. 7203 ]

Crimes: Tax evasion: U.S. Sentencing Commission Guidelines: Enhanced sentence: Downward departure: Jurisdiction, lacking: Court of Appeals.--Jurisdiction was lacking over the trial court's decision not to grant a downward departure of a corporate owner's sentence for tax evasion on the basis of circumstances not contemplated by the 1992 U.S. Sentencing Commission Guidelines. While the trial court took the taxpayer's circumstances into consideration for sentencing purposes, it did not indicate that it lacked authority to depart from the sentencing guideline range.

Thomas D. Haney, Fairchild, Haney & Buck, P.A., Topeka , Kansas , for Defendants-Appellants. Meghan S. Skelton (Alan Hechtkopf, with her on the brief), Department of Justice, Washington , D.C. 20530 , for Plaintiff-Appellee.

Before: TACHA, MCWILLIAMS and KELLY, Circuit Judges.

TACHA, Circuit Judge:

Defendants William L. and Correen Kay Mounkes appeal from the district court's order denying their motions for judgment of acquittal and for a new trial. Defendants also appeal the district court's two point enhancement of Mr. Mounkes's sentence and the district court's failure to rule upon their motion for a one point reduction of Mrs. Mounkes's sentence. We exercise jurisdiction pursuant to 28 U.S.C. §1291 and 18 U.S.C. §3742, and affirm.

I.

Mr. and Mrs. Mounkes owned and operated Bill Mounkes, Inc. (BMI). BMI purchased used educational materials from professors and colleges and at government auctions, then sold the materials to distributors. One distributor, Amtext, sometimes sent defendants multiple checks to pay for a single shipment. Mr. Mounkes testified that somebody at Amtext advised him to request payment by multiple checks for sums over $10,000 in order to avoid IRS paperwork. Amtext's financial officer, Paula Blanche, testified that Amtext would break up payments only upon a payee's request. Ms. Blanche did not recall having spoken personally to Mr. Mounkes about multiple check payments.

On at least one occasion, Mr. Mounkes cashed multiple payment checks for a single shipment of BMI materials at different bank branches on the same day. On at least one other occasion, Mr. Mounkes cashed multiple checks at the same bank branch on different days. Mr. Mounkes testified that he knew about the IRS's $10,000 transaction reporting requirement but did not comply because he was concerned that filling out the reports would lengthen his already lengthy workdays.

Mr. and Mrs. Mounkes maintained both business and personal bank accounts. Stanley Buss, the Mounkeses' accountant, testified that he instructed the Mounkeses to keep their business and personal accounts separate. Mr. Mounkes testified that he did not recall being so advised.

The IRS audited the Mounkeses' personal income tax returns for 1989 and their personal and corporate income tax returns for 1991 and 1992. In the 1989 audit, IRS Agent Rob ert Tice found that the Mounkeses had deducted $10,000 in corporate expenses on their personal return. Tice testified that he explained to Mr. Mounkes that personal and corporate expenses must be kept separate and that the Mounkeses could properly receive payments from the corporation only in the form of wages or dividends. Mr. Mounkes testified that he had never heard of a dividend until trial.

In the 1991 and 1992 audits, IRS Agent Maria Espinoza employed the "bank deposits" method of determining unreported income. This method required that she compare the Mounkeses' bank deposits and nondeductible personal expenditures to the income reported on their tax returns for each audited year. Espinoza therefore had to establish a "cash on hand balance" for the beginning of each of those years. In BMI's 1991 corporate tax return, Mr. Mounkes reported that BMI's cash on hand was $1000 at the beginning and $296 at the end of the year. Mr. Mounkes also gave Espinoza a handwritten statement of personal cash on hand repeating what he had reported for BMI. He further testified that he did not keep any additional cash at home or in his desk.

Espinoza ultimately found that the Mounkeses' bank deposits and personal expenditures significantly exceeded the amount of income they reported on their personal returns for 1991 and 1992. She testified that Mr. Mounkes blamed the discrepancies on Buss. Mr. Mounkes testified that he had told Buss that certain land and jewelry he purchased were corporate assets. Evidence at trial indicated otherwise, and Buss testified that he believed the assets to be personal on the basis of information that Mr. Mounkes had provided him.

A grand jury indicted the Mounkeses on four counts of attempting to evade personal and corporate income taxes in violation of 26 U.S.C. §7201. A jury convicted both defendants on all four counts. The Mounkeses moved for a judgment of acquittal and a new trial, and the district court denied both motions. In sentencing the defendants, the trial court applied a two point enhancement to Mr. Mounkes's sentence for obstruction of justice pursuant to U.S. Sentencing Guidelines Manual §3C1.1 (1998). Under 18 U.S.C. §3553(b), the court did not rule upon the Mounkeses' motion for a one point reduction of Mrs. Mounkes's sentence on the basis of circumstances not contemplated by the sentencing guidelines.

II.

The Mounkeses challenge the denial of their motions for judgment of acquittal and for a new trial, arguing that the evidence of beginning on-hand cash balances was insufficient to support a guilty verdict. In determining the sufficiency of evidence, we review the record de novo. United States v. Urena, 27 F.3d. 1487, 1489 (10th Cir. 1994). We review the evidence to determine whether, if taken in the light most favorable to the prosecution, it is sufficient for a reasonable jury to find the defendants guilty beyond a reasonable doubt. United States v. Jenkins, 175 F.3d 1208, 1215 (10th Cir.), cert. denied, 120 S.Ct. 263 (1999). "The evidence supporting the conviction must be substantial and do more than raise a suspicion of guilt." United States v. Anderson, 189 F.3d 1201, 1205 (10th Cir. 1999) (internal quotation marks and citation omitted).

We review the district court's refusal to grant a new trial for abuse of discretion. United States v. Quintanilla, 193 F.3d 1139, 1146 (10th Cir. 1999). The trial court may grant a new trial if the interests of justice so require. Fed.R.Crim.P. 33. Motions for new trial are disfavored, however, and granted only with great caution. Quintanilla, 193 F.3d at 1146.

A jury convicted the Mounkeses of willfully attempting to evade personal and corporate income taxes in violation of 26 U.S.C. §7201. To establish that offense, the government must prove 1) the existence of a substantial tax liability, 2) willfulness, and 3) an affirmative act constituting evasion or attempted evasion. United States v. Meek [93-2 USTC ¶50,409], 998 F.2d 776, 779 (10th Cir. 1993) (citing Sansone v. United States [65-1 USTC ¶9307], 380 U.S. 343 (1965)). The Mounkeses argue that there was insufficient evidence to prove the first element.

To establish the first element, the government employed the bank deposit method of proof. The government's evidence showed that the Mounkeses' bank deposits and cash expenditures exceeded their reported income after adjustments for applicable exemptions and deductions. Such evidence supports an inference that defendants had unreported income. See United States v. Conaway [94-1 USTC ¶50,009], 11 F.3d 40, 43 (5th Cir. 1993); United States v. Ludwig [90-1 USTC ¶50,152], 897 F.2d 875, 878 (7th Cir. 1990); United States v. Abodeely [86-2 USTC ¶9713], 801 F.2d 1020, 1023 (8th Cir. 1986). This "indirect" method of proof is permitted because "direct methods of proof . . . depend on the taxpayer's voluntary retention of records," rendering "[p]roof of unreported taxable income by direct means . . . extremely difficult and often impossible." Abodeely [86-2 USTC ¶9713], 801 F.2d at 1023. However, to distinguish between unreported, taxable income and those deposits and expenditures not derived from taxable income, the government still must establish the defendants' pre-income "cash on hand" with reasonable certainty, while negating other sources of nontaxable income during the same period. Conaway [94-1 USTC ¶50,009], 11 F.3d at 44. On the other hand, the government need not establish the "cash on hand" figure with mathematical exactitude. Id. ; see also Ludwig, 897 F.2d at 880-81; United States v. Boulet [78-2 USTC ¶9628], 577 F.2d 1165, 1170 (5th Cir. 1978).

Agent Espinoza testified at trial that she defined "cash on hand" for Mr. Mounkes when she sought his beginning cash balances. The record indicates that Mr. Mounkes then gave Espinoza a written statement of his cash on hand, and that statement was admitted into evidence. Mr. Mounkes testified at trial that he did not keep unreported cash at home or in his desk. Finally, BMI's corporate balance sheets and tax returns, which were admitted into evidence, precisely corroborated the figures that Mr. Mounkes gave to Espinoza. Under these circumstances, the jury could quantify the Mounkeses' beginning cash on hand with reasonable certainty for 1991 and 1992. Thus the evidence, when taken in the light most favorable to the prosecution, was sufficient for a reasonable jury to find the Mounkeses guilty beyond a reasonable doubt. We therefore affirm the district court's denial of the Mounkes's motion for judgment of acquittal.

Because the Mounkeses based their motion for a new trial on the same claim as their motion for judgment of acquittal, we also conclude that the trial court did not abuse its discretion in denying their motion for a new trial. Nothing in the record indicates that the interests of justice required a new trial be granted.

III.

The Mounkeses also claim that the trial court erred in enhancing Mr. Mounkes's sentence by two points for obstruction of justice pursuant to U.S. Sentencing Guidelines Manual §3C1.1 (1998). The district court must enhance the defendant's base offense by two levels if it finds that

the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the admin istration of justice during the course of the investigation, prosecution, or sentencing of the instant offense.

Id. The obstruction of justice enhancement may be predicated upon a defendant's "committing, suborning, or attempting to suborn perjury." Id. cmt. 4(b). The court sentenced the Mounkeses under the 1992 version of the sentencing guidelines and thus was required to evaluate Mr. Mounkes's statements "in a light most favorable to the defendant" in making its perjury determination. U.S. Sentencing Guidelines Manual §3C1.1 cmt. 1 (1992), amended by U.S. Sentencing Guidelines Manual App. C. amend. 566 (1997).

Because the trial judge observed defendant's testimony, we give deference in reviewing the trial court's finding of perjury. United States v. Yost, 24 F.3d 99, 106 (10th Cir. 1995). However, "[w]hile we review the factual findings of the district court under the clearly erroneous standard, and while we give due deference to the district court's application of the guidelines to the facts, when that application involves contested issues of law, we review de novo." United States v. Medina-Estrada, 81 F.3d 981, 986 (10th Cir. 1996) (internal quotation marks and citation omitted).

A §3C1.1 enhancement predicated upon perjury is appropriate when the sentencing court finds that the defendant has given "[i] false testimony [ii] concerning a material matter [iii] with the willful intent to provide false testimony, rather than as a result of confusion, mistake, or faulty memory." United States v. Dunnigan, 507 U.S. 87, 94 (1993) (citing 18 U.S.C. §1621, the federal criminal perjury statute); accord Anderson , 189 F.3d at 1213. The sentencing court must "review the evidence and make independent findings necessary to establish [the elements of perjury]." Dunnigan, 507 U.S. at 95; see also Anderson , 189 F.3d at 1213 ("[I]n order to apply the §3C1.1 enhancement, it is well-settled that a sentencing court must make a specific finding--that is, one which is independent of the jury verdict--that the defendant perjured herself." (internal quotation marks and citation omitted)). The court need not recite the perjured testimony verbatim, however. Medina-Estrada, 81 F.3d at 987. Rather, "[t]he district court may generally identify the testimony at issue . . . so that when we review the transcript we can evaluate the Dunnigan findings of the elements of perjury . . . without having simply to speculate on what the district court might have believed was the perjurious testimony." United States v. Massey, 48 F.3d 1560, 1574 (10th Cir. 1995).

A.

The Mounkeses raise two objections to the district court's perjury enhancement. First, they contend that the district court did not follow the 1992 Sentencing Guidelines' requirement that testimony be evaluated in a light most favorable to the defendant. Rather, defendants imply that the district court followed the 1997 revision to this requirement, under which "the court should be cognizant that inaccurate testimony or statements sometimes may result from confusion, mistake, or faulty memory." See U.S. Sentencing Guidelines Manual App. C. amend. 566 (1997). We find no merit in this contention. The district court specifically noted that in enhancing Mr. Mounkes's sentence it had viewed his statements "in the most favorable light." (Appellants' Supp. App. Vol. 5 at 13.) Nothing in the record casts doubt upon this statement.

B.

The Mounkeses' second claim is that the sentencing court did not make independent Dunnigan findings. We disagree. Under Dunnigan, the sentencing court must find defendant's testimony false, material, and intended to affect the outcome of trial rather than a product of confusion, mistake or faulty memory. See Dunnigan, 507 U.S. at 94. The district court specifically cited two examples of Mr. Mounkes's testimony which in its judgment contradicted other persuasive trial testimony: (1) Mr. Mounkes's statements regarding personal use of corporate funds, which contradicted the testimony of Buss, the Mounkeses' accountant, and (2) Mr. Mounkes's testimony regarding why Amtext broke payments into increments smaller than $10,000, which the court found to contradict the testimony of Blanche, Amtext's financial officer. Contradictions in testimony support findings of falsehood. See Anderson , 189 F.3d at 1213-14; United States v. Lowder, 5 F.3d 467, 47172 (10th Cir. 1993). While Mr. Mounkes's testimony does not appear to contradict Blanche's testimony directly, ¹ his testimony does directly contradict Buss's testimony. The district court therefore could conclude that Mr. Mounkes testified falsely.

The district court also expressly found that Mr. Mounkes's testimony was material and willful. Both the diversion of corporate funds to personal use and the structuring of payments to avoid IRS reporting requirements are "affirmative act[s] constituting evasion or attempted evasion" of income taxes. See Meek [93-2 USTC ¶50,409], 998 F.2d at 779. False testimony about such acts therefore would be material to the Mounkeses' prosecution for tax evasion. Finally, while there appear to be some indications of confusion as opposed to willfulness on Mr. Mounkes's part, these do not displace the deference we give to the trial judge, who was able to observe the defendant at trial and was best situated to determine whether Mr. Mounkes was merely confused or was being willfully evasive in order to avoid conviction. See Yost, 24 F.3d at 106.

In sum, we find that the sentencing court identified Mr. Mounkes's perjurious testimony and expressly evaluated this testimony in light of the three Dunnigan elements. Our de novo review of the district court's application of these elements reveals no misunderstanding of the law of perjury. Thus, we find no error in the sentencing court's enhancement decision under §3C1.1. ²

IV.

Finally, the Mounkeses claim that the district court erred in failing to rule upon their motion for a one point reduction of Mrs. Mounkes's sentence on the basis of circumstances not contemplated by the Sentencing Guidelines. Under 18 U.S.C. §3553(b), a sentencing court may depart from the Guidelines if it "finds that there exists an aggravating or mitigating circumstance of a kind, or to a degree, not adequately taken into consideration by the Sentencing Commission in formulating the guidelines that should result in a sentence different from that described." The Mounkeses argued below that there were mitigating circumstances which warranted a downward departure in Mrs. Mounkes's sentence. The district court stated that it took Mrs. Mounkes's circumstances into consideration when it sentenced her, but did not explicitly rule on the motion for downward departure.

We "cannot exercise jurisdiction to review a sentencing court's refusal to depart from the sentencing guidelines except in the very rare circumstance that the district court states that it does not have any authority to depart from the sentencing guideline range for the entire class of circumstances proffered by the defendant." United States v. Castillo, 140 F.3d 874, 887 (10th Cir. 1998). The district court did not indicate that it lacked authority to depart from the sentencing guideline range in sentencing Mrs. Mounkes. We therefore lack jurisdiction to review the district court's decision not to grant the departure.

AFFIRMED.

¹ Mr. Mounkes testified that he asked Amtext to break up checks in payment of amounts exceeding $10,000 on the advice of an Amtext representative. Blanche testified that Amtext generally broke up payments only upon a payee's request. These assertions are not inconsistent. An Amtext employee could have advised Mr. Mounkes as to why he might prefer to have his payments broken up, and Mr. Mounkes could then have requested that the payments be broken up. However, Mr. Mounkes could not identify the Amtext employee who he claimed had given him the advice, and Blanche was not aware of any Amtext employee who did.

² The Mounkeses also object to the perjury enhancement on the ground that there is insufficient contrary testimony in the record to warrant the sentencing court's determination. The Mounkeses argue that such an inadequately supported determination will have a chilling effect on future defendants who would otherwise testify in their own defense at trial. The Supreme Court addressed a similar argument in Dunnigan, and concluded that a defendant's right to testify simply does not include the right to commit perjury. See 507 U.S. at 96. While a routine finding of untruthfulness based upon the verdict alone would impinge upon Mr. Mounkes's constitutional right to testify on his own behalf, Anderson , 189 F.3d at 1213, specific and independent findings of perjury which comply with the Dunnigan safeguards do not. See 507 U.S. at 96-97.

 

 

[2000-1 USTC ¶50,118] United States of America , Plaintiff-Appellee v. Anita L. Guidry, Defendant-Appellant

(CA-10), U.S. Court of Appeals, 10th Circuit, 98-3287, 12/21/99 , 199 F3d 1150. Affirming, reversing in part, and remanding for resentencing, an unreported District Court decision

[Code Sec. 7203 ]

False returns: U.S. Sentencing Commission Guidelines: Enhanced sentence: Abuse of position of trust: Victim of crime.--Under the U.S. Sentencing Commission Guidelines, the sentence of an accountant who was convicted of filing a false return in connection with her failure to report funds that she embezzled from her employer could not be enhanced for abuse of a position of trust. While she abused her employer's trust, the position of trust had to be found in relation to the victim of the offense; and she was not in a position of trust with respect to the government, which was considered to be the victim of her crime.

[Code Sec. 7203 ]

False returns: U.S. Sentencing Commission Guidelines: Enhanced sentence: Sophisticated means: Concealment of offense: Currency Transaction Reports.--Under the U.S. Sentencing Commission Guidelines, the sentence of an accountant who filed a false return was properly enhanced for her use of sophisticated means to conceal her unreported embezzlement income. By cashing checks that her employer made out to its bank, and then using the cash to purchase personal items, she made it difficult for the IRS to determine the amount of her embezzled income or of the tax loss she caused. Moreover, she structured the transactions so that the bank would not file Currency Transaction Reports with the IRS.

[Code Sec. 7203 ]

False returns: U.S. Sentencing Commission Guidelines: Downward departure: Discretion: Review: Race.--The trial court's discretionary refusal to make a downward departure from the sentencing guidelines for an accountant who filed a false return by failing to report embezzlement income was not subject to review. Although the judge improperly referred to the taxpayer's race when he explained his refusal to make the departure, he did so only in response to her claim that her public service to the minority community justified a reduced sentence.

[Code Sec. 7206 ]

False returns: Admissible evidence: Search warrant: Specificity: Good faith.--Evidence relating to willfulness that was uncovered pursuant to a search warrant authorizing the seizure of bank records was properly admitted against an accountant who was convicted of filing a false return. Although the warrant may have been insufficiently specific, it was executed by an IRS agent who acted on a good-faith belief that it was valid. Moreover, he was intimately involved in the investigation of the taxpayer prior to the execution of the warrant and in the preparation of an affidavit in support of the warrant, which gave him obvious knowledge of the crimes that were under investigation.

[Code Sec. 7206 ]

False returns: Evidence: Sufficiency.--An accountant was properly convicted of willfully filing a false return in connection with her failure to report as income funds that she embezzled from her employer. The evidence established that she was an educated and experienced accountant, she knew or had reason to know that embezzled income was taxable, and she attempted to conceal the embezzlement from the government, as well as from her employer.

[Code Sec. 7206 ]

False returns: Jury instruction: Willfulness: Negligence.--An accountant was properly convicted of willfully filing a false return in connection with her failure to report as income funds that she embezzled from her employer. A jury instruction defining willfulness as the voluntary and intentional violation of a known legal duty was correct. The taxpayer was not entitled to an additional instruction stating that negligent conduct was insufficient to establish willfulness.

[Code Sec. 7206 ]

False returns: U.S. Sentencing Commission Guidelines: Enhanced sentence: Sophisticated means: Abuse of position of trust: Victim of crime: Downward departure: Discretion: Review: Race.--Under the U.S. Sentencing Commission Guidelines, the sentence of an accountant who filed a false return was properly enhanced for her use of sophisticated means to conceal her failure to report embezzled income. However, since she was not in a position of trust with respect to the government, which was considered to be the victim of her crime, her sentence could not be enhanced for abuse of a position of trust. Finally, the trial court's discretionary refusal to make a downward departure from the sentencing guidelines was not subject to review. The judge's improper reference to the taxpayer's race when he explained his refusal to make the departure was made only in response to her claim that her public service to the minority community justified a reduced sentence.

Debra L. Barnett, United States Attorney, Jackie N. Williams, Assistant United States Attorney, Wichita, Kansas, for plaintiff-appellee. Daniel E. Monnat, Monnat & Spurrier, Wichita , Kansas , for defendant-appellant.

Before: BRORBY, HENRY and LUCERO, Circuit Judges.

BRORBY, Circuit Judge:

A jury found Appellant Anita L. Guidry guilty of three counts of knowingly and willfully filing a false tax return in violation of 26 U.S.C. §7206(1). The district court denied Mrs. Guidry's Motion for Judgment of Acquittal as to the three counts and sentenced her to sixty months imprisonment. Mrs. Guidry now appeals her conviction and sentence, challenging a search warrant as overbroad, jury instructions, the sufficiency of the evidence, and various applications of the sentencing guidelines. We exercise jurisdiction pursuant to 28 U.S.C. §1291 and 18 U.S.C. §3742. We affirm in part, reverse in part, and remand for resentencing.

BACKGROUND

Anita L. Guidry was the architect of an embezzlement scheme that allowed her to line her pockets with approximately $3 million belonging to her employer, Wichita Sheet Metal. ¹ While the embezzlement scheme itself is not directly in issue here, understanding the facts surrounding the scheme is a necessary predicate to resolving the issues before us. Accordingly, we begin with a cursory examination of Mrs. Guidry's background and her embezzlement.

Mrs. Guidry graduated from Wichita State University with a Bachelor's Degree in Business Administration. Her resume lists her major area of study as accounting, and she listed her occupation as accountant on several tax returns filed with the Internal Revenue Service. Wichita Sheet Metal hired Mrs. Guidry as an assistant to the controller of the company in 1986, and she subsequently became the controller in 1987, a position she held until she resigned in 1997. As controller, Mrs. Guidry not only supervised nearly every employee in the office, but she was an authorized signatory on the company checking account.

Mrs. Guidry's embezzlement scheme consisted of submitting checks, already signed by her and made payable to the company's bank, to Freda Moore or John Griffit, owners of Wichita Sheet Metal, for their signature. Mrs. Guidry wrote the checks in $10,000 or $9,000 increments, and she told Mrs. Moore and Mr. Griffit the checks were for federal tax payments. After collecting the proper signature, Mrs. Guidry cashed the checks at the company bank and pocketed the cash. Finally, to prevent discovery of her scheme, Mrs. Guidry altered the company's books to make it appear the money she had taken for personal pleasures was actually used to purchase inventory for the company. This created a discrepancy between the actual inventory and the inventory reflected on the company's books. The company's owners eventually asked for a detailed audit of the discrepancy, which ultimately led to the discovery of Mrs. Guidry's embezzlement.

Mrs. Guidry had financial responsibilities at home in addition to those at work. As the accountant in the family, Mrs. Guidry prepared the joint federal tax returns she filed on behalf of herself and her husband for 1993, 1994, and 1995. According to Mrs. Guidry's husband, these returns were prepared elaborately, which fact is buttressed by the returns themselves. The Guidrys painstakingly itemized their deductions, taking charitable deductions of $7,513 in 1993, $11,692 in 1994, and $13,102 in 1995. Not surprisingly, however, none of the returns reported the embezzled income. In 1993, Mrs. Guidry cashed forty checks through her embezzlement scheme for a total amount of $400,000. The Guidrys declared a total income, combined husband and wife, of $82,817 on their federal income tax return in 1993. In 1994, fifty-nine checks were cashed for a total of $563,000, and the Guidrys declared a total income of $88,547. In 1995, it was sixty-four checks cashed for $576,000, compared to a total declared income of $90,883.

While investigating Mrs. Guidry's embezzlement, Special Agent Martin McCormick of the Internal Revenue Service participated in the execution of a search warrant at the Guidry home. While searching for bank records, Special Agent McCormick opened a drawer in a file cabinet marked "taxes" and observed "tax booklets identical to those that are mailed to everyone by the Internal Revenue Service every year at the first of the year." The 1993 tax booklet the Internal Revenue Service provided with the Individual Income Tax Return listed embezzled income as taxable income that must be reported. The 1994 and 1995 tax booklets did not specifically contain this language, but instead referenced a publication the taxpayer could request which did specifically state embezzled income must be reported as taxable income.

DISCUSSION

I. The Warrant

The search warrant executed at Mrs. Guidry's home authorized officers to seize "[a]ny and all bank records, including but not limited to checks, statements, deposits, or investment records, or records of bank or money transfers." Mrs. Guidry contends the warrant suffered from three deficiencies: (1) the warrant failed to provide any meaningful limitations on items to be seized; (2) the warrant simply authorized the seizure of all files, regardless of their relevance to a specified crime; and (3) the warrant authorized the search and seizure of evidence not supported by probable cause, meaning the scope of the warrant exceeded the probable cause supporting it.

"When reviewing a district court's denial of a motion to suppress, we consider the evidence in the light most favorable to the government, and accept the court's findings of fact unless they are clearly erroneous.' " United States v. Vazquez-Pulido, 155 F.3d 1213, 1216 (10th Cir.), cert. denied, 119 S. Ct. 437 (1998). However, "[w]e review de novo whether the warrant was overbroad or insufficiently particular under the Fourth Amendment." United States v. Hargus, 128 F.3d 1358, 1362 (10th Cir. 1997), cert. denied, 118 S. Ct. 1526 (1998). The Fourth Amendment requires warrants "particularly describing the place to be searched, and the persons or things to be seized." U.S. Const. amend. IV. A sufficiently particular warrant "allows the searcher to reasonably ascertain and identify the things authorized to be seized," leaving "nothing to the officer's discretion as to what is to be seized, so that the officer is prevented from generally rummaging through a person's belongings." Hargus, 128 F.3d at 1362. A warrant describing "items to be seized in broad and generic terms may be valid when the description is as specific as the circumstances and the nature of the activity under investigation permit.' " United States v. Leary, 846 F.2d 592, 600 (10th Cir. 1988) (quoting United States v. Santarelli, 778 F.2d 609, 614 (11th Cir. 1985)); see also Hargus, 128 F.3d at 1363.

The district court focused on the affidavit in support of the warrant to examine the context in which the warrant was requested. The court pointed out the affidavit detailed what was known about the embezzlement scheme at the time, including information about the closing of several bank accounts in Kansas proximate to the time the scheme was discovered and the subsequent opening of other accounts in Oklahoma, and the inability of agents to find either the vast majority of the money Mrs. Guidry had embezzled, or all the money she withdrew from her Kansas banks. Considering the type and extent of Mrs. Guidry's criminal activity, the district court reasoned the warrant was as specific as circumstances allowed: "Absent omniscience, the government could provide no greater specificity." We find this a much closer call, but need not address the Fourth Amendment issue because we exercise our discretion to turn "immediately to a consideration of the officers' good faith" as allowed under United States v. Leon, 468 U.S. 897, 925 (1984).

"Even if the warrant was not specific enough, [a] court should not suppress the evidence [if] the agents seized it in objectively reasonable reliance on the warrant." United States v. Rob ertson, 21 F.3d 1030, 1034 (10th Cir. 1994) (citing Leon, 468 U.S. at 920-22). "Our good-faith inquiry is confined to the objectively ascertainable question whether a reasonably well trained officer would have known that the search was illegal despite the magistrate's authorization. In making this determination, all of the circumstances . . . may be considered." Leon, 468 U.S. at 922 n.23. Given the circumstances surrounding the warrant at issue here, we hold the officers acted on a good-faith belief the warrant was sufficiently particular in regard to the items to be seized.

The government executed this warrant nearly two months after the initial indictment was filed against Mrs. Guidry. The initial indictment charged Mrs. Guidry with violations of 18 U.S.C. §§1956 (money laundering) and 1344 (bank fraud). Special Agent McCormack was intimately involved in the investigation of Mrs. Guidry's embezzlement prior to the execution of the warrant at Mrs. Guidry's home. By the time he executed the warrant, Special Agent McCormack had analyzed numerous bank records connected to the case, served federal grand jury subpoenas on two banks, and served seizure warrants at three banks. The affidavit in support of the warrant limited the search to bank records related to violations of 18 U.S.C. §§982 (criminal forfeiture) and 1957 (engaging in monetary transactions in property derived from specified unlawful activity), in addition to the code sections listed in the initial indictment. ² While Special Agent McCormack did not personally prepare the affidavit, he did help collect the information used by the preparing officer.

We have previously stated "the knowledge of the executing officer can be considered in determining the sufficiency of the description [of a place to be searched]." United States v. Occhipinti, 998 F.2d 791, 799 (10th Cir. 1993). We have also applied the good-faith exception when the officer who swore out the affidavit helped execute the warrant. See United States v. Simpson, 152 F.3d 1241, 1248 (10th Cir. 1998). We find these cases instructive, and hold Special Agent McCormack acted in good-faith reliance on the warrant because he was so intimately involved in the investigation prior to the execution of the warrant, and the preparation of the affidavit in support of the warrant. This level of involvement in the case gave him obvious knowledge of the crimes that were the subject of the investigation. ³

II. The Jury Instructions

Mrs. Guidry next assigns error to the district court's jury instructions, claiming the instructions inadequately defined the term "willfully" as it pertains to the crime of filing a false tax return. (Apt. Br. at 19-22.) "We review de novo a timely challenge to a jury instruction to determine whether, considering the instructions as a whole, the jury was misled." United States v. Winchell [97-2 USTC ¶50,890 ], 129 F.3d 1093, 1096 (10th Cir. 1997). We will not reverse "unless we have substantial doubt that the jury was fairly guided.' " Id. (quoting United States v. Mullins, 4 F.3d 898, 900 (10th Cir. 1993)).

The Supreme Court addressed the statutory definition of "willful" as it is applied in the tax code in Cheek v. United States [91-1 USTC ¶50,012 ], 498 U.S. 192 (1991). The Court held its cases "conclusively establish that the standard for the statutory willfulness requirement is the voluntary, intentional violation of a known legal duty.' " Id. at 200-01 (quoting United States v. Bishop [73-1 USTC ¶9459 ], 412 U.S. 346, 360 (1973)); see also Winchell [97-2 USTC ¶50,890 ], 129 F.3d at 1096. The district court's instructions in the current case tracked the Cheek language almost verbatim: "For the purpose of this instruction, the term wilfully' means to voluntarily and intentionally violate a known legal duty." Mrs. Guidry requested an additional sentence at the end of the instruction stating "[n]egligent conduct is not sufficient to constitute willfulness." Mrs. Guidry argues she was entitled to the requested language. As support for her position, she contends we have endorsed such an instruction in Winchell, and the additional language is crucial for a proper definition of the willfulness element. This argument has no merit. First, Mrs. Guidry misconstrues our holding in Winchell. In Winchell, we held the defendant in a §7206(1) case was not entitled to a separate instruction on "specific intent" because the "willfulness" instruction given was adequate standing alone. ⁴ Winchell [97-2 USTC ¶50,890 ], 129 F.3d at 1096-97. Concluding the language at issue in Winchell was adequate is a far cry from deeming it necessary. Second, nothing in Cheek requires an additional reference to negligent conduct. The instructions in this case did not mislead the jury. To the contrary, the instructions clearly stated the correct legal standard.

III. Sufficiency of the Evidence

Mrs. Guidry next complains the evidence at trial was insufficient to sustain the jury's verdict. This argument presents a high hurdle, and one Mrs. Guidry fails to surmount.

"[I]n reviewing the sufficiency of the evidence to support a jury verdict, this court must review the record de novo and ask only whether, taking the evidence--both direct and circumstantial, together with reasonable inferences to be drawn therefrom--in the light most favorable to the government, a reasonable jury could find the defendant guilty beyond a reasonable doubt."

United States v. Beers, 189 F.3d 1297, 1301(10th Cir. 1999) (quoting United States v. Voss, 82 F.3d 1521, 1524-25 (10th Cir.), cert. denied, 519 U.S. 889 (1996)). We will not second-guess the jury's credibility determinations or conclusions concerning the weight of the evidence presented. Id.

Mrs. Guidry contends the "only" evidence supporting willfulness consists of her background and experience in accounting, the testimony to the effect Internal Revenue Service documents listed embezzled income as taxable income, and Agent McCormick's testimony he observed some Internal Revenue Service tax booklets in Mrs. Guidry's files at her home. Seeing a lack of evidence, Mrs. Guidry then goes on to cite our decision in McCarty v. United States [69-1 USTC ¶9322 ], 409 F.2d 793 (10th Cir.), cert. denied, 396 U.S. 836 (1969), for the proposition that "willfulness cannot be inferred from a mere understatement of income." Id. at 795 (citing Spies v. United States [43-1 USTC ¶9243 ], 317 U.S. 492 (1943)). This analysis suffers from two fatal flaws: it fails to view all the evidence in the light most favorable to the Government, and it provides an incomplete view of the Supreme Court's guidance in Spies.

While it is well established willfulness cannot be inferred solely from an understatement of income, willfulness can be inferred from

making false entries of alterations, or false invoices or documents, destruction of books or records, concealment of assets or covering up sources of income, handling of one's affairs to avoid making the records usual in transactions of the kind, and any conduct, the likely effect of which would be to mislead or to conceal."

Spies [43-1 USTC ¶9243 ], 317 U.S. at 499; see also United States v. Samara [81-1 USTC ¶9220 ], 643 F.2d 701, 704 (10th Cir. 1981). This conduct can be used to prove willfulness "even though the conduct may also serve other purposes such as concealment of other crime." Spies [43-1 USTC ¶9243 ], 317 U.S. at 499. The jury heard sufficient evidence to support its finding of willfulness in this case.

First, the jury heard evidence of Mrs. Guidry's expertise in accounting via her degree in business and her work experience as the controller of a company. The evidence showed Mrs. Guidry prepared the family taxes, and did so "elaborately" according to her husband. An investigator observed tax booklets from unknown years in Mrs. Guidry's files, and the jury learned the tax booklets specific to the years in question in this case either stated embezzled income should be reported, or referenced a second Internal Revenue Service document where taxpayers might receive that information. The evidence also showed: an ever-burgeoning disparity between the Guidrys' reported income and their actual income as complemented by the embezzlement scheme; the embezzled cash was used to purchase goods, making the money more difficult to detect; the Guidrys took significant charitable deductions on their taxes while not reporting the embezzled income; and the money was embezzled in increments of $9,000 or $10,000. Mrs. Guidry argues the jury should not have been allowed to take evidence of the embezzlement scheme itself into account, but such an argument defies logic.

Concealment of income can have more than one purpose. Such activity can show a desire to conceal the theft from the employer, and it can tend to show a purposeful attempt to conceal such income from the Internal Revenue Service. In addition, an inference of willfulness can be supported by a "consistent pattern of underreporting large amounts of income." Holland v. United States [54-2 USTC ¶9714 ], 348 U.S. 121, 139 (1954); see also United States v. Frank [71-1 USTC ¶9208 ], 437 F.2d 452 (9th Cir.), cert. denied, 402 U.S. 974 (1971). "Criminal willfulness can be inferred when a defendant does not supply her tax preparer with evidence of substantial items of income." United States v. Stokes [93-2 USTC ¶50,545 ], 998 F.2d 279, 281 (5th Cir. 1993). In Stokes, the Ninth Circuit upheld a conviction under §7206(1) when the defendant did not disclose illegal income to her tax preparer. It makes little sense to apply one standard to a person who withholds information from a tax preparer, and another standard to a self-preparer who withholds similar information from the Internal Revenue Service directly. The jury was free to conclude Mrs. Guidry had accounting expertise, that information stating embezzled income was to be reported as income on the tax return was available to her, and that she would have availed herself of the information. The jury was also free to examine the way the embezzlement scheme was designed to conceal assets, and infer Mrs. Guidry's intent was to avoid paying a known tax liability. As in Spies, Mrs. Guidry "claims other motives animated [her] in these matters. We intimate no opinion. Such inferences are for the jury." Spies [43-1 USTC ¶9243 ], 317 U.S. at 500. Our holding is limited to the unique facts of this case. Given the combination of Mrs. Guidry's background and training, the details of her embezzlement scheme and attempts to conceal her income, and the testimony concerning the presence and contents of federal tax booklets, the evidence was sufficient to support the jury's verdict in this case.

IV. Application of the Sentencing Guidelines

Finally, Mrs. Guidry argues the district court erred in imposing sentencing enhancements for sophisticated means and abuse of position of trust, and improperly considered race when denying a downward departure. We review the district court's legal interpretation of the sentencing guidelines de novo and the district court's factual findings for clear error. United States v. Rice, 52 F.3d 843, 848-49 (10th Cir. 1995). We conclude the district court's imposition of the enhancement for abuse of position of trust was clearly erroneous, and remand for resentencing.

A. Sophisticated Means Enhancement

United States Sentencing Guideline §2T1.1 provides for a two-level sentence enhancement when "sophisticated means were used to impede discovery of the existence or extent of the offense." U.S.S.G. §2T1.1(b)(2) . The commentary to the guideline defines "sophisticated means" as "conduct that is more complex or demonstrates greater intricacy or planning than a routine tax-evasion case." U.S.S.G. §2T1.1 , cmt. n.4. The district court imposed this enhancement after explicitly finding this was not a routine case. We agree.

Mrs. Guidry's is not a case of simply claiming to have paid withholding taxes not paid, see Rice, 52 F.3d at 849, or of not disclosing income to one's accountant, see Stokes [93-2 USTC ¶50,545 ], 998 F.2d at 282. Mrs. Guidry's scheme allowed her to do more than conceal her embezzlement from her employers--it allowed her to conceal the income from the Internal Revenue Service and made it difficult to determine the extent of the tax loss suffered by the federal government. The checks Mrs. Guidry used to embezzle funds were made payable to the bank, not Mrs. Guidry. Mrs. Guidry converted the checks to cash, which is harder to trace, then spent the vast majority of the money on personal items, again making it difficult for the Internal Revenue Service to discover the extent of the crime. She deposited only a fraction of the embezzled money in the bank. Most damaging for Mrs. Guidry, she never took more than $10,000 in one day. The district court heard testimony at the sentencing hearing that banks are required to file documents known as Currency Transaction Reports for transactions exceeding $10,000. These reports are filed with the Internal Revenue Service, and are not, as a matter of course, made available to the company or individual in whose name the transaction occurred. Structuring the transactions to avoid a Currency Transaction Report, therefore, served the main purpose of shielding the transaction from the Internal Revenue Service. In addition, while Mrs. Guidry may not have used a sham corporation, or offshore bank accounts, to hide her bounty from the Internal Revenue Service, stocking multiple storage units with over a million dollars in clothes and costume jewelry had a similar effect--concealment of the embezzled cash. Clearly, her meticulous scheme was designed, at least in part, to conceal the existence and extent of her failure to file a truthful tax return, and the district court did not clearly err in finding she did so in a sophisticated manner.

B. Abuse of Position of Trust Enhancement

The district court also imposed an enhancement pursuant to U.S.S.G. §3B1.3, which provides, in pertinent part: "If the defendant abused a position of public or private trust, or used a special skill, in a manner that significantly facilitated the commission or concealment of the offense, increase [the offense level] by 2 levels." U.S.S.G. §3B1.3. Before imposing this enhancement, a district court must find two things: (1) the defendant possessed a position of trust; and (2) the defendant abused the position to significantly facilitate the commission or concealment of the offense. United States v. Burt, 134 F.3d 997, 998-99 (10th Cir. 1998). Mrs. Guidry focuses on the latter step, arguing the imposition of this enhancement was clearly erroneous because her obvious abuse of her position of trust at Wichita Sheet Metal did not significantly facilitate the commission or concealment of her offense. While this particular argument is unconvincing, we agree the application of this enhancement is inappropriate here because Mrs. Guidry did not occupy a position of trust vis-a-vis the government, ⁵ thereby failing the first step of the Burt analysis.

The district court employed the two-step Burt analysis and made the following findings: "The first element is really not contested. . . . [T]heevidence is overwhelming that the Defendant occupied a position of trust at Wichita Sheet Metal." As far as the second element, the court emphasized the control Mrs. Guidry exercised over the payment of wages and the finances of the company, and found the evidence showed

the people who ran Wichita Sheet Metal trusted her explicitly and really never questioned her about anything she was doing in her capacity as controller, [her position] allowed her to systematically take more than $2 million out of that company and put it into her pocket and not report it in any way on the books of the company and particularly on records that would go to the Internal Revenue Service as a matter of course from the business. . . . And that allowed her to conceal the offense from the [Internal Revenue Service].

The district court's approach to the second prong of Burt is fairly persuasive. U.S.S.G. §3B1.3 allows enhancement when a defendant's abuse of a position of trust significantly facilitates "the commission or concealment of the offense." U.S.S.G. §3B1.3. Sentencing courts may consider conduct outside the offense of conviction when imposing the abuse of a position of trust enhancement: "The determination of a defendant's role in the offense is to be made on the basis of all conduct within the scope of §1B1.3 (Relevant Conduct), . . . and not solely on the basis of elements and acts cited in the count of conviction." U.S.S.G. Ch. 3, Pt. B, intro. cmt. Section 1B1.3 in turn states enhancements shall be based on "all acts and omissions committed, aided, abetted, counseled, commanded, induced, procured, or willfully caused by the defendant . . . that occurred during the commission of the offense of conviction, in preparation for that offense, or in the course of attempting to avoid detection or responsibility for that offense." U.S.S.G. §1B1.3(a)(1). Given the facts of this case, the district court may have been correct in finding Mrs. Guidry's embezzlement activity was relevant conduct, committed to avoid detection of her false income tax returns. However, to reach the second prong of Burt a district court must first find the defendant occupied a position of trust, and our case law clearly states the position of trust must be found in relation to the victim of the offense: "The question of whether an individual occupied a position of trust is evaluated from the victim's perspective." United States v. Trammell, 133 F.3d 1343, 1355 (10th Cir. 1998) (citing United States v. Queen, 4 F.3d 925, 929 (10th Cir. 1993), cert. denied, 510 U.S. 1182 (1994)); see also United States v. Brunson, 54 F.3d 673, 677 (10th Cir.), cert. denied, 516 U.S. 951 (1995).

"The primary concern of §3B1.3 is to penalize defendants who take advantage of a position that provides them freedom to commit or conceal a difficult-to-detect wrong." United States v. Koehn, 74 F.3d 199, 201 (10th Cir. 1996). We have applied §3B1.3 in two types of cases: "The first is where the defendant steals from his employer, using his position in the company to facilitate the offense," and the "second is where a fiduciary or personal trust relationship exists' with other entities [not the employer], and the defendant takes advantage of the relationship to perpetrate or conceal the offense." Id. (quoting Brunson, 54 F.3d at 677). Mrs. Guidry's conduct in filing false income tax returns falls into neither category. We must vacate the portion of the sentence imposed due to the abuse of a position of trust enhancement and remand for resentencing because Mrs. Guidry did not occupy a position of trust vis-a-vis the government, the victim in this case. ⁶

C. Denial of Downward Departure

At sentencing, Mrs. Guidry moved for a downward departure, citing as support her years of service to groups and individuals in the black community. The district court denied Mrs. Guidry's motion. In considering the departure, the court stated it was

balancing her community service with what she did in this case; and in my opinion her community service does not justify a downward departure considering the evidence in the case regarding the nature and extent of her wrongdoing. . . . This is a case where the Defendant set out and did steal millions of dollars from her employer and would be doing so today if she had not been caught.

Now, she might also be out doing good works, Ladies and Gentlemen, in the community; but she also would be a thief and a crook . . . .

The court also cited the "terrible disservice" Mrs. Guidry's criminal activity had visited on her husband and daughter as a factor to take into consideration in determining whether or not to depart. The court then added the following remarks:

So I suppose I ought to say one more thing in view of the evidence today. I have sentenced many many people in this court from the black community here in Wichita . Some of you know that. And probably all of you know it to one extent or another. They are people, some of them, many of them, have had no--they don't have parents . . . who cared for [them]. They had no significant upbringing of any kind. They commit violent crimes. They're involved with drugs. Things that you all, I think rightly so, are trying to stop. Now, what kind of message does it send to the people that you all are concerned about if I overlook, as you all have done for your own reasons, what Mrs. Guidry--the crimes Mrs. Guidry has committed and consider only her community service? It says--I think it would say--it would send a message, perhaps, to people, maybe the wrong message, but it might send the message that if you're active in the community that you can steal a couple of million dollars from your employer and then come in and ask the judge to give you a break because you were active in the community. And I don't believe that's the message to be sent.

Just prior to imposing sentence, the court expressed its dislike for the sentencing guidelines, but stated: "I do my best to follow [the guidelines] because I think that's my duty . . . because I think that the appropriate way for a federal judge to conduct himself or herself is to follow the guidelines whenever possible rather than find ways to get around them."

Under normal circumstances, we lack jurisdiction to review a sentencing court's discretionary denial of a downward departure. United States v. Neary, 183 F.3d 1196, 1197 (10th Cir. 1999); United States v. Castillo, 140 F.3d 874, 887 (10th Cir. 1998) (citing United States v. Rodriguez, 30 F.3d 1318, 1319 (10th Cir. 1994)). However, we retain the ability to review a refusal to depart when the denial is based on an illegal factor, or an incorrect application of the Guidelines. See Castillo, 140 F.3d at 888; Rodriguez, 30 F.3d at 1319; United States v. Garcia, 919 F.2d 1478, 1479, 1481 (10th Cir. 1990); 18 U.S.C. §3742(a)(1) , (a)(2), and (e). Certain factors--"race, sex, national origin, creed, religion, and socio-economic status"--may never be bases for departure. See Koon v. United States , 518 U.S. 81, 93 (1996); U.S.S.G. §5H1.10 . A sentencing decision based on race qualifies as both a violation of law and an incorrect application of the Guidelines, and therefore can be reviewed by this court. Neary, 183 F.3d at 1198; United States v. Onwuemene, 933 F.2d 650, 651 (8th Cir. 1991); Garcia, 919 F.2d at 1480.

Mrs. Guidry argues the district court's reference to the "black community" constituted consideration of her race for sentencing purposes. We disagree. While the district court's reference to race was most unfortunate and inappropriate, we do not read the judge's comments as taking any action or refusing action relating to Mrs. Guidry based on race. Rather, the court was rejecting, inartfully, her argument that her service to the minority community somehow atoned for her crimes. Simply put, the court was responding to a chorus of Mrs. Guidry's supporters with a reference to the fact that the same community Mrs. Guidry had served so ably had also been deeply damaged by her actions. Standing alone, the court's comments might suggest stereotyping and bias that would give us grave concern and require a remand. However, given the context of the sentencing hearing and the nature of the court's remarks taken in their entirety, we determine the district court did not consider Mrs. Guidry's race in its sentencing decision. See generally United States v. Munoz, 974 F.2d 493 (4th Cir. 1992). The district court did not base its sentencing decision on an illegal factor, or an incorrect application of the Guidelines, and therefore we lack jurisdiction to review its discretionary denial of the requested downward departure.

Accordingly, we AFFIRM in part, VACATE the portion of the sentence enhanced for abuse of a position of trust, and REMAND for resentencing.

¹ Mrs. Guidry used her stolen money to make sure she had plenty of pockets to line. During the years of her embezzlement, Mrs. Guidry spent over $1.2 million on clothing from one retailer alone--GM Clotheshorse. Her employer, Wichita Sheet Metal, eventually took possession of 1300 dresses, 182 pairs of shoes, 164 hats, 40 belts, 27 purses, two fur coats, and boxes of jewelry that included over 400 pairs of earings, all of which Mrs. Guidry had kept in several rented storage units. Mrs. Guidry's former employers certainly have the inventory, if not the experience, to open their own boutique should the sheet metal business turn sour.

² The particularity of an affidavit can cure an overbroad warrant when the affidavit is both referenced in the warrant and physically attached to the warrant. See Leary, 846 F.2d at 603. The record here is insufficient to make such a determination, thus the affidavit cannot cure any possible overbreadth in the warrant.

³ Our holding is further bolstered by the fact Special Agent McCormack did not actually seize the tax records and booklets he observed in Mrs. Guidry's home.

⁴ The instruction in Winchell, which was accepted by both parties, stated: "To act willfully' means to voluntarily and intentionally violate a known legal duty . . . . Negligent conduct is not sufficient to constitute willfulness." Winchell [97-2 USTC ¶50,890], 129 F.3d at 1096 (quotation marks and citation omitted).

⁵ "When an issue or claim is properly before the court, the court is not limited to the particular legal theories advanced by the parties, but rather retains the independent power to identify and apply the proper construction of governing law.' " United States Nat'l Bank v. Independent Ins. Agents of Am., Inc., 508 U.S. 439, 446 (1993) (quoting Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 99 (1991)).

⁶ The Circuits are split on the relationship a position of trust must have to the victim of the offense for the purpose of enhancement. Compare United States v. Barakat [98-1 USTC ¶50,114], 130 F.3d 1448, 1454-56 (11th Cir. 1997) (holding defendant did not use his particular position of trust, which allowed him access to illegal unreported income, to conceal the offense of conviction--tax evasion), United States v. Jolly, 102 F.3d 46, 48-50 (2d Cir. 1996) ("the abuse of trust enhancement applies only where the defendant has abused discretionary authority entrusted to the defendant by the victim" (citing United States v. Broderson, 67 F.3d 452, 455-56 (2d Cir. 1995) (stating without a nexus between the victim and the position of trust, anyone commanded by statute to make an accurate report to the government would be subject to the enhancement, including all taxpayers who file false tax returns)), and United States v. Moore, 29 F.3d 175, 179-80 (4th Cir. 1994) (reversing §3B1.3 enhancement when defendants held positions of trust in relation to entities other than the victim of their fraud scheme), with United States v. Cianci, 154 F.3d 106, 110-13 (3d Cir. 1998) (holding §3B1.3 enhancement appropriate in tax evasion case when defendant abused position of trust with his company to embezzle unreported income), United States v. Bhagavan [97-2 USTC ¶50,585], 116 F.3d 189, 193 (7th Cir. 1997) (holding the government is not necessarily the only victim in a tax evasion scheme, and the enhancement can apply if any identifiable victim of the overall scheme to evade taxes put the defendant in a position of trust), and United States v. Duran, 15 F.3d 131, 132-34 (9th Cir. 1994) (per curiam) (sheriff's use of position to embezzle money and his subsequent structuring of financial transactions to avoid reporting requirements were part of a common scheme or plan under U.S.S.G. §1B1.3(a)(2), and §3B1.3 enhancement was appropriate when jury convicted defendant of structuring offense, but failed to reach a verdict on underlying theft charge).

Lucero, Circuit Judge

: I join in the majority opinion with the exception of Section IV.C., as to which I dissent. Race is never relevant to sentencing determinations. U.S.S.G. §5H1.10 . There is no doubt in my mind that the trial court's comments on race uttered at Mrs. Guidry's sentencing were motivated by good intent. Nonetheless, it is impossible to overlook the fact that Mrs. Guidry's race played some role in the denial of the motion for downward departure. In making this sentencing decision, the trial court expressly and unequivocally sought to send a message--or not send the "wrong" message--to the African-American community of Wichita , a community to which Mrs. Guidry belonged. While it may be permissible to use a sentence to send a message to criminal groups, it is impermissible to use a sentence to send a message to racial groups. Cf. United States v. Munoz, 974 F.2d 493, 496 (4th Cir. 1992) ("[T]he connection between the group targeted for deterrence and the defendant must be the criminal conduct and not the defendant's national origin."). Similarly, while a sentencing court has discretion to disregard a defendant's benevolent activities, see U.S.S.G. §5K2.0 , it may not to do so for the explicit purpose of sending a message to the racial community that benefits from those activities.

Because U.S.S.G. §5H1.10 prohibits the consideration of race in sentencing determinations, and because the sentencing court controverted that principle, I would reverse and remand for resentencing for this reason as well.

 

 

 

 

 

[97-2 USTC ¶50,585] United States of America , Plaintiff-Appellee v. Grama K. Bhagavan, Defendant-Appellant

(CA-7), U.S. Court of Appeals, 7th Circuit, 95-3382, 5/22/97 , 116 F3d 189, 116 F3d 189. Affirming an unreported District Court decision

[Code Sec. 7201 ]

Penalties, criminal: Tax evasion: Sentencing guidelines: Calculation of tax loss: Who is the taxpayer: Corporate v. personal income: Abuse of trust.--The trial court properly applied the sentencing guidelines to the president and largest shareholder of a small engineering firm who pleaded guilty to personal income tax evasion. In calculating the tax loss, it properly classified unreported client payments as corporate income rather than individual income. It concluded that the payments, which the taxpayer diverted to his own use, belonged to the corporation and were not the taxpayer's personal income. It also followed the appropriate methodology in calculating tax loss. Further, the trial court properly concluded that the taxpayer's actions amounted to an abuse of a position of trust and correctly enhanced the taxpayer's sentence level.

Andrew B. Baker, Jr., Assistant United States Attorney, Dyer, Ind. , for plaintiff-appellee. James B. Meyer, Scott L. King, King & Meyer, 363 S. Lake St. , Gary , Ind. , for defendant-appellant.

Before: POSNER, Chief Judge, and CUDAHY and WOOD, Circuit Judges.

WOOD, Circuit Judge:

In his position as president and largest shareholder of Valley Engineering, Inc., a small engineering and surveying firm, Grama Bhagavan was able to control the firm's day-to-day operations. And control them he did, to a fault: this case arose because Bhagavan diverted a substantial amount of money nominally due to Valley into his personal bank accounts. Worse yet, he did not report these monies as income on either Valley's corporate returns or his personal return. When the IRS caught up with him, Bhagavan eventually pleaded guilty to one count of personal income tax evasion for the tax year 1988 in violation of 26 U.S.C. sec. 7201. Bhagavan now claims that the district court made several errors in computing his Sentencing Guideline range. Because we conclude that the district court's interpretations of the Guidelines were correct and that its findings of fact were adequately supported by the evidence, we affirm the sentence.

I

Although Valley was a small company, Bhagavan was not its only shareholder. In addition to Bhagavan, who owned 60% of its shares, the shareholders included Bhagavan's wife, Sita, draftsman Ronald Golden, survey manager Noah Stump, and two others. Golden and Stump each owned 20 shares of stock in Valley which they each purchased in 1986 for $500 a share. Although Valley appears not to have paid dividends regularly, the record shows that in 1987, Golden and Stump each received a dividend of $200. Evidently they never received any other dividends thereafter, and the company bought out their stock in 1993. Unbeknownst to the other shareholders, Bhagavan paid himself secret stock dividends of $500 in both 1988 and 1989, and he gave Sita Bhagavan a secret $250 stock dividend in 1989. In addition, Bhagavan received director's fees of $200 in both 1987 and 1988 and of $400 in 1989, while Sita Bhagavan received director's fees of $650 in 1988 and $200 in 1989. In 1993, Valley itself was acquired by Abonmarche Consultants.

In addition to his positions as president and largest shareholder, Bhagavan was also Valley's chief operating officer. Among other things, he solicited accounts from customers, handled payment terms, and directed where payments should go. Bhagavan opened the mail personally and passed along client checks to Valley's office manager, Sharon Campbell, for deposit. Campbell followed Bhagavan's instructions on other matters as well: she made out customer invoices according to notes he left her, and she recorded those invoices and the corresponding payments on a chart she kept for each client. Valley used an outside accountant to prepare its tax returns, which were based entirely on its bank accounts without reference to its invoices or account ledgers.

This system enabled Bhagavan to manipulate which incoming business went Valley's way, and which business remained "personal" to him. From 1987 to 1991, he arranged for 19 companies to make their checks payable to him personally and deposited those checks (amounting to $98,830) in his personal bank account without reporting them as income. A total of $95,355 of the diverted income came from known Valley clients, while the remaining $3,475 came from payors who were not listed as clients in Valley's books. For the former group, Bhagavan's practice was to request the client to pay for invoices partly with checks made out to Valley and partly with checks made out in his own name. Often, Bhagavan would record "credits" or "professional discounts" in the firm's accounting books which matched the amounts of the checks made out to him personally; he then reduced Valley's accounts receivables by these amounts. For the $3,475 coming from companies that could not be identified as Valley clients, Bhagavan billed the payors on his personal letterhead. Although he reported $2,975 in imputed dividends in 1987 and 1990, Bhagavan did not file Form 1099's in any of these years, which would have been required if he had personally done $600 or more of work for a business client in a given tax year.

II

A grand jury initially indicted Bhagavan on seven counts of tax evasion, four relating to his individual income taxes for the years 1987-90 and three relating to false corporate tax returns for the years 1988-90. Ultimately, he entered a plea of guilty on one count of attempted individual tax evasion for the tax year 1988 and the remaining counts were dismissed. The Probation Department, using the 1988 version of the Sentencing Guidelines (because of ex post facto concerns related to changes in the tax guideline), prepared a Presentence Report (PSR), which recommended that the $95,355 coming from Valley's clients should be treated as corporate income, subject to both the double taxation treatment of imputed dividends and the higher corporate rate. That figure resulted in a total tax loss of $50,182, which in turn yielded a base offense level of 11 under the tax table at USSG sec. 2T4.1(g). The PSR also recommended a two-level enhancement under USSG sec. 3B1.3 for abuse of a position of trust, a two-level enhancement under USSG sec. 2T1.1(b)(2) for use of sophisticated means, and a two-level decrease under USSG sec. 3E1.1 for acceptance of responsibility, for a final level of 13.

At the sentencing hearing, Bhagavan argued that the unreported $95,355 represented personal income for services he performed as a private consultant, not corporate income. Both he and the government presented witnesses who testified about the internal operations and the corporate structure of Valley. The district court agreed with the government that the clients whose checks Bhagavan pocketed believed they were dealing with Valley and not with Bhagavan personally and therefore concluded that the $95,355 was properly characterized as corporate income. The district court rejected the proposed enhancement for the use of sophisticated means, but it agreed that Bhagavan had abused a position of private trust for purposes of sec. 3B1.3. As president of the company, Bhagavan had abused the trust of the other shareholders by diverting funds that could have been used to pay dividends or to improve the company's long-term prospects. Finally, the district court gave Bhagavan a two-level decrease under sec. 3E1.1 for acceptance of responsibility, which brought his final adjusted offense level back down to 11. With his Criminal History Category of I, this meant that the final sentencing range was 8 to 11 months. The district court sentenced Bhagavan to four months of imprisonment and four months of community confinement to be followed by a three year term of supervised release and fined him $3,000.

III

Bhagavan has three complaints about his sentence: he argues that the unreported $95,355 should have been classified as individual income, that the district court misinterpreted the guideline for abuse of private trust in his situation, and that the evidence did not support the district court's finding that an enhancement for an abuse of a position of trust was appropriate. We review the proper tax treatment of a transaction de novo and underlying facts for clear error. See Indianapolis Power & Light Co. v. Commissioner [88-2 USTC ¶9529], 857 F.2d 1162, 1165 (7th. Cir. 1988), aff'd [90-1 USTC ¶50,007], 493 U.S. 203 (1990); see also United States v. Brimberry [92-1 USTC ¶50,288], 961 F.2d 1286, 1291 (7th Cir. 1992) (ultimate issue of amount of tax loss is issue of law). We review de novo the district court's interpretation of the meaning of "position of trust," see United States v. Strang, 80 F.3d 1214, 1219 (7th Cir. 1996); United States v. Sinclair, 74 F.3d 753, 762 (7th Cir. 1996), but we review the finding that Bhagavan occupied such a position under the clearly erroneous standard, see United States v. Stewart, 33 F.3d 764, 768 (7th Cir. 1994).

A. Calculation of the Tax Loss

The base offense level of USSG sec. 2T1.1(a) is determined by the "tax loss." The 1988 Sentencing Guidelines defined "tax loss" as the greater of (A) the total amount of tax that the defendant evaded or attempted to evade, including interest; and (B) the "tax loss" as defined in USSG sec. 2T1.3. Section 2T1.3 defined "tax loss" as "28 percent of the amount by which the greater of gross income and taxable income was understated, plus 100 percent of the total amount of any false credits claimed against the tax. If the taxpayer is a corporation, use 34 percent in lieu of 28 percent." The question whether the $95,355 in controversy here was properly characterized as corporate income rather than individual income is one of fact, and we see nothing erroneous in the district court's conclusion that this income was Valley's rather than Bhagavan's personal income. The clients received their bills on Valley invoices, they received offsetting credits or discounts in the precise amounts that Bhagavan instructed them to send to him, they never filed Form 1099's for the money paid to Bhagavan, and the type of work he performed was consistent with Valley's business. It is not as if Bhagavan were receiving payments for oil paintings he produced in his spare time, which he marketed separately. Indeed, there is even an interesting question under Indiana corporate law whether Bhagavan could appropriate corporate opportunities of this type for himself, consistently with his duties to the company and its minority shareholders. But there is no need to belabor the point; the money was corporate, and we must therefore decide whether the district court handled the tax loss question properly as a matter of law.

In United States v. Harvey [93-2 USTC ¶50,368], 996 F.2d 919 (7th Cir. 1993), this court set forth the proper methodology for determining tax loss for purposes of USSG sec. 2T1.3(a) (which was consolidated with sec. 2T1.1 effective November 1, 1993) in cases like this one, where a single crime causes both corporate and personal income to be understated. The district court followed the Harvey methodology carefully, and again, we find no error in its conclusion. Under Harvey, the calculation involves three steps, which begin from the premise that the full amount of the loss was an imputed dividend to the individual taxpayer: (1) apply the corporate rate of 34% to the unreported profit, which produces the amount of lost corporate taxes, (2) reduce the imputed dividend by the amount of the imputed corporate taxes; and (3) apply the personal rate of 28% to the reduced dividend to determine the amount of lost personal taxes. Here, we take 34% of $95,355, which is $32,420.70, the lost corporate taxes. We next subtract $32,420.70 from $95,355, which gives $62,934.30 as the adjusted imputed dividend. At this stage, we must add the additional $3,475 to the imputed dividend, because this is the income Bhagavan received that did not go through Valley, and we subtract the $2,975 that he actually reported. This produces a total of $63,434.30 in unreported income. Finally, we take 28% of the $63,434.30, which is $17,721.60, the amount of lost individual taxes. The sum of the two types of lost taxes, $32,420.70 + $17,721.60, is $50,182.30. We repeat these calculations for the benefit of those who have not seen the district court's opinion, which clearly and accurately followed the same analysis. Under the 1988 version of USSG sec. 2T1.1(a), this corresponded to a base offense level of 11.

B. Abuse of a Position of Trust

Bhagavan's efforts to show error in the district court's decision to enhance his level for abuse of a position of trust are equally unavailing. Application Note 1 to sec. 3B1.3 defines "public or private trust" as a position "characterized by professional or managerial discretion (i.e. substantial discretionary judgment that is ordinarily given considerable deference). Persons holding such positions ordinarily are subject to significantly less supervision than employees whose responsibilities are primarily non-discretionary in nature." In order for the enhancement to apply, the defendant must have used his position of trust in such a way that made the offense easier to commit or conceal. See id. The Application Note gives the examples of an attorney serving as a guardian who embezzles funds from a client and a bank executive's fraudulent loan scheme. In determining whether an enhancement for an abuse of a position of trust is appropriate, we look "to the nature of a defendant's relationship to the victims and to the responsibility he was given." Strang, 80 F.3d at 1220 (enhancement appropriate where defendants befriended victims in order to persuade them to invest in phony scheme); see also Sinclair, 74 F.3d at 763 (enhancement appropriate where assistant vice president of bank proposed to split commissions from bank loan insurance policies with insurance broker).

Bhagavan's legal challenge to this enhancement focuses on the nature of the victim of his scheme. He argues, relying on United States v. Hathcoat, 30 F.3d 913 (7th Cir. 1994), and United States v. Broderson, 67 F.3d 452 (2d Cir. 1995), that this enhancement may be used only when "the" victim has placed the defendant in the position of trust. He argues that the victim here was the Government, which did no such thing. He also suggests that the minority shareholders could not have placed him in a position of trust, because he had full power to run the company without them. The fallacy in these arguments is the notion that there can be only one victim of a tax evasion scheme--the United States--and thus that the sec. 3B1.3 enhancement can never apply in tax evasion cases. In Stewart we recognized that the same fraudulent scheme might inflict harm on multiple sets of victims--there, both elderly individuals who were trying to arrange in advance for their funerals, and the funeral companies who agreed to provide the services. See 33 F.3d at 769. Under hornbook corporate law, Bhagavan's position as majority shareholder and president brought with it fiduciary duties to act in the interests of the minority shareholders. Thus, in that sense he did occupy a position of trust vis vis the minority, which was a price of his use of the corporate form of doing business. The other shareholders were victims of his scheme to enrich himself and to avoid paying taxes on the secret income: to the extent that the income was diverted from the corporation to Bhagavan's own pocket, it was unavailable for any other lawful corporate purpose. It is enough that identifiable victims of Bhagavan's overall scheme to evade his taxes put him in a position of trust and that his position "contributed in some significant way to facilitating the commission or concealment of the offense." Application Note 1, sec. 3B1.3. The district court correctly concluded that this enhancement was available as a legal matter.

Hathcoat and Broderson are distinguishable on other grounds as well. Application Note 1 to USSG sec. 3B1.3 draws a clear distinction between one who has "professional or managerial discretion (i.e. substantial discretionary judgment that is ordinarily given considerable deference)" and those subject to significant supervision, such as "an ordinary bank teller or hotel clerk." The defendant in Hathcoat was a bank teller, but her ability to embezzle might have been made possible primarily by her cooperation with her corrupt manager; a remand was therefore necessary to determine whether the enhancement was proper. See 30 F.3d at 919. In Broderson, the Second Circuit reversed an enhancement under this section partly because the underlying offense itself consisted of abuse of a position of trust (in that case, violations of the Truth in Negotiations Act, 10 U.S.C. sec. 2306a, and the Federal Acquisition Regulations, 48 C.F.R. sec.sec. 15.801-15.804), as opposed to an offense, such as skimming, that is facilitated by holding a position of trust. See 67 F.3d at 456. The Guidelines expressly disallow the abuse-of-trust enhancement where the abuse is a necessary element of the offense. See USSG sec. 3B1.3; Sinclair, 74 F.3d at 762. Here, the district court found that Bhagavan had both extensive managerial control and discretionary executive powers, and the abuse was not a necessary element of the offense.

C. Sufficiency of the Evidence of an Abuse of a Position of Trust

We have little to say on Bhagavan's last point, which is that the district court clearly erred in concluding that his actions actually amounted to an abuse of a position of trust. First, we review this kind of determination deferentially. Second, the evidence amply showed that his actions "significantly facilitated the commission or concealment of the offense." See Strang, 80 F.3d at 1219-20; Hathcoat, 30 F.3d at 919; United States v. Lamb, 6 F.3d 415, 421 (7th Cir. 1993). He personally opened the mail, decided how each customer should pay its invoices, restricted the information available to his own office manager and accountant, and adjusted invoices to reflect his side payments. These actions both facilitated the commission of the tax evasion offense and concealed it from others with a connection to the company, making the enhancement appropriate.

The judgment of the district court is AFFIRMED.

[Concurring and Dissenting Opinion]

CUDAHY , Circuit Judge

I concur in all aspects of the able majority opinion but one: its treatment of the sentence enhancement for abuse of trust under U.S.S.G. sec. 3B1.3.

The question here is whether Bhagavan abused a position of trust reposed in him by a victim of the crime for which he was convicted--tax evasion. The majority points to his abusing his fiduciary relationship to Valley Engineering's minority stockholders. By receiving payments for engineering services personally instead of allowing them to be submitted to the corporation, Bhagavan may have violated a duty to the minority stockholders. Bhagavan says that the minority stockholders may not have been deprived of anything tangible since Bhagavan as majority stockholder had the power to pay himself large sums as salary; this may very well be so, since the minority stockholders in the years in question received only $200 in dividends. I concede, however, that in principle if not in concrete reality, the minority stockholders reposed a trust in Bhagavan and that the minority has suffered from the diversion of revenue.

But this concession does not answer the relevant question. For, although the minority stockholders may be victims of the diversion of revenue, they are not victims of the crime of conviction--tax evasion--or any other crime, for that matter. Thus, there is no nexus between the putative victims, the minority stockholders, and the crime of conviction, tax evasion. No nexus, no enhancement: this is the law of this circuit, and of others as well. See, e.g., United States v. Hathcoat, 30 F.3d 913, 919 (7th Cir. 1994); United States v. Broderson, 67 F.2d 452, 456 (2d Cir. 1995). The majority cites examples from the Guidelines' Application Note that confirm this rule: an attorney's embezzling from his client and a bank executive's approving fraudulent loans. In both examples a nexus links victim and crime: the client was the victim of the embezzlement, the bank the victim of the fraudulent loans. I agree that beyond a doubt a crime may have more than one victim, but all the alleged victims must suffer from the one crime--not from some other circumstances.

The majority speaks of Bhagavan's "scheme": diverting the revenue from Valley Engineering and then not paying the taxes due. Bhagavan, however, stands convicted only of tax evasion. The diversion of revenue is not even a crime, as far as I can tell. And even if the diversion were relevant, there is nothing to show that Bhagavan diverted the revenue for the purpose of avoiding taxes. All we know is that the revenue was diverted and the taxes not paid. This is roughly analogous to a person's embezzling from her employer and not paying taxes on the loot. She steals, but we do not ordinarily assume that she steals for the purpose of evading taxes. (There the employer would be a victim--but of the crime of theft, not of her tax evasion.)

Although the minority shareholders may have been victims of the diversion, they were certainly not victims of the tax evasion. If anything, Bhagavan's failure to pay the corporate taxes benefitted, not burdened, the minority shareholders. The problem with the majority's multiple-victim theory here is that the IRS and the minority shareholders were not victims of the same crime. In fact, the minority shareholders were not victims of any crime. They merely may have suffered a breach of fiduciary trust--at most, a civil wrong.

I therefore respectfully dissent with respect to the enhancement.

 

 

[97-1 USTC ¶50,208] United States of America , Appellee v. Richard Goldberg, Defendant-Appellant

(CA-1), U.S. Court of Appeals, 1st Circuit, 96-1132, 2/3/97, Affirming an unreported District Court decision

[Code Sec. 7203 ]

Crimes: Conspiracy to defraud IRS: Aiding and assisting in filing false returns: Purpose: Inference.--The trial court properly concluded that an individual, who filed false returns and was convicted of conspiracy to defraud the IRS and aiding and assisting in filing false returns, and at least one other conspirator shared a purpose to interfere with the IRS functions by filing false returns with the IRS. The purpose was imputed to the individual who paid lobbyists through "straw" employees or third parties because the very acts agreed to by the conspirators included the filing of false tax documents. Further, the duration of the schemes and the individual's own sophistication added to the inference. Although there was no evidence that he discussed the filing of false tax documents with other conspirators, such conduct was an integral and self-evident part of each conspiracy, permitting the inference that the other co-conspirators shared in that purpose.

[Code Sec. 7203 ]

Crimes: Conspiracy to defraud IRS: Aiding and assisting in filing false returns: Hearsay: Co-conspirator.--The trial court properly admitted two out-of-court conversations between co-conspirators at trial against an individual who was convicted of conspiracy to defraud the IRS and aiding and assisting in filing false returns. Even though the statements were made before he joined, a late-joining conspirator takes the conspiracy as he finds it.

[Code Sec. 7203 ]

Crimes: Conspiracy to defraud IRS: Aiding and assisting in filing false returns: Motion to dismiss indictment: Selective prosecution: Hearing.--An individual who was convicted of conspiracy to defraud the IRS and aiding and assisting in filing false returns and who, prior to trial, filed a motion to dismiss the indictment on the ground of selective prosecution was not entitled to a hearing on the motion before the trial court denied it. The individual claimed that he was targeted by the government in response to his vigorous and constitutionally protected lobbying activities against a city project. However, the trial court did not abuse its discretion because there was a lack of evidence to support a selective prosecution claim.

[Code Sec. 7203 ]

Crimes: Conspiracy to defraud IRS: Aiding and assisting in filing false returns: Motion for new trial.--A new trial motion was denied because there was no evidence that the government did not follow its own internal rules for tax prosecutions or reveal to an individual who was convicted of conspiracy to defraud the IRS and aiding and assisting in filing false returns information about its decision to prosecute.

[Code Sec. 7203 ]

Crimes: Conspiracy to defraud IRS: Aiding and assisting in filing false returns: Sentencing: Upward adjustment: Manager or supervisor in conspiracy.--The trial court properly imposed a two-level enhancement in sentencing for the managerial or supervisory role in two conspiracies of an individual who was convicted of conspiracy to defraud the IRS and aiding and assisting in filing false returns. There was ample evidence to show that he superintended "straw" employees to receive false tax documents. Further, even if the other co-conspirators were the true leaders of the conspiracies, the individual did not have to be at the top of the criminal scheme to be a manager or supervisor.

Donald K. Stern, United States Attorney, Kevin J. Cloherty, Michael J. Kendall, Assistant United States Attorneys, Boston, Mass. 02109, for appellee. Morris M. Goldings, David R. Kerrigan, Mahoney, Hawkes & Goldings, 75 Park Plaza, Boston, Mass. 02116, for defendant-appellant.

Before: BOUDIN, Circuit Judge, BOWNES, Senior Circuit Judge, and LYNCH, Circuit Judge.

BOUDIN, Circuit Judge:

Richard Goldberg was convicted of two counts of conspiracy to defraud the Internal Revenue Service, 18 U.S.C. §371, and eight counts of aiding and assisting the filing of false income tax returns, 26 U.S.C. §7206(2). Goldberg's appeal is now before us. We begin by describing the factual background and proceedings in the district court.

In the years prior to his indictment in 1995, Goldberg was involved in several businesses in and around Boston . His ventures included a billboard company, Logan Communications, and a partial interest in a "Park 'N Fly" lot located in East Boston near Logan Airport . Goldberg also owned and operated Liverpool Lumber, Inc., which Goldberg used as a management company for various of his other enterprises.

In or around 1988, Goldberg became aware that the Commonwealth of Massachusetts planned to take all or part of the East Boston Park 'N Fly lot by eminent domain as part of its Third Harbor Tunnel project. The planned taking not only threatened Goldberg's profitable parking business, but also his billboard company, since many of its signs were located on the parking lot's land. Goldberg began an intense lobbying effort against the proposal in 1988, eventually spending over $1 million of his and his partners' money to oppose the tunnel plans.

Two of those hired to oppose the project--community activist Rob ert A. Scopa and consultant Vernon Clark--were named as co-conspirators in the two separate conspiracies for which Goldberg was ultimately convicted. Taking the evidence most favorable to the verdict, the facts pertaining to the two different conspiracies were as follows.

Scopa Conspiracy. From 1990 to 1995, Goldberg employed Scopa to help organize the East Boston community against the tunnel project and to perform other services. But Goldberg never paid Scopa in Scopa's own name. Instead, Goldberg had his Liverpool Lumber company issue paychecks to three successive "straw" employees, none of whom worked for Goldberg and all of whom agreed to hand the money over to Scopa.

To reflect the "wages" of the straw employees, Goldberg directed his bookkeeper at Liverpool Lumber to prepare various W-2, W-3, and W-4 reporting statements, which were then filed with the IRS. These documents falsely described wage payments to straws who had performed no work for Liverpool Lumber. The straws, in turn, falsely included the phantom wages from Liverpool on their own individual returns. Reporting the money on the straws' returns instead of Scopa's resulted in a loss of about $150 to the Internal Revenue Service.

The government claimed at trial that the scheme was devised so that Scopa would seem to be unemployed and thus could continue to collect monthly benefits under a disability insurance policy. Evidence also indicated that Scopa sought to hide the payments in order to preserve his status as an "independent" activist in the East Boston community and to prevent an extramarital affair from being discovered by his wife. The district court later found that Scopa, but not Goldberg, was motivated by all of these objectives.

Clark Conspiracy. In the course of opposing the Third Harbor Tunnel project, Goldberg also retained Vernon Clark, a lobbyist in Washington , D.C. , who performed various services to this end. Goldberg's companies owed Clark a substantial sum of money in 1991 for work performed in opposition to the tunnel project. Rather than pay the bill directly, the two men agreed with others to a more complicated method for Goldberg to discharge his debt to Clark .

At the time, Clark was having a secret affair with a woman named Patricia McNally. The pair occasionally spent time in a Maine beach house of which McNally was part owner. Clark sought to fund an expansion of the beach house without his wife's knowledge. Goldberg agreed to pay the money he owed to Clark to a landscaping company owned by John Lango, McNally's brother-in-law, who would in turn construct the beach house expansion.

Goldberg arranged for the preparation of two separate $10,000 invoices to Park 'N Fly from Lango, dated October 15, 1991 and January 1, 1992 , respectively. The invoices were ostensibly for landscaping services, although Lango performed no work for any of Goldberg's companies. The invoices were paid by Park 'N Fly. Lango testified at trial that the payments were structured in two installments so as to reduce his taxes on the transaction.

The triangular flow of money and services involved the preparation and filing of several false tax documents. At Goldberg's direction, Park 'N Fly sent forms 1099-MISC, one for each $10,000 payment, to the IRS and to Lango. The forms falsely listed the payments as non-employee compensation to Lango. Lango in turn reported the payments as income on his own income tax returns in 1991 and 1992. Clark did not report the money. The foreseeable tax loss to the IRS based on this scheme was about $3,000.

A federal grand jury indicted Goldberg on April 6, 1995 for offenses relating to the above activities. The indictment charged Goldberg with two counts of conspiring to defraud the United States government, 18 U.S.C. §371, several counts of aiding and assisting the filing of false income tax returns, 26 U.S.C. §7206(2), and several counts of mail fraud based on his alleged efforts to conceal his employment of Scopa from the latter's disability insurer. 18 U.S.C. §1341.

After moving unsuccessfully to dismiss the indictment, Goldberg waived his right to a trial by jury. Goldberg's trial before the district judge took eight days, and on September 6, 1995 , the court announced its findings. The court found Goldberg guilty of conspiring to defraud the government and of aiding and assisting in the preparation of false tax returns, but acquitted him on the mail fraud charges on the ground that his motive to help defraud the insurer had not been proved beyond a reasonable doubt.

At Goldberg's sentencing in December 1995, the district court made guideline calculations (described below) but then departed downward two levels and sentenced Goldberg at the bottom of the range. The result was a ten-month sentence--five months to be served in prison and five in community confinement--as well as three years of supervised release and a $20,000 fine. Goldberg now appeals, challenging his convictions and sentence.

The most important and difficult issues on appeal relate to Goldberg's conviction for conspiracy under 18 U.S.C. §371 to defraud the IRS. This type of conspiracy is known as a Klein conspiracy, taking its name from an earlier case involving a complex scheme designed to escape taxes. United States v. Klein [57-2 USTC ¶9912], 247 F.2d 908 (2d Cir. 1957). Goldberg argues that the district court misunderstood the crime's "purpose" element and that the evidence did not support a conviction.

The defraud clause of Section 371 criminalizes any conspiracy "to defraud the United States , or any agency thereof in any manner or for any purpose." 18 U.S.C. §371. Such conspiracies to defraud are not limited to those aiming to deprive the government of money or property, but include conspiracy to interfere with government functions. See, e.g., United States v. Tarvers, 833 F.2d 1068, 1075 (1st Cir. 1987). The crime with which Goldberg was charged, therefore, was that he conspired to interfere with the proper functioning of the IRS, through the filing of false tax documents.

It is commonly said that in such a conspiracy the fraud has to be a purpose or object of the conspiracy, and not merely a foreseeable consequence of the conspiratorial scheme. Dennis v. United States , 384 U.S. 855, 861 (1966); 1 Sand et al., Modern Federal Jury Instructions §19.02 (1990). Consider, for example, the case of a band of bank robbers. All know that the agreed-upon robbery will generate "income" that none of the robbers will report. Yet it would be straining to describe interference with the IRS as a purpose or object of the conspiracy. E.g., United States v. Vogt, 910 F.2d 1184, 1202 (4th Cir. 1990).

This requirement of purpose accords generally with conspiracy doctrine, United States v. Alvarez, 610 F.2d 1250, 1256 (5th Cir. 1980), but it is especially important under the defraud clause of section 371. There are not many financial crimes without some implications for false reporting in someone's tax filings, if not for tax liability itself. If section 371 embraced every foreseeable consequence of a conspiracy, many joint financial crimes having no other federal nexus--and perhaps many non-criminal acts as well--would automatically become federal conspiracies to defraud the IRS.

The "purpose" requirement, however, is easier to state than to apply. The laundering of drug money, for example, normally involves the deliberate concealment of the money's origin. The primary purpose is almost always to avoid detection of the underlying crime; but can a jury also find an implied secondary objective to conceal income from the IRS? We have held, on specific facts, that a jury could draw such an inference and also find a violation of section 371. E.g., United States v. Cambara, 902 F.2d 144, 147 (1st Cir. 1990); Tarvers, 833 F.2d at 1075-76.

Such cases are the source of Goldberg's first argument on this issue. He argues, inventively, that the conspirators either must have as their primary purpose the aim of frustrating the IRS or must be agreeing to undertake the conduct in question to conceal some other crime. An example of the first alternative (primary purpose) is Klein itself where a web of shell companies and deceptive arrangements was devised to evade taxes; the second alternative (concealment of crime) captures the money laundering precedents.

This view of section 371 might explain a number of cases and create a barrier against overreaching by prosecutors. But it makes no doctrinal sense. A conspiracy can have multiple objects, Ingram v. United States [59-2 USTC ¶15,245], 360 U.S. 672, 679-80 (1959), and any agreed-upon object can be a purpose of the conspiracy and used to define its character. The central problem, which ought not be shirked, is to distinguish rationally between cases where interfering with government functions is a purpose and those where it is merely a foreseeable effect of joint action taken for other reasons.

This effort poses subtle problems in discriminating "purpose" from "knowledge" and in separating the objects of a conspiracy from its more remote consequences. Volumes could be written on these subjects but--for cases like ours--a more compact solution is at hand: where the conspirators have effectively agreed to falsify IRS documents to misstate or misattribute income, we think that (depending upon the circumstances) the factfinder may infer a purpose to defraud the government by interfering with IRS functions in the sense endorsed by the Supreme Court in Dennis.

It may well be that the conspirators in this case had no subjective desire--primary or secondary--to throw sand in the wheels of the IRS, let alone a subjective aim to reduce tax liability. Goldberg's argument on this point, with one qualification as to the Clark conspiracy, may be plausible. But filing a number of false tax documents misattributing income can interfere so clearly and proximately with IRS functions--or at least a factfinder could (but need not) so find--that we see no sharp distinction under section 371 between a purpose to file such documents and a purpose to interfere.

In permitting a factfinder to equate the two purposes, we leave untouched the general precept, namely, that mere collateral effects of jointly agreed-to activity, even if generally foreseeable, are not mechanically to be treated as an object of the conspiracy. This would be a different case if, without filing false tax documents, Goldberg had agreed with his partners to pay Jones under the table, knowing that Jones had no intention of reporting the money to the IRS. If the difference is in degree, then here the degree matters.

This brings us to the evidentiary question raised by Goldberg which we rephrase to accord with our just-stated view of the law: does the evidence in this case show that Goldberg and at least one other conspirator shared a purpose to interfere with IRS functions by the filing of false income reports with the IRS? This question must be asked and answered separately as to each conspiracy, as Goldberg was convicted of two separate conspiracies under section 371 and each conviction involves a separate assessment.

In each conspiracy, the illicit purpose that gives rise to section 371 violation must be shared by two or more conspirators. Although the government's brief stresses the evidence pertaining to Goldberg's own role and knowledge, a conspiracy to defraud requires at least two who share that aim. Innocent third parties may be the unwitting instruments of a conspiracy. But when it comes to characterizing the purposes or objects of the conspiracy, it is those that are shared by at least two co-conspirators that make up the illegal agreement between them. United States v. Krasovich, 819 F.2d 253, 255 (9th Cir. 1987).

Here, the district court found that a purpose of the conspirators, in each conspiracy, was to interfere with the IRS. As we have said, such a purpose can be inferred, depending upon the facts, where the very acts agreed to by the conspirators included the filing of false income-related tax documents. This purpose can fairly be imputed to Goldberg who arranged for the creation of several or more false tax documents in each scheme. The duration and complexity of the schemes, and Goldberg's own sophistication, add to the inference.

There is no evidence that Goldberg discussed the filing of false tax documents with other conspirators. Yet we think that such conduct was an integral and self-evident part of each conspiracy, permitting the inference that other co-conspirators shared in that purpose. In the case of the Scopa conspiracy, false W-2s were given to the straws, who were participants in the scheme, over an extended period. Scopa himself signed a tax return with his wife, who was one of the straws, that incorporated a false W-2.

As to the Clark conspiracy, Lango received the false form 1099s, and he in turn reported the false figures to the IRS. Indeed, Lango asked that the amount be divided so that it could be reported in two different years, testifying later that Clark had made the suggestion. This indicates a tax motive but, in addition, shows that both men knew that the filing of false tax documents was an integral part of the scheme, and both shared in this purpose with Goldberg. In sum, the evidence supports the trial court's findings of a common purpose to interfere with IRS functions.

In addition to "the danger [of injustice] inherent in a criminal conspiracy charge," Dennis, 384 U.S. at 860, the defraud clause of section 371 has a special capacity for abuse because of the vagueness of the concept of interfering with a proper government function. For that reason, we have examined with special care both the concept and the evidence in this case. But having done so, we conclude that the conduct and purpose of the defendants, although markedly less sinister than in Klein, could properly be found to fall within the outer bounds of section 371.

Goldberg next challenges the admission at trial of two out-of-court conversations between Lango and Clark, in which they discussed the false landscaping invoices and the solicitation of Goldberg's participation in the scheme. These statements were admitted, over Goldberg's objection at trial, pursuant to Fed. R. Evid. 801(d)(2)(E), which provides that "a statement by a co-conspirator of a party during the course and in furtherance of the conspiracy" is not considered hearsay.

Goldberg does not dispute that Lango and Clark made the challenged statements during and in furtherance of the conspiracy, but he argues that the statements were not admissible against him because they were made before he joined. He relies heavily on our opinion in United States v. Petrozziello, 548 F.2d 20 (1st Cir. 1977), where we said that "if it is more likely than not that the declarant and the defendant were members of a conspiracy when the hearsay statement was made, and that the statement was in furtherance of the conspiracy, the hearsay is admissible." Id. at 23.

Although this language has been cited with approval in a few later cases, e.g., United States v. McCarthy, 961 F.2d 972, 976-77 (1st Cir. 1992), it conflicts with United States v. Baines, 812 F.2d 41 (1st Cir. 1987). Baines expressed the traditional notion that--insofar as hearsay is concerned--a late-joining conspirator takes the conspiracy as he finds it: "a conspiracy is like a train," and "when a party steps aboard, he is part of the crew, and assumes conspirator's responsibility for the existing freight . . .." Id. at 42; accord United States v. Saccoccia, 58 F.3d 754, 778 (1st Cir. 1995).

Frankly, the underlying co-conspirator exception to the hearsay rule makes little sense as a matter of evidence policy. No special guarantee of reliability attends such statements, save to the extent that they resemble declarations against interest. The exception derives from agency law, an analogy that is useful in some contexts but (as the Advisory Committee noted) is "at best a fiction" here. The most that can be said is that the co-conspirator exception to hearsay is of long standing and makes a difficult-to-detect crime easier to prove. United States v. Gil, 604 F.2d 546, 549 (7th Cir. 1979).

If starting afresh, one might argue that the narrow Petrozziello version of the exception should be preferred, if only because it accords better with the companion rule imposing substantive liability for other crimes committed during the conspiracy; a co-conspirator is held liable for foreseeable acts of others done in furtherance of the conspiracy but only if committed during the defendant's period of membership. United States v. O'Campo, 973 F.2d 1015, 1021 (1st Cir. 1992). Symmetry is at least convenient.

But we are not starting afresh. The broader Baines test describes the traditional approach, United States v. United States Gypsum Co., 333 U.S. 364, 393 (1948), presumptively adopted by the Federal Rules of Evidence. It is followed in most circuits. See 2 Saltzburg, et al., Federal Rules of Evidence Manual 219-22 (5th ed. 1990) (collecting cases). Most important, it is the test in most of our own recent cases, including Saccoccia, decided only 19 months ago. ¹ This panel is arguably not free, but is in any event not inclined, to depart from Saccoccia.

Goldberg's next claim on appeal is based on his motion filed prior to trial asking the district court to dismiss the indictment on the ground of selective prosecution. The district court denied the motion without holding a full evidentiary hearing. Goldberg claims that he alleged facts sufficient to require a hearing on his complaint, and he now asks this court to remand the case so that he may have such a hearing.

The government is allowed "broad discretion" in deciding whom to prosecute, Wayte v. United States, 470 U.S. 598, 607 (1985), but there are some limitations. It is said that the government may not base its decision to prosecute on an "unjustifiable standard," including the defendant's exercise of protected statutory and constitutional rights. Wayte, 470 U.S. at 608. Goldberg bases his selective prosecution claim on the theory that he was targeted by the government in response to his vigorous--and constitutionally protected--lobbying activities in opposition to the Third Harbor Tunnel project.

In seeking an evidentiary hearing, a defendant need only allege "some facts (a) tending to show that he has been selectively prosecuted and (b) raising a reasonable doubt about the propriety of the prosecution's purpose." United States v. Saade, 652 F.2d 1126, 1135 (1st Cir. 1981). But the court may refuse to grant a hearing if the government puts forward adequate "countervailing reasons" to refute the charge, id., and if the court is persuaded that the hearing will not be fruitful. Review on appeal is for abuse of discretion. United States v. Gary , 74 F.3d 304, 313 (1st Cir. 1996).

Here, Goldberg alleged that one of the prosecutors on the case made a comment to Goldberg's counsel during a preindictment meeting to the effect that Goldberg "should not have won" his fight with Frederick Salvucci, Massachusetts' secretary of transportation during the tunnel planning stage. Goldberg also claimed that the initials "D.D." on a prosecution file reflect the complicity in the investigation of David Davis, executive director of MassPort. Finally, he pointed to the fact that several of his co-conspirators in the two schemes, including Clark and Lango, were never indicted.

The government filed several affidavits to rebut the claim. It denied that the prosecutor in question made the alleged statement to Goldberg's attorney. It explained that the initials "D.D." on the file that raised Goldberg's suspicion in fact referred not to David Davis but to Denise Doherty, an FBI agent assigned to the case. In another district court paper, the government described the origins of its investigation into Goldberg's activities and gave examples of other recent prosecutions for mail fraud and Klein conspiracies.

The district court ultimately denied a hearing, saying that Goldberg's claims were "close to conclusory." We have reviewed the complete filings of both sides and the district court's explanation. What is involved is a judgment call--tempered on appeal by the deferential standard of review--as to the force and specificity of the allegations, the strength of the response, and the likelihood that a hearing would be helpful. United States v. Lopez, 71 F.3d 954, 963-64 (1st Cir. 1995). Here, the district court did not abuse its discretion.

The claim of selectivity was quite weak; the government largely explained its choice mainly to pursue Goldberg and Scopa. And the rather modest evidence of wrongful motive also melted away, leaving only a single dispute. As to this, four prosecutors denied under oath that the alleged remark had been made. But it is in any event too thin a reed to require an evidentiary hearing, given the lack of surrounding evidence to support a selective prosecution claim.

Even less need be said about Goldberg's later new trial motion, whose summary denial is also cited as error. In substance Goldberg complained that the government did not follow its own internal rules for tax prosecutions or reveal to him information about this decision. The government's procedures do not create substantive rights, United States v. Michaud [88-2 USTC ¶9577], 860 F.2d 495, 499 (1st Cir. 1988), and there is no substantial basis for believing that the government withheld Brady material, Brady v. Maryland, 373 U.S. 83 (1963), let alone that its actions were prejudicial.

Goldberg's last claim of error concerns his sentencing. In fixing the sentence, the district court enhanced Goldberg's base offense level of 10, by four levels--two levels for his role in the offense, U.S.S.G. §3B1.1(c), and two more levels for obstruction of justice, id. §3C1.1--to arrive at an adjusted offense level of 14. (All citations are to the November 1995 edition of the guidelines). However, the court departed downward two levels to 12 because it thought Goldberg's conduct was outside the "heartland" contemplated by the Klein conspiracy sentencing guideline. Id. §2T1.9.

The district judge stated that although Goldberg's conduct "as a matter of law constitutes a Klein conspiracy, as a matter of sentencing law, it seems to me inappropriate to apply the Klein conspiracy guidelines." He chose to depart downward two levels because he thought the guideline section for aiding and assisting tax fraud, §2T1.4, with a base offense level of 8 (when the tax loss is $3,001 to $5,000), was more reflective of Goldberg's conduct than the Klein conspiracy guideline, §2T1.9, which has a base offense level of 10. ²

The government, sensibly in our view, has chosen not to pursue an appeal from the downward departure. But Goldberg, as is his right, challenges the district court's decision to impose a two-level enhancement for his managerial or supervisory role in the Scopa and Clark conspiracies. The applicable guideline calls for an increase if "the defendant was an organizer, leader, manager, or supervisor in any criminal activity." U.S.S.G. §3B1.1(c). In such a case, a two-level increase applies to joint criminal activity that involved fewer than five participants and was not otherwise extensive. Id.

Goldberg says that the only person he managed or supervised was his bookkeeper, Arlene Meucci. Meucci, he argues, does not count under the guideline because she was not a culpable participant. See United States v. Morillo, 8 F.3d 864, 872 & n.13 (1st Cir. 1993); U.S.S.G. §3B1.1, comment n.1. However, at the sentencing hearing, the district court found that Goldberg "had a management role" in connection with false payroll and tax documentation directed to the straw employees in the Scopa conspiracy.

We review a district court's factfinding at sentencing under a clearly erroneous standard. United States v. Thompson, 32 F.3d 1, 4 (1st Cir. 1994). On the record before us, ample evidence shows that Goldberg superintended the straws' receipt of false tax documents. Goldberg says that Scopa and Clark were the true leaders of the two conspiracies. But a defendant need not be at the top of a criminal scheme to be a manager or supervisor. United States v. Savoie, 985 F.2d 612, 616 (1st Cir. 1993). Here, Goldberg's role was sufficient for the enhancement even if we assume that Scopa conceived of the payroll scheme and may have exercised primary supervision over the straws.

Affirmed.

¹ See Saccoccia, 58 F.3d at 778; O'Campo, 973 F.2d at 1023 n.5; United States v. Fields, 871 F.2d 188, 194 (1st Cir. 1989); United States v. Murphy, 852 F.2d 1, 8 (1st Cir. 1988); United States v. Anguilo, 847 F.2d 956, 969 (1st Cir. 1988); United States v. Reynolds, 828 F.2d 46, 47-48 (1st Cir. 1987); United States v. Cintolo, 818 F.2d 980, 997 (1st Cir. 1987).

² The ten-month sentence--five months to be served in prison and five in community confinement--was the minimum end of the resulting guideline range of 12. U.S.S.G. ch. 5, pt. A (10-16 months at offense level 12).

 

 

[93-1 USTC ¶50,058] United States of America , Plaintiff-Appellee v. Daniel Jay Callahan, Defendant-Appellant

(CA-11), U.S. Court of Appeals, 11th Circuit, 91-3010, 1/14/93, 981 F2d 491, Affirming an unreported District Court decision

[Code Secs. 6103 and 7203 ]

Failure to file return: Voir Dire: Prejudice.--Failure of the district court to allow a painting contractor early access to jury panel information did not cause prejudice. The court conducted a voir dire that elicited more information than the contractor could have received from the IRS regarding jurors' experiences with IRS audits. The contractor was guilty of perjury for producing a false document to a grand jury that was material to his defense. The document contained a stamped signature made with a stamp purchased after the purported date of the document. As a result of his production of the false document, the contractor's offense level under the sentencing guidelines was enhanced for obstruction of justice.

Rob ert W. Genzman, United States Attorney, Rob ert T. Monk, Karla R. Spaulding, Assistant United States Attorneys, Tampa, Fla. 33602, for plaintiff-appellee. Daniel Jay Callahan, 3214 Saffold Rd., Wimauma, Fla. 33598, pro se. DeeAnn Athan, 1802 W. Cleveland St., Tampa, Fla. 33606, for defendant-appellant.

Before KRAVITCH, Circuit Judge, GODBOLD and OAKES, ^* Senior Circuit Judges.

KRAVITCH, Circuit Judge:

In a twelve count indictment Daniel Jay Callahan ("Callahan") was charged with federal income tax evasion, willful failure to file tax returns, obstruction of justice and perjury before the federal grand jury. ¹ On appeal Callahan argues that his conviction should be overturned because the district court failed to release the jury lists in a timely fashion as required by 26 U.S.C. §6103(h)(5) . He also claims that the evidence was not sufficient to sustain the guilty verdict on the perjury counts and challenges the district court's decision to depart upward under the Sentencing Guidelines for obstruction of justice pursuant to U.S.S.G. §3C1.1.

We hold that the district court failed to comply with 26 U.S.C. §6103(h)(5) by denying Callahan's motion for early access to jury panel information, but that this failure did not prejudice Callahan. Further, we conclude that the evidence was sufficient to support Callahan's conviction on the perjury counts and that the district court did not err in departing upward for obstruction of justice in computing Callahan's sentence. Accordingly, we AFFIRM.

I.

Callahan owned and operated his own business as a painting contractor under various trade names. Until 1981, Callahan operated his business under the name "Dan Callahan Painting Contractor." He filed no income tax returns from 1973 to 1985. In 1981, tax deficiency assessments were issued against him by the IRS amounting to over $32,000 for 1973 and $8,900 for 1974. Shortly thereafter, Callahan ceased doing most of his business under "Dan Callahan Painting Contractor" and began using the name "Spray-Away." He opened a bank account with a false name and a false social security number for "Spray-Away." His main client, WG-Development Company (later known as Sunmark Communities Corporation), paid Callahan by writing checks to "Spray-Away." Callahan continued to use "Dan Callahan Painting Contractor" to bill customers of whom the IRS was unaware.

After Callahan learned that the government knew of his use of the "Spray-Away" trade name, Callahan opened another bank account in a different bank in the name of "Confederated Enterprises, Inc.," using his step-daughter and a friend as the authorized signatories. He procured a signature stamp from M&M Printing Company containing these two authorized signatures; this stamp allowed him to exercise control over the account without appearing to be connected to it.

Callahan deposited more than $32,000 in the "Confederated Enterprises" account, ninety-eight percent of which was subsequently disbursed to defendant or his main suppliers and advertisers. No disbursements were made to any of the four corporate officers listed in state records.

The grand jury was convened in December 1989 to investigate whether Callahan had violated any criminal laws relating to tax evasion. Callahan testified before the grand jury regarding his connection with "Spray-Away" and "Confederated Enterprises," his knowledge of their purposes and whether he received any income from them. Callahan testified that his connection to "Confederated Enterprises" was minimal, that he had merely assisted some friends in starting up the business. He also claimed to not remember whether he received any income from either "Confederated" or "Spray-Away."

After Callahan was indicted by the grand jury on April 4, 1990 , and during reciprocal discovery, Callahan presented to the IRS a document that he claimed was a January 1, 1985 , agreement between the alleged owners of "Confederated" and himself. The substance of the agreement purported to demonstrate that the corporation had agreed to compensate Callahan for his services, thus supporting Callahan's theory of defense. The document had affixed to it the stamped signatures of the two officers of the company. The government introduced this document at trial, however, because it was able to show that Callahan had procured the signature stamp on February 8, 1985 , after the date of the agreement. This showed that the document was not what Callahan claimed it to be.

Two months before his trial was to begin, Callahan filed a motion for timely release of the jury list pursuant to 26 U.S.C. §6103(h)(5) . ² Initially, the United States Magistrate Judge granted Callahan's motion and ordered a release of the jury list. When Callahan did not receive the list, he filed a motion for a continuance of the trial. In response to Callahan's motion, the government asked the Magistrate to reconsider her original ruling granting the release. On August 1, 1990 , the Magistrate issued her final order, denying Callahan access to the jury panel list until the day of trial. The district judge affirmed that order. ³

At the commencement of the trial, Callahan was given access to the jury panel list and given the opportunity to complete his request with the Secretary of the Treasury, which he attempted to do by fax machine that day. The district court provided Callahan the opportunity during voir dire to question the jurors regarding their past involvement with the IRS. Callahan declined to question the jurors. The trial court, however, did conduct a voir dire examination of the jurors in which it asked whether any of the jurors or their immediate family had ever been the subject of an audit, and if so, whether the matter was resolved or pending. The court also inquired as to whether any encounter with the IRS had left the jurors with a bad feeling toward the IRS.

After an eight day trial, Callahan was convicted on all twelve counts. The district court sentenced Callahan to eighteen months incarceration on Counts One through Four and Eight through Twelve. On Counts Five through Seven, Callahan was sentenced to one year for each count. All of the terms were to be served concurrently. Callahan's incarceration is to be followed by three years of supervised release. ⁴

II.

Callahan argues that under 26 U.S.C. §6103(h)(5) he was entitled to receive the jury panel list before the trial so that he could seek information from the Secretary of the Treasury as to whether any of the potential jurors had been the subject of an audit by the IRS. Granting him access to the juror list before the trial began, Callahan asserts, would have enabled him to conduct a meaningful voir dire of the potential jurors. Thereafter, he could have used his peremptory challenges more effectively.

The statutory language of §6103(h)(5) "does not itself describe the procedures to be followed. . . . Therefore, any judgment concerning the proper procedures under §6103(h)(5) must be based on a consideration of what procedures will best carry out the purposes of the statute." United States v. Hashimoto [89-2 USTC ¶9432 ], 878 F.2d 1126, 1130 (9th Cir.1989). Section 6103(h)(5) is an exception to the general rule establishing confidentiality with respect to disclosure of taxpayers' returns. See 26 U.S.C. §6103(a) . "The legislative history of §6103(h)(5) reflects that Congress sought to eliminate the prior informational advantage enjoyed by government regarding a potential juror's tax history." United States v. Spine [91-2 USTC ¶50,464 ], 945 F.2d 143, 147 (6th Cir.1991). Prior to passage of §6103(h)(5) , the government was able to obtain tax information on prospective jurors but tax defendants were not. In passing the Tax Reform Act of 1976, of which §6103(h)(5) was one part, Congress decided to allow the government to maintain access to the information as long as defendants had access to the same information. See id. (detailing the legislative history of the Act).

This circuit recently has ruled that the best way to ensure that the goals of §6103(h)(5) are met is to create "a presumption of reversal . . . when a party is denied access to §6103(h)(5) information." United States v. Schandl [91-2 USTC ¶50,580 ], 947 F.2d 462, 469 (11th Cir.1991), cert. denied, -- U.S. --, 112 S.Ct. 2946, 119 L.Ed.2d 569 (1992). The Schandl panel followed the Fifth Circuit decision in United States v. Masat [90-1 USTC ¶50,156 ], 896 F.2d 88 (5th Cir.1990) in refusing to establish a per se rule that reversal is required if a defendant is denied the jury list before the trial. ⁵ Since the decision in Schandl, a number of circuits have adopted the same approach. See United States v. Axmear [92-1 USTC ¶50,278 ], 964 F.2d 792, 793 (8th Cir. 1992); United States v. Droge [92-1 USTC ¶50,207 ], 961 F.2d 1030, 1032-37 (2nd Cir.), cert. denied, -- U.S. --, 113 S.Ct. 609, -- L.Ed.2d -- (1992); Spine [91-2 USTC ¶50,464 ] 945 F.2d at 145-48.

"This presumption [of reversal] may be overcome where voir dire questioning elicits information similar to that accessible under §6103(h)(5) ." Schandl [91-2 USTC ¶50,580 ], 947 F.2d at 469. Under §6103(h)(5) , the Secretary is required to disclose only whether any of the jurors have been the subject of a tax investigation. Here, as in Schandl, the trial court conducted a thorough voir dire examination. Through his questioning, the trial judge elicited more information than would have been available from the Secretary by asking any juror who had been audited whether he or she harbored ill feelings toward the IRS. In addition, all potential jurors were asked whether there was any reason they felt they could not be fair toward either party. ⁶ Therefore, the presumption of prejudice created by the district court's denial of Callahan's timely motion for the jury panel lists was sufficiently overcome.

We want to make clear, however, that Schandl means what it says. Merely because we have adopted a rebuttable presumption standard and not a per se reversal standard does not mean that we interpret 26 U.S.C. §6103(h)(5) to be discretionary. In the future, we expect the statute to be strictly followed. ⁷ We reiterate what the court said in Schandl:

Our decision today is intended to do two things: (1) ensure that all timely requests for jury panel information will be honored by the district court; and (2) provide the district court with the tools necessary to guarantee a fair trial where a party cannot access information under the statute prior to voir dire.

Schandl [91-2 USTC ¶50,580 ], 947 F.2d at 469 (footnote omitted).

III.

Callahan asserts that there was insufficient evidence to convict him under 18 U.S.C. §1623 because the evidence at trial failed to establish that Callahan knowingly made false statements to the grand jury that were material to the grand jury's investigation. Callahan argues that the prosecutor asked intentionally ambiguous questions, which Callahan misinterpreted, and to which Callahan gave answers that were, at the most, unresponsive but not materially false. According to Callahan, the government did not prove that he knowingly lied to the grand jury regarding his business associations with "Spray-Away" and "Confederated Enterprises."

In reviewing a challenge on sufficiency of the evidence grounds, " 'we must view the evidence in the light most favorable to the government, drawing all reasonable inferences in favor of the jury's verdict.' " United States v. Martin, 961 F.2d 161, 163 (11th Cir.), cert. denied, -- U.S. --, 113 S.Ct. 271, 121 L.Ed.2d 200 (1992) (quoting United States v. Van Hemelryck, 945 F.2d 1493, 1499 (11th Cir.1991)). After reviewing the record, we conclude that a reasonable juror could have found that the government proved beyond a reasonable doubt that Callahan knowingly lied to the grand jury about his business dealings. See Martin, 961 F.2d at 163 (citing Van Hemelryck, 945 F.2d at 1499-1500).

IV.

Callahan's final ground for appeal is that the district court abused its discretion by enhancing his offense level for obstruction of justice pursuant to U.S.S.G. §3C1.1. ⁸ The enhancement was based on Callahan's production, during discovery, of the document that purported to be the contract between him and "Confederated Enterprises, Inc." Among the specific conduct which constitutes obstruction of justice under §3C1.1 is "producing or attempting to produce a false, altered, or counterfeit document or record during an official investigation or judicial proceedings." U.S.S.G. §3C1.1, comment. (n. 3).

A finding that a defendant has obstructed justice pursuant to U.S.S.G. §3C1.1 is a factual determination that will not be overturned on appeal unless clearly erroneous. United States v. Cain, 881 F.2d 980, 982 (11th Cir.1989). The evidence introduced by the government at trial showing that the contract could not have been signed and executed when Callahan claimed it was--because the signature stamp had not yet been made--provided a sufficient basis on which to make a two-level enhancement under §3C1.1.

For the foregoing reasons, the conviction and the sentence imposed are AFFIRMED.

^* Honorable James L. Oakes, Senior U.S. Circuit Judge for the Second Circuit, sitting by designation.

¹ Count One of the indictment alleged that Callahan obstructed the admin istration of justice in violation of 18 U.S.C. §1505 by impeding an investigation by the Internal Revenue Service ("IRS") of his tax records. Counts Two through Four alleged that Callahan willfully evaded paying taxes for 1973 and 1974 in violation of 26 U.S.C. §7201 . Counts Five through Seven alleged that Callahan willfully failed to file tax returns for the years 1983, 1984 and 1985 in violation of 26 U.S.C. §7203 . Counts Eight through Twelve alleged that Callahan made material false allegations to the federal grand jury in violation of 18 U.S.C. §1623.

² 26 U.S.C. §6103(h)(5) provides:

(5) Prospective jurors

In connection with any judicial proceeding described in paragraph (4) to which the United States is a party, the Secretary shall respond to a written inquiry from an attorney of the Department of Justice (including a United States attorney) involved in such proceeding or any person (or his legal representative) who is a party to such a proceeding as to whether an individual who is a prospective juror in such a proceeding has or has not been the subject of any audit or other tax investigation by the Internal Revenue Service. The Secretary shall limit such response to an affirmative or negative reply to such inquiry.

³ In its motion for reconsideration, the government cited to an order by United States District Judge William Terrell Hodges in United States v. Awan, No. 88-330CR-T-13(B) (M.D.Fla., Jan. 9, 1990), denying defendant's request for release of the jury panel lists. The Magistrate rested her revised order, in part, on the ruling in Awan. However, Awan was indicted under the Money Laundering Control Act of 1986, not under federal income tax laws. Thus, neither the district court's order nor the opinion of this court on appeal, United States v. Awan, 966 F.2d 1415 (11th Cir.1992), is binding on this case.

⁴ Only Counts Eight through Twelve were subject to sentencing under the Sentencing Guidelines, as only those charged offenses occurred after November 1, 1987 .

⁵ In their briefs, Callahan and the government raise a number of arguments as to why this court should or should not adopt a per se rule. Because Schandl was decided after both sides submitted their briefs on appeal, most of these arguments became moot. However, it was not until a few days before this case was scheduled for oral argument that the government filed a motion with supplemental authority, including Schandl. Although this court is able to keep up to date on its own precedent, we recommend that all parties before this court follow the appropriate procedure under Fed.R.App.P. 28(j) in notifying the court of any changes in the law that affect their arguments on appeal.

⁶ The following is an example of the questioning that took place:

THE COURT: [I]s there anything about the nature of the charges in this case about which because of some experience you may have had or for some other reason you have formed a particularly strong opinion or conviction one way or another so that you might have difficulty serving as a fair and impartial juror in the case merely by virtue of the nature of the charges themselves and before you've heard anything more about the evidence or lack of evidence in the case? . . .

[PANELIST]: Yes, I just get real hateful when it comes to IRS, people not paying.

THE COURT: All right.

[PANELIST]: We work so hard too and people try. . . . We work so hard to pay our taxes, and people don't.

(Supp.R. at 3-2--3-3).

⁷ To the extent any local rules of court prohibit disclosure of the jury list until the day of trial, those rules are preempted by §6103(h)(5) . See, e.g., M.D.Fla.R. 5.01(b). In addition, we advise the government to adopt a policy of not opposing a defendant's motion for release of the jury list under §6103(h)(5) .

⁸ Without reference to any case law, Callahan also asserts that his due process rights were violated when the probation officer responsible for writing Callahan's Presentence Investigation ("PSI") held a "position of the parties" meeting without Callahan or his counsel present. Callahan was proceeding pro se in this action and had stand-by counsel. Although Callahan claims that he was not notified of the meeting, he admits that his counsel was notified, but chose not to attend because of a scheduling conflict.

Despite their absence from this meeting, Callahan and his counsel prepared written objections to the PSI, many of which were resolved in his favor. In addition, Callahan was given ample opportunity at the sentencing hearing to voice his objections to the PSI and rebut the government's evidence. Through these procedures, Callahan's due process interests were adequately protected. See United States v. Castellanos, 904 F.2d 1490, 1495 (11th Cir.1990); United States v. Wise, 881 F.2d 970, 972 (11th Cir.1989).