Tuesday, January 20, 2009

Case involving conspiracy to evade taxes under section 7203. An individual was properly convicted and sentenced for conspiracy to evade taxes and conspiracy to willfully fail to file a tax return. The evidence at trial was sufficient to allow the jury to reasonably conclude that the individual did not have a good faith belief in the lawfulness of her actions and that she knowingly, willfully, and in agreement with her husband, engaged in affirmative acts to evade taxes and avoid, filing obligations, which resulted in a tax deficiency. Because she was charged with conspiracy offenses, the jury was not required to find that she personally had an obligation to file a tax return. Further, the district court properly sentenced the individual under the sentencing guidelines and determined the amount of tax loss in light of the evidence regarding the IRS's audit of the couple and their trust. A sentence enhancement for engaging in offenses involving sophisticated means was proper because the couple concealed income and assets through the use of their trust. Also, an increase in the individual's offense level for obstruction of justice was proper because she failed to appear as ordered for a scheduled sentencing hearing. Finally, reductions for acceptance of responsibility and for a mitigating role in the offense were not warranted.

United States of America, Appellee v. Karen Petersen, Appellant.

U.S. Court of Appeals, 8th Circuit; 07-3346, January 8, 2009.

Unpublished opinion affirming, per curiam, an unreported DC Minn.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

[ Code Sec. 7203]

Before: Wollman, Smith and Gruender, Circuit Judges.

PER CURIAM: In this direct criminal appeal following a jury trial in which Karen Petersen and her husband, Charles Petersen, were each found guilty of conspiracy to evade taxes and conspiracy to willfully fail to file a tax return, Karen Petersen (Petersen) challenges (1) the sufficiency of the evidence to support her conviction and (2) the district court's 1 application of the Guidelines at sentencing.

We first conclude that the evidence was sufficient to support the jury's guilty verdict. See United States v. Hamilton, 332 F.3d 1144, 1148-49 (8th Cir. 2003) (in reviewing sufficiency of evidence to support guilty verdict, this court views evidence in light most favorable to government, resolving all conflicts and accepting all reasonable inferences in favor of verdict; verdict will be upheld if any reasonable interpretation of evidence could lead reasonable jury to find guilt beyond reasonable doubt). Based on the evidence at trial, the jury reasonably could have found that Petersen did not have a good faith belief in the lawfulness of her actions and that she knowingly, willfully, and in agreement with her husband engaged in affirmative acts for the purpose of evading taxes and avoiding filing obligations, which resulted in a tax deficiency. In addition, because she was charged with conspiracy offenses, the jury was not required to find that she personally had an obligation to file a tax return. See United States v. Schoppert, 362 F.3d 451, 454 (8th Cir. 2004) (elements of tax evasion are (1) willfulness, (2) existence of tax deficiency, and (3) affirmative act constituting evasion or attempted evasion of tax); United States v. Nichols, 151 F.3d 850, 851 (8th Cir. 1998) (elements of conspiracy are (1) agreement to achieve illegal purpose, (2) defendant's knowledge of agreement, and (3) defendant's knowing participation in conspiracy); United States v. Gleason, 726 F.2d 385, 388 (8th Cir. 1984) (per curiam) (elements of willful failure to file tax return are (1) failure to file return and (2) willfulness).

We further conclude, for the following reasons, that the district court properly applied the Guidelines in sentencing Petersen.

The district court did not clearly err in its determination of the relevant amount of tax loss, particularly in light of the evidence at trial regarding an audit conducted by the Internal Revenue Service of the Petersens and their trust. See U.S.S.G. § 2T1.1, comment. (n.1) ("tax loss" includes interest and penalties in cases involving willful evasion or willful failure to pay; in some cases, amount of tax loss may be uncertain; Guidelines contemplate that court will simply make reasonable estimate based on available facts); United States v. Radtke, 415 F.3d 826, 841 (8th Cir. 2005) (sentencing court's determination of amount of loss is reviewed for clear error). Moreover, Petersen did not show that the tax deductions she proposed were appropriate. Cf. United States v. Gordon, 291 F.3d 181, 187-88 (2d Cir. 2002) (defendant bears full burden of proof in establishing appropriateness of unclaimed deduction).

The district court did not clearly err in finding that Petersen and her husband used their trust to convert checks to cash and to money orders for the purpose of concealing income and assets; accordingly, the court did not err in applying a sentencing enhancement for tax offenses involving sophisticated means. See U.S.S.G. § 2T1.1, comment. (n.4) (conduct such as hiding assets or transactions, or both, through use of fictitious entity ordinarily indicates sophisticated means); United States v. Rouillard, 474 F.3d 551, 555 (8th Cir. 2007) (findings of fact reviewed for clear error; interpretation and application of Guidelines reviewed de novo); United States v. Brooks, 174 F.3d 950, 958 (8th Cir. 1999) (affirming application of sophisticatedmeans enhancement where defendant had taken steps to conceal his ownership of property and evade his tax obligations, even though court recognized that defendant "could have taken even more intricate steps to avoid payment of his federal income taxes").

The district court did not plainly err in increasing Petersen's offense level for obstructing justice, because it was undisputed that she had failed to appear as ordered for a scheduled sentencing hearing. See U.S.S.G. § 3C1.1, comment. (n.4(e)) (among examples of conduct warranting obstruction adjustment is willful failure to appear, as ordered, for judicial proceeding); United States v. Cramer, 414 F.3d 983, 989 (8th Cir. 2005) (defendant's failure to object to specific alleged fact in PSR allows district court to accept fact as true for purposes of sentencing); United States v. Dixon, 360 F.3d 845, 847 (8th Cir. 2004) (defendant's failure to object to application of Guidelines provision in district court results in plain-error review on appeal).

The district court did not clearly err in finding that a reduction for acceptance of responsibility was not warranted. Although Petersen's decision to proceed to trial did not automatically preclude her from consideration for this reduction, see U.S.S.G. § 3E1.1, comment. (n.2), that decision plus other relevant factors noted by the district court at sentencing were more than sufficient to support the denial of this reduction. See United States v. Jones, 539 F.3d 895, 897 (8th Cir. 2008) (determination as to acceptance of responsibility is factual finding that appellate court reviews only for clear error); United States v. Winters, 416 F.3d 856, 860 (8th Cir. 2005) (factual determination on whether defendant has demonstrated acceptance of responsibility is entitled to great deference and should be reversed only if it is so clearly erroneous as to be without foundation).

Finally, the district court did not clearly err in finding that a reduction for a mitigating role in the offense was not warranted. See U.S.S.G. § 3B1.2, comment. (n. 3(A)) (section applies to defendant who "plays a part in committing the offense that makes him [or her] substantially less culpable than the average participant"); United States v. Lopez-Arce, 267 F.3d 775, 784 (8th Cir. 2001) (district court's determination whether defendant was minor or minimal participant may be reversed only for clear error).

The judgment is affirmed.

1 The Honorable Michael J. Davis, Chief Judge, United States District Court for the District of Minnesota.


Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than 1 year, or both, together with the costs of prosecution. In the case of any person with respect to whom there is a failure to pay any estimated tax, this section shall not apply to such person with respect to such failure if there is no addition to tax under section 6654 or 6655 with respect to such failure. In the case of a willful violation of any provision of section 6050I, the first sentence of this section shall be applied by substituting "felony" for "misdemeanor" and "5 years" for "1 year".

Conspiracy. --Willful Failure to File Return, Supply Information, or Pay Tax: Conspiracy

Taxpayers' motion to dismiss a conspiracy count on the grounds that it was the same as the first substantive counts in the indictment was overruled.

Klein, DC, 54-2 USTC ¶9604, 124 FSupp 476. Aff'd, CA-2, 57-2 USTC ¶9912. Cert. denied, 355 US 924.

Albanese, DC, 54-2 USTC ¶9647, 123 FSupp 732. Aff'd, CA-2, 55-1 USTC ¶9494, 244 F2d 879. Cert. denied, 350 US 845.

A conspiracy count which charged a single conspiracy to evade taxes for two separate years was an improper count.

M.C. Goldberg, DC, 62-2 USTC ¶9638, 206 FSupp 394. Aff'd on other issues, CA-3, 64-1 USTC ¶9316, 330 F2d 30. Cert. denied, 377 US 953.

The three defendants were properly convicted of conspiring to evade taxes due from one of the defendants in connection with his acquisition of certain stock.

M. Catalano, CA-2, 74-1 USTC ¶9204, 491 F2d 268. Cert. denied, 419 US 825.

It was proper to indict tax attorneys for conspiring to defraud the United States in connection with a tax scheme even though their clients were not charged with tax evasion because no additional tax was due and owing from those clients.

R.S. Baskes, DC, 77-2 USTC ¶9488, 433 FSupp 799.

The defendant's argument that he was entitled to a new trial because the trial court erred in failing to give the jury adequate instructions on the essential elements of the conspiracy charge was rejected.

R.S. Baskes, CA-7, 80-2 USTC ¶9679, 649 F2d 471.

A district court order suppressing evidence in the defendant's trial for conspiracy to defraud the United States and for violation of the Internal Revenue laws was reversed and the case remanded.

R.S. Baskes, CA-7, per curiam, 79-2 USTC ¶9437 640 F2d 48. Rev'g 79-2 USTC ¶9437. Cert. denied, 450 US 920.

A six-year, not a five-year, limitations period applied to a charge of conspiring to defraud the United States and the indictment was timely. Code Sec. 6531, not 18 U.S.C. §3282, was the controlling limitations provision. Nor did it matter that each conspirator may not have participated in all the activities in furtherance of the conspiracy.

G.J. Brunetti, CA-10, 80-1 USTC ¶9215, 615 F2d 899.

A conviction under 18 U.S.C. §371 for conspiring to defraud the U.S. by hindering the IRS in its lawful duty to compute and collect taxes was affirmed. That provision was intended to cover conspiracies involving violation of the revenue laws and was not preempted by Title 26.

C. Shermetaro, CA-6, 80-2 USTC ¶9589.

Three individuals were properly convicted of conspiracy to defraud the government of income taxes under 18 U.S.C. §371. The trial court did not err in denying recross-examination, in refusing to give requested jury instructions, or in rejecting the individuals' Constitutional arguments.

H.D. Fleschner, CA-4, 96-2 USTC ¶50,536.

An individual was properly convicted of conspiracy to defraud the government under 18 U.S.C. §371 and of aiding and assisting in filing false income tax returns. The individual interfered with the proper functioning of the IRS by filing false tax documents that misattributed income to others. Further, although there was no evidence that he discussed the filings with other conspirators, such conduct was an integral and self-evident part of the conspiracy which permitted the inference that they all shared in that purpose.

R. Goldberg, CA-1, 97-1 USTC ¶50,208.

Adequate evidence supported an attorney's conviction for conspiracy under the defraud clause of 18 U.S.C. §371. The record contained direct evidence that the attorney knew of an illegal conspiracy to conceal his client's assets and circumstantial evidence of the attorney's involvement in sham transactions. The evidence further showed that the attorney conspired to deprive the government of the information it needed to collect the client's taxes. Finally, the attorney could not be judged under a different standard of involvement than nonlawyers.

J.B. Kraig, CA-6, 96-2 USTC ¶50,616.

Conspiracy convictions of two organizers of various "churches," who sold "ministries" through a pyramidal sales network, were upheld.

J.E. Heinemann, CA-2, 86-2 USTC ¶9686, 801 F2d 86.

Evidence of a doctor's money laundering was sufficient to uphold his conviction of conspiracy to defraud the United States by impeding the IRS in its collection of revenue. The doctor's lack of knowledge about an underlying drug deal was immaterial to the conspiracy charge.

J.M. Montalvo, CA-5, 87-2 USTC ¶9546.

The court overturned the conviction of two men who had been charged with conspiring to aid a third party in evading income taxes he owed, because evidence did not demonstrate that the two men were aware of the third party's tax liability, nor did it show that the men knew of the essential nature of the conspiracy and voluntarily joined it.

D.M. Pritchett, CA-11, 90-2 USTC ¶50,444, 908 F2d 816.

Although it was proper to consolidate for trial three substantive indictments with one for conspiracy, conviction on the conspiracy was reversed as a result of the court's failure to make an adequate distinction between evidence pertinent to a conspiracy and that pertinent to the substantive charges.

Rosenblum, CA-7, 49-1 USTC ¶9314, 176 F2d 321. Cert. denied, 338 US 893.

But acquittal of the taxpayers on a conspiracy charge was not a bar to their being prosecuted or punished for the offense of income tax evasion.

Rosenblum, CA-7, 50-2 USTC ¶9352, 182 F2d 956. Cert. denied, 340 US 826.

Similarly, a dismissal of conspiracy charges did not bar taxpayer's conviction for tax evasion.

D.H. Wenger, CA-2, 72-1 USTC ¶9221, 455 F2d 308. Cert. denied, 407 US 308.

An acquittal on a charge of conspiring to defraud the United States did not preclude a conviction on a charge of causing, aiding and abetting an IRS agent to submit a false audit.

E. Krogstad, CA-3, 78-1 USTC ¶9470, 576 F2d 22.

Defendants, former government agents convicted of defrauding the government, constituted a single "ring" of conspirators. Defendant was held to be a party to each particular "fix" which the conspirators effected.

Witt, CA-2, 54-2 USTC ¶9582, 215 F2d 580. Cert. denied, 348 US 887.

Convictions for conspiracy were overturned. The defendants intended to benefit themselves individually, not the group as a whole. Although some were assisted by the same people, mutual assistance or dependence was not shown. Thus, the evidence was insufficient to establish the existence of a single overall conspiracy with regard to the filing of false tax forms with the IRS. While several groups of conspirators were identified, the jury was not given a multiple conspiracy instruction.

E.R. Rosnow, CA-8, 92-2 USTC ¶50,506. Rehearing denied, 1/11/94.

Evidence that several individuals attempted to evade taxes on illegal income was insufficient to sustain their convictions for conspiracy to defeat the lawful function of the IRS. The defendants were charged with conspiracy to conceal income from allegedly fraudulent bank loans by failing to file accurate returns. However, the likelihood that the alleged conspirators each wished to evade taxes did not establish that they had entered into an agreement to do so. Moreover, participation in tax-related activities as part of their efforts to conceal illegal income did not show that they intended to interfere with the IRS.

W.M. Adkinson, CA-11, 98-2 USTC ¶50,842, 158 F3d 1147.

A married couple and their tax attorney were properly convicted of tax evasion and conspiracy to defraud the government; the attorney was also properly convicted of making false statements to the IRS. By indirectly purchasing a new home in the name of a co-conspirator, the couple tried to hide assets from the IRS in order to avoid paying the husband's tax liability. Although the attorney was not intimately involved in the scheme, he submitted an offer in compromise on behalf of the husband that omitted any mention of the new home and claimed that the old home was sold because the taxpayer could not afford it.

F.Y. Wright, Jr., CA-5, 2000-1 USTC ¶50,438, 211 F3d 233, aff'g an unreported District Court decision.

An individual's coviction for conspiracy to defraud the IRS was upheld. Trial evidence established that the individual conspired with others to claim illegal deductions for his construction company and assisted a subcontractor in avoiding employee and withholding taxes. The indictment was sufficient and was not constructively amended. The district court reasonably included in calculating the tax loss: (1) the unpaid taxes of subcontractors, and (2) unreported income attributable to checks made out to subcontractors that were deposited in to the individual's personal bank account. There was no proof that the amounts deposited into his personal bank account were loan repayments. Finally, his claims that a portion of the tax loss was diverted income and, therefore, only a percentage was includible in calculating the tax loss, was rejected.

T. Kosinski, CA-6 (unpublished opinion), 2005-1 USTC ¶50,241, 127 FedAppx 742, aff'g an unreported DC Mich. decision.

Two individuals who operated a printing and copying business were properly convicted for conspiracy to evade taxes. In addition to two business accounts, they maintained a secret bank account that was not known to their accountant. Business income was deposited in the account and they used funds in the account for personal expenses. They conspired to underreport the business's sales by instructing their accountant to adjust sales downward when there were discrepancies in the comparison of sales to bank deposits.

L.K. Spurlock, CA-5 (unpublished opinion), 2007-1 USTC ¶50,384, 214 FedAppx 382, aff'g an unreported DC Texas decision.

Three partner's convictions for conspiracy to defraud the government were affirmed. The government's evidence established that the partners, despite their knowledge of the requirement to file accurate tax returns on behalf of the partnership, willfully omitted payroll information for their employees who were members of a small religious sect that opposed payment of taxes. The partners were involved with the sect, intended that their business be run in a manner that was consistent with the sect's beliefs and, consequently, engaged in practices that interfered with the government's ability to collect taxes from the members of the sect who were employed in their partnership.

K. McKee, CA-3, 2007-2 USTC ¶50,778, 506 F3d 225.

An individual was properly convicted and sentenced for conspiracy to defraud the government. The company he worked for had filed multiple fraudulent returns and claimed a huge amount in refunds on behalf of its clients. In addition, the company's agreement with its clients to share any refund received was intended to cause substantial losses to the IRS.

J.K. Lansing, CA-11 (unpublished opinion), 2008-1 USTC ¶50,167, 263 FedAppx 849, aff'g, per curiam, an unreported DC Fla., decision.

A married couple who operated a multi-level marketing program through their foreign and U.S.-based corporations was properly convicted of tax evasion. The evidence showed that the wife willfully conspired with her husband to defraud the government by concealing domestic and foreign commission income. Despite the couple's insistence that the commissions were corporate income, none of their corporations paid taxes on the commissions. The evidence also showed that the couple's failure to report the income was willful because they created and presented to the IRS a false, back-dated loan document in an effort to conceal the unreported income.

J. Thompson, CA-10, 2008-1 USTC ¶50,398.

Willful Failure to File Return, Supply Information, or Pay Tax: Sentence: U.S. Sentencing Commission Guidelines: Enhanced sentence, sophisticated means

The trial court erred in holding that an individual's tax-evasion scheme did not involve the use of sophisticated means to impede discovery, as described in §2T1.1 of the U.S. Sentencing Guidelines. Thus, the case was remanded for resentencing under the enhancement provision. The scheme, which used numerous fictitious entities and checks to gain fraudulent deductions, was more complex and intricate and required more planning and repetitive conduct than a routine evasion case. Money was moved through two levels of bank accounts in order to conceal its path. Although the scheme was crafted by an accounting firm hired by the taxpayer, he was still culpable and could not be viewed as only a minor participant.

E. Lewis, CA-2, 96-2 USTC ¶50,452, 93 F3d 1075.

Similarly. Since a tax evasion scheme employed by a doctor used sophisticated means to impede discovery, resentencing was required under §2T1.1 of the U.S. Sentencing Guidelines. The scheme was developed by the same accounting firm involved in E. Lewis, above, and likewise was more complex and demonstrated greater intricacy and planning than a routine tax-evasion case. It did not matter that the doctor neither created nor devised the scheme himself.

H. Richman, CA-2, 96-2 USTC ¶50,453, 93 F3d 1085.

The trial court properly sentenced taxpayers who were convicted of tax evasion, conspiracy to evade taxes and conspiracy to defraud the United States. A presentence report could be adopted without an evidentiary hearing. The court calculated the tax loss correctly in arriving at the individuals' base offense level. Also, it was appropriate to add two levels to the base offense level for the use of sophisticated means since one individual abused her position of trust as a financial planning adviser and tax preparer.

J.M. Noske, CA-8, 97-2 USTC ¶50,538, 117 F3d 1053.

The district court properly calculated an individual's base offense level according to the sentencing guidelines. The amount of the tax loss caused by his offense was based on stipulated facts. Moreover, the increase in the base offense level for concealing his crime by sophisticated means did not violate his plea agreement.

J.E. Worthen, CA-10 (unpublished opinion), 99-2 USTC ¶50,788, aff'g an unreported District Court decision.

Enhancement of an individual's base sentence for use of sophisticated means to impede discovery of the offense was appropriate.

E.H. Mathison, CA-8 (unpublished opinion), 98-2 USTC ¶50,560, aff'g, per curiam, an unreported District Court decision.

A taxpayer's sentence was properly enhanced because he used sophisticated means to conceal his tax evasion and he failed to report proceeds from his illegal activities in excess of $10,000. Also, the district court properly counted the individual's misdemeanor conviction in his criminal history calculation. The fact that his probation was unsupervised was immaterial.

M.L. Richards, CA-9 (unpublished opinion), 99-1 USTC ¶50,153, aff'g an unreported District Court decision.

An individual's sentence for failure to file tax returns was enhanced because he failed to offer any evidence to refute information in a presentence report indicating that he used sophisticated means to impede discovery of the nature or extent of his offense.

E.L. Kotmair, CA-4 (unpublished opinion), 2001-1 USTC ¶50,370, aff'g, per curiam, an unreported District Court decision.

Sufficient evidence existed to uphold sophisticated means sentence enhancements.

S. Aragbaye, CA-9, 2001-1 USTC ¶50,126.

D. Newell, CA-7, 2001-1 USTC ¶50,248.

J. Sabino, CA-6, 2002-1 USTC ¶50,137, 274 F3d 1053.

B.L. Butler, CA-6, 2002-2 USTC ¶50,579, 297 F3d 505.

D.S. Fletcher, CA-9 (unpublished opinion), 2002-2 USTC ¶50,794, 50 FedAppx 379, aff'g an unreported District Court decision.

F. Boycoff, CA-2 (unpublished opinion), 2003-1 USTC ¶50,495, aff'g an unreported District Court decision.

A district court's two-level sentence enhancement of a tax evader's base offense was proper because he used sophisticated means to conceal the existence or extent of his offense. After the IRS filed a levy on his income, he obtained a fraudulent levy release to request payments due him and took five cashier checks instead of one corporate check. Depositing those checks in a warehouse bank and using family members to cash them constituted sophisticated means.

M.D. Clear, CA-6, 2005-1 USTC ¶50,379.

The district court clearly made a two point enhancement, when it found that an individual convicted of willful failure to pay tax had used sophisticated means. This finding was based on a preponderance of the evidence standard and lay outside of the jury's verdict. The court erred in imposing a sentence upon the individual based on the two point enhancement, because his sentence then exceeded the maximum sentence authorized by the facts found by the jury alone.

A.H. Iskander, CA-4, 2005-2 USTC ¶50,549.

An individual's offense level for tax evasion was properly enhanced based on the use of sophisticated means. The individual had not reported income in the form of stock received in exchange for services that was issued to shell entities. The comments to the Sentencing Guidelines lists the use of shell corporations as evidence of sophisticated means; it was not an error to base the enhancement on those comments.

E.W. Roush, Jr., CA-5, 2006-2 USTC ¶50,543.

A district court correctly applied the two-level sophisticated means enhancement to an individual's base offense level with respect to his sentences for filing false tax returns and for tax evasion. The individual was compensated as a consultant rather than as an employee, his personal expenses were paid directly by the company he managed, he failed to remit payroll taxes but provided employees with W-2 forms indicating the payroll taxes withheld from their paychecks, and he used loan schemes and third-party accounts to mask income.

R.G. Bailey, CA-4 (unpublished opinion), 2007-1 USTC ¶50,367, 216 FedAppx 378, aff'g, per curiam, an unreported DC Va. decision.

The sentence imposed on an individual for evading federal income tax was reasonable. In calculating the tax loss, the "penalty" for early withdrawal of funds from an IRA was properly considered as part of the total tax loss. A two-level sentence enhancement was proper because the individual's use of elaborate financial entities to conceal his assets indicated use of sophisticated means. Finally, his request for imposition of a nonguidelines sentence was rejected in order to emphasize general deterrence and the importance of cultivating respect for the tax system.

J.J. Anthony, CA-1, 2008-2 USTC ¶50,612.

.A two-level sentence enhancement for engaging in an offense that involved "sophisticated concealment" was proper following an individual's conviction for aiding and abetting attempted tax evasion. The evidence established that the individual helped another move and hide assets through the use of trusts and trust bank accounts.

C.L. Avila, CA-9, 2009-1 USTC ¶50,113.

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