Concealment of Assets Page2

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In addition to hiding the assets from his real estate holdings through Gemstone, Sturman also sold his adult bookstores and attempted to hide the income from these sales. The evidence also supports the inference that Sturman sold the bookstores after his indictment so that, in the event he was convicted, the IRS would not discover and attach his property in order to pay the taxes owed.

The government showed that Kraig also took part in this portion of the conspiracy. For example, in 1988, Kraig prepared a contract indicating that one of Sturman's employees, John Bordone, was purchasing adult bookstores from Eduardo Stockali, one of the coconspirators in this action. In fact, Sturman, not Stockali, owned the stores. Bordone made installment payments on the stores he had purchased. Bordone testified that he sent the checks, which were made out to Stockali, to Kraig in Cleveland . Kraig forwarded the checks to Stockali for deposit in one of the Swiss offshore accounts set up on behalf of Sturman by the Panamanian law firm. Kraig accepted these payments from Bordone between 1988 and 1991. Bordone Tr. at 49-69, J.A. at 239-59.

In 1990, after Sturman was convicted, the IRS entered a large tax assessment against Sturman and proceeded to try to collect the amount through levies and liens on Sturman's properties, including Gemstone. Sturman, through the coconspirators in this case, including Kraig, hired two Cleveland lawyers, Frank DeSantis and Jim Scott, to file lawsuits against the United States to challenge the tax levies and for wrongful prosecution. The new lawyers said they would only take the case if it could be demonstrated that Sturman was not the beneficial owner of Gemstone. Ginsberg Tr. at 241-45, J.A. at 435-43. Kraig testified that he told the new lawyers that he thought the trust was owned by Sturman for the benefit of Sturman's children but "he wasn't sure." DeSantis Tr. 336, 366, J.A. at 267, 297. One of the lawyers testified at trial that Kraig "assured" him that Sturman was not the owner. DeSantis Tr. 336-43, 406-07, J.A. at 267-74, 302-03. In 1991, Kraig met with Ginsberg and Horatio Alfaro, the Panamanian lawyer and a coconspirator in this case, to decide what information about Gemstone to turn over to the newly-hired lawyers for purposes of the suit against the United States .

Kraig prepared a memorandum for Sturman advising him that to prevail in a wrongful levy action against the IRS, he would need to show that someone else owned Gemstone or to show that Gemstone is fully owned by an irrevocable trust. As mentioned above, Ginsberg testified that Kraig had known since at least a 1989 meeting that both Ginsberg and Kraig attended with Sturman that Gemstone was not owned by a trust. Ginsberg Tr. at 256-64, J.A. at 454-62. Ginsberg ultimately drafted a false affidavit stating that a Swiss citizen named Thomas Kummer was the owner of Gemstone and that Sturman had no ownership interest in Gemstone. Ginsberg Tr. at 253, J.A at 451; Gov't Ex. 64, J.A. at 234. This affidavit was presented to the IRS by the new lawyers as proof that Sturman did not own Gemstone. The new lawyers, however, went to Switzerland to meet with the alleged owner of the trust and discovered that Sturman was in fact the beneficial owner of Gemstone. The new lawyers resigned. Ginsberg Tr. 180, DeSantis Tr. at 361-62, J.A. at 328, 292-93.

Kraig was tried separately from his codefendants and was convicted by a jury in April 1995. He was sentenced after a hearing to 30 months in jail, three years supervisory release and a $10,000 fine.

II.

A. The Conviction

1. Motion to Dismiss the Indictment

Kraig first contends that the indictment should have been dismissed. The indictment charged Kraig with conspiracy pursuant to 18 U.S.C. §371 , which states:

If two or more persons conspire either to commit any offense against the United States , or to defraud the United States , or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined....

Section 371 prohibits two kinds of conspiracies: (1) conspiracies to commit a specific offense against the United States and (2) conspiracies to defraud the United States . In order to charge a violation under section 371 , the government must show that the defendant conspired to commit one or more substantive offenses against the United States or that the defendant conspired to defraud the government in any manner for any purpose.

Kraig was charged under the defraud portion of the statute. The indictment under which Kraig was charged states that he

did unlawfully, knowingly and willfully conspire, combine, confederate and agree [with other named and unnamed defendants] to defraud the United States of America by hampering, hindering, impeding, impairing, obstructing and defeating the lawful functions of the [IRS] in the ascertainment, computation and collection of income taxes [in violation of 18 U.S.C. §371 ].

Indictment at ¶1, J.A. at 18-19. Relying on United States v. Minarik [90-1 USTC ¶50,085 ], 875 F.2d 1186 (6th Cir. 1989), Kraig contends that at most he could be convicted under the "offense" clause of Section 371 because the evidence demonstrated only that he had conspired to commit a violation of 26 U.S.C. §7206(4) by concealing assets upon which the IRS may impose a levy for taxes owed. That statute criminalizes the removal or concealment of any good, commodity or property upon which levy is authorized with intent to evade or defeat assessment or collection of any tax.

Minarik held that conspiracy to commit an offense against the United States and conspiracy to defraud the United States under section 371 are two separate crimes and the government must allege and prove violation of one clause or the other. Specifically, Minarik held that a defendant must be charged with a conspiracy to commit an offense against the government and not a conspiracy to defraud if there is a specific statute describing the conduct involved in the alleged conspiracy. [90-1 USTC ¶50,085 ], 875 F.2d at 1193-94.

In Minarik, one of the defendants had been issued a tax assessment. The defendant responded that she did not owe the tax. The defendant then arranged to sell a house she owned and received the payment by seven installment checks of less than $5,000 each. When she tried to cash the checks, the bank contacted the IRS and she was arrested for violating the Bank Secrecy Act which requires the filing of a report with the IRS for any transaction over $10,000. The defendant was charged under section 371 for conspiring to defraud the government by concealing from the government the nature of and income from a business. The indictment did not make clear what function of the government the defendants were impeding.

The defendant in Minarik properly could have been charged under §7206(4) of the Internal Revenue Code, which, as described above, makes it a felony to conceal any goods or commodities on which a tax or levy has been imposed. The Minarik Court , therefore, found that the facts proved a conspiracy under the "offense" clause of §371 for violating §7206(4) not the "defraud" clause as the indictment indicated and therefore dismissed the indictment. Minarik explained that the purpose of the "defraud" section of §371 "was to reach conduct not covered elsewhere in the criminal code" and should not be used when a specific provision covers that conduct. [90-1 USTC ¶50,085 ], 875 F.2d at 1194.

Minarik was concerned with whether the indictment adequately notified defendants of the charges against them, thereby prejudicing defendants ability to prepare for trial. The government changed its theory of the case throughout the proceeding. This Court found that the prosecution used the defraud clause in a way that caused "great confusion about the conduct claimed to be illegal." Id. at 1196. Minarik states that "prosecutors and courts are required to determine and acknowledge exactly what the alleged crime is. They may not allow the facts to define the crime through hindsight after the case is over." Id.

At least two later Sixth Circuit cases have distinguished Minarik: United States v. Sturman, 951 F.2d 1466 (6th Cir. 1991), cert. denied, 504 U.S. 985 (1992) and United States v. Mohney [91-2 USTC ¶50,568 ], 949 F.2d 899 (6th Cir. 1991), cert. denied, 504 U.S. 910 (1992). These cases discuss Minarik extensively and distinguish Minarik on its facts. See also United States v. Hurley, 957 F.2d 1, 3-4 (1st Cir.), cert. denied, 506 U.S. 817 (1992); United States v. Notch [91-2 USTC ¶50,470 ], 939 F.2d 895, 900-01 (10th Cir. 1991); United States v. Bilzerian, 926 F.2d 1285, 1302 (2d Cir.), cert. denied, 502 U.S. 813 (1991) (indictment under defraud clause proper where conduct broader than specific statutory provision).

In both Sturman and Mohney, the Court found that the conduct at issue satisfied the defraud clause of section 371 . The conspiracies in these two cases, unlike Minarik, violated numerous tax statutes--not just one. The indictment in this case is identical to the indictment in the Sturman case. The conduct alleged in the indictment, if proven, violates more than one specific statute. The broad nature of the conspiracy distinguishes this case from Minarik.

Kraig contends, as did the defendants in Minarik, that §7206(2) and (4) of the Internal Revenue Code cover the conduct for which Kraig was indicted and that at most he should have been charged under the "offense" clause of section 371 and not the "defraud" clause. Kraig contends that the government's theory presented at trial related solely to Kraig's concealment of Sturman's assets in order to defeat the tax liability imposed in 1990 and the government did not attempt to prove that Kraig had impeded the "ascertainment or computation" of taxes prior to the time the levy was imposed against Sturman.

The facts presented in this case are more analogous to those in Sturman and Mohney than Minarik. First, unlike Minarik, an indictment under the "defraud" clause of section 371 is proper here because the conduct undertaken by Kraig is broader than that encompassed solely by section 7206 . Charging a defendant under the "defraud" clause of section 371 is appropriate when the conspiracy alleges violation of more than one statute. In Minarik, the conspiracy had the narrow objective of concealment of assets upon which the IRS was empowered to levy and arose from a single event--the sale of a house. That conduct was explicitly proscribed by 28 U.S.C. §7206(4) . In contrast, the government in this case alleges that Kraig and his coconspirators participated in a long-standing and wide-ranging scheme to deceive the IRS regarding the amount and source of Sturman's assets, including allegations of improper conduct prior to the levy of the tax liability against Sturman. No provision of the tax code covers the totality and scope of the conspiracy. The government contends that the members of the Sturman conspiracy violated several tax statutes including 26 U.S.C. §7201 (evasion of assessment and payment of taxes), 26 U.S.C. §7204 (concealing assets subject to levy), 26 U.S.C. §7206 (concealment of assets after levy of tax) and 18 U.S.C. §1001 (providing false information to the IRS). The indictment charged that the conspirators here, including Kraig, used nominees, sham transactions and others means of obstruction to keep the IRS from "ascertaining, computing and collecting" Sturman's taxes. Only the defraud clause can adequately cover all the aspects of the conspiracy in this case.

Second, unlike the indictment in Minarik, the indictment here gave Kraig adequate notice of the conduct constituting the charges against him. In Minarik, the indictment did not make clear what function of the Treasury Department the defendants were impeding and the government changed its theory of the case throughout the indictment process and trial. We concluded that the defendants properly could have been charged under 28 U.S.C. §7206(4) and therefore could not be charged under the defraud clause but convicted on evidence that supports the offense clause. When a statute closely describes the conduct that the defendant is accused of violating, we reasoned that requiring the indictment to charge the defendant with conspiracy to commit the specific crime reduces the uncertainty in the case.

Furthermore, unlike Minarik, the government did not shift its theory between the "offense" an "defraud" clauses of section 371 . The government consistently has maintained that Kraig and the other coconspirators sought to deceive the IRS through an elaborate set up of offshore bank accounts and shell corporations.

Accordingly, because the conduct alleged in the indictment fits within the "defraud" section of section 371 and the indictment gave adequate notice of the charges against Kraig, the District Court did not err in denying the motion to dismiss the indictment.

2. Sufficiency of the Evidence

Kraig next asserts that the evidence is insufficient to support his jury conviction. The record, however, contains both direct evidence of Kraig's knowledge of the conspiracy and circumstantial evidence arising from Kraig's ongoing involvement in sham transactions over a number of years.

Evidence is sufficient to uphold a jury conviction if after viewing the evidence in the light most favorable to the government and drawing all inferences in the government's favor, a reasonable juror could find that each element of the offense has been established beyond a reasonable doubt. United States v. Taylor , 13 F.3d 986, 991 (6th Cir. 1994).

When attempting to prove an individual's participation in a conspiracy, the government must first establish that a conspiracy existed. The essential elements of a conspiracy are: (1) the conspiracy described in the indictment was wilfully formed, and was existing at or about the time alleged; (2) that the accused willfully became a member of the conspiracy; (3) that one of the conspirators thereafter knowingly committed at least one overt act charged in the indictment at or about the time and place alleged; and (4) that such overt act was knowingly done in furtherance of some object or purpose of the conspiracy as charged. United States v. Sturman, 951 F.2d at 1474 (citations omitted).

Kraig contends that the government failed to prove that he intentionally joined or participated in a conspiracy to defraud the IRS. Kraig also seems to contend that lawyers are held to a different standard when evaluating their participation in a conspiracy. Kraig states: "the actions of a lawyer in representing his/her client can only create an inference that the attorney was connected to and a willing participant in a conspiracy if the evidence establishes that the attorney 'understood that [his/her] facially proper undertakings were part of [an illegal scheme.]' " Appellant's brief at 19 (citing United States v. Klein, 19 F.3d 20 (6th Cir. 1994) (unpublished)). Klein holds that this understanding can only be inferred if the evidence establishes that (1) the lawyer's involvement in the operation of the illegal enterprise was so pervasive that his knowledge of its illegal nature was reasonably certain or (2) he misrepresented or actively concealed facts about the illegal enterprise. Klein, slip op. at 7-8 (the "sheer number" of transactions with which Klein was involved gave rise to an inference that Klein knowingly and wilfully participated in the conspiracy to defraud). Kraig contends that he meets neither of the Klein criteria.

First, to the extent that Kraig maintains that lawyers should be held to a different standard from nonlawyers, we disagree. The cases cited by Kraig do not establish any different standard for lawyers when reviewing their participation in a conspiracy. Second, as detailed below, it appears from the evidence that Kraig meets both criteria set out in the cases on which he relies. Kraig's involvement in Sturman's operation was "so pervasive that [his] knowledge of its illegal nature was reasonably certain" and Kraig "misrepresented or actively concealed facts" about Sturman's activities.

Ample evidence was submitted at trial from which the jury could have convicted Kraig. The most harmful testimony came from Ginsberg. As to pre-levy conduct, Ginsberg testified that in 1988, well before the tax levy against Sturman, Ginsberg turned to Kraig for "information, advice and help in dealing with Gemstone in general." Ginsberg Tr. at 207, J.A. at 405. Ginsberg testified that Kraig was "the person that knew most of the details about Gemstone. [Kraig] gave me all the information, all the files, and he had been involved in many of the transactions that had come to me in the files. ... [H]e was Reuben's attorney and close friend and he could get things done and he could tell me who to deal with and just provide me with information to help me." Id. Ginsberg further testified that "[Kraig] had given me outlines of which properties were to be purchased [by Gemstone], how they were to be purchased, where the money was to come from .... " Ginsberg Tr, at 216, J.A at 414. In 1989, about the time the levy was assessed, Ginsberg sent a memo to Kraig and others outlining how he planned to transfer different properties into Gemstone's name. Gov't Ex. 30, J.A. at 207.

After the tax levy was assessed, evidence demonstrates that Kraig participated in keeping the IRS from discovering who actually owned Gemstone. Ginsberg testified that at least by March 1989 Kraig knew that Gemstone was actually owned by Sturman and not by a trust. Ginsberg Tr. at 240, J.A at 439. Kraig and Ginsberg then lied to the lawyers they had hired to file a wrongful levy action against the United States on Sturman's behalf when they told the lawyers that a Swiss citizen named Kummer owned the trust and manufactured a false affidavit so stating. Ginsberg Tr. at 235, 253-54, J.A. at 433, 451-52.

Other testimony showed that Kraig was involved in concealing assets from stores Sturman sold. Kraig was involved in drafting the sales contracts to make it look like Eduardo Stockali was the seller. Checks made out to Stockali were sent to Kraig who sent them to Stockali in Switzerland . Stockali then deposited the checks in offshore bank accounts. Kraig sent copies of the checks to Sturman so Sturman could keep track of how much was being deposited in the offshore accounts. Ginsberg Tr. at 265, J.A. at 463; Bordone Tr. at 60-61, J.A. at 250-51.

Other activities between 1985 and 1993 also should have alerted Kraig that his actions on behalf of Sturman were illegal. Sturman's offices were raided by the IRS in 1985 while Kraig was a tenant in the space. Later in 1985, Sturman was indicted in a 16-count conspiracy for tax fraud. Several lawyers and accountants quit representing Sturman and told Kraig why they were leaving and advised him to leave too. The evidence shows that Kraig knew that Sturman owed taxes and conspired to deprive the government of the information it needed to ascertain and collect those taxes, as well as concealing assets.

Therefore, the record indicates that the jury reasonably could have inferred from the evidence that Kraig knew of the conspiracy, willfully joined the conspiracy and participated in fulfilling the objectives of the conspiracy both before and after the assessment of the tax levy against Sturman. Kraig's conviction under the defraud clause of 18 U.S.C. §371 is supported by adequate evidence.

B. Sentencing

1. Kraig's Role in the Offense

The District Court enhanced Kraig's base offense level by three levels for his role as a "manager" in the conspiracy. Kraig challenges this enhancement because he contends that the evidence does not show that he in any way controlled or supervised any of the other coconspirators.

U.S.S.G. §3B1.1(b) provides a three-level enhancement if the defendant is a "manager or supervisor" of criminal activity that involves five or more participants or is otherwise extensive. Contrary to Kraig's assertion, the precedents in our Court hold that the evidence need not show that Kraig was the manager or supervisor of five other persons, but rather that he had a managerial or supervisory role in illegal conduct involving five or more persons. See, e.g., United States v. Dean, 969 F.2d 187, 197 (6th Cir. 1992), cert. denied, 507 U.S. 1033 (1993) (guidelines require five participants, not five subordinates to defendant).

The criminal activity here clearly involved more than five participants. The indictment here names four participants and by including Reuben Sturman, not named in the indictment at issue here but clearly a participant in the conspiracy, the total is at least five. Moreover, there is evidence that many more people were involved in the conspiracy. See Memorandum Opinion Regarding Sentencing at 4-5, J.A. at 52-53.

As to Kraig's role in the conspiracy, the evidence supports the finding that he recruited lawyers and accountants to participate in the scheme. He recruited attorney Robert Garfield to consolidate various real estate holdings of Sturman's into one entity that became Gemstone. Kraig contacted the Panamanian law firm that formed Gemstone. The testimony also demonstrates that Kraig provided information about Sturman's various holdings to the numerous accountants and lawyers working for Sturman and it was to Kraig that these persons turned for information regarding Gemstone. Given this ample evidence, it was within the District Court's discretion to enhance Kraig's base offense level by three levels.

2. Calculation of Kraig's Base Offense Level

a. Which Subsection to Use

Kraig's base offense level was established pursuant to U.S.S.G. §2T1.9, Conspiracy to Impair, Impede or Defeat Tax. Kraig does not contest the correctness of using this guideline, but contends that the wrong subsection of the guideline was used in determining his base offense level. Subsection (a) provides that the greater of (1) the base offense level for section 2T1.1 or section 2T1.3, whichever is applicable depending on the underlying conduct, or (2) base offense level 10 should be applied. Section 2T1.1, Tax Evasion, and section 2T1.3, Fraud and False Statements Under Penalty of Perjury, provide that the base offense level for these crimes is to be determined by applying the tax tables contained in section 2T4.1.

The District Court determined that section 2T1.9(a)(1) applied and therefore looked to section 2T1.1 and section 2T1.3 as directed. The District Court determined that either section 2T1.1 or section 2T1.3 could be applied in this case and because they both use the tax table in the same way, as a practical matter, therefore, it was not necessary to determine which section applied. Both sections 2T1.1 and 2T1.3 direct the user to establish the "tax loss" caused by the conduct and to then look to the tax loss table in section 2T4.1 to determine the base offense level. Kraig contends that because there was no "tax loss" as defined in the sections 2T1.1 and 2T1.3 and his offense is not similar to either of the tax offenses covered by sections 2T1.1 or 2T1.3, the District Court should have defaulted to section 2T1.9(a)(2) and imposed a base offense level of 10.

We do not agree with Kraig's interpretation. The plain language of section 2T1.9 states that the applicable statutory provision is 18 U.S.C §371 . Application Note 2 provides that the base offense level should come from sections 2T1.1 or 2T1.3, whichever is most applicable, if the base offense level is more than 10. As the base offense level applicable here under either section is greater than 10, the plain language of the guideline directs that one of these two sections is to be used. The case law is in agreement. See, e.g., United States v. Moore, 997 F.2d 55, 60 (5th Cir. 1993); United States v. Hunt, 25 F.3d 1092 (D.C. Cir. 1994).

b. Calculating the Tax Loss

Kraig asserts that if this Court determines that the tax loss table under §2T4.1 does apply to determine his base offense level, the District Court's calculation of the tax loss here was based on improper valuations of the properties involved. Kraig maintains that the tax loss did not exceed $1,500,000 and that the base offense level, therefore, should have been 17. We do not agree. The trial court conservatively estimated the tax loss at between $1,500,000 and $2,500,000 for a base offense level of 18.

In assessing the amount of tax loss, the district court is to make a "reasonable estimate" of the amount of the loss that defendant intended to inflict, not the actual amount of the government's loss. United States v. Moore , 997 F.2d at 55. See also Sentencing Memorandum at 3, J.A. at 51.

The trial court estimated the value of four properties in arriving at the estimated amount that the conspiracy attempted to conceal from the government to be in excess of $1,500,000 but less than $2,500,000. This is a conservative estimate and is supported by the evidence. The trial court purposely omitted including the value of two properties where it found the amounts more tentative. Sentencing Memorandum Opinion at 4, J.A. at 52. The District Court's loss valuation is not clear error and is affirmed.

3. Downward Departure

Kraig also contends that the trial court abused its discretion by failing to grant his request for a downward departure based on the "atypical" nature of the case. Because the sentence imposed by the trial court is within the guideline range, the sentence is not appealable on this basis unless it appears that the trial court was not aware of its discretion to depart downward. The trial court specifically stated that "[t]he Court has considered and rejected the suggestion" that a downward departure is appropriate. Sentencing Memorandum at 6, J.A. at 54. Moreover, the reasons given by Kraig to warrant departure are not that unusual. Kraig focuses mainly on the fact that he is an attorney who was zealously representing his client and was blinded to that client's improper conduct because he believed that the government was "out to get" his client due to the nature of his business.

4. Government's Cross-Appeal

a. Enhancement for Use of "Sophisticated Means"

The sentencing guidelines allow an upward adjustment of two levels for use of "sophisticated means" in a tax evasion case. U.S.S.G. §2T1.1(b)(2). A determination of whether conduct constitutes "sophisticated means" is a question of fact for the District Court's and is reviewed for clear error. Although the conspiracy at issue here was complex, the sophisticated means enhancement requires the sentencing court to look at the actions taken by the individual. A defendant involved in a complex or repetitive tax conspiracy is not automatically given a sophisticated means enhancement if his or her personal involvement did not constitute sophisticated means.

Kraig did not personally open the Swiss bank accounts or set up the shell corporations--this was the work of the Panamanian law firm. While the evidence demonstrates that Kraig undoubtedly knew of their existence and function in the conspiracy, his personal involvement with them was minimal.

A close question is presented as to Kraig's personal use of sophisticated means. Although we might have reached a different conclusion than the District Court, we must "accept the findings of fact of the district court unless they are clearly erroneous and shall give deference to the district court's application of the guidelines to the facts." 18 U.S.C. §3742(e). We would violate this admonition were we to substitute our judgment on this issue.

b. Acceptance of Responsibility

U.S.S.G. §3E1.1 provides for a two-level reduction in the offense level if the defendant clearly demonstrates affirmative acceptance of personal responsibility for his criminal conduct. The trial court granted Kraig's request for a downward adjustment for acceptance of responsibility, made for the first time at the sentencing hearing, after listening to Kraig's statement at the sentencing hearing. The government argues on cross-appeal that granting the request was in error both because it was not timely made and because the facts do not warrant the departure. The government points out that Kraig maintained his innocence, before, during and after trial, and only partially accepted responsibility after his conviction.

Conviction by trial does not automatically preclude a defendant from consideration for a reduction based on acceptance of responsibility. In certain circumstances a defendant may clearly demonstrate an acceptance of responsibility even though he exercises his right to trial. In granting the request, the District Court recognized that it was a "close call" and acknowledged that he had not encountered a case quite like this one before. The District Court seemed to rely primarily on the points that (1) Kraig was a lawyer with an unblemished record up to that point, (2) his conduct resulted from Kraig's zealous advocacy on behalf of Sturman in his adult entertainment business and (3) Kraig believed that the government was "out to get" Sturman any way it could to stop his adult entertainment business.

The standard of review here is whether the finding was clearly erroneous. While we recognize that other sentencing courts may have come to a different conclusion regarding this matter, acceptance of responsibility is uniquely within the province of the District Court and we do not find clear error. U.S.S.G. §3E1.1, comment. (n.5); United States v. Fleener, 900 F.2d 914, 917 (6th Cir. 1990) (grant of reduction for acceptance of responsibility affirmed even though defendant put government to its burden at trial).

Furthermore, we give deference to the sentencing judge in determining acceptance of responsibility, particularly where the sentencing judge also presided over the entire trial, as the judge did here. The District Court was in the best position to gauge Kraig's state of mind and to assess his credibility and this Court will not lightly overturn that finding.

For the foregoing reasons, the judgment of the District Court is affirmed.

^* The Honorable Robert L. Echols, United States , District Judge for the Middle District of Tennessee, sitting by designation.

¹ References to the Joint Appendix filed in this case hereinafter will be referred to a "J.A. at --."

 

 

[98-2 USTC ¶50,898] United States of America , Plaintiff-Appellee v. Shirley J. Holland, Defendant-Appellant

(CA-7), U.S. Court of Appeals, 7th Circuit, 97-3148, 11/5/98 , 160 F3d 377, Affirming an unreported District Court decision

[Code Secs. 7203 and 7206 ]

Penalties, criminal: Fraud: Willful failure to file returns: Tax evasion: Conspiracy.--An individual's convictions for tax evasion, failure to file tax returns and conspiring with her late husband to defraud the IRS were sustained. Her claim that Congress lacked the constitutional authority to criminalize the willful failure to file a return or pay a tax was contrary to precedent and rejected. The court's restriction of testimony to relevant matters was not error. Likewise, any error in the court's refusal to declare a mistrial on the basis of a witness's statement labeling the taxpayer's conduct as "money laundering" was harmless.
[Code Secs. 7203 and 7206 ]

Penalties, criminal: Fraud: Money laundering: Conspiracy: Bankruptcy.--An individual's convictions for concealment of assets in bankruptcy, bankruptcy fraud and money laundering, and conspiring with her husband to commit such crimes were sustained. Evidence that the taxpayer and her husband transferred assets to a warehouse banker in return for cash payments amply supported the convictions.

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

CUMMINGS, Circuit Judge:

Shirley J. Holland ("Shirley") was convicted of conspiracy to defraud the Internal Revenue Service ("IRS"), tax evasion, failure to file tax returns, conspiracy to commit bankruptcy fraud and money laundering, bankruptcy fraud and money laundering. After a jury trial, she was committed to 17 months' imprisonment and two years of supervised release, and ordered to pay $1,250 in special assessments, a $6,000 fine, $5,836 in investigative costs and to forfeit $50,706.14. Her husband, Francis Joe Holland ("Joe"), was similarly charged and like Shirley was found guilty by a jury. Joe was ordered to serve 80 months' imprisonment, to pay a $50,000 fine and to forfeit $50,706.14. Shirley and Joe timely appealed but Joe died while their appeal was pending. In accordance with United States v. Klein [57-2 USTC ¶9912], 247 F.2d 908 (2d Cir. 1957), the Hollands were charged with a conspiracy to impair the IRS between 1991 and November 1993. She was also charged with various tax offenses. ¹ The Hollands were also charged with and convicted of conspiracy and bankruptcy fraud (18 U.S.C. sec.sec. 371, 152) in connection with the bankruptcy cases of Joe and HEC and convicted of money laundering for having laundered the proceeds of the bankruptcy fraud (18 U.S.C. sec. 1956). We are concerned here only with Shirley's appeal.

The Hollands were residents of Boonville , Indiana . Each owned one-half interest in several Indiana corporations, including HEC. Joe served as the president and Shirley served as secretary/treasurer of each corporation. HEC marketed investments in oil and gas wells. Shirley also worked for three sole proprietorships owned by Joe.

For the tax years 1990 through 1992, the Hollands concealed the income-generating activities of their businesses. They deposited checks payable to HEC into Shirley's personal bank account. Between May and October 1991, they sent checks totaling $332,197 to Anthony L. Hargis ("Hargis"), a California warehouse banker who deals in cash and does not provide information to the IRS. He paid the Hollands ' personal and business expenses through checks drawn on bank accounts maintained in his name. He sent the Hollands $71,809 in currency between May 1991 and October 23, 1991 , and a total of $87,320 during 1991. During bankruptcy proceedings, the Hollands understated and misrepresented to creditors the income they sent to Hargis. They also encumbered their assets through promissory notes and mortgages issued through the Christian Common Law Foundation in order to place those assets beyond the reach of the IRS.

On October 23, 1991 , Joe filed personal bankruptcy and the corporate bankruptcy of HEC. According to the government, the Hollands transferred and concealed assets in which Joe or HEC had an interest (such as checks, funds and various bank accounts and a vehicle). After Joe and HEC filed for bankruptcy, the Hollands allegedly concealed assets of Joe and HEC from creditors by transferring checks to Hargis. They did not disclose the existence of the accounts maintained by Hargis.

The evidence showed that the Hollands laundered the proceeds of the bankruptcy fraud by directing Hargis to pay their personal and business expenses by checks drawn on Hargis' bank accounts. The checks were of course difficult to trace because they were in Hargis' name. The Hollands also received cash from Hargis and failed to report it to the IRS and used the money to pay their telemarketers, who had their own accounts with Hargis. According to the evidence, the Hollands made false statements concerning their business affairs and the nature of their activities with Hargis during the bankruptcy proceedings.

During the 1990 tax year HEC was required to file an income tax return and owed income taxes of $41,431. Shirley did provide expense records to her accountant used to prepare a 1990 HEC return but the return was not filed even though she was required to do so.

Joe and HEC were sued by various investors, resulting in judgments totaling $457,260.51 against Joe and against HEC. Two days thereafter on October 23, 1991 , Joe filed for bankruptcy, claiming assets of $1,600 and liabilities of $457,260. He simultaneously filed a corporate bankruptcy petition for HEC claiming the same assets and liabilities.

A jury found both Hollands guilty of all counts, and we affirm her conviction and sentence.

Shirley's Motion to Dismiss the Indictment

Shirley alleges that the district court should have granted her motion to dismiss the indictment because "Congress lacks the power to criminalize the willful failure to file a return or pay a tax" ( Br. 22). We have rejected this argument before, United States v. Dack [84-2 USTC ¶9913], 747 F.2d 1172, 1176 n.5 (7th Cir. 1987), and it need not be belabored here. Shirley's motion to dismiss the indictment as unconstitutional was properly denied.

Cross-examination of Anthony Hargis and Donald Schmitt

Shirley complains that the court impermissibly limited the cross-examination of government witness Hargis. However, our study of the transcript shows that Judge Tinder allowed ample testimony with respect to Hargis' dealings and merely restricted irrelevant testimony. Shirley also argues that the district court improperly limited the cross-examination of IRS tax expert Donald Schmitt. While Joe's lawyers sought to ask Schmitt about the taxation of mutual fund contributions, the district court ruled that the questions were irrelevant because mutual funds were not analogous to the scenario presented by this case. Such testimony was clearly irrelevant, so there was no abuse of discretion in limiting the cross-examination of this witness. United States v. Richardson, 130 F.3d 765, 777 (7th Cir. 1997), certiorari denied, 118 S. Ct. 1324.

Denial of Motion for Mistrial

James Greenwell, an IRS agent, spent much time in reviewing the facts involved in this case. In response to a question on cross-examination, he stated "Money laundering works." Shirley claims that the district court should have granted her motion for mistrial after that comment.

Greenwell had spent a great deal of time in reviewing documents during his investigation of the Hollands . When the questioning by Joe's counsel, Mr. Brinson, was concluding, the following exchange occurred between him and Greenwell:

Q: You spent a lot of time on the Hargis records?

A: Yes, I did. Money laundering works.

Following an objection, the district court struck the phrase and told the jury to disregard it. Thereupon a motion for mistrial was denied and Shirley told the district judge that she did not "want any more instructions to the jury on this" (Tr. 164). However, the court had previously instructed the jury:

if a witness blurts something out and a lawyer objects to it and I strike it from the record, I would tell you to disregard that; you need to put that out of your mind and not consider it in any way. You may not refer to that statement. If it had been blurted out and I struck it, you can't later refer to that in your deliberations.

Also, the court gave the following final instruction:

You are not to pay any attention to any testimony that was stricken or any statements of counsel with reference to matters of that kind, such as objections, responses to objections or questions to which objections were sustained.

Therefore the jury was adequately told to disregard the three words in question and the error, if any, was harmless. United States v. Windfelder [86-1 USTC ¶13,668], 790 F.2d 576, 582 (7th Cir. 1986).

Sufficiency of Evidence on Certain Counts

Shirley has only attacked the sufficiency of the evidence as to several bankruptcy fraud and money laundering offenses, choosing not to challenge the sufficiency of the evidence with respect to the tax-related counts. However, the evidence showed that F. Joe Holland & Company was a sole proprietorship that Joe owned and controlled. The 28 checks specified in Count 11 were all made payable to this company and were deposited in Joe's account between August and October 1991. Shirley notarized Joe's endorsement on the 28 checks. This evidence showed that the checks and funds specified in Counts 11 and 12 were assets of Joe as asserted by the government. There was also ample evidence that the 28 checks sent to Hargis were transferred and concealed as found by the jury.

Transfer of HEC's Assets

The indictment charged that the Hollands fraudulently transferred a recreational vehicle owned by HEC in contemplation of HEC's bankruptcy. Shirley complains that the jury could not have reasonably found that the vehicle was fraudulently transferred. In August 1991 HEC purchased this vehicle through an account of Joe maintained by Hargis. A few days after Joe had discussions with a bankruptcy lawyer for HEC about taking it into bankruptcy, HEC transferred the vehicle to Shirley without telling the bankruptcy lawyer. Also, Joe did not disclose the existence of the vehicle or its transfer to Shirley when he filed the bankruptcy schedules for HEC. The evidence permitted the jury to find that the Hollands fraudulently transferred the vehicle to Shirley in contemplation of HEC's bankruptcy filing.

The indictment charged that the Hollands fraudulently concealed five checks payable to HEC and sent to Hargis for deposit in his account. The checks, which were part of the assets of the HEC bankruptcy estate, were deposited with Hargis after its bankruptcy. Clearly they were concealed assets of HEC.

The Hollands were convicted of 12 counts of money laundering in violation of 18 U.S.C. sec. 1956. The Hollands concealed these proceeds of bankruptcy fraud by endorsing checks from the investors in F. Joe Holland & Company to Hargis. He paid the Hollands ' bills with checks drawn on various Hargis bank accounts. The original source of the funds was thus concealed from their creditors. The evidence amply supported the jury's finding that the Hollands committed money laundering as charged in the indictment. Since there was ample evidence for the jury to find that Shirley engaged in money laundering, her attack on the criminal forfeiture count is baseless. The judgment of forfeiture in the amount of $50,706.14 was amply justified by the record.

Loss for Which Shirley Is Responsible

The loss for which Shirley is responsible under U.S.S.G. sec. 2F1.1 was $454,000, consisting of the default judgments sought to be discharged by Joe and HEC by filing for bankruptcy. Shirley submits that the loss for which she was responsible was only $32,284.07, which was the balance in a bank account maintained by Joe when the bankruptcy petitions were filed. The petitions to commence the bankruptcy proceedings were filed on October 23, 1991 , two days after default judgments totaling $454,000 had been entered in a pending lawsuit against Joe and HEC. In imposing sentence, the district judge found that the acts of bankruptcy fraud were an attempt to conceal Joe's and HEC's assets in order to obtain a discharge of $454,000 in default judgments held by creditors of Joe and HEC. Since the evidence showed that the acts of bankruptcy fraud were committed to obtain a discharge of the $454,000 in default judgments, the district judge was justified in finding that the loss was $454,000, thus increasing the offense level pursuant to U.S. Sentencing Guidelines sec. 2F1.1(b)(1)(J). Shirley's reliance on United States v. Gunderson, 55 F.3d 1328, 1331 (7th Cir. 1995), is misplaced, because the court in that case explicitly refused to choose between the prosecution's and defendant's methods of calculating intended loss. The Hollands ' failure to disclose the assets of the bankruptcy estate was motivated to obtain a discharge of $454,000 owed to Joe's and HEC's creditors. Consequently that is the intended loss.

Effect of Joe's Death

Because of Joe's death, his appeal and the indictment against him were ultimately dismissed. The evidence of his death does not vitiate his guilt, nor Shirley's. The jury properly found that Shirley conspired with Joe as charged in the indictment.

Conviction and sentence affirmed.

¹ The offenses included evasion of corporate income tax of Holland Energy Company, Inc. ("HEC") for 1990, failure to file a corporate income tax return for HEC for 1990, and failure to file her 1991 individual tax return.

 

 

 

[2003-1 USTC ¶50,222] United States of America , Plaintiff-Appellee v. Francis F. Paul, Defendant-Appellant.

U.S. Court of Appeals, 6th Circuit; 01-1284, 57 FedAppx 597, January 23, 2003 .

Unpublished opinion affirming, per curiam, an unreported DC Mich. decision.

[ Code Sec. 7206]

Crimes: Fraud: Plain error: Dismissal of jurors: Jury instructions: Abuse of discretion. --

A federal district court's dismissal of potential jurors and interactions with the jury in the course of an individual's criminal fraud and tax evasion trial did not constitute plain error. The taxpayer failed to establish that the judge's introductory comments and subsequent ex parte communications with the jury substantially affected his rights. Also, the judge's dismissal of potential jurors for having strong opinions regarding the IRS did not constitute an abuse of discretion absent proof of bias. Further, while the judge erred in assembling both parties to render additional jury instructions, no prejudice resulted. The supplemental instructions simply referred to the original instructions; thus, the error was harmless and did not warrant a new trial.

[ Code Sec. 7206]

Crimes: Fraud: Abuse of discretion: Evidence. --

A federal district court did not abuse its discretion in admitting evidence in a tax fraud proceeding that showed how a taxpayer handled the proceeds from the sale of his home in a manner designed to deceive the IRS. The evidence, which demonstrated an intent to defraud the government, was relevant, was not unfairly prejudicial, and did not affect the taxpayer's substantial rights.

[ Code Sec. 7206]

Crimes: Fraud: Sentencing: Conditions of supervised release. --

Sentencing guidelines applicable to an individual convicted of tax fraud permitted the inclusion of conditions that he refrain from consuming alcohol and participate in community service activities. Those conditions were reasonably related to the goals of probation and rehabilitation. Also, records from the taxpayer's business were properly used to reconstruct his income and taxes due. Amounts that he had previously remitted were not deducted from the current taxes owing because those funds were paid in connection with a fraudulent offer-in-compromise that was entered into after the crimes were committed.

[ Code Sec. 7206]

Crimes: Fraud: Sentence enhancements: Sophisticated concealment: Obstruction of justice. --

Sentence enhancements and conditions for a supervised release were appropriate in the case of an individual who was convicted of tax fraud. No error was committed in the application of sentence enhancements that increased his sentence by six levels based upon his part in the sophisticated concealment of his crimes, the aggravating role he played as the organizer of the fraudulent scheme, and his obstruction of justice.

Before: Boggs and Cole, Circuit Judges, and Battani, ^* District Judge.

¬ Caution: The court has designated this opinion as NOT FOR PUBLICATION. Consult the Rules of the Court before citing this case.®

PER CURIAM: Dr. Francis F. Paul was named in a 47-count indictment issued in March 2000: Count 1 charged Dr. Paul with attempting to evade and defeat the payment of assessed personal income taxes for calendar years 1987 through 1991; Count 2 charged Dr. Paul with violating 26 U.S.C. §7206(l) by subscribing his signature and knowingly submitting a false Offer-in-Compromise (and its accompanying schedules and attachments) to the Internal Revenue Service (IRS): Count 3 charged Dr. Paul with signing and submitting a false 1993 individual income tax return, in violation of 26 U.S.C. §7206(l): Count 4 charged Dr. Paul with bank fraud, in violation of 18 U.S.C. §1344; and Counts 5-47 charged Dr. Paul with committing mail fraud in furtherance of his alleged scheme to defraud a federal bank, set forth in Count 4. Dr. Paul went to trial in October 2000, and was convicted by the jury on all counts, except for Count 11, which was dismissed by the court during the trial on a motion from the government. Dr. Paul now appeals his conviction on Counts 4-10 and 12-47, on a number of different grounds.

Dr. Paul claims the trial judge committed plain error at three points during the trial and thus his conviction should be vacated and a new trial held. First, Dr. Paul claims the judge erred by making improper and misleading introductory comments during the jury selection process. Second, Dr. Paul claims the judge erred by dismissing certain potential jurors during the voir dire process without sufficiently probing their potential for impartiality. Third, Dr. Paul claims the judge erred by engaging in ex parte communications with the jurors.

Next, Dr. Paul appeals the district court's denial of his motion for acquittal, in which he claimed that there was insufficient evidence for his conviction on the bank fraud charge, and additionally claims that the trial judge abused his discretion by admitting evidence that was unrelated to the crimes for which Dr. Paul was charged. Finally, Dr. Paul claims that the district court abused its discretion by denying Dr. Paul's motion for a new trial on the basis of allegedly improper and misleading jury instructions and committed clear error in its calculation of the tax loss sustained by the government as a result of Dr. Paul's actions.

On February 16, 2000, the district court sentenced Dr. Paul to fifty-four months on Counts 1, 4-10 and 12-47, to run concurrent with a term of imprisonment of thirty-six months on Counts 2 and 3, with post-confinement conditions imposed on Dr. Paul's supervised release, requiring that Dr. Paul retain from using alcohol and perform 300 hours of community service in a non-medical field. Apart from the appeals that Dr. Paul has brought with regard to his conviction, he challenges his sentencing, contending that the district court committed clear error in applying separate two-level enhancements for sophisticated concealment of his offenses, his leadership role in the crimes, and for obstructing justice. In addition, Dr. Paul contends that the district court committed plain error in setting the terms of his post-confinement supervised release. We affirm on all points.

I

Francis F. Paul was a self-employed neurosurgeon in the Muskegon , Michigan area. During the late 1980's and into the early 1990's. Dr. Paul's practice steadily declined and he began to accumulate large debts. Beginning in 1988, Dr. Paul failed to file his federal income tax returns on time. When he was directly contacted by the Internal Revenue Service (IRS) several years later, Dr. Paul filed the delinquent returns, but did not pay the taxes that were due with the returns filed. In addition, Dr. Paul collected, but did not pay over to the IRS, his employees' income withholdings.

Dr. Paul owned a house in North Muskegon . As a result of his falling behind on the monthly mortgage payments, the bank started foreclosure on the property. During a six-month mortgage redemption period, Dr. Paul suggested to a friend, Edward Snider, that he buy the home and rent it back to Dr. Paul. Snider's testimony revealed that he understood Dr. Paul needed to put the property into someone else's name in order to protect it from creditors. Snider testified that he decided to go forward with the purchase of the house in order to help Dr. Paul.

In September 1991, Dr. Paul's attorney prepared a Purchase and Sale Agreement, in which Snider was to purchase the property from Dr. Paul for $300,000, with $60,000 to be paid by Snider to Dr. Paul as a down payment. Subsequently, on October 5, 1991, Dr. Paul and Snider executed an agreement (the Rental Agreement) in which Dr. Paul agreed to rent the house from Snider after closing on the sale of the property for the amount of Snider's mortgage payment. The Rental Agreement was for a term of seven years, included an option for Dr. Paul to buy the property at any time during the term of the agreement for a sum equal to the outstanding mortgage balance or a sum greater than that at Paul's discretion, required Dr. Paul to pay the real estate taxes and unspecified insurance premiums on the property, and provided for the establishment of an interest-bearing account in Snider's name, which would hold a sum equal to three monthly mortgage payments to be deposited by Dr. Paul, with the interest on the money to be divided equally between Dr. Paul and Snider.

After being denied a mortgage at Old Kent Bank, Snider approached a non-federally-insured Michigan mortgage broker, the Mortgage House, and submitted a loan application in October 1991. The mortgage broker obtained a mortgage from St. Paul Federal Bank, a federally insured bank, on the basis of a loan application submitted to the Mortgage House by Snider in which he misrepresented his income, assets, and profession, and also incorrectly stated that he had given Dr. Paul $60,000 as a down payment on the property. Additionally, Snider submitted a phony bill of sale for a diamond to be used as collateral, a phony gift letter to explain where the $60,000 down payment had come from, and false tax returns. Snider alleges that he did all of this with Dr. Paul's knowledge and help.

St. Paul Federal Bank (the Federal Bank) sent a loan commitment letter to the Mortgage House and subsequently the closing on the property took place. Nevertheless, neither Dr. Paul nor Snider disclosed the existence of the Rental Agreement to either the Mortgage House or the Federal Bank. Over the course of the next few years, Dr. Paul sent Snider checks to cover the mortgage payments and Snider used those funds to pay the mortgage. These checks are the basis of the mailings charged in Counts 5-47, mail fraud. Because of late payments, Snider twice filed suit against Dr. Paul for back rent in Michigan state court.

In February 1992, Dr. Paul's practice in Muskegon had declined to such an extent that he was forced to shut it down and Dr. Paul began a new practice in Idaho Falls , Idaho , affiliated with the Eastern Idaho Regional Medical Center (EIRMC). EIRMC provided Dr. Paul with several loans in order to help start his practice and defray moving costs, so that by the end of 1993, Dr. Paul owed the company $235,000 plus interest, which increased to more than $363,000 by early 1994. Dr. Paul paid his employees in this new office in cash and did not apply for a new Employer Identification Number for the practice. In addition, Dr. Paul did not open up a checking account in the practice's name and utilized five different bank accounts to deposit checks from patients for services.

By 1994, Dr. Paul was assessed approximately $311,000 in unpaid taxes, penalties, and interest, approximately $138,000 of which was actual tax. In May 1994, the IRS decided to accept an Offer-in-Compromise filed by Dr. Paul, which would forgive his tax debt of $311,431.55 for the reduced amount of $50,000. This compromise was reached on the basis of financial statements provided to the IRS by Dr. Paul with regard to his current assets and income, which caused the IRS to make a determination that the residual money owed would very likely remain uncollectible. However, Dr. Paul did not disclose to the IRS that he had a new practice in Idaho, an ongoing interest in a the North Muskegan residence, five bank accounts in Idaho, Nevada, and Wyoming, ownership of an antique Packard automobile, and a new home in Idaho Falls, purchased for $250,000 on an unrecorded land contract. In fact, when dealing with the IRS, Dr. Paul used a false Nevada address, a Nevada driver's license, and Nevada automobile license plates.

In July 1993, Dr. Paul and William Sewell, the husband of Dr. Paul's Idaho Falls office manager, formed an entity known as the Idaho Brain Tumor Center (IBTC), which was to develop and utilize a new medical technology called "boron neutron capture therapy." In July 1994, EIRMC made another loan to Dr. Paul, this time in the amount of $297,000. Dr. Paul gave the proceeds of that loan to the IBTC. In total, Dr. Paul invested approximately $500,000 into IBTC, which sustained huge losses over the course of its existence. EIRMC filed a claim against Dr. Paul in federal court for a sum in excess of $868,152, which included the various loans made to him. In 1999, Dr. Paul managed to refinance the Michigan home through another bank mortgage, paid off the St. Paul Federal Bank mortgage and thereby removed Snider as the owner of record. Shortly thereafter, Dr. Paul sold the house at a substantial profit. In 1997, the IRS began a criminal investigation of Dr. Paul, which eventually led to his arrest and indictment for the charges in this case.

II

1. Claims of Plain Error During the Trial

Dr. Paul now appeals three events during the course of his trial to which his lawyer did not make a timely objection. We restrict our review of these claims, therefore, to correcting "plain errors or defects affecting substantial rights" under Fed. R. Crim. P. 52(b). See United States v. Dedhia, 134 F.3d 802, 808-09 (6th Cir. 1998). Before this court can correct an error not raised at trial, there must be 1) error, 2) that is plain, and 3) that affects substantial rights. United States v. Olano, 507 U.S. 725, 732 (1993); Fed. R. Crim. P. 52(b). If those three factors are met, then this court may exercise its discretion to notice a forfeited error if the error "seriously affect[s] the fairness, integrity, or public reputation of judicial proceedings." Olano, 507 U.S. at 732.

Introductory Comments Made by the Trial Judge

Dr. Paul contends that the trial judge committed plain error by suggesting to the jurors that they were to apply their own local values and local sense of justice when evaluating issues at trial, that the comments tainted the jurors' perception of their role in the proceeding, and that this court should, therefore, reverse Dr. Paul's conviction and order a new trial. In part, the judge stated:

This is your community. And I can't speak more strongly for the fact that the values that are cherished and are a part, indigenous to West Michigan , you bring to this courtroom, and that's okay. And you will use those as you evaluate a matter such as this.

...

You represent [a] statistical cross section [of your district]. That's very important because a jury that sits and deliberates on justice and a just result has historically come from the district where the event is alleged to have occurred and is one in which it is said in the earliest English roots that it's a peer group of the community sitting in judgment on itself. That is, you bring to this courthouse, whether consciously or unconsciously, a sense of justice which you as a member of your community have. Now, this may come from coffee klatches, from newspapers, through television, through schools, through any number of things. You bring that to your sense of justice.

JA at 1046, 1065.

The trial judge's introductory remarks, if objectionable at all, do not amount to plain error requiring reversal. They were made in explanation of the common-law principle that one has a right to be tried by a jury of one's peers. This basic tenet of our judicial system is reflected in the Jury Selection and Service Act of 1968, as amended, which states that "[i]t is the policy of the United States that all litigants in Federal courts entitled to trial by jury shall have the right to grand and petit juries selected at random from a fair cross section of the community in the district or division wherein the court convenes." 28 U.S.C. §1861.

Moreover, the approved circuit instructions on the proper role and duties of a juror were given at the beginning of the trial and after closing arguments the judge reiterated that the jury was bound by oath to follow the court's instructions with regard to the law, applying it to the facts as found by the jury. These additional instructions minimize the likelihood that anything said by the trial judge in his introductory comments could have been misinterpreted by the jury and would have clarified any doubt in a juror's mind that he or she was to apply the law as identified by the court. The district court, therefore, did not commit plain error.

Dismissal of Jurors by the District Court

Dr. Paul contends that the trial judge committed plain error by dismissing venire members during voir dire for expressing opinions about the IRS, without probing further to ascertain if the jurors in question would be capable of putting such opinions aside. Dr. Paul argues that as a result of the judge's actions, the jury impaneled was "pro" IRS and thus Dr. Paul was denied an opportunity to be heard by an impartial jury, in violation of the Sixth Amendment.

The district court has the duty and authority to dismiss jurors for cause. See 28 U.S.C. §1870. In addition, "[t]he scope of questions permitted to be asked on voir dire examination is generally a matter addressed to the sound discretion of the court." Eisenhauer v. Burger, 431 F.2d 833, 836 (6th Cir. 1970). See also United States v. Anderson , 562 F.2d 394, 397 (6th Cir. 1977). The district judge asked a number of routine questions of jurors in order to ascertain if anyone's past experiences with the IRS would affect their ability to evaluate the evidence presented at trial in a fair or impartial manner. Considering that much of this case deals with tax fraud, the trial judge did not abuse his discretion when he dismissed jurors for having strong opinions about the IRS when the jurors admitted to the court that they either did not think they would be fair or impartial in their evaluation of the evidence presented in relation to the IRS or were not sure. Furthermore, it is not enough for Dr. Paul to show that the trial court's decision to exclude the jurors in question was improper. He must also show that the jury selected was biased. See Hill v. Brigano, 199 F.3d 833, 844 (6th Cir. 1999) (citing Ross v. Oklahoma, 487 U.S. 81, 83-85 (1988)). Dr. Paul, however, does not provide any evidence that the jury selected was biased. The trial court did not commit plain error in dismissing the jurors in question and there was no evidence of bias in the jury that was impaneled in this case.

Ex parte Communications

Dr. Paul contends that the trial judge erred by engaging in ex parte communications with jurors during the trial and that according to our decision in Standard Alliance Industries, Inc. v. Black Clawson Co., 587 F.2d 813, 828 (6th Cir. 1978), such conduct raises a presumption of reversible error that cannot be rebutted. However, the situation in this case differs markedly from the situation in Standard Alliance, in which there was absolutely no record of the court's ex parte contact, which was conducted through the court's law clerk, and to which the defendant had no opportunity to object during his trial. Moreover. since Standard Alliance, the Supreme Court has refined the law in this area, providing us with guidance for considering claims of judicial ex parte communications.

The right of the accused to be present during all critical stages of a trial against him is fundamental. See Rushen v. Spain , 464 U.S. 114, 117 (1983); Fed. R. Crim. P. 43. Ex parte communications are absolutely discouraged and a question from the jury should be answered in open court, after providing the defendant with an opportunity to be heard. See Rogers v. United States , 422 U.S. 35, 39 (1975): United States v. Reynolds, 489 F.2d 4, 7-8 (6th Cir. 1973). Nevertheless, even if a judge improperly participates in ex parte communications, such communications will not necessarily constitute reversible error. See Rushen, 464 U.S. at 118-19; Miller v. Am. President Lines, Ltd., 989 F.2d 1450, 1468 (6th Cir. 1993). There must be a reasonable possibility that the ex parte communications affected the verdict.

In this case the judge properly disclosed in open court and on the record that he had communicated ex parte with the jury. See Rushen v. Spain, 464 U.S. 114, 119-20 (1983) (stating that "[w]hen an ex parte communication relates to some aspect of the trial, the trial judge generally should disclose the communication to counsel for all parties."). If Dr. Paul's counsel had been concerned about the communications relayed by the judge, he could have voiced his concern to the district court and an appropriate record could have been made. Counsel having failed to object at trial, our review is limited to a plain error analysis in which we must determine if the judge's responses to the inquiries of the jurors affected the defendant's substantial rights. Olano, 507 U.S. at 736. However, Dr. Paul offers no evidence that the communications in question affected his substantial rights, making it unnecessary to determine whether or not the fairness, integrity or public reputation of the trial was affected.

The ex parte communications in question do not appear to raise a reasonable possibility of prejudice. The communications were related to the general well-being of the jurors, the way in which the lawyers were handling the exhibits, and the fact that the lawyer for the United States Attorney's office was speaking too softly, making it difficult for the jurors to hear him. As pointed out by the Supreme Court in Rushen, 464 U.S. at 118, there "is scarcely a lengthy trial in which one or more jurors do not have occasion to speak to the trial judge about something, whether it relates to a matter of personal comfort or to some aspect of the trial." There appears to be nothing in the content of what was communicated that would adversely affect Dr. Paul's substantial rights. Dr. Paul suggests that these communications should be viewed in the light of other comments made by the judge that suggested he viewed Dr. Paul with "disdain." However, each detrimental comment made by the judge and referred to by Dr. Paul occurred only after the jury had announced its verdict. Although the comments made by the judge are disparaging towards Dr. Paul, such comments are noticeably absent from the rest of the record, suggesting that the judge was careful not to make such comments before the jury rendered a verdict. In sum, there is no evidence to support Dr. Paul's contention that the ex parte communications between the judge and the jury during the course of this trial had any affect on Dr. Paul's substantial rights.



2. Motion for Acquittal

Following the close of the government's evidence, Dr. Paul moved unsuccessfully for a judgment of acquittal pursuant to Fed. R. Crim. P. 29 with regard to the bank fraud charge, arguing that the government had not presented sufficient evidence to support its claim. In determining whether the evidence presented at Dr. Paul's trial was sufficient to support a conviction, "[t]he relevant question is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." United States v. Kelly, 204 F.3d 652, 656 (6th Cir. 2000) (quoting Jackson v. Virginia, 443 U.S. 307, 319 (1979) (emphasis in original) (internal quotation marks and citation omitted)). All reasonable inferences are to be drawn in the government's favor. Ibid. Moreover, since Dr. Paul failed to renew his motion at the end of his trial, we review the district court's denial "for plain error and can reverse only if there is a `manifest miscarriage of justice."' United States v. Beaver, No. 97-2224/48/70, 97-2343 4, 98-1012/5/76/1155, 2000 WL 491538, at **4 (6th Cir. Apr. 20, 2000) (quoting United States v. Price, 134 F.3d 340, 350 (6th Cir. 1998)).

In order to convict Dr. Paul for bank fraud under 18 U.S.C. §1344, the government must prove that Dr. Paul 1) knowingly executed or attempted to execute a scheme to defraud a financial institution: 2) did so with the intent to defraud; and 3) that the financial institution was insured by the FDIC. See United States v. Everett , 270 F.3d 986, 989 (6th Cir. 2001); United States v. Hoglund, 178 F.3d 410, 412-13 (6th Cir. 1999). Dr. Paul contends that the government failed to demonstrate that he had any knowledge of the fraudulent statements and misrepresentations made by Snider in order to obtain the mortgage for his Michigan home, and thus failed to prove the specific intent requirement contained in the second element of the crime. Alternatively, Dr. Paul argues that because the Mortgage House, the institution from which Snider, and allegedly Dr. Paul, fraudulently obtained a mortgage, was not federally insured, the government did not prove the third element of bank fraud, despite the fact that the Mortgage House sold the mortgage to a federally insured institution at closing on the property.

First, there is ample evidence to support the conclusion that Dr. Paul knowingly acted in collusion with Snider as part of a scheme to obtain a mortgage on the basis of fraudulent information and that this was done with the intent to defraud. Snider's testimony supports this conclusion, as he states that Dr. Paul originally formulated the plan, helped Snider to fraudulently fill out the loan application taken by the Mortgage House, assisted Snider in falsifying his tax returns for the loan application, offered proof to the bank that he had received a down payment of $60,000 from Snider, even though Dr. Paul had not, and finally helped Snider obtain a fraudulent gift letter to be used as evidence of the source of the down payment to the mortgage broker.

Second, it is not necessary for the Mortgage House to have been a federally insured entity in order to prove bank fraud. It is sufficient to demonstrate that the "defendant in the course of committing, fraud on someone causes a federally insured bank to transfer funds under its possession and control." United States v. Everett , 270 F.3d 986, 989 (6th Cir. 2001). In this case, at closing on Dr. Paul's Michigan home, Snider signed a mortgage with The Mortgage House and immediately thereafter at closing that mortgage was assigned to St. Paul Federal Bank on the basis of a commitment letter in which the Federal Bank agreed to purchase the mortgage on the Michigan property. The representative from the Mortgage House testified to the fact that the false information provided to her by Snider in his loan application was forwarded to St. Paul Federal Bank and the Federal Bank representative at trial testified that the bank approved the loan on the basis of that falsified mortgage application. Under the Everett standard, the entire question of whether or not Dr. Paul knew that St. Paul Federal Bank or any bank was to hold the mortgage is moot. If Dr. Paul was deemed to have participated in creating the fraudulent application that was subsequently relied upon by the Federal Bank to transfer funds in its possession and control to Dr. Paul, there is sufficient evidence of bank fraud.

Moreover, there is evidence to suggest that Dr. Paul knew that St. Paul Federal Bank was to hold the mortgage on the property. The representative from the Mortgage House testified that upon receipt of the commitment letter from the Federal Bank, she informed Snider of its acceptance of the mortgage. In addition, Snider testified to the fact that he told Dr. Paul of this fact. Furthermore, the representative from St. Paul Federal Bank testified that both parties knew at closing that the bank was lending the money for the sale of the property.

The evidence relied upon by the government in its case against Dr. Paul on the count of bank fraud is witness testimony, which in this case the jury found to be credible. It is not our position to second-guess the jury's assessment upon review. We generally avoid making such a determination, noting that the opportunity of the trial court to assess witness testimony is superior to that of the appellate court. See United States v. Garcia, 866 F.2d 147, 151-52 (6th Cir. 1989). See also United States v. Hernandez, 227 F.3d 686, 694 (6th Cir. 2000) (noting that "[s]ufficiency-of-evidence appeals are `no place ... for arguments regarding a government witness's lack of credibility."') (citations omitted). Accordingly, we hold there to be sufficient evidence for Dr. Paul's conviction of bank fraud and affirm the district court's denial of Dr. Paul's motion to acquit on that basis.

3. Mail Fraud Counts

Dr. Paul contends that since there is insufficient evidence to find him guilty of bank fraud, the mail fraud charges, which are predicated on the scheme to defraud St. Paul Federal Bank, must fail as well. In light of our holding that the government presented sufficient evidence at trial to find Dr. Paul guilty of bank fraud, his objection to the mail fraud counts must fail.

4. Evidence Admitted of Financial Transactions by Dr. Paul

Dr. Paul contends that the trial court abused its discretion in admitting evidence of Dr. Paul's handling of the proceeds he obtained from the sale of his Michigan home in 1999, after having paid off the St. Paul mortgage, removing Snider as the owner of record and selling the house to a bona fide purchaser at a substantial profit.

Dr. Paul contends that the evidence proffered was irrelevant and thus violated Rule 402 of the Federal Rules of Evidence, that its probative value was substantially outweighed by the danger of unfair prejudice, and that specific notice of the government's intention to introduce this evidence was not provided, in violation of Rule 404(b) of the Federal Rules of Evidence. Dr. Paul further argues that the admission of this evidence affected his substantial rights and that the judgment should, therefore, be vacated and a new trial ordered by this court.

Dr. Paul filed a pre-trial motion in limine, seeking to bar the government from introducing the evidence in question; however, the trial court denied that motion. At trial, Dr. Paul renewed his objection, but it was overruled. We review the trial court's decision to admit the evidence for abuse of discretion. See United States v. Bonds, 12 F.3d 540, 554 (6th Cir. 1993).

The evidence admitted described how Dr. Paul took the proceeds of his house sale ($120,767.47) and broke it down into a number of cashier's checks, periodically cashing each one, taking a small amount of cash and putting the remainder into a new cashier's check. The government argues that this evidence was relevant to the government's case. The government contends that Dr. Paul handled the proceeds of the sale of his house in this unique way in order to avoid creating a trail to a bank account, in an effort to continue to deceive the IRS.

"Broad discretion is given to district courts in determinations of admissibility based on considerations of relevance and prejudice, and those decisions will not be lightly overruled." United States v. Jackson-Randolph, 282 F.3d 369, 376 (6th Cir. 2002). The evidence proffered by the government is reasonably relevant to the crime as subsequent acts that demonstrate an intent to defraud and Dr. Paul does not offer an argument as to why the evidence is unfairly prejudicial to the defense. Furthermore, the record indicates that the government gave notice of its intention to include this information in a brief filed one week before trial, describing the inclusion of this evidence in some detail, in response to Dr. Paul's motion in limine. In so doing, the government provided sufficient notice. See United States v. French, 974 F.2d 687, 694-95 (6th Cir. 1992) (finding no violation of the Fed. R. Evid. 404(b) notice requirement where the government informed the defense of its intent to offer evidence of prior bad acts one week before trial and no motion for a continuance was made). Dr. Paul's three objections to the admission of this evidence fail.

5. Jury Instructions

During deliberations, the jury sent a written question to the judge, which asked "[i]f payments are being made on a fraudulent loan and these payments are mailed --are those payments mail fraud just because the initial loan agreement is fraudulent?" JA at 19. The court notified the parties that the question was asked, and answered the jurors with a note that read: "See instruction `Use of Mails --Defined' (page 33) and specifically the third and fourth paragraphs." The third and fourth paragraphs referred to by the court state the following:

The Government must prove beyond reasonable doubt, however, that the mails were, in fact, used in some manner to further, or to advance, or to carry out the scheme to defraud or scheme to obtain money or property by false or fraudulent pretenses, representations or promises. The Government must also prove that the use of the mails would follow in the ordinary course of business or events or that the use of the mails by someone was reasonably foreseeable.

It is not necessary for the Government to prove that the item itself mailed was false or fraudulent or contained any false or fraudulent statement, representation, or promise, or contained any request for money or thing of value.

Dr. Paul maintains that the district court erred in not providing him with an opportunity to respond to the jury's note and that therefore we should remand this case for a new trial. Under Rule 43 of the Federal Rules of Criminal Procedure, a defendant shall be present "at every stage of the trial." The rule requiring a defendant's presence at every stage of the trial must be reviewed by this court for harmless error under Fed. R. Crim. P. Rule 52(a). See United States v. Harris, 9 F.3d 493, 499 (6th Cir. 1993). This court has held that an ex parte communication of this type, between the judge and the jury during its deliberations, will not result in reversal if there is no reasonable possibility of prejudice. Ibid. See also United States v. Giacalone, 588 F.2d 1158, 1165 (6th Cir. 1978) (quoting United States v. Reynolds, 489 F.2d 4, 8 (6th Cir. 1973)). This court has alternatively said that such an error "is reversible only if the court's response to the question is confusing, misleading or potentially harmful to the defendant, or results in `a miscarriage of justice."' United States v. Combs, 33 F.3d 667, 670 (6th Cir. 1994). In this case, Dr. Paul has not successfully demonstrated how the court's instructions could have created a reasonable possibility of prejudice. The court did not make a substantive response to the jury's note, but instead mechanically referred back to the jury instructions that had been previously given. Cf. Combs, 33 F.3d at 670 (holding that although the district court erred in failing to assemble the parties and the jury in the courtroom in order to render supplemental instructions, the instructions were legally correct and therefore the error did not result in a "grave miscarriage of justice."); Giacalone, 588 F.2d at 1164 (harmless error to tell jury to continue deliberations after receiving a note informing court that jury was deadlocked); United States v. Florea, 541 F.2d 568, 570-71 (6th Cir. 1976) (harmless error to allow agent to replay tapes admitted into evidence at the request of the jury, without the presence of the parties).

The district court erred in failing to assemble the parties and the jury in the courtroom in order to render the supplemental instructions; however, there was no reasonable possibility of prejudice towards Dr. Paul as a result, because the judge's note simply referred back to the original jury instructions. This error was, therefore, harmless and on this basis we affirm the district court's denial of Dr. Paul's motion for a new trial.



6. Calculation of Tax Loss

The district court determined the tax loss to the government under the Sentencing Guidelines to be $327,302.93. This figure was based on a total of three amounts. First, the court calculated the assessed tax without penalties and interest for the period covered by the Offer-in-Compromise, which came to $134,105.63. This figure is undisputed. Second, the court calculated the amount of tax Dr. Paul avoided on his 1993 income tax return when he failed to disclose the gross proceeds from his Idaho medical practice to be $180,952.30. This second figure is disputed by Dr. Paul. The government produced at trial two different methods by which Dr. Paul's income from the Idaho practice during 1993 and 1994 could be calculated. On the one hand, the government introduced the patient checks that Dr. Paul had deposited into his various bank accounts and had a revenue agent calculate for the court, based on those deposits, the amount of tax that Dr. Paul would have owed. The expert calculated that Dr. Paul would have owed $54,571.40. In the alternative, the government introduced Dr. Paul's own business records, as kept by his office manager, Kaye Sewell, which reflected a considerably larger revenue from the Idaho practice. The final amount of tax owed, based on Ms. Sewell's records, came to $180,952.30. The court chose to use the tax debt calculated on the basis of Ms. Sewell's records and at sentencing Dr. Paul objected, stating that Ms. Sewell's testimony and records were unreliable. Third and finally, the court calculated the tax Dr. Paul avoided on his 1994 income tax return to be $12,245. This figure is undisputed. Dr. Paul also objects to the fact that the district court did not reduce the calculated tax loss by the $50,000 he paid in connection with the Offer-in-Compromise.

In examining factual determinations made by the district court for the purpose of applying the Sentencing Guidelines, we review for clear error. 18 U.S.C. §3742(e); United States v. Pierce, 17 F.3d 146, 151 (6th Cir. 1994). We review de novo the application of the Sentencing Guidelines to a particular set of facts. See United States v. Morrison, 983 F.2d 730, 732 (6th Cir. 1993). Thus, the first issue, centering on whether or not Ms. Sewell's testimony and records are reliable, is reviewed for clear error. The district judge's response to Dr. Paul's objection on this point demonstrates that he carefully weighed the evidence before him and decided that Ms. Sewell's records were likely to be more accurate. The judge noted that the government might not have found all of the bank accounts that Dr. Paul had opened while practicing in Idaho and that there was evidence demonstrating that Dr. Paul had paid for things by signing over checks he received from patients. In either case, the government's first figure would not have taken these variables into account, while Ms. Sewell's calculations would not have had the same problem. Although Dr. Paul claims that Ms. Sewell's records were unreliable and that she was biased, the judge noted that the jury found Ms. Sewell's testimony to be credible. In sum, the district court did not clearly err in its decision to use Ms. Sewell's records in order to calculate the tax loss at stake.

We review de novo the issue of whether the amount paid by Dr. Paul in connection with the Offer-in-Compromise should have been subtracted from the overall tax loss, since it requires an application of the Sentencing Guidelines to a particular set of facts. The government argues that the district court did not err since the Sentencing Guidelines specifically state that "[t]he tax loss is not reduced by any payment of the tax subsequent to the commission of the offense." USSG §2T1.1(c)(5). Dr. Paul contends that the commission of the offense actually occurred when the IRS accepted Dr. Paul's final Offer-in-Compromise and that the money paid in association with that acceptance does not fall under the auspices of §2T1.1(c)(5), since it is not a payment made subsequent to the relevant offense.

The district court established two categories of offenses for the purposes of sentencing under the guidelines, pursuant to USSG §3D1.2. The first group, known as the "Count Group 1" contained Counts One, Two, and Three, all of which involved Dr. Paul in a common scheme of tax evasion. The base offense level assigned to Dr. Paul for Count Group 1 was 17, based on the calculation done by the court that his calculated tax loss came to $327,302.93. Therefore, the "offense" to which the tax payment must be subsequent includes any of the offenses contained in this common scheme of tax evasion. Count One of the indictment, on which the jury returned a guilty verdict, charges Dr. Paul with willfully attempting to evade and defeat the payment of a substantial portion of the assessed taxes owed by him "from on or about December 14, 1993 to on or about May 27, 1994." December 14, 1993 was chosen because it was when Dr. Paul submitted the first Offer-in-Compromise, which was later rejected by the IRS. Therefore, the money paid in association with the Offer-in-Compromise in April 1994 was made subsequent to the relevant offense and is subject to USSG §2T1.1(c)(5). We affirm the district court's ruling on this matter.

7. Sentence Enhancements

Dr. Paul now appeals the district court's decision to apply three sentence enhancements, ultimately increasing his sentence by six levels on the basis of sophisticated concealment, his aggravating role, and for obstruction of justice. We review the district court's findings of fact with respect to the application of the enhancement for clear error, but review legal conclusions as to whether the facts justify an enhancement de novo. See United States v. Morris, No. 99-3905, 2001 WL 92126, at **3 (6th Cir. Jan. 23, 2001) (reviewing the application of a sentence enhancement under USSG §2T1.1 for sophisticated concealment by the defendant, making the offense difficult to detect); United States v. Caseslorente, 220 F.3d 727, 734 (6th Cir. 2000) (reviewing the application of a sentence enhancement under USSG §3B1.1 for the defendant's role in the offenses he committed); United States v. Sabino, 307 F.3d 446, 448 (6th Cir. 2002) (reviewing the application of a sentence enhancement under USSG §3C1.1 for the defendant's obstruction of justice).

Sophisticated Concealment Enhancement

The Sentencing Guidelines provide for a sentence enhancement of two levels for tax evasion offenses involving "sophisticated concealment." USSG §2T1.1(b)(2). Sophisticated concealment is defined as "especially complex or especially intricate offense conduct in which deliberate steps are taken to make the offense, or its extent, difficult to detect." USSG §2T1.1, comment. (n.4). The Commentary points out that `[c]onduct such as hiding assets or transactions, or both, through the use of fictitious entities, corporate shells, or offshore bank accounts ordinarily indicates sophisticated concealment." Ibid.

In general, complex schemes of tax evasion warrant imposition of the sophisticated concealment enhancement. In United States v. Butler [ 2002-2 USTC ¶50,579], 297 F.3d 505 (6th Cir. 2002), this court affirmed the application of a sophisticated concealment enhancement where the defendant set up shell corporations, used post office drop boxes, aliases, and different bank accounts to conceal his tax evasion. In Sabino [ 2002-1 USTC ¶50,137], 274 F.3d 1053, this court affirmed the application of a sophisticated concealment enhancement where the defendant had used at least seven trusts to avoid payment of taxes, noting that the IRS investigation had been lengthy and complex. In United States v. Middleton, 246 F.3d 825 (6th Cir. 2001), this court affirmed the application of a sophisticated concealment enhancement where the defendant had deposited his receipts into non-interest-bearing business bank accounts, had opened accounts at several different banks, had used several different company names to open these accounts, including one in which he had no ownership interest, had traveled to different branches of the same bank to make structured withdrawals of amounts less than $10,000, and had paid all of his bills using cash, money orders, or endorsed business checks without ever retaining a receipt or other record of the transaction.

The district court, in justifying its enhancement of Dr. Paul's sentence for sophisticated concealment, noted that Dr. Paul opened five different bank accounts in three states, supplied a false social security number to the IRS, paid his employees with cash, personal checks, and checks from a business other than his medical practice, required the buyer of his home in Michigan to enter into a confidentiality agreement that prevented the new owner of the house from disclosing any facts or circumstances of the land purchase, and carefully broke down the check he had received from the sale of the Michigan property into amounts that were below $10,000 in order to avoid alerting the IRS to his activities when depositing this money into various accounts. Moreover, the court took notice of the scheme between Dr. Paul and Snider in conducting the straw sale purchase of his Michigan home. All of these factors point to an elaborate plan to conceal Dr. Paul's tax evasion, relatively similar to the one described in Middleton. The district judge did not commit clear error in assessing Dr. Paul a sentence enhancement for sophisticated means.

Aggravating Role Enhancement

The Sentencing Guidelines provide a sentence enhancement for an individual's aggravating role in the commission of an offense. USSG §3B1.1. In particular, the guidelines direct a sentencing court to increase a defendant's offense level by two levels "if the defendant was an organizer, leader, manager, or supervisor in any criminal activity...." The Commentary gives examples of factors to be considered in determining whether the defendant had a leadership role:

Factors the court should consider include the exercise of decision making authority, the nature of participation in the commission of the offense, the recruitment of accomplices, the claimed right to a larger share of the fruits of the crime, the degree of participation in planning or organizing the offense, the nature and scope of the illegal activity and the degree of control and authority exercised over others.

USSG §3B1.1, comment. (n.4).

In this case, the district judge enhanced Dr. Paul's sentence because of his leadership role in the straw sale purchase of his Michigan home. The judge points out that Dr. Paul came up with the idea, planned the offense, recruited Snider and others, such as Kaye Sewell and the man who fronted Dr. Paul the money for the down payment in the straw sale of his Michigan property, and directed them in the commission of the crime, exercising a considerable degree of control over Snider in particular. Furthermore, the judge points out that Dr. Paul was the only participant to gain financially from the transaction.

Dr. Paul cites to the case of United States v. Vandeberg, 201 F.3d 805, 812 (6th Cir. 2000), in which this court held that the record did not support the imposition of a two-level enhancement to a defendant's sentence for being an organizer, leader, manager, or supervisor of criminal activity pursuant to USSG §3B1.1, even though the defendant had provided his co-conspirator with information that was crucial to helping the co-conspirator burglarize a home. However, in Vandenberg, there was no evidence indicating that the defendant had either recruited his co-conspirator, exercised any authority over him, or had taken a leadership role in planning the crime. Id. at 811. Moreover, the defendant in Vandeberg did not take a larger share in the profits garnered from the burglary. Ibid. Dr. Paul's role is not comparable, since there was evidence to support the conclusions reached by the district court in this case that Dr. Paul had recruited Snyder and others into defrauding the IRS, had exercised control over Snyder, had masterminded the straw sale of his Michigan home, and had reaped a far greater financial gain as a result of his crime than anyone else involved. The district court did not commit clear error in applying the two-level enhancement for Dr. Paul's leadership role in the commission of the offense.

Obstruction of Justice Enhancement

The Sentencing Guidelines provide for a two-level enhancement for obstruction of justice pursuant to USSG §3C1.1. The guidelines provide that:

If (A) the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice during the investigation, prosecution, or sentencing of the instant offense of conviction, and (B) the obstructive conduct related to (i) the defendant's offense of conviction and any relevant conduct; or (ii) a closely related offense, increase the offense level by 2 levels.

USSG §3C1.1. The non-exhaustive list of examples of obstructive conduct found in the Commentary includes in relevant part:

...

(b) committing, suborning, or attempting to suborn perjury;

...

(f) providing materially false information to a judge or magistrate;

(g) providing a materially false statement to a law enforcement officer that significantly obstructed or impeded the official investigation or prosecution of the instant offense;

...

USSG §3C1.1, comment. (n.4).

The district court found that Dr. Paul was eligible for a sentence enhancement on the basis of obstruction of justice because Dr. Paul had perjured himself in the submission of his Offer-in-Compromise, which was signed "under penalty of perjury," on December 14, 1993 . Moreover, the court held that Dr. Paul had willfully perjured himself on the witness stand on several material points, when Dr. Paul declared that he had not filled out the documents relating to the Offer-in-Compromise, had never used a false Social Security number and that Snider alone committed the bank fraud.

As in this case, the application of an enhancement on the basis of obstruction of justice is generally dependant upon credibility determinations and thus a district court has considerable discretion in determining whether the obstruction enhancement applies. See United States v. Moss, 9 F.3d 543, 553 (6th Cir. 1993). Here, the district court did not err in its application of the obstruction of justice enhancement. Dr. Paul contends that the judge's determinations with regard to Dr. Paul's credibility were unreasonable, but the evidence and the jury's conviction prove otherwise. We affirm the district court's ruling.

8. Conditions on Supervised Release

The Sentencing Guidelines permit the trial court to add specific conditions to the supervised release of a defendant, stating that:

The court may impose other conditions of supervised release to the extent that such conditions (1) are reasonably related to (A) the nature and circumstances of the offense and the history and characteristics of the defendant; (B) the need for the sentence imposed to afford adequate deterrence to criminal conduct; (C) the need to protect the public from further crimes of the defendant; and (D) the need to provide the defendant with needed educational or vocational training, medical care, or other correctional treatment in the most effective manner; and (2) involve no greater deprivation of liberty than is reasonably necessary for the purposes set forth above and are consistent with any pertinent policy statements issued by the Sentencing Commission.

USSG §5D1.3(b). In addition, the Guidelines recommend that the court impose certain conditions, including that the "defendant shall refrain from excessive use of alcohol...." USSG §5D1.3(c)(7). Moreover, the Guidelines note that certain "special conditions" may be appropriate on a case-by-case basis, including community service. Since Dr. Paul did not object at sentencing to the conditions set by the district court, we review for plain error. See United States v. Vincent, 20 F.3d 229 (6th Cir. 1994).

The district court imposed two conditions on Dr. Paul's supervised release. First, the district court required that Dr. Paul refrain from consuming alcohol. Dr. Paul contends that there is no basis for this condition and that it should be eliminated. The record, however, reflects that Dr. Paul was arrested twice for incidents that related to an abuse of alcohol. Dr. Paul was once charged with operating a vehicle under the influence, and was allowed to plead guilty to the lesser included offense of operating while impaired. A few years later, Dr. Paul was arrested for resisting and obstructing an officer who had pulled him over for speeding, weaving, and other traffic offenses, and attempted to conduct a sobriety test. As a result of the second arrest, Dr. Paul was required to participate in alcohol counseling and his driver's license was suspended for a year.

This court has consistently held that the imposition of a special condition is within the district court's discretion if that condition is "reasonably related to the dual goals of probation, the rehabilitation of the defendant and the protection of the public." United States v. Bortels, 962 F.2d 558, 560 (6th Cir. 1992). In addition, the Sentencing Guidelines specifically provide that if the court has reason to believe that the defendant has an alcohol problem, conditions requiring that the defendant participate in abuse programs that include testing for the substance to ensure abstinence are appropriate. USSG §5D1.3(d)(4). Given Dr. Paul's criminal record, it is not unreasonable to assume that he may have a substance abuse problem and therefore the district court did not commit clear error in requiring that Dr. Paul refrain from consuming alcohol during his supervised release. Cf United States v. Modena, 302 F.3d 626, 636-37 (6th Cir. 2002) (holding that the district court's requirement that the defendant abstain from the use of alcohol during his term of supervised release was an abuse of discretion since there was nothing in the record to indicate that the defendant had a substance abuse problem).

The second condition required by the court is that Dr. Paul perform 300 hours of community service in a non-medical related field. The court explained that it was putting this restriction on Dr. Paul in order to help Dr. Paul to regain a more realistic picture of himself as a normal human being, and not as an important doctor. This special condition is intended to serve the permissible goal of rehabilitation. See Bortels, 962 F.2d at 560. We affirm the district court's imposition of these two conditions.

III

For the reasons given above, we AFFIRM Dr. Paul's conviction and sentence.

^* The Honorable Marianne O. Battani, United States District Judge for the Eastern District of Michigan, sitting by designation.