NO. 99-1096
In the Supreme Court of the United States
UNITED STATES OF AMERICA, PETITIONER
v.
GEORGE LOREN REED
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PETITION FOR A WRIT OF CERTIORARI
SETH P. WAXMAN
Solicitor General
Counsel of Record
LORETTA C. ARGRETT
Assistant Attorney
General
MICHAEL R. DREEBEN
Deputy Solicitor General
JAMES A. FELDMAN
Assistant to the Solicitor
General
ROBERT E. LINDSAY
ALAN HECHTKOPF
MICHAEL E. KARAM
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217
QUESTION PRESENTED
Whether the Due Process Clause requires proof by clear and convincing evidence,
rather than proof by a preponderance of the evidence, to establish the applicability
of specific offense characteristics and sentencing adjustments under the
Sentencing Guidelines that together increase the defendant's offense level
by seven.
PARTIES TO THE PROCEEDING
In addition to the parties named in the caption, Alice Hopper, Terry Ingram,
George Kendall Reed, David L. Ries, Janice Mallen, Robert McKendrick, and
Roger Knight were co-defendants of respondent at trial, and the court of
appeals disposed of their appeals in the same opinion in which it disposed
of respondent's appeal.
In the Supreme Court of the United States
No. 99-1096
UNITED STATES OF AMERICA, PETITIONER
v.
GEORGE LOREN REED
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PETITION FOR A WRIT OF CERTIORARI
The Solicitor General, on behalf of the United States of America, petitions
for a writ of certiorari to review the judgment of the United States Court
of Appeals for the Ninth Circuit in this case.
OPINIONS BELOW
The opinion of the court of appeals (App., infra, 1a-17a) is reported at
177 F.3d 824. The opinion of the district court (App, infra, 18a-89a) is
unreported.
JURISDICTION
The judgment of the court of appeals was entered on May 20, 1999. Petitions
for rehearing were denied on August 31 and September 17, 1999. On November
18, 1999, Justice O'Connor extended the time within which to file a petition
for a writ of certiorari to and including December 29, 1999. The jurisdiction
of this Court is invoked under 28 U.S.C. 1254(1).
CONSTITUTIONAL PROVISION INVOLVED
The Due Process Clause of the Fifth Amendment provides: "[N]or shall
any person be * * * deprived of life, liberty, or property without due process
of law."
STATEMENT
After a jury trial in the United States District Court for the Eastern District
of California, respondent was convicted of conspiracy to obstruct proceedings
before the Internal Revenue Service (IRS), in violation of 18 U.S.C. 371,
and one count of obstruction of IRS proceedings, in violation of 18 U.S.C.
1505. The court of appeals affirmed his convictions, but remanded the case
to the district court for resentencing, holding, inter alia, that the district
court had erred in failing to require proof by clear and convincing evidence,
rather than by a preponderance of the evidence, to establish a specific
offense characteristic and an adjustment that enhanced respondent's sentence
under the Sentencing Guidelines.
1. During the 1980s, respondent failed to pay the IRS $146,000 in federal
taxes withheld from employees of Reed Trenching, a firm controlled by respondent.
In early 1989, the IRS obtained a judgment against respondent in the amount
of $357,000, which included penalties and interest on the amount that Reed
Trenching failed to pay. App., infra, 32a. In contesting his responsibility
for the taxes, respondent asserted that "he was not required to file
tax returns or to pay tax obligations because the Internal Revenue Code
did not apply to him" as a "free citizen of the Republic of California."
Ibid. On December 11, 1989, the IRS recorded a lien with the Stanislaus
County, California, Recorder, in the amount of $416,000 (which included
further accrual of penalties and interest) against a property (the "Beckwith
property") owned by respondent in Modesto, California. Ibid.
By April 1992, respondent had become involved with the Juris Christian Assembly
(JCA), an organization that "had as a primary purpose the evasion by
persons of the payment of future or outstanding tax obligations due and
owing to the United States." App., infra, 31a; see id. at 33a. The
sentencing issues on which this petition is based concern petitioner's involvement
with the conspiracy centering around the JCA and, in particular, whether
the JCA's use of violence and threats of violence to government officials
were foreseeable to respondent and therefore properly used as the basis
for the two sentencing enhancements. See Sentencing Guidelines § 1B1.3(a)(1)(B).
Respondent transferred the Beckwith property "into a 'religious trust'
to be managed by the JCA so that [respondent] would show no income upon
which taxes could be assessed by the IRS." App., infra, 33a. Respondent
invited the JCA's leader, Everett Thoren, "to live on the Beckwith
Property to facilitate the efforts to end [respondent's] tax problems and
long struggle with the IRS." Ibid. Other members of the conspiracy
lived on the Beckwith property, did business there, or congregated there.
Id. at 34a.
Members of the JCA took various actions to obstruct the enforcement of the
lien against the Beckwith property. The attorney for the government who
was seeking to enforce the lien received a package of documents, including
one purporting to be an "order of arrest" and another purporting
to be a "complaint claiming that [the attorney] was conspiring against
the United States." App., infra, 5a. Respondent's son, Kendall Reed,
who was a co-conspirator, attempted to pay the judgment against respondent's
property with a spurious document purporting to be a "Government Article
I, §§ 1, 2 Warrant." Ibid. A U.S. Marshall's Service employee,
however, refused to accept it, and the Treasury Department refused to accept
it as payment when it was sent to the Department in Washington. Ibid.
Members of the conspiracy took other steps to obstruct the lien as well.
Respondent and others visited the Stanislaus County Recorder, Karen Mathews,
"demanding the tax liens on the Beckwith property be removed."
App., infra, 38a. Mathews refused to do so. As the district court found,
"[o]n one occasion, a box was placed under the County Recorder's car,
containing an object, to simulate a pipe bomb, with the word 'boom' written
on it." Ibid. In addition, "a letter was mailed to [Mathews] which
stated that unless the lien was removed, the Recorder would be an 'example'
to all other recorders in the state of California." Ibid. An envelope
was sent to Mathews in which a bullet was enclosed and a note that "threatened
that unless the liens were removed, the next bullet would be for her."
Ibid.
On January 30, 1994, another member of the conspiracy, Roger Steiner,
gained entry into Mathews' garage and waited for her to return home. After
Mathews parked her car in the garage and closed the garage door, Steiner
attacked her, inflicting physical and psychological injury.
App., infra, 39a. Steiner "scratched Mathews on the neck, held a gun
to her head, dry fired the gun numerous times and told Mathews to file the
documents she had been ordered to file." Ibid. "The purpose of
the planned attack was to further the overall goal of the conspiracy-to
impede or obstruct the IRS, i.e., defeat the collection of taxes by sale
of the real property." Id. at 50a.
In addition to its attempts to defeat respondent's tax lien, the conspiracy
was also involved in obstructing an IRS tax levy placed on the wages of
co-conspirator Terry Ingram, who owed $13,000 in taxes. Two members of the
conspiracy went to Ingram's employer and unsuccessfully demanded that the
tax levy be removed. App., infra, 3a-4a. Subsequently, the conspirators
prepared some documents, signed by respondent and others, which were mailed
to IRS Agent Mary Ryan, who had been assigned to collect the taxes Ingram
owed. The documents, many of which "purported to be issued by the Solicitor
General's Office, the Department of Justice, and the War Department,"
included a document purporting to be "an arrest warrant for Ryan"
signed by respondent and others. Id. at 4a.1
2. Respondent was indicted on one count of conspiring to obstruct the lawful
function of the IRS, in violation of 18 U.S.C. 371, one count of interstate
travel in aid of racketeering, in violation of 18 U.S.C. 1952, and three
counts of obstruction of proceedings before the IRS, in violation of 18
U.S.C. 1505. The interstate travel count alleged that respondent aided and
abetted in Steiner's travel from Oregon to California for purposes of committing
the assault on Mathews. Resp. C.A. Excerpt of Rec. 13-14. The three obstruction
counts related to the attempted use of the phony "warrant" to
satisfy respondent's tax obligations, the mailing of the fictitious "arrest
warrant" to the IRS attorney, and the assault on Mathews. Resp. C.A.
Excerpt of Rec. 10, 12, 14. Respondent was convicted after a jury trial
on the conspiracy count and the obstruction count based on the attempted
use of the phony "warrant," but was acquitted on the other counts.
App., infra, 18a-19a n.1, 28a. All eight of his co-conspirators were also
convicted on the conspiracy count, and various of them were also convicted
on various of the other substantive counts. See id. at 26a, 29a-31a.
The district court calculated respondent's sentence under Sentencing Guidelines
§ 2T1.9, which provides that the base offense level should be determined
from the tables at Guidelines Sections 2T1.1 (tax evasion) or 2T1.4 (aiding,
assisting, procuring, counseling, or advising tax fraud). App., infra, 54a,
65a, 112a. The court employed Section 2T1.4, which in turn bases the offense
level on the amount of tax loss under the Tax Table at Section 2T4.1. App.,
infra, 71a. Based on the district court's finding that the total tax loss
was the $416,000 at issue in the lien on the Beckwith property plus the
$13,000 at issue in the tax levy on Ingram's wages, see id. at 76a-77a,
respondent's base offense level was in the range of more than $325,000 and
less than $550,000, resulting in an offense level of 17, id. at 78a, 112a.
The court then applied the four-level enhancement under Guidelines §
2T1.9(b)(1) for "the planned or threatened use of violence to impede,
impair, obstruct, or defeat the ascertainment, computation, assessment,
or collection of revenue." The court found that, although petitioner
had not "himself engaged in any * * * conduct that was directly hostile
or threatening towards Miss Mathews," see App., infra, 111a, "the
plan or threatened use of violence was foreseeable to you, and, therefore,
the Court is going to enhance by those four levels." id. at 114a. Based
on the foreseeable violence and threats of violence directed at Mathews
and the threats to IRS agent Ryan, the court also applied the three-level
enhancement under Guidelines § 3A1.2(a), see App., infra, 115a, applicable
where "the victim was a government officer or employee * * * and the
offense of conviction was motivated by such status." The court also
applied the two-level enhancement under Guidelines § 2T1.9(b)(2) for
encouraging "persons other than * * * co-conspirators to violate the
internal revenue laws or impede, impair, obstruct, or defeat the ascertainment,
computation, assessment, or collection of revenue." App., infra, 116a.
The result was that respondent's sentencing range was 63-78 months' imprisonment.
Id. at 116a. The court imposed a sentence of 63 months' imprisonment. Id.
at 117a.
3. The court of appeals affirmed respondent's conviction, but remanded the
case to the district court for resentencing. App., infra, 1a-18a. Of primary
significance for present purposes, the court addressed the four-level enhancement
for use of violence and the three-level enhancement for a government-officer
victim. Id. at 15a-16a.2 The court stated that, in United States v. Restrepo,
946 F.2d 654, 659 (9th Cir. 1991) (en banc), it had "held that 'when
a sentencing factor has an extremely disproportionate effect on the sentence
relative to the offense of conviction,' the government may have to satisfy
a 'clear and convincing' standard." App., infra, 14a. The court then
found that:
The seven-level adjustment increased the sentencing range from 24-30 months
to 63-78 months. Given the relative shortness of [respondent's] sentence,
a potential increase of 48 months satisfies the Restrepo extremely disproportionate
impact test. Consequently, the district court erred in failing to apply
the clear and convincing standard.3
App., infra, 15a. The court held that: "We therefore vacate respondent's
sentence and remand this case to the district court for re-sentencing on
this issue using the clear and convincing standard." Id. at 15a-16a.4
REASONS FOR GRANTING THE PETITION
This Court has twice "acknowledge[d] that there is a divergence of
opinion among the Circuits as to whether, in extreme circumstances, relevant
conduct that would dramatically increase the sentence must be based on clear
and convincing evidence." United States v. Watts, 519 U.S. 148, 156
(1997) (per curiam); accord Almendarez-Torres v. United States, 523 U.S.
224, 248 (1998). The court of appeals' decision that the two sentencing
enhancements in this case could be applied only if proven by clear and convincing
evidence presents the question of which of the opposing views is correct.
The Ninth Circuit's holding conflicts with decisions of three courts of
appeals that the preponderance standard is always sufficient to support
application of a sentencing factor. See United States v. Washington, 11
F.3d 1510, 1516 (10th Cir. 1993), cert. denied, 511 U.S. 1020 (1994); United
States v. Lombard, 102 F.3d 1 (1st Cir. 1996), cert. denied, 520 U.S. 1266
(1997); United States v. Urrego-Linares, 879 F.2d 1234, 1237-39 (4th Cir.),
cert. denied, 493 U.S. 943 (1989). The decision also conflicts with numerous
decisions of other circuits holding that sentencing factors with similar
or greater effect on the defendant's sentence than the increase in this
case did not have to be supported by more than a preponderance of the evidence.
The court of appeals' standard not only is incorrect, but will require the
application of differing standards of proof to various sentencing factors
that are potentially applicable to a single defendant, and to a single sentencing
factor that is potentially applicable to multiple defendants who have committed
the same crime. It will thus unduly complicate sentencing proceedings in
the Ninth Circuit. Further review is therefore warranted.
1. In McMillan v. Pennsylvania, 477 U.S. 79 (1986), this Court held that
a Pennsylvania statute that treated visible possession of a firearm as a
sentencing factor requiring a minimum five-year prison sentence for certain
specified offenses was constitutional, id. at 84-91, and it rejected the
claim that due process nevertheless required that sentencing factor to be
proven by at least clear and convincing evidence, id. at 91-93. The defendants
in McMillan who were subject to the five-year minimum included one whose
sentence, without the enhancement, would have been 11 1/2 to 23 months and
another whose sentence would have been 1 to 6 years. Id. at 82 n.2.5 The
sentencing factor in McMillan thus had at least as great an effect on those
defendants' sentences as the enhancements at issue in this case. This Court
nonetheless stated that it "ha[d] little difficulty concluding that
in this case the preponderance standard satisfies due process." Id.
at 91.
In reaching its conclusion in McMillan, the Court noted that "[s]entencing
courts have traditionally heard evidence and found facts without any prescribed
burden of proof at all." Ibid. The Court further stated that it "s[aw]
nothing in Pennsylvania's scheme that would warrant constitutionalizing
burdens of proof at sentencing." Id. at 91-92. Finally, the Court pointed
out that courts of appeals had "uniformly rejected due process challenges
to the preponderance standard under the federal 'dangerous special offender'
statute, 18 U.S.C. § 3575, which provides for an enhanced sentence
if the court concludes that the defendant is both 'dangerous' and a 'special
offender.'" Id. at 92-93 (citing United States v. Davis, 710 F.2d 104,
106 (3d Cir.) (collecting cases)).
In the course of concluding that the Pennsylvania statute had not in effect
added an element (visible possession of a firearm) to the underlying offenses
and then permitted that element to be found by a judge by a preponderance
of the evidence, the Court in McMillan noted that "[t]he statute gives
no impression of having been tailored to permit the visible possession finding
to be a tail which wags the dog of the substantive offense." 477 U.S.
at 88. That statement was apparently intended to address the possibility
that a legislature might mask an element of an offense as a sentencing factor,
and thereby evade the defendant's constitutional right to proof beyond a
reasonable doubt and a jury trial. It was not intended to vitiate the Court's
conclusion that legitimate sentencing factors may be proven by a preponderance
of the evidence.
Nonetheless, some courts-notably the Ninth Circuit in Restrepo, see 946
F.2d at 659, and the Third Circuit in United States v. Kikumura, 918 F.2d
1084, 1101 (3d Cir. 1990)-have suggested that that language in McMillan
may be read to indicate that something more than a preponderance-of-the-evidence
standard may sometimes be required before a sentencing enhancement may be
applied in a given case. Referring, inter alia, to Restrepo and Kikumura,
this Court in United States v. Watts, 519 U.S. 148, 156 (1997) (per curiam),
"acknowledge[d] a divergence of opinion among the Circuits as to whether,
in extreme circumstances, relevant conduct that would dramatically increase
the sentence must be based on clear and convincing evidence." See also
id. at 156 (stating that McMillan established that "application of
the preponderance standard at sentencing generally satisfies due process");
Almendarez-Torres v. United States, 523 U.S. 224, 248 (1998) (acknowledging
divergence among courts of appeals but expressing no view on its proper
resolution). But before the decision in this case, no court of appeals had
squarely held that proof of a sentencing factor under the Guidelines required
more than a preponderance of the evidence.
In Restrepo, the Ninth Circuit held that the circumstances in that case
did not require a higher burden of proof. See 946 F.2d at 659. While the
Third Circuit in Kikumura did hold that factors warranting an extensive
upward departure-a "twelve-fold, 330-month departure from the median
of an applicable sentencing range," 918 F.2d at 1102-must be proven
by clear and convincing evidence, Kikumura addressed an upward departure
from the Guidelines, rather than the routine application of sentence enhancements
in the course of applying the Guidelines. The court in Kikumura, moreover,
ultimately rested its decision on a reading of the statute authorizing departures
from the Guidelines, rather than on a direct application of the Due Process
Clause. See 918 F.2d at 1102 ("We hold that the clear and convincing
standard is, under these circumstances, implicit in the statutory requirement
that a sentencing court 'find' certain considerations in order to justify
a departure, 18 U.S.C. 3553(b).").6 See United States v. Lombard, 102
F.3d 1, 4 (1st Cir. 1996) (Kikumura holding "much discussed but generally
not followed").
2. After the decision in Kikumura, the Sentencing Commission added commentary
to Sentencing Guidelines § 6A1.3 stating that "[t]he Commission
believes that use of a preponderance of the evidence standard is appropriate
to meet due process requirements and policy concerns in resolving disputes
regarding application of the guidelines to the facts of a case." See
Sentencing Guidelines, App. C, Amdmt. 387 (effective Nov. 1, 1991). In this
case, however, the court of appeals nevertheless held that two sentencing
factors, with a cumulative effect on respondent's sentence of seven offense
levels and an increase in respondent's sentencing range from 24-30 months
to 63-78 months, may be applied only if proven by clear and convincing evidence.7
While the court of appeals did not explicitly identify the legal authority
justifying its rule, its citation to Restrepo, see App., infra, 14a, 15a,
indicates that the court intended to invoke the Due Process Clause. The
cited passage in Restrepo stated the court of appeals' view that McMillan
recognized "that there may be an exception to the general rule that
the preponderance standard satisfies due process when a sentencing factor
has an extremely disproportionate effect on the sentence relative to the
offense of conviction." Restrepo, 946 F.2d at 659. The court in this
case found that such an exception existed on the facts of this case, and
that clear and convincing evidence was therefore required.
That decision conflicts with decisions of the Tenth, First, and Fourth Circuits.
The Tenth Circuit has rejected the proposition "that relevant conduct
causing a dramatic increase in sentence ought to be subject to a higher
standard of proof." United States v. Washington, 11 F.3d at 1516. In
Washington, the sentencing court found that the quantity of drugs involved
in the defendant's offense was more than six kilograms, rather than the
61 grams that defendant claimed. That increased defendant's sentence under
the Guidelines from level 32 to level 40, and, after taking into account
other adjustments for the defendant's role in the offense and obstruction
of justice, it increased his sentencing range more than 150 months, from
210-262 months to life imprisonment, which under the Guidelines is considered
to be greater than 360 months' imprisonment. See Sentencing Guidelines,
Ch. 5, Pt. A (Sentencing Table). Citing Kikumura, the court reserved judgment
about whether a court must apply "a higher standard for significant
departures from the guidelines sentence." 11 F.3d at 1516. But, as
this Court in Watts noted, the Tenth Circuit stated that "[a]t least
as concerns making guideline calculations the issue of a higher than a preponderance
standard is foreclosed in this circuit." Watts, 519 U.S. at 157 n.2
(quoting Washington, 11 F.3d at 1516). See also 11 F.3d at 1516 ("[T]he
Due Process Clause does not require sentencing facts in the ordinary case
to be proved by more than a preponderance standard.").
Similarly, in United States v. Lombard, 102 F.3d 1 (1996), the First Circuit
upheld the use of the preponderance-of-the-evidence standard in enhancing
the defendant's sentence, based on relevant conduct for which the defendant
had been acquitted in an earlier proceeding, from a 20-30 year range to
mandatory life imprisonment. The court rejected the defendant's argument
that factors that had such a large effect on sentencing must be proven beyond
a reasonable doubt, holding that "the Constitution does not require
a heightened proof standard in a case such as ours." 102 F.3d at 5.
See also Watts, 519 U.S. at 156 n.2 (noting that Lombard stated that a downward
departure in an extreme case may be warranted).
The Fourth Circuit has also squarely rejected the proposition that sentencing
factors must be proven by more than a preponderance of the evidence, albeit
in a case in which only a two-level adjustment was at issue. In United States
v. Urrego-Linares, 879 F.2d at 1237-39, the court explained that, in McMillan
v. Pennsylvania, 477 U.S. 79, 91 (1986), this Court "ruled that, as
prescribed by Pennsylvania statute, due process is satisfied by application
of a preponderance standard to factual findings made by a court during sentencing."
879 F.2d at 1237. The Fourth Circuit also rejected the contention that a
more rigorous standard should be adopted on fairness grounds, even if not
constitutionally required. Id. at 1237-1238. In doing so, the court noted,
inter alia, that this Court had stated in McMillan "that the adoption
of a clear and convincing standard of proof 'would significantly alter criminal
sentencing,' [McMillan, 477 U.S. at 92 n.8], a change which the Court determined
would be unnecessary and burdensome." Ibid.
Although some courts in addition to the Ninth Circuit have held or suggested
that a higher standard than preponderance might apply in extreme cases,
we have found no case in which one of those courts has held or suggested
that a sentence increase on the order of magnitude of the one in this case
warranted a higher standard than preponderance. To the contrary, greater
sentence increases than the increase in this case have been held not to
warrant a higher standard. See United States v. Rodriguez, 67 F.3d 1312,
1322-1323 (7th Cir. 1995) (increase from 51-63 months to life imprisonment
in drug case); United States v. Thompson, 51 F.3d 122, 125 (8th Cir. 1995)
(fourfold increase in sentence did not require higher standard). In United
States v. Carreon, 11 F.3d 1225, 1240 (1994), the Fifth Circuit made the
point clear, holding that a sentencing factor that would increase the defendant's
term of imprisonment from six years to almost twenty years "does not
justify considering, much less imposing, the higher burden of proof."
3. Before this case, the Ninth Circuit had indicated that, whatever the
scope of Restrepo, sentencing factors that enhanced a sentence to at least
the same extent as in this case need not be proven by more than a preponderance
of the evidence.8 On that basis, we filed a petition for rehearing en banc
in this case, but the court of appeals denied our suggestion. Nonetheless,
in a subsequent case, the Ninth Circuit confirmed that it views the decision
in this case as expressing the law of the circuit on the application of
a clear-and-convincing evidence standard at sentencing.
In United States v. Lawton, 193 F.3d 1087 (1999), the Ninth Circuit reversed
an upward departure imposed by the district court, on the ground that the
district court had in effect "deprived [the two defendants] of the
benefit of their plea bargain" by sentencing them for "the suspected
but uncharged real offense conduct." Id. at 1089. In remanding for
resentencing, the court held that the district court could consider the
uncharged conduct as "relevant conduct" under Sentencing Guidelines
§ 1B1.3. But, citing its decision in the instant case, the court added
that "if any disputed fact has a 'disproportionate impact' on the sentence,
the fact must be established by clear and convincing evidence." Id.
at 1095.9
4. The decision of the court of appeals is likely to sow substantial confusion
in the sentencing process throughout the Ninth Circuit. Enhancements of
the same magnitude as the three-level and four-level enhancements at issue
in this case are prevalent throughout the Guidelines. As in McMillan, "embracing
[the court of appeals'] suggestion that we apply the clear-and-convincing
standard here would significantly alter criminal sentencing, for we see
no way to distinguish the [sentencing enhancements] at issue here from a
host of other express or implied findings sentencing judges typically make
on the way to passing sentence." 477 U.S. at 92 n.8.
For example, Guidelines § 2A2.2 is a typical provision, covering aggravated
assault. Section 2A2.2 provides for a base offense level of 15, which is
comparable to respondent's base offense level of 17. It then provides, inter
alia, for a two-level increase for more than minimal planning, a five-level
increase if a firearm was discharged, increases of from two to six levels
depending on the degree of injury suffered by the victim, a two-level increase
if the offense was motivated by a payment of money, and a two-level increase
if the offense involved violation of a court protective order. Under the
Ninth Circuit's decision, the application of any one of those enhancements
could be determined on the basis of a preponderance of the evidence, but
an application of two or more could frequently require application of the
clear and convincing standard.
Indeed, even aside from issues arising in the determination of the base
offense level and the application of specific offense characteristics, the
application of one or more other sentencing adjustments can easily have
a similar effect in a great many cases. For example, a determination of
the defendant's role in the offense can add four levels under Section 3B1.1(a)
of the Guidelines or subtract four levels under Section 3B1.2(a) from the
otherwise applicable offense level. Thus, a decision on the question of
what role a defendant played in an offense can cause an eight-level swing
in the defendant's offense level, greater than the seven-level enhancement
that the court required to be proved by clear and convincing evidence in
this case.
The difficulties in applying the Ninth Circuit's ruling are compounded by
the fact that a district court often does not know what sentencing factors
it will apply until after it completes the sentencing process. In a typical
case, the presentence report will recommend a base offense level, with one
or more enhancements or reductions, the defendant may argue for a lower
base offense level and for the application of one or more mitigating factors,
and the government may argue for a higher base offense level and for one
or more enhancements. There is no way to determine how much effect one or
more of the sentencing factors would have on the sentence-and therefore
whether the application of those factors must be proven by clear and convincing
evidence under the Ninth Circuit's ruling-until the court has decided all
or most of the other disputed sentencing issues. The result can only be
to inject needless confusion and indeterminacy into the sentencing process;
a court that has found a particular enhancement applicable by a preponderance
of the evidence will have to revisit that determination as soon as it finds
sufficient other enhancements applicable to make the total enhancement equal
to that in this case. In practice, district courts may have to apply the
clear and convincing evidence standard to adjustments that increase (but
not, presumably, to those that decrease) the sentence in a great many cases
as a safe harbor, or risk unpredictable appellate reversals and resentencings
based on commonplace and unexceptionable applications of the Sentencing
Guidelines.
5. On November 29, 1999, this Court granted certiorari in Apprendi v. New
Jersey, No. 99-478. In that case, the defendant was convicted of weapons
offenses that carried a maximum penalty of ten years' imprisonment. The
New Jersey Supreme Court held that it was constitutional to apply a state
"hate crimes" statute providing for extending the maximum term
of imprisonment to twenty years if the court finds, by a preponderance of
the evidence, that the defendant acted with the purpose to intimidate an
individual because of race, gender, religion, or other specified characteristics.
This Court granted certiorari to consider whether the New Jersey statute
"unconstitutionally provides for an extended term of imprisonment increasing
the maximum possible penalty by ten years, based on proof by a preponderance
of the evidence, rather than proof beyond a reasonable doubt, and denies
the defendant rights to notice by indictment and trial by jury." 99-478
Pet. at i.
The question presented in Apprendi is quite distinct from the question presented
in this case. In Apprendi, the "hate crimes" sentencing statute
extends the maximum term of imprisonment to which the defendant is subject.
The case thus presents the question whether a factor that extends the maximum
term of imprisonment authorized by statute must be "charged in an indictment,
submitted to a jury, and proven beyond a reasonable doubt." 99-478
Pet. App. 19a (quoting Jones v. United States, 526 U.S. 227, 243 n.6 (1999)).
By contrast, there is no claim in this case that either of the sentencing
enhancements at issue-for use of violence or for official victim-must be
proven as elements of the underlying offense, and neither enhancement has
any effect on the maximum punishment authorized by the statutes under which
respondent was convicted. Instead, this case simply presents the question
whether the Due Process Clause requires a clear and convincing standard
of proof, rather than a preponderance of the evidence, to establish two
sentencing enhancements, in light of their effect on respondent's sentence
within the maximum statutory term. The Court's disposition of the quite
different question in Apprendi is unlikely to affect the disposition of
this case, and the issue presented in this case warrants this Court's review.
CONCLUSION
The petition for a writ of certiorari should be granted.
Respectfully submitted.
SETH P. WAXMAN
Solicitor General
LORETTA C. ARGRETT
Assistant Attorney
General
MICHAEL R. DREEBEN
Deputy Solicitor General
JAMES A. FELDMAN
Assistant to the Solicitor
General
ROBERT E. LINDSAY
ALAN HECHTKOPF
MICHAEL E. KARAM
Attorneys
DECEMBER 1999
1 Many of the documents were in the form of legal pleadings, and purported
to relate to proceedings in the "United States of America, Supreme
Court." Gov't C.A. Supp. Exc. of Rec. Tab 1.
2 The court of appeals also held that the district court had made two other
errors at sentencing that should be corrected on remand. The court held
that "the district court erred by including penalties and fees in the
amount of loss." App., infra, 12a-13a. The court also held that the
district court had erred in applying the two-level Section 2T1.9(b)(2) enhancement
for encouraging non-conspirators to obstruct the collection of taxes, since
Sentencing Guidelines § 2T1.9(b) instructs that, in cases in which
both that enhancement and the four-level Section 2T1.9(a) enhancement for
use of violence applies, the sentencing court must "use the greater."
App., infra, 16a. The court of appeals' rulings on those claims are not
at issue here.
3 The court of appeals incorrrectly stated that, without the seven-level
enhancement, the sentencing range was 24-30 months. Respondent was sentenced
at offense level 26. Without the four-level and three-level enhancements,
respondent would have been sentenced at offense level 19. The indicated
sentencing range for offense level 19, however, is 30-37 months, not 24-30
months. We brought this error to the attention of the court in our Petition
for Rehearing and Suggestion of Rehearing En Banc, at 6 n.4, but the court
denied the petition and suggestion without comment.
4 The court of appeals also held that there was sufficient evidence of a
single conspiracy, App., infra, 6a-8a, that there was sufficient evidence
that the defendants attempted to obstruct a pending proceeding before the
IRS, id. at 8a-11a, that the district court did not err in instructing the
jury that the alleged invalidity of a levy is not a valid defense to a charge
of obstructing an IRS proceeding, id. at 11a-12a, that the district court
properly sentenced respondent and the other defendants under Sentencing
Guidelines § 2T1.9, see id. at 13a-14a, and that the district court
did not err in including respondent's tax liabilities in a co-defendant's
relevant conduct, id. at 16a-17a.
5 Without the five-year minimum, the other defendants' sentences would have
been 3 to 10 years, 4 to 8 years, and 2 1/2 to 5 years. 477 U.S. at 82 n.2.
6 Since Kikumura, the Third Circuit has applied the clear-and- convincing
standard in three cases that involved upward departures. See United States
v. Paster, 173 F.3d 206, 216 (1999); United States v. Bertoli, 40 F.3d 1384,
1411 (1994); United States v. Seale, 20 F.3d 1279, 1288 (1994). In United
States v. Paulino, 996 F.2d 1541, 1545 n.4 (1993), however, the court confined
Kikumura to the departure context, holding that the preponderance standard
applied to the determination of the quantity of drugs distributed by a conspiracy,
because "the present fact-finding dispute does not arise in a Kikumura
significant-departure context." Moreover, even if Kikumura were applicable
outside the departure context, the Ninth Circuit's holding that two adjustments
resulting in a seven-level increase in respondent's offense level required
an elevated standard of proof is in conflict with a statement in Kikumura
that the preponderance standard would probably be sufficient as to a ten-level
increase, under Sentencing Guidelines § 2K1.3(b)(4), for distributing
explosives to a fugitive from justice. See 918 F.2d at 1100.
7 As we note above, see p. 8 n.3, supra, the seven-level enhancement in
fact increases respondent's sentencing range from 30-37 months to 63-78
months, not from 24-30 months to 63-78 months. Because the court of appeals'
legal ruling, however, rests on the premises that it recited, we assume
for purposes of this case that the two enhancements increased respondent's
sentence as the court of appeals stated.
8 In United States v. Harrison-Philpot, 978 F.2d 1520 (9th Cir. 1992), the
defendant was convicted of distributing cocaine, and an uncharged quantity
of cocaine raised her offense level from 22, with a sentencing range of
41-51 months, to 34, with a sentencing range of 292-365 months. Id. at 1522.
In United States v. Sanchez, 967 F.2d 1383 (9th Cir. 1992), amounts of heroin
included as relevant conduct raised the defendant's offense level from 12
to 26 and his sentencing range from 10-16 months to 63-78 months. Id. at
1384.
9 In United States v. Romero-Rendon, 1999 WL 1101292 (Dec. 7, 1999), the
Ninth Circuit refused to apply its decision here to hold that a sentencing
factor must be shown by clear and convincing evidence in that case, but
its decision rested on the ground that the defendant had never challenged
the accuracy of the information on which the sentencing court had based
the sentence enhancement. Id. at *2. In United States v. Kaluna, 192 F.3d
1188 (9th Cir. 1999) (en banc), the Ninth Circuit upheld the constitutionality
of the federal three-strikes law, 18 U.S.C. 3559(c)(1), providing for life
imprisonment for felons who had previously been convicted of two or more
serious violent felonies or serious drug offenses. In holding that the government
had the burden of proving the prior offenses, the court cited United States
v. Young, 33 F.3d 31, 32 (9th Cir. 1994), and added in a parenthetical that
"[t]he Government bears the burden of proving factors enhancing a sentence
by a preponderance of the evidence." 192 F.3d at 1194 (quoting Young,
33 F.3d at 32).
APPENDIX A
IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
Nos. 97-10445, 97-10457, 97-10463, 97-10494,
97-10495, 97-10496, 97-10515, 97-10527
UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE
v.
ALICE HOPPER, DEFENDANT-APPELLANT
UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE
v.
TERRY INGRAM, DEFENDANT-APPELLANT
UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE
v.
GEORGE KENDALL REED, DEFENDANT-APPELLANT
UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE
v.
DAVID L. RIES, DEFENDANT-APPELLANT
UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE
v.
GEORGE LOREN REED, DEFENDANT-APPELLANT
UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE
v.
JANICE MALLEN, DEFENDANT-APPELLANT
UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE
v.
ROBERT MCKENDRICK, DEFENDANT-APPELLANT
UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE
v.
ROGER ARDELL KNIGHT, DEFENDANT-APPELLANT
[Argued and Submitted: April 13, 19991
Filed: May 20, 1999]
Before: Alfred T. Goodwin and Stephen S. Trott, Circuit Judges, and Samuel
P. King, District Judge.2
TROTT, Circuit Judge:
Alice Hopper ("Hopper"), Terry Ingram ("Ingram"), George
Kendall Reed ("Kendall Reed"), David Ries ("Ries"),
George Loren Reed ("George Reed"), Janice Mallen ("Mallen"),
Robert McKendrick ("McKendrick") and Roger Knight ("Knight")
(collectively "Appellants") appeal their convictions and sentences
for conspiracy to obstruct proceedings before an agency in violation of
18 U.S.C. § 371, obstruction of proceedings before an agency in violation
of 18 U.S.C. § 1505, false personation of a government official in
violation of 18 U.S.C. § 912, and HUD fraud in violation of 18 U.S.C.
§ 1010. We have jurisdiction pursuant to 18 U.S.C. § 3742(a) and
28 U.S.C. § 1291, and we affirm in part, reverse in part and remand
this case to the district court for further sentencing proceedings in conformity
with this opinion.
BACKGROUND
Appellants are members of, or were otherwise associated with, the Juris
Christian Assembly ("JCA"). The JCA was established by the late
Everett Thoren ("Thoren"), who convinced his followers that the
JCA was a tax exempt religious organization. Originally established in Oregon,
Thoren moved the JCA to a warehouse owned by George Reed in Modesto, California.
JCA members would place all their property in a trust with the JCA appointed
as trustee. The JCA would pay its members' bills and transfer the remaining
money back to its members, minus an administrative fee of ten percent. Because
of the JCA's purported religious status, JCA members declared themselves
tax exempt.
The IRS assigned IRS agent Mary Ryan ("Ryan") to investigate and
collect unpaid taxes from Ingram. Ryan placed a IRS tax levy on Ingram's
wages from Ingram's employer Modesto Toyota. Thoren promised Ingram that
the JCA would "take care" of the wage levy. Shortly thereafter,
Ries and another individual went to Modesto Toyota, and demanded that the
IRS levy be removed. Modesto Toyota refused. Subsequently, Ries and Knight
prepared a packet of documents, which were signed by George Reed, Mallen,
McKendrick, Knight, and Ries and mailed to Ryan by Hopper. These documents
included: (1) an arrest warrant for Ryan; (2) requests for admissions; (3)
a complaint demanding a refund of money garnished from Ingram's wages; (4)
a verification form, informing Ryan that if she tried to enforce the levy
she would be tried and have a sentence imposed upon her; (5) a letter informing
Ryan that the levy was unconstitutional; (6) a letter informing Ryan that
a court-martial had been conveyed; (7) an order stating that the levy constituted
a declaration of war; (8) a letter requiring Ryan to respond to the charges;
and (9) a pamphlet on "Silent Weapons for Quiet Wars." Many of
these documents purported to be issued by the Solicitor General's Office,
the Department of Justice, and the War Department.
After receiving the documents in the mail, Ryan checked the status of Ingram's
tax liabilities. She learned that the IRS had received two "Article
1 Section 2" warrants for the amount of the wage levies and had applied
those warrants in satisfaction of Ingram's debt. Ryan requested the warrants,
determined they were worthless homemade checks, and reinstated Ingram's
debt.
George Reed failed to pay more than $100,000 in withholding taxes he had
collected from his employees at Reed Trenching. With fees and interest,
that amount grew to over $416,000. IRS agent Michael Cash ("Cash")
was assigned to investigate and collect George Reed's taxes. Cash caused
liens to be filed against George Reed's property in Modesto. Assistant United
States Attorney Diana Noweski ("Noweski") was assigned to prosecute
the matter on behalf of the IRS. Noweski obtained a judgment in federal
court against George Reed and sought to foreclose the judgment lien. Later,
Noweski received a package of documents similar to those received by Ryan,
including an order of arrest and a complaint claiming that Noweski was conspiring
against the United States.
Shortly after Noweski received the documents, George Reed's son Kendall
Reed went to the U.S. Marshal's Service and attempted to pay the judgment
against George Reed's property with a "Government Article I, §§
1, 2 Warrant" similar to the spurious warrant received by the IRS on
behalf of Ingram. Kendall Reed presented the warrant to Colleen Maloney
("Maloney") a U.S. Marshal's Service employee and insisted that
she accept the warrant as satisfaction of the judgment. Maloney, however,
refused to accept the warrant. Later, that same warrant was mailed to the
Treasury Department in Washington D.C., but the IRS mailed the warrant back
to George Reed, stating that it would not be accepted as payment.
In December 1993, Kendall Reed went to the Stanislaus County Recorder's
office to have the liens removed from George Reed's land. Karen Mathews
("Mathews"), the county recorder, refused to remove the liens.
George Reed also went to see Mathews to have the liens removed, but she
again refused to remove the liens. Previously, Mathews had received a letter
from Knight that quoted the Supreme Court decision in Simmons v. United
States, 390 U.S. 377, 390-91, 88 S. Ct. 967, 19 L.Ed.2d 1247 (1968), to
the effect that "it is intolerable that one Constitutional Right should
have to be surrendered in order to assert another." Knight's letter
threatened that "anyone who attempts to enforce a void 'unlaw' does
so at their own peril and risk." After George Reed's visit, Mathews
received another letter also quoting Simmons, which contained a bullet and
threatened that if Mathews continued to enforce a "void 'unlaw,'"
"the next bullet would be directed at [her] head." Later, Mathews
was assaulted by Roger Steiner. Steiner scratched Mathews on the neck, held
a gun to her head, dry fired the gun numerous times and told Mathews to
file the documents she had been ordered to file.3
Based on these actions, Appellants were indicted in a multi-count indictment,
which among other charges alleged a conspiracy by Appellants to obstruct
the due and proper proceedings of law before the IRS. The jury found Appellants
guilty of the conspiracy, and this appeal followed.
DISCUSSION
I. Single Conspiracy
Appellants argue that there was insufficient evidence to prove that they
were members of a single conspiracy as opposed to two or more separate conspiracies.
There is sufficient evidence to support a conviction if, 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, 99 S. Ct. 2781, 61 L.Ed.2d
560 (1979).
A single conspiracy "is one overall agreement to perform various functions
to achieve the conspiracy's objectives." United States v. Shabani,
48 F.3d 401, 403 (9th Cir.1995) (internal quotation omitted). A formal agreement
is not necessary; an agreement may be inferred from the Appellants' acts
pursuant to the scheme, or other circumstantial evidence. See United States
v. Clevenger, 733 F.2d 1356, 1358 (9th Cir. 1984). "A single conspiracy
may involve several subagreements or subgroups of conspirators." United
States v. Bibbero, 749 F.2d 581, 587 (9th Cir. 1984). To distinguish a single
from a multiple conspiracy, we examine "the nature of the scheme; the
identity of the participants; the quality, frequency, and duration of each
conspirator's transactions; and the commonality of time and goals."
Id.
In this case, the scheme encompassed a sham organization created to evade
tax liabilities. The participants were all members of or somehow affiliated
with the JCA. Although each defendant's level of participation differs with
each act, all defendants engaged in one or more overt acts. The actions
were performed at the JCA headquarters in Modesto and had as its purpose
preventing the collection of lawful taxes from persons sheltered by the
JCA. Viewing this evidence in the light most favorable to the government,
we hold there was sufficient evidence to prove that Appellants were engaged
in a single conspiracy.4
II. Obstruction of a Proceeding Before An Agency
Kendall and George Reed argue that there is insufficient evidence to prove
that they attempted to obstruct a pending proceeding before the IRS. George
and Kendall Reed were indicted under § 1505 for obstructing a proceeding
before a department or agency of the United States, in this case the IRS.
The indictment alleged that Kendall Reed attempted to prevent collection
of the tax deficiencies by paying the judgment with a "fraudulent monetary
instrument, entitled 'Government Art I §§ 1,2 Warrant.'"
The Reeds argue that their actions may have obstructed a judgment of the
federal courts, but because federal courts are not "departments"
or "agencies," they should not have been charged under §
1505.
In United States v. Aguilar, 515 U.S. 593, 600, 115 S. Ct. 2357, 132 L.Ed.2d
520 (1995), the defendant was indicted under 18 U.S.C. § 1503 for obstructing
a judicial proceeding. The indictment alleged that Aguilar had intentionally
given false information to federal investigators who were potentially going
to be called to testify before a grand jury. The Supreme Court held that
lying to an investigating agent who "might or might not testify before
a grand jury" did not constitute obstruction of a judicial proceeding.
Aguilar, 515 U.S. at 600. The Court noted, however, that had the investigators
been subpoenaed or summoned by the grand jury, or had there been proof that
they were acting as an arm of the grand jury, there would have been enough
to support a conviction for obstructing a judicial proceeding. Id. at 600-02.
The Court held that in order to be indictable for obstruction of a judicial
proceeding, the defendant's actions must have a "natural and probable
effect of interfering with the due administration of justice." Id.
at 601 (internal quotation marks omitted); see also United States v. Ryan,
455 F.2d 728, 734 (9th Cir. 1972) ("The acts complained of must bear
a reasonable relationship to the subject of the grand jury inquiry.");
United States v. Kassouf, 144 F.3d 952, 956-57 (6th Cir. 1998) (holding
that the act must have a relationship in time, causation or logic with the
judicial proceedings).
In this case, we hold that the actions taken by the Reeds had the "probable
and natural" affect of obstructing a proceeding before the IRS. If
accepted, the phony warrant would have precluded collection of the tax debt
and the enforcement of the IRS tax liens. Until the debt behind those liens
was satisfied, the collection proceeding before the IRS continued. Moreover,
the Reeds knew that the judgment was for the IRS liability, which the IRS
was seeking to collect. Indeed, the Reeds' warrant was made payable to the
"U.S. District Court/IRS C/O U.S. Marshall (sic)." (emphasis added).
Additionally, after the warrant was rejected by the U.S. Marshal, the warrant
was mailed to the Treasury Department for payment to the IRS. The Reeds
knew that if the phony warrant had been accepted by the U.S. Marshal, the
"natural and probable" effect would be to satisfy the delinquent
taxes and prevent collection of money owed to the IRS. That understanding
and the actions taken to prevent collection constitute obstruction of an
IRS proceeding. See Aguilar, 515 U.S. at 599-601.
The Reeds rely on the Supreme Court's decision in Hubbard v. United States,
514 U.S. 695, 115 S. Ct. 1754, 131 L.Ed.2d 779 (1995) for the proposition
that they may have obstructed a judicial proceeding, but not a "department"
or "agency" of the United States. Hubbard is distinguishable.
In Hubbard, the defendant made false representations in papers filed in
a bankruptcy proceeding and was indicted under 18 U.S.C. § 1001. Section
1001 criminalizes the making of false statements or similar conduct "in
any manner within the jurisdiction of any department or agency of the United
States." 18 U.S.C. § 1001. The Supreme Court held that a court
is not a department or agency, and therefore that submitting false documents
to a bankruptcy court did not violate § 1001. Hubbard, 514 U.S. at
715. However, in Hubbard, the only government entity involved was the bankruptcy
court, and the only activity was the bankruptcy proceeding. The false statements
did not, therefore, have the "natural and probable" effect of
interfering with proceedings before a department or agency. Conversely,
in this case, the IRS was a party to the judicial proceeding, and the phony
warrant had the "natural and probable" effect of obstructing collection
of delinquent taxes by the IRS. Additionally, enforcement of tax liens by
the IRS is an IRS proceeding. The fact that the IRS was required to enforce
its lien in federal court does not change the IRS's involvement. It was
an IRS tax lien, prosecuted by an Assistant United States Attorney representing
the IRS, and any money collected would have been paid to the IRS.
The Reeds correctly point out that the IRS levies merged with the judgment,
and that the judgment was to be collected by the United States Marshal's
service not the I.R.S. However, money paid to the U.S. Marshal is then paid
to the party who holds the judgment, in this case the IRS. Therefore, preventing
the collection of the funds by the U.S. Marshal would have the direct effect
of obstructing collection of those funds by the IRS. Because collection
of delinquent taxes is an IRS proceeding, the Reeds were properly convicted
under 18 U.S.C. § 1505.
III. Requested Affirmative Defense Instruction
At trial, the Appellants argued that the Ingram wage levies were invalid
and therefore that they could not be criminally responsible for obstructing
collection of those levies. The district court rejected their argument and
instructed the jury that "[t]he alleged invalidity of a levy under
the revenue laws of the United States is not a defense." Appellants
argue that this instruction was erroneous. Whether a jury instruction accurately
states the law is an issue of law reviewed de novo. United States v. Eshkol,
108 F.3d 1025, 1028 (9th Cir. 1997).
We have not addressed whether the invalidity of the underlying levy is a
defense to a charge of obstruction under § 1505. However, in United
States v. Lewis, 657 F.2d 44, 45 (4th Cir. 1981), the Fourth Circuit held
that "the underlying validity of the levy under the revenue laws of
the United States is a matter to be determined in a separate action of a
civil nature and may not be used as a defense to a criminal charge such
as [obstructing an IRS proceeding]." We agree with the Fourth Circuit
and hold that the invalidity of the underlying levies is not a defense to
charges of obstruction. If Appellants sincerely believed the levies were
invalid, they should have challenged those levies in a civil action, rather
than with threatening letters, phony warrants and violence. Because the
invalidity of the underlying levy is not a defense to an obstruction charge,
the district court did not err in refusing to give the requested instruction.
IV. Calculating Amount of Loss
Appellants argue that the district court erred by including penalties and
fees into the amount of loss for sentencing. The district court's interpretation
of the Guidelines is reviewed de novo. United States v. Bailey, 139 F.3d
667, 667 (9th Cir. 1998).
The Guidelines instruct the district court to determine tax loss and then
to determine the offense level by using the tax table at § 2T4.1. U.S.S.G.
§§ 2T1.1, 2T1.4. The application notes specifically state that
"tax loss does not include interest or penalties." U.S.S.G. §§
2T1.1 cmt. 1. The government argues that subtracting the penalties and fees
from the amount of loss fails to adequately address the nature of the conspiracy,
which sought to prevent the collection of over $400,000. We agree but are
confined by the plain language of the Guidelines. See United States v. Pollen,
978 F.2d 78, 91 n. 29 (3d Cir. 1992) (noting that by failing to include
interest and penalties, the Guidelines fail to "reflect accurately
the criminal behavior," but affirming the sentence based on tax amount
without interest and penalties). Given the plain language of the Guidelines,
the district court erred in including interest and penalties in the amount
of tax loss. We therefore vacate Appellants' sentences and remand this case
to the district court for re-sentencing.
V. Sentencing Under § 2T1.9
Appellants argue that the district court erred in sentencing them under
§ 2T1.9 instead of § 2J1.2. Section 1B1.2 of the Guidelines instructs
the sentencing court to determine "the offense guideline section .
. . most applicable to the offense of conviction (i.e., the offense conduct
charged in the count of the indictment or information of which the defendant
was convicted)." U.S.S.G. § 1B1.2(a). The accompanying commentary
refers to the Guidelines's Statutory Index (Appendix A), which "specifies
the guideline section or sections ordinarily applicable to the statute of
conviction." U.S.S.G. App. A. at 373. However, the Statutory Index
does not establish "immutably the exclusive list of available guidelines
for given offenses," United States v. Cambra, 933 F.2d 752, 755 (9th
Cir. 1991), and in an atypical case, the court may use "the guideline
section most applicable to the nature of the offense conduct charged in
the count of which the defendant was convicted." U.S.S.G. App. A. at
373.
Appellants were convicted of conspiracy under § 371 and obstruction
of proceedings under § 1505. In this case, the district court properly
sentenced Appellants according to § 2T1.9, which covers conspiracies
to "impede, impair, obstruct or defeat tax." See U.S.S.G. §
2X1.1(c)(1) ("When an attempt, solicitation, or conspiracy is expressly
covered by another offense guideline section, apply that guideline section.").
According to the Statutory Index, defendants convicted of violating §
1505 should normally be sentenced under § 2J1.2. In this case, however,
the district court looked at the overt acts taken by Appellants and held
that § 2J1.2 did not "address the seriousness of the defendants'
conduct." We agree. Section 2J1.2 does not consider the amount of tax
liability Appellants attempted to obstruct or the sometimes violent nature
of the conspiracy. Therefore, the district court correctly applied §
2T1.9.
VI. Enhancement for Violent Conduct Under § 2T1.9(b)(1)
George Reed and Knight argue that the district court erred in increasing
their sentences based on violent activity for which they were acquitted.
We review the district court's factual findings in the sentencing phase
for clear error. See, e.g., United States v. Ladum, 141 F.3d 1328, 1344
(9th Cir. 1998).
"[A] jury's verdict of acquittal does not prevent the sentencing court
from considering conduct underlying the acquitted charge, so long as that
conduct has been proved by a preponderance of the evidence." United
States v. Watts, 519 U.S. 148, 157, 117 S. Ct. 633, 136 L.Ed.2d 554 (1997).
However, in United States v. Restrepo, 946 F.2d 654, 659 (9th Cir. 1991)
(en banc), we held that "when a sentencing factor has an extremely
disproportionate effect on the sentence relative to the offense of conviction,"
the government may have to satisfy a "clear and convincing" standard.
See also Watts, 519 U.S. at 156-57 (recognizing, but not addressing, a split
in the Circuits as to whether relevant conduct must be proven by clear and
convincing evidence in extreme circumstances).
Knight's resulting four-level increase in sentence is not an exceptional
case that requires clear and convincing evidence. See Watts, 519 U.S. at
156-57 (holding that an increase of two levels is not an extreme case);
United States v. Kikumura, 918 F.2d 1084, 1100-01 (3d Cir. 1990) (noting
that the preponderance of evidence standard would satisfy due process when
the result is a four-level increase in offense level). However, even if
Knight's enhancement required clear and convincing evidence, the district
court found that "the evidence was clear and convincing," that
Knight wrote the threatening letter sent to Mathews. The letters in this
case contain identical language and punctuation and the letters were both
received by Mathews, who happened to be working on the George Reed tax liability.
Given the similarity of the letters and the fact that both were delivered
to the person working on the George Reed tax liability, we hold that the
district court correctly held that Knight sent the threatening letter.
In George Reed's case, the result was a seven-level increase, three for
official victim and four for violent conduct. The seven-level adjustment
increased the sentencing range from 24-30 months to 63-78 months. Given
the relative shortness of George Reed's sentence, a potential increase of
48 months satisfies the Restrepo extremely disproportionate impact test.
Consequently, the district court erred in failing to apply the clear and
convincing standard. We therefore vacate George Reed's sentence and remand
this case to the district court for re-sentencing on this issue using the
clear and convincing standard.
VII. Enhancement Under § 2T1.9(b)(2)
George Reed argues that the district court erred in applying both a four-level
increase under § 2T1.9(b)(1) and a two-level increase under §
2T1.9(b)(2). The Guidelines provide that if both (b)(1) and (b)(2) enhancements
apply, the court should "use the greater." Here, the district
court erred in applying both. We therefore vacate George Reed's sentence
and remand for re-sentencing.
VIII. Ingram's Sentence
Ingram argues that the district court erred by including the George Reed
tax liabilities in his relevant conduct. Section 1B1.3(a)(1)(B) provides
that the relevant conduct in a conspiracy includes "all reasonably
foreseeable acts and omissions of others in furtherance of the [conspiracy]."
A defendant's relevant conduct does not include the conduct of members of
a conspiracy prior to the defendant's joining the conspiracy or after the
defendant has properly withdrawn from the conspiracy. U.S.S.G. § 1B1.3(a)(1)(B)
cmt. 2; Levine v. United States, 383 U.S. 265, 266, 86 S. Ct. 925, 15 L.Ed.2d
737 (1966).
Ingram argues that because the George Reed tax liabilities had reached judgment
before he joined the JCA he should not be responsible for George Reed's
tax amount. However, obstruction of the collection of George Reed's liabilities
had not ended when Ingram joined the JCA. Ingram first contacted the JCA
in February 1993 and he began to filter money through the JCA shortly thereafter.
Although the Reed tax liabilities had been reduced to a judgment before
Ingram joined the JCA, the JCA took acts to prevent collection of the Reed
tax liability after Ingram joined the conspiracy. Specifically, the arrest
warrant and other documents sent to Noweski were mailed in June or July
of 1993. Because the conspiracy to prevent collection of the Reed tax liabilities
was ongoing during the time that Ingram was a co-conspirator in the JCA,
he is responsible for the Reed tax loss.
Ingram argues that obstruction of the Reed tax liability was not foreseeable.
We disagree. Ingram knew that other persons were using the JCA, as he was,
to filter money and prevent the collection of taxes. Additionally, the district
court correctly held that because George Reed owned the land on which the
JCA was headquartered, it was foreseeable that he was one of the people
filtering money through the JCA. Ingram was therefore liable for the George
Reed tax liabilities. See United States v. Lorenzo, 995 F.2d 1448, 1460
(9th Cir. 1993).
IX. Other Issues
Finally, we note that Appellants raise numerous other points of error on
appeal. After having carefully considered each issue, we affirm the district
court on the remaining issues.
CONCLUSION
For the reasons stated herein we affirm in part, reverse in part and remand
for further proceedings in conformity with this opinion.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
1 Alice Hopper and Roger Knight were submitted on the briefs. All other
appeals were argued. Fed. R. App. P. 34(a)(2).
2 The Honorable Samuel P. King, Senior United States District Judge for
the District of Hawaii, sitting by designation.
3 Steiner was a defendant in the trial and was convicted of carrying out
this attack on behalf of the JCA. Steiner's appeal has been severed.
4 Appellants argue that the jury rejected the single conspiracy theory by
finding some defendants guilty of one part of the conspiracy but acquitting
them of others. However, the existence of facially inconsistent jury verdicts
is not grounds for reversing a conviction. United States v. Lennick, 18
F.3d 814, 821 (9th Cir. 1994).
APPENDIX B
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF CALIFORNIA
No. CR-F-95-5174 OWW
UNITED STATES OF AMERICA, PLAINTIFF
v.
ROGER KNIGHT, ET AL., DEFENDANTS
[Filed: Oct. 24, 1997]
MEMORANDUM OPINION AND ORDER RE:
18 U.S.C. § 371 (COUNT ONE) SENTENCING ISSUES
I. INTRODUCTION
This criminal case has been pending since June 22, 1995, when the nine defendants
were charged as alleged members of a criminal conspiracy.1 The third superseding
indictment charges in Count One, a criminal conspiracy to commit an offense
against the United States by obstructing and impeding the due and proper
administration of the law under which a matter was proceeding before the
Internal Revenue Service. 18 U.S.C. §§ 371, 1505. Following a
41 day jury trial, the defendants were convicted on various counts of the
superseding indictment.2 All defendants were convicted of Count One, the
conspiracy. Counts Two through Nine of the superseding indictment, charge
one or more defendants with substantive offenses allegedly committed in
furtherance of the conspiracy. Some of the individual defendants were found
guilty of the substantive crimes. Others were acquitted of the separate
crimes.
The United States Probation Office prepared presentence reports ("PSRs")
for each of the defendants which contain sentencing recommendations. Defendants
filed formal objections to the PSRs and the government filed responses to
the objections. The court continued defendants' sentencing dates to permit
supplemental objections and for responses to the PSRs and to questions propounded
by the court. These extensive briefings have been fully reviewed and all
defendants have been provided an opportunity to present oral argument on
the Count One sentencing issues.
To determine the "tax loss" resulting from defendants' acts, the
court permitted IRS agents Michael Cash and Mary Ryan to testify at an evidentiary
hearing at which all defendants, their counsel, and the government were
present. Although not constitutionally mandated, see United States v. Beltran,
109 F.3d 365, 369 (7th Cir. 1997), in exercise of its discretion such a
hearing was warranted due to the complexity of the sentencing issues.
Having considered the papers, oral argument, and testimony, and having undertaken
an independent analysis, the following order shall govern the issues raised
in respect to the Count One conspiracy. Individual factual findings will
be made as to each defendant at the time of sentencing.
II. SENTENCING UNDER THE SENTENCING GUIDELINES
The principle goal of the United States Sentencing Guidelines (USSG or Guidelines)
is to eliminate disparity and uncertainty in federal sentencing for similarly
situated defendants. The Guidelines encourage sentences based on the relative
seriousness of different crimes. Of the key sentencing compromises resolved
by the Guidelines, the most relevant here is whether defendants are to be
sentenced for the "charged offense" or for the "real offense"
conduct. See (Justice) Stephen Breyer, The Federal Sentencing Guidelines
and the Key Compromises Upon Which They Rest, 17 Hofstra L. Rev. 1 (1988).
At sentencing, the court must find by a preponderance of the evidence that
the individual defendants were involved in the charged activity in a manner
which is reasonably foreseeable to be in furtherance of the jointly undertaken
criminal activity, same course of conduct or common scheme or plan as the
offense of conviction. See Witte v. United States, 515 U.S. 389, 401, 115
S. Ct. 2199, 132 L.Ed.2d 351 (1995) (Government need not prove facts related
to the severity of punishment beyond a reasonable doubt) (citing McMillan
v. Pennsylvania, 477 U.S. 79, 84, 106 S. Ct. 2411, 91 L.Ed.2d 67 (1986));
Nichols v. United States, 511 U.S. 738, --, 114 S. Ct. 1921, 128 L.Ed.2d
745 (1994) (conduct considered in sentencing must be proved by a preponderance
of the evidence); United States v. Restrepo, 946 F.2d 654, 656 (9th Cir.)
(en banc) (Sentencing Guidelines do not alter standard of proof required
of facts related to sentencing), cert. denied, 503 U.S. 961, 112 S. Ct.
1564, 118 L.Ed.2d 211 (1992); United States v. Wilson, 900 F.2d 1350, 1353-54
(9th Cir. 1990) ("district courts are constitutionally required to
make factual determinations underlying application of the Guidelines by
at least a preponderance of the evidence"). A sentencing court may
consider facts not proven or even introduced at trial, as long as the government
establishes those facts by a "preponderance of evidence." United
States v. Karterman, 60 F.3d 576, 580 (9th Cir. 1995) (citing Restrepo,
946 F.2d at 656-57); USSG § 6A1.3 commentary.
III. THE CHARGED OFFENSE
The third superseding indictment charged defendants in Count One as members
of an unlawful conspiracy (18 U.S.C. § 371) to commit an offense against
the United States, the purpose of which was to impede or obstruct lawful
proceedings before the IRS in violation of 18 U.S.C. § 1505.3 The conspiracy
alleged spans April 1, 1992 to April 10, 1995. The indictment charged the
following overt acts4 in furtherance of the conspiracy:
1. On April 29, 1992, George Loren Reed ("George Reed") transferred
property owned by him and located on Beckwith Road, Modesto, California
(the "Reed Property" or "Beckwith Property"), to the
Juris Christian Assembly so as to avoid payment of federal tax liens placed
on the property by the IRS.
2. On June 23, 1992, George Kendall Reed ("Kendall Reed") attempted
to pay tax liens on the Reed Property by presenting to the United States
Marshal Service a monetary instrument in the amount of $416,343.32. The
instrument, "Government Art. I, 1 & 2 Warrant, was fraudulent and
valueless.
3. On August 3, 1993, David Ries and Roger Steiner demanded an IRS wage
levy placed on Terry Ingram's wages be removed by Ingram's employer, Modesto
Toyota.
4. On August 3, 1993, defendants Roger Knight, Alice Hopper, Janice Mallen,
George Reed and Robert McKendrick issued a fraudulent warrant of arrest
against the IRS employee responsible for placing the wage levy on Ingram's
wages.
5. On August 23, 1993, Ingram and Knight prepared and mailed two documents
to the IRS purporting to be monetary instruments in the amounts of $12,550.48
and $1,238.94, to satisfy the wage levy imposed on Ingram. The instruments
were fraudulent and valueless.
6. On November 12, 1993, JCA members went to the Stanislaus County Recorder's
office and attempted to have the IRS lien removed from the Beckwith property.
On January 15, 1995, Knight, George Reed, and Kendall Reed devised a plan
to physically assault or threaten the Stanislaus County Recorder, Karen
Mathews, so she would remove the IRS lien on the Beckwith property. On January
29, 1994, Steiner traveled from Oregon to California for the purpose of
assaulting Karen Mathews.
7. On November 29, 1993, JCA members attempted to place liens on property
belonging to IRS employees through the Stanislaus County Recorder.
8. On January 30, 1994, Steiner physically assaulted the Karen Mathews.
Mathews was beaten, cut and threatened with a gun during the assault.
IV. THE OFFENSE OF CONVICTION
In a conspiracy prosecution, the government must prove both the existence
of the conspiracy and that each defendant was a member, beyond a reasonable
doubt. United States v. Garza, 980 F.2d 546, 552 (9th Cir. 1992). Conspiracy
under 18 U.S.C. § 371 requires (1) an agreement between two or more
persons (2) to commit in concert an unlawful act, and (3) an overt act in
furtherance of the conspiracy. Pettibone v. United States, 148 U.S. 197,
13 S. Ct. 542, 37 L.Ed. 419 (1893); United States v. Falcone, 311 U.S. 205,
61 S. Ct. 204, 85 L.Ed. 128 (1940); United States v. Bendis, 681 F.2d 561
(9th Cir.), cert. denied, 459 U.S. 973, 103 S. Ct. 363, 74 L.Ed.2d 286 (1982);
United States v. Heck, 499 F.2d 778 (9th Cir. 1974), cert. denied, 419 U.S.
1088, 95 S. Ct. 677, 42 L.Ed.2d 680 (1974); Weniger v. United States, 47
F.2d 692 (9th Cir. 1931). In a conspiracy to defraud (or commot an unlawful
act against) the United States or one of its agencies, the government is
required to prove beyond a reasonable doubt the existence of an agreement
to defraud or commit an unlawful act against the United States and that
one or more persons acted in pursuit of the objective. United States v.
Browning, 723 F.2d 1544, 1546 (11th Cir. 1984); see also United States v.
Carruth, 699 F.2d 1017 (9th Cir. 1982) (conspiracy to defraud United States
exists where conspirators attempt to defeat IRS collection of taxes for
direct benefit of others and indirect benefit of themselves). Under the
substantive law of conspiracy, every member of a conspiracy need not know
every other member or be aware of all acts committed in connection with
the conspiracy. United States v. Lorenzo, 995 F.2d 1448, 1458 (9th Cir.
1993). A single conspiracy may involve several subagreements or subgroups.
United States v. Lulan, 936 F.2d 406, 411 (9th Cir. 1991).
The jury convicted all defendants of the Count One, 18 U.S.C. § 371
conspiracy to commit an unlawful act against the United States by impeding
or obstructing the collection of tax in proceedings before the IRS, an agency
of the United States, a violation of 18 U.S.C. § 1505. The evidence
established essential elements of the conspiracy-that defendants violated
or attempted to violate the laws of the United States by impeding or obstructing
the collection of tax revenue in a proceeding before the IRS, that each
defendant agreed to participate in the conspiracy, and that one or more
overt acts were perpetrated to further the purpose of the conspiracy-beyond
a reasonable doubt. The manner or means included, inter alia, false and
valueless warrants submitted for payment of George Reed's and Terry Ingram's
taxes; wrongfully demanding removal of the tax lien on the Beckwith Ranch
property and Ingram wage levy; threatening arrest of Mary Ryan, I.R.S. agent;
intimidating Sharon Mein at Modesto Toyota concerning the Ingram tax levy;
and threatening and attacking Karen Matthews for refusing to release the
Reed tax lien from record.
The forms of verdict did not require the jury to make special findings as
to the conspiracy count. If a jury returns a general verdict which does
not specify the object of a conspiracy, the defendant must be sentenced
on the basis of the object yielding the lowest offense level. United States
v. Garcia, 37 F.3d 1359 (9th Cir. 1994).5 In Garcia, the jury returned a
general verdict as to a conspiracy to commit various drug related offenses.
The Ninth Circuit reversed a fifteen year sentence as to the conspiracy
which was determined from convictions on the underlying substantive offenses.
The court found the evidence sufficient to find the object of the conspiracy
either to violate 18 U.S.C. § 843(b) or to violate § 841(a)(1),
but the district court could not make such a finding at sentencing. 37 F.3d
at 1370-71.
Garcia is not applicable here. Factually, this does not involve violations
of narcotics laws nor a multiple object conspiracy. This conspiracy had
a single object: to impede or obstruct the collection of taxes by the IRS.
A number of overt acts were charged as such and as separate substantive
counts. That there was such a conspiracy, that all defendants knew of its
object was proved by direct and circumstantial evidence beyond a reasonable
doubt. There is no ambiguity in the jury's finding that defendants were
guilty of the single object conspiracy. The evidence varies from defendant
to defendant as to what means or methods allegedly were used by the defendants
to achieve the object of the conspiracy and ultimately requires factual
findings to be made separately for each defendant. At sentencing, however,
so long as relevant conduct is proved by a preponderance of the evidence,
it may be considered. Finally, Garcia was decided under pre-Guidelines sentencing
laws and the Ninth Circuit has not addressed its continued vitality in light
of the Guidelines.
Other Circuit Courts which cite Garcia have not found it improper for a
sentencing court to determine from the record as a whole the object of a
generally found conspiracy, so long as no ambiguity as to that object appears
in the record. United States v. Bush, 70 F.3d 557, 561 (10th Cir. 1995);6
United States v. Edwards, 105 F.3d 1179 (7th Cir. 1997).7
The sole object of the conspiracy to commit an unlawful act against the
United States of which defendants have been convicted is to impede, obstruct,
or impair lawful proceedings before the IRS. Each of the additional substantive
offenses are other crimes committed by some of the members of the conspiracy,
most of which constituted overt acts of obstruction of IRS proceedings.
Except count Count Nine which is an unrelated crime committed by Roger Knight.
That a number of crimes to obstruct proceedings of the IRS were committed
does not change the single object of the conspiracy. Each defendant's sentence
must be determined by his or her relevant conduct in furtherance of the
conspiracy and reasonably foreseeable acts by coconspirators. Ingram's "lowest
objective" theory does not apply to a single-object conspiracy issue
violation of 18 U.S.C. § 371 and § 1505.
A. Defendants' Convictions.
Defendants were convicted of the substantive offenses charged in Counts
Two through Nine of the superseding indictment as follows:
Kendall Reed and George Reed were convicted of the substantive offense charged
in Count Two, 18 U.S.C. §§ 2, 1505, obstruction of proceedings
of the IRS and aiding and abetting, for presenting a false financial warrant
to the United States Marshal Service on June 21, 1992 for the purpose of
attempting to satisfy an IRS lien on the Beckwith property.
David Ries and Roger Steiner were convicted of the substantive offense charged
in Count Three, 18 U.S.C. § 1505, for entering Modesto Toyota for the
purpose of having the wage levy removed from Ingram's wages on August 3,
1993, to obstruct IRS proceedings by defeating collection of the tax.
David Ries and Roger Steiner were convicted of the substantive offense charged
in Count Four, 18 U.S.C. § 912, for impersonating a government official
while attempting to have the wage levy removed from Ingram's wages to obstruct
IRS proceedings by defeating the collection of tax.
Alice Hopper, Roger Knight, and Ries were convicted of the substantive offense
charged in Count Five, 18 U.S.C. §§ 2, 1505, for obstruction of
proceedings of the IRS and aiding and abetting, by transmitting a false
warrant of arrest to IRS agent Mary Ryan on August 3, 1993. Janice Mallen,
Robert McKendrick, and George Loren Reed were acquitted of the Count Five
offense.
Roger Knight was convicted of the substantive offense charged in Count Six,
18 U.S.C. §§ 2, 1505, for obstructing the proceedings of the IRS
and aiding and abetting, by presenting false financial warrants to the IRS
on August 23, 1993. Terry Ingram was acquitted of the Count Six offense.
Roger Steiner was convicted of the substantive offense charged in Count
Seven, 18 U.S.C. §§ 2, 1952, traveling interstate for the purpose
of committing or aiding and abetting a racketeering activity. Roger Knight,
Kendall Reed, and George L. Reed were acquitted of the Count Seven offense.
Roger Steiner was convicted of the substantive offense charged in Count
Eight, 18 U.S.C. §§ 2, 1505, assaulting the Stanislaus County
Recorder on January 30, 1994. Roger Knight, Kendall Reed, and George L.
Reed were acquitted of the Count Eight offense.
Roger Knight was convicted of the substantive offense charged in Count Nine,
18 U.S.C. § 1010, HUD fraud.
B. Factual Findings From Evidence At Trial.
The following facts were proved beyond a reasonable doubt at trial. The
JCA had as a primary purpose the evasion by persons of the payment of future
or outstanding tax obligations due and owing to the United States. Although
the JCA operated out of the Reed Property, the evidence showed that the
purpose of the JCA was to obstruct, impair or impede the IRS in carrying
out its lawful functions of enforcing the tax laws. See, e.g. United States
v. Rivera, 696 F.2d 1213 (9th Cir. 1982)8 ("the standard for determining
the existence of a single conspiracy is whether there was 'one overall agreement'
among the parties to carry out the objectives of the conspiracy").
Within that object, the JCA attempted to obstruct two proceedings pending
before the IRS: collection of the George Reed tax lien and collection of
the Terry Ingram wage levy. United States v. Guzman, 852 F.2d 1117 (9th
Cir. 1988) (a single conspiracy exists where there is one overall agreement
to perform a variety of functions to achieve the objectives of the conspiracy,
and may include subgroups or subagreements).
1. George Reed Tax Dispute
The tax dispute between defendant George Reed and the IRS began in the early
1980s. The tax dispute arose from the non-payment of federal taxes on withheld
employee wages for Reed Trenching, as well as George Reed's non-payment
of personal income taxes. George Reed owed the IRS some $146,000 in unpaid,
but previously assessed, taxes. In 1989, the IRS obtained a judgment against
George Reed in the amount of $356,778.28, plus penalties and interest from
February 28, 1988. The IRS sought to enforce the judgment and on December
11, 1989, recorded an Abstract of Judgment in Stanislaus County, California,
in the amount of $416,343.32, which represented the Judgment plus penalties
and interest accumulated to date. An Attorney for the Justice Department,
Diane Noweski, represented the IRS in the court proceedings. The abstract
of judgment was a lien recorded with the Stanislaus County Recorder against
the Reed Property, located at Beckwith Road, in Modesto, California. In
defending the tax case, Reed asserted he was not required to file tax returns
or to pay tax obligations because the Internal Revenue Code did not apply
to him. Reed claimed he was a "free citizen of the Republic of California,"
not subject to the Internal Revenue Code.9
2. Involvement of the JCA
The JCA became active in the Reed tax dispute in April 1992 when Everett
Thoren, George Reed, Kendall Reed and David Ries agreed that the JCA and
Mr. Thoren would solve George Reed's tax problems. The Beckwith property
was transferred into a "religious trust" to be managed by the
JCA so that George Reed would show no income upon which taxes could be assessed
by the IRS.
George Reed and David Ries first met Everett Thoren at a meeting in San
Jose, California, at which Everett Thoren, a self-proclaimed "free
citizen of the republic of Oregon,10 described the Juris Christian Assembly,
a tax protest organization. Thoren claimed the JCA was a tax exempt religious
organization and individuals could avoid payment of income taxes by transferring
their assets in trust to the JCA. Everett Thoren espoused the illegality
of United States tax laws and the JCA advocated changing constitutional
government under Articles I and II of the State Constitution.
George Reed invited Thoren to live on the Beckwith Property to facilitate
the efforts to end Reed's tax problems and long struggle with the IRS. Everett
Thoren accepted the offer and moved to Modesto in April, 1992. George Reed
transferred the Beckwith Property in trust to the JCA on April 29, 1992.
The conspiracy commenced on or about April 1, 1992.
David Ries operated a business on the Beckwith property. He drafted "legal
documents" for the JCA. Ries was more overt in his activities. Others
who congregated at Beckwith Road did not agree with Ries' confrontational
methods.
Alice Hopper began working as a secretary for Everett Thoren and the JCA
in 1992. The JCA offices were located on the Beckwith property. Ms. Hopper
believed in the sentiments espoused by Thoren and the JCA and gave substantial
assistance in preparing and/or mailing various documents to IRS agents as
well as various other federal and state offices and officers, and private
entities, regarding both the George Reed tax lien and the Ingram wage levy.
Ms. Hopper was aware of the JCA Trust and, by her work, assisted a number
of individuals who transferred assets to Thoren and the JCA to evade the
payment of United States income taxes.
Ms. Mallen and Mr. McKendrick moved onto the Beckwith property in 1992 at
the invitation of David Ries, with George Reed's permission. Although McKendrick
frequently visited the JCA's offices for coffee, he disagreed with Everett
Thoren's theories and was not a member of the JCA. Ms. Mallen was not a
member of the JCA.
3. Terry Ingram Wage Levy Tax Issue
In February 1992, Terry Ingram was encouraged by Judy Hatfield, a friend
of Ries', who also helped JCA work at the Beckwith Road property, to transfer
his assets to the JCA for the purpose of avoiding payment of previously
assessed and future income taxes. Hatfield testified she told Ingram he
could avoid paying taxes by filing a declaration of non-citizenship. Hatfield
introduced Ingram to Everett Thoren, who explained to Ingram the JCA "religious
trust" concept to avoid payment of federal income taxes. The JCA agreed
to assist Ingram in defeating the collection of his tax obligations.
Everett Thoren, Ingram, or other JCA members prepared and filed false W-4
statements with the IRS claiming Ingram was a foreign citizen in April,
1992. Such statements were made under oath and/or penalty of perjury. The
JCA also mailed a request dated April 9, 1992 to have Ingram's past social
security contributions refunded to him, again claiming Ingram was not a
United States citizen. Ingram declared himself a free citizen of the Republic
of California, not subject to the tax laws or obligations of the United
States.
In June 1993, Ingram received a notice from the IRS from agent Mary Ryan,
that he owed back taxes and notice that a wage levy was being placed by
the IRS on Ingram's earnings payable to him by Modesto Toyota for his work
as an independent contractor.
In August 1993, David Ries and Steiner (although some defendants contend
it was Roger Knight) went to Modesto Toyota and demanded that accounting
manager, Sharon Mein, remove the IRS wage levy on Ingram's earnings. Ries
presented a false identification which represented that he was an agent
for the United States House Banking Committee. Ms. Mein photocopied the
identification card and it was introduced into evidence during the trial.
When Mein refused to release the wage levy, Ries became angry, slammed his
fist on her desk in a threatening manner and addressed Ms. Mein pejoratively
as a "bitch," and told her she "didn't know who she was dealing
with."
Defendants Knight, Mallen, McKendrick, Ries, and Hopper prepared, signed
and sent a "warrant of arrest" to IRS agent Mary Ryan and other
documents intended to deter Mary Ryan from collecting Ingram's taxes. Aside
from living on the Beckwith property, the only evidence adduced at trial
of Mallen's involvement was her signature as a member of the "Court
of Conscience" on the warrant of arrest mailed to Mary Ryan. Although
Mr. McKendrick disagreed with Everett Thoren and did not subscribe to the
JCA's beliefs, he signed the warrant of arrest sent to Mary Ryan as a member
of the "Court of Conscience" with three others besides Mallen.
Alice Hopper signed proofs of service for the arrest warrant sent to Mary
Ryan and mailed the packet of documents. Ms. Ryan testified that upon receiving
the warrant she feared she would be arrested or otherwise taken into custody.
Knight and Ingram also prepared or signed two false and valueless financial
warrants which were presented to the IRS as payment of Ingram's wage levy.
The financial warrants were "drawn" under the "Article I
and II government" which the JCA purportedly represented. The warrants
were sufficiently credible in appearance to cause the IRS to credit Ingram
for any back tax liability. It was not until after Mary Ryan received the
warrant for her arrest, that she checked Ingram's tax account record which
showed his tax obligation had been satisfied. When further investigation
determined the financial warrants satisfying Ingram's tax obligation were
valueless, she ordered Ingram's tax liability reinstated.
4. George Reed/Beckwith Property Tax Lien Issue
Upon the instructions of Everett Thoren, and the direct and indirect help
of JCA members Hopper, Knight, Ries and others, around April 1992 George
Reed sought to have the $416,343.32 tax lien released from the Beckwith
Property. JCA members mailed threats to the Stanislaus County Recorder,
Karen Mathews, and Diane Noweski, the United States Department of Justice
attorney representing the IRS against George L. Reed. JCA members also visited
the Stanislaus County Recorder demanding the Reed tax lien be released from
the property, presented false financial warrants to attempt to discharge
the IRS lien, and physically assaulted Karen Mathews, all in an effort to
defeat or avoid payment of the lien amount.
George Reed had engaged in obstructive conduct for years to prevent the
Reed Property from being sold to satisfy his outstanding tax debt. Hopper
prepared or assembled documents for JCA members to sign which she knew or
should have known were false or fictitious or threatening, and were prepared
by the JCA to prevent the satisfaction of George Reed's tax liability. JCA
members signed the documents placed out on a counter in the Beckwith Road
JCA office for signature by Hopper. Mr. McKendrick's signature appears on
two documents sent to Diane Noweski, the United States Justice Department
attorney who prosecuted the tax case against George Reed. Mr. McKendrick's
name also appears in Roger Steiner's notebook found during a search of one
of Steiner's trailers in Oregon.
Kendall Reed, Knight, George Reed, and Everett Thoren all went to the Stanislaus
County Recorder's office at various times in 1992, 1993, and early 1994,
demanding the tax liens on the Beckwith property be removed. On one occasion,
a box was placed under the County Recorder's car, containing an object,
to simulate a pipe bomb, with the word "boom" written on it. In
another, a letter was mailed to the County Recorder which stated that unless
the lien was removed, the Recorder would be an "example" to all
other recorders in the state of California. In still another incident, the
County Recorder received a bullet in a letter delivered to her residence.
The accompanying note threatened that unless the liens were removed, the
next bullet would be for her.
In late 1993, Roger Steiner, who was living in Baker, Oregon, was observed
in Grass Valley, California. Mr. Steiner was known to Everett Thoren, through
an Oregon acquaintance the two shared.11 A witness, Anthony Dalglish, testified
he heard Knight, George Reed and Kendall Reed discussing at Knight's residence,
bringing someone from Oregon to deal with "the problem." Dalglish
did not know what was meant by "the problem." The jury convicted
Steiner for traveling from Oregon to Modesto for the purpose of carrying
out the intimidation of and physical assault on Karen Mathews.
On January 30, 1994, Steiner gained entry into Mathews' garage and waited
for her to return home. After Mathews parked her car in the garage and closed
the garage door, Steiner attacked her, inflicting physical and psychological
injury. Up until the assault of Karen Mathews, the JCA's methods of carrying
out the conspiracy did not involve actual, physical violence.
5. Frustration of the Conspiracy
After the confrontation of Sharon Mein at Modesto Toyota by Ries and Steiner,
Ingram became disillusioned with the JCA and its methods. He began to remove
himself from the JCA, it took several months after August 1993 for Ingram
to disassociate himself from the JCA. Ingram ultimately left California
in early 1994 to return to Pennsylvania.
After the Mathews assault, the FBI increased its investigation efforts with
respect to the JCA. In early 1994, the JCA moved its offices from the Beckwith
property to Hopper's apartment. The JCA's records were stored by Hopper
in her apartment.
Mallen and McKendrick left the Beckwith property in 1995.
Everett Thoren died in April 1995. He is an unindicted coconspirator.
V. SENTENCE RECOMMENDATION BY PROBATION OFFICE
The United States Probation Office utilized the May 1997 version of the
USSG to calculate the sentencing ranges for each of the defendants.12 As
to the Count One conspiracy, the Probation Office stated:
Base Offense Level: The guideline for a violation of 18 USC 371, Conspiracy,
is found at USSG § 2T1.9, Conspiracy to Impede and Impair, Obstruct
or Defeat Tax. USSG § 2T1.9 advises the base offense level is to be
determined from 2T1.1 or 2T1.4 as appropriate. USSG § 2T1.4, Aiding,
Assisting, Procuring, Counseling or Advising Tax Fraud is most appropriate
and advises the base offense level is based on the Tax Table at 2T4.1 in
an amount corresponding to the tax loss. According to the Tax Table at USSG
§ 2T4.1, if the total loss is more than $325,000 but less than $550,000,
the base offense level is 17. In this case, the lien placed against the
Beckwith properties owned by the Reed family trust was in the amount of
$416,343. The loss should also include the fraudulent financial warrants
in the amount of $13,789.42 the JCA used to attempt to lift the wage levies
imposed against Terry Ingram by the IRS. The actual tax loss to the government
is the IRS tax lien amount which originated from the Reeds' business, "Reed
Trenching," and the amount of the fraudulent financial warrants used
by JCA in an attempt to get the wage levies placed against defendant Ingram,
under a failure to pay Federal Withholding and Federal Insurance Contribution
Act taxes, removed. Pursuant to USSG § 2T4.1(L), because the loss is
in excess of $325,000, however, less than $550,000, the base offense level
is 17. Therefore the base offense level of 17 is recommended.
Specific Offense Characteristics: None.
Victim-Related Adjustments: USSG § 3A1.2 allows for a three-level increase
in the base offense level if the victim was a Government office or employee.
In this case, the conspirators sent to the IRS an arrest warrant for IRS
agent Mary Ryan. . . . Because the IRS agent is an official victim, a three
level increase is recommended.
VI. SENTENCING ISSUES RAISED BY THE COURT
On September 11, 1997, the court issued an Order re Count One Sentencing
Issues, which was served on all the parties. The Order outlined common issues
as to all defendants with respect to the conspiracy conviction that the
court must consider in determining each defendants' individual sentence.
The parties responded to the Order in briefs and a hearing was held September
29, 1997 to permit further argument as to the common sentencing issues.
The issues raised in the Order are addressed below in no particular order.
A. Version of the Guidelines to Apply to Count One.
Ordinarily the court applies the Guidelines in effect at the time of sentencing.
18 U.S.C. § 3553(a)(4); United States v. Warren, 980 F.2d 1300, 1304
(9th Cir.) (district court applies the Guidelines in effect at sentencing),
cert. denied, 510 U.S. 950, 114 S. Ct. 397, 126 L.Ed.2d 344 (1993); United
States v. Mapp, 990 F.2d 58, 61 (2d Cir. 1993) (same).
However, when the later set of Guidelines would subject a defendant to a
harsher penalty than the earlier applicable Guidelines, constitutional ex
post facto concerns arise. See United States Constitution, Art. I, §
9.
To fall within the Ex Post Facto prohibition, two elements must be present:
"first, the law must be retrospective, that is, it must apply to events
occurring before its enactment; and second, it must disadvantage the offender
affected by it." Miller v. Florida, 482 U.S. 423, 430, 107 S. Ct. 2446,
2451, 96 L.Ed.2d 351 (1987) (quotations omitted).
[¶] The Ex Post Facto Clause "forbids the imposition of punishment
more severe than the punishment assigned by law when the act to be punished
occurred." Weaver v. Graham, 450 U.S. 24, 30, 101 S. Ct. 960, 965,
67 L.Ed.2d 17 (1981).
Hamilton v. United States, 67 F.3d 761, 764-65 (9th Cir. 1995).13
When the ex post facto clause is violated, the defendant must be sentenced
under the Guidelines as they existed at the time the offense is committed.
Hamilton, 67 F.3d at 765; United States v. Garcia-Cruz, 40 F.3d 986 (9th
Cir. 1994) (on remand district court applies Guidelines in effect on date
of original sentencing where amended Guidelines results in increased sentence);
United States v. Seligsohn, 981 F.2d 1418, 1424 (3d Cir. 1992);14 see also
USSG 1B1.11(b)(1) (1997) ("if the court determines that use of the
Guidelines in effect on the date that the defendant is sentenced would violate
the ex post facto clause of the United States Constitution, the court shall
use the Guidelines Manual in effect on the date that the offense of conviction
is committed.")
Under the general rule, the 1997 USSG are utilized to calculate defendants'
sentences under Count One. Under ex post facto concerns, if the 1997 Guidelines
impose harsher penalties on defendants for criminal activity for which they
were convicted, then the Guidelines in effect at the commission of the offense
determines the appropriate Count One sentences base offense level.15 Here,
the question of the correct version of the Guidelines to apply is further
complicated because conspiracy is a continuing offense.
The defendants contend the most favorable set of Guidelines in effect during
the life of the conspiracy applies. Ries argues, and McKendrick agrees,
if § 2T1.9(a)(1) is utilized to determine defendants' base offense
levels, then the 1992 Guidelines, which provides a more favorable base offense
level under the tax tables must apply. Ingram argues he engaged in no relevant
conduct after the 1993 Guidelines amendments to the tax table, and for that
reason, should be sentenced under the 1992 Guidelines.
The defendants' arguments are rejected, because the facts proved the conspiracy
continued beyond November 1, 1993, the effective date of the 1993 Guidelines
amendments. Cf. 1B1.11(b)(3) ("if the defendant is convicted of two
offenses, the first committed before, and the second after, a revised edition
of the Guidelines Manual became effective, the revised edition of the Guidelines
Manual is to be applied to both offenses.") (1997).
The Ninth Circuit's decision in United States v. Ortland, 109 F.3d 539 (9th
Cir. 1997), is instructive. Ortland was convicted for mail fraud and appealed
his conviction and sentence. The scheme, which spanned from August 1986
to July 1990, involved defrauding investors of a partnership. Ortland contended
his former wife, who fled before trial, had hidden facts pertaining to wrongdoing
from him. However, several former employees testified Ortland had taken
money from the partnership, although no such right was specified in the
partnership agreement, and ultimately helped to divert almost $1.5 million
from the partnership's accounts. Ortland argued his sentence under the 1989
Guidelines violated the ex post facto clause because it increased the penalty
for his conduct, most of which occurred prior to the amendment.16 The Ninth
Circuit agreed in part:
When a law has retrospective application which disadvantages the offender
affected by it, its application is prohibited by the ex post facto clause.
Therefore, when application of a version of the Guidelines enacted after
the offense leads to a higher punishment than would application of the Guidelines
in effect at the time of the offense, there is an ex post facto problem.
We hold that application of the 1994 version of § 2F1.1 to Ortland's
pre-December, 1989 conduct disadvantaged Ortland and created an ex post
facto violation, as to those counts. Even if the later offenses are sentenced
at the higher level, that does not undercut the fact that the earlier offenses
cannot be.
109 F.3d at 546 (internal citations omitted). The Court also noted:
We have required all single-count conduct to be sentenced under a single
Guidelines manual. United States v. Warren, 980 F.2d 1300, 1306 (9th Cir.
1992). Clearly, the Sentencing Commission agrees with that approach. See
USSG § 1B1.11(b) (2) (adopted for sentences on or after November 1,
1992). We have also required that all continuing offenses be sentenced under
one Guidelines manual: the later one. See United States v. Morales, 11 F.3d
915, 197 (9th Cir. 1993).
However, we have applied more than one Guidelines manual to multiple counts
involving offenses completed at different times, and we must do so in this
case. See Castro, 972 F.2d at 1112. In Castro, . . . [w]e held that the
1989 Guidelines were properly applied to the conspiracy count, because conspiracy
is a continuing offense and at least some of the conspiracy's acts occurred
after the amendment. On the other hand, we reversed and remanded for sentencing
under the 1988 Guidelines of the three earlier possession counts. We suggested
than use of the 1989 Guidelines violated the ex post facto clause.
109 F.3d at 546-47 (emphasis added).
Defendants' argument that their acquittals of substantive offenses bars
a later application of the Guidelines is also without merit. In United States
v. Brady, 928 F.2d 844, 850-52 (9th Cir. 1991), the Ninth Circuit concluded
the sentencing court may not reconsider facts necessarily rejected by the
jury's not guilty verdict. This approach to sentencing was overruled by
the Supreme Court in Koon v. United States, -- U.S. --, 116 S. Ct. 2035,
135 L.Ed. 2d 392 (1996). The Ninth Circuit expressly recognized that Brady
was overruled in United States v. Sherpa, 110 F.3d 656, 661 (9th Cir. 1996)
("[w]e now hold that the approach we took in Brady is overruled"),
concluding the district court correctly reconsidered facts rejected by the
jury in deciding whether to apply the safety valve provision (18 U.S.C.
§ 3553(f)) to depart below the mandatory minimum sentence for drug-related
offenses of which the defendant was convicted based on circumstantial evidence,
rather than evidence of actual knowledge.
Finally, none of the defendants legally withdrew from the conspiracy so
as to limit their sentencing liability to the pre-1993 Guidelines. During
the life of a conspiracy, the Guidelines may be amended several times. In
United States v. Inafuku, 938 F.2d 972, 974 (9th Cir.), cert. denied, 502
U.S. 1034, 112 S. Ct. 877, 116 L.Ed.2d 782 (1992), the court held that because
the agreement to participate in a conspiracy occurs not only at the point
of entry into the conspiracy but also on an ongoing basis until withdrawal
or cessation of the conspiracy, it does not violate the prohibition against
ex post facto laws to apply the standards in effect when the conspiracy
terminates.
In United States v. Stanberry, 963 F.2d 1323 (10th Cir. 1992), the Tenth
Circuit affirmed the district court's decision to sentence the defendant
under an amended Guidelines although the majority of the conspiratorial
acts occurred under less harsh Guidelines. Only one act of the conspiracy
occurred under the new Guidelines. The court stated:
When a conspiracy begins during a period where the application of certain
Guidelines would be controlling and extends into a period when another Guideline
application would be appropriate, there is no violation of the ex post facto
clause in applying the Guidelines in effect at the time of the last act
of the conspiracy.
963 F.2d at 1327 (Citations omitted, emphasis added).
The Stanberry principle is generally followed by the Ninth Circuit. In United
States v. Stoddard, 111 F.3d 1450 (9th Cir. 1997), the court recognized
that "the time period of a conspiracy is determined not by the dates
alleged in the indictment, but by the evidence adduced at trial." 111
F.3d at 1454 n. 4 (citing Guzman, 852 F.2d at 1120); United States v. Lurz,
666 F.2d 69, 74 n. 3 (4th Cir. 1981), cert. denied, 455 U.S. 1005, 102 S.
Ct. 1642, 71 L.Ed.2d 874 (1982).
United States v. Robertson, 73 F.3d 249 (9th Cir. 1996), is one of the few
cases found where a straddling offense did not result in sentence under
the later Guidelines. Robertson was convicted for his involvement in a RICO
enterprise. The enterprise began prior to the Guidelines and continued after
their November 1, 1987 effective date. The sentencing court denied the government's
request to sentence under the Guidelines. The Ninth Circuit affirmed this
decision, recognizing that a continuing course of criminal conduct straddles
the Guidelines could be sentenced under the Guidelines; United States v.
Kohn, 972 F.2d 294, 298 (9th Cir. 1992); United States v. Castro, 972 F.2d
1107, 1112 (9th Cir.), cert. denied, 507 U.S. 944, 113 S. Ct. 1350, 122
L.Ed.2d 731 (1993); however, the government failed to tie any post-guidelines
conduct to an investment or operation of the RICO enterprise. Id. Accordingly,
Robertson could not be sentenced under the USSG.
The evidence establishes that the last overt act in furtherance of the conspiracy
was the Karen Mathews assault on January 30, 1994. Ingram moved back to
Pennsylvania later in 1994. In November and December 1993, George Reed,
Kendall Reed, and Everett Thoren all, separately entered the Stanislaus
County Recorder's office and demanded that the lien on the Reed Property
be removed. Knight had entered the Recorder's Office on earlier occasions,
Ms. Matthews testified George L. Reed was in her office in January, 1994.
Steiner traveled from Oregon to California to "teach" Karen Mathews
a "lesson," on account of her prior refusals to take the IRS lien
off the Beckwith property. The purpose of the planned attack was to further
the overall goal of the conspiracy-to impede or obstruct the IRS, i.e.,
defeat the collection of taxes by sale of the real property. Mallen and
McKendrick left the Beckwith property in 1995, however, there is no evidence
of any conduct or activity by them or any other coconspirator after February
1994. Everett Thoren died in the Spring of 1995. The evidence shows affirmative
conduct was undertaken by some members in furtherance of the conspiracy
after the November 1, 1993, effective date of the 1993 Amendments to the
USSG.
It is also disingenuous for defendants to argue that they disassociated
from the JCA prior to the Mathews attack, in an effort to have an earlier
version of the Guidelines apply to them.17 When one agrees to join a conspiracy,
he or she agrees to all acts that have been or will be committed by the
conspiracy, and is responsible for those acts regardless of his role in
their commission. United States v. Inafuku, 938 F.2d 972, 974 (9th Cir.),
cert. denied, -- U.S. --112 S. Ct. 877 (1992). Under the Guidelines, a defendant
can be sentenced for any acts undertaken by coconspirators that are reasonably
foreseeable and done in furtherance of the conspiracy. § 1B1.3; United
States v. Conkins, 987 F.2d 564, 572-73 (9th Cir. 1993). The limit on vicarious
liability is foreseeability. For other reasons, however, all conspiracy
conduct is not foreseeable to all defendants and cannot be considered as
to all defendants for determining their sentences. The evidence does not
show that Hopper, Mallen, McKendrick, or Ingram condoned or discussed violence,
ever employed violence, or that they had reason to foresee violence would
be used. Although the evidence established Karen Mathews advised law enforcement
of the threats against her, there was no evidence these threats were publicized
or communicated to Hopper, Mallen, McKendrick or Ingram.
Ingram sought to distance himself from the conspiracy by requesting the
return of his assets and by ultimately moving to Pennsylvania. Although
the Ninth Circuit has not ruled on the issue, the Seventh Circuit determined
geographic removal from an unlawful conspiracy does not constitute legal
withdrawal from the conspiracy. United States v. Bullis, 77 F.3d 1553 (7th
Cir. 1996).
Bullis and others were convicted for conspiring to fix milk prices in Indiana
school districts in violation of the Sherman Act. The conspiracy lasted
from 1985 to 1992. Bullis, however, left the Indiana dairy industry in July
1989, relocating to Florida. Bullis challenged his sentence under the 1993
USSG as an ex post facto clause violation. Bullis asserted his relocation
to Florida was a withdrawal from the conspiracy. The district court rejected
this argument, instead finding Bullis remained a conspirator until 1992
because he communicated with coconspirators after moving to Florida. Bullis
could be sentenced for acts of coconspirators reasonably foreseeable to
him and in furtherance of the conspiracy. 77 F.3d at 1562-64.
Likewise, Ingram did not effectively withdraw from the JCA conspiracy simply
by returning to Pennsylvania. It is well-established that when a criminal
conspiracy exists, the cessation of criminal activity by a conspirator without
more is not enough to constitute withdrawal. United States v. Castro, 972
F.2d 1107, 1112 (9th Cir.), cert. denied, 113 S. Ct. 1350 (1993). A conspirator
can withdraw from a conspiracy in at least three ways: (1) by disavowing
the unlawful goal of the conspiracy; (2) by affirmatively acting to defeat
the purpose of the conspiracy; or (3) by taking "definite, decisive,
and positive" steps to disassociate himself from the conspiracy. Lothian,
976 F.2d at 1261; United States v. Loya, 807 F.2d 1483, 1493 (9th Cir. 1987);
United States v. Smith, 623 F.2d 627, 631 (9th Cir. 1980); United States
v. Juodakis, 834 F.2d 1099, 1102 (1st Cir. 1987). There must be evidence
either of a full confession to authorities or a communication by the accused
to his co-conspirators that he has abandoned the enterprise and its goals.
Juodakis, 834 F.2d at 1102.
"To punish a defendant simply because of his relationship to guilty
parties is the height of injustice." United States v. Reese, 2 F.3d
870, 890 (9th Cir. 1990). Here, the evidence shows Mr. Ingram communicated
his withdrawal from the JCA by requesting return of his property and leaving
California. He testified he no longer wished to be associated because he
disagreed with David Ries' methods. It is not apparent Mr. Ingram communicated
his disillusionment with the JCA to law enforcement or to the JCA leader,
Mr. Thoren. Ninth Circuit authority squarely holds that a conspirator who
takes steps to defeat the object of a conspiracy or otherwise withdraw from
the conspiracy can escape liability only for the underlying substantive
offense, and not for the conspiracy itself. Lothian, 976 F.2d at 1262 ("[o]nce
an overt act has taken place to accomplish the unlawful objective of the
agreement, the crime of conspiracy is complete and the defendant is liable
despite his later withdrawal.") Accordingly, because all defendants
participated in the unlawful agreement to obstruct or impede the collection
of revenue by the IRS with the intent of frustrating the tax code, it is
not improper to sentence all defendants for the Count One conspiracy under
the 1993 version Guidelines.
B. Guidelines Section Most Applicable to the Conspiracy
Guidelines § 1B1.2 instructs the court to determine the offense guideline
from Chapter Two (Offense Conduct) that is most applicable to the offense
of conviction, i.e., the offense conduct charged in the indictment of which
the defendant was convicted. USSG § 1B1.2(a) (1993). Appendix A provides
statutory references for each Guidelines section. If a statutory reference
is inappropriate because of the offense conduct involved, the Guidelines
section most applicable given the nature of the offense conduct is to be
used to calculate the base offense level. Id. App. Note 1.
Cross-referencing the charged offense, 18 U.S.C. § 371, with the statutory
references in Appendix A, provides four Guidelines sections. Of these, §
2X1.1, general conspiracy, and § 2T1.9, conspiracy to violate tax laws,
are the more relevant Guidelines. USSG, Appendix A (1993).
The Guideline § 2X1.1 refers the court to the underlying substantive
offense in order to determine the base offense level for the conspiracy.18
The substantive offense means the "offense that the defendant was convicted
of conspiring to commit." USSG § 2X1.1, App. Note 2 (1997). The
substantive offense charged was conspiracy to commit an offense against
the United States, 18 U.S.C. § 371, with the object of this conspiracy,
18 U.S.C. § 1505,19 impeding or obstructing the lawful proceedings
of the IRS. Cross-referencing this offense with Appendix A, leads to guideline
§ 2J1.2,20 which some of the defendants contend provides the applicable
base offense level.
The conspiracy to which § 2T1.9 applies,21 as stated in the commentary,
are "conspiracies to defraud the United States by impeding, impairing,
obstructing and defeating . . . the collection of revenue. United States
v. Carruth, 699 F.2d 1017, 1021 (9th Cir. 1983), cert. denied, 464 U.S.
1038 (1984)." App. Note 1 (1993). The base offense level from §
2T1.1 or § 2T1.4 relate to violations of the tax laws, including 26
U.S.C. § 720122 and 26 U.S.C. § 7206.23 The government elected
not to charge defendants with violation of any of these statutes.
1. Elements of the Relevant Offenses
The offense "obstruction of proceedings" chargeable under 18 U.S.C.
§ 1505 has three essential elements. United States v. Price, 951 F.2d
1028, 1031 (9th Cir. 1991). First, there must be a proceeding pending before
a department or agency of the United States. See United States v. Sutton,
732 F.2d 1483, 1490 (10th Cir.), cert. denied, 469 U.S. 1157, 105 S. Ct.
903, 83 L.Ed.2d 919 (1985). Second, the defendant must be aware of the pending
proceeding. See id. Third, the defendant must have intentionally endeavored
corruptly to influence, obstruct or impede the pending proceeding. See United
States v. Laurins, 857 F.2d 529, 536-37 (9th Cir.), cert. denied, 492 U.S.
906, 109 S. Ct. 3215, 106 L.Ed.2d 565 (1989). "The obstruction need
not be successful; the jury may convict one who 'endeavors' to obstruct
such a proceeding." United States v. Vixie, 532 F.2d 1277, 1278 (9th
Cir. 1976).
The offense of tax evasion, chargeable under 26 U.S.C. § 7201, includes
only one offense which can be committed either by evading assessment or
evading payment. United States v. Mal, 942 F.2d 682, 686 (9th cir. 1991)
("Nothing in the text of § 7201 suggests that Congress intended
to define two distinct crimes. The statute prescribes evasion of assessment
("to evade or defeat any tax") and evasion of payment ("or
the payment thereof") in a single sentence and imposes a single penalty
for either act, a construction which indicates that Congress did not mean
to create more than one offense"; Sansone v. United States, 380 U.S.
343, 354 (1965). However, under either type of evasion, the government must
prove: (1) the existence of a tax deficiency; (2) willfulness; and (3) an
affirmative act constituting an evasion or attempted evasion of the tax.
United States v. Wood, 943 F.2d 1048, 1050 (9th Cir. 1991).
26 U.S.C. § 7206(1), filing false returns or statements, requires proof
that (1) defendant filed a return, statement, or other document that was
false as to a material matter; (2) signed the document under penalty of
perjury; (3) did not believe the document was true as to every material
matter; and (4) willfully subscribed the false document with the specific
intent to violate the law. United States v. Hanson, 2 F.3d 942, 945 (9th
Cir. 1993).
Finally, the elements of the offense aiding and abetting the preparation
of a false tax return under 26 U.S.C. § 7206(2) are: "(1) the
defendant aided, assisted, or otherwise caused the preparation and presentation
of a return; (2) the return was fraudulent or false as to a material matter;
and (3) the act of the defendant was willful." United States v. Salerno,
902 F.2d 1429, 1432 (9th Cir. 1990). Willfulness is established by showing
defendant (1) acted with bad purpose or evil motive, or (2) voluntarily
and intentionally violated a known legal duty. United States v. Kellogg,
955 F.2d 1244, 1248 (9th Cir. 1992). Willfulness may be proved circumstantially.
Id. (defendants creation of fictitious deductions sufficient to show wilfulness
under tax laws because defendant knew of duty not to defraud IRS); United
States v. Conforte, 624 F.2d 869, 875 (9th Cir. 1980).
2. Analysis
Defendants contend Guidelines § 2J1.2, derived from § 2X1.1, applies
to this conspiracy. Defendants assert the offense of conviction was a conspiracy
to obstruct the IRS by means which violate 18 U.S.C. § 1505. Hopper
argues § 2J1.2 fairly encompasses the offense of which defendants were
charged, and in some cases convicted, in the indictment.24 The defendants
contend the evidence establishes by a preponderance that defendants sought
prevent or interfere with the IRS's ability to collect a tax which had already
been determined. Some defendants also argue the tax guidelines should not
be applied because they were not allowed to present evidence at trial regarding
a good faith belief that they were complying with the tax laws.25 This is
not a good faith argument because defendants called an expert and contested
the validity of the Ingram tax liability.
The government asserts, however, to sentence defendants under Guideline
§ 2J1.2 for simple obstruction fails to account for the acts committed
by defendants during and in furtherance of the conspiracy to obstruct the
collection of revenue due and owing to the federal government. The government
refers to the Application Notes to § 2X1.1, which require use of the
most appropriate Guidelines section when the conspiracy is covered by another
section, to contend the proper guideline is § 2T1.9. The government
asserts the evidence shows the JCA provided assistance to members for the
purpose of preventing the IRS from collecting taxes due and successfully
impeded or obstructed payment to the IRS of more than $420,000 in tax obligations.
The government distinguishes defendants' reliance on Hanson, 2 F.3d 942,
stating the Ninth Circuit's holding rested on the fact that § 2T1.9
is reserved for concerted activity.26
In Van Krieken, 39 F.3d 227 (9th Cir. 1994), the court held that the obstruction
Guidelines applied to offense conduct, the purpose of which was to defeat
the collection of tax by the IRS. There, the defendant was convicted for
filing false returns in violation of 26 U.S.C. § 7206(1) and interference
with the administration of the revenue laws in violation of 26 U.S.C. §
7212(a). Van Krieken had a long history of disagreements with the IRS regarding
his tax obligations. He had been assessed tax deficiencies for multiple
years and refused to file returns and to complete tax forms required to
be filed by his employers. After his conviction at a bench trial, Van Krieken
was sentenced to 24 months imprisonment. He appealed, asserting that the
district court should have sentenced him under the Guidelines for fraudulent
returns, § 2T1.5. The Ninth Circuit held that based on the relevant
offense conduct-filing false Forms 1099, filing false returns and seeking
a tax levy on innocent tax payers, as well as filing a groundless lawsuit
and police theft report-the district court did not err in applying the obstruction
guideline. 39 F.3d at 231.
Van Krieken is distinguishable from the conspiracy here, because the relevant
offense conduct shows that concerted action was used by the defendants to
impede and obstruct the payment of taxes by use of unlawful acts, threats,
extortion, and fraud. To apply obstruction guidelines 2J1.1 as Hopper suggests
simply does not address the seriousness of the defendants' conduct. The
Guidelines state that conduct which must be considered to determine the
appropriate sentence includes:
(A) all acts and omissions committed, aided, abetted, counseled, commanded,
induced, procured, or willfully caused by the defendant; and
(B) in the case of a jointly undertaken criminal activity (a criminal plan,
scheme, endeavor, or enterprise undertaken by the defendant in concert with
others, whether or not charged as a conspiracy), all reasonably foreseeable
acts and omissions of others in furtherance of the jointly undertaken criminal
activity. . . .
§ 1B1.3(a)(1) (1993). Accordingly, while the conspirators agreed to
obstruct the IRS in its efforts to collect amounts due and owing from Ingram
and George Reed, the actual base offense level for each defendant must be
individually determined.
Here, a single object conspiracy was indicted and proved by direct and circumstantial
evidence. The single object was to defeat the IRS' collection of taxes,
which was carried out by a number of different overt acts, some criminal,
some not. While the overall JCA conspiracy among the defendants was to obstruct
the IRS in its efforts to collect tax amounts due and owing from Terry Ingram
and George Reed, and to wrongfully keep Ingram from paying taxes, each defendant
can only be sentenced for foreseeable acts within the scope of his or her
agreement with his or her coconspirators. See United States v. Bracy, 67
F.3d 1421 (9th Cir. 1995).
The relevant conduct proved at trial by a preponderance of the evidence
does not support the application of the more generalized obstruction Guidelines,
§ 2J1.2. Rather, the nature of defendants' conduct in furtherance of
the Juris Christian Assembly facilitated evasion of taxes, by the religious
trust and renunciation of citizenship, use of fraudulent warrants to avoid
payment of taxes, and impeding conduct to interfere with public employees
and officers' performance of their duties to stop taxes from being collected;
all of which makes application of § 2T1.9, the most appropriate Guideline,
given the charged offense, offense of conviction and relevant conduct. See,
Mal, 942 F.2d 682 (filing of a false W-4 form constitutes a sufficient affirmative
act to support a felony tax evasion prosecution).
The Ninth Circuit's recent decision in United States v. Newland, 116 F.3d
400 (9th Cir. 1997), also produces this result. In Newland, the defendant
was indicted for a money laundering and a drug conspiracy. In an unreported
opinion, the Ninth Circuit reversed Newland's convictions of the substantive
offenses and affirmed the conspiracy and money laundering convictions. See
United States v. Newland, 69 F.3d 545 (Table), 1995 WL 422515 (9th Cir.
1995).27 The district court was required to consider the amount of drugs
possessed by Newland's coconspirators in the drug offenses, which were foreseeable
in light of Newland's own involvement in assisting the conspiracy. The court
stated that the district court was not precluded from considering the quantity
of drugs trafficked in by the conspiracy although as an aider and abettor
of the drug conspiracy Newland could not be liable under Pinkerton for the
subsequent acts of the coconspirators:
Although Newland's participation in the criminal enterprise does not invoke
Pinkerton liability, Newland was found to have aided and abetted the drug
conspiracy by laundering its illicit proceeds. Accordingly, the district
court should have considered the quantity of drugs that was imported or
possessed as a direct result of Newland's acts of money laundering.
The district court must [also] consider the quantity of drugs linked to
Newland's involvement in the Guzman organization even though we reversed
his convictions on the substantive drug offenses.
Newland, 116 F.3d at 403-5. Newland also cited United States v. Diaz-Rosas,
13 F.3d 1305, 1308 (9th Cir. 1994) ("[A] defendant who is guilty of
conspiracy to possess and distribute cocaine [but not of the underlying
offenses] may properly be held accountable for any cocaine possessed or
distributed by coconspirators, so long as that cocaine was foreseeable to
him.")
The Supreme Court stated in Watts, -- U.S. --, 117 S. Ct. 633, 136 L.Ed.2d
554 (1997): "[A] jury's verdict of acquittal does not prevent the sentencing
court from considering conduct underlying the acquitted charge, so long
as that conduct has been proved by a preponderance of the evidence."
For the purposes of sentencing, foreseeable relevant conduct must be proved
by a preponderance of the evidence:
"While the inquires demanded by Pinkerton and U.S.S.G. § 1B1.3(a)(1)(B)
are similar, See United States v. Rodriguez, 67 F.3d 1312, 1324 (7th Cir.
1995), cert. denied, -- U.S. --, 116 S. Ct. 1582, 134 L.Ed.2d 679 (1996),
the standards of proof are not. Criminal liability under Pinkerton must
be proved beyond a reasonable doubt, while relevant conduct generally must
be proved by a preponderance of the evidence."
Newland, 116 F.3d at 405, n 3.
Accordingly, § 2T1.9 is the most applicable guideline for sentencing
defendants for the Count One conspiracy.
3. 2T1.9(a)(1) OR 2T1.9(a)(2)?
The next issue concerns whether the base offense level must be calculated
utilizing the Guidelines tax tables after determining the "tax loss"
under § 2T1.1 or § 2T1.4, or whether the default base offense
level of 10 is most appropriate. See USSG § 2T1.9(a) (1993). The base
offense level for § 2T1.9(a)(1) requires the application of §
2T1.1 or § 2T1.4, as appropriate, in light of the defendants' relevant
conduct. Section 2T1.9 does not expressly require a conviction under the
tax laws as a prerequisite for applying the Guidelines section.28
The government asserts § 2T1.9(a)(1) is the appropriate guideline to
apply to the conspiracy to obstruct and impede the payment of more than
$429,000 in outstanding tax assessments.29 If the entire amount of tax that
the conspiracy sought to defeat is not considered, the defendants' sentences
will not adequately reflect the true nature of the offense conduct. The
government asserts the court first determines the base offense level under
§ 2T1.9(a)(1). If the level is less than 10, then the default provision
in § 2T1.9(a)(2) applies, citing United States v. Kraig, 999 F.2d 1361
(6th Cir. 1996).30
The defendants collectively assert reference to the tax tables is not warranted
because they have neither been charged with nor convicted of the tax crimes
defined in 26 U.S.C. § 7201 or § 7206 and because the government
suffered no "tax loss." If the tax tables are applied, they contend
the tax loss is much lower than $420,000.31
In the alternative, defendants argue if § 2T1.9 applies, then §
2T1.9(a)(2) requires a base level of 10. McKendrick and Ries assert the
§ 2T1.1 Guideline refers to various forms of personal tax evasion;
§ 2T1.4 involves tax fraud. The conspiracy charged in this case only
relates to obstruction of the IRS proceedings, which is covered by neither
of these Guidelines. Because neither § 2T1.1 nor § 2T1.4 is appropriate,
they argue the base offense level 10 under the default provision must be
applied.32
Ingram also asserts no loss to the government occurred within the scope
of his agreement in the conspiracy or while he was actively associated with
the JCA. He asserts his acquittal of the Count Six charge, obstruction of
the IRS proceedings by filing a false, fictitious and valueless financial
instrument to satisfy tax obligations, is evidence that no conduct attributed
to him resulted in a tax loss.
The decision of the district court in United States v. Krause, 786 F. Supp.
115 (S.D.N.Y. 1992), is helpful. There, a tax protestor filed income tax
forms seeking a refund of $23,472,858, setting forth huge sums of money
as his earnings ($32,595,126), which were obviously fictitious. Krause filed
forms with the IRS as a protest, in furtherance of his ultimate goal of
being treated as a non-taxpayer. Krause protested the obligation to pay
taxes and whether his salary from his employer was taxable income. Following
an IRS levy on Krause's property, he began a course of conduct which resulted
in his convictions.
At sentencing, the government sought punishment under § 2T1.3(a)(1)
requiring application of the tax table; Krause sought sentencing under §
2T1.3(a)(2), the default provision. The government contended that the proper
amount of the tax loss was based on the amount asserted in Krause's tax
forms ($32,595,126) because that represented a false credit against tax.
Moreover, the government asserted that the target offense to impede or obstruct
the IRS, namely by causing confusion, had succeeded. The government asserted
that if departure was warranted because of mitigating circumstances, the
court could do so under Chapter 5 of the Guidelines. Krause contested this
calculation of the base offense level, in part relying on the Fourth Circuit's
decision in United States v. Schmidt, 935 F.2d 1440 (4th Cir. 1990), where
the tax loss was calculated as the actual loss of tax revenue to the IRS
determined from the amount of revenue that should have been collected by
the government.
The district court concluded there was no tax evasion, no tax loss and no
false tax credits involved, because no one at the IRS seriously considered
making any refunds to Krause based on these amounts. The district court
stated:
The figures stated by Krause in his tax return and forms were an obvious
exaggeration and patently fictitious. No reasonably prudent tax examiner
or IRS employee would have refunded 23 million dollars based on Krause's
return. . . . Further it is reasonable to believe that there was no actual
loss intended by the defendant. Krause was angry with the person who filed
tax liens against him. In order to hurt these people, he engaged in this
scheme to harass, frighten and confuse them. The whole scenario, although
constituting criminal acts, was an obvious fictional device of protest.
786 F.Supp. at 1156 (emphasis added). The district determined the sentence
under the default provision was appropriate.
A like result occurred in United States v. Telemaque, 934 F.2d 169 (8th
Cir. 1991). In Telemaque, the defendant was convicted of conspiring to defraud
the Untied States with an elaborate scheme under which she would file fraudulent
tax returns, claiming a refund for money reported on a Form 1099. Telemaque
claimed refunds in excess of a billion dollars. Applying Guidelines §
2T1.9, the district court determined the default provision applied. Her
offense level was increased based on her encouragement of others to violate
the tax code and because of the extent of the intended monetary loss or
disruption of the government. The Eighth Circuit affirmed, stating: "We
are convinced that the District Court's application of the guidelines was
not clearly erroneous." 934 F.2d at 171.
The circumstances warranting application of the default provision in Krause
and Telemaque, are not applicable here. The ultimate goal of the JCA conspiracy
was that the IRS would accept defendants' Article I & II fraudulent
financial warrants in satisfaction of over $420,000 in IRS tax obligations
owed by Terry Ingram and George Reed and cease further collection efforts.
To accomplish the conspiracy, defendants engaged in conduct which can reasonably
be construed as tax evasion, filing fraudulent documents under penalty of
perjury with the IRS and aiding and abetting the preparation of false documents
to interfere with or impede the collection of taxes. Defendants' acts included,
among other things: attempting to "revoke United States citizenship
by declaration of foreign citizenship, claiming to be a citizen of a "sovereign
republic state;" using a purported tax-exempt religious trust to receive
and administer assets to evade income taxes; threatening federal and state
officials both in person and using the United States mails to wrongfully
induce removal of IRS liens or levies placed on members' property or wages;
attempting to record liens on the property of IRS agents; impersonating
federal officials and demanding that private and public individuals remove
tax liens; issuing false warrants for the arrest of IRS agents; using false
and valueless financial warrants to satisfy IRS obligations; and attacking
the Stanislaus County Recorder. This conduct requires application of §
2T1.9(a)(1) to calculate the base offense levels for defendants sentences.
Accordingly, the amount of "tax loss" attributable to defendants
conduct is to be utilized as the basis for calculating defendants' base
offense levels for the Count One conspiracy.
3. Calculating the Tax Loss
The base offense level under either § 2T1.1 or § 2T1.4 is calculated
as follows:
(a)(1) Level from § 2T4.1 (Tax Table) corresponding to the tax loss;
or (2) 6, if there is no tax loss.
(1993). "Tax loss" is defined in § 2T1.1(c):
(1) If the offense involved tax evasion or a fraudulent or false return,
statement, or other document, the tax loss is the total amount of loss that
was the object of the offense (i.e., the loss that would have resulted had
the offense been successfully completed).
(2) If the offense involved failure to file a tax return, the tax loss is
the amount of tax that the taxpayer owed and did not pay.
(3) If the offense involved wilful failure to pay tax, the tax loss is the
amount of tax that the taxpayer owed and did not pay.
(4) If the offense involved improperly claiming a refund to which the claimant
was not entitled, the tax loss is the amount of the claimed refund to which
the claimant was not entitled.
(5) The tax loss is not reduced by any payment of the tax subsequent to
the commission of the offense.
(1993.) Application Note 1 provides in relevant part: "The tax loss
does not include penalties or interest." (1993.) "In determining
the tax loss attributable to the offense, the court should use as many methods
set forth in subsection (c) . . . as are necessary given the circumstances
of the particular case. If none of the methods of determining the tax loss
set forth fit the circumstances of the particular case, the court should
use any method of determining the tax loss that appears appropriate to reasonably
calculate the loss that would have resulted had the offense been successfully
completed." App. Note 1 (1993). All conduct violating the tax laws
is considered as part of the same course of conduct or common scheme unless
the evidence demonstrates that the conduct is "clearly unrelated."
App. Note 2 (1993).
The government asserts the object of the JCA conspiracy was to obstruct
the proceedings of the IRS in the collection of over $416,323 owed to the
IRS by George Reed and over $13,700 for Terry Ingram. For that reason, the
government seeks to have the guideline range represent the entire amount
sought to be obstructed. The defendants take varying positions on the amount
of the tax loss.
Aside from cases such as Telemaque where the amount of tax loss was not
based upon the erroneous amount sought to be gained by false reporting of
income in a tax return, the courts are uniform in deciding that the "actual
loss" to the government does not bear on the amount of loss determination.
See, United States v. Tandon, 111 F.3d 482, 490 (6th Cir. 1997) ("tax
loss" is based on the amount by which income is understated on the
false tax return, not whether the government ultimately lost money). This
is so because "the purpose of the guideline rules is to measure the
size of the lie, not the size of the government's loss after all corrections
in both directions." United States v. Valentino, 19 F.3d 463, 465 (9th
Cir. 1994).
In Valentino, the defendant pleaded guilty to violating § 7206(1) for
wilful underreporting of $100,000 of interest income, discovered by the
IRS after Valentino applied for a bank loan and showed annual taxable income
as substantially more than stated on tax returns. He appealed the calculation
of his sentence arguing that the sentencing judge should have allowed evidence
whether he was entitled to depreciation deductions to lower the tax loss
amount. The Ninth Circuit found no error. Offset for allowable depreciation
deductions need not be considered by the court; rather, only the amount
concealed. Id. at 464. The court noted critically:
Existence of a tax loss is not an element of these offenses. Furthermore,
in instances where the defendant is setting the groundwork for evasion of
a tax that is expected to become due in the future, he may make false statements
that underreport income that as of the time of conviction may not yet have
resulted in a tax loss.
Id. at 464-5.
Likewise, the Third Circuit has calculated tax loss based on the amount
sought to be obstructed. United States v. Pollen, 978 F.2d 78 (3d Cir. 1992).
There, the defendant plead guilty to tax evasion and the tax loss determination
at sentencing was calculated at $488,000. Pollen appealed, asserting that
if the tax loss had properly been calculated, he would have owed slightly
more than $100,000 in taxes. The Circuit Court found no error. It concluded
that the full tax debt attempted to be evaded without any credit for payments
made to the IRS could form the basis of the sentencing calculation. In footnote
29 (relied upon here by the government), the court stated in part:
Guideline section 2T1.1, Application Note 2, provides that for the purposes
of imposing sentence for violation of section 7201, the tax loss considered
cannot include interest or penalties. See U.S.S.G. § 2T1.1. While such
a limitation may be appropriate in an evasion of assessment case, it is
not always so when imposing sentence for tax evasion committed through the
evasion of payment. [¶] The Guidelines' requirement that his sentence
be calculated based on only his evasion of the . . . raw taxes owed, and
not also on his evasion of the payment of interest and penalties, fails
to reflect accurately the criminal behavior involved in this type of evasion
of payment of taxes offense.
Pollen, 978 F.2d at 91, n. 29 (emphasis added). The Fourth Circuit has also
permitted a similar calculation of tax loss. See United States v. Fleschner,
98 F.3d 155, 160 (4th Cir. 1996) (base offense level included entire amount
sought to be camouflaged by defendants under fraudulent tax scheme).33 see
also, United States v. McLaughlin, -- F.3d --, 1997 WL 572533 (3d Cir. 1997)
("including interest in computing tax loss to the government merely
recognizes the time value of money. [I]t is a rational calculation of the
real loss sustained as a consequence of a taxpayer's illegally concealing
his income from assessment. [I]t is always within the taxpayer's power to
pay the deficiency and to stop interest from accruing.")
The government's position that the entire tax loss consisting of the amount
sought to be obstructed by nonpayment of the George Reed tax lien ($416,343.32)
and the amount of the Ingram wage levy sought to be satisfied with fraudulent
financial warrants ($13,788.42), must be attributed to all defendants is
untenable. Keeping in mind the nature of the conspiracy proven was to obstruct
the collection proceedings of the IRS, which included conduct to obstruct
seizure of the Beckwith property and payment of Ingram's wage levy, the
relevant conduct and knowledge of each defendant must be considered in assessing
the tax loss.
a. Ingram Tax Levy
Each of the defendants engaged in relevant conduct which establishes their
agreement to impede the collection of Ingram's tax obligation. The amount
sought to be obstructed, i.e. the amount of loss defendants intended to
inflict, is established by the amount of the fraudulent financial warrants
they issued and delivered to the IRS. That amount was proved to be $13,788.42.
The base offense level for this amount is 11. See § 2T4.1(F) (applies
to amounts more than $13,500 and less than $23,500). Although all defendants
were linked to the JCA by their common contact with Everett Thoren, the
evidence showed that Mallen, McKendrick, Ingram, Hopper, Knight, Ries and
Steiner all engaged in overt acts to impede the collection of Ingram's tax.
Additionally, this amount is properly attributed to George and Kendall Reed
because they knew the purposes of the JCA, George L. Reed provided the Reed
family property to facilitate the unlawful activities of the JCA, and their
conduct was jointly undertaken to obstruct the IRS' efforts to collect tax
liabilities and they could reasonably foresee that their coconspirators
were acting to defeat the tax liabilities of others including Ingram.
b. Reed Tax Lien
Everett Thoren, Ries, Knight, Steiner, and George and Kendall Reed, by their
conduct and words agreed to obstruct the collection of George Reed's tax
obligation. The amount of the outstanding obligation which they sought to
obstruct, is the amount of the Abstract of Judgment, $416,343.32. Although
the underlying tax amount was originally $146,000, if only this amount is
considered in the calculation of defendants' base offense levels, the defendants
will have succeeded in obstructing the collection proceedings of the IRS
without responsibility for the full amount of the liability and tax lien.
Moreover, the amount they intended to defeat was the $416,343.32 lien, which
was recorded against the Reed property prior to 1992.
As to defendants Mallen and Ingram, the government failed to show they participated
in the conspiracy to obstruct this larger amount. More than presence or
convenience in living arrangements must be shown in order to permit calculation
of these defendants' guideline sentencing offense levels for the amount
of the Reed taxes. The evidence did not establish that Mallen or Ingram
had knowledge of or participated in the conduct to defeat the tax lien on
the Reed property.
As to McKendrick, his signature appears on two documents sent to Diane Noweski
regarding the Beckwith property. This issue will be treated separately at
his sentencing. As to Hopper, her claim that merely signing a proof of service
does not evidence knowledge or acquiescence in the contents of the document
that is being served is without merit, is belied by the extent her overall
involvement in the JCA conspiracy. She is the person who worked most closely
with Everett Thoren. She knew his philosophies and the manner and means
by which he utilized the purported religious trust. Hopper, despite her
assertions, was well aware of the JCA's goals and the means or methods utilized
to attain that purpose. The evidence also showed that after the JCA left
the Beckwith property, it continued to operate from her apartment, where
all JCA records and accounts were maintained. She is chargeable with knowledge
of the amount of the tax sought to be obstructed by the JCA's conduct and
will be held accountable for the Reed tax liability.
The base offense level for these latter defendants is 17. See § 2T4.1(L)
(applies to amounts more than $325,000 and less than $550,000).
D. Special Offense Characteristics Under § 2T1.9(b)
The special offense characteristics under § 2T1.9(b) instruct the court
to apply the greater, if applicable:
(1) if the offense involved the planned or threatened use of violence to
impede, impair, obstruct, or defeat the ascertainment, computation, assessment
or collection of revenue, increase by 4 levels.
(2) if the conduct was intended to encourage persons other than or in addition
to the co-conspirators to violate the internal revenue laws or impede, impair,
obstruct, or defeat the ascertainment, computation, assessment, or collection
of revenue, increase by 2 levels. Do not, however, apply this adjustment
if an adjustment from § 2T1.4(b)(1) is applied.
USSG 1993.
The special offense characteristic in § 2T1.4(b)(1) does not apply.
The offense characteristics in § 2T1.4(b)(1) applies to tax preparers
or persons who derive substantial income from the failure to report.
Only the special offense characteristics in § 2T1.9(b) are considered.
Application Note 4 under § 2T1.9(b) states "subsection (b)(2)
provides an enhancement where the conduct was intended to encourage persons,
other than the participants directly involved in the offense, to violate
the laws (e.g., an offense involving a "tax protest" group that
encourages persons to violate the tax laws. . . .)" (1993). Because
the special offense characteristic in § 2T1.9(b)(1) provides a greater
increase, it will be considered first.34
Section 2T1.9(b)(1) does not expressly provide that the victim of the threats
be a government official. "Planned or threatened use of violence"
to impede the collection of revenue can occur even without threats being
made to the government. For instance, if a witness has knowledge of a conspiracy's
obstructionist activities and is threatened by members of the conspiracy
if he or she informs law enforcement authorities of the obstruction, the
special offense characteristic would be applied.
The four level increase applies to George Reed, Kendall Reed, Knight, Ries
and Steiner with respect to the several threats to harm the Stanislaus County
Recorder because she refused to remove the lien from the Beckwith property.
All of these individuals threatened or actually used violence in carrying
out the purposes of the conspiracy. Defendants placed a false bomb under
the County Recorder's car, mailed a bullet to her home and threatened to
make an example of her if she did not "do her job" and file liens
brought to her office against IRS employees. The evidence proves by more
than a preponderence that Defendant Knight sent one of the threatening letters
to Matthews. These threats and plans of violence culminated in Steiner's
attack on Karen Mathews in her garage on January 30, 1994. These acts constitute
threatened and actual use of violence to obstruct or impede the collection
of revenue by the IRS.
The question as to whether the "warrant of arrest" can also be
considered a "threatened use of violence" is more difficult to
decide. The evidence shows IRS agent Mary Ryan was threatened with the prospect
of personal arrest if she failed to remove the tax levy from Ingram's wages.
The government contends the arrest warrant involved the threatened use of
violence for the purposes of increasing the base offense level by 4. Certain
of the defendants dispute this contention.
Defendants Mallen, McKendrick, Knight, and George Reed signed the warrant
of arrest; Hopper executed the attached proof of service and mailed the
documents to Ms. Ryan. Some of the defendants assert the warrant of arrest
cannot constitute the threatened use of violence because no contact with
Mary Ryan was contemplated by the document and, when construed in its proper
light, the warrant was meant only as a protest statement. Hopper contends
the most analogous offense which can apply to mailing the "warrant
of arrest" is the offense defined under 18 U.S.C. § 876, threatening
communications, which neither includes as an element the use of force nor
the substantial risk of injury. The defendants' arguments in this regard
have merit.
Section 2T1.9(b)(1) does not define the phrase "planned or threatened
use of violence." However, the term "crime of violence" is
defined in Guidelines § 4B1.2, under the career offender provisions.
That provision states in part:
(1) The term "crime of violence" means any offense under federal
or state law punishable by imprisonment for a term exceeding one year that-(I)
has as an element the use, attempted use, or threatened use of physical
force against the person of another. . . .
(1993). The Application Notes following this provision apply the term "crime
of violence" to a host of enumerated offenses including offenses where
the "use, attempted use, or threatened use of physical force against
the person of another" is contemplated. App. Note 2 (1993).
In construing the "crime of violence" characteristic, the Ninth
Circuit narrowly construes the Guideline so as to restrict its application
to the categories of offenses enumerated in the Guidelines. See United States
v. Sherbondy, 865 F.2d 966 (9th Cir. 1988) (construing "violent felony"
and "crime of violence" under 18 U.S.C. § 924). Other Circuit
Courts have also construed the Guideline in a restrictive manner. United
States v. Left Hand Bull, 901 F.2d 647, 649 (8th Cir. 1990) (deeming a letter
by defendant threatening to kill his estranged wife a crime of violence
for the purposes of sentencing under the career offender statute because
"an essential element of section 876 is that the communication convey
a "threat to injure the person of the addressee or of another");
United States v. McCaleb, 908 F.2d 176 (7th Cir. 1990) (letter threatening
life of President sufficient to constitute a crime of violence where defendant
had undertaken affirmative steps to carry out threat).35 But see United
States v. Poff, 926 F.2d 588 (7th Cir. 1991) ("Threats are themselves
a form of violence that 'may be costly and dangerous to society in a variety
of ways, even when their authors have no intention whatever of carrying
them out.'") (citing Rogers v. United States, 422 U.S. 35, 46-7, 95
S. Ct. 2091, 45 L.Ed.2d 1 (1975) (Marshall, J., concurring).
Under California statutes, neither an arrest without authority nor false
imprisonment constitute felonies. Cal. Penal Code § 146 states:
Every . . . person pretending to be a public officer, who, under the pretense
or color of any process or other legal authority, does any of the following,
without a regular process or other lawful authority, is guilty of a misdemeanor:
(a) Arrests any person or detains that person against his or her will.
Cal. Penal. Code § 146 (1988). The crime and punishment of false imprisonment,
Cal. Penal Code §§ 236 and 237 state:
False imprisonment is the unlawful violation of the personal liberty of
another.
False imprisonment is punishable by fine not exceeding one thousand dollars
($1,000), or by imprisonment in the county jail not more than one year,
or by both. If such false imprisonment be effected by violence, menace,
fraud, or deceit, it shall be punishable by imprisonment in the state prison.
Cal. Penal Code §§ 267, 267 (1988). Under the California provision,
misdemeanor false imprisonment can be punished as a felony where great force
is used. In California v. Hendrix, 8 Cal.App.4th 1458 (1992), the court
explained the false imprisonment statutes:
Force is an element of both felony and misdemeanor false imprisonment. Misdemeanor
false imprisonment becomes a felony only where the force used is greater
than that reasonably necessary to effect the restraint. In such circumstances
the force is defined as "violence" with the false imprisonment
effected by such violence a felony.
Id. at 1462 (reversing felony conviction for false imprisonment because
trial court failed to give lesser included offense instruction).
In California v. Fernandez, 26 Cal.App.4th 710 (1994), the court affirmed
defendant's conviction under the false imprisonment statute for his role
in beating another man. The court found that an essential of misdemeanor
and felony false imprisonment is restraint of the person. Id. at 717. "Any
exercise of force, or express or implied threat of force, by which in fact
the other person is deprived of his liberty or is compelled to remain where
he does not wish to remain, or to go where he does not wish to go, is false
imprisonment. The wrong may be committed by acts or by words, or both, and
by merely operating upon the will of the individual or by personal violence,
or both." Id. (quoting California v. Zilbauer, 44 Cal.2d 43, 51 (1955))
(internal quotations and further citations omitted).
While a "warrant of arrest" contemplates some sort of physical
restraint, there is no evidence here which supports construing it as a "crime
of violence" because none of the defendants threatened to use "physical
force" or "violence" to hold Mary Ryan. Although Mary Ryan
testified she was uncertain as to the meaning of the "warrant of arrest,"
no violence or force was actually contemplated by it.
The government's analogy to a case involving child stealing, United States
v. Lonczak, 993 F.2d 180 (9th Cir. 1993), is not sufficiently analogous.
The actual physical caption and restraint of the child demonstrate a degree
of action not proven in this case. No evidence was adduced that any defendant
intended to take Ms. Ryan into custody. The California Penal Code provisions
cited by the government clearly define when false imprisonment constitutes
a crime of violence. The relevant case law leads to the conclusion that
the warrant of arrest did not manifest an intent to use the required level
of force. Accordingly, the four level increase does not apply.
E. Official Victim Enhancement, 3A1.2
The Official Victim enhancement, § 3A1.2, states:
If-(A)the victim was a government officer or employee . . . and the offense
of conviction was motivated by such status; . . . increase by 3 levels.
(1993).
The Application Notes apply § 3A1.2 "when specified individuals
are victims of the offense." The enhancement "does not apply when
the only victim is an organization, agency, or the government." App.
Note 1. The adjustment also does not apply when the offense guideline specifically
incorporates the official status of the victim. App. Note 3.
The defendants assert increasing the base offense level by four under §
2T1.9(b)(1) and adding a three level enhancement under § 3A1.2 results
in impermissible "double counting." Ingram and Hopper assert that
in order for defendants to have potentially interfered with the activities
of the IRS by the use or threatened use of violence, such acts would have
necessarily been directed toward the government's agents. They assert only
government agents can be the target of threatened violence in the obstruction
of tax laws.
Hopper further argues "threatening the use of violence" under
the special offense characteristic in § 2T1.9(b)(1) means threats made
to the government. Hopper argues "if an individual is going to threaten
violence [to impede or obstruct the lawful proceedings of the government],
there can thus be only two objects of that threat, (1) the governmental
property, or (2) its agents." She asserts for this reason, the §
2T1.9(b)(1) enhancement takes into account the official status of the victim.
Accordingly, applying both § 2T1.9(b)(1) and § 3A1.2 would constitute
impermissible "double counting" to enhance the base offense level.
There are no cases directly on point. However, the principle of "double
counting" for sentencing is discussed in several Ninth Circuit decisions.
In United States v. Williams, 14 F.3d 30 (9th Cir. 1994), defendant was
convicted of threatening a federal official in violation of 18 U.S.C. §
115(a)(1)(B). The district court determined the guideline for threatening
communications, § 2A6.1, applied. The court also imposed a three level
increase under the official victim enhancement. Williams appealed asserting
the applicable Guidelines provision incorporated the status of the victim,
or alternatively, status as an official was an element of the underlying
offense. The Ninth Circuit rejected these arguments, concluding instead:
[T]he proper comparison to determine whether impermissible double-counting
occurred is "between the applicable guidelines provisions, not between
the guidelines provisions and the criminal code."
14 F.3d at 32 (quoting United States v. McAnich, -- U.S. --, 114 S. Ct.
394, 126 L.Ed.2d 342 (1993). Accordingly, the official victim enhancement
was properly applied by the district court.
In United States v. Pritchett, 908 F.2d 816 (11th Cir. 1990), the court
applied the four level increase under § 2T1.9(b)(1) although the victim
of the defendants' threats was not a government agent. Rather, the victim
of the threats was a witness to the underlying drug conspiracy whose purpose
included evading payment or collection of taxes. In Pritchett, the Guidelines
applied were those in effect prior to 1990, when the § 2T1.9(b)(1)
enhancement simply provided: "if the offense involved the planned or
threatened use of violence, increase by 4 levels." This change in the
Guidelines is significant because under the 1993 Guidelines, applicable
here, the threat of violence must be for the purpose of impeding, impairing,
obstructing or defeating the collection of revenue. While Hopper's argument
is not frivolous, it is not persuasive.
If the Sentencing Commission wanted to include the official status of the
victim under the § 2T1.9(b)(1) enhancement, it would have done so in
clear and explicit language. For instance, the Guidelines specifically advise
against applying the official victim enhancement under § 2A2.4, obstructing
or impeding officers. Application Note 1 under § 2A2.4 states: "The
base offense level reflects the fact that the victim was a governmental
officer performing official duties. Therefore, do not apply § 3A1.2
(Official Victim) unless subsection (c) requires the offense level to be
determined under § 2A2.2 (Aggravated Assault)."
Accordingly, the official victim enhancement should be applied to conduct
which was motivated because of the official status of the victim. In the
Ingram wage levy, the defendants mailed a false arrest warrant with papers
specifically addressed to Mary Ryan to threaten her in her official capacity,
as opposed to the government generally, for the purpose of interfering with
her official functions as a collection agent for the IRS to impede her duties
to collect the outstanding Ingram taxes. Hopper prepared and mailed the
documents to IRS Agent Ryan at Ms. Ryan's office. The package was mailed
after Ms. Ryan initiated the wage levy against defendant Ingram. One of
the documents mailed was the warrant of arrest, which named Ms. Ryan personally.
Even if the arrest warrant was a threatening communication motivated by
Mary Ryan's official status as an IRS agent, the official victim enhancement
apply. Mary Ryan was the revenue officer investigating Ingram's tax liability.
The purpose of the warrant of arrest was to stop Ryan's official investigation
or enforcement efforts to satisfy the outstanding tax obligation. The "victim"
of Ingram's obstruction efforts were the IRS and Ms. Ryan. Ms. Ryan was
personally threatened. Accordingly, Mallen, McKendrick, Ingram and Hopper,
whose conduct reasonably furthered the communication of the threats to Ryan
to defeat tax obligations of Ingram, are subject to the § 3A1.2 enhancement.
As to the attack on Karen Mathews, who could reasonably foresee such conduct
because of the nature of their agreement, must be individually determined.
Mathews was threatened on several occasions by various defendants to remove
liens from the Beckwith property. George Reed, Kendall Reed, Knight and
Everett Thoren all went to Mathews and demanded she remove IRS liens on
the Beckwith property. A fake "bomb" was placed under Ms. Mathews'
car and a letter was mailed to Ms. Mathews' personal residence which threatened
her with physical harm if she failed to carry out her official functions
as Stanislaus County Recorder and remove the liens or otherwise do what
they demanded.
All of these acts were proved beyond a reasonable doubt to be motivated
because of the official status of Karen Mathews as the Stanislaus County
Recorder. The Guidelines makes no distinction as to whether the official
victim must be a state or federal officer. It is sufficient that the victim
was employed in an official position. Additionally, the acts were undertaken
so as to impede the collection of tax revenue due and owing to the United
Stated by George Reed.
VII. CONCLUSION
The base offense levels and some of the recommended enhancements for each
of the defendants convicted of participation in the criminal conspiracy
to impede or obstruct the administration of the tax laws by the Internal
Revenue Service in violation of 18 U.S.C. 1505 and 18 U.S.C. 371, charged
in Count One of the superseding indictment, will be calculated in accordance
with this decision.36
SO ORDERED.
DATED: October ___, 1997.
____________________________________
OLIVER W. WANGER
UNITED STATES DISTRICT JUDGE
countone.frm
1 The original indictment was filed June 22, 1995. Superseding indictments
were filed December 21, 1995 (Doc. 189), December 19, 1996 (Doc. 466) and
January 7, 1997 (Doc. 492). The third superseding indictment charges defendants
as follows: Count I, 18 U.S.C. § 371; Count II, 18 U.S.C. § 2,
1505 (obstruction of IRS Proceedings George L. Reed and George Kendall Reed);
Count III, 18 U.S.C. § 1505 (Obstruction of IRS Proceedings Roger Steiner
and David Ries); Count IV, 18 U.S.C. § 912 (Obstruction of IRS Proceedings
by Attack on Stanislaus County Recorder Knight, George L. Reed, George K.
Reed and Steiner); Count V, 18 U.S.C. § 2, 1505 (Obstruction of Proceedings
Knight, Hopper, Ries, George L. Reed, Robert McKendrick and Janice Mallen);
Count VI, 18 U.S.C. § 2, 1505 (Obstruction of IRS Proceedings Ingram
and Knight); Count VII, 18 U.S.C. § 2, 1952 (Interstate Travel in Aid
of Racketeering and Aiding and Abetting Knight, George L. Reed, George K.
Reed, and Roger Steiner); Count VIII, 18 U.S.C. § 2, 1505 (False Persecution
of Government Official, Ries and Steiner); and Count IX, 18 U.S.C. §
1010 (HUD Fraud, Knight).
2 Following their convictions, defendants filed motions for acquittal or,
alternatively, new trial. Some of those motions have been denied by the
court at the time of hearing.
3 The federal criminal code at 18 U.S.C. § 371 states:
If two or more persons conspire either to commit any offense against the
United States, or to defraud the United States, or any agency thereof in
any manner or for any purpose, and one or more of such persons do any act
to effect the object of the conspiracy, each shall be fined under this title.
. . .
18 U.S.C.S. § 371 (Supp. 1997).
4 Each overt act was charged as a substantive offense in the remaining eight
counts of the superseding indictment.
5 Terry Ingram contends Garcia requires the court to assess the lowest appropriate
base offense level because the jury did not make special findings as to
the object of the JCA conspiracy. The government asserts the JCA had but
one object-using unlawful means to obstruct and impede lawful proceedings
of the IRS. The government argues each of the separately charged offenses
are acts that occurred in attempting to accomplish the object of the conspiracy.
6 In Bush, 70 F.3d 557, the defendant was sentenced for 7.5 kilograms of
cocaine base after entering a plea of guilty to conspiracy to distribute
cocaine in violation of 21 U.S.C. § 841. Bush appealed, arguing he
should have been sentenced under the Guidelines for powder cocaine. The
Eleventh Circuit did not find the colloquy between Bush and the court at
the change of plea hearing or at sentencing reasonably ambiguous as to whether
he intended to plead guilty to conspiring to distribute cocaine base or
powder. The Court stated: "if a guilty plea or verdict is ambiguous
regarding the object of the conspiracy, the appropriate remedy is to remand
the case to the district court with directions to hold a hearing and make
a finding as to the object of the conspiracy." Id. at 561. On the record
as a whole, the court determined Bush intended to plead guilty to distribution
of cocaine base and affirmed his sentence.
7 In stating its outright disagreement with prior cases, including Garcia,
Edwards found that "under the Sentencing Guidelines, the judge alone
determines which drug was distributed, and in what quantity." 105 F.3d
at 1180. The Seventh Circuit recognized "relevant conduct" case
law permits the sentencing court to consider drugs not specified in the
indictment, not considered by the jury, or for which the defendant has been
acquitted, so long as the sentencing judge finds their existence by a preponderance
of the evidence.
8 In Rivera, the court found one overall conspiracy because the conduct
of the Union official defendant involved "the same scheme, the same
central actors, the same activities, and the same goals"-namely, to
use ignore violations of union rules by demanding payment from employers
seeking visas for Latin American musicians. See id., at 1214.
9 The Ninth Circuit in United Stated v. Studley, 783 F.2d 934 (9th Cir.
1986) found such an argument to be "utterly meritless," instead
finding "an individual is a 'person' under the Internal Revenue Code
and thus subject to Title 26." Id. at 937 & n. 3, cited with approval
in United States v. Hanson, 2 F.3d 942, 945 (9th Cir. 1993) (rejecting claim
of defendant that he was a natural born citizen of Montana and therefore
a non-resident alien not deemed a taxpayer under Title 26.)
10 Sometimes called the "sovereign state of Oregon" or "Article
I & II government."
11 Evidence introduced by Steiner showed he used similar nomenclature in
signing documents and expressing his philosophy of the WCC, which was utilized
by co-conspirators in this case in their communications to Ms. Noweski and
Ms. Ryan.
12 The Probation Office made identical recommendations for all defendants
except Steiner for whom the base offense level depended on a consideration
of certain grouping factors.
13 In Hamilton, 67 F.3d 761, the issue before the court was "whether
a court, in resentencing a defendant pursuant to a retroactive amendment
to the Sentencing Guidelines, must apply the Guidelines in effect at the
time of resentencing or those in effect at the time of the offense."
Id. at 762. There, a defendant originally sentenced in 1990 for violation
of 18 U.S.C. § 922(g)(1) (felony in possession of a firearm) to a term
of 84, sought resentencing under November 1, 1991 USSG amendment of retroactive
application. Id. at 763. The district court re sentenced defendant, without
the enhancement under the 1993 USSG. The later Guidelines increased the
base offense level from 9 to 24.
The Ninth Circuit concluded application of the 1993 USSG violated the ex
post facto clause:
The 1993 Guidelines satisfy squarely the first element: the 1993 version
of section 2K2.1 has been applied to a crime that occurred in 1989, four
years prior to its enactment.
We are further persuaded that the application of the 1993 Guidelines disadvantaged
Hamilton. As Hamilton agrees, the 1993 version of section 2K2.1 imposes
a base offense level 15 levels higher than that imposed under the 1988 version.
. . .
Id. at 765.
14 In Seligsohn, the defendants were convicted for consumer mail fraud,
skimming of cash receipts to pay under-the-table compensation to employees
and owners, defrauding union welfare benefit plans of required contributions,
paying bribes to a union shop steward; destroying company records, defrauding
insurance carriers, and filing false tax returns.
The district court calculated defendants' sentences under post-1989 version
of the USSG, without considering whether the offenses at issue had been
committed before or after the effective date of the Guidelines' amendments.
Defendants appealed the district court's calculations asserting that some
of the acts for which they were sentenced concluded before the effective
date of the Guidelines.
The Third Circuit reversed. Whether or not a change in the Guidelines has
minimal effect in the total points assessed, application of the correct
version of the Guidelines is mandatory. 981 F.2d 1424-1425.
15 Application Note 2 to 1B1.11 defines "the offense of conviction"
as "the conduct charged in the count of the indictment or information
of which the defendant was convicted." Here, the conspiracy charged
in the third superseding indictment is alleged to have existed from April
1, 1992 to April 10, 1995. The government's evidence did not prove a conspiracy
that operated after February 1994. The verdict forms did not require the
jury to make special findings regarding the duration of the conspiracy.
The court may make its own findings as to the duration of the conspiracy
for the purposes of sentencing so long as those findings are based on a
preponderance of the evidence. The government agrees that for sentencing
purposes the conspiracy did not operate beyond February 1994.
16 The district court calculated the total loss from fraud to be $886,000.
At the time of Ortland's conduct, i.e., when the crimes were committed,
the base offense level was 8. The 1989 Guidelines increased the base offense
level to 11. The district court sentenced Ortland under the higher Guideline
because Ortland committed an act of mail fraud, charged in the fifth count,
after the effective date of the amendment. 109 F.3d at 546.
17 Ingram argues, for example, he began to disassociate himself from the
JCA in August 1993, before the November 1, 1993 amendments to the Guidelines.
Ingram asserts he should not be held accountable for offenses committed
by other conspirators after his withdrawal, relying on United States v.
Lothian, 976 F.2d 1257 (9th cir. 1992). Ingram was acquitted of direct involvement
in obstruction by use of fraudulent government warrants which occurred in
late August 1993.
Ingram asserts that under the ex post facto prohibition, the Guidelines
in effect in 1992 must be applied to him. Ingram's position fails because
the evidence showed by a preponderance that Ingram had not legally withdrawn
from the conspiracy for the purposes of negating his further implication
in the conspiracy, and to so limit the application of the Guidelines is
contrary to their express purpose.
18 The base offense level under § 2X1.1 is determined as follows:
The base offense level from the guideline for the substantive offense, plus
any adjustments from such guideline for any intended offense conduct that
can be established with reasonable certainty.
USSG § 2X1.1(a) (1993).
19 18 U.S.C. § 1505 provides in relevant part:
Whoever corruptly, or by threats or force, or by any threatening letter
or communication influences, obstructs, or impedes or endeavors to influence,
obstruct, or impede the due and proper administration of the law under which
any pending proceeding is being had before any department or agency of the
United States. . . [shall be guilty of a felony].
18 U.S.C.S. § 1505 (1994).
20 The base offense level under § 2J1.2 is 12. (1993.)
21 Section 2T1.9 provides a base offense level as follows: "(a)(1)
Offense level determined from § 2T1.1 or § 2T1.4, as appropriate;
or (2) 10." (1993.)
22 26 U.S.C. § 7201 provides:
Any person who wilfully attempts in any manner to evade or defeat any tax
imposed by this title or the payment thereof shall . . . be guilty of a
felony.
26 U.S.C.S. § 7201 (1996).
23 The statutory provision at 26 U.S.C. § 7206 contains five subsections.
Of these, subsections (1) and (2) are relevant to the conduct at issue here.
Those subsections provide:
Any person who-(1) Willfully makes and subscribes any return, statement,
or other document, which contains or is verified by a written declaration
that it is made under the penalties of perjury, and which he does not believe
to be true and correct as to every material matter . . . shall be guilty
of a felony . . .; [or]
(2) Willfully aids or assists in, or procures, counsels, or advises the
preparation or presentation under, or in connection with any matter arising
under, the internal revenue laws, of a return, affidavit, claim, or other
document, which is fraudulent or is false as to any material matter, whether
or not such falsity or fraud is with the knowledge or consent of the person
authorized or required to present such return, affidavit, claim, or document
. . . shall be guilty of a felony. . . .
26 U.S.C.S. § 7206 (1996).
24 In an unreported case, the Tenth Circuit rejected such arguments. See
United States v. Scott, 13 F.3d 407, 1993 WL 490259 (10th Cir. 1993). There,
defendant who was convicted of conspiring to defraud the United States (18
U.S.C. § 371) by impeding, impairing, obstructing and defeating the
lawful functions of the IRS, argued Guidelines § 2T1.9 was incorrectly
utilized to calculate his sentence because he was neither indicted nor convicted
of the underlying tax crimes. The sentencing court instead found defendant's
conduct supported the sentence and "Section 2T1.9 does not expressly
direct that a conviction is required . . . under 26 U.S.C. § 7201 or
§ 7206 . . . before applying Section 2T1.1 or Section 2T1.3. . . ."
1993 WL 490259 at **3.
25 Defendants confuse the scope of the evidence which was required for their
convictions at trial with the standard required at sentencing. In support
of their contention that § 2J1.2 is the appropriate Guideline, the
defendants have advanced arguments that they believed the JCA to be a religious
trust based on Everett Thoren's representations, and they believed their
freedom to protest tax laws motivated, at least in part, their conduct.
Some defendants have also argued that JCA members did not harbor ill will
toward the government and are law-abiding citizens. The evidence, however,
shows all defendants participated as members of a group that protested the
payment of income taxes to the federal government. This collective involvement
began at least as of April 1, 1992, although the evidence showed several
defendants engaged in various forms of tax protest acts prior to the involvement
of the Juris Christian Assembly. Within the JCA, members engaged in numerous
acts which show that they specifically intended to obstruct the IRS. The
evidence illustrated, but by no means is this list exhaustive, defendants
engaged in the following: submitted false W-4 forms claiming exemption from
federal withholding as foreign citizens; refused to pay federal income taxes
or to file voluntary tax returns; responded to letters from the IRS to delinquent
JCA members with documents refuting the obligation to pay taxes, issued
false and valueless financial warrants in the name of a fictitious governmental
entity; claimed unwarranted and unlawful refunds of federal wages paid as
social security taxes.
26 Hansen did so find. See United States v. Van Krieken, 39 F.3d 227 (9th
Cir. 1994).
27 "A reasonable jury could find beyond a reasonable doubt that the
alter ego of a closely-held corporation which has no declared source of
income, but has a substantial increase in assets, who pays cashier's checks
for a warehouse in a way that avoids currency transaction reports, who facilitates
cash transactions for three motor homes, two of which . . . have been used
for drug smuggling, who pays $20,000 as a down payment on the house to be
owned by one of the bosses in the drug ring, knows that he is laundering
money . . . and in this way aiding and abetting the drug conspiracy. . .
. There was sufficient evidence to convict him of money laundering and,
as an aider and abettor, of conspiracy to import cocaine and of conspiracy
to possess with intent to distribute marijuana and cocaine. However, as
an aider and abettor he cannot be held liable under a Pinkerton theory for
the subsequent acts of his coconspirators, Hernandez v. United States, 300
F.2d 114, 121 n. 17 (9th Cir. 1962), and so his convictions of importation
of cocaine, of possession with intent to distribute cocaine, and of possession
with intent to distribute marijuana must be reversed." 1995 WL 422515
at ** 2.
Newland is all the more puzzling because he was convicted of the conspiracy.
Additionally, Hernandez does not appear to reach the same finding that an
aider and abettor cannot be vicariously liable for acts of coparticipants
in a concerted course of criminal conduct.
28 Where a conviction of the underlying offense is required for application
of a stated guideline section, the USSG so specifies. The guideline for
§ 2D1.1 instructs a base offense level of 43 or 38, "if the defendant
is convicted under 21 U.S.C. §§ 841(b)(1)(A), (b)(1)(B), or (b)(1)(C),
or 21 U.S.C. §§ 960 (b)(1), (b)(2), or (b)(3)." (1997 Version.)
Similarly, § 2S1.1(a)(1) provides a base offense level of "23,
if [the defendant is] convicted under 18 U.S.C. §§ 1956(a)(1)(A),
(a)(2)(A), or (a)(3)(A)". (1997 Version.)
29 This amount includes interest and penalties.
30 While Kraig did so find, the court believes that the Sixth Circuit's
interpretation fails to give effect to each provision of the Guidelines.
In Kraig, a lawyer was convicted of his role in a conspiracy to conceal
the assets of Reuben Sturman, a marketer of adult entertainment material,
from the IRS. The conspiracy involved the creation of foreign shell corporations
and trusts to conceal Sturman's assets. Kraig was convicted and sentenced.
The district court determined Kraig's base offense level pursuant to §
2T1.9(a)(1), applying § 2T1.1 or § 2T1.3 (deleted). Kraig asserted
on appeal that the default score of 10 applied to his conduct. The Sixth
Circuit did not agree:
The plain language of section 2T1.9 states that the applicable statutory
provision is 18 U.S.C. § 371. Application Note 2 provides that the
base offense level should come from sections 2T1.1 or 2T1.3, whichever is
most applicable, if the base offense level is more than 10. As the base
offense level applicable here under either section is greater than 10, the
plain language of the guideline directs that one of these two sections is
to be used.
99 F.3d at 1370.
31 The first argument fails because, as already stated, § 2T1.9 does
not require a conviction under the tax code. As to the "tax loss,"
defendants' assess the amount differently. All defendants agree the amount
of "tax loss" should not include interest and penalties. McKendrick
asserts none of the Ingram or Reed tax obligations are foreseeable to him.
Terry Ingram asserts he is only responsible for $8,397, which represents
the principal amount of his unpaid tax exclusive of interest and penalties.
32 The government asserts the Guidelines require a minimum a base offense
level of 10., relying on Application Note 2 ("The base offense level
is the offense level . . . from § 2T1.1 or § 2T1.4 . . . if that
offense level is greater than 10. Otherwise, the base offense level is 10.")
A correct reading of relevant case law refutes this contention. In United
States v. Hunt, 25 F.3d 1092 (D.C. Cir. 1994), the court rejected arguments
that calculation of "tax loss" should reflect only the amount
of money actually lost by the government because of fraudulently obtained
refunds or reduction in taxes paid. 25 F.3d at 1095. However, the court
stated:
United States v. Telemaque, 934 F.2d 169 (8th Cir. 1991), . . . involved
a tax protest rather than a serious attempt to defraud the United States.
In Telemaque, the sentencing court drew from sources other than the tax
loss provisions in applying the guidelines. It is perfectly possible that
a legitimate category of exceptions to the guidelines exists for those cases
in which there is no serious attempt to evade. . . . [¶] The present
[1992] version of § 2T1.4 provides for a base offense level of 6 "if
there is no tax loss." USSG § 2T1.4(a)(2).
25 F.3d at 1096. Accordingly, if there is no tax loss, the court is instructed
to apply the default base offense level stated in § 2T1.9(a)(2), or
10. To read the Guidelines in the manner suggested by the government would
not give full effect to all the Guidelines provisions, in that, if there
is a tax loss and the base offense level for the amount is less than 10,
under an appropriate application of § 2T1.9, a defendant would have
his or her base offense level increased without engaging in any relevant
conduct.
33 In Fleschner, defendants were convicted of a conspiracy to defraud the
United States of revenue under 18 U.S.C. § 371. Defendants formed an
organization called the "Carolina Patriots," the purpose of which
was to advise and conceal taxable income of members. The Patriots activities
included claiming illegitimate allowances from withholding, refusing or
filing to file tax returns, removing themselves from the banking system
by dealing in cash so as to hide income. One of the leaders of the Patriots
operated a separate business during the relevant conspiracy period and paid
all employees in cash so to avoid federal withholding and reporting. The
tax evaded from these separate activities was $219,051, which represented
nearly the entire amount of the calculated tax loss attributable to defendants.
The Fourth Circuit held the amount was properly included because the manner
in which it was evaded was consistent with and related to the methods utilized
by the Patriots.
34 The evidence does not show Ingram, Mallen, McKendrick, Hopper, Kendall
Reed or Steiner by their conduct, encouraged others, including coconspirators,
to obstruct IRS proceedings by impeding collection of taxes owed. Rather,
the evidence presented showed that George Reed, with Everett Thoren's support,
encouraged the remaining defendants to engage in conduct calculated to obstruct
the collection on the tax lien. Knight engaged in similar conduct with respect
to the Ingram wage levy. Ries engaged in such conduct as to both the Reed
lien and the Ingram levy.
35 The McCaleb court stated in part:
The crime of threatening the life of the President . . . [requires that
t]he threat must be a "true threat" as opposed to mere political
hyperbole or constitutionally protected speech. (Citations) This court has
required that the government prove that the defendant made the threat with
the intent that it be interpreted by the recipient as a genuine expression
of an intent to take the life of the President.
908 F.2d at 178.
36 This decision does not consider all sentencing issues or applicable Guidelines
provisions which relate to the Count One conspiracy. For that reason, this
decision does not calculate the sentencing scores for each defendant on
the Count One conspiracy. Further Guidelines provisions may be applicable
depending on each coconspirators' role in the JCA. Additionally, this decision
does not take into consideration applicable grouping concerns for the purpose
of determining sentence.
APPENDIX C
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF CALIFORNIA
No. CR-95-5174-OWW
UNITED STATES OF AMERICA, PLAINTIFF
vs.
GEORGE L. REED, DEFENDANT
SENTENCING
[Oct. 24, 1997]
REPORTER'S TRANSCRIPT OF PROCEEDINGS
THE CLERK: Going to item Criminal-F-95-5174, United States versus George
Reed for sentencing.
MR. CONKLIN: Jon Conklin and Carl Faller for the United States.
MR. SERRA: J. Tony Serra on behalf of George Reed who is present and before
the Court.
THE COURT: Thank you very much.
All right, are the parties ready to proceed with sentencing?
MR. SERRA: Yes, Your Honor.
MR. CONKLIN: Yes, Your Honor. Thank you.
THE COURT: All right. I believe that there was additionally a motion for
new trial that had been previously not ruled on by the Court. I have read
and fully considered that motion, and I am ready to rule on it. I don't
know whether the parties wish to present any argument on the subject of
the new trial motion.
MR. SERRA: We'll submit it, Your Honor.
THE COURT: Thank you.
Does the Government wish to-
MR. CONKLIN: We'll submit it, Your Honor. Thank you.
THE COURT: All right. The ground for the motion is that there was a violation
of due process within the meaning of the Basurto, B-A-S-U-R-T-O, and related
cases that the alleged knowing use of perjured testimony so interfered with
and tainted the trial process as to deprive Mr. Reed of a fair trial.
The Court finds that although there was impeachment of the witness, Anthony
Dalglish, that some of what Mr. Dalglish testified to was undisputedly true.
Some of it was undisputedly false, and it was ultimately the determination
of the trier of fact whether they accepted or rejected Mr. Dalglish's testimony,
and the Court was not provided with evidence that satisfies the standard
that there was a knowing use of false or perjured testimony on the part
of Mr. Dalglish.
I suspect everybody received what I would call surprises in listening to
Mr. Dalglish's testimony, and I do not have evidence to support that where
Mr. Dalglish's testimony was established to be false, that there was a knowing
use of the false testimony, or that that preknowledge was possessed by the
Government other than it could have expected impeachment based on Mr. Dalglish's
background, and there was such impeachment. So the motion for new trial
is denied.
MR. SERRA: Your Honor, may I just preserve what I believe is present in
our moving papers, and that is that that motion was also directed to the-what
we view as perjury before the grand jury. I want to only preserve that aspect
of this motion for potential appellate review.
THE COURT: Yes, and certainly this is in your papers, and it is preserved.
I didn't mention the grand jury, but, again, the testimony of Mr. Dalglish,
there were shown to be inconsistencies between his trial testimony and his
grand jury testimony, but given the evidence in the case, the Court does
not find that the prosecution knew of perjured testimony, or that it had
reason to believe that Mr. Dalglish was going to give, if any, testimony
was inconsistent, inconsistent testimony at the trial.
MR. CONKLIN: Thank you, Your Honor.
THE COURT: So that issue is preserved, Mr. Serra.
MR. SERRA: Thank you, Your Honor.
THE COURT: Moving to the sentencing, Mr. Reed, have you had an opportunity
to read the presentence investigation report that has been prepared by the
probation officer?
THE DEFENDANT: Yes, I have.
THE COURT: First, have you read it?
THE DEFENDANT: Yes, I have.
THE COURT: And have you had a chance to discuss it with Mr. Serra, your
attorney?
THE DEFENDANT: Yes.
THE COURT: Have you also had a chance to see the objections that have been
filed to the probation officer's formal report and the response-I should
say the probation officer did not respond to that, but there were formal
objections filed by your lawyers and also a motion for a downward departure.
Have you read and considered all of that?
THE DEFENDANT: Yes, I have, Your Honor.
THE COURT: And had a chance to review it with Mr. Serra?
THE DEFENDANT: Yes.
THE COURT: The Government did file opposition to the sentencing objections,
and have you had a chance to see those as well?
THE DEFENDANT: Yes.
THE COURT: All right. In the sentencing, we're going to proceed as we have
in the other cases. I will start by listening to Mr. Serra, and I will go
over the objections and will rule on the objections that have been made.
When Mr. Serra has concluded with the statement of views that he wishes
to proceed to the Court concerning your sentence, I will, then, listen to
the Government's attorneys who will present the Government's position so
that you can hear that before you have a chance to speak.
I'll then let Mr. Serra respond, and after Mr. Serra is finished, if he
chooses to respond, I'll give you the opportunity to say anything that you
think will help the Court choose the right sentence in your case.
Do you understand what we're going to do?
THE DEFENDANT: Yes.
THE COURT: All right, Mr. Serra.
MR. SERRA: Yes, Your Honor. And I appreciate the opportunity. I am going
to, however, be succinct because I have received the-what was entitled,
the "Sentencing Memorandum of Opinion" and have perused it. That
means superficially scanned it, and I note by virtue of talking with other
attorneys, that certain issues, in essence, have been resolved. So I am
not going to reiterate our position on a number of issues that have been
raised in our papers.
Further, Your Honor, I'm going to submit for your findings those disputes,
which I think both sides have made presentations in respect to in regard
to the allegations or findings by the probation department. So I'm trying
to streamline it and get to what I consider the single remaining significant
issue, and that is relevant conduct as it relates to my client's reasonable
foreseeability in terms of violence that was perpetrated here on Karen Mathews.
So in that respect, and I know well, that the Court has detailed recall,
but allow me just, once again, to superficially present our position on
that.
Firstly, taking into account this, my client is not richly endowed in one
formal education. And secondly, through life's experience, he's not what
I'd call worldly. He's not a sophisticated human being. He's not a person
of letters. He's not a person of language. He is not a person who well articulates
himself, or at least in written form. His strength has been in his-oh, what
I'll call the tenacity with regard to his livelihood.
He digs ditches. He has a ditch-digging machine. He has had a variety of
relationship with family and others. With reference to that business as
you well recall, it was good at one time. There was a large economic drought
that occasions severely declined his income, and as we approached the trial,
as I recall, the business was better for him. But I characterized him previously,
and I recharacterized him. He's a person who spends life in the dirt, in
the ditches, hard work, leaving, delegating most of the formal business
necessities in terms of the accounting and the check-writing, even the filing
of forms and income tax returns. Most of that was all delegated to others
throughout his whole lifetime.
So I want you to take into account, I'm talking about whether violence was
foreseeable. I want you to first take into account his unsophisticated nature.
His, dare I say, naivete in trustingness. And I say this is supported by
the strong ties he has had to family, who are here today, many of them,
and who were with him as you perceived during the course of the trial. So
his strength is an extended family, and he's like a spoke on this family.
And he's the work spoke, and the work ethic was most prominent in his life.
So he had this calamitous event, and we stand on his testimony. I know your
findings are contrary, but he believed that in the engaging of various entities
and in his association here with JCA, he was hopeful that somehow a tax
resolution could occur.
What I'm stressing is that violence was never, Your Honor, on the horizon
for him. We have an episode, I'm mindful of it, that predated the conspiracy,
and we're aware of it, wherein I would say, very acting out, almost adolescent
behavioral way. He drew the line, you know, and "This is my property,"
and "That's your property." And there was this small confrontation.
But recall, there is no conviction of any misdemeanor that occurred, and
once again, that doesn't signal in any fashion a character trait. It was
one isolated, let's call it heat, passion, small episode that did not even
culminate into a misdemeanor conviction. And there were no blows exchanged.
And there was, in essence, heat of passion or, you know, emotions of your
property, I guess, being taken from you. So-
THE COURT: You should know that there is in my mind a second incident at
the courthouse that was described in reports that were furnished early on
in the case, and so if you want to address that as well. This is where allegedly
Mr. Reed and his son were present during a hearing on papers that the money
brokers had brought-as I recall, it had to do with the eviction of the Reeds
from their family property, and there was a confrontation between Mr. Reed
and his son and some representative of the party who was seeking to eject
him from the property. Threatening words type of thing.
MR. SERRA: Going beyond what the Court has read, there was a confrontation.
It was an exchange of words. My client says that he did not utter angry
words at that occasion. That did not culminate, I believe, in any arrest
or conviction.
And, once again, though, Your Honor, you have to look at that kind of behavior,
which is open-how would I call it, emotionally based, dare I say a manifestation
of an unsophistication. You see, here, we have an entirely different type
of-I don't know-image of violence. What we have is the alleged conspiracy.
We have probably alleged secretive conversations and potential planning,
and everything that is, in essence, concealed and premeditated and stealthy-that's
not his nature. He bubbled over twice. Not very severe. He has an utter
clean record. Then, you know, tracing the evidence in the case, there is
no evidence that he did anything violent. Adopting the testimony, which
we disputed, that he was in the County Recorder's Office on more than one
occasion. His recollection is one. There is no testimony that says that
he, you know, threatened in any fashion.
Recall the testimony, at least on one occasion, that's the occasion that
he recalls, that he was invited behind the counter. They walked for, I don't
know, a distance, and they showed him some files and directed him to Sacramento,
and he went to Sacramento. So I would suggest not only is that not violent,
it was congenial. It was a satisfactory contact. Not at all anything untoward.
We have rejected-my client has testified on all occasions. He is nonviolent,
he doesn't believe in violence. He would never have participated in any
kind of conspiracy to perpetrate violence on anyone. There is no direct
evidence he had anything at all to do with the fake pipe bomb and the bullet
sent in the mail. These would be speculative conjecture, a nexus, if, you
know, one is going to engage in any nexus whatsoever.
Recall, Your Honor, his testimony in regard to when JCA came and Thorne
was there. This is true. My client didn't live there. He lived somewhere
else. My client didn't share an office with them. He didn't work for them.
He didn't prepare the accounts. He didn't keep records. He wasn't on the
phone. He had a separate phone. He was in a separate area. And all of the
testimony is, is that he busied himself with his machinery, that he was
out for a substantial period on various jobs that he was undertaking, that
he was not a consort of Mr. Thorne. That he was not-whatever Thorne was
planning, whatever Thorne, you know, ultimately perpetrated, indirectly
or directly, my client was not part of it. He was not privy to it. He would
not have endorsed it. It is against his character to endorse it. And I think
that we showed that in trial.
Now, you can engage in this kind of presumption, oh, the jury. I heard that
this was argued previously. The jury believed Mr. Anthony Dalglish. There
was a meeting. But merely being at a meeting didn't satisfy the high criteria
of beyond a reasonable doubt.
Well, we reject that. That is, both my client and his son testified, as
did another defendant, that there was no meeting, and it never occurred.
And if you have to infer, if you want to sit here and infer whether the
jury believed my client, his son, one other defendant, that there was such
a meeting, or they believe Dalglish, then you cannot ever find to a preponderance
of the evidence standard that there was such a meeting. And that's the only-that's
why we were charged with the case, based on what everyone considers profane
and perjurious testimony by Dalglish. We really wouldn't have really been
charged. There would be no evidence whatsoever. So I'm trying to argue as
strongly as I can, that he has not in any way associated himself, endorsed.
It was not foreseeable. He did not see it.
Now, he signed a Court of Conscience. That is clear. He used to put them
on the courter. Every witness testified to this. They were not attached
to anything. And he had his aged mother sign one, the same one that he signed,
and it was not attached to the so-called arrest warrant for Mary Ryan. That
was attached sometime later as was the practice of JCA, so you can't even
say, "Well, you knew something was cooking. You knew that this Thorne,
he had violence, you know, planned on the agenda. When you brought him into
the property, you knew that if-if his litigation process failed, that he
would resort to violence." You can't say that. You can't say it because
the evidence doesn't support it, and certainly doesn't support it to a preponderance
of the evidence. And you can't point to that he signed a Court of Conscience,
which is like an affidavit of service, when it was not attached to the arrest
warrant for Mary Ryan. He has no inkling that that would be attached to
that type of a document. There is no testimony that he had any inkling.
So what I am trying to show you, there is no bridge, Your Honor, for you
to infer to the necessary standard that my client engaged in or foresaw
the use of violence. It would have been against his nature to go along with
it, which demonstrated that through the evidence.
So we ask you to make that kind of a finding so that he isn't, from my perspective
given, you know, what will be a life sentence. He is an aged man. If he's
visited with the relevant conduct of violence that he did not participate
in, did not foresee and did not know about, why, I think we take the greater
part of his remaining days away. So that's my major thrust here.
I don't dignify this notion that he misled the jury when he testified. And,
therefore, there should be an obstruction of justice, you know, levied against
him. The U.S. Attorney says he distanced himself from Thorne, and this was
somehow inaccurate. He distanced himself from Thorne because he was distant,
as I indicated in both his living and in his relationship to him.
So I'm asking the Court for a finding that my client here did not foresee
and could not have reasonably foreseen from his position and from his simple
state of mind that Thorne would engage in any form of violence.
THE COURT: Thank you very much, Mr. Serra.
Mr. Conklin.
MR. CONKLIN: Your Honor, briefly. The Government submits that proper sentencing
calculations are as follows: Base offense level would be a 17 pursuant to
2T1.9 considering the $400,000 plus loss. That that offense level would
be increased by two, pursuant to 2T1.9(b)(2), because as this Court has
previously ruled on other defendants, and this defendant is no different,
JCA was in the business of encouraging others to obstruct the IRS.
That further, that level is increased by three for the official victim enhancement
pursuant to guidelines Section 3, which equates to a 22 to start.
The only offense calculations there at issue, therefore, would be the four-level
enhancement pursuant to 2T1.9(B)(1) for the use of violence or the foreseen
use of violence, and the obstruction enhancement, and I'll address the obstruction
enhancement first.
This defendant lied. As unpleasant as that is to admit, the defendant took
the stand and told this jury he had nothing to do with JCA. And when that
conduct is considered in the denial that this defendant has exhibited throughout
the case, the Government submits that that is a very plausible enhancement.
This defendant has denied that he prepared any of the prior pleadings involved
in the prior act evidence. That a neighbor down the street did it.
He's denied the pleadings in this case, attributing those, I believe, to
Mr. Thorne and Mr. Ries. He even today, through his attorney, denies knowledge
of the arrest warrant stating that he was just signing the form. To his
credit, the defendant's own son testified that his father was, in fact,
active in JCA in the sense that his father ran money through JCA. I believe
even the businesses that Mr. Reed so proudly admits to own and to run were
run through JCA. That was established through the Government's evidence
and the gas receipts, where Mr. Thorne-we recovered documents in the search
warrant where Mr. Reed signed the gas receipts as an administrator of JCA.
So, again, Your Honor, it is very material. The defendant here didn't want
this jury to think he was involved in JCA. He wanted them to believe he
had a different office. He didn't live there. He didn't know about it. How
could he ignore the banner that was over the office in his building? How
could he ignore the activities that were going on every day? He didn't ignore
them. He relished them. They were his savior. They were the ones that were
going to get him out of this tax problem. Therefore, the additional two
points for obstruction, the Government submits, is clearly warranted.
The next issue, then, is the four points for violence. Could this defendant
foresee that violence would be used? And I would join with Mr. Serra in
his initial arguments. This defendant exhibited, to quote Mr. Serra, "tenacity."
That was exactly what he did. He exhibited tenacity before JCA came along
in preparing and submitting the prior documents to get out of the tax debt
with the money brokers. That there is not even an issue that he owed that.
He exhibited tenacity when JCA came along. He exhibited tenacity the day
that the money brokers' representatives came out to his property, innocently,
simply to review the property and show the property to potential buyers,
and he did draw the line in the sand. He did threaten at that point, I believe-I
believe he threatened physical violence in the sense that he was going to
beat the material out of the witness that was there. And then at the courthouse,
that same type of tenacity was continued to be exhibited when he got into
at least the oral confrontation with the witnesses.
To quote Mr. Serra again, Mr. Reed bubbles over. He was at the end of his
rope in this case. His property was all but taken from him. All but worthless
and his business was finished. He was clearly able to foresee that violent
means would be used based upon his own conduct. And the government would,
therefore, submit that the additional four levels is warranted, taking it
from a clear level 24 to a 28. And we would request the Court impose the
sentence at that guideline level.
We'd submit it.
THE COURT: Thank you.
Mr. Serra, do you wish to respond?
MR. SERRA: Very short.
My client had nothing to do with the everyday workings of JCA. That's what
was meant. From his perspective, there was, like, no membership, I don't
know, meetings and rituals that he participated in. For a very short time,
I think two to three months, when the IRS closed his business bank account,
he did run his checks through there, but that was the extent of it. It wasn't
of long duration, nor was it continuous.
Tenacity he showed, but it was tenacity in having people in the entity file
that he believed were legal documents, that is, in terms of litigation,
not tenacity in any violent or physical way. My word, "tenacity"
was not utilized in that fashion, and the evidence does not bear out that
he was tenacious in that fashion.
I think, Your Honor, I'm not even going to dignify the obstruction issue.
My client testified in every respect in an honest, frank, and open way,
and if they had anything to impeach him, they should have done it, not claim
here in hindsight, that somehow when he distanced himself from the JCA,
that that was invalid. The fact is, he wasn't living there. And the fact
is that his office was different, and the fact is, he was working on his
own business most of the-of that time period.
So he was, in fact, distant, and his distancing as is in the brief was,
therefore, supported by the evidence.
THE COURT: Thank you, Mr. Serra.
Mr. Reed, at this time, do you wish to say anything? And the Court is prepared
and ready to hear from you.
THE DEFENDANT: Yes, Your Honor, I have two things that I would like to mention.
That is, I am not a violent person. I never advocated it. And I wish to
make that very well known that violence is not my issue. My family will
back me up on that and my friends.
I gave my two years with the military with an honorable discharge with no
violence in there, and that's the statement on violence I wish to make.
The other is I wish to thank you, Your Honor, for your comments when my
son was sentenced, for your comments about my family and his. I appreciate
that very much. Thank you.
THE COURT: Thank you, Mr. Reed. Is there any legal cause why sentence should
not now be pronounced?
MR. SERRA: Your Honor, I should have said, I am submitting the family relationship
to the support of his mother and the logistic concern-
THE COURT: Yes, in concerns with your motion for downward departure, yes.
MR. SERRA: Yes, I'm submitting that-
THE COURT: On the papers that I have read and fully considered?
MR. SERRA: Yes, Your Honor. And there is no legal reason why sentence should
not be pronounced.
THE COURT: Thank you. If the parties bear with me, if I didn't apologize,
I do now for the late start. We were set to begin at 10:30, and you all
saw why we didn't start on time, and I am sorry.
I should also note that in considering all of the submissions in connection
with the sentencing, that I did receive and review the letter that George
Reed sent to Mr. Hatfield explaining in his own words his view of the case,
and I have read and fully considered that.
The Court has filed now its memorandum opinion and order concerning what
I have referred to as the Count 1 sentencing issues, and I have also indicated
that this case requires that each defendant be individually sentenced, individually
considered, and I am not other than doing the legal analysis on which year
of the guidelines apply, and which sections of the guidelines apply to the
conspiracy count, intending that omnibus analysis, which took a lot longer
than the Court would have preferred, but that seems based on the issues
that were raised to be what was required to discuss it.
The Court is going to commence by adopting those sections of the presentence
investigation report that are not inconsistent with my written decision,
and I will also make findings today at this time which I intend to control
and prevail over other matters that may be stated to the extent that what
is stated in the presentence investigation report is to the contrary. I
intend my oral findings to take precedence over and to supersede to the
extent and consistent with the written findings, but I otherwise will incorporate
the presentence investigation report, except as it is inconsistent where
I am not doing that.
The Court has determined that this was a conspiracy; that the operation
of which extended beyond the amendment to the guidelines effective November
1st of 1993, and because those guidelines are more advantageous to the defendant
than the 1997 guidelines, which is the time of sentencing guidelines, and
those are amendments to the 1995 guidelines, the Court is going to use as
it must those guidelines more favorable to the defendant as is required
by the law, which is the '93 version. I do find that the evidence showed
that conduct was continuing. That there were the visits to the County Recorder's
Office in January of 1994, which show that active participation by persons
who are found to be members of the conspiracy was ongoing and where the
conduct of the conspiracy straddles the temporal change in the guidelines.
The Court applies the section of the guidelines that addresses the conduct
here are the '93 guidelines. And so the defendant's objections to the application
of that set of the guidelines are overruled.
As to the objections to the presentence investigation and recommendation,
the written report of the probation officer, the objection to paragraph
4, the Court overrules the objection. The Court believes that the evidence
at trial showed that Mr. Reed associated with the JCA to avoid his tax obligation,
that it was Mr. Reed's position that he, although at trial, he said he acknowledge
the tax obligation. There has been no evidence of prior acknowledgment.
In fact, the evidence showed that he tried to avoid payment of the obligation
in very way that he could. And so that objection is overruled.
As to paragraph 6, I don't believe that there was any evidence that George
Reed ever submitted a W-4 form. Is the prosecution familiar with any?
MR. CONKLIN: A W-4 form specifically, no, Your Honor.
THE COURT: That objection is sustained.
As to paragraph 8, the Court believes that the invitation to Ms. Mallen
and to Mr. McKendrick was from David Ries. That Mr. George L. Reed did give
them permission to stay, but that he didn't invite them, and so that objection
in paragraph 8, is that the prosecution's belief of the evidence?
MR. CONKLIN: Our belief of the evidence is he allowed them to stay there
once they arrived.
THE COURT: Yes, that is my finding, but he didn't invite them there. It
was David Ries, from my interpretation of the evidence, who invited them.
So as to that part, the objection is sustained, but I do find that he allowed
them, permitted them to stay.
As to the objection, I don't really think it's an objection, and I'm not
going to rely on the Committee of the State's evidence in sentencing, so
I'm not going to rule on that.
As to paragraph 12, this, it seems to me, is somewhat ambiguous to avoid
paying his taxes. The Court finds that he was trying to avoid paying the
$416,000 lien for taxes, and so to that extent, this objection is ambiguous,
but I overruled the objection because the evidence the Court believes proves
to the contrary, beyond a reasonable doubt.
As to paragraph 15, the evidence did not specifically show that all of the
pleadings were reviewed or signed by Mr. Reed personally, and I will treat
this fact in the overruled basis that I state factually for sentencing,
and so I'm going to pass that objection because it will be subsumed within
my findings.
As to paragraph 16, the Court believes that Mr. Reed did give the JCA authority
to do whatever the JCA could to avoid his payment of the tax obligation,
and this objection is overruled. But he did run income from his business
through the JCA, and that was the evidence at trial.
As to paragraph 20, the fact that two lien sales were scheduled and cancelled
without George Reed's knowledge, and that he had expected the property would
be sold, I believe that Mr. Reed may have testified to that, but I do not
find that it is relevant where other conduct that was being taken showed
that actions to try to defeat or to avoid the obligation represented by
the lien, $416,323 and some cents were undertaken, and, therefore, the Court
finds this to be an immaterial objection because the conduct of Mr. Reed
was proved to whether or not certain of the foreclosure sales were cancelled.
His conduct was nonetheless in avoidance and with the endeavor to defeat
the Internal Revenue Service's endeavors to execute and ultimately foreclose
to satisfy the obligation on the Reed property.
Paragraphs 21 through 24 are objected to as not having to do with his behavior,
but since the count is a conspiracy actions of persons found to be coconspirators
is relevant, and so the Court overrules that objection. It is not necessary
to delete it from the report. The Court will describe how Mr. Reed will
be held responsible and for whose conduct, and so there is no prejudice
from the inclusion of those background paragraphs concerning activities
of other coconspirators.
The Court recognizes that George L. Reed was acquitted of the counts relating
to the assault of Karen Mathews, and that he claims that he was not aware
that any assault was to take place. The evidence also did not directly show
that Mr. Reed mailed any of the letters, placed the phony pipe bomb, or
that he himself engaged in any other conduct that was directly hostile or
threatening towards Miss Mathews. Miss Mathews testified that Mr. Reed was
not threatening when he was in her office, but that his statement to her
were that he wanted the lien on his property removed, and she declined to
do that, as was her legal right.
The balance of this, objects to the fact that Mr. Reed has an individualized
right, and I am considering the facts individually as to Mr. Reed. And although
these facts are relevant that are described, I do not recall any testimony
that Mr. Reed knew the limits of the legal authority that Miss Mathews had,
and, therefore, I'm going to overrule this objection because the evidence
is relevant. It may not be attributable directly to Mr. Reed, but the evidence
referred to is relevant. The same paragraph 49, the objection is overruled.
And as 50 to 62, this is the issue. Whether or not violence was reasonably
foreseeable to Mr. Reed, as a result of his participation in the conspiracy,
and the Court is going to deal with that in its factual findings.
The Court has selected 2T1.9 as the applicable guideline for the conspiracy
count, and on Count 1, the analysis is, then, that the base level under
2T1.9 is found in the tax table. It makes no difference whether the Ingram
tax liability is included, because the obligation sought to be avoided by
Mr. Reed was $416,000, which is more than 325,000, but less than $550,000,
and so the offense level from 2T4.1 is a 17.
The next provision of the guideline that is to be applied under 2T1.9 is
whether the offense involved the plan or threatened use of violence to impede,
impair, obstruct, or defeat the ascertainment, computation assessment or
collection of revenue. And the Court has noted and continues to note that
just as I said to your son, Mr. Reed, you make a fine appearance before
the Court. You appear to be an upstanding citizen. You present yourself
very well. The evidence has shown in the case that your commitment to your
family and your property, it's the Court's belief blinded you in this instance
to the line between conduct that is acceptable in society and conduct that
is not, because when people get seriously injured, and when people as a
result of the kind of conduct that was proved in this case beyond a reasonable
doubt are subjected to threats to their personal safety, are subjected to
threats that they are going to be-whether it is arrest or removed from their
office or interfered with, or if they don't do their jobs the way somebody
wants them to do them, they're going to suffer consequences. That conduct
crosses the line.
And I find, it, frankly, not believable that with Mr. Thorne there every
day, that although I do believe the evidence established without question
that your office was not in the JCA part of your-I'm going to call it a
warehouse kind of property. I know it wasn't a formal warehouse, but it
was a machine shop, and that kind of a forum property building.
The Court does believe that the evidence reasonably established by a preponderance
of the evidence that Mr. Thorne's views about the Internal Review Service,
essentially being a foreign power, that the declarations by individuals,
that they were not citizens of the United States, but were citizens of sovereign
states here that are different from the United States, such language was
in papers that you signed. You signed as a free person, a free man was the
exact word. You signed in sui juris. You used the constitutionalist rhetoric
in many of your papers, before even Mr. Thorne came on the scene, and the
issue is, is that free speech? Are you simply redressing and petitioning
to have your views known?
And the Court finds again, that the line was crossed. That you can say all
the things you want. You can write all the letters that you want, you can
go to the point of where you start threatening people, but when the message
that you're sending is to threaten, and what you're saying to people who
are doing their jobs as government servants, is then to say, "We're
going to arrest you, we're going to harm you, we're going to take the actions
that are taken." The Court finds that it was reasonably foreseeable
to you in this instance, that threats were being made, that they were being
carried out.
The Court recognizes that the jury did not find you directly responsible
for the Mathews attack. However, your providing of the forum of the JCA
gave them encouragement, your, in effect, provision of the facilities for
the conduct that was engaged in by other members of the conspiracy, which
include Mr. Thorne, Mr. Ries, Mr. Knight, Miss Hopper and others. I have
analyzed McKendrick, Mallen and Ingram separately because I think that they
are in a separate category, but nonetheless rightfully conducted of the
conduct-some of the conduct that they were accused of.
At some point, starting in 1983, thereabouts, when this whole involvement
started through the years as you had to battle for your property, it seems
reasonable to the Court that you would have looked at what was happening,
and looked to yourself to say there must be a better way to do this, candidly.
And by the support and the furnishing of the resources of your facilities
to Thorne and what I find to be at the least constructive, if not actual
knowledge of the activities that were being carried out there, and the rhetoric,
you heard Mr. Thorne speak in San Jose. You went with David Ries. There
have been witnesses at the trial who described Mr. Ries as an extreme person
who was willing to use extreme methods. It is the Court's belief that the
plan or threatened use of violence was foreseeable to you, and, therefore,
the Court is going to enhance by those four levels.
I have already determined that it-and it's in the memorandum that the official
victim enhancement applies here because Karen Mathews was singled out. Mary
Ryan was singled out. They were addressed as persons who had specific identities,
yes, as government officials, but the cases cited in my written memorandum
support that enhancement. The whole raison d'etre, the reasons for existence
of the JCA was to encourage people to not pay their taxes. It was to impair
or obstruct by declarations of foreign citizenship, by committing funds
to trusts, to have it not subject to tax, and, therefore, I do find that
the encouragement, however, according to the use note in 1993 is not to
be applied if 2T1.4(B)(1) is applied.
MR. CONKLIN: That wasn't pled, Your Honor. That's . 4, not . 9.
THE COURT: That is correct. 2T1.4 is for the tax service provider or consultant.
So on the obstruction, the Court understands the Government's argument clearly.
The Court believes that you may have in your mind thought that you were
sufficiently disassociated as to have given the testimony that you gave.
You were represented very well at this trial, and the Court does not find
that you intentionally obstructed justice by testifying the way you did
at the trial.
I am not suggesting that anybody counseled you on how you should testify,
but I believe overall, that you did not intend to lie. I think that it is
a human inclination and a natural tendency, when you are standing accused,
to distance yourself from the organization, and the evidence did not in
the Court's belief show that you were an active day-to-day participant,
keeping the books. You weren't preparing the documents, you weren't counseling
and consulting, but I do believe you had enough information about what was
going on on a continuing basis as to not negate my finding as to the foreseeable
foreseeability by you of violence.
That makes the offense level a 17 plus 4 is 21. The Official Victim-I'm
sorry, the encouragement is two more, making it a level 23. And my recollection
of the Official Victim enhancement is-if you'll bear with me.
MR. CONKLIN: Three levels, Your Honor.
THE COURT: That that is a three level, making the total offense level a
26, if my math is right.
MR. CONKLIN: Yes, Your Honor.
THE COURT: The report shows your Criminal History Category to be a I.
As to Count 2, which is the obstruction of justice, I'm following the analysis
of the probation officer, and that adjusted offense level is a 23, following
the analysis on pages 19 and 20. Under the grouping rules, the Court finds
that the higher of the two is the Count 1 level, making the total offense
level a 26. The guideline range for someone in offense level 1-I'm sorry,
offense level 26 in a Criminal History Category I is 63 to 78 months.
The Court is well cognizant of your family responsibilities, and history,
and has fully considered the motion for a downward departure, but does not
find that there is a basis for a downward departure, and I will provide
in writing the additional reasons for that. It does appear that there are
resources.
I do recognize that you have other family members who can assist with the
care of your very elderly mother. And the Court believes that in this case,
a sentence at the low end of the guideline adequately addresses, given your
age, and given the overall posture of your participation in the case. It
is, therefore, the judgment of the Court that the defendant George L. Reed
is hereby committed to the custody of the Bureau of Prisons, to be imprisoned
for a term of 63 months on each count to be served concurrently. You shall
pay a special assessment of $100.00, payable immediately.
As to the matter of fine, the Court recognizes that you have an obligation,
and instead of imposing a separate fine on top of that, I provide as an
order that you pay the obligation owed to the Internal Revenue Service.
I do not find that you have additional resources to pay a fine. I am imposing
that required payment as a condition of your sentence, so I'm not going
to order a separate fine.
Upon your release from custody, you shall be placed on supervised release
for a term of 36 months. Within 72 hours following your release from custody,
you shall report in person to the probation office in the district where
you are released. While on supervised release, do not commit another federal,
state, or local crime, do not possess a firearm or illegally possess controlled
substances. There will be standard conditions furnished to you recommended
by the United States Sentencing Commission. Refrain from unlawful use of
a controlled substance. Submit-I don't believe that there is any evidence
that there would be a need for drug testing, Mr. Hatfield?
MR. HATFIELD: Your Honor, if I may review the report for a moment, if you
like.
THE COURT: Well, I don't find that there is any evidence.
Mr. Conklin, do you know of any objection-
MR. CONKLIN: No, Your Honor, I-
THE COURT: I'm not going to impose drug testing on Mr. Reed. Special conditions
include submit to the search of of your person, property, home, and vehicle
by a probation officer, or someone acting in the immediate personal supervision
of a probation officer without a search warrant. Failure to do so may be
grounds for revocation.
Make payments on the IRS obligation as ordered in installments determined
by your probation officer. Provide your probation officer with access to
requested financial information. Provide the probation officer with copies
of your filed tax returns by May 1st for each year during your term of supervised
release, and for any reason, you should need an extension, that will have
to be approved by your probation officer.
I advise you now that you have a right to appeal this case, both your conviction
and your sentence. In order to perfect your right to appeal, you must file
with this Court a written Notice of Appeal. It has to say "Notice of
Appeal." It has to be filed within 10 days of today's date. If you
cannot afford an attorney for an appeal, the Court will appoint one for
you.
Do you understand the appeal rights I have just explained?
THE DEFENDANT: Yes, I do.
THE COURT: There is a motion made for release pending appeal. I am going
to take that under submission. I am going to rule on those motions in writing.
At this time, is there anything further?
MR. SERRA: Yes, Your Honor.
THE COURT: Yes.
MR. SERRA: May we have the recommendation to Sheridan, Oregon, and this
is for purposes of convenience to family, some of whom live in Oregon, and
others who desire that as convenience for visiting.
THE COURT: Yes, I will, and I will set a date. Do you have any objection
to Mr. Reed surrendering?
MR. CONKLIN: No, Your Honor.
THE COURT: All right. When would be a reasonably convenient date to surrender?
MR. SERRA: We would like it where in the same time frame, as I believe other
defendants have been allowed to wait, second week of February.
MR. CONKLIN: That's fine, Your Honor. I'm sure it goes without saying, this
defendant is aware of his obligation not to have contact in or not around
Miss Mathews. And would the Court recognize its discretion for the downward
departure that it had the discretion to do that-
THE COURT: Very definitely. If I didn't state it explicitly, I do recognize
that I had discretion. I do not believe the grounds for downward departure
were established.
MR. CONKLIN: Thank you, Your Honor.
THE COURT: I will then-may I have a date, Mr. Lucas?
THE CLERK: February 2nd.
THE COURT: You should surrender-you must surrender on February 2nd, your
choice is to surrender directly to the institution.
MR. SERRA: Did you say 10th or 2nd?
MR. CONKLIN: 2nd.
THE COURT: 2nd. February 2nd. If you don't surrender at Sheridan, if you
get assigned to Sheridan, Oregon, or whichever institution, Mr. Reed, you
can surrender here to the marshals. As I have indicated to other defendants
in this case, it's to your advantage to surrender to the institution.
Is there anything further?
MR. CONKLIN: Your Honor, very briefly. The Government submitted its opposition
to request for bail pending appeal. This defendant did not formally submit
one. I did not address him. I simply ask the Court to adopt this motion.
If it would like further pleadings, we'll provide those.
MR. SERRA: This-
THE COURT: I believe you joined in the motion for bail pending appeal, but
am I wrong?
MR. SERRA: You may be wrong because our intention is to file a formal motion,
and you calendared it obviously before February 2nd, subsequent to filing
a Notice of Appeal.
MR. CONKLIN: Then we'll address it, then. Thank you, Your Honor.
THE COURT: Yes. Anything further?
MR. SERRA: I'm forgetful. Do you have to pronounce credit for time served
of approximately three months, or is that taken into account by-
THE COURT: The Bureau of Prisons has the sole jurisdiction to do that. I
don't do that.
MR. SERRA: Okay.
THE COURT: But I will note for the record that Mr. Reed does have time that
was served in this case for which he should receive credit.
MR. SERRA: I appreciate that.
MR. CONKLIN: Fine, Your Honor. Thank you.
THE COURT: All right, we'll stand in recess.
I, Gail Lacy Thomas, Official Court Reporter, certify that the foregoing
transcript is true and correct.
January 13, 1998 /s/ GAIL LACY THOMAS
APPENDIX D
NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
No. 97-10495
D.C. No. CR-95-05174-3-OWW
UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE
v.
GEORGE LOREN REED, DEFENDANT-APPELLANT
[Filed: Aug. 31, 1999]
ORDER
Before: GOODWIN and TROTT, Circuit Judges, and KING, District Judge.1
The panel as constituted above has voted to deny the Government's petition
for rehearing filed July 6, 1999. Judge Trott has voted to deny the petition
for rehearing en banc, and Judges Goodwin and King so recommend.
The full court has been advised of the petition for rehearing en banc and
no judge of the court has requested a vote on them. Fed. R. App. P. 35(b).
The petition for rehearing, and the petition for rehearing en banc are DENIED.
1 The Honorable Samuel P. King, Senior United States District Judge for
the District of Hawaii, sitting by designation.