Instructions to Jury
3Page5
[98-2
USTC ¶50,884]
United States of America
, Plaintiff-Appellee v. John Patrick Proctor, Defendant-Appellant
United States of America
, Plaintiff-Appellee v. Jill Ann Proctor, Defendant-Appellant
(CA-10),
U.S. Court of Appeals, 10th Circuit, 97-5242, 97-5246, 11/23/98,
Affirming and reversing an unreported District Court decision
[Code
Sec. 7206 ]
Penalties, criminal: Fraud and false statements: Returns: Evidence.--Sole
stockholders of a glass company who made personal car payments using
unreported business income were properly convicted of willfully filing
false income tax returns for three tax years. The district court
correctly permitted an IRS agent to give expert opinion testimony that
was limited to factual determinations regarding the process by which
summaries of invoices, sales tickets, and checks were compiled.
[Code
Sec. 7206 ]
Penalties, criminal: Fraud and false statements: Returns:
Instructions to jury: Materiality: Substantiality.--The district
court properly instructed the jury regarding the legal definition of
materiality as it related to the charge of filing a false return, and it
was not required to give a substitute instruction on substantiality.
Although substantiality is an element of income tax evasion, it is not
an element of filing a false tax return.
[Code
Sec. 7206 ]
Penalties, criminal: Fraud and false statements: Returns: Sentencing
guidelines: Tax loss finding: Obstruction of justice.--The district
court properly applied the sentencing guidelines with respect to its
finding of the amount of tax loss to the government in connection with
false tax returns filed by sole stockholders of a glass company since
the taxpayers failed to prove that they had used corporate funds to pay
corporate liabilities. Additionally, the taxpayers' filing of a criminal
complaint against their bookkeeper in order to harm her credibility as a
witness against them supported an obstruction of justice enhancement.
[Code
Sec. 7402 ]
Court of Appeals: New issue: IRS agent: Testimony of:
Admissibility.--Sole stockholders of a glass company who failed to
object during their trial for filing a false tax return to the
withholding of a portion of an IRS agent's investigative report waived
the issue on appeal.
Before:
KELLY, HOLLOWAY and BRISCOE, 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Caution: This court has designated this opinion as NOT FOR
PUBLICATION.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:
In
these appeals, John Patrick Proctor and Jill Ann Proctor appeal their
convictions and sentences for willfully filing a false tax return in
violation of 26 U.S.C. §7206(1). Our jurisdiction arises under 28
U.S.C. §1291, and we affirm in part and reverse in part.
Background
The
Proctors are the sole stockholders of their business, Ace Glass, Inc.
("Ace"). During the years 1990, 1991, and 1992, Ace had four
sources of income: commercial sales, residential sales, over-the-counter
sales, and subtenant rental income. However, only commercial sales were
reflected on the corporate books. The other three sources of income,
according to trial evidence, amounted to over $246,000. There was
evidence at trial that the Proctors used some of that income to make
personal car payments as well as paying overtime in cash to employees of
Ace. The jury convicted them and the district court found unreported
personal income of over $246,000 for sentencing purposes. On appeal, the
Proctors argue that there was insufficient evidence to convict them, and
that the district court erred in (1) excluding testimony from a state
district attorney; (2) failing to provide the Proctors with Jencks
materials from the IRS investigative agent's report; (3) allowing two
government witnesses to testify as experts; (4) its jury instruction on
materiality and in not giving an instruction on substantiality; (5) its
application of the Sentencing Guidelines in its findings as to the
amount of tax loss to the government and an obstruction of justice
enhancement; and (6) denying a motion to appeal in forma pauperis and
for appointment of counsel.Discussion
Discussion
I.
The
Proctors first argue that the evidence was insufficient to support their
convictions. In addressing this claim, we review the record de novo. See
United States
v. Wolny, 133 F.3d 758, 760 (10th Cir. 1998). There is sufficient
evidence if, "after viewing the evidence in the light most
favorable to the prosecution, any rational trier of fact could have
found the essential elements of the crime beyond a reasonable
doubt." Jackson v.
Virginia
, 443
U.S.
307, 319 (1979).
The
Proctors claim that the evidence merely dealt with their business
practices and that it failed to show that their personal tax returns
were materially false. The evidence included unrecorded residential
sales receipts totaling $153,068.49, unrecorded over-the-counter sales
receipts totaling $41,849.57, and unrecorded subtenant rental income of
$14,400. In addition, the evidence included 175 checks made out to Ace
that were cashed by the Proctors or their bookkeeper, Susan Elliott.
Although it is undisputed that some of this cash was used to pay
employee overtime, there was evidence that the Proctors used some of the
proceeds to make personal car payments and that they took money from the
cash register. 7 R. at 133-34, 167. This income was not reported on the
Proctors' personal income tax returns.
The
Proctors defended on the basis that Ms. Elliott, the bookkeeper, who
testified for the government at trial, embezzled the funds. Although
evidence was presented that Ms. Elliott was awaiting trial on
embezzlement charges initiated by the Proctors, the jury and district
court chose to believe her version of events rather than that presented
by the Proctors.
We
conclude that the evidence regarding the personal car payments and
taking money from the cash register is sufficient to convict the
Proctors. However, we note that the government's theory in this case
seemed to be that, once the Proctors cashed a corporate check, the money
became income to them. This is untenable. Had the evidence only shown
that the checks were cashed and used for corporate liabilities, such as
paying overtime to employees, it would have been insufficient to
predicate the charges of wilfully filing a false personal income tax
return. The Proctors were corporate officers and, to the extent that
money was used to pay overtime, were acting merely as conduits in
cashing the checks for corporate purposes.
II.
The
Proctors next claim that the district court erred in excluding testimony
from Rick Esser, a state district attorney, who was involved with the
embezzlement prosecution of Susan Elliott. The district court's decision
to exclude this evidence is reviewed for abuse of discretion. See
Osteguin v. Southern Pac. Transp. Co., 144 F.3d 1293, 1295 (10th
Cir. 1998). "In this circuit, abuse of discretion is defined as an
arbitrary, capricious, whimsical, or manifestly unreasonable
judgment." Towerridge, Inc. v. T.A.O., Inc., 111 F.3d 758,
763 (10th Cir. 1997) (quotations and citations omitted).
The
Proctors proffered testimony from Mr. Esser to demonstrate that Gary
Benuzzi, the IRS special agent investigating the Proctors, was biased in
favor of Susan Elliott and against the Proctors. The district court
determined that the testimony was irrelevant and unhelpful to the jury
in determining the issues on trial: the evidence did not raise
reasonable doubt based upon the government's conduct in its
investigation of the Proctors, and other matters were already well
established in the evidence. In addition, Fed. R. Evid. 608(b) prohibits
the use of extrinsic evidence of specific instances of conduct for the
purpose of attacking a witness' credibility. After reviewing the record,
we conclude that this is the type of evidence that the Proctors were
seeking to introduce and thus that the district court did not abuse its
discretion in excluding it.
III.
The
Proctors next assert that the district court erred in failing to provide
them with Jencks materials from Agent Benuzzi's investigative report.
The government submitted the full report to the court for an in camera
inspection prior to trial according to the Jencks Act, 18 U.S.C. §3500(c).
The court found only one item therein which it turned over to the
Proctors without objection. We review for abuse of discretion. See
Palermo v. United States [59-2 USTC ¶9532], 360 U.S. 343, 353
(1959); United States v. Alvarez, 86 F.3d 901, 905 (9th Cir.
1996).
The
Act provides that:
If
. . . any portion of such statement is withheld from the defendant and
the defendant objects to such withholding, . . . the entire text of
such statement shall be preserved by the
United States
and, in the event the defendant appeals, shall be made available to the
appellate court for the purpose of determining the correctness of the
ruling of the trial judge.
18
U.S.C. §3500(c) (emphasis added). According to the Act, the statement
is only preserved and thus appellate review is only possible if the
defendant first objects before the district court. See
United States
v. Moody, 778 F.2d 1380, 1383 (9th Cir. 1985). Because the Proctors
failed to object to the withholding of the rest of Agent Benuzzi's
report, they have waived the issue.
IV.
The
Proctors further contend that the district court erred in allowing two
government witnesses to testify as experts. James Puckett was tendered
as an expert in questioned documents and provided testimony as to the
signatures or endorsements on 175 checks. Agent Benuzzi was offered as a
summary witness, but the Proctors contend that he was a de facto
"expert" in being allowed to give opinion testimony. "We
review a trial court's admission of evidence, including scientific
evidence, under an abuse of discretion standard."
United States
v.
Davis
, 40 F.3d 1069, 1073 (10th Cir. 1994).
As
to Mr. Puckett's testimony, the Proctors raise two issues: first, that
the government failed to comply with Fed. R. Crim. P. 16(a)(1)(E), and
second, that Mr. Puckett was not qualified to give expert testimony.
Fed. R. Crim. P. 16(a)(1)(E) provides that "[a]t the defendant's
request, the government shall disclose to the defendant a written
summary of [intended expert] testimony [which] shall describe the
witnesses' opinions, the bases and the reasons for those opinions, and
the witnesses' qualifications." Although Mr. Puckett's report did
not include the bases and the reasons for his opinion, the district
court nonetheless found that the Rule 16 requirements were met: "It
seems fairly clear, if not a matter of common sense, that the examiner
compared the handwriting exemplars with a variety of checks and other
documents and determined the authorship of each piece of evidence with
varying degrees of conclusiveness." 8 R. at 490. Indeed, in his
testimony Mr. Puckett described his methodology in detail. 9 R. at
502-06.
Still,
the district court erred in finding that the government met the
requirements of Rule 16(a)(1)(E). The government was required to provide
a foundation for Mr. Puckett's opinions prior to trial. However, its
failure to do so did not unfairly affect the substantial rights of the
Proctors. See Frontier Refining Inc. v. Gorman-Rupp Co., 136 F.3d
695, 705 (10th Cir. 1998); 28 U.S.C. §2111 ("On the hearing of any
appeal . . . , the court shall give judgment after an examination of the
record without regard to errors or defects which do not affect the
substantial rights of the parties."); Fed. R. Evid. 103(a)
("Error may not be predicated upon a ruling which admits or
excludes evidence unless a substantial right of the party is
affected."); see also
United States
v. Basinger, 60 F.3d 1400, 1407 (9th Cir. 1995). The Proctors knew
before trial that Mr. Puckett would be testifying and what his opinions
were. Also, at trial Mr. Puckett described his methodology in detail,
and the Proctors had an opportunity to cross-examine him extensively on
the reliability of that methodology. Finally, the Proctors could have
asked for a continuance to prepare more fully to discredit Mr. Puckett's
testimony. This they failed to do.
The
Proctors further argue that Mr. Puckett was not qualified to give expert
testimony, focusing on his lack of extensive formal education in
questioned document examination. However, according to Fed. R. Evid.
702, "a witness [may be] qualified as an expert by knowledge,
skill, experience, training, or education." At trial Mr. Puckett
testified that he has examined documents on a full-time basis for
seventeen years. As a senior forensic document examiner for the IRS
national forensic laboratory, he has testified in more than 100 judicial
proceedings. He is a member of numerous forensic science associations
and receives additional instruction through annual training conferences.
Even though Mr. Puckett does not hold an advanced degree in the field of
questioned document examination, the district court did not abuse its
discretion in ruling that he had more than sufficient training,
knowledge, skill, and experience to qualify as an expert in questioned
documents.
As
to Agent Benuzzi's summary testimony, the Proctors contend that he was
improperly allowed to give expert opinion testimony. Agent Benuzzi
prepared various summaries based on evidence which had already been
admitted during the trial, and the summaries themselves were admitted
into evidence without objection. His testimony was limited to describing
the process by which he compiled the summaries, which were compilations
of invoices, sales tickets, and checks, as well as comparisons of Ace's
company books with those compilations. The Proctors do not argue that a
summary witness must be first qualified as an expert--of course, such
qualification is not necessary. See 5 Mueller & Kirkpatrick, Federal
Evidence §584 (2d ed. 1994);
United States
v. Olano, 62 F.3d 1180, 1203 (9th Cir. 1995). Our review of the
record confirms the district court's finding that his testimony was
limited to factual determinations, and thus we fail to find merit in the
Proctors' claim that Agent Benuzzi was offering "expert"
opinion. Accordingly, there was no abuse of discretion in admitting it.
V.
The
Proctors also contend that the district court erred in its jury
instruction on "materiality" and in not giving an instruction
on "substantiality." "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).
In
this case the court instructed the jury that "material matters in
income tax returns are those essential to the accurate computation of
taxes." 11 R. at 921. According to the Proctors, this amounted to a
directed finding of materiality. Instead, they argue, the court should
have given an instruction on substantiality. However, the cases they
cite in support of this argument all involve a different offense, income
tax evasion, 26 U.S.C. §7201, for which substantiality is, indeed, an
element. See United States v. Meek [93-2 USTC ¶50,409], 998 F.2d
776, 779 n.5 (10th Cir. 1993). Since substantiality is not an element of
§7206(1), there was no error in declining to give such an instruction
to the jury. However, materiality is an element of §7206(1) which,
according to United States v. Clifton [97-2 USTC ¶50,832], 127
F.3d 969, 971 (10th Cir. 1997), must be submitted to the jury. Thus,
"[w]hile the trial judge must properly instruct the jury on the
legal definition of materiality, only the jury can decide whether the
facts proved at trial meet that legal standard." United States
v. DiRico [96-1 USTC ¶50,149], 78 F.3d 732, 736 (1st Cir. 1996). In
this circuit, "we have defined materiality under §7206(1) as
information necessary 'in order that the taxpayer . . . compute his tax
correctly.' "
Clifton
[97-2 USTC ¶50,832], 127 F.3d at 970 (quoting United States v.
Strand [80-1 USTC ¶9309], 617 F.2d 571, 574 (10th Cir. 1980)). This
was essentially the definition given by the district court in this case,
and thus the jury was properly instructed. Further, contrary to the
Proctors' assertion, the jury, rather than the court, decided whether
the facts met that standard. We conclude that the district court did not
err in its instructions on materiality.
VI.
The
Proctors assert that the district court erred in its application of the
Sentencing Guidelines in its finding as to the amount of tax loss to the
government and in giving an obstruction of justice enhancement. We
review the district court's factual findings for clear error and its
application of the Guidelines de novo. See
United States
v. Morales, 108 F.3d 1213, 1225 (10th Cir. 1997). "To
constitute clear error, we must be convinced that the sentencing court's
finding is simply not plausible or permissible in light of the entire
record on appeal, remembering that we are not free to substitute our
judgment for that of the district judge."
Id.
(quoting
United States
v. Torres, 53 F.3d 1129, 1144 (10th Cir. 1995)).
The
district court adopted the findings of the presentence report in using
the gross unreported receipts ($246,343.11) of Ace Glass to calculate
the base offense level. No adjustment was made to account for evidence
that some, and perhaps most, of this money had gone back into the
corporation to pay overtime in cash, or for employee cash withdrawals.
Section 2T1.1(c)(1)(A) of the Guidelines provides that "the tax
loss shall be treated as equal to 28% of the unreported gross income . .
. , unless a more accurate determination of the tax loss can be
made." The Proctors contend that there was sufficient evidence
presented to accurately account for the overtime cash payments, which
would have nullified any tax loss to the government. We agree that, had
the Proctors presented reliable evidence as to the amount of overtime
that was paid, there should have been an adjustment made to the amount
of tax loss. However, the only evidence the Proctors adduced as to the
amount of cash overtime payments was an accountant's estimate based upon
hearsay which the district court properly described as speculative. 12
R. at 129. The only witness to testify was Ms. Elliott, who stated that
she had received up to $4,000 in overtime. Even if the Proctors had been
able to prove up to $100,000 in overtime payments, the sentencing range
would have remained the same. The district court accommodated the
consensus that some of the unreported receipts had gone back into Ace in
the form of overtime cash payments by sentencing the Proctors at the low
end of the guideline range. We conclude that the district court's
finding as to the amount of tax loss was not clearly erroneous.
The
Proctors also assert that the district court erred in its finding of
obstruction of justice. Section 3C1.1 of the Guidelines provides that
"[i]f the defendant willfully obstructed or impeded, or attempted
to obstruct of impede, the administration of justice during the
investigation, prosecution, or sentencing of the instant offense,
increase the offense by 2 levels." Application note 3 provides an
example of such conduct: "threatening, intimidating, or otherwise
unlawfully influencing a . . . witness . . . , directly or indirectly,
or attempting to do so." U.S.S.G. §3C1.1, cmt. 3(a). "We have
held that attempting to influence the testimony of a potential witness
can form the basis for an upward departure for obstruction of
justice."
United States
v. Hernandez, 967 F.2d 456, 459 (10th Cir. 1992).
The
Proctors' sentence was enhanced as a result of their initiating the
filing of a criminal complaint against Ms. Elliott for embezzlement. The
district court found that the Proctors instigated the state criminal
investigation in order to harm Ms. Elliott's credibility as a witness
against them. This finding was based on evidence that the Proctors knew
that they were the focus of a criminal investigation and that Ms.
Elliott would be speaking to the IRS. In addition, Ms. Elliott refused
to accept the services of the Proctors' attorney. Although the Proctors
did not actually know that Ms. Elliott was a cooperating witness for the
IRS until after they initiated the criminal investigation against her,
we are not able to say that the district court's factual findings are
clearly erroneous.
VII.
Finally,
the Proctors argue that the district court erred in denying their
motions to appeal in forma pauperis and for court-appointed counsel
pursuant to 28 U.S.C. §1915(a)(1), (e)(1). We review the district
court's denial for an abuse of discretion. See Rucks v. Boergermann,
57 F.3d 978, 979 (10th Cir. 1995). In support of their motions, the
Proctors submitted financial affidavits in which they listed assets as
approximately $55,000 and to which they attached statements of their
debts totaling over $175,000. In response to the district court's order
to specify monthly payments on their debts, the Proctors filed
superseding motions which included an affidavit listing monthly expenses
as approximately $3,784. The attorneys for the Proctors have further
represented that they have not been paid for their services and have
handled the appellate work pro bono. The district court denied the
motions, finding that the Proctors had "not demonstrated sufficient
inability to pay the costs of their appeals and for counsel on
appeal." 1 R. doc. 78.
Section
1915 does not require a litigant to demonstrate absolute destitution. See
Adkins v. E.I. Du Pont De Nemours & Co., 335
U.S.
331, 339 (1948); McCone v. Holiday Inn Convention Ctr., 797 F.2d
853, 854 (10th Cir. 1986). Given their substantial debt, we conclude
that the Proctors made a sufficient showing of their poverty to be
permitted to proceed on appeal in forma pauperis and to have counsel
appointed. The district court's determination must be REVERSED. We
appoint attorneys Michael Louis Minns and Stanley D. Monroe, nunc pro
tunc, to the dates appellants' appeals were perfected. The Clerk of
this Court is directed to forward the appropriate voucher materials to
counsel to submit request for payment.
AFFIRMED
in part and REVERSED in part.
*
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.
[99-1
USTC ¶50,230]
United States of America
, Plaintiff-Appellee v. William L. Scholl, Defendant-Appellant
United States of America
, Plaintiff-Appellant v. William L. Scholl, Defendant-Appellee
(CA-9),
U.S.
Court of Appeals, 9th Circuit, 97-10143, 97-10248, 1/27/99, 166 F3d 964,
amended 3/17/99. Affirming an unreported District Court decision
[31 U.S.C. Secs. 5322 and 5324 and Code Sec. 7206 ]
Crimes: Filing false returns: Gambling activities: Netting of wins
and losses: Structuring of currency transactions: Conviction: Expert
testimony.--The conviction and sentence of a former judge and
compulsive gambler on four counts of filing false tax returns and three
counts of structuring currency transactions were sustained. The trial
court did not abuse its discretion in finding that the testimony of a
psychological expert regarding compulsive gambling had no probative
value and in excluding that testimony because it posed a substantial
risk of prejudicial effect. The disallowance of expert testimony
regarding tax and accounting law was also upheld. Testimony concerning
the reasonableness of the taxpayer's belief that he could net out
gambling wins and losses called for a legal conclusion and was an
inappropriate matter for expert testimony.
[Code
Sec. 7206 ]
Crimes: Filing false returns: Structuring of currency transactions:
Conviction: Jury instructions.--A former judge and compulsive
gambler who was convicted on charges of filing false tax returns and
structuring currency transactions was not prejudiced by jury
instructions on the issue of materiality and recordkeeping.
[Code
Sec. 7206 ]
Crimes: Filing false returns: Gambling activities: Sentencing
guidelines.--The trial court did not clearly err in determining that
no reasonable estimate of tax loss could be made in calculating a
gambler's offense level under the U.S. Sentencing Guidelines with
respect to charges of filing false returns and structuring currency
transactions. The record did not compel a finding of a reliable estimate
of the magnitude of any tax loss that occurred as a result of the
taxpayer's gambling activities and false tax returns.
Robert
L. Miskell, Assistant United States Attorney,
Tucson
,
Ariz.
85701
, for plaintiff-appellee-cross-appellant. Robert J. Hirsh, Jeffrey J.
Rogers, Hirsh, Davis & Piccarreta, P.C.,
145 S. Sixth Ave.
,
Tucson
,
Ariz.
85701-2007
, for defendant-appellant-cross-appellee.
Before:
BEEZER, HALL and RYMER, Circuit Judges.
OPINION
RYMER,
Circuit Judge:
William
L. Scholl appeals his conviction in the district court on four counts of
filing false tax returns in violation of 26 U.S.C. §7206(1) and three
counts of structuring currency transactions in violation of 31 U.S.C. §5324.
The government cross-appeals the district court's imposition of
sentence. We affirm in each instance.
I
Scholl
was a Superior Court Judge in
Tucson
,
Arizona
, from 1984 until he was indicted. He was a compulsive gambler who took
numerous trips to
Las Vegas
to gamble. Throughout the 1980s, he gambled on credit lines established
at various casinos. In 1989, he had outstanding balances on credit lines
from six different casinos totaling $163,000. In the latter part of 1989
and the beginning of 1990, Scholl settled his outstanding credit line
balances, paying a total of $50,000. From that point through 1994, he
continued to gamble as a cash player.
Once
he became a cash player, Scholl would purchase a cashier's check from
his checking account or bank credit line payable to the casino where he
was staying. He would deposit the cashier's check in the cage of that
casino upon his arrival and draw against his deposit to gamble at
various casinos during the trip. After the end of the trip, he would
withdraw his deposit in the form of cash and transport the cash back to
Tucson
. Records were not kept of these withdrawals.
Upon
returning to
Tucson
, Scholl would put the currency into the gun safe at his house. When he
went to work, he would take one bundle of $5,000 in his pocket. At lunch
time, he would deposit the money into a bank. He was aware that currency
forms may be generated when a person deposits more than $10,000 in
currency at a bank, and part of the reason he broke up deposits into
amounts less than $10,000 in currency was to avoid the preparation of
those reports. Scholl made numerous deposits in various accounts that
avoided the reporting requirements and, in addition, made sub-$10,000
deposits into a personal credit line that was his main account for
gambling.
Scholl's
accountant, Ken Silva, had a conversation with Scholl in 1987 in which
he told Scholl that both gambling winnings and gambling losses must be
reported separately on Scholl's tax return. Scholl's 1987 return
reflected "gambling winnings" of $128,680 and an itemized
deduction for "gambling losses" of $128,680. In connection
with preparation of Scholl's 1988 tax return, Silva asked Scholl if he
had any gambling winnings. Scholl responded that he did not have any, or
that he had "lost his ass there." Scholl's tax returns for
1990 and 1993 do not reflect any gambling income or losses, and his
returns for 1991, 1992, and 1994 reflect only small amounts. In each of
those years, the only gambling income reported was gambling income of
the type reflected on a Form W-2G, which he was required to file with
the IRS.
Scholl
testified to his belief that he could "net out" his gambling
wins and losses in any particular year and, if losses exceeded wins,
nothing needed to be reported on the return. He did not, however,
"net out" gambling winnings that were reflected on Forms W-2G.
On
December 5, 1995
, a grand jury in Tucson, Arizona, returned an indictment charging
Scholl with filing false tax returns for the years 1989 through 1994, in
violation of 26 U.S.C. §7206(1) (Counts 1 through 6), and five counts
of structuring currency transactions to avoid the Treasury reporting
requirements, in violation of 31 U.S.C. §5324 (Counts 7 through 11).
Trial to a jury began
September 24, 1996
. The court granted Scholl's motion for judgment of acquittal on Count
8. On November 19, the jury found Scholl guilty of counts 2, 3, 4, 6, 7,
9, and 10, but acquitted him on counts 1, 5, and 11. On
February 27, 1997
, the court sentenced Scholl to five years probation on each count, to
run concurrently. Although Casino Market Analysis Center Reports and
eyewitnesses indicated that Scholl had substantial unreported winnings,
the district court did not find them a sufficiently reliable indicator
of tax loss to make a reasonable estimate for purposes of determining
Scholl's offense level under the Guidelines.
Scholl
timely appeals his conviction. The government cross-appeals from
sentence, challenging the district court's failure to calculate Scholl's
offense level based on a reasonable estimate of tax loss.
II
Scholl
first argues that he was substantially prejudiced when the district
court moved the trial from
Tucson
, where he lives, to
Phoenix
. His request for change of venue back to the
Tucson
division was denied. The denial of a motion for transfer should be
overruled only if the district court abused its discretion.
United States
v. Herbert, 698 F.2d 981, 984 (9th Cir. 1983). We see none here.
Federal
Rule of Criminal Procedure 18 provides, in relevant part:
The
court shall fix the place of trial within the district with due regard
to the convenience of the defendant and the witnesses and the prompt
administration of justice.
The
district court emphasized the convenience of a trial in Phoenix to
witnesses (relying in part on the availability of more daily flights
from Las Vegas to Phoenix than from Las Vegas to Tucson); the
unavailability of a courtroom in Tucson to conduct the trial as
scheduled; the effect such a transfer would have on resolution of
pending motions and discovery issues in other matters; substantial
pretrial publicity in Tucson; and the efficiency to be gained by not
transferring the matter to another judge. On the other hand, Tucson was
the site of the offense and the home of the defendant, counsel for both
the government and Scholl, and most of the principal witnesses; Scholl
had particularly weighty family obligations; and trial in Tucson imposed
burdens of travel and expense that would not otherwise have existed.
While we might have decided the matter differently, the court considered
the relevant facts in applying the proper standard. As such we cannot
say that the denial of the transfer was an abuse of discretion. See
United States
v. McMullan, 98 F.3d 1155, 1159 (9th Cir. 1996), cert. denied,
117
S. Ct.
2444 (1997) ("Under the abuse of discretion standard, an appellate
court may not simply substitute its judgment for that of the lower
court. . .").
III
Scholl
maintains that he was unable to present a meaningful and truthful
defense because the district court improperly and prejudicially limited
the testimony of his compulsive gambling psychological expert; limited
the number of character witnesses he was allowed to call; excluded
evidence that would have laid the foundation for his compulsive gambling
expert's testimony; excluded other defense evidence and witnesses; and
excluded Scholl's expert witnesses on accounting and tax law. We
disagree.
A
Scholl
sought to have Dr. Robert Hunter, his expert on compulsive gambling,
testify that pathological gamblers have distortions in thinking and
"denial," which impact their ability and emotional wherewithal
to keep records. He would have testified that compulsive gamblers do not
want to keep records because that would force them to confront the
reality of losses, which creates too much upheaval. Hunter also would
have opined that a pathological gambler is not motivated by money, but
believes that the next "big win" will fix their lives.
In
a published opinion the district court applied the twopart analysis 1 set out in Daubert
v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786,
125 L.Ed.2d 469 (1993). See
United States
v. Scholl, 959 F. Supp. 1189, 1194 (D.
Ariz.
1997). The court concluded that a diagnosis of compulsive gambling
disorder satisfied the validity prong of Daubert, and ruled that Hunter
could testify that Scholl was a compulsive gambler at the time the
alleged crimes occurred. However, the court limited Hunter's testimony
to the ten diagnostic criteria for pathological gambling set forth on
page 618 of the Diagnostic and Statistical Manual of Mental Disorders,
Fourth Edition (DSM-IV), and excluded proffered evidence regarding
distortion in thinking and denial of the existence of a gambling
problem. Distortion and denial are "Associated Descriptive
Features" but are not regarded as sufficiently sensitive or
specific to be recognized as diagnostic criteria.
The
district court also excluded the proffered testimony under Federal Rules
of Evidence 402 and 403, noting among other things that Hunter said it
was not his opinion that gamblers could not truthfully report on their
income tax returns. Hunter did not state that compulsive gamblers have
no memory of what occurred when they prepare their tax returns.
Accordingly the court ruled that Hunter's opinion on denial was not
relevant and could be confusing, inconsistent, and misleading to the
jury.
Meanwhile,
we rendered decisions in United States v. Morales, 108 F.3d 1031
(9th Cir. 1997), and United States v. Bighead, 128 F.3d 1329 (9th
Cir. 1997), upon which Scholl now relies to challenge the district
court's limitations on Hunter's testimony. In Morales, we held that an
accounting expert should not have been precluded from testifying that
the defendant lacked bookkeeping competence because such an opinion does
not go to the ultimate issue of intent, but rather to a predicate fact
from which the jury may infer the necessary mens rea. 108 F.3d at
1037-38. In Bighead, we reiterated that Daubert's test for the
admissibility of expert scientific testimony does not require exclusion
of expert testimony that involves specialized knowledge rather than
scientific theory. 128 F.3d at 1330; see also
United States
v.
Cordoba
, 104 F.3d 225, 230 (9th Cir. 1997) (noting Daubert test
inapplicable to proffered expert testimony based upon specialized, not
scientific, knowledge). Scholl contends that Morales makes it clear that
Hunter's testimony should not have been limited, and that in any event
the district court erred by subjecting his proffer to Daubert analysis
because Hunter's testimony about characteristics of compulsive gamblers
was based on his own observations over the years, just as the expert's
testimony in Bighead concerning behavioral characteristics of child
abuse victims was based on her own observations.
We
need not decide on which side of the line the proffer falls because the
district court did not abuse its discretion under either Daubert or
Bighead in finding that Hunter's testimony had essentially no probative
value but substantial risk of prejudicial effect, and should therefore
be excluded under Rules 402 and 403. The court stated that Hunter's
"expert testimony would not be helpful to the jury because there is
no 'fit' between his testimony and the issue of willfulness in this
case. 959 F. Supp. at 1197. The court excluded Hunter's opinion
regarding denial as "not relevant" pursuant to Rule 402 and
"confusing, inconsistent and misleading" under Rule 403."
Id.
At
best, Hunter's opinion would have been that compulsive gambling disorder
makes one believe that he has lost more money than he has won--not that
it renders one unable to remember what occurred, or unable to enter both
winnings and losses on a Form 1040. While Hunter was prepared to testify
that Scholl could have misevaluated his winnings and losses and believed
he was telling the truth, Hunter also acknowledged that there was no
support in the literature for this opinion or for the idea that
pathological gamblers cannot truthfully report gambling income. Indeed,
Hunter made it clear that it was not his opinion that compulsive
gamblers cannot truthfully report income on their tax returns. Thus,
evidence that compulsive gamblers are in denial, or that their thinking
about gambling in relation to their life is distorted, would not tend to
show that Scholl did not believe his tax return to be correct in
reporting winnings and losses, or that he did not falsely subscribe to
it specifically intending not to report gambling wins and losses.
Likewise,
the excluded characteristics do not tend to negate materiality because
even if one truly believes he has lost more than he has won, the numbers
should be reported as information about winnings and losses is necessary
to determine whether income tax is owed. See 26 U.S.C. §7206(1).
Thus, as the district court concluded, the proffered opinion on denial
is not relevant. In any event, had Hunter been allowed to testify as
proffered, his opinion may have been mistaken to mean that Scholl lacked
intent to report wins or losses because of his disorder. This conclusion
would have been without support either in the scientific community or
Hunter's own experience. It would therefore have been misleading and
confusing. For these reasons, the district court had discretion under
Rules 402 and 403 to limit Hunter's testimony to wellrecognized
characteristics of compulsive gamblers, and to exclude that portion of
his proffered opinion which had slight (if any) relevance, and was both
speculative and misleading. See Morales, 108 F.3d at 1035
(reviewing exclusion of expert testimony for abuse of discretion).
B
Scholl
also contends that the court erred in limiting him to three character
witnesses in his case-in-chief on the footing that more would be
cumulative. 2 Because a
limitation on character witnesses is "left to the sound discretion
of the judge," Loux v. United States, 389 F.2d 911, 917 (9th
Cir. 1968), and Scholl fails to present "exceptional and compelling
circumstances clearly indicat[ing] an abuse of discretion" on the
part of the district court, United States v. Henry, 560 F.2d 963,
965 (9th Cir. 1977) (quoting Wagner v. United States, 416 F.2d
558, 564 (9th Cir. 1969)), there was none here.
Id.
at 965 ("We resist the implication that the number of[character]
witnesses rather than the quality of their testimony should determine
the strength of argument.").
C
Scholl
contends that the district court improperly excluded defense evidence
which would have laid the foundation for Hunter's testimony and evidence
of his state of mind. First, he asserts that he was unable to explore
the health problems of his children that were stressful to him. Plenty
of evidence was admitted on this point and Scholl fails to identify any
particular evidence that was improperly excluded. Secondly, Scholl
contends his counsel was precluded from exploring with Mrs. Scholl
discussions they had about gambling winnings and losses with respect to
tax returns. However, the court ruled that these discussions were
admissible. Counsel simply failed to pursue the line of inquiry after an
objection was sustained to his lead-off question as leading.
D
Scholl
challenges the exclusion of copies of nine cashier's checks as a
sanction for discovery abuse pursuant to Fed. R. Crim. P. 16. 3 In light of
representations made earlier that a "full forensic financial
audit" had been conducted and turned over, and the fact that
counsel had possessed the records for some time, the court found that
Scholl's failure to disclose the checks until after the jury was sworn
was " 'a strategic decision to withhold the [evidence]' until the
government would be unable to fully investigate." Our review is for
abuse of discretion, United States v. Duran, 41 F.3d 540, 545
(9th Cir. 1994), and we see none.
The
evidence was not "of decisive value," nor was the exclusion
"disproportionate to the conduct of counsel."
Id.
(quoting United States v. Aceves-Rosales, 832 F.2d 1155,
1157 (9th Cir. 1987) (per curiam) (describing test)). Although the
checks themselves were not entered into evidence, the information
contained on the checks was. Scholl was permitted to use the checks to
refresh his recollection. The court's determination that failure to
disclose the checks was deliberate is supported in the record, and the
sanction was directly related to the offending conduct.
E
Scholl
argues that the district court improperly disallowed the testimony of
his proffered experts on tax and accounting law because United States
v. Brodie [88-2 USTC ¶9520], 858 F.2d 492 (9th Cir. 1988), the
opinion partially relied upon by the district court in excluding the
testimony, has since been overruled by United States v. Morales,
108 F.3d 1031 (9th Cir. 1997). Scholl's witnesses would have testified
that Scholl's belief that he could "net out" his gambling wins
and losses was reasonable because the law was confusing; that Scholl's
recordkeeping method met IRS standards; and about whether Scholl's
accountant met the requisite standard of care in preparing Scholl's
returns.
Although
Scholl correctly points out that Brodie has been overruled in part, the
portion of Brodie overruled by Morales is not the same part discussed by
the district court in excluding Scholl's proffered experts. Morales
overruled Brodie's analysis of Federal Rule of Evidence 704(b). See
Morales, 108 F.3d at 1038 ("We overrule Brodie's Rule 704(b)
analysis which is inconsistent with this holding."). Rule 704(b)
applies only to expert witnesses "testifying with respect to the
mental state or condition of a defendant," Fed. R. Evid. 704(b),
but Scholl's experts were to testify regarding the confusing state of
tax and accounting law--not as to Scholl's individual confusion. That
portion of Brodie remains good law, as
[i]t
is well settled that the judge instructs the jury in the law. Experts
"interpret and analyze factual evidence. They do not testify about
the law because the judge's special legal knowledge is presumed to be
sufficient, and it is the judge's duty to inform the jury about the law
that is relevant to their deliberations."
Brodie
[88-2 USTC ¶9520], 858 F.2d at 496-97 (quoting United States v.
Curtis [86-1 USTC ¶9195], 782 F.2d 593, 599 (6th Cir. 1986)).
Furthermore,
testimony concerning the reasonableness of Scholl's belief that he could
net out wins and losses calls for a legal conclusion. As such, it is
inappropriate matter for expert testimony. See Aguilar v.
International Longshoreman's
Union
, 966 F.2d 443, 447 (9th Cir. 1992) (noting matters of law are for
the court's determination, not that of an expert witness); see also
Marx & Co. v. Diners' Club, Inc., 550 F.2d 505, 509-10 (2d Cir.
1977) (expert testimony consisting of legal conclusions inadmissible).
Regardless,
even though the tax expert personally may have believed that gambling
wins and losses could be netted out before he researched the issue, he
also acknowledged that the Form 1040 Instructions Manual specifically
states: "You cannot offset [gambling] losses against winnings and
report the difference." Instruction for Form 1040 (1990), at 16. In
addition, the proffered experts had no personal knowledge of any
predicate matter relating to Scholl's own ability to understand the
legal principles involved in reporting his gambling activity on tax
returns. This further distinguishes Morales, where the proffered
accounting expert sought to opine that the defendant had a weak grasp of
accounting principles to counter testimony by the government's witnesses
that she had a good understanding of the bookkeeping process. Finally,
the exclusion of this expert testimony did not prevent Scholl from
pursuing the theory that he believed he did not have to report anything
if he thought his wins exceeded his losses. The reasonableness of what
Scholl said he believed is irrelevant; the only relevant issue is
whether Scholl actually had this belief (thus negating intent), and on
this issue Scholl's proffered experts had nothing to say. In sum, as the
district court explained, this "expert's personal experience with
the tax laws was not relevant, would be confusing, and the prejudicial
effect outweighed the probative value."
Testimony
as to whether Scholl's record keeping practices met IRS standards would
not have "assist[ed] the trier of fact to understand the evidence
or to determine a fact in issue," Fed. R. Evid. 702, because the
jury did not need assistance in applying the legal standard declared by
the court--that taxpayers must maintain such records as are sufficient
to determine the amount of income and deductions required to be reported
on tax returns.
Nor
did the court abuse its discretion in limiting expert testimony about
whether Scholl's accountant exercised the proper standard of care.
Scholl had already introduced into evidence a document published by the
American Institute of Certified Public Accountants entitled
"Statements on Responsibilities in Tax Practice," which
detailed the "appropriate standards of tax practice outlining the
extent of a CPA's responsibility to the clients, the public, the
Government, and the profession," and had engaged in lengthy
crossexamination of his accountant with respect to these guidelines and
accounting standards of care in general. As the jury was provided with
the governing standards and this testimony, the court did not abuse its
discretion in determining that additional expert testimony would be a
waste of time and would not assist the jury to understand the evidence
or determine a fact in issue. See Fed. R. Evid. 403.
IV
Scholl
contends that there was pervasive prosecutorial misconduct throughout
the trial requiring reversal across the board. Specifically, he argues
that the district court erred in denying his motion for mistrial based
on misconduct in the government's cross-examination of character
witnesses, Mrs. Scholl, and Scholl himself, as well as in the
government's opening statement and closing argument. 4 Denial of a
motion for mistrial based on allegation of prosecutorial misconduct is
reviewed for abuse of discretion. See
United States
v.
Davis
, 932 F.2d 752, 761 (9th Cir. 1991). "[T]he court should not
reverse a defendant's conviction if substantial, independent and
credible evidence of the defendant's guilt overwhelms whatever
incriminating aspects inadmissible statements may have had in
isolation."
Id.
(internal quotations omitted).
A
Relying
on
United States
v. Michelson, 335
U.S.
469, 482, 69 S.Ct. 213, 221-22, 93 L.Ed. 168 (1948), Scholl first
contends that the use of a "Did you know . . .?" form of
question instead of "Have you heard . . .?" in
cross-examination of character witnesses was improper. This argument is
without merit because Federal Rule of Evidence 405, enacted after
Michelson, informs the methods by which character may be proven and
challenged. Rule 405(a) provides that"[o]n crossexamination,
inquiry is allowable into relevant specific instances of conduct."
Fed. R. Evid. 405. The Advisory Committee Notes emphasize that the
distinction between asking an opinion witness "whether he
knew" and "whether he had heard" is
of
slight if any practical significance, and the second sentence of
subdivision (a) eliminates them as a factor in formulating questions.
This recognition of the propriety of inquiring into specific instances
of conduct does not circumscribe inquiry otherwise into the bases of
opinion and reputation testimony.
Fed.
R. Evid. 405, Adv. Comm. Notes.
Scholl
also faults the government's cross-examination of Judge Lacagnina, a
character witness who had testified that Scholl's "integrity is
beyond question," regarding his knowledge of a $10,000 loan Scholl
had accepted from an attorney who was counsel in a case over which
Scholl presided while the loan was outstanding without disclosing it to
all parties. In Scholl's view the question was improper because the
government's characterization of the loan was unfair and misleading, as
the case was "non-adversarial." The judge's attention was
called to the Arizona Code of Judicial Conduct, 5 but the
court limited further inquiry once the witness responded that the rule
did not cover this situation. The questioning itself was not
prosecutorial misconduct.
Scholl
further cites as misconduct the cross-examination of Judge Lacagnina
regarding charges brought by the Arizona Commission on Judicial Conduct,
which included filing a false state financial disclosure form. However,
the inquiry was relevant because the judge had testified to Scholl's
truthfulness, honesty and integrity, and the government had a good faith
basis for asking the questions given the publicly-filed Statement of
Charges. While Judge Lacagnina was asked whether his opinion would be
affected if the information in the Commission's complaint regarding
Scholl's false statements on the state financial disclosure forms was
shown to be true, the question did not assume Scholl's guilt on any of
the counts in the indictment.
Next,
Scholl argues that cross-examination regarding Scholl's attendance and
vacation time was misconduct. No such inquiry was made on
cross-examination, although on redirect Scholl's counsel asked Judge
Lacagnina if he had formed an opinion "as to whether defendant was
doing his job." The witness responded that Scholl was a good judge,
and talked about the work he put out and the quality of that work. On
re-cross, and with permission of the court, the AUSA asked Lacagnina if
he had heard that the Chief Judge of the Juvenile Court believed that
Scholl had abused the attendance and vacation policies of the court.
Although this strayed somewhat from the relevant character traits at
issue in this trial, it was equally irrelevant for Scholl's counsel to
inquire whether Scholl was "doing his job." In any event, this
falls well short of being sufficiently prejudicial to warrant reversal.
To the extent that Scholl suggests there was no basis for the
government's belief that the Chief Judge's comments about his attendance
had been discussed in the relevant community, Judge Lacagnina merely
testified to his opinion, not to Scholl's reputation, so knowledge in
the community was not a material predicate to that testimony.
Finally,
Scholl argues that asking character witnesses whether they had heard
that Scholl believed himself to be a compulsive gambler was improper
because it had nothing to do with his character and the government had
no good faith basis to believe that any of this had been discussed in
the relevant community. However, Scholl could not have been prejudiced
by this line of questioning because he himself invoked his compulsive
gambling disorder in his defense, and his counsel said in opening
statement that Scholl never concealed the disorder.
B
The
government questioned Mrs. Scholl about the two houses the Scholls
owned, a time-share in
Hawaii
and membership in the Oro Valley Golf Club. Scholl argues that these
questions were appeals to class prejudice and therefore prosecutorial
misconduct. However, Scholl's defense centered on his belief that he was
losing more money gambling than he was winning. Although marginal, the
evidence adduced was probative of whether he actually held that belief
and it was not misconduct for the government to elicit it.
Scholl's
more serious complaint is that by precluding Mrs. Scholl from testifying
as to the reasons for the purchase of the house next door, the court
allowed the government to convey the false impression that the Scholls
had purchased it simply because they were wealthy. In fact, Mrs. Scholl
would have testified that the house was purchased to rent to a full-time
caretaker for their disabled son. Even so, while the reason for
purchasing the second property might have painted a more sympathetic
picture for Scholl, it is the fact of the purchase, not the reason for
it, that had probative value. If there were error, it was harmless and
in any event, there was no reversible misconduct.
C
Scholl
makes a number of loosely-connected misconduct charges about his own
cross-examination. We treat these most summarily, because neither singly
nor cumulatively do they constitute misconduct. Scholl opened the door
to questions about how compulsive gambling affected his ability to
follow the Canon of Judicial Ethics and act as a judge by contending
that his gambling had not interfered with his work. Questions regarding
when he disclosed his compulsive gambling problems were properly
responsive to Scholl's position that he was "open as far as
discussing [his] gambling activity." And questions about loans that
he failed to disclose on his state financial form were relevant to
credibility.
Scholl's
own statement that the propriety of his actions would be decided by the
Commission on Judicial Conduct paved the way for the government to ask,
with the court's permission, about Scholl's motivation to testify in a
way that would affect the pending proceedings before the Commission.
This did not have to do with the verdict in the criminal case, but with
Scholl's testimony. Nor, contrary to Scholl's argument, did the
government impermissibly suggest that he would return to the bench if
not convicted. Regardless, the court instructed the jury that the
decision of the Commission "is completely separate from the
resolution you will make by verdict in this case." Finally,
questions regarding why Scholl did not provide information to the
government were not misconduct running afoul of Doyle v. Ohio,
426 U.S. 610, 61720, 96 S.Ct. 2240, 2244-46, 49 L.Ed.2d 91 (1979),
because Scholl claimed that he was never given the opportunity to
present documents or cooperate as he had requested. See McMillan v.
Gomez, 19 F.3d 465, 469-70 (9th Cir. 1994) (determining no Doyle
error where prosecution refuted impression that defendant was
cooperative by asking about later noncooperation).
Scholl
contends that eliciting evidence from Mike Grayson regarding a prior bad
act was misconduct. Grayson told an IRS investigator that he had seen
Scholl win as much as $100,000 at a craps table at the Desert Inn,
possibly in 1988 but most likely in 1990. The morning Grayson was to
testify he told the IRS agent that based on further research he now
believed the incident had occurred in 1986 or 1987. The court allowed
Grayson to testify pursuant to Federal Rule of Evidence 404(b). This
decision was not improper. Cf. United States v. Conforte [80-1
USTC ¶9417], 624 F.2d 869, 875-76 (9th Cir. 1980) (holding that a
pattern of understatement of income in successive years is evidence of
willfulness in a tax prosecution). Although Rule 404(b) requires
pretrial disclosure of such evidence, that requirement may be excused
"for good cause shown." Fed. R. Evid. 404(b). The court
properly concluded that good cause was shown because, prior to trial,
the government believed that the incident had occurred in 1990, not
1986. This was not an abuse of discretion, nor was it misconduct for the
government to seek to introduce Grayson's testimony or to ask for relief
from the pre-trial disclosure requirement.
Finally,
Scholl submits that the AUSA committed misconduct in his examination of
Richard Bock by asking whether Bock had discussed with Scholl the
circumstances that led Scholl to be transferred to the juvenile court.
Whether or not this line of questioning was proper, no prejudicial
information was elicited. Bock testified that he did not believe that
Scholl ever told him why he was transferred to juvenile court.
D
Scholl
faults the AUSA for having said during his opening statement that Scholl
could not prove that compulsive gambling was relevant to the case,
knowing that the court had excluded such evidence. This is not quite
correct, as the court had merely precluded Scholl's compulsive gambling
expert from testifying to characteristics that the expert himself said
did not affect the ability to report winnings or losses truthfully on a
tax return. Essentially the same point underlies Scholl's submission of
misconduct in closing argument, and it fails for the same reason.
V
Scholl
argues that pervasive judicial bias against him and favoritism toward
the government denied him a fair trial.
A
Scholl
first challenges Judge Silver's decision not to recuse herself. Scholl
contends that Judge Silver, a former Assistant United States Attorney,
should have recused herself pursuant to 28 U.S.C. §455(b)(3), which
directs a judge to disqualify himself "[w]here he has served in
governmental employment and in such capacity participated as counsel,
adviser or material witness concerning the proceeding . . ." 28
U.S.C. §455(b)(3). We review the denial of a motion to recuse for abuse
of discretion. See
United States
v. Hernandez, 109 F.3d 1450, 1453 (9th Cir. 1997).
Scholl
relies on United States v. Arnpriester, 37 F.3d 466, 467-68 (9th
Cir. 1994), where we held that a judge who had been United States
Attorney (and as such was responsible for the entire office) should have
recused himself in a case under investigation during his tenure.
Scholl's reliance is unwarranted. Judge Silver was an Assistant United
States Attorney from 1980 through
October 7, 1994
, and for much of that time was the Chief Criminal Assistant to the
United States Attorney. However Judge Silver did not have supervisory
power over the section of the office that investigated Scholl; she
supervised only investigations in the
Phoenix
division, while the investigation of Scholl was performed by the
Tucson
division. Thus, Arnpriester does not require recusal and Judge Silver
did not abuse her discretion in refusing to recuse herself.
B
Scholl
later filed a motion for disqualification pursuant to 28 U.S.C. §144,
identifying ten bases that he contends showed that Judge Silver had a
bent of mind against the defense and in favor of the government. 6 On appeal,
Scholl argues that Judge Silver was required to refer the motion to
another judge instead of ruling on it herself, as she did. We disagree,
as the §144 affidavit was neither timely nor sufficient to trigger
reassignment. See Toth v. Trans World Airlines, Inc., 862 F.2d
1381, 1388 (9th Cir. 1988) (holding that only after determining the
legal sufficiency of a §144 affidavit is a judge obligated to reassign
decision on merits to another judge). It was filed less than 10 days
before trial, and relied on the judge's prior service as an Assistant
United States Attorney, which we have already explained did not require
recusal, and actions taken by Judge Silver during the proceedings, which
are not a proper ground for disqualification.
C
Nor
does the remainder of Scholl's list of incidents warrant a new trial. A
federal judge has broad discretion in supervising trial, and her
behavior during trial justifies reversal only if she abuses that
discretion. "A trial judge is more than an umpire, and may
participate in the examination of witnesses to clarify evidence, confine
counsel to evidentiary rulings, ensure the orderly presentation of
evidence, and prevent undue repetition." United States v.
Laurins [89-1 USTC ¶9250], 857 F.2d 529, 537 (9th Cir. 1988).
"A judge's participation justifies a new trial only if the record
shows actual bias or leaves an abiding impression that the jury
perceived an appearance of advocacy or partiality."
Id.
We have reviewed the record, and here as in Liteky v. United States,
510 U.S. 540 (1994), the grounds Scholl complains of mainly
consist
of judicial rulings, routine trial administration efforts, and ordinary
admonishments (whether or not legally supportable) to counsel and to
witnesses. All occurred in the course of judicial proceedings, and
neither (1) relied upon knowledge acquired outside such proceedings nor
(2) displayed deep-seated and unequivocal antagonism that would render
fair judgment impossible.
510
U.S.
at 556 (italics in original). Judge Silver's judicial rulings and
efforts at trial administration are an inadequate basis for
disqualification.
There
is one exception, having to do with the judge's mouthing "stand
up" to the AUSA during defense counsel's closing argument. However,
this was adequately explained by Judge Silver as intended to communicate
that if counsel wanted to make an objection like he looked like he
wanted to do, he should stand up. There is no indication the gesture was
visible to or seen by the jury. While all communications with counsel
should be audible instead of inaudible, the judge's reaction was an
understandable, if regrettable, effort to avoid interrupting defense
counsel's closing argument that we cannot say warrants reversal, for
nothing suggests it had anything to do with the outcome.
VI
Scholl
contends that the court improperly admitted Market Analysis Center (MAC)
reports prepared by casinos to establish amounts allegedly won or lost
by Scholl and the source of money he allegedly structured. The MAC
reports were received under the business records exception to the
hearsay rule, Fed. R. Evid. 803(6). The district court has "wide
discretion" in determining whether a business record meets the
trustworthiness standard, United States v. Olano, 62 F.3d 1180,
1206 (9th Cir. 1995) (citations omitted), and did not abuse its
discretion here.
MAC
reports are prepared by a floor worker at the casino that serve as
estimates of particular gamblers' winnings or losses. Generally, the
floor worker keeps track of cash or chips that the gambler has when he
arrives at the table, records the average bet made by the gambler, and,
to the extent possible, keeps track of how much money the gambler is
winning or losing. Typically, this information is used by the casino to
determine the amount of complimentary services to give the gambler.
Scholl
argues that these reports should be inadmissible under Rule 803(6)
because they are rough estimates and insufficiently trustworthy.
However, a party need not prove that business records are accurate
before they are admitted. "Generally, objections that an exhibit
may contain inaccuracies, ambiguities, or omissions go to the weight and
not the admissibility of the evidence." United States v.
Keplinger, 776 F.2d 678, 694 (7th Cir. 1985); see also
La Porte
v.
United States
, 300 F.2d 878, 880 (9th Cir. 1962) (noting "the admissibility
of a document, as distinguished from its weight, normally does not
depend upon either completeness or freedom from ambiguity").
Discussing
the policy behind Rule 803(6) in United States v. Licavoli, 604
F.2d 613 (9th Cir. 1979), we explained:
The
focus of the business records exception to the hearsay rule is on the
requirements that the record be made in the course of and as a regular
practice of a regularly conducted business activity. . . . There are
circumstantial guarantees of trustworthiness in a record
contemporaneously prepared by one who acts under a business duty of care
and accuracy, particularly when the business entity for which the record
is made relies on it.
Id.
at 622 (citations omitted). In this case, the government established
that the records were made at or near the time of the activity reflected
in the records, made by a person with knowledge based on their
observations, kept in the ordinary course of business, and made as part
of the regular practice of the casinos' operations. Hence, the Rule
803(6) requirements were fulfilled.
To
be sure the records are merely estimates, and crude ones at that.
However, as the Tenth Circuit held in a §7206(1) case involving failure
to report gambling income, estimates or averages given by witnesses are
sufficient to demonstrate a substantial understatement in the wagers
reported by a defendant. See
United States
v. Hallmark, 911 F.2d 399, 402 (10th Cir. 1990). Here as in
Hallmark, the government "did not have to prove the exact amount by
which [the defendant] misstated the tax returns; the witness' [estimates
] demonstrated substantial understatements in the wagers he
reported."
Id.
Furthermore,
Scholl had the opportunity to attack the reliability of the MAC reports
at trial and did so. The jury was informed that the reports were mere
estimates. Given that the records are trustworthy for what they
are--estimates--and that Scholl was permitted to elicit testimony going
to their questionable accuracy, and we conclude that the MAC reports
were properly admitted into evidence.
VII
A
Scholl
contends that his §5324 convictions must be vacated because the
government submitted no proof that he knew the alleged structuring was
illegal. To violate 31 U.S.C. §5324, a defendant must (1) intentionally
structure financial transactions, (2) with the purpose of avoiding the
currency reporting requirements, and (3) with the knowledge that the
conduct is unlawful. See Ratzlaf v. United States [94-1 USTC ¶50,015],
510 U.S. 135, 136-37, 114 S.Ct. 655, 657, 126 L.Ed.2d 615 (1994).
Willfulness rarely can be proved by direct evidence that the defendant
knew of the illegality of structuring; instead, it is usually
established by drawing reasonable inferences from the available facts. United
States v. Tipton [95-1 USTC ¶50,288], 56 F.3d 1009, 1012 (9th Cir.
1995) (citations omitted). A jury may find the requisite knowledge that
the structuring was unlawful by drawing reasonable inferences from the
evidence of defendant's conduct.
Id.
at 1012-13 (quoting Ratzlaf [94-1 USTC ¶50,015], 510
U.S.
at 149 n.19).
The
evidence at trial, viewed in a light most favorable to the prosecution,
allowed a rational factfinder to infer Scholl knew that structuring his
deposits was illegal. Scholl admitted that he was aware financial
institutions must report currency transactions of $10,000 or more, and
that he divided his deposits into amounts less than $10,000 "in
part " to avoid triggering this requirement. Whenever Scholl made
two deposits on the same day, he made the deposits at different banks.
By using different banks, he concealed from each bank the fact that he
was making multiple deposits. Furthermore, virtually all of Scholl's
deposits were in amounts of $5,000 or less. Thus, Scholl was making more
than the minimum number of deposits necessary to avoid the reporting
requirements. See United States v. Beidler, 110 F.3d 1064, 1070
(4th Cir. 1997) ("Based upon the fact that Beidler made more
deposits than the minimum necessary to evade the reporting requirements,
the jury reasonably could have inferred that Beidler intended to conceal
his structuring because he knew structuring was illegal.")
Furthermore,
a "jury may infer knowledge of the law from a defendant's education
and expertise." See United States v. Simon [96-2 USTC ¶50,358],
85 F.3d 906, 910 (2d Cir.), cert. denied, 117 S.Ct. 517 (1996) (S
5324 structuring transaction of a licensed stockbroker). Given Scholl's
legal training, career on the bench, and the credibility of his
testimony, the jury rationally could have disbelieved Scholl's testimony
that he did not know structuring was illegal. See United States v.
Kenny, 645 F.2d 1323, 1346 (9th Cir. 1981) ("When the defendant
elects to testify, he runs the risk that if disbelieved, the trier of
fact may conclude that the opposite of his testimony is the
truth.") (citations omitted). Thus, while not overwhelming, there
is sufficient evidence in the record from which a reasonable factfinder
could conclude, by drawing permissible inferences, that Scholl knew his
structuring activity was illegal.
B
Scholl
contends that there was insufficient evidence of materiality to sustain
a conviction under §7206(1). The elements of a violation of 26 U.S.C.
§7206(1) are: (1) the defendant made and subscribed a return,
statement, or other document that was incorrect as to a material matter;
(2) the return, statement, or other document subscribed by the defendant
contained a written declaration that it was made under the penalties of
perjury; (3) the defendant did not believe the return, statement, or
other document to be true and correct as to every material matter; and
(4) the defendant falsely subscribed to the return, statement, or other
document willfully, with the specific intent to violate the law. See
United States v. Marabelles [84-1 USTC ¶9189], 724 F.2d 1374, 1380
(9th Cir. 1984). Whether there was an actual tax deficiency is
irrelevant because the statute is a perjury statute. See United
States v. Marashi [90-2 USTC ¶50,482], 913 F.2d 724, 736 (9th Cir.
1990).
Since
Scholl's trial, we considered the materiality requirement of §7206(1)
in light of the Supreme Court's decision in United States v. Gaudin,
515 U.S. 506, 115 S.Ct. 2310, 132 L.Ed.2d 444 (1995), in United
States v. Uchimura [97-2 USTC ¶50,671], 125 F.3d 1282 (9th Cir.
1997), cert. denied, 119 S.Ct. 151 (1998). There we held that,
for purposes of §7206(1), "information is material if it is
necessary to a determination of whether income tax is owed." [97-2
USTC ¶50,671], 125 F.3d at 1285. We also noted that materiality
necessarily depends on the facts of each case.
Id.
The
Internal Revenue Service must be able to measure gambling income against
gambling losses in order to determine whether income tax is owed. When
gambling income and losses are both knowingly omitted, a reasonable jury
could conclude that the information was necessary to a determination of
whether income tax is owed. Whether Scholl believed (correctly or
incorrectly) that he had lost more than he had won is irrelevant. See
United States v. Holland, 880 F.2d 1091, 1096 (9th Cir. 1989)
(holding "any failure to report income is material"). As there
is no dispute that Scholl failed to report winnings and losses, in this
case that evidence suffices to show that the return was not correct as
to a material matter.
VIII
Scholl
contends that he was prejudiced by two improper jury instructions: (1)
the materiality instruction that he argues improperly took the issue
from the jury; and (2) the instruction on recordkeeping that he asserts
created a strict liability guilt assumption in violation of Sandstrom
v. Montana, 442 U.S. 510, 99 S.Ct. 2450, 61 L.Ed.2d 39 (1979).
A
Section
7206(1) makes it a crime for a person to file a tax return "which
he does not believe to be true and correct as to every material
matter." 26 U.S.C. §7206(1). Consistent with Gaudin, the district
court submitted the element of materiality to the jury. The instruction
read as follows:
The
tax return must be false as to a material matter. To be material, the
statement must have a natural tendency to influence, or to be capable of
influencing, the decision making body to which it is addressed.
If
you find the defendant made a false statement on his tax return relating
to gross income, regardless of the amount, that is to say, if you find
that the defendant received income in addition to that reported on his
tax return, regardless of the amount, such omission of income is a
material matter.
Scholl
did not object to the definition of materiality. 7
Scholl
argues that although the issue of materiality was given to the jury (as
it should have been under Gaudin), the instruction was tantamount to
instructing the jury that any omission of income was material as a
matter of law. This, he submits, is no longer the law of the Ninth
Circuit in light of Uchimura, which noted that
just
because a jury usually would agree with [the statement in
Holland
that 'any failure to report income is material'] does not mean that a
jury must agree with it, as a matter of law. Even if any failure to
report income is material in most circumstances, it is not necessarily
material in all circumstances, since the materiality of an
underreporting of income necessarily depends on the facts of each case.
Uchimura
[97-2 USTC ¶50,671], 125 F.3d at 1285-86. Yet as we have already
explained, on the facts of this case there is no dispute that Scholl won
and lost but failed to report what he won or what he lost. In United
States v. Knapp, as here, where the defendant failed to object to
the materiality error, "to warrant reversal in a case where a
Gaudin-type error is made, the error must 'seriously affect the
fairness, integrity or public reputation of judicial proceedings.'"
United States v. Knapp [97-2 USTC ¶50,556], 120 F.3d 928, 933
(9th Cir.), cert. denied, 118 S.Ct. 417 (1997) (citations
omitted). Knapp dealt with the very similar situation of taking from the
jury's consideration the element of materiality of a filing false
currency report charge, and held it was not reversible error because the
evidence of materiality in the defendant's failure to report properly
several transactions in excess of $10,000 was overwhelming. In this
case, as in Knapp, the evidence of materiality in Scholl's failing to
report money he lost or money he won was overwhelming, thereby
precluding reversal.
B
Over
Scholl's objection, the jury was instructed that
[a]n
individual is required to keep such records as are sufficient to
establish the amount of gross income (other than gross income from wages
and salary) and deductions required to be shown on a tax return.
Scholl
contends that this creates a "strict liability guilt
assumption" in violation of Sandstrom v. Montana, 442 U.S.
510, 99 S.Ct. 2450, 61 L.Ed.2d 39 (1979). This argument also fails. None
of the charged crimes involves a failure to keep records, nor would the
keeping of adequate records have exonerated Scholl had he nonetheless
violated §7206(1). Therefore the burden of proof was not shifted nor
was the government relieved of its obligation to prove beyond a
reasonable doubt every fact necessary to constitute the crime charged. See
In re Winship, 397
U.S.
358, 90 S.Ct. 1068, 25 L.Ed.2d 368 (1970).
CROSS-APPEAL
IX
The
government contends that the district court erred by failing to make a
reasonable estimate of tax loss in calculating Scholl's offense level.
Under U.S.S.G. §2T1.1(a), the offense level for filing false tax
returns is either the level from the tax table (§2T4.1) corresponding
to the tax loss, or level 6 if there is no tax loss. Where the tax loss
is uncertain, the court shall "make a reasonable estimate based on
the available facts." U.S.S.G. §2T1.1, comment (n.1).
At
sentencing, the district court found it could not make a reasonable
factual estimate of any tax loss and imposed an offense level of 6. The
government argues that the district court should have relied on casino
records or, alternatively, testimony concerning unchallenged gambling
winnings to calculate the tax loss. Scholl responds (and the record
reflects) that the court attempted to make such a determination but,
after review of the evidence, found that no reasonable estimate could be
made.
We
cannot say that this was clearly erroneous. The evidence showed that
Scholl failed to report both gambling income and gambling losses. This
was a material misstatement, and the jury found that this misstatement
was willful. These findings support a conviction under §7206(1).
However, the jury was not required to find how much of a misstatement it
was. The court was free to do so, and to find that there was
insufficient evidence to make a reasonable estimate of tax loss. Nor can
we say that the court erred in finding that Grayson's testimony as to
when one of the big wins occurred was speculative, or that, with respect
to the second win, other evidence indicated losses in that same year
exceeded the size of the win. Given that the record does not compel a
finding of a reliable estimate of the magnitude of any tax loss that
occurred as a result of Scholl's gambling activity and false tax
returns, the district court did not err in determining that no
reasonable estimate could be made or in applying the Sentencing
Guidelines as it did.
AFFIRMED.
1
"First, we must determine nothing less than whether the experts'
testimony reflects 'scientific knowledge,' whether their findings are
'derived by the scientific method,' and whether their work product
amounts to 'good science'. . . . Second, we must ensure that the
proposed expert testimony is 'relevant to the task at hand,' . . . i.e.,
that it logically advances a material aspect of the proposing party's
case. The Supreme Court referred to this second prong of the analysis as
the 'fit' requirement." Daubert v. Merrell Dow Pharmaceuticals,
Inc., 43 F.3d 1311, 1315 (9th Cir. 1995) (citations omitted).
2
Two other witnesses testified to Scholl's good character during the
government's case-in-chief.
3
Federal Rule of Criminal Procedure 16(b)(1)(A) provides:
If
the defendant requests disclosure under subdivision (a)(1)(C) or (D) of
this rule, upon compliance with such request by the government, the
defendant, on request of the government, shall permit the government to
inspect and copy or photograph books, papers, documents, . . . which are
within the possession, custody, or control of the defendant and which
the defendant intends to introduce as evidence in chief at the trial.
The
sanctions for failure to comply with this Rule are provided in Rule
16(d)(2):
If
at any time during the course of the proceedings it is brought to the
attention of the court that a party has failed to comply with this rule,
the court may order such party to permit the discovery or inspection,
grant a continuance, or prohibit the party from introducing evidence not
disclosed, or it may enter such other order as it deems just under the
circumstances. . . .
4
The questions that Scholl calls prosecutorial misconduct are mainly in
areas deemed permissible by the district court. We treat Scholl's
citations as he does, as instances of prosecutorial misconduct rather
than as arguably erroneous rulings on evidence. Nevertheless we are
mindful of Scholl's overarching argument that the entire trial was
infected by prosecutorial misconduct and judicial bias. As we explain in
connection with each of his specific arguments, however, we do not see
the court's admission of any particular statement as reversible error in
light of the overall evidence of Scholl's guilt.
5
Arizona
Supreme Court Rule 81 codifies Canon 4 of the Arizona Code of Judicial
Conduct, which provides, in relevant part:
D.
Financial Activities, . . . (5) A judge shall not accept . . . a gift,
bequest, favor or loan from anyone except for: . . .
(h)
any other gift, bequest, favor or loan, only if: the donor is not a
party or other person who has come or is likely to come or whose
interests have come or are likely to come before the judge; . . .
17A
Ariz.
Rev. Stat. Sup. Ct. Rules, Rule 81, Canon 4(D).
6
These included the judge's mistreatment of previous defense counsel;
requirement that previous defense counsel file affidavits in support of
factual assertions; suggestion that Scholl should have hired Phoenix
counsel to obviate Rule 18 problems; defense claims that Scholl's
daughter's necessity to wear a pacemaker and had special needs were
suspect because she was a high school golfer; general failure to address
issues of government misconduct; changes in transcript of record made by
the court reporter and recognized by the court; handling of Scholl's
request for CJA appointment and Rule 17(b) request; permission to allow
discovery of Scholl's expert and failure to require the government to
pay expert's travel expenses; pretrial threats of imposition of
sanctions; and issues relating to bias of Judge Silver's bailiff.
7
Scholl requested a substantiality instruction but does not argue that
its rejection was error. Rather, he focuses on the absence of an
instruction consistent with Uchimura as he reads it.
[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.
[2000-1
USTC ¶50,355]
United States of America
, Plaintiff-Appellee v. Bonnie R. Rosco, Russell D. Rosco,
Defendants-Appellants
(CA-9),
U.S. Court of Appeals, 9th Circuit, 99-30109, 99-30117, 4/4/2000,
Affirming an unreported District Court decision
[Code
Sec. 7206 ]
Crimes: Filing false returns: Willfulness: Evidence: Harmless
errors.--Married taxpayers who filed tax returns on which they
claimed that their wages constituted nontaxable compensation were
properly convicted of filing false returns. The evidence established
that they had acted willfully. Despite the taxpayers' argument that they
did not qualify as "employees" and did not earn
"wages," they also failed to report nonemployee income. Also,
the wife had taken tax preparation courses and had worked for the state
(
Washington
) revenue department, and they were advised by numerous parties that
their return position was wrong. Forms W-4 that were submitted
reasonably close in time to the filing of the returns were properly
admitted into evidence for their probative value as to the issue of
willfulness. Moreover, the trial court's admission into evidence of the
couple's tax return bearing the stamp "Frivolous Tax Penalty
Assessed" was harmless error because it was more probable than not
that the evidence did not materially affect the verdict. Other alleged
errors were also deemed harmless.
[Code
Sec. 7206 ]
Crimes: Filing false returns: Willfulness: Jury instructions.--Married
taxpayers who submitted tax returns on which they claimed that their
wages constituted nontaxable compensation were properly convicted of
filing false returns. The taxpayers' challenges to two jury instructions
regarding materiality were rejected. The instructions did not directly
conflict with each other; one instruction pointed to the government's
burden of showing that a misstatement affected the calculation of tax
owed, while the second instruction properly relieved the government of
the burden of showing an actual loss. Since the instructions presented
an accurate statement of the law, the taxpayers were not entitled to
have their proposed instruction on the issue of materiality given to the
jury.
[Code
Sec. 7206 ]
Crimes: Filing false returns: Willfulness: Prosecutorial
misconduct.--Married taxpayers who submitted tax returns on which
they claimed that their wages constituted nontaxable compensation were
properly convicted of filing false returns. The prosecution's discussion
of the wife's tax preparation training and its argument that the
taxpayers were aware that their accountant had lost his license did not
rise to the level of prosecutorial misconduct.
Robert
A. Ellis, Assistant United States Attorney,
Yakima
,
Wash.
, for plaintiff-appellee. Thomas M. Monaghan, Federal Defenders of
Eastern Washington, Yakima, Wash., for Bonnie R. Rosco, Bonnie R. Rosco,
Renton, Wash., pro se, John Maxwell, Jr., Yakima, Wash., for
Russell D. Rosco.
Before:
BROWNING, FLETCHER and GOULD, 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
MEMORANDUM
1
The
Appellants, Russell and Bonnie Rosco, were each convicted of filing
false tax returns. On appeal, they argue that the evidence was
insufficient to support the verdict and raise a number of issues
regarding the fairness of their trial. The Appellants contend that the
admission of their W-4 forms and an unredacted copy of their 1040 form
was improper and that the prosecution engaged in misconduct during its
closing which unfairly prejudiced their trial. We affirm the district
court's judgment.
Bonnie
and Russell Rosco filed form 1040 tax returns for the years 1992, 1993
and 1994 in which they claimed their wages were non-taxable
compensation. The Roscos claimed a full refund for all sums withheld
from their wages during those years and attached a four-page letter
explaining their view that they were entitled to a refund. Later, the
Roscos filed their 1040 form for the 1995 tax year and took the same
position as they had in their previous returns. Each of these four tax
returns and the explanatory letter was prepared by an accountant. The
Internal Revenue Service (IRS) sent the Roscos a refund of $4,823 for
their withholding in 1994. The Roscos' returns for 1992, 1993 and 1995
were determined to be frivolous by the IRS, triggering a criminal
investigation. The Roscos were indicted for violating 26 U.S.C. §7206(1)
by willfully making and subscribing to tax returns which they did not
believe to be correct as to a material matter. A jury found both of the
Roscos guilty. The Roscos moved for judgment of acquittal and for a new
trial but both of these motions were denied by the district court.
The
Appellants argue that there was insufficient evidence at trial to
convict them. The issue of sufficiency of the evidence is evaluated
based on "whether, after viewing the evidence in the light most
favorable to the prosecution, any rational trier of fact could have
found the essential elements of the crime beyond a reasonable
doubt."
Jackson
v. Virginia, 443
U.S.
307, 319, 61 L.Ed.2d 560, 99 S.Ct. 2781 (1979). Conviction under 26
U.S.C. §7206 (1) requires proof of four separate elements: (1) the
defendant made and subscribed to income tax returns that contain false
information as to a material matter; (2) the defendant knew this
information was false; (3) the return contained a written declaration
that it was being signed subject to the penalties of perjury; and (4) in
making and filing the tax returns the defendant acted willfully. See
United States v. Marabelles [84-1 USTC ¶9189], 724 F.2d 1374, 1380
(9th Cir. 1984).
The
Appellants argue that there was not sufficient evidence that they acted
willfully because the evidence supported the conclusion that the Roscos
sincerely believed that their position as to the income tax law was
correct. The Supreme Court interpreted the term "willfully" in
United States v. Bishop [73-1 USTC ¶9459], 412 U.S. 346, 360, 36
L.Ed.2d 941, 93 S.Ct. 2008 (1973), as meaning "a voluntary,
intentional violation of a known legal duty." The Court in Cheek
v. United States [91-1 USTC ¶50,012], 498 U.S. 192, 202, 112
L.Ed.2d 617, 111 S.Ct. 604 (1991), elaborated that "the issue is
whether, based on all the evidence, the Government has proved that the
defendant was aware of the duty at issue, which cannot be true if the
jury credits a good-faith misunderstanding and belief submission,
whether or not the claimed belief or misunderstanding is objectively
reasonable."
The
Roscos' theory, according to the testimony of Bonnie Rosco and the
four-page explanatory letter attached to their tax returns, was that the
term "employee" as defined in the tax code did not include
them, and that they did not earn "wages" as defined by the tax
code. However, the Roscos also did not report Bonnie Rosco's social
security income, the income from their vending business or any income
earned from the sale of Herbalife products. The Roscos for a time ran a
tax preparation business. Bonnie Rosco had taken courses at H&R
Block and worked for the Washington State Department of Revenue. Both of
the Roscos were repeatedly told by friends, employers and co-workers
that their position as to their tax liability was wrong. Even under the
Roscos' own theory, they should have reported the income from sources
other than their employment. Taken together, all the admissible evidence
from which inferences could be drawn was sufficient for a reasonable
jury to find that the Roscos willfully filed false tax returns.
The
Appellants also argue that the district court erred in giving two jury
instructions which were in conflict on the issue of materiality and in
failing to give the defendants' proposed jury instruction on the issue
of materiality. We held, in United States v. Uchimura [97-2 USTC
¶50,671], 125 F.3d 1282, 1285 (9th Cir. 1997), that "information
is material if it is necessary to a determination of whether income tax
is owed." This was the substance of the first instruction given
here. It explained that a statement was material if "necessary to
determine whether income tax was owed." In United States v.
Marashi [90-2 USTC ¶50,482], 913 F.2d 724, 736 (9th Cir. 1990), we
reaffirmed that "it is irrelevant whether there was an actual tax
deficiency." Another instruction, following this precedent, stated
that the government "does not have to prove that there was a tax
due and owing" or that the government suffered a loss. These
instructions do not directly conflict with each other as one instruction
points to the government's burden to show that a misstatement affected
the calculation of tax owed while the other instruction properly
relieved the government of the burden to show an actual loss. These
instructions gave an accurate statement of the law. Therefore, the
defendant was not entitled to the proffered instruction.
The
Appellants further argue that the district court improperly allowed the
Roscos' W-4 forms to be admitted at trial because they were never
charged with filing false W-4 forms. In United States v. Bergman
[87-1 USTC ¶9268], 813 F.2d 1027, 1029 (9th Cir. 1987), a case
involving a criminal prosecution for willful failure to file federal
income tax returns, we held that the filing of a false W-4 form was
"evidence of 'other crimes' under Rule 404(b)." However, in
that case, we further held that the W-4 forms were admissible because
they were similar, close in time and highly probative on the issue of
willfulness for the pending charge. See id. The facts in this
case are very close to the facts of Bergman. Here, as there, the W-4
forms were introduced for the probative value on the issue of
willfulness. As in Bergman, the W-4 forms in this case raise similar
issues and are reasonably close in time to the filing of the 1040
returns. Therefore, the district court did not clearly abuse its
discretion in admitting the W-4 forms.
The
Appellants argue that the admission of the Roscos' 1995 1040 form with
the stamp "Frivolous Tax Penalty Assessed" constituted
inadmissible hearsay. Initially, the district court explicitly required
the prosecution, in order to admit the evidence, to show that the
information stamped on the return by the IRS had been conveyed to the
Roscos. The district court later reversed itself, in denying the motion
for mistrial, and stated that "whether or not it was conveyed"
it remained the opinion of the IRS. Given the district court's initial
ruling and the prosecution's failure to present evidence of the
communication of the "frivolous" designation to the Roscos
before the admission of this evidence, the district court abused its
discretion in admitting the unredacted 1040 form because the form's
probative value was substantially outweighed by the danger of unfair
prejudice.
An
error is not harmless "unless it is more probable than not that the
error did not materially affect the verdict."
United States
v. Morales, 108 F.3d 1031, 1040 (9th Cir. 1997). The Roscos
argue that the stamp suggested that they were informed by the IRS that
their position was frivolous and, therefore, went to the issue of
willfulness. In cross-examination, the defense counsel clearly brought
out that there was no letter or phone communication from the IRS to the
Roscos regarding this "frivolous" designation. Therefore, it
is more probable than not that this evidence did not materially affect
the verdict, making the error harmless.
The
Appellants also argue that prosecutorial misconduct occurred during
their trial because of the government's suggestion that conviction was
necessary to insure a civil penalty and because of the violation of the
motion in limine regarding questioning concerning membership in the
"militia." The district court took very seriously the negative
implications that linking the Roscos to the "militia" would
have in the eyes of many jurors. However, the prosecutor did not seek to
elicit the response regarding the "militia." The witness
mentioned the "militia" only once to explain that Bonnie Rosco
stated she was not involved. The district court properly instructed the
jurors to disregard the entire statement. On cross-examination, defense
counsel further emphasized Bonnie Rosco's lack of connection with the
"militia." Therefore, the district court was correct in
determining that this error was harmless.
On
re-cross examination of Russell Rosco, the government asked:
"Certainly you're aware, Mr. Rosco, that if you're convicted of
this crime one of your obligations will be to pay back the
United States
the money you've taken?" The Appellants argue that this question
suggested to the jury that absent a conviction the Roscos would not have
to repay the tax refund. In United States v. Frank, 956 F.2d 872,
879 (9th Cir. 1992), we reaffirmed prior holdings maintaining that the
jury is not to be concerned with the penalty or punishment to be imposed
on the defendant. However, we also held, in United States v.
Salcedo-Lopez, 907 F.2d 97, 99 (9th Cir. 1990), that restitution is
not the same as punishment. The repayment of the mistaken tax refund
would be a form of restitution rather than punishment. The district
court was correct in its conclusion that the defendants were not
significantly harmed by this question.
The
Appellants also claim that the prosecution improperly argued in its
closing that the Roscos were aware that their accountant had lost his
license and that classes taken by Bonnie Rosco at H&R Block had gone
beyond the preparation of tax forms. It is not misconduct for "the
prosecutor to argue reasonable inferences based on the record."
United States
v. Atcheson, 94 F.3d 1237, 1244 (9th Cir. 1996). In addition, a
prosecutor may express doubt about the veracity of a defendant witness'
testimony. See
United States
v. Birges, 723 F.2d 666, 672 (9th Cir. 1984). However, a prosecutor
may not "misstate, or exceed the evidence in any significant
respect."
United States
v. Parker, 549 F.2d 1217, 1222 (9th Cir. 1977).
The
prosecution's discussion of Bonnie Rosco's training at H&R Block was
not improper. The prosecution recited facts in evidence regarding the
variety of classes which she had taken with H&R Block and then
recited her testimony about what she learned from these classes. The
prosecution was entitled to challenge her veracity. The prosecution's
reference to the Roscos' use of the accountant as an "escape
hatch" was a bit of hyperbole that may over state the case, but
does not rise to the level of prosecutorial misconduct.
Based
on the foregoing reasons, we AFFIRM the district court's judgment.
1
This disposition is not appropriate for publication and may not be cited
to or by the courts of this circuit except as may be provided by Ninth
Cir. Rule 36-3.
[2000-1
USTC ¶50,409]
United States of America
, Plaintiff-Appellee, Cross-Appellant v. Ljupco Ristovski,
Defendant-Appellant, Cross-Appellee
(CA-6),
U.S. Court of Appeals, 6th Circuit, 98-1749, 98-1868, 4/18/2000, 2000
U.S. App. LEXIS 7282. Affirming an unreported District Court decision
[Code
Sec. 7206 ]
Penalties, criminal: Signing false return: Corporations: President:
Willfulness.--The president of a steel cutting company that failed
to report advances that it received from a purchaser of scrap metal was
properly convicted of signing false corporate returns. Evidence
regarding unreported advances received by the corporation during a prior
tax year and the evasion of the cash transaction reporting requirement
was properly admitted because it was relevant to the issue of
willfulness.
[Code
Secs. 7206 and 7207
]
Penalties, criminal: Signing false return: Corporations: President:
Financial control: Reasonable reliance in accountant.--The president
of a steel cutting company that failed to report advances that it
received from a purchaser of scrap metal was properly convicted of
signing false corporate returns. He had sufficient knowledge of and took
an active role in the company's finances, and he made arrangements to
receive the advances; thus, his conduct was willful for purposes of Code Sec. 7206 , and his
contention that he reasonably relied on the company's accountant to
prepare the returns was rejected.
[Code
Sec. 7206 ]
Penalties, criminal: Signing false return: Submission of false
documents: Corporations: President: Jury instructions: Willfulness.--The
convictions of a corporate president for signing false corporate returns
and submitting false documents to the IRS were upheld since the jury was
properly instructed that mere negligence was insufficient to constitute
willfulness.
[Code
Sec. 7207 ]
Penalties, criminal: Submission of false documents: Invoices:
Defenses: Waiver: Misdemeanors: Multiplicity.--The president of a
steel cutting company was properly convicted of submitting false
documents to the IRS in connection with replacement invoices that he
furnished after the company's records were allegedly stolen. The IRS was
unable to substantiate payments reported in the documents, and the
mechanic who prepared them admitted that they were largely based on his
own memory and figures suggested by the taxpayer. Moreover, by failing
to argue that the misdemeanor counts based on the documents were
multiplicitous at trial, the taxpayer waived his right to raise the
issue on appeal. Furthermore, even if the documents were not relevant to
the company's false returns, they were admissible evidence because they
contained false statements that were material to the documents
themselves.
[Code
Secs. 7206 and 7207
]
Penalties, criminal: Signing false return: Submission of false
documents: Corporations: President: Sentencing: United States Sentencing
Guidelines: Harmless error: Tax loss, determination of: Criminal
convictions.--The sentence imposed on the president of a steel
cutting company who was convicted of signing false corporate returns and
submitting false documents to the IRS was upheld since the trial court's
mistakes in applying the U.S. Sentencing Guidelines constituted harmless
error. The court erred on the side of the government by using guidelines
from the wrong year, and it erred in favor of the taxpayer by failing to
consider his personal tax evasion in the calculation of the tax loss
caused by his conduct and in excluding misdemeanor convictions from its
consideration of his criminal history. The court correctly included the
full amount of advances received by the corporation in a prior tax year
in its calculation of the tax loss caused by the taxpayer's conduct.
Ross
MacKenzie, David J. Debold, Asst. U.S. Attorneys, Office of the U.S.
Attorney, Detroit, Mich., for plaintiff-appellee, cross-appellant.
Gordon S. Gold, Seyburn, Kahn, Ginn, Bess, Deitch & Serlin,
Southfield
,
Mich.
, for defendant-appellant, cross-appellee.
Before:
MERRITT, NELSON and DAUGHTREY, 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
OPINION
NELSON,
Circuit Judge:
Ljupco
Ristovski was convicted on two felony counts of subscribing false
corporate tax returns in violation of 26 U.S.C. §7206(1) and eight
misdemeanor counts of submitting false documents to the Internal Revenue
Service in violation of 26 U.S.C. §7207. Sentenced to concurrent terms
of imprisonment, the longest of which was 18 months on the felony
counts, he has appealed his convictions and sentences. The
United States
has cross-appealed, contending that the district court erred in favor of
Ristovski in its application of the sentencing guidelines.
We
find no basis for reversing the convictions. We think there were
probably errors on both sides of the ledger in the calculation of the
defendant's sentencing range under the guidelines, but the errors
cancelled one another out; the range actually used in sentencing was
identical to what it would have been had there been no errors.
Accordingly, we shall affirm both the convictions and the sentences.
I
Ristovski
was the president of Precision Steel Shearing Company, a small business
that cut steel to its customers' specifications. The steel-cutting
process produced scrap that was sold to a company known as Mason Iron
& Metal.
As
a service to its customers, Mason would sometimes make advance payments
for scrap that was to be delivered in the future. Mason was willing to
make these advances in the form of checks made out to cash. Mason was
also willing to break down advances of more than $10,000 into several
smaller checks, thus making it possible to circumvent IRS reporting
requirements for cash transactions of more than $10,000.
Through
Ristovski, Precision arranged to receive numerous advances from Mason.
Many were in the form of checks (or multiple checks) made payable to
cash. Ristovski cashed a number of these checks himself, and he asked
other employees or family members to cash the rest. Whoever cashed the
checks generally returned the proceeds to Ristovski, but occasionally
would be instructed to use some of the money to buy items for the
business.
Precision's
activities came to the attention of the IRS during an audit of Mason.
After a preliminary investigation into Precision's records, the IRS
began a formal audit of Precision. It soon became apparent that a
sizable portion of the cash received via the Mason checks in 1988, 1989,
and 1990 had not been accounted for as corporate income. Neither was the
money included as income on Ristovski's personal tax returns.
As
the audit was getting underway, a break-in and theft allegedly occurred
at Precision's plant. Whether fortuitously or otherwise, most of the
items that turned up missing were materials needed for the audit.
In
the face of the loss of Precision's records, Ristovski contacted Chris
Formosa, a mechanic who serviced the company's vehicles, and had him
create replacement invoices to show what work
Formosa
had done for the company and what he had been paid. The recreated
records, which were turned over to the IRS, were based for the most part
on
Formosa
's memory, augmented with suggestions from Ristovski himself. The
documents were clearly marked as replacements; there was no attempt to
misrepresent them as original records.
Other
documentation was available to show that some of the cash taken by
Ristovski and members of his family had represented repayment of loans
previously made by them to the company. Much of the cash from the Mason
checks, however, could not be traced to any corporate use.
Precision's
books were kept by Joan Penny, Ristovski's girlfriend at the time, who
worked as the office secretary and had no prior bookkeeping experience.
She knew of the cash advances from Mason, and she claimed to have
expressed concern about them to Ristovski.
The
company's tax returns were prepared by John Golovich, an accountant.
Golovich apparently had serious personal or psychological problems, as a
result of which he disclaimed any recollection of the events at issue in
the trial. Precision has since sued Golovich for malpractice and has
recovered a default judgment against him.
In
1996, as an upshot of the IRS audit, Ristovski was indicted on 12
counts. Counts I and II of the indictment charged him with willfully
attempting to evade personal income tax, in violation of 26 U.S.C. §7201,
by filing false individual tax returns for 1989 and 1990. Counts III and
IV charged him with subscribing false corporate returns, a violation of
26 U.S.C. §7206(1), for the same years. Counts V through XII charged
him with submitting false documents (the
Formosa
replacement records) to the IRS on
August 8, 1995
, in violation of 26 U.S.C. §7207.
After
the case was tried and submitted to the jury, the court accepted a
partial verdict when the jury reported that it had reached a unanimous
decision on Counts III through XII. The verdict proved to be
"guilty" on each of these counts. The jury then deliberated
further on Counts I and II, but was eventually discharged because it
could not reach a unanimous decision. Counts I and II were later
dismissed.
At
sentencing, the court overruled an objection by the government to a
recommendation in the presentence investigation report that the tax loss
from the false corporate returns not be aggregated, for purposes of
applying the guidelines, with the tax loss from Ristovski's individual
tax returns. The court also sustained an objection by Ristovski to the
criminal history category assigned him in the report; contrary to the
recommendation of the probation officer who prepared the report, the
court declined to give effect to two prior misdemeanor convictions on
Ristovski's record, thereby placing him in Category I rather than
Category II. Using the 1997 edition of the sentencing guidelines (an
edition identical, in all relevant aspects, to the 1994 edition that was
in effect at the time of the misdemeanor offenses charged in Counts V
through XII), the court then imposed concurrent sentences of 18 months
for Counts III and IV and 12 months for the remaining counts.
Ristovski's appeal and the government's cross-appeal followed.
II
A. Sufficiency of the Evidence
1.
Sufficiency of the Evidence as to Signing to False Returns
At
the close of the evidence, Ristovski moved for a judgment of acquittal
on the ground that the evidence was insufficient to support a
conviction. The motion was denied.
Appellate
review of the denial of such a motion is conducted de novo. See
United States v. Gibson, 675 F.2d 825, 829 (6th Cir.), cert.
denied, 459 U.S. 972, 74 L.Ed.2d 285, 103 S.Ct. 305 (1982). The
reviewing court must ask "whether, after viewing the evidence in
the light most favorable to the prosecution, any rational trier of fact
could have found the essential elements of the crime beyond a reasonable
doubt."
Jackson
v. Virginia, 443
U.S.
307, 319, 61 L.Ed.2d 560, 99 S.Ct. 2781 (1979). This does not involve
weighing the evidence or judging the credibility of witnesses. See
Gibson, 675 F.2d at 829.
To
prove a violation of 26 U.S.C. §7206(1), the government must
demonstrate that (1) the defendant willfully made and subscribed a tax
return that was (2) signed under penalties of perjury and (3) the
defendant did not believe the return to be true and correct as to every
material matter. See United States v. Bishop [73-1 USTC ¶9459],
412 U.S. 346, 350, 36 L.Ed.2d 941, 93 S.Ct. 2008 (1973). Challenging the
adequacy of the government's proofs with respect to the element of
willfulness in signing and filing the false returns prepared by
Golovich, Ristovski argues that he lacked formal education and that he
conducted the financial aspects of his business--freely mixing personal
and business assets--in accord with his "old world"
background. (He had immigrated to the
United States
from
Yugoslavia
at the age of 9.) He also maintains that his management of the company
focused on operations in the shop and that he remained largely ignorant
of the company's finances. He naively trusted Penny and Golovich to keep
accurate records, he says, and had no idea that anything was amiss when
he signed the tax returns in question. The jury, obviously, disagreed.
For
purposes of section 7206, willfulness has been defined as a
"voluntary intentional violation of a known legal duty." United
States v. Pomponio [76-2 USTC ¶9695], 429 U.S. 10, 12, 50 L.Ed.2d
12, 97 S.Ct. 22 (1976). The government is permitted to prove
willfulness--a state of mind that entails more than a careless disregard
for the truth--through the surrounding facts and circumstances. See
United States v. Barnes [63-1 USTC ¶9247], 313 F.2d 325, 327 (6th
Cir. 1963). Facts and circumstances relevant in this connection include
the extent of the defendant's knowledge about the income and revenues of
the business and the role played by the defendant in the business
operations. See United States v. Mohney [92-1 USTC ¶50,081], 949
F.2d 1397, 1406 (6th Cir. 1991), cert. denied, 504
U.S.
910, 118 L.Ed.2d 546, 112 S.Ct. 1940 (1992).
In
the case at bar the evidence did indicate that Ristovski spent a
considerable amount of time in the shop. There was also ample evidence,
however, that he took an active role in the financial affairs of the
business as well. It was Ristovski who, working with a man named Michael
Duerr of Mason Iron & Steel, made the arrangements for the advances
and for the checks payable to cash. After the initial deal was made,
Ristovski would often call Duerr seeking an advance and would instruct
Duerr as to the amount he wanted on each check. Ristovski would either
pick up the checks and cash them himself or would instruct someone else
to do so. When others cashed the checks, they always returned the money
to Ristovski or made purchases at Ristovski's instruction.
Ristovski
claims that he arranged for checks payable to cash in order to prevent
his father (who acted as corporate treasurer) from learning how
Precision was spending the money. The father cashed some of the Mason
checks, however, and turned the proceeds over to the son. The younger
Ristovski had become a signatory on the corporate account in 1987,
moreover--before the arrangement with Mason was established--and it was
unnecessary for him to obtain his father's approval on corporate
expenditures.
Defendant
Ristovski's involvement in the financial aspects of the business is also
evident from the fact that he kept track of how much money Precision
owed to others and how much others owed Precision. He often asked Ms.
Penny whether particular funds had been received or particular bills had
been paid. Ristovski also orchestrated other financial transactions for
the business, such as the purchase and refinancing of property. Further,
there was evidence that both Penny and Golovich warned him of the danger
of misusing the cash received from Mason.
The
jury, in short, heard ample testimony to the effect that Ristovski
played an active and sentient role in the financial operations of the
business. Under the circumstances presented here, this was more than
enough to sustain the denial of his motion for acquittal. See Mohney
[92-1 USTC ¶50,081], 949 F.2d at 1406. The evidence did not have to
exclude every reasonable hypothesis except that of guilt. See United
States v. Reed [87-1 USTC ¶9345], 821 F.2d 322, 325 (6th Cir.
1987).
2.
Sufficiency of the Evidence as to Submitting False Documents
The
misdemeanor charges against Ristovski for submitting false documents
were based on the delivery to the IRS of the replacement invoices
created by Chris Formosa. A violation of 26 U.S.C. §7207 occurs when a
person willfully discloses to the IRS any documents that the person
knows to be false as to any material matter. See 26 U.S.C. §7207.
See also Sansone v. United States [65-1 USTC ¶9307], 380 U.S.
343, 13 L.Ed.2d 882, 85 S.Ct. 1004 (1965).
Ristovski
argues that the evidence did not show a violation of this section
because he had a legitimate reason--the alleged break-in and theft--for
giving the IRS replacement invoices; he informed the IRS of this reason;
the documents clearly indicated that they were replacements rather than
originals; and the IRS was not deceived. Furthermore, according to
Ristovski, he did not give the documents to the IRS (his sister did),
and he did not otherwise authorize their disclosure. Finally, Ristovski
argues that the documents were not "material" inasmuch as the
payment of cash for corporate expenses had nothing to do with the false
corporate tax returns.
These
arguments are not without flaws. Although the replacement invoices were
given to the IRS agent by Ristovski's sister, for example, the jury was
entitled to find that she was acting as his attorney at the time, just
as it could find that Ristovski himself had instructed
Formosa
to create the new documents with a view to their delivery to the IRS.
Moreover, Ristovski arranged for new documents to be created even where
some original paperwork was available. (The original paperwork was later
taken from
Formosa
in a drug raid.)
Formosa
--who apparently owed Ristovski money at the time in question--testified
that the documents were reconstructed largely from memory, although he
did rely to some extent on existing receipts for items he had bought for
use in making repairs to Precision's vehicles. He admitted to simply
making up some figures to suit Ristovski's needs, and he testified that
the numbers given were merely guesstimates. The IRS, for its part, was
unable to substantiate the payments reported in the replacement
documents.
Given,
as we have said, that our task is to determine "whether, after
viewing the evidence in the light most favorable to the prosecution, any
rational trier of fact could have found the essential elements of the
crime beyond a reasonable doubt," see Jackson, 443 U.S. at
319, we conclude that Ristovski's conviction for submission of false
documents must be affirmed. The argument regarding materiality does not
persuade us otherwise. Contrary to what Ristovski suggests, the
documents need not have been relevant to the tax evasion. These
documents probably had such relevance, in our view, but the law only
requires that the falsities be material to the documents themselves. See
26 U.S.C. §2707. Here the documents set forth amounts--and perhaps
entire transactions--that were fictitious. This would certainly be
material to any reconstructed invoice.
B.
Lack of "Willfulness" Jury Instruction
Ristovski
argues that the alleged insufficiency of the evidence as to his
willfulness in subscribing the false corporate returns was exacerbated
by the court's failure to give a requested jury instruction as to the
meaning of "willfulness" in this context. Refusal to give a
jury instruction is reversible error if:
"(1)
the omitted instructions are a correct statement of the law; (2) the
instruction is not substantially covered by other delivered charges; and
(3) the failure to give the instruction impairs the requesting party's
theory of the case. It is only when the instructions given, viewed as a
whole, are misleading, that a reversal of judgment is warranted." Sutkiewicz
v.
Monroe
County
Sheriff, 110 F.3d 352, 361 (6th Cir. 1997).
Although
the trial court refused to give the requested instruction on willfulness
with respect to the corporate tax returns, the court did instruct the
jury that, as to all the counts, the "Government must prove beyond
a reasonable doubt that the Defendant acted willfully. To act willfully
means to act voluntarily and deliberately and intending to violate a
known legal duty. Negligent conduct is not sufficient to constitute
willfulness." This differed from Ristovski's proposed instruction
only in the last sentence, where Ristovski asked for this formulation:
"Mere negligence, inadvertence, mistake, a careless disregard for
the truth, or even gross negligence is not sufficient to constitute
willfulness." We believe that the requested instruction was
"substantially covered by other delivered charges," and the
instructions as given clearly applied to the corporate tax return
counts. Viewed as a whole, the instructions were not misleading.
C.
Multiplicity of Counts for Submission of False Documents
Ristovski
maintains that the eight misdemeanor counts based on the submission of
the recreated invoices were multiplicitous. An indictment offends the
rule against multiplicity when it charges one criminal offense in
several counts. See United States v. Hart, 70 F.3d 854, 859 (6th
Cir. 1995), cert. denied, 517
U.S.
1127, 134 L.Ed.2d 534, 116 S.Ct. 1368 (1996). Here the documents were
all submitted to the IRS together, arguably giving rise to only one
offense. But Ristovski did not raise the multiplicity issue prior to
trial, and he thus waived any claim that the indictment should be
dismissed on that ground. See id. at 860 (citing Rule 12(b)(2),
Fed.R.Crim.P.), and United States v. Colbert, 977 F.2d 203, 208
(6th Cir. 1992).
As
far as sentencing is concerned, we note that Risotvski's 12-month
sentences for the misdemeanors are to be served concurrently. This being
so, it makes no practical difference whether the counts were
multiplicitous or not. Furthermore, Ristovski raised this issue in a
footnote only. An argument raised in this manner merits little, if any,
attention. See Becherer v. Merrill Lynch, Pierce, Fenner & Smith,
43 F.3d 1054, 1058-59 (6th Cir.), cert. denied, 516 U.S. 912, 133
L.Ed.2d 203, 116 S.Ct. 296 (1995).
D.
Evidentiary Rulings
1.
Evidence as to Money Received in 1988
Because
he was not charged with tax evasion for 1988, Ristovski argues that the
trial court erred in declining, as it did, to exclude evidence of the
amount of money Precision received from Mason in 1988 in the form of
checks payable to cash. Because the 1988 receipts were part of the same
tax evasion scheme as that charged, however, the evidence was admissible
as "intrinsic" to the charged conduct. The evidentiary rule on
which Ristovski's relies--Rule 404(b), Fed.R.Evid.--need not be applied
here. See
United States
v. Barnes, 49 F.3d 1144, 1149 (6th Cir. 1995). And even under Rule
404(b), which was considered by the district court in denying
Ristovski's motion in limine on this matter, the evidence was admissible
to show willfulness. See United States v. Ausmus [85-2 USTC ¶9742],
774 F.2d 722, 727-28 (6th Cir. 1985). In addition, an appropriate
limiting instruction was given. We see no basis for a reversal on this
point.
2.
Information on Cash Transaction Reporting Requirement
Ristovski
complains that the government should not have been allowed to introduce
evidence that the IRS requires banks to file reports for cash
transactions involving more than $10,000 and should not have been
allowed to bring out the fact that Ristovski directed that checks
totaling more than $10,000 be cashed at different bank branches. Again,
however, this information was relevant under Rule 404(b) as indicative
of willfulness.
3.
Testimony by Joan Penny
Ristovski
argues that Joan Penny should not have been allowed to testify that she
told Ristovski to plead guilty and that he refused because the
government would not offer him less than a felony conviction. This
testimony, he says, was gratuitous and vindictive.
A
cautionary instruction was given, however, and Ms. Penny's testimony
does not seem particularly damning in context. She had made it clear to
Ristovski that she did not want to become involved in the litigation,
and her testimony could easily be read to mean that she asked him to
plead guilty in order to keep her out of the matter. Any error, we
believe, was harmless.
Ms.
Penny also testified that Ristovski was subject to a restraining order
as a result of having threatened to kill everyone in Penny's house. No
objection to this testimony was made, so it can be reviewed for plain
error only. See
United States
v. Kelly, 204 F.3d 652, 2000
U.S.
App. LEXIS 2696 (6th Cir. 2000). Given the context of the
statement--establishing the current extent of contact between Penny and
Ristovski--no plain error is evident. Moreover, the jury already knew
that Penny and Ristovski were no longer on amiable terms and that
Ristovski had a violent temper. Her testimony added little to the story.
4.
Impeachment of
Formosa
by the Government
Ristovski
complains that the court erred in allowing the government to impeach
Chris Formosa, its own witness. This impeachment occurred when the
government showed that
Formosa
has a conviction on his record, that he was interviewed by the IRS while
in jail, and that belongings he kept in his employer's garage had been
subject to a search by the Drug Enforcement Administration.
Any
party is allowed to impeach a witness, even the party calling the
witness. See Rule 607, Fed.R.Evid.
Formosa
's credibility was at issue because of his testimony regarding the
validity of the replacement documents he created for Ristovski. In
addition, his presence in jail, and the DEA raid, helped explain why he
did not know where his original paperwork was at the time of trial. We
reject this assignment of error.
E.
Acceptance of Partial Jury Verdict
After
more than six hours of deliberation, the jury informed the court that it
had reached a unanimous verdict as to Counts III through XII. Defense
counsel objected to the receipt of a partial verdict, urging that in
further considering Counts I and II the jury might reconsider the other
counts. The court nonetheless elected to receive the partial verdict.
After deliberating further, the jury then asked the court this question:
"Will our verdict on Counts III through XII stand if we are hung on
Counts I and II?" Ristovski argues that this confirms that the jury
did not understand the consequences of a partial verdict and might have
reconsidered its decision as to Counts III through XII had it been able
to.
Whether
to accept a partial verdict is left to the sound discretion of the trial
court. See
United States
v. Benedict, 95 F.3d 17, 19 (8th Cir. 1996). No abuse of that
discretion is evident here, where the court gave the jury the option of
continuing deliberations on all counts or proceeding with a partial
verdict on the decided counts. The jury's subsequent note can reasonably
be interpreted as seeking reassurance that being hung on two
counts--which would lead to a mistrial--would not negate the verdict
already rendered on the other counts.
There
was no inconsistency, moreover, in finding the defendant guilty on
Counts III through XII but not on Counts I and II. Further deliberations
on Counts I and II did not necessarily require reconsideration of the
other counts so as to make a partial verdict inappropriate. Cf.
Benedict, 95 F.3d at 20.
F.
Sentencing Issues
1.
Use of the 1997 Guidelines
The
presentence investigation report, which was largely followed by the
district court in sentencing Ristovski, used the 1997 edition of the
sentencing guidelines, the edition that was expected to be in effect at
the time of sentencing. See 18 U.S.C. §3553 and U.S.S.G. §1B1.11(a).
At the sentencing hearing the court observed that the 1994 edition was
applicable to Ristovski, this having been the edition in effect in 1995
when the misdemeanors were committed. The court noted, however, that the
1997 edition was identical to the 1994 edition insofar as the relevant
sections were concerned.
Ristovski
argues that the 1991 edition of the guidelines should have been used,
his felony convictions having been based on the subscription of tax
returns for 1989 and 1990. These crimes occurred prior to 1993 guideline
amendments that increased sentencing offense levels for corporate tax
evasion. The increase, in Ristovski's case, came to two levels.
It
seems to us that Ristovski's argument has considerable force,
notwithstanding the "one book" rule embodied in U.S.S.G. §1B1.11(b)(2)
and notwithstanding the rule that in general requires the use of an
amended edition of the guidelines when a defendant has been convicted of
one offense committed before the amendment and one committed afterwards.
U.S.S.G. §1B1.11(b)(3). See Miller v. Florida, 482 U.S. 423, 96
L.Ed.2d 351, 107 S.Ct. 2446 (1987), where the Ex Post Facto Clause of
the United States Constitution was held to bar retrospective application
of an amendment in a state sentencing scheme. The Miller amendment was
one that substantially disadvantaged the defendant, whose crime had been
committed before the amendment was adopted; the Court declined to let
the amendment be applied notwithstanding that the state statute had from
the beginning warned of future amendments.
Ordinarily,
as explained in the Background section of the Commentary accompanying
U.S.S.G. §1B1.11 (1997 ed.), ex post facto considerations pose no bar
to application of the guidelines as written (i.e., to use an
amended edition) in situations where, as here, at least one of a series
of offenses was committed after the amendment had become effective. This
is so, basically, because relevant conduct involving the earlier offense
or offenses can properly be taken into account in fixing the punishment
for the post-amendment offense or offenses. In the instant case,
however, the post-amendment offenses were misdemeanors for which the
maximum term of imprisonment authorized by statute--12 months--was the
sentence actually imposed by the court. Under these circumstances it is
not readily apparent to us how the commission of misdemeanors after the
1993 amendment could properly be used to ratchet up the sentence for
felonies committed before the amendment. For purposes of this appeal, in
any event, we shall assume that Ristovski should have been sentenced
under the 1991 edition of the guidelines.
2.
Use as Relevant Conduct of Uncharged Violations Involving 1988 Returns
Ristovski
takes issue with the district court's use of tax violations associated
with the 1988 returns, which were not included in the indictment, in
determining the tax loss under the sentencing guidelines. His complaint
is not with the use of uncharged relevant conduct as such, see United
States v. Pierce, 17 F.3d 146, 150 (6th Cir. 1994), but with the use
of the full amount ($105,000) received from Mason in 1988 in the form of
checks payable to cash. Ristovski argues that he had no way to rebut
this figure, the bank records from 1988 no longer being available.
Citing United States v. Silverman, 976 F.2d 1502, 1506 (5th Cir.
1991), cert. denied, 507
U.S.
990, 123 L.Ed.2d 159, 113 S.Ct. 1595 (1992), he contends that none of
the $105,000 should have been included. At the very least, he asserts,
$60,000 of the Mason advances was used to refinance Precision's real
property, and this and other legitimate expenses should have been
deducted from the $105,000.
We
are not persuaded. It is clear from testimony throughout the trial that
numerous records from 1988 were available. These showed that no deposits
of the proceeds of Mason checks payable to cash were made to the
corporate account or otherwise picked up as corporate income. As to the
refinancing, the property in question was titled in the name of
Ristovski's sister, not in the name of the company. After the
refinancing, the company paid rent to the sister. The $60,000 thus
cannot count as an expense for the business. Other items pointed to by
Ristovski are not supported in the record either.
3.
Failure to Aggregate Tax Loss from Personal Tax Evasion
The
government argues here, as it did at the sentencing hearing, that the
tax loss used to determine Ristovski's base offense level should have
included both the loss from his personal tax evasion ($55,384)--a loss
supported by a preponderance of the evidence, notwithstanding the
absence of a conviction--and the loss resulting from the false corporate
tax returns ($33,062), for an aggregate loss of $88,446. This figure
would have resulted in a base offense level of 12, under the 1991
guidelines, rather than 11.
The
sentencing court refused to aggregate the losses. The court used only
the $55,384, 1 expressing
some concern that to do otherwise might constitute double counting, the
same money not having been reported on either the personal or corporate
returns. But in United States v. Cseplo, 42 F.3d 360 (6th Cir.
1994), a case with facts nearly identical to those presented here, we
held that the personal tax loss and the corporate tax loss must be
aggregated. See Cseplo, 42 F.3d at 364-65. That precedent is
controlling in the instant case. The losses should have been aggregated,
thereby raising the offense level by one.
4.
Exclusion of Misdemeanors in Determining Criminal History Category
In
determining Ristovski's criminal history category, the presentence
investigation report counted two previous misdemeanor convictions. One
was for assault and battery and the other for driving with a revoked
license. The court sustained Ristovski's objection to the use of these
convictions, thereby reducing his criminal history category from
Category II to Category I.
In
support of his objection, Ristovski argued that (1) there was inadequate
documentation of the convictions; (2) there was no proof that Ristovski
had been represented by counsel when he pleaded guilty; and (3) as to
the revoked license offense, his sentence did not meet the requirements
of U.S.S.G. §4A1.2.
The
district court sustained the objection on the ground that the government
could not show that Ristovski had been represented by counsel. The
Supreme Court, however, has stated that the burden of proof as to the
presence of counsel is properly placed on the defendant. See Parke v.
Raley, 506
U.S.
20, 30-31, 121 L.Ed.2d 391, 113 S.Ct. 517 (1992). The district court
should have presumed the validity of the convictions unless adequately
rebutted by the defendant. See United States v. McGlocklin, 8
F.3d 1037, 1043 (6th Cir. 1993), cert. denied, 511
U.S.
1054, 128 L.Ed.2d 341, 114 S.Ct. 1614 (1994). See also United States
v. Cordero, 42 F.3d 697, 701 (1st Cir. 1994), United States v.
Ruo, 943 F.2d 1274, 1276 (11th Cir. 1991), and United States v.
Gallman, 907 F.2d 639, 643 (7th Cir.), cert. denied, 499
U.S.
908, 113 L.Ed.2d 219, 111 S.Ct. 1110 (1991). Moreover, the probation
officer testified that she verbally confirmed with the relevant state
courts that their records indicated that Ristovski had been represented
by counsel.
Ristovski's
argument as to the lack of documentation has little merit. Although
copies of the judgments were not provided, it is clear that Ristovski's
counsel had paperwork regarding at least one of the convictions--he
referred to it when arguing about Ristovski's sentence in the
driving-with-revoked-license incident. Furthermore, the probation
officer testified that she verified the convictions and that the courts
had microfiche records of the incidents.
As
to Ristovski's final argument, U.S.S.G. §4A1.2 provides that
driving-with-revoked-license offenses are counted in a criminal history
"only if (a) the sentence was a term of probation of at least 1
year or a term of imprisonment of at least 30 days. . . ." U.S.S.G.
§4A1.2(c)(1) (1991). The application note to this section explains that
if a defendant receives a sentence that allows him to elect a fine or
other non-incarcerative punishment as an alternative to incarceration,
the sentence is deemed not to have entailed incarceration at all. See
U.S.S.G. §4A1.2(c)(1) comment. (n.4). In his objections to the
presentence report, Ristovski argued that he received such an elective
sentence and that the conviction should therefore not be counted.
This
argument--which essentially concedes the existence and validity of the
conviction--is incorrect as to the sentence's terms. It became evident
at the sentencing hearing that the sentence for the licensing offense
entailed a fine of $100, costs of $205, "and 30 Days or 60 Days in
Macomb County Jail." (Emphasis added.) Ristovski was given 30 days'
incarceration with release for work. His sentence thus qualified under
§4A1.2.
In
sum, we conclude that the sentencing court should not have sustained
Ristovski's objection on the ground it did. Ristovski's alternative
arguments as to why the court's decision was correct have no merit. He
should have been placed in Criminal History Category II.
Had
this been done, and had the sentencing court used the 1991 guidelines
and aggregated the tax losses, the guideline range for the felony counts
would have been 12-18 months. This, as it happens, is precisely the
range that was used. Accordingly, we see no need for a remand.
Both
the convictions and the sentences are AFFIRMED.
1
For reasons not clear from the record, Ristovski was sentenced on the
amount of tax loss from his personal tax evasion rather than the amount
from the corporate tax evasion. He has not raised this issue on appeal.