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

II. The Jury Instructions

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

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

III. Sufficiency of the Evidence

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

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

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

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

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

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

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

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

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

IV. Application of the Sentencing Guidelines

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

A. Sophisticated Means Enhancement

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

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

B. Abuse of Position of Trust Enhancement

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

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

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

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

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

C. Denial of Downward Departure

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Lucero, Circuit Judge

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

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

 

 

[2000-1 USTC ¶50,272] United States of America, Plaintiff-Appellee v. Brenda Kay Scarberry, also known as Brenda Raymond, also known as Brenda Jordan, Defendant-Appellant

(CA-10), U.S. Court of Appeals, 10th Circuit, 99-6234, 3/2/2000, Affirming an unreported District Court decision

[Code Sec. 7206 ]

Tax crimes: False returns: Deductions exaggerated: Filing status: Materiality.--A return preparer was properly convicted of filing false returns after she overstated her husband's deductions on their joint return, and filed a second return in which she claimed married-filing-jointly status with another man. She deducted substantial business losses in connection with her husband's carpet business even though he worked only occasionally as an installer and did not own the business. Further, her husband was not involved in the preparation of the return and he provided no information or documentation concerning the claimed deductions. Regarding her second return, her improper filing status qualified as a material matter because filing status affects tax rates, dependency status and the earned income credit.
[Code Sec. 7206 ]

Tax crimes: False returns: Venue: Failure to raise issue: Residence in judicial district.--A return preparer was properly convicted of filing false returns after she claimed married-filing-jointly status with a man who was not her husband. Her claim that the trial court lacked venue over the charge was rejected because she failed to raise the issue at trial, and the evidence indicated that at the time she filed the return, she was living in the judicial district where her case was tried.

[Code Sec. 7206 ]

Tax crimes: Preparation of false returns: False deductions.--A return preparer was properly convicted of assisting in the preparation of a false return because she prepared a truck driver's return on which she claimed a false farming loss from cattle ranching. The truck driver never told her he owned a ranch, the only documentation he gave her was his W-2 statement, and it appeared that he lacked the education or reading ability to understand the return that she prepared.

[Code Sec. 7206 ]

Tax crimes: Filing false returns: Preparation of false returns: Evidence: Revenue agent's testimony: Conclusions of law: Evidence voluntarily surrendered: Misrepresentations: Duress.--Evidence was properly admitted and excluded from a return preparer's trial for filing false returns and assisting in the preparation of false returns. A revenue agent's testimony that the false information she provided was material to the computation of tax liability was admissible because it merely assisted the jury in understanding the facts. Documents that her mother voluntarily surrendered to an IRS agent were also admissible absent a showing that the agent made any misrepresentations to obtain them. Evidence that her husband once forced his former wife to sign a false return was properly excluded. While the husband may have forced her into the return preparation business and appropriated her proceeds, there was no evidence that he forced her to prepare any of the returns at issue.

[Code Sec. 7206 ]

Tax crimes: Filing false returns: Preparation of false returns: Duress: Jury instructions.--A return preparer who was convicted of filing and preparing false returns was not entitled to a jury instruction on her defense of duress. Evidence concerning her husband's threats in connection with her return preparation business was too far removed to establish that she was under duress in the preparation and signing of the returns at issue.

Before: BRORBY, KELLY and MURPHY, Circuit Judges. ^*

è Caution: This court has designated this opinion as NOT FOR PUBLICATION. Consult the Rules of the Court before citing this case.ç

ORDER AND JUDGMENT ^**

KELLY, JR., Circuit Judge:

Brenda Scarberry appeals from her conviction of two counts of making and subscribing to false tax returns, 26 U.S.C. §7206(1) & 18 U.S.C. §2 and one count of aiding and assisting in the preparation of false tax returns in violation of 26 U.S.C. §7206(2). She was sentenced to 15 months imprisonment to be followed by two years of supervised release.

On appeal, Ms. Scarberry contends that (1) the evidence is insufficient to support the convictions; (2) the revenue agent testified as to the law; (3) the district court erred in excluding the testimony of another ex-wife of Tony Scarberry, Jr.; (4) the jury was not instructed as to the defense's theory of the case; and (5) her motion to suppress was denied in error. Our jurisdiction arises under 28 U.S.C. §1291 and we affirm.

Background

Ms. Scarberry was married to Tony Scarberry, Jr., from 1990 until 1996. During their marriage, the Scarberrys filed joint tax returns, including for the 1994 tax year. In 1994 Ms. Scarberry, using her maiden name of Brenda Jordan, filed a joint return with Tony Scarberry, Jr. claiming business losses associated with Mr. Scarberry's part-time employment as a carpet installer (count 2). Ms. Scarberry also filed a 1994 joint return with Craig Raymond, her current husband, claiming an incorrect marital status (count 3). Ms. Scarberry prepared tax returns for compensation, including one for Monte Hamman, reporting a $6,710 farm loss (count 8).

Discussion

A. Sufficiency of the Evidence

We review a sufficiency of the evidence claim de novo, viewing the evidence and its reasonable inferences in the light most favorable to the government. The issue is whether a rational jury could have found the elements of the offense beyond a reasonable doubt. See United States v. McSwain, 197 F.3d 472, 477 (10th Cir. 1999). To establish a violation of §7206(1), the government was required to prove that Ms. Scarberry (1) made and subscribed a return, (2) the return contained a written declaration that it was being signed subject to the penalties of perjury, (3) she did not believe the return to be true and correct as to every material matter contained in the indictment, and (4) she acted willfully in filing the return. See United States v. Winchell [97-2 USTC ¶50,890], 129 F.3d 1093, 1095-96 (10th Cir. 1997). To establish a violation of §7206(2), the government was required to prove that Ms. Scarberry (1) aided or assisted or otherwise caused the preparation and presentation of a return, (2) the return was false or fraudulent as to a material matter, and (3) she acted wilfully. See United States v. Aramony, 88 F.3d 1369, 1382 (4th Cir. 1996).

Ms. Scarberry argues that the government failed to prove she acted wilfully regarding the three counts of conviction, that the filing status of taxpayer is not material as a matter of law, and that venue was improper on count 3. Willfulness is the voluntary, intentional violation of a known legal duty. See Cheek v. United States [91-1 USTC ¶50,012], 498 U.S. 192, 201 (1991); United States v. Guidry [2000-1 USTC ¶50,118], 199 F.3d 1150, 1156 (10th Cir. 1999). Making false entries or documents or invoices may be circumstantial evidence of willfullness. See Guidry [2000-1 USTC ¶50,118], 199 F.3d at 1157.

1. Count 2--1994 Jordan/Scarberry Return

In challenging the proof of wilfulness, Ms. Scarberry argues that she cannot be presumed to have known that the information was false and that her husband theoretically may have been able to claim expenses in driving to a part-time work site. However, we reject this challenge after considering Mr. Scarberry's testimony as to his non-involvement with the preparation of the return and the nature of his part-time work. When she prepared the return, Ms. Scarberry had been married to him for over four years. The jury could reasonably infer that she knew he worked full-time as a sheet metal worker, and only occasionally as a carpet installer, the business for which a loss of $11,160 was claimed. Additionally, Ms. Scarberry almost certainly knew her husband did not own the carpet installation business, but only worked as a helper, and thus was not entitled to business loss deductions. Mr. and Ms. Scarberry were separated at the time she completed the tax forms; according to his testimony, he provided no information or documentation concerning any of the items that comprise the business expenses claimed, see Tr. at 437-41; he merely picked up the completed form to sign.

2. Count 3--1994 Jordan/Raymond Return

Ms. Scarberry, again using her maiden name of Brenda Jordan, also filed a 1994 income tax return with Craig Raymond, with the filing status of "married filing jointly." Given the obviousness of one's marital status in these circumstances, the jury certainly could infer that her conduct was willful. Ms. Scarberry also contends that the government failed to prove that the filing status, here, "married filing jointly," was material. Material information under §7206(1) is that information necessary to enable the correct determination of tax liability. See United States v. Clifton [97-2 USTC ¶50,832], 127 F.3d 969, 970 (10th Cir. 1997). She argues that the government offered no evidence to show that the false filing status had affected the tax calculation.

Ms. Scarberry understates the record when she suggests that the revenue agent stated that all discrepancies are material. Aplt. Br. at 27. The revenue agent specifically testified that filing status affects tax rates, dependency status for children, and computation of the earned income credit. Tr. at 446-47. A reasonable jury could certainly conclude that incorrect filing status is material.

Ms. Scarberry also contends that venue for this count was improper. Venue for the trial of a defendant charged with violating 26 U.S.C. §7206(1) is proper in the district where the return was made and subscribed. Ms. Scarberry claims that the government did not prove that the return was made or subscribed in the Western District of Oklahoma.

Ms. Scarberry waived this claim by failing to object to venue at trial or requesting an instruction on venue. See United States v. Miller, 111 F.3d 747, 750 (10th Cir. 1997). Additionally, she signed the return on March 20, 1995 , and record evidence suggests that she was residing in Oklahoma at that time. See Tr. at 140. Allowing this count to be heard in the Western District of Oklahoma was not plain error.

3. Count 8--1993 Monty Hamman Return

Ms. Scarberry's claim of insufficient evidence on this count is similarly unpersuasive. She assisted in the preparation of a 1993 income tax return for Monte Hamman that falsely claimed a $6,710 farming loss on a cattle ranch. Testimony at trial indicated that Mr. Hamman was a truck driver rather than a rancher and did not have the education or reading ability to understand what was claimed on his return. He merely signed where he was told. Additional testimony established that the only documentation he gave Ms. Scarberry was his W-2 form, and he never mentioned having a cattle ranch. A reasonable jury could believe that any false information was attributable to Ms. Scarberry and that her conduct was willful. Courts have sustained §7206(2) convictions on similar facts. See United States v. Conlin [77-1 USTC ¶9291], 551 F.2d 534, 536 (2d Cir. 1977); United States v. Miller [76-1 USTC ¶9228], 529 F.2d 1125, 1127, 1129 (9th Cir. 1976); Amos v. United States [74-1 USTC ¶9447], 496 F.2d 1269, 1271, 1273-74 (8th Cir. 1974).

B. Expert Testimony on Materiality

For the first time on appeal, Ms. Scarberry objects to the testimony of the revenue agent. He testified that certain line items the government claimed were false were material to computation of tax liability. Ms. Scarberry argues that the agent was impermissibly allowed to define the law of the case. She bases her argument on Specht v. Jensen, 853 F.2d 805 (10th Cir. 1988) (en banc), cert. denied, 488 U.S. 1008 (1989), where the court held that a legal expert could not testify as to the ultimate legal issues in the case.

Because she raises this issue for the first time on appeal, we review for plain error only. See United States v. Deters, 184 F.3d 1253, 1258 (10th Cir. 1999). No such error occurred here; the revenue agent's testimony merely assisted the jury in understanding the facts in evidence; in no way did it supplant the function of the court to define the law and the jury to apply it.

C. Exclusion of Ex-Wife's Testimony

Ms. Scarberry alleges that the district court erred in excluding the testimony of Linda Prestwich, an ex-wife of Tony Scarberry, Jr. Ms. Scarberry argued that Mr. Scarberry had a proclivity to force people to sign false returns when he would benefit. According to the offer of proof, Mr. Scarberry forced Ms. Prestwich to sign a false 1989 joint return when she was married to someone else. Tr. at 557. We review the exclusion of evidence for an abuse of discretion. See United States v. Beers, 189 F.3d 1297, 1300 (10th Cir. 1999). While there was other evidence that Mr. Scarberry forced Ms. Scarberry into the tax preparation business and took the proceeds, there simply was no foundation that Ms. Scarberry was forced by Mr. Scarberry to file the returns comprising the counts of conviction. The trial judge did not abuse his discretion.

D. Refusal to Instruct on Theory of Defense

Ms. Scarberry requested a type of duress instruction, claiming that she was not capable of acting willfully and with the requisite intent because of the abuse she had suffered at the hands of her ex-husband. ¹ We review a district court's decision to deny a particular instruction for an abuse of discretion. See Davoll v. Webb, 194 F.3d 1116, 1131 (10th Cir. 1999).

A defendant is entitled to an instruction on her theory of defense if the instruction is a correct statement of law and supported by sufficient evidence. See United States v. Bindley, 157 F.3d 1235, 1241 (10th Cir. 1998). In this case, Ms. Scarberry did not show " '(1) an immediate threat of death or serious bodily injury, (2) a well-grounded fear that the threat will be carried out, and (3) no reasonable opportunity to escape the threatened harm.' " United States v. Merchant, 992 F.2d 1091, 1096 (10th Cir. 1993) (citation omitted). While some evidence may have indicated that Ms. Scarberry was threatened by Mr. Scarberry in connection with her tax return activities, it is too far removed from establishing duress in the preparation and signing of the returns described in the indictment.

E. Motion to Suppress Evidence

Ms. Scarberry argues that her mother was tricked into turning over a box of papers when a revenue agent told her that he was authorized by Ms. Scarberry to collect the box. See United States v. Tweel [77-1 USTC ¶9330], 550 F.2d 297, 299 (5th Cir. 1977). "A consensual search is unreasonable under the Fourth Amendment or violative of due process under the Fifth Amendment if the consent was induced by fraud, deceit, trickery, or misrepresentation by the revenue agent." United States v. Peters [98-2 USTC ¶50,650], 153 F.3d 445, 451 (7th Cir. 1998). The burden is on a defendant to prove agent misconduct by clear and convincing evidence. See United States v. Powell [88-1 USTC ¶9140], 835 F.2d 1095, 1098 (5th Cir. 1988).

The district court declined to suppress evidence from the box after hearing the testimony of both Ms. Scarberry's mother and the revenue agent, finding that the agent "did not make the statement that he had the permission of the Defendant and that these documents were turned over voluntarily by the Defendant's mother and not based upon any representations about the willingness of the Defendant to have them turned over." Tr. at 345-46. Having carefully reviewed the record, we hold that the trial court's findings are not clearly erroneous.

AFFIRMED.

^* After examining the briefs and the appellate record, this three-judge panel has determined unanimously that oral argument would not be of material assistance in the determination of this appeal. See Fed.R.App.P. 34(a); 10th Cir. R. 34.1(G). The cause is therefore ordered submitted without oral argument.

^** This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. This court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.

¹ The transcript of the jury instructions conference indicates that counsel tendered the instruction, and that the court denied it. However, the exact form of the requested instruction does not appear in the record.

 

 

 

[2001-1 USTC ¶50,290] United States of America , Appellee v. Dennis Ray Peiker, Appellant

(CA-8), U.S. Court of Appeals, 8th Circuit, 00-1426, 3/13/2001 , 2001 U.S. App. LEXIS 3829. Affirming an unreported District Court decision

[Code Secs. 7206 and 7402 ]

Appeal from district court: Penalties, criminal: False returns: Motion for acquittal.--The district court properly affirmed an alleged drug dealer's conviction for filing false income tax returns during the tax years in issue. His contention that a 5-6% understatement was not material as a matter of law was rejected because the amount of income involved was not relevant to the issue of whether he willfully filed false returns. Moreover, the exclusion of evidence regarding his ex-wife was not an abuse of discretion because only his actions were relevant in determining whether a violation under Code Sec. 7206 occurred.

John Joseph Ulrich, Pierre , S.D. , Rita Allen, Sioux Falls , S.D. , for appellee. Thomas K. Wilka, Hagen & Wilka, Sioux Falls , S.D. , for appellant. Dennis Ray Peiker, Milbank , S.D. , pro se.

Before: HANSEN, ARNOLD and BYE, Circuit Judges.

è Caution: This court has designated this opinion as NOT FOR PUBLICATION. Consult the Rules of the Court before citing this case.ç

PER CURIAM:

A"EC JURY FOUND DENNIS RAY PEIKER GUILTY OF TWO COUNTS OF WILLFULLY FILING FALSE INCOME TAX RETURNS FOR 1992 AND 1995, IN VIOLATION OF 26 U.S.C. §7206(1). THE DISTRICT COURT ¹ DENIED PEIKER'S MOTION FOR JUDGMENT OF ACQUITTAL, AND SENTENCED HIM TO SIX MONTHS IMPRISONMENT AND ONE YEAR SUPERVISED RELEASE. ON APPEAL, PEIKER ARGUES (1) THE DISTRICT COURT SHOULD HAVE GRANTED HIS MOTION FOR JUDGMENT OF ACQUITTAL, BECAUSE THE AMOUNT OF UNREPORTED INCOME WAS NOT MATERIAL AS A MATTER OF LAW, AND BECAUSE THERE WAS INSUFFICIENT EVIDENCE TO SUPPORT THE JURY'S VERDICT; (2) HE WAS PREJUDICED BY THE EXCLUSION OF EVIDENCE RELATING TO HIS WIFE AND HER ALLEGATIONS THAT HE WAS A DRUG DEALER; AND (3) THE INDICTMENT SHOULD HAVE BEEN DISMISSED BECAUSE IT CHARGED HIM WITH COMMITTING THE OFFENSES IN THE "NORTHERN DISTRICT OF SOUTH DAKOTA," AND THERE WAS NO EVIDENCE OF HIS WHEREABOUTS WHEN HE SIGNED THE 1992 AND 1995 TAX RETURNS. WE AFFIRM.

Viewing the evidence in the light most favorable to the jury's verdict and giving the government the benefit of all reasonable inferences that may be drawn from the evidence, we conclude the district court correctly denied Peiker's motion for judgment of acquittal. See United States v. Cunningham, 83 F.3d 218, 222 (8th Cir. 1996) (standard of review). First, we reject Peiker's argument that a 5-6% underreporting is not material as a matter of law, because the government need not establish an actual tax deficiency to demonstrate that his false statements in the 1992 and 1995 returns were material. See United States v. Young [86-2 USTC ¶9806], 804 F.2d 116, 119 (8th Cir. 1986), cert. denied, 482 U.S. 913, 96 L.Ed.2d 673, 107 S.Ct. 3184 (1987). Second, we conclude the government presented sufficient evidence to prove that he willfully misreported his income. The government's evidence showed that Peiker, in all, omitted $ 10,710 from his 1992 income and over $ 23,000 from his 1995 income by not reporting checks and by cashing checks without reporting them as income. The jury, moreover, could have inferred that Peiker willfully omitted income in 1992 and 1995 based on his admission to an Internal Revenue Service agent that he did not want his wife to know how much he was making. See United States v. Schaefer [93-2 USTC ¶50,526], 4 F.3d 679, 681 (8th Cir. 1993) (willfulness in criminal tax case may be inferred from facts of case); Young [86-2 USTC ¶9806], [86-2 USTC ¶9806], 804 F.2d at 119 (tax return that included bail-bonding-business income as net, not as gross, income omitted material items necessary to computation of income and thus was material omission forming basis for §7206(1) conviction).

Further, we conclude that the district court did not abuse its discretion in excluding Peiker's evidence about his ex-wife, as only his willfulness in misreporting his income was relevant to the §7206(1) offense, see Pittman v. Frazer, 129 F.3d 983, 989 (8th Cir. 1997) (district court has discretion in excluding evidence); that the indictment--although it contained a typographical error--was not defective, as it clearly set out the §7206(1) offense on which he was convicted, see United States v. Miller, 471 U.S. 130, 138-40, 85 L.Ed.2d 99, 105 S.Ct. 1811 (1985) (where defendant was tried on indictment that clearly set out offense for which he was ultimately convicted, defendant showed no deprivation of his Fifth Amendment rights); and that Peiker's whereabouts when he signed the tax returns was immaterial to the convicted offense.

Accordingly, we affirm.

¹ The Honorable Charles B. Kornmann, United States District Judge for the District of South Dakota.

 

 

[2003-1 USTC ¶50,312] United States of America , Plaintiff-Appellee v. Warren Monroe Hayes, Defendant-Appellant.

U.S. Court of Appeals, 4th Circuit; 02-4421, 02-4478, 322 F3d 792, March 14, 2003 .

Affirming in part, vacating and remanding in part an unreported DC Va. decision.

[ Code Secs. 6531 and 7206]

 

Penalties, criminal: Fraud and false statements: Statute of limitations: Six-year period. --

The prosecution of a return preparer for procuring the presentation of tax returns containing false statements by fraudulently inflating taxpayers' deductions, in violation of Code Sec. 7206(2), was not barred by the statute of limitations. The six-year limitations period under Code Sec. 6531(3) applied because the preparer's actions constituted acts furthering the presentation of false returns. The application of Code Sec. 6531(3) to offenses under Code Sec. 7206(2) was appropriate, notwithstanding that Code Sec. 6531 neither expressly refers to Code Sec. 7206(2) nor incorporates all of the elements of a Code Sec. 7206(2) offense.

[ Code Sec. 7206]

Penalties, criminal: Fraud and false statements: Sufficiency of evidence. --

A federal district court properly convicted a tax preparer of procuring the presentation of tax returns containing false statements by fraudulently inflating taxpayers' deductions in violation of Code Sec. 7206(2). The preparer's appeal asserted that there was insufficient evidence to support six of his convictions. However, the weight of the evidence, including the testimony of witnesses for whom he had prepared returns, was sufficient to support a finding of the preparer's guilt.

[ Code Sec. 7206]

Penalties, criminal: Fraud and false statements: Sentencing guidelines. --

A federal district court erred in failing to consider evidence of relevant conduct submitted by the government in sentencing a return preparer convicted of procuring the presentation of tax returns containing false statements in violation of Code Sec. 7206(2). While the sentencing guidelines preserve a broad range of discretion for district courts, a court had no discretion to disregard relevant conduct in order to determine the sentence it considered appropriate.

Paul J. McNulty, United States Attorney, Laura C. Marshall, Assistant United States Attorney, for appellee. Mary Elizabeth Maguire, Frank W. Dunham, Jr., for appellant.

Before: Wilkins, Chief Judge, and Widener, Circuit Judge, and Greenberg, Senior Circuit Judge.

OPINION

WILKINS, Chief Circuit Judge: Warren Monroe Hayes appeals his convictions for 24 counts of procuring the presentation of tax returns containing false statements, in violation of 26 U.S.C.A. §7206(2) (West 2002). He asserts that 20 of the charges against him are barred by the statute of limitations, that six of his convictions are not supported by sufficient evidence, and that the district court erred in admitting certain evidence. On cross-appeal, the Government contends that the district court improperly refused to consider relevant conduct at sentencing. Finding merit only in the Government's claim, we affirm Hayes' convictions, vacate his sentence, and remand.

I.

On November 19, 2001 , a grand jury in the Eastern District of Virginia issued an indictment charging Hayes with preparing 24 tax returns that fraudulently inflated the taxpayers' deductions. The returns in question were filed between February 17, 1996 and April 15, 1999 .

Hayes moved to dismiss all but four of the charges. In support, he argued that a three-year statute of limitations applied under 26 U.S.C.A. §6531 (West 2002) and that only four of the charges in the indictment involved conduct within the preceding three years. The district court denied Hayes' motion, concluding that the applicable limitations period is six years, not three.

At the ensuing trial, the Government presented testimony from several witnesses who had retained Hayes to prepare their taxes. Their testimony indicated that Hayes was not a full-time accountant or tax-preparer but that he supplemented his income every year by preparing returns for relatives and acquaintances. These returns were ostensibly based on documents provided to Hayes by his customers. The customers testified, however, that the returns prepared by Hayes substantially overstated some of their deductions, primarily for charitable contributions and medical expenses. The customers further testified that they did not review the returns before filing them; thus, even as they recognized that they were receiving larger refunds than they were accustomed to, they did not become aware of the overstatements until contacted by investigators from the Internal Revenue Service (IRS).

Hayes testified in his own behalf. He admitted that he made errors in the returns he prepared but denied fabricating any figures in order to increase his customers' deductions.

The jury found Hayes guilty of all 24 counts charged in the indictment. The court then sentenced Hayes to 24 concurrent terms of 30 months imprisonment.

II.

Hayes' first claim is that the district court erred in refusing to apply a three-year statute of limitations to the charges against him. This is a legal issue which we review de novo. See Franks v. Ross, 313 F.3d 184, 192 (4th Cir. 2002).

Section 6531 provides that criminal violations of tax laws are ordinarily subject to a three-year statute of limitations. The statute further provides, however, that the limitations period is six years for eight types of offenses. As is relevant here, the longer limitations period applies to

the offense of willfully aiding or assisting in, or procuring, counseling, or advising, the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a false or fraudulent return, affidavit, claim, or document (whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document).

26 U.S.C.A. §6531(3). The district court concluded that the charges against Hayes were governed by §6531(3) and thus subject to a six-year statute of limitations. We agree.

The charges against Hayes alleged violations of §7206(2), which establishes criminal penalties for any person who

[w]illfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document.

Even a cursory comparison of these provisions demonstrates that §6531(3) refers to offenses under §7206(2). The language of the two statutes is virtually identical, with the only substantive difference being that §6531(3) omits the requirement that the defendant's false statements relate to a "material matter."

Hayes contends that this difference demonstrates that §6531(3) does not apply to violations of §7206(2). This argument might be persuasive if the additional requirement appeared in the procedural provision establishing the statute of limitations rather than the substantive provision defining the crime. Here, however, the reverse is true. Thus, while there may be offenses that satisfy §6531(3) without including all the elements of a §7206(2) violation, it is not possible to violate §7206(2) without meeting all the requirements of §6531(3). See United States v. Zavin [ 61-1 USTC ¶9468], 190 F.Supp. 393, 394 (D. N.J. 1961) ("A return which is false as to any material matter is a false return.").

Hayes further argues that the absence of any reference to §7206(2) in §6531 demonstrates that Congress did not intend for the extended statute of limitations to apply to §7206(2) offenses. He bolsters this argument by noting that §6531(5) specifically alludes to §7206(1). We acknowledge that the legislative intent would be clearer if §6531 identified both of the relevant portions of §7206 in the same manner, rather than referring to one by citation and to the other by incorporating its language. Nevertheless, the absence of an explicit reference to §7206(2) within §6531 does not preclude the application of a six-year limitations period here. Of the eight categories of offenses subject to the six-year period under §6531, four are defined through descriptions of offense conduct, see 26 U.S.C.A. §§6531(1)-(4), while the other four are defined through statutory references, see 26 U.S.C.A. §§6531(5)-(8). A holding that the six-year statute of limitations applies only to the statutory provisions explicitly mentioned in §6531 would effectively nullify the four paragraphs of that statute that use descriptions rather than citations. This result would contravene well-settled principles of statutory construction. See Lane v. United States [ 2002-1 USTC ¶60,437], 286 F.3d 723, 731 (4th Cir. 2002).

For the foregoing reasons, we conclude that application of §6531(3) to offenses under §7206(2) is appropriate, notwithstanding that §6531 neither expressly refers to §7206(2) nor incorporates all the elements of a §7206(2) offense. We therefore hold that the district court properly denied Hayes' motion to dismiss the 20 charges involving conduct occurring more than three years before he was indicted.

III.

We next consider Hayes' claim that there was insufficient evidence to support six of his convictions. We review this claim de novo. See United States v. Romer, 148 F.3d 359, 364 (4th Cir. 1998).

Section 7206(2) requires the Government to prove that "`(1) the defendant aided, assisted, or otherwise caused the preparation and presentation of a return; ... the return was fraudulent or false as to a material matter; and (3) the act of the defendant was willful."' United States v. Aramony, 88 F.3d 1369, 1382 (4th Cir. 1996) (quoting United States v. Salerno [ 90-1 USTC ¶50,261], 902 F.2d 1429, 1432 (9th Cir. 1990)). The verdict of the jury that Hayes committed this offense will be upheld if "`there is substantial evidence, taking the view most favorable to the Government, to support it."' United States v. Bennafield, 287 F.3d 320, 324 (4th Cir.) (quoting Glasser v. United States, 315 U.S. 60, 80 (1942)), cert. denied, 123 S. Ct. 388 (2002). With these standards in mind, we now examine the evidence supporting the convictions challenged by Hayes.

A. Count 7: Eunicea and Larry Ellerbe

Eunicea Ellerbe testified that she retained Hayes through her sister, Cynthia Peeples. Ellerbe gave relevant documents to Peeples for delivery to Hayes, and Hayes then prepared a tax return for Ellerbe and her husband. This return included, among other inaccurate figures, a claimed deduction of $16,381 for medical expenses. Ellerbe testified that she did not give Hayes any information supporting such a deduction.

Hayes contends that his conviction relating to the Ellerbe tax return is not supported by sufficient evidence because there was no evidence negating the possibility that Peeples, rather than Hayes, invented the deductions listed on the Ellerbe return. We disagree. Peeples testified at trial that, in addition to recruiting Hayes to prepare returns for Ellerbe, she twice hired him to prepare her own returns. The first return included deductions not supported by the information Peeples had provided to Hayes, and Peeples was audited as a result. She testified that she subsequently instructed Hayes "to do my taxes, but only put the figures on my taxes of what I give you." J.A. 564-65. The jury could reasonably infer that Peeples would not adhere to this policy for herself and yet provide Hayes with false information about her sister's taxes. This inference is particularly strong in light of the substantial similarities connecting the misstatements in the Ellerbe return with those in other returns prepared by Hayes. Cf. Morgan v. Foretich, 846 F.2d 941, 944 (4th Cir. 1988) (holding that evidence that two half-sisters suffered similar sexual abuse tended to show that they were abused by their common parent or grandparents).

B. Counts 12 and 13: Ronald Gullette

Like Eunicea Ellerbe, Ronald Gullette retained Hayes through an intermediary (Van Ashe) and never interacted with Hayes directly. Hayes thus contends that the evidence fails to establish that he created the false information that was included on returns he prepared for Gullette; instead, such information may have been given to Hayes by Ashe. Once again, however, the jury could reasonably infer that Hayes was responsible, because the misstatements in Gullette's returns were so similar to those in other returns prepared by Hayes.

C. Count 14: Linda Macklin

Linda Macklin, Hayes' sister-in-law, testified that Hayes prepared her tax returns for 1996 and 1997. On her 1996 return, Hayes included a medical expense of over $13,000. Macklin told the grand jury that she had incurred more than $14,000 in medical bills in 1996, when her daughter was born. On this basis, Hayes asserts that the deduction noted on Macklin's return was not fraudulent.

This argument fails because Macklin testified that she never discussed her medical bills with Hayes. Also, it appears that Macklin never claimed to have paid these bills herself; instead, she testified that they were paid by her insurance, which rendered them non-deductible, see 26 U.S.C.A. §213(a) (West 2002). The jury could reasonably infer from these circumstances that Macklin did not provide Hayes with the $13,000 figure listed on her tax return and that Hayes may instead have invented this number. Moreover, while the $13,000 deduction noted by Hayes was close to Macklin's actual expenses, this figure also resembles false medical deductions claimed by Hayes in other returns he prepared.

D. Counts 23 and 24: Gloria and Willard ¹ Turnage

Gloria Turnage, like Linda Macklin, is Hayes' sister-in-law, and, like Macklin, Gloria hired Hayes to prepare tax returns for her and her husband in 1996 and 1997. These returns included large deductions for medical expenses and charitable contributions. Hayes asserts that the Turnages' testimony established that these deductions were accurate. This is incorrect. Under questioning by the court, Willard Turnage testified that the deductions on the Turnages' returns were "wrong." J.A. 193. Thus, the evidence supports the conclusion that the Turnages' returns included false statements.

Although Hayes has not raised this issue, we note that the evidence also supports the inference that it was Hayes who fabricated the incorrect amounts noted on the Turnages' returns. Gloria testified that she gave Hayes a series of documents --"[m]y W-2s, my medical bills, my financial statement from church, my day care," id. at 170 --and let him compute her deductions. Willard, for his part, stated that he "really didn't do anything" to assist Hayes with the preparation of tax returns. Id. at 189. It follows that neither Gloria nor Willard provided Hayes with the incorrect numbers that appeared on their tax returns. Consequently, Hayes must have either derived those numbers from Gloria's records or invented them himself. In light of the general reliability of business records and the substantial similarities between the errors on the Turnage returns and false deductions noted on other returns prepared by Hayes, a jury could reasonably conclude that Hayes fabricated the incorrect figures on the Turnage returns. Accordingly, the evidence was sufficient to support Hayes' convictions.

IV.

Hayes' remaining claims challenge the admission of certain evidence. Decisions allowing the introduction of evidence are reviewed for abuse of discretion. See United States v. Robinson, 275 F.3d 371, 383 (4th Cir. 2001), cert. denied, 122 S. Ct. 1581, 1945 (2002).

A. Summary Charts

Hayes initially challenges the admission of charts created by Special Agent Jo Ann Haarstick of the IRS. These charts summarized the alleged misstatements in tax returns prepared by Hayes. Hayes contends that these charts were unnecessary because this case was not unduly complex. He further asserts that the charts tended to bolster the testimony of the taxpayers who claimed that Hayes included false information in their returns.

We uphold the admission of the charts for three reasons. First, although the trial was short, numerous witnesses testified about multiple errors in 24 different tax returns; consequently, the charts may have aided the jury in organizing the information it received before Haarstick testified. See United States v. Loayza, 107 F.3d 257, 264 (4th Cir. 1997) (noting that a decision to admit summary charts should be guided by consideration of the "complexity and length of the case as well as the numbers of witnesses and exhibits"). Second, the charts and accompanying testimony assisted the Government in meeting its burden of proving that Hayes' misstatements were material to the computation of taxes owed by his customers. Third, the district court minimized the possibility that the jury would treat the charts as substantive evidence by instructing that, if the information in the charts conflicted with the materials from which the charts were derived, "it is the raw material underlying the charts and summaries that controls." J.A. 624; see Loayza, 107 F.3d at 264 (upholding admission of charts based in part on use of limiting instruction).

B. Vouching by Haarstick

Hayes next contends that the district court improperly permitted Haarstick to vouch for other Government witnesses. This claim arises from the following colloquy, which occurred at the end of the Government's direct examination of Haarstick:

Q And were any of the taxpayers subjects of the investigation?

A No.

Q Why is that?

A The element was willfulness. And when the interviews were done, to my knowledge --

[DEFENSE COUNSEL]: This requires hearsay. Second of all, requires a legal opinion, which I don't think she is qualified to make.

THE COURT: No. It is a policy of the IRS. The objection is overruled.

Proceed.

BY [THE PROSECUTOR]:

Q If you could just --the question was why weren't they considered to be --why wouldn't the IRS have considered them to be subjects of the investigation?

A It was determined that they did not willfully know what was on the tax return. They had not reviewed it, didn't have knowledge that it was false.

J.A. 483-84.

It is impermissible for a prosecutor to indicate her personal belief in the credibility of Government witnesses or to elicit one witness' opinion that another witness has told the truth. See United States v. Lewis, 10 F.3d 1086, 1089 (4th Cir. 1993). Such improper vouching is not necessarily reversible error, however. Instead, a reviewing court must assess the prejudicial effect of the improper comments by considering "(1) the degree to which the comments could have misled the jury; (2) whether the comments were isolated or extensive; (3) the strength of proof of guilt absent the inappropriate comments; and (4) whether the comments were deliberately made to divert the jury's attention." United States v. Sanchez, 118 F.3d 192, 198 (4th Cir. 1997).

We assume for purposes of decision that Haarstick's testimony amounted to improper vouching. Nevertheless, applying the factors listed in Sanchez, we hold that any error was harmless. ²

With respect to the first factor, we conclude that the comments had no appreciable effect on the jury. We recognize that the comments in question went to the central issue to be decided at trial --that is, whether the misstatements in tax returns prepared by Hayes resulted from inaccurate information provided by Hayes' customers or from Hayes' own fabrications. But Haarstick's statement that the Government had resolved that question against Hayes only restated the obvious; if the IRS had believed Hayes rather than his customers, Hayes would not have been indicted. Furthermore, Haarstick expressed the conclusion of the IRS, without indicating either that the IRS had any undisclosed knowledge to support that conclusion or that she personally considered the testimony against Hayes to be credible. For these reasons, we do not believe the testimony in question misled the jury.

The remaining three factors also weigh against reversal. The testimony at issue was not extensive, but rather amounted to two or three sentences in the middle of the trial. In addition, the Government's case, viewed in its entirety, was quite strong, as it demonstrated a pattern of similar misstatements on 24 different tax returns prepared by Hayes; thus, the jury could not have credited Hayes' defense --that he relied entirely on information provided by his customers --without concluding that Hayes' diverse customers all made false claims involving the same types of deductions and similar dollar amounts. And finally, there is nothing in the record to indicate that the Government deliberately elicited the statements in question for improper purposes. For these reasons, we affirm Hayes' 24 convictions for violating §7206(2).

V.

We now turn to the Government's cross-appeal. The Government contends that the district court improperly refused to consider evidence that Hayes' offenses resulted in tax losses exceeding $274,000. "We review the district court's factual findings for clear error, but if the issue on review turns primarily on the legal interpretation of a guideline term, the standard moves closer to de novo review." United States v. Hudson, 272 F.3d 260, 263 (4th Cir. 2001) (alteration and internal quotation marks omitted).

The presentence report (PSR) prepared before Hayes' sentencing concluded that the crimes of which Hayes had been convicted cost the Government a total of $75,814 ("Indictment Losses"). The PSR then estimated that the Government suffered additional losses of $199,017 from 63 tax returns prepared by Hayes that did not result in prosecution ("Non-Indictment Losses"). In computing Hayes' sentencing range, the PSR included both the Indictment Losses and the Non-Indictment Losses in Hayes' relevant conduct. See U.S. Sentencing Guidelines Manual §1B1.3 (2000) (defining relevant conduct).

Before the sentencing hearing, Hayes filed written objections to the PSR. With respect to the Non-Indictment Losses, he argued that (1) the 63 returns in question were not part of his relevant conduct, (2) the value of the Non-Indictment Losses was calculated improperly, and (3) consideration of the Indictment Losses alone would result in an appropriate sentence under 18 U.S.C.A. §3553(a) (West 2000). The Government, responding in writing, disagreed with these assertions and offered to introduce evidence in support of its position.

The Government did not have an opportunity to present this evidence. At the beginning of the sentencing hearing, the district court ruled:

Given the facts in the pre-sentence report, I grant the defendant's objections to the calculations of the tax loss amount. Even though relevant conduct may be considered, The Court finds that a tax loss amount of $75,814, the total loss amount for the counts charged in the indictment, results in a sentence sufficient, but not greater than necessary, to reflect the seriousness of the offense, provide just punishment for an adequate deterrence, and to protect the public, in satisfaction of [ §3553(a)].

J.A. 691. The Government noted an objection and proffered evidence to support its assertions, but the court did not change its ruling. The effect of this ruling was to reduce Hayes' base offense level from 16 to 14. See U.S.S.G. §§2T1.4(a)(1), 2T4.1(I) & (K) (2000).

The Government asserts that the district court erred in refusing to consider its evidence. Hayes counters that the court did not refuse to consider any evidence, but instead found such evidence insufficient to demonstrate that the Non-Indictment Losses resulted from relevant conduct.

We agree with the Government's position. The statements of the district court do not reflect any inquiry whatsoever into the adequacy of the Government's proffers. Instead, the ruling quoted above indicates that the court simply made a personal assessment of what loss amount would result in an appropriate sentence, without regard to the sentencing guidelines. However, "[t]he relevant conduct provisions are designed to channel the sentencing discretion of the district courts and to make mandatory the consideration of factors that previously would have been optional." Witte v. United States, 515 U.S. 389, 402 (1995); see U.S.S.G. §1B1.3(a) (providing that a defendant's offense level ordinarily "shall be determined on the basis of" relevant conduct (emphasis added)). Thus, while the guidelines preserve a broad range of discretion for district courts, a court has no discretion to disregard relevant conduct in order to achieve the sentence it considers appropriate.

For these reasons, we must vacate Hayes' sentence and remand for further proceedings. On remand, the district court must apply §1B1.3 to determine whether to treat some or all of the Non-Indictment Losses as part of Hayes' relevant conduct. We take no position regarding the procedures the court must follow or what its ultimate conclusion should be.

VI.

For the reasons stated above, we affirm Hayes' convictions but vacate his sentence and remand for resentencing.

AFFIRMED IN PART; VACATED AND REMANDED IN PART

¹ The indictment spells Mr. Turnage's first name "Williard." J.A. 13. It appears in the transcript as "Willard," however. Id. at 188. We have adopted the latter spelling.

² The Government asserted at oral argument that this claim is subject to plain error review because Hayes did not object on the basis of improper vouching. We need not consider whether Hayes adequately preserved this claim, because we conclude that the Government prevails even under a harmless error standard.

 

 

[2005-2 USTC ¶50,565] United States of America , Plaintiff-Appellee v. David L. Smith, Defendant-Appellant. United States of America , Plaintiff-Appellee v. Herbert A. Bates, Defendant-Appellant.

U.S. Court of Appeals, 9th Circuit; 03-10548, 03-10604, September 13, 2005 .

Affirming in part and remanded in part an unreported DC Calif. decision.

[ Code Sec. 7206]

Procedure and administration: Tax shelters: Fraud and false statements: Aiding and abetting. --

Tax shelter promoters (the "promoters") willfully aided clients in filing false or fraudulent tax returns in violation of Code Sec. 7206(2). The promoters charged hundreds of clients to set up and manage trusts known as Unincorporated Business Organizations (UBOs), which purportedly avoided taxes on income streamed into them. The government sufficiently proved the three elements of a Code Sec. 7206 violation. First, the IRS proved that the promoters aided, assisted or otherwise caused the preparation and presentation of a false or fraudulent return. Code Sec. 7206 does not require that the promoter actually prepare the offending tax returns. Second, the returns at issue were fraudulent or false as to a material matter because they omitted reportable income. While the income could have been reported elsewhere, it was not and, therefore, the failure to report the income on the clients' personal returns made those returns false and fraudulent. Finally, the promoters willfully acted to defraud the government. It did not matter that the promoters also intended to steal money from their clients.

John Balazs, for defendant-appellant Smith; Victor S. Haltom, for defendant-appellant Bates; Samantha S. Spangler, Assistant United States Attorney, for plaintiff-appellee.

Before: Kleinfeld, Hawkins and Graber, Circuit Judges.

OPINION

HAWKINS, Circuit Judge: Defendants David Larry Smith ("Smith") and Herbert Arthur Bates ("Bates") appeal their convictions on multiple counts of tax fraud, mail and wire fraud, money laundering, and conspiracy, as well as their sentences. Defendants challenge: (1) arraignment by a magistrate judge, (2) multiplicity of the indictment resulting in a multiplicitous sentence on the three conspiracy counts, (3) an indictment passed on by grand jurors not questioned about their feeling towards the IRS, (4) denial of a suppression motion based on alleged defects in the arrest and search warrants, (5) sufficiency of the evidence on the tax counts, (6) denial of a motion for a new trial based on alleged petit juror bias, and (7) denial of a multiple conspiracy instruction. In addition to disputing the district court's application of various sentencing guidelines, Smith and Bates make a United States v. Booker, 125 S.Ct. 738 (2005), challenge to sentencing based on facts not found by a jury, and an ex post facto challenge to application of an advisory guideline system to their sentences. We have jurisdiction under 28 U.S.C. §1291 and affirm the convictions in all respects and remand on sentencing pursuant to United States v. Ameline, 409 F.3d 1073 (9th Cir. 2005) (en banc).

FACTS AND PROCEDURAL HISTORY

The government brought Smith and Bates ¹ to trial for enlisting hundreds of clients to set up trusts known as Unincorporated Business Organizations, or "UBOs," which purportedly avoided taxes on income streamed into them; the defendants charged their clients to set up and conduct transactions for the UBOs, only to later steal their clients' money.

The defendants advised their clients to transfer all of their income and assets --including their businesses, homes, relative's homes, furniture, jewelry, cars, and even pets --into the UBO. Defendants also advised clients to ask their employers to issue pay checks, commission checks, or other income sources in the names of their UBOs instead of in their names.

Moreover, the defendants assured clients that they could use the UBOs to pay a variety of expenses, to be deducted as "business expenses" from the UBO's income. These business expenses included everything from mortgage and utility payments to business equipment to haircuts, pet needs, laundry, clothes, and lawn care. As one client testified, "practically everything we did could be seen as a legitimate deduction." Another client echoed that "pretty much everything could be deducted or be used as legitimate business expenses. ... Probably certain personal items were not exempt, so to speak. Like toothpaste."

Numerous clients testified at trial how defendants (usually Smith ² ) advised them that they did not have to pay taxes once they paid the defendants to establish a UBO. For example, Phyllis Ellen Denby testified that Bates advised her to establish a UBO to distribute stock profits in a way the IRS would not be aware of them. Bates told Denby and her husband that no taxes need be paid on "any money" that was in the UBO. Charles Michael Stoker testified that Smith told him and his wife that by placing their home into the UBO, the home could be sold and yet he could withhold the proceeds from tax filing. David Vette testified that Smith informed him that "as long as the UBO did not have a profit at the end of the year, there was no taxable consequence. I did not have to file a tax return." Ronald J. Herrema testified that Smith told him that UBOs are never audited and do not have any filing requirements. Smith strongly recommended that Herrema "get rid of any cash" in the UBO at the end of the year to "not raise a flag to the Internal Revenue Service," and thus "never [be] subject to filing requirements or IRS audit inspections." And, Smith "highly suggested" that he and his wife kept their income below $10,500, the ceiling below which married couples were not required to file tax returns.

Similarly, James Allen Herrema testified that Smith told him that the benefit of the UBO receiving his income is that he "would not have to file personal income tax on that income." Smith plainly stated that income into the UBO "fell into a category of not being taxable." When Herrema specifically asked whether he had to continue filing personal tax returns, Smith said "it was not necessary." Sharon Ludders testified that she was told that everything she owned could be transferred into the UBO, and that the trust would "take care" of her obligations to pay personal income taxes. Judith Reitz testified that Smith told her that "it wasn't necessary" for her UBO to file a tax return; "[i]n fact, it was really not desirable." When Ms. Reitz said she planned to continue filing personal income tax returns, Smith explicitly told her not to file.

Michael Joseph Young was told by Smith that trust expenses would be deducted from the income into the trust, to achieve a zero balance at the end of the year. "You didn't have to worry about filing a return or anything like that on it." Young understood from Smith that the money that went into the UBO did not need to be reflected on his personal income tax return, either. Lawrence Newton Craig testified that Smith said that UBOs did not have to file any tax returns. Smith said UBOs were "basically a tax shelter."

In addition to the above advice, Smith had a "particular way" at "particular bank[s]" to set up the UBO accounts, which he did in person. Smith established non-interest-bearing accounts for the UBOs, which the government argued kept the banks from filing with the IRS to report interest income.

Smith told clients not to discuss their UBOs with qualified accountants or attorneys. Bates told one set of clients to not even tell their closest relatives about their UBO. Smith told another client that she did not have the authority to provide UBO-related documents to the IRS because a vote of the trustees was needed. Bates and Smith also insisted on handling correspondence with the IRS. For example, Bates would write the IRS requesting legal authority for reporting certain income to the IRS, as well as asking the IRS to review certain portions of the Constitution regarding the power to collect taxes. The letters attempted to avoid paying taxes. Indeed, with or without such letters, most of the defendants' clients did not file tax returns and/or filed tax returns that omitted substantial income.

In order to make the UBO scheme work, many clients were told that they had to make "distributions" out of their UBOs to avoid filing taxable income within them. As one client put it, "if there was a [UBO] profit, we would do a distribution, and that would eliminate any of the profit, and there would be no taxable occurrence." Clients were told that their "distribution" was "going offshore into an investment program ... and it would earn a profit ... and [they] would have access to it down the road." Smith offered several ways to get the distribution money back, including an out-of-country credit card account or a direct payment to Smith to move the money offshore for an eleven percent charge. Although clients could access their distribution or investment money for a while, Smith eventually transferred the money to another bank, and the clients could no longer access their money. Client losses ranged from $20,000 to $400,000.

Agent Bridgette O'Keeffe ("Agent O'Keeffe"), the government's summary witness, testified, among other things, regarding (1) each of the tax returns charged in the counts pertaining to aiding and assisting false or fraudulent returns, and (2) the numerous mail fraud and wire fraud counts, explaining the monies she traced that clients had invested with the defendants that ended up in Cayman Islands accounts.

The jury found Bates guilty of: (1) conspiracy to defraud the United States in the ascertainment, computation, or assessment of taxes, in violation of 18 U.S.C. §371; (2) multiple counts of aiding and assisting in the preparation and presentation of false and fraudulent tax returns, in violation of 26 U.S.C. §7206(2); (3) conspiracy to engage in mail or wire fraud, in violation of 18 U.S.C. §371; and (4) conspiracy to launder money, in violation of 18 U.S.C. §371. The jury also found Smith guilty of the above charges, as well as multiple counts of each of the following: (1) mail fraud, in violation of 18 U.S.C. §1341; (2) wire fraud, in violation of 18 U.S.C. §1343; (3) money laundering, in violation of 18 U.S.C. §§1956(a)(1)(A) 1956(a)(1)(B); and (4) engaging in financial proceeds of unlawful activity, in violation of 18 U.S.C. §1957.

Bates and Smith moved for a new trial based on the alleged lack of impartiality of Jurors #9 and #1. Juror #9 wrote Agent O'Keeffe after the trial suggesting they "get acquainted." Juror #9 did not converse with Agent O'Keeffe during the trial, at most exchanging a smile across elevators. The district court considered allegations of Juror #9's bias, and found "absolutely no tangible evidence that there was any extraneous information or extraneous influence on this juror by anyone."

During deliberations, Juror #1 wrote that she was criticized by the foreperson and felt intimidated. The district court questioned Juror #1 outside the presence of other jurors, whereupon Juror #1 told the court she felt able to return to deliberations and make future decisions based on her own conscience and belief. After considering the evidence as to Jurors #1 and #9, the district court denied the motion for a new trial.

At the close of the evidence, Smith moved for judgment of acquittal on the counts charging him with aiding and assisting in the preparation and presentation of false tax returns and conspiracy to commit tax fraud. The district court denied the motion as to both Smith and Bates, and denied the renewed motion after the verdict as to all defendants.

Smith was sentenced to 151 months' imprisonment; Bates to 136 months' imprisonment. The district court also ordered three defendants, including Smith and Bates, to forfeit $1 million, pursuant to the parties' stipulation.

DISCUSSION

I. Magistrate Judge's Authority to Conduct Arraignment

Magistrate Judge John F. Moulds presided over Smith's hearing for the entry of a plea. The magistrate judge asked Smith's counsel, Scott Tedmon, for the entry of the plea to the indictment. Smith's counsel had no objection and stated that his client was prepared to enter a plea of not guilty and requested a jury trial. The magistrate judge then scheduled a status conference before District Judge Lawrence Karlton.

Smith now argues that the magistrate judge had no authority to arraign Smith under Rules 5 and 10 of Criminal Procedure, and that Judge Karlton erroneously denied his motion to dismiss the indictment on this ground. We review de novo the district court's refusal to dismiss an indictment for lack of jurisdiction. United States v. Phillips, 367 F.3d 846, 854 (9th Cir.), cert. denied, 125 S.Ct. 479 (2004).

Rule 5 pertains to initial appearances before a magistrate judge for "arrest[s] under a warrant issued upon a complaint or any person making an arrest without a warrant." Fed. R. Crim. P. 5(a) (2000). Thus, Rule 5(c)'s provision that a magistrate judge may not accept a plea in a felony case is inapposite.

Nor does Smith cite any violations of Rule 10 (stating the requirements for an arraignment in open court) either, except to say that magistrate judges are not authorized to conduct a Rule 10 arraignment. Smith is mistaken. Rule 72-302(b)(1) of the Local Rules of the United States District Court for the Eastern District of California grants authority to magistrate judges to handle pretrial matters in felony cases, and does not exclude the arraignment process for a not guilty plea. Thus, the magistrate judge had authority to arraign Smith.

II. Multiplicity of Conspiracy Counts & Plain Error

The three conspiracy counts are: (1) conspiracy to defraud the United States in the ascertainment, computation, or assessment of taxes, in violation of 18 U.S.C. §371; (2) conspiracy to engage in mail or wire fraud, in violation of 18 U.S.C. §371; and (3) conspiracy to launder money, in violation of 18 U.S.C. §§371 and 1956(h). Bates and Smith ³ argue that these three conspiracy counts are multiplicitous because there was only one combined scheme, i.e., one conspiracy. Bates asserts that the convictions and consecutive sentences on these counts violate the Double Jeopardy Clause and separation of powers principles. Bates bases these claims not on the multiplicity of the indictment, but rather the multiplicity of sentences imposed by the district court.

Typically, whether a defendant's double jeopardy rights have been violated is reviewed de novo. United States v. Stoddard [ 97-2 USTC ¶50,574], 111 F.3d 1450, 1454 (9th Cir. 1997). However, Bates did not clearly raise the multiplicity of sentences issue below. Though Bates claims that he raised the issue when his counsel argued at the sentencing hearing that "the Government's case against [Bates] was one set of acts done for a common purpose, and that he, therefore, should be sentenced accordingly rather than for multiple reasons," this one sentence is insufficient to raise a double jeopardy objection with respect to the three conspiracy counts.

Nevertheless, a multiplicious sentence cannot be waived. ⁴ See Launius v. United States , 575 F.2d 770, 772 (9th Cir. 1978) ( per curiam) ("[I]f sentences are imposed on each count of [a] multiplicious indictment the defendant is not forced to serve the erroneous sentence because of any waiver.") (internal quotations and citation omitted). Because Bates failed to raise this issue before the district court, plain error review applies. See United States v. Freeman, 6 F.3d 586, 600-01 (9th Cir. 1993) (consecutive sentences for duplicitous charges subject to plain error review); United States v. Hernandez-Guardado, 228 F.3d 1017, 1028-29 (9th Cir. 2000) (failure to raise double jeopardy claim based on a second trial not waived absent evidence of a voluntary and knowing relinquishment of right against double jeopardy).

For Bates to prevail under plain error review, he must show (1) an error, (2) that is plain, (3) that affects substantial rights, and (4) that seriously affects the fairness, integrity, or public reputation of judicial proceedings. Johnson v. United States , 520 U.S. 461, 467 (1997).

[1] "The Double Jeopardy Clause prohibits subdivision of a single criminal conspiracy into multiple violations of one conspiracy statute." United States v. Montgomery, 150 F.3d 983, 989 (9th Cir. 1998) (internal quotations and citation omitted). Because all three conspiracy counts in this case violate the same statute --18 U.S.C. §371 ⁵ --this court uses the five-factor test adopted in Arnold v. United States, 336 F.2d 347, 350 (9th Cir. 1964), rather than the test articulated in Blockburger v. United States, 284 U.S. 299, 304 (1932). See United States v. Luong, 393 F.3d 913, 916 (9th Cir. 2004), cert. denied, 125 S.Ct. 1953 and 1963 (2005); Montgomery , 150 F.3d at 990.

[2] The Arnold analysis has been summarized by Stoddard:

To determine whether two conspiracy counts charge the same offense and so place the defendant in double jeopardy, we consider five factors: (1) the differences in the periods of time covered by the alleged conspiracies; (2) the places where the conspiracies were alleged to occur; (3) the persons charged as coconspirators; (4) the overt acts alleged to have been committed; and (5) the statutes alleged to have been violated.

[ 97-2 USTC ¶50,574], 111 F.3d at 1454 (internal quotations and citation omitted). Rather than focus on any one factor, the court considers all the factors together to determine if there was more than one agreement. "'The fact that there is some interrelationship between conspiracies does not necessarily make them the same criminal enterprise,' where one conspiracy involves unlawful transactions 'quite distinct in their means of execution and their objects.'" United States v. Guzman, 852 F.2d 1117, 1121 (9th Cir. 1988) (quoting United States v. Ingman, 541 F.2d 1329, 1331 (9th Cir. 1976) ( per curiam).

On appeal, the defendant has the burden of showing that the multiple conspiracies charged are based on a single agreement, i.e., that the conspiracies are "indistinguishable in law and in fact." Montgomery , 150 F.3d at 990 (citing Guzman, 852 F.2d at 1119-20). This issue is based on sufficiency of the evidence, examining the evidence "in the light most favorable to the prosecution to determine if any rational trier of fact could have found that more than one conspiracy existed." Id.

A. Time Frame

[3] The government alleged that the Count 1 conspiracy spanned from August 14, 1981 to June 13, 1997 , the Count 25 conspiracy from August 14, 1981 to February 1, 1998 , and the Count 64 conspiracy from January 1, 1987 to June 13, 1997 . Thus, there is substantial overlap in timing. It is worth noting here that the government argued that "from the very beginning" of the Count 1 agreement, there was a plan to steal the clients' money, which would involve mail and wire fraud (Count 25) and money laundering (Count 64). ("From the very beginning of the agreement between the parties, the agreement was to engage in tax crimes together with mail and wire fraud crimes together with money laundering crimes.")

B. Geographic Locations

[4] Bates contends that the vast majority of activities relevant to all three counts occurred in Sacramento , California , and the Cayman Islands . The government does not dispute this contention. The indictment and the evidence at trial support Bates's contention that the overt acts for all three counts occurred in the same geographic locations.

C. Participants

All four defendants were charged in Count 1, and all defendants except Charlotte Wadsworth were charged in Counts 25 and 64. However, the third factor depends not only on overlap in membership, but also the roles of the overlapping members. Stoddard [ 97-2 USTC ¶50,574], 111 F.3d at 1455. Bates contends that the roles were the same in all three counts.

[5] The government argued at trial that the defendants each played different roles in the various schemes. However, that many overt acts are incorporated by reference between the conspiracy counts supports the defendants' argument that the (different) role of each defendant was similar across the three alleged conspiracies.

D. Overt Acts

[6] Although the overt acts for three counts are not identical, they substantially overlap. For Count 1, the government alleged 166 overt acts; for Count 25, 151 of the 166 overt acts are incorporated by reference, and 23 new overt acts are added; for Count 64, overt acts are incorporated by reference from Counts 1 and 25.

The overt acts in Count 1 generally relate to defendants: (1) forming various UBOs, (2) accepting fees (in the form of checks or wire transfers) for the UBOs, (3) depositing fees, (4) serving as agents or trustees for the UBOs, (5) advising clients they need not file taxes, (6) writing letters to clients and the IRS, (7) forming corporations and bank accounts in the Cayman Islands, (8) opening bank accounts in California, and (9) authorizing wire transfers between various accounts. Count 25 adds overt acts pertaining to specific fraudulent investments defendants persuaded the UBO clients to pursue.

E. Statutes Violated

[7] The three conspiracy counts allege a violation of the same statute --18 U.S.C. §371 --although Count 64 also alleges a violation of 18 U.S.C. §1956(h). However, the fifth factor considers not only the violation of the same statute, but also whether the goals of the conspiracies were similar. Stoddard [ 97-2 USTC ¶50,574], 111 F.3d at 1456.

The government specifically addressed in closing argument how 18 U.S.C. §371 can relate to three separate crimes. In arguing that "the conspiracy counts are very different," the government first pointed to the two distinct types of crimes covered by §371: (1) conspiracy to defraud the United States in the exercise of its lawful governmental functions, and (2) conspiracy to violate a specific section of the United States Code. The government further explained that Count 1, the first type of conspiracy, related to defrauding the IRS in the assessment of taxes, whereas Counts 25 and 64 related to violations of different code sections (mail or wire fraud sections, and money laundering sections, respectively).

However, the government argued to the jury that the goals of defrauding the government, and engaging in mail and wire fraud and money laundering, were all inter-related:

This case is a situation where the defendants had a single unified plan from the very beginning. This is not a situation where the defendants that engaged in one type of activity and then did that for a while and then decided to get into some other type of activity which might be fraudulent and then to launder money at the end of day.

The defendants had a single, unified plan from, as I say, the very get-go in this case. From the very beginning of the agreement between the parties, the agreement was to engage in tax crimes together with mail and wire fraud crimes together with money laundering crimes. That's the only way the defendants' actions and their activities make any sense at all is to look at all the actions as pieces of a bigger essentially three-dimension, circular-type of a scheme.

The tax scheme was set up in a certain way specifically for the purpose to create the ability to engage in mail and wire fraud. ... And the defendants could not engage in mail and wire fraud if they did not launder money. ... So from the very beginning, the defendants had it in their mind the aspect of stealing --effectively stealing, to use a generic term, money from the investors and use the promotion of the tax vehicle as a way to accomplish that fraud.

The government concluded closing arguments with the point that all the counts were fraud crimes to enrich the defendants --with respect to the tax crimes, to collect fees on the UBOs; with respect to money laundering, "to move the money around and get what [defendants] need without being caught"; and with respect to mail and wire fraud, more monetary motives.

[8] Given the government's contention that the goal for all three conspiracies was one and the same --to steal money --it appears under Stoddard that they should be treated as one conspiracy, at least for the purpose of sentencing. Considering all five Arnold factors, it was arguably error for Bates and Smith to be sentenced to consecutive terms on the three conspiracy counts.

[9] However, an error is not plain unless it is "clear" or "obvious." United States v. Olano, 507 U.S. 725, 734 (1993). Plain error "is so clear-cut, so obvious, a competent district judge should be able to avoid it without benefit of objection." United States v. Turman, 122 F.3d 1167, 1170 (9th Cir. 1997) (citing United States v. Frady, 456 U.S. 152, 163 (1982)). In this complex case, with hundreds of overt acts, multiple defendants, and weeks of trial, it was not plain or obvious that only one conspiracy transpired. Indeed, the government convinced the jury that the defendants engaged in three separate conspiracies.

[10] To muddle the multiplicity issue further, defendants did not merely fail to argue that there was one overarching conspiracy for double jeopardy purposes; they argued the opposite position: that each of the three conspiracy counts were themselves duplicitous, encompassing multiple agreements and conspiracies in each one. That is, they asserted that there were even more conspiracies. As to Count 1, Smith disputed one overarching conspiracy to defraud the United States because the overt acts covered six alleged UBOs, with differing (1) time periods, (2) identity of defendants involved, (3) identity of taxpayers involved, and (4) specific transactional facts. Smith posed the "same argument and analysis" from Count 1 to Counts 25 and 64. Thus, it was not clear or obvious that the three conspiracies were multiplicitous, even at the sentencing stage. The defendants have failed to show plain error.

III. Dismissal of Indictment Based on Potentially Biased Grand Jury

Smith argues that the district court erred in denying his motion to dismiss the indictment because the grand jurors were not questioned about their contacts with the IRS to ensure that they could serve as impartial jurors.

We review de novo the district court's denial of a motion to dismiss an indictment. United States v. Rivera-Sillas, 376 F.3d 887, 889 (9th Cir. 2004). A district court may not dismiss an indictment for error in a grand jury proceeding unless the error prejudiced the defendant. Bank of N.S. v. United States [ 88-2 USTC ¶9547], 487 U.S. 250, 254 (1988). "Substantial proof of grand jury bias is required to overturn an indictment." United States v. Miller, 105 F.3d 552, 555 (9th Cir. 1997).

[11] Smith bases his grand juror (potential) bias claim on 28 U.S.C. §1866(c)(2), which states in part that "no person or class of persons shall be disqualified, excluded, excused, or exempt from service as jurors: Provided, That any person summoned for jury service may be ... (2) excluded by the court on the ground that such person may be unable to render impartial jury service." Not surprisingly, neither §1866(c)(2) nor any Ninth Circuit case ⁶ requires probing the grand jurors with questions about their feelings toward the IRS.

[12] Given that Smith makes no factual allegation of actual bias on the part of any grand juror in his case, he has not shown "[s]ubstantial proof of grand jury bias," see Miller, 105 F.3d at 555, let alone prejudice, see Bank of N.S. [ 88-2 USTC ¶9547], 487 U.S. at 254. Thus, the district court did not err in denying dismissal of the indictment on this ground.

IV. Search and Arrest Warrants

Smith argues that the district court erred by denying his motion to suppress evidence based on defects in the search and arrest warrants, alleging that: (1) the search warrant lacked particularity and was facially overbroad, (2) the government agents flagrantly seized items outside the scope of the warrant, (3) the agents failed to provide a complete copy of the warrant at the outset of the search, and (4) the search and arrest warrants were invalid because they lacked a court seal and the magistrate judge did not sign the arrest warrant.

We review de novo the district court's denial of a motion to suppress, and the factual findings supporting the denial for clear error. United States v. Mann, 389 F.3d 869, 874 (9th Cir. 2004), cert. denied, 125 S.Ct. 1719 (2005).

A. Particularity and Overbreadth

[13] "The Fourth Amendment requires that a warrant particularly describe both the place to be searched and the person or things to be seized." United States v. Spilotro, 800 F.2d 959, 963 (9th Cir. 1986). As Spilotro explained, "[t]he description must be specific enough to enable the person conducting the search reasonably to identify the things authorized to be seized." Id. The purpose of the breadth requirement is to limit the scope of the warrant "by the probable cause on which the warrant is based." In re Grand Jury Subpoenas, 926 F.2d 847, 856-57 (9th Cir. 1991). Both the particularity and breadth requirements prevent "general, exploratory rummaging in a person's belongings." Id. at 857 (quotation marks and citations omitted).

Smith argues the warrant in this case "failed to restrict government agents in any meaningful way, converting the warrant into the type of general, overbroad warrant prohibited by the Fourth Amendment." Specifically, Smith argues that paragraphs 1 through 11 of the search warrant's Attachment B "authorized the seizure of virtually all of Smith's personal and business records, electronic documents, photographs, films, and videotapes ... 'for the period of January 1990 through the current date.'"

Attachment B describes the items to be seized as follows:

For the period January 1990 through the current date:

 

1) The following documents relating to the promotion of UBOs: seminar tapes, presentation documents, video tapes, literature, flyers, advertising, and business cards.

2) UBO client files to include UBO names, individuals names, addresses, telephone numbers, and other identifying information; contracts of "UBO Organization"; copies of minutes; domestic and foreign bank account statements; wire transfer documents; canceled checks; deposit slips; copies of money orders; copies of cashier's checks; correspondence to, from, and on behalf of UBO clients including correspondence with the IRS; copies of Forms SS-4, Request for Employer Identification Number; records of payments from and to UBO clients reflecting dates and purpose of such payments; invoices; receipts; memoranda; copies of tax returns, and any documents used in the preparation of tax returns.

3) All documents relating to any alleged defense contractor loan investment program including literature, contracts, agreements, notes, financial statements and records, correspondence, memoranda, receipts, advertising, and other records; copies of letters and invoices or monthly statements to investors.

4) All documents pertaining to the purchase, and/or sale, and/or transfer of real property including escrow statements, deeds, deeds of trust, mortgages, notes, correspondence, closing statements, mortgage payments and down payments including documents reflecting the form, amount, and date of such payments. Documents pertaining to the purchase/sale of personal property including vehicles, furniture, and other items to include receipts, contracts, agreements, financial statements, purchase agreements, and correspondence.

5) All books and records of UBO businesses, including general journals, general ledgers, financial statements, balance sheets, income statements, cash receipts and disbursements journals[.]

6) All documents relating to the receipt and disbursement of income, by or from any UBO, including credit card receipts and statements, receipts, invoices, statements of accounts at domestic and foreign banks, check registers, cancelled check, money orders, cashier's checks, wire transfer documents, bank drafts, safety deposit box records, stocks, bonds, and other securities, investment records, loan applications, and other financial statements, promissory notes, telephone toll records and bills, personal calendars, address and telephone books, rolodex indices, records relating to domestic and international travel including tickets, reservations, hotel receipts, travel logs, itineraries, and receipts, Forms 1099 and other tax documents; any other records used to reconstruct income and expenses; records relating to safe deposit box rental.

7) All documents reflecting current ownership, occupancy, and use of premises including utility bills, receipts, correspondence, monthly statements, photographs, film, and video tapes.

8) All information and/or data stored in the form of magnetic or electronic coding on computer media or on media capable of being read by a computer or with the aid of computer-related equipment. This media includes, but is not limited to, floppy diskettes, fixed hard disks, removable hard disk cartridges, laser disks, video cassettes, and any other media which is capable of storing magnetic coding.

9) All electronic devices which are capable of analyzing, creating, displaying, converting, or transmitting electronic or magnetic computer impulses or data. These devices include, but are not limited to, computers, computer components, computer peripherals, word processing equipment, modems, monitors, printers, plotters, encryption circuit boards, optical scanners, external hard drives, and other computer related electronic devices.

 

10) All instructions or programs stored in the form of electronic or magnetic media which are capable of being interpreted by a computer or related components. The items to be seized include, but are not limited to, operating systems, application software, utility programs, compilers, interpreters, and any other programs or software used to communicate with computer hardware or peripherals either directly or indirectly via telephone lines, radio, or other means of transmission.

11) All written or printed material which provides instructions or examples concerning the operation of a computer system, computer software, and/or any related device which is present at the scene.

[14] The warrant's Attachment B describes with sufficient specificity the types of documents and property sought. Potentially problematic is its breadth: though limited in time period and subject matter (UBO businesses and loan investment program since 1990), the warrant is quite broad as it relates to those enterprises. However, even an "extraordinarily broad" warrant authorizing the seizure of essentially all business records may be justified when there is "probable cause to believe that fraud permeated the entire business operation." United States v. Offices Known as 50 State Distrib. Co. , 708 F.2d 1371, 1374 (9th Cir. 1983). This is just such a case. The magistrate judge reviewed Agent O'Keeffe's affidavit in support of the application for the search warrant, which detailed her comprehensive investigation of the UBO scheme. The affidavit concluded that "the entirety of the businesses operated by Bates, Smith and their associates are criminal in nature." Agent O'Keeffe's affidavit provided ample probable cause to meet the "permeated-with-fraud" exception to the particularity and breadth requirements.

B. Seizure Outside the Scope of Warrant

Smith claims that federal agents flagrantly seized innocuous personal items outside the scope of the warrant, such as Christmas gifts, computer monitors, and computer games. However, computer monitors and computer games (to the extent they were on computer diskettes) were within the scope of the warrant. The alleged Christmas gifts remain unidentified in the record. Thus, there is no evidence that there was any evidence seized outside the scope of the warrant.

C. Defects in Providing Warrant to the Smiths

The district court held that the warrant "was provided to the Smiths on a prompt basis." The district court further held that, although Agent O'Keeffe's affidavit was not attached to the warrant, the warrant was valid and served the purpose of providing notice to the Smiths that the officers were executing a search under the color of law. Smith argues that the search of his home violated Federal Rule of Criminal Procedure 41(d) (1997) ⁷ because (1) agents failed to provide a copy of the search warrant at the outset of the search, and (2) the warrant was incomplete without the affidavit that was incorporated by reference into the warrant.

1. Failure to Provide Search Warrant at Outset of Search

At the evidentiary hearing, there was some discrepancy as to the length of time after the search began before Smith and his wife received a copy of the warrant. It is clear that the search did not start as soon as the agents entered the home, as they initially conducted a safety sweep for approximately fifteen minutes. The district court established that a delay of thirty to forty-five minutes occurred before the Smiths received the warrant.

[15] Under United States v. Gantt, 194 F.3d 987, 1001 (9th Cir. 1999), "[a]bsent exigent circumstances, Rule 41(d) requires service of the warrant at the outset of the search on persons present at the search of their premises." While the court recognized that "'technical' violations of Rule 41(d) require suppression only if there was a 'deliberate disregard of the rule' or if the defendant was prejudiced," it held that suppression was justified due to the deliberate violation in Gantt's case. Id. at 1005. Gantt was not served with the search warrant until after she was arrested, hours after the search and hours after she requested to see the warrant. Id. at 1000.

[16] In Smith's case, there is neither deliberate disregard of Rule 41(d) nor any prejudice. Gantt's interpretation of Rule 41(d) to require service of the warrant at the outset of the search was issued in 1999, whereas the search of Smith's home took place in 1997. Agent Adams's testimony reveals he did not know of an obligation to show the warrant at the outset of the search -- Adams "never" before had presented a warrant at the time of entry. Instead, his team typically did a safety sweep first, as was done in the Smith home.

Furthermore, unlike in Gantt, after Mrs. Smith asked for the warrant, she got one. The timing may be disputed --ten minutes after the request or half an hour later --but regardless, she and her husband received the warrant near the outset of the search. As the district court found, the delay was not unreasonable.

[17] Nor was the delay prejudicial. Upon receiving the warrant, Mrs. Smith "just kind of glanced at it" and believes that her husband "might have looked at it" more than she did. She admits that she chose not to review the warrant. Neither of the Smiths disputed the warrant after having access to it, and the search went on for another several hours. Thus, under Gantt, there was only a technical violation of Rule 41(d), which does not require suppression.

2. Warrant Missing Affidavit

[18] That the Smiths were given the search warrant without the affidavit of Agent O'Keeffe, though incorporated by reference in the warrant, does not require suppression. Smith argues that Gantt held that "when a warrant incorporates by reference the supporting affidavit, the affidavit comprises part of the warrant itself and must be provided with the rest of the warrant. 194 F.3d 987, 1001 n.7." The cited footnote 7 states: "Showing Gantt the face of the warrant without Attachment A certainly did not satisfy Rule 41(d). Without Attachment A, the warrant violated the Fourth Amendment's particularity requirement and for purposes of Rule 41(d) was not a valid warrant."

What Smith leaves out is the content of Attachment A in Gantt's case, which is substantively different from the O'Keeffe affidavit. In Gantt, "[i]nstead of describing the items to be seized, the warrant stated 'see Attachment A.' Attachment A was a two-page, typed list of items to be seized." Id. at 996. In Smith's warrant, Attachment B, which described the items to be seized, was attached. It was Agent O'Keeffe's affidavit, admittedly important in the magistrate judge's probable cause determination, that was missing. Agent O'Keeffe's affidavit was not related to the particularity requirement, which was satisfied by Attachment B.

Smith confuses the "well-settled principle that a warrant's overbreadth can be cured by an accompanying affidavit that more particularly describes the items to be seized," United States v. Luk, 859 F.2d 667, 676 (9th Cir. 1988), with the contention, unsupported by case law, that an affidavit incorporated by reference must always be attached for the search warrant to be valid --even if the warrant is not overbroad without the attachment. For example, in United States v. Hayes, 794 F.2d 1348, 1355 (9th Cir. 1986), the court held that the affidavit could not be considered because it did not accompany the warrant; nevertheless, the court went on to examine the warrant "on its face" for overbreadth, determining it met the breadth requirement and did not require suppression, id. at 1355-56.

[19] Thus, here, the warrant without the affidavit was facially valid standing alone. The failure to attach the affidavit does not require suppression.

D. No Court Seal on Search and Arrest Warrants; No Magistrate Judge's Signature on Arrest Warrant

Smith argues that the search and arrest warrants are void because (1) the arrest warrant was initialed only by the court clerk, but not signed by the magistrate, in violation of Rule 4(c)(1) of Criminal Procedure, and (2) neither warrant contained the seal of the court. The district court found that neither alleged defect invalidated the warrants.

First, Rule 9, rather than Rule 4(c)(1), governs arrest warrants on an indictment. Rule 9(b)(1), pertaining to the form of the warrant, states it must be signed "by the clerk," not the magistrate judge.

Smith's second argument that the court seal must be affixed to both the search and arrest warrants also fails. The argument relies on 28 U.S.C. §1691, which states: "All writs and process issuing from a court of the United States shall be under the seal of the court and signed by the clerk thereof." However, the Federal Rules of Criminal Procedure for arrest warrants on an indictment (Rule 9) and search warrants (Rule 41) make no mention of the requirement for a court seal. The arrest warrant and search warrant follow the stated dictates of Rules 9 and 41, respectively. The magistrate judge unquestionably issued a bench warrant without bail on Smith, and a deputy clerk signed an arrest warrant, as required by Rule 9. The search warrant was issued and signed by a magistrate judge on January 3, 1997.

[20] Thus, there appears to be only a technical violation of 28 U.S.C. §1691. None of this circuit's cases has suppressed evidence for lack of a court seal. Cf. Ystrom v. Handel, 252 Cal. Rptr. 110, 114 (Ct. App. 1988) (lack of court's seal "is a mere technicality and does not render [a summons] 'substantially defective'").

[21] We have refused to suppress evidence or reverse convictions based on technical rule violations. In a similar context, "'technical' violations of Rule 41(d) require suppression only if there was a 'deliberate disregard of the rule' or if the defendant was prejudiced." Gantt, 194 F.3d at 1005. Here, there is no evidence in the record that officers executing either warrant relied in bad faith on them because they lacked the court seal, and certainly no evidence of deliberate disregard of 28 U.S.C. §1691. Neither is there a scintilla of prejudice to the defendant: if the warrants did have the court seal, Smith's home would still have been searched, and his person still arrested. Thus, neither suppression nor reversal of Smith's conviction is warranted by this technical violation of 28 U.S.C. §1691.

V. Sufficiency of the Evidence

Smith and Bates argue that the evidence is insufficient to sustain their convictions for: (1) multiple counts of aiding and assisting in the preparation and presentation of false tax returns, under 26 U.S.C. §7206(2); and (2) conspiracy to defraud the United States in the ascertainment, computation, or assessment of taxes, under 18 U.S.C. §371.

After the jury verdict, the district judge denied a Federal Rules of Criminal Procedure 29 motion for judgment of acquittal as to all defendants. We review de novo the district court's ruling on a motion for acquittal. United States v. Johnson, 357 F.3d 980, 983 (9th Cir. 2004). The evidence is reviewed in the light most favorable to the prosecution to determine "whether any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Id. (internal quotations and citations omitted).

Section 7206(2) pertains to any person who:

Willfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document[.]

[22] Under §7206(2), the government must prove that "(1) the defendant aided, assisted, or otherwise caused the preparation and presentation of a return; (2) that the return was fraudulent or false as to a material matter; and (3) the act of the defendant was willful." United States v. Salerno [ 90-1 USTC ¶50,261], 902 F.2d 1429, 1432 (9th Cir. 1990). Defendants argue that the government presented insufficient evidence on all three elements.

A. Aid, Assist In, Procure, Counsel, or Advise

[23] Although Smith and Bates did not actually prepare their clients' tax returns, the plain language of §7206(2) is satisfied by aid, assistance, procurement, counsel, or advice in the preparation or presentation of a false or fraudulent return --there need not be actual preparation of the return at issue. Unsurprisingly, we do not require defendants engaged in tax schemes to physically "prepare" the tax returns to be found guilty of §7206(2). See, e.g., United States v. Crum [ 76-1 USTC ¶9214], 529 F.2d 1380, 1382 (9th Cir. 1976) ("[T]he reach of Section 7206(2) is clearly not limited to acts of tax return 'preparers[.]'").

[24] A review of the record reveals ample evidence of aid, assistance and advice in the preparation of the defendants' clients' false tax returns. To promote their tax shelter scheme, the defendants explicitly advised their clients to transfer all of their income and assets to the UBO, and then not to file any tax returns (for the business trust, personal income, or otherwise). Smith advised UBO clients to have their employers issue pay checks, commission checks, or other income sources in the name of the UBO instead of the clients' names. Further, defendants established mechanisms for the UBO income to go undetected by the IRS, such as keeping end-of-the-year income below a certain threshold through "distributions," false "business deductions," and non-interest-bearing accounts. These actions directly caused clients to file false and fraudulent returns. ⁸

B. Fraudulent or False Return

Smith argues that the particular 1040 personal returns or 1065 partnership tax returns were not false for omitting income or revenue that should have been reported on a separate 1041 trust return. However, IRS Agent Brown testified that although revenue in a business trust such as a UBO would typically be reported on a form 1041, as a default the income could also be reported on a 1040 personal income tax return. In any event, the income had to be reported on some IRS form. Thus, the under-reporting of income on the clients' personal returns, that could have been but was not reported elsewhere, made the personal returns "false" or "fraudulent."

[25] Agent O'Keeffe methodically went through each allegedly false or fraudulent return, and testified to the substantial understatement of income on each one. Viewing the evidence in the light most favorable to the prosecution, there is sufficient evidence from which a rational juror could find that the returns were false or fraudulent.

C. Willfulness

Smith argues that the evidence was insufficient to show that he acted willfully "with specific intent to defraud the government in the enforcement of its tax laws." Salerno [ 90-1 USTC ¶50,261], 902 F.2d at 1432. While there is nothing "inherently unlawful with an UBO," and the government told the jury during closing argument to assume UBOs are "legitimate," the government provided ample evidence that Smith gave advice to unlawfully use UBOs to file false or fraudulent tax returns (or not to file at all).

Smith further argues that there was no evidence presented that Smith was advised by the IRS that UBOs must file a tax return or that his actions were illegal. However, Smith worked in concert with Bates, who kept busy drafting "response" letters to the IRS disputing the IRS's contention that taxes needed to be paid.

Finally, Smith argues that "even under the government's own theory, Smith's purpose was to steal money or defraud the persons who purchased UBOs from him; he did not have the specific intent to defraud the government in the enforcement of its tax laws." Smith ignores that stealing from clients and defrauding the government are not mutually exclusive --and that the evidence is sufficient to establish both purposes.

Smith argues that this case is analogous to Salerno , where this court reversed the defendants' §7206(2) convictions because, although they were guilty for implementing a scheme to embezzle millions from the casino, "the government failed to prove the scheme had as a purpose the violation of the federal tax laws." [ 90-1 USTC ¶50,261], 902 F.2d at 1430. The government had to show that the defendants engaged in the scheme "not merely for their own benefit but with a specific intent to cause the casino to file false tax returns." Id. at 1432. However, there was neither evidence that the defendants had anything to do with preparation of tax returns, nor "evidence that the defendants had any motive for conducting a scheme to defraud the government, [n]or that they ever mentioned their own taxes, much less the tax returns of the casino." Id.

Unlike in Salerno , Smith and Bates had as "a purpose," although not their sole purpose, the violation of tax laws. They specifically advised clients that the UBO income need not be reported on any kind of tax return, and told them not to consult friends, family, or accountants about their UBOs. The evidence was sufficient to prove that the defendants had a "specific intent to cause" their clients to file false returns.

[26] Further unlike Salerno , Smith and Bates had a "motive" for conducting a scheme to defraud the government: to hook the clients into giving them control over the clients' money so they could steal it. Finally, unlike in Salerno , here there was ample mention of the clients' tax returns within the scheme. Thus, there was sufficient evidence, viewing the evidence in the light most favorable to the prosecution, to find that the defendants willfully intended to cause false or fraudulent returns to be filed.

D. Conspiracy Count 1

Smith argues that the reasons for the insufficiency of the §7206(2) counts apply to invalidate the Count 1 conspiracy conviction. Because his arguments with respect to the §7206(2) counts fail, they fail equally with respect to the conspiracy count.

VI. Alleged Juror Bias & Misconduct

Smith and Bates argue that they are entitled to a new trial because of two instances of alleged juror misconduct and bias. We review a district court's denial of a post-verdict evidentiary hearing for an abuse of discretion, United States v. Saya, 247 F.3d 929, 934 (9th Cir. 2001), and its denial of a new trial on the assertion of juror misconduct or bias for abuse of discretion as well, United States v. Hanley, 190 F.3d 1017, 1031 (9th Cir. 1999). "Because of the trial judge's unique opportunity to observe the jurors during trial, to hear the defenses asserted, and to hear the evidence, the judge's conclusion about the effect of the alleged misconduct deserves substantial weight." Saya, 247 F.3d at 937 (quotations and citations omitted).

A. Juror #9's Alleged Bias

[27] "The Sixth Amendment guarantees criminal defendants a verdict by impartial, indifferent jurors." Dyer v. Calderon, 151 F.3d 970, 973 (9th Cir. 1998) (en banc). "A court confronted with a colorable claim of juror bias must undertake an investigation of the relevant facts and circumstances." Id. at 974. However, "[a]n evidentiary hearing is not mandated every time there is an allegation of jury misconduct or bias. Rather, in determining whether a hearing must be held, the court must consider the content of the allegations, the seriousness of the alleged misconduct or bias, and the credibility of the source." Hanley, 190 F.3d at 1031 (quotations and citation omitted). An evidentiary hearing is not necessary where the court knows "the exact scope and nature" of the bias allegation. Saya, 247 F.3d at 935 (internal quotations and citations omitted).

About a month after the jury returned the verdicts in this case, Juror #9 wrote the following letter to Agent O'Keeffe:

Dear Bridget,

My name is Brandt Mayer and I was juror #9 in the Bates/Smith/Wadsworth trial in Sacramento recently. As a sworn in juror as you know, we were not allowed to converse with anyone on the case.

Now that it's over and forgotten by me (thank god) I would like the opportunity to be able to talk with you. Not about the case of course, or your profession or mine, but in a casual way.

I was deprived not being allowed to just walk up and start a conversation with you, which normally for me is completilly [sic] out of character, as I am a bit timid.

After listening to you on the stand [you] showed a very "kind" aura about you. You're [sic] sofistication [sic] also impressed me. You're [sic] introduction led me to believe that you are  a single woman and has given me the comfort and insentive [sic] to write you.

I am hoping that you remember who I was: You were getting off the elevator one day on the 10th floor and I leaned out of the elevator accross [sic] from you as we (the jurors) were heading down. I purposly [sic] gave you a smile. It appeared that you returned a smile back to me. In fact the jurors teased me about that for days afterward, but that's ok, I told them that the smile was for me and not them.

Could it be possable [sic] to send an e-mail to me? A "get aquianted" [sic] type. I will surely respond.

But if you are finding this type of approach odd, tastless [sic], or in anyway [sic] out of line, or that you're simply not interested, I will surely understand and appollogize [sic]. I couldn't think of any other way to give it a try and I thought it couldn't hurt. Take care.

Agent O'Keeffe promptly reported the letter to prosecutors who in turn reported the letter to the court and opposing counsel. Thereafter, Smith and Bates moved for a new trial based on Juror #9's claimed bias; Bates also requested an evidentiary hearing. Both sides submitted briefs on the issue and argued the motion before the district court ruled. After considering the evidence, the district court denied the motion without conducting an evidentiary hearing.

With Juror #9's letter in hand, the district court understood the exact nature and scope of the bias allegation. Cf. Saya, 247 F.3d at 935. The district court examined the content of the allegations from the letter and never doubted the credibility of the source to which defendants pointed --Juror #9 himself. Cf. Hanley, 190 F.3d at 1031. In analyzing the seriousness of the allegations, the district court took into account that (1) Agent O'Keeffe was one of the last witnesses to take the stand after six weeks of trial (thereby limiting her influence on Juror #9), (2) Agent O'Keeffe was a summary witness who presented no new evidence, (3) other than the "kind aura" statement, there was "absolutely no tangible evidence that there was any extraneous information or extraneous influence on this juror by anyone," (4) there was "absolutely no evidence that Juror Number 9 did anything inappropriate during the trial" (noting at most a smile was exchanged), and (5) there was no evidence filed by defendants or declarations from any of the jurors that there was extraneous information or influence.

The district court logically reasoned it was unlikely that this juror was attempting to impress Agent O'Keeffe by finding defendants guilty, since he voted to acquit Charlotte Wadsworth, to acquit Bates of 88 out of 111 counts against him, and to acquit Smith on three counts. Furthermore, Juror #9 explicitly wrote Agent O'Keeffe that he had no desire to discuss the case with her, making the argument that he was trying to impress her with guilty verdicts even more attenuated.

An evidentiary hearing to listen to Juror #9's testimony regarding the trial would likely not have produced any valuable information. When inquiring into the validity of a verdict, pursuant to Federal Rule of Evidence 606(b),

a juror may not testify as to any matter or statement occurring during the course of the jury's deliberations or to the effect of anything upon that or any other juror's mind or emotions as influencing the juror to assent to or dissent from the verdict or indictment or concerning the juror's mental processes in connection therewith, except that a juror may testify on the question whether extraneous prejudicial information was improperly brought to the jury's attention or whether any outside influence was improperly brought to bear upon any juror.

(emphasis added). Thus, even if the juror's thought process was biased with his alleged "infatuation" with Agent O'Keeffe, the court was not free to hear evidence in this regard. Further, it was clear from Juror #9's letter that there was neither extraneous prejudicial information from Agent O'Keeffe (a smile can hardly be so deemed), nor "outside influence [that] was improperly brought to bear."

[28] The district court did not abuse its discretion in denying the evidentiary hearing and a new trial. Even if this juror had something of a crush on Agent O'Keeffe, his letter made clear that he diligently performed his duty as a juror, never speaking to Agent O'Keeffe during the trial, and at most exchanging a smile with her. It is unlikely that any trial goes by without one juror finding one witness nice or attractive. The only unusual thing about this case is that Juror #9 put his feelings in writing. The district court was well within its discretion in finding no evidence of juror misconduct and no extraneous influences on the juror, such that an evidentiary hearing was not required.

B. Juror #1's Alleged Intimidation

The district court also denied defendants' motion for a new trial based on the alleged intimidation of Juror #1. During the trial, Juror #1 wrote an e-mail explaining her disagreement with the foreperson regarding her approach to analyzing the mail and wire fraud counts without first considering the basis of the conspiracy charges. She explained:

I have been criticized by the foreperson and consequently have felt intimidated into proceeding on a ruling on more than two dozen counts without having first established the underlying business relationship of the defendants. She criticized me for wanting to review my notes; she criticized me for wanting to look at the evidence, and specifically she criticized me for wanting to look at evidence relative to count one. At one point she accused me of having already made up my mind because I suggested that we consider the prosecution's foundation for the case. The foreperson then threatened to throw me off the jury.

The district court questioned Juror #1 outside the presence of the other jurors about her feelings of intimidation. After the juror reiterated her concerns from the e-mail, the judge told her:

Each of you [jurors] must decide the case for yourself, but you should do so only after you have considered all the evidence, discussed it fully with the other jurors, and listened to the views of your fellow jurors.

Do not be afraid to change your opinion if the discussion persuades you that you should. But do not come to a decision simply because other jurors think it is right. It is important that you attempt to reach a unanimous verdict, but, of course, only if each of you can do so after having made your own conscientious decision. Do not change an honest belief about the weight and effect of the evidence simply to reach a verdict.

Although Juror #1 told the judge that she did not believe her decisions were made based upon her own beliefs up to that point, after hearing the above instruction, she felt able to return to deliberations and make future decisions (including those on verdicts that may have been rendered previously) based on her own conscience and belief.

The attorneys for defendants and the government then had a long discussion about whether the jury should be instructed to start deliberations anew or be instructed again on their role as jurors, and whether to keep Juror #1 on the jury. The court then brought Juror #1 back in, and asked more questions regarding whether she still felt intimidated, to which she answered she did not. The court was convinced that Juror #1 made "very clear that she is not intimidated at this point, that she understands her duty as a juror, and that she is ready to continue her deliberations in this case after the entire jury is reinstructed as to 34 and 39" (which had been reread to Juror #1).

[29] Smith argues that the foreperson's bullying of Juror #1 "demonstrates that the jury was not impartial and that the jury deliberation process was not functioning properly." However, if anything, the foreperson's misconduct ran to the defendants' favor by discounting the prosecution's theories. This alleged misconduct was thoroughly investigated by the district court, and its effect cured by ensuring that Juror #1 no longer felt intimidated. The district court did not abuse its discretion in refusing a new trial on this ground.


VII. Duplicity and Multiple Conspiracies Jury Instruction

Before trial, Smith moved to dismiss Counts 1, 25, and 64, the three conspiracy charges of the indictment, arguing that each one encompassed multiple conspiracies (and thus that each one was duplicitous). Bates joined this motion. Defendants disputed that there was one overarching conspiracy within any of these counts because the overt acts covered six alleged UBOs, with differing: (1) time periods, (2) identity of defendants involved, (3) identity of taxpayers involved, and (4) specific transactional facts.

The government opposed the motion, arguing that Counts 1, 25, and 64 each contained a singular conspiracy. As to Count 1, the government asserted that defendants entered into an agreement to impair and impede the IRS through the use of UBOs "in a fashion which knowingly and intentionally understated income and overstated legitimate deductible expenses." Although the UBOs were marketed to 249 or more taxpayers, the government argued that the Count 1 conspiracy was not "taxpayer specific"; it involved "one agreement, regardless of the number of taxpayers whose income tax return[s] were involved." As to Count 25, the government argued that there was one agreement to use the mail and interstate wire communications in furtherance of a scheme to defraud. Finally, Count 64, though involving different money laundering sections (18 U.S.C. §§1956(a)(1)(A), 1956(a) (1)(B), and 1957), encompassed only one agreement to engage in money laundering. The government summarized its argument as "[o]ne agreement; one count."

After considering the pre-trial briefs and supplemental briefs of all the parties on this issue, the district court found the indictment not duplicitous as to Counts 1, 25, and 64. After the trial, during the jury instruction conference, Smith renewed the motion to dismiss these counts, claiming that the government had "not been able to show an overarching conspiracy but rather ha[d] shown individual conspiracies." The district court denied the motion, and sustained the government's objection to a multiple conspiracy instruction.

The district court's ruling that there were no duplicitous counts appears correct, and defendants do not dispute it on appeal. Instead, defendants now argue that the district court erred in denying the request for the multiple conspiracy instruction. However, this argument is not based on any of the pretrial briefing arguments or post-trial jury instruction conference arguments that each conspiracy count encompassed multiple conspiracies. Rather, defendants argue (based on their multiplicitous sentence argument) that three conspiracy counts inherently require a multiple conspiracy instruction.

This argument was never made below, and thus was waived. Even if it were not waived, the argument misconstrues the nature of a multiple conspiracy instruction, which pertains to multiple conspiracies within a conspiracy count. The district court correctly denied the multiple conspiracy instruction.

VIII. Application of Sentencing Guidelines

Smith and Bates argue that the district court erred in enhancing their sentences under the Sentencing Guidelines. "Even though the Guidelines are no longer mandatory after the Supreme Court's decision earlier this year in United States v. Booker, 125 S.Ct. 738 (2005), the district court should still consult them for advice as to the appropriate sentence, id. at 767." United States v. Kimbrew, 406 F.3d 1149, 1152 (9th Cir. 2005). We review "the district court's interpretation of the Sentencing Guidelines de novo, the district court's application of the Sentencing Guidelines to the facts of this case for abuse of discretion, and the district court's factual findings for clear error." Id. at 1151 (citation omitted).

A. U.S.S.G. §3D1.2

[30] Smith and Bates argue the district court erred by grouping the tax counts separately from the money laundering and mail and wire fraud counts, which resulted in a two-point increase in each of their offense levels. The Guidelines provide that "[a]ll counts involving substantially the same harm shall be grouped together into a single Group." U.S.S.G. §3D1.2. In part, "same harm" means the counts involve the "same victim." Id. §3D1.2(a), (b).

The government argued at sentencing that the counts in question encompassed different harms and different victims. The Presentence Investigation Reports ("PSRs") for Bates and Smith both found that the victim as to the tax fraud counts is the United States government, whereas the victims as to the mail fraud and wire fraud counts "are the clients who had their money stolen by the defendants." The district court adopted the PSRs' findings and declined to group all counts together.

[31] The district court's factual finding that multiple victims were involved is not clearly erroneous, and the district court did not abuse its discretion in applying U.S.S.G. §3D1.2.

B. U.S.S.G. §3B1.1(c)

The U.S.S.G. §3B1.1(c) aggravating role two-level enhancement applies "[i]f the defendant was an organizer, leader, manager, or supervisor in any criminal activity" involving less than five participants and that was not otherwise extensive. Smith's PSR recommended this enhancement because Smith managed the activities of Christopher Bates and Charlotte Wadsworth. The district court's adoption of this factual finding was not clearly erroneous.



IX. Increasing Smith's Sentence Based on Allocution

Near the end of Smith's sentencing hearing, the district court stated its intention "to depart somewhat from the Probation Officer's recommendations and to sentence Mr. Smith to the low end of [the] guideline range of 121 months imprisonment." Defense counsel and the prosecution presented nothing further. Then, the district court asked whether Smith wished to address the court; Smith did.

Smith made a lengthy speech, denying (1) the jurisdiction of the district court, (2) that he had any connection to any state or the United States, (3) the existence of the United States, California, Sacramento, the district court, the prosecutor, defense counsel, Judge England, a list of UBOs, and even himself, and (4) that he is a Fourteenth Amendment "person." Smith contested that the offenses he was charged with were committed by anyone, and argued that the prosecution had "failed to show any actual or threatened injury as a result of the challenged conduct." Smith demanded that the court "reconsider and withdraw the proposed sentence, reverse the conviction, enter judgment of acquittal, vacate the charges against [him], quash the indictment, dismiss the complaint and otherwise ... set [him] free."

The district court responded to Smith's speech:

The defendant's statements to the Court that were just read have made it abundantly clear to this Court that Mr. Smith has absolutely no remorse for his actions. And further, he has directly challenged this Court and its ultimate authority. Accordingly, I find that this defendant is appropriate to be sentenced not at the lower end of the guideline range but at the upper end.

Mr. Smith apparently just simply does not get it. He is a direct and continuing threat to the financial safety of the public. And this Court has the belief, well-founded belief that if he were to be released from custody at any earlier time, he would immediately resume the criminal activity for which he was on trial here in this court.

The district court then sentenced Smith to 151 months instead of 121 months. Smith's counsel made no objection to the increased sentence.

[32] Smith argues that his First Amendment free speech and Fifth Amendment due process rights were violated because he was punished with a higher sentence for expressing his views on the district court's lack of jurisdiction. But the district court made it clear that it was increasing the sentence based on Smith's lack of remorse, and his threat to the financial safety of the public when released. These are legitimate sentencing factors under 18 U.S.C. §3553(a), which include considering the "characteristics of the defendant" and the need for the sentence "to promote respect for the law," "to afford adequate deterrence to criminal conduct," and "to protect the public from further crimes of the defendant."

[33] The district court may indicate a tentative sentence and then hear from the defendant before making a final sentencing determination. See United States v. Laverne, 963 F.2d 235, 236 (9th Cir. 1992). The district court here "was able to consider the defendant's statement and was free to alter its view of the sentence if the defendant offered a sufficient reason for changing its view." Id. at 237. That the district court considered Smith's lack of remorse in sentencing him is by no means a novel concept. See United States v. Malquist [ 86-2 USTC ¶9484], 791 F.2d 1399, 1402-03 (9th Cir. 1986) ("inclusion of [defendant's] lack of repentance in the court's sentencing calculus was permissible"). The district court did not err in taking Smith's statement into consideration for sentencing. The Sentencing Guidelines, in either their mandatory or advisory status, do not insulate a defendant from his or her own foolishness.



X. Reconsideration of Bates's sentence

At sentencing, the district court stated its tentative intention to sentence Bates at the low end of the guideline range (121 months) because of Bates's medical condition. The government made "another pitch for the mid-range of 136 months" because "the defendant's criminal history is actually substantially understated." Although Bates was found not criminally liable, he was found civilly liable for fraud in the amount of $4,687,984.71.

The district court sentenced Bates to 136 months, explaining: "I have reconsidered my initial decision, and I am going to follow the recommendation of Probation for 136 months." The court further stated:

The Court wants to make it clear that the reconsideration of the sentencing is based upon not only the words that Mr. Twiss [AUSA] stated here today in open court, but also a further review of the Presentence Report and also the Court's own recollection of the magnitude of the scheme in which Mr. Bates was involved, which led to the losses of substantial sums of money, upwards of 1.8 million dollars, from varying individuals and ages, some who have lost their entire retirement system under this scheme of unincorporated business organizations.

And I want the record to reflect that as being the basis for the Court following the mid-term recommendation of 136 months.

Thus, the district court relied at least in part on proper factors, such as the magnitude of the scheme and the loss incurred by victims, in determining placement in the sentencing range. See 18 U.S.C. §3553(a)(2)(A) (sentence "to reflect the seriousness of the offense"). Furthermore, the Guidelines state that the "history" of the defendant may be considered. Id. §3553(a)(1). A civil judgment against a defendant could be a factor in the defendant's history. Thus, it does not appear that the district court relied on improper factors in sentencing Bates to the middle of the Guidelines range.

XI. Booker Issue

[34] Both Smith and Bates argue that they must be resentenced under Booker because their sentences are based on facts not found by a jury beyond a reasonable doubt. Because the defendants did not challenge their sentences on Sixth Amendment grounds in the district court, and because the record in this case does not "provide a reliable answer to the question of whether the judge would have imposed a different sentence had the Guidelines been viewed as advisory," we grant a limited remand to the district court to answer this question. United States v. Ameline, 409 F.3d 1073 (9th Cir. 2005) (en banc).

XII. Ex Post Facto Issue

Smith and Bates argue that upon resentencing, their sentences must be capped by the maximum terms of imprisonment authorized by the unenhanced base offense levels, under ex post facto principles. We have rejected that argument in United States v. Dupas, 2005 U.S. App. LEXIS 15938 (9th Cir. 2005).

CONCLUSION

For the foregoing reasons, the judgments of conviction are affirmed and the cases are remanded pursuant to Ameline.

¹ Smith and Bates were tried as co-defendants with another alleged participant in the conspiracy, Charlotte Wadsworth. Wadsworth was acquitted by the jury.

² Bates told clients that he took care of dealings with the IRS and legal advice, while Smith provided investment advice.

³ It appears from the joint reply brief that Smith joins Bates in this argument. ( "[A]ppellants' consecutive sentences on the three conspiracy counts in this case are multiplicitous and constitutionally infirm.")

⁴ Multiplicity of sentences is unlike the issue of the multiplicity of an indictment, which can be waived if not raised below. United States v. Klinger, 128 F.3d 705, 708 (9th Cir. 1997).

⁵ Title 18 U.S.C. §371 states, in part:

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 under this title or imprisoned not more than five years, or both.

⁶ Smith mischaracterizes United States v. Hashimoto [ 89-2 USTC ¶9432], 878 F.2d 1126, 1134 n.9 (9th Cir. 1989), as determining that "general questions that did not delve into a juror's attitudes and dealings with the IRS are inadequate to expose bias of petit jurors in criminal tax cases." In Hashimoto, the trial court refused defendant's request for a jury panel list to investigate whether the jurors had been audited by the IRS, as he was entitled to do under 26 U.S.C. §6103(h)(5). [ 89-2 USTC ¶9432], 878 F.2d at 1129-33. Because of the specificity of the §6103(h)(5) inquiry, general questions on juror impartiality did not overcome the presumption of prejudice from the denial of the list. Id. at 1134 n.9. However, the court found that the presumption of prejudice could be overcome by juror voire dire on past audits and attitudes toward the IRS. Id. at 1134. Hashimoto does not hold that grand jurors in tax cases must be asked such questions.

⁷ Rule 41(d) stated, in relevant part: "The officer taking property under the warrant shall give to the person from whom or from whose premises the property was taken a copy of the warrant and a receipt for the property taken or shall leave the copy and receipt at the place from which the property was taken."

⁸ Defendants mistakenly argue that this case is "indistinguishable" from United States v. Dahlstrom [ 83-2 USTC ¶9557], 713 F.2d 1423, 1429 (9th Cir. 1983), which held that "[p]rosecution for advocacy of a tax shelter program in the absence of any evidence of a specific intent to violate the law is offensive to the first and fifth amendments of the United States Constitution." Dahlstrom's holding is limited to pure advocacy or speech cases. See United States v. Schulman [ 87-1 USTC ¶9334], 817 F.2d 1355, 1359 (9th Cir. 1987) ( Dahlstrom is properly read as an advocacy case); United States v. Russell [ 86-2 USTC ¶9801], 804 F.2d 571, 576 (9th Cir. 1986) (Ferguson, J., concurring) (as a member of the Dahlstrom panel, describing the case as "primarily a First Amendment case involving pure advocacy").