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United States v. Diesel

Procedural entryThis page is a short order in United States v. Diesel. Read the opinion of the Court — 238 F. App'x 398 →
Court of Appeals for the Tenth Circuit·Decided July 31, 2007·No. 06-3325·Published

Opinion

F I L E D United States Court of Appeals Tenth Circuit UNITED STATES COURT OF APPEALS July 31, 2007 TENTH CIRCUIT Elisabeth A. Shumaker Clerk of Court

U N ITED STA TES O F A M ER IC A ,

P l a in t i f f - A p p e ll e e , No. 06-3325 v. (D.C. No. 05-CR-20005-JW L) ( D . K a n .) M ICH AEL E. DIESEL,

D efendant-A ppellant.

ORDER AND JUDGMENT*

B e f o r e O ’ B R I E N , M c W I L L I A M S , a n d G O R S U C H , C i r c u it J u d g e s .

A f e d e r a l ju r y f o u n d M i c h a e l E . D i e s e l g u i lt y o f w i ll f u l ly u n d e r -

r e p o r t i n g t o t h e I R S o v e r $ 3 m i l l i o n o f h is p e r s o n a l i n c o m e o v e r a th r e e -ye a r

p e r i o d . T h e U n i t e d S t a te s D i s t r i c t C o u r t f o r t h e D i s t r i c t o f K a n s a s

t h e r e a f t e r s e n te n c e d M r. D ie s e l, i n t e r a l i a , to 4 2 m o n th s o f in c a r c e r a tio n .

I n t h i s a p p e a l , M r . D i e s e l a r g u e s t h a t w e s h o u l d o v e r t u r n h i s c o n v ic ti o n

b e c a u s e ( 1 ) h e “ c o u ld n o t p o s s i b l y h a v e h a d t h e r e q u is i t e m e n s r e a ” ; ( 2 ) t h e

g o v e r n m e n t u n c o n s t i t u t i o n a ll y r e q u ir e d M r . D i e s e l t o “ c re a te h is o w n t a x

* T h i s o r d e r a n d ju d g m e n t i s n o t b i n d i n g p r e c e d e n t e x c e p t u n d e r t h e d o c tr i n e s o f la w o f th e c a s e , r e s j u d i c a ta a n d c o l l a te r a l e s t o p p e l. I t m a y b e c i t e d , h o w e v e r, f o r i ts p e rs u a s iv e v a lu e c o n s is te n t w ith F e d . R . A p p . P . 3 2 . 1 a n d 1 0 th C i r . R . 3 2 . 1 . f o r m ” ; a n d ( 3 ) t h e d is t r i c t c o u r t v i o l a te d A p p r e n d i v . N e w J e r s e y , 5 3 0 U . S .

4 6 6 ( 2 0 0 0 ) , a n d i ts p r o g e n y w h e n i t s e n t e n c e d h i m t o a m i d - G u i d e l i n e s t e r m

o f 4 2 m o n t h s o f i n c a r c e r a t io n . B e c a u s e M r . D i e s e l ’ s f i r s t tw o a r g u m e n t s a r e

w h o l l y w i t h o u t m e r i t a n d M r . D i e s e l’ s t h i r d a r g u m e n t i s p r e c lu d e d b y

Suprem e C ourt and our case law , w e affirm .

* * *

M r . D i e s e l f o u n d e d a n d , t h r o u g h a s e r i e s o f tr u s t s , e f f e c ti v e ly o w n e d

a n d o p e ra te d a te le c o m m u n i c a ti o n s r e s e a rc h c o m p a n y w h i c h p a id h i m a n

a n n u a l s a la ry o f $ 1 0 3 ,5 4 9 in 1 9 9 8 , $ 1 0 6 ,7 5 4 in 1 9 9 9 , a n d $ 1 0 8 ,7 8 8 in 2 0 0 0 .

M r . D i e s e l r e p o r te d , a n d p r e s u m a b l y p a i d , in c o m e t a x o n t h e s e a m o u n t s . I n

a d d it i o n t o h i s s a la r y, h o w e v e r, M r . D i e s e l’ s t r u s t s a ls o m a d e o v e r $ 3

m i l li o n i n d i s t r i b u t i o n s f r o m 1 9 9 8 t o 2 0 0 0 , t h r o u g h a s e r i e s o f i n t e r m e d i a t e

t r u s t s , t o th e P e rn o u r I n te rn a tio n a l T r u s t, a n o f f - s h o r e , B e liz e - b a s e d tr u s t.

M r . D i e s e l c o n tr o l l e d a ll o f th e tr u s t s i n t h e c h a i n a n d u lt i m a te ly r e c e i v e d

all of the proceeds from Pernour for his personal use. M r. Diesel failed to

pay income taxes on any of these proceeds.

M r . D i e s e l a p p a re n tl y l e a rn e d h o w t o d e v is e th i s s c h e m e f r o m t h e

A e g is C o m p a n y i n C h i c a g o , w h i c h , f o llo w i n g a n a ti o n w i d e in v e s t i g a ti o n ,

t h e g o v e rn m e n t s u c c e s s f u ll y p r o s e c u te d f o r t a x f r a u d . I n J a n u a ry 1 9 9 8 , a n

u n d e r c o v e r I R S a g e n t a t a n A e g i s s e m i n a r i n B e l iz e t a p e r e c o r d e d M r .

D i e s e l s t a ti n g t h a t ( 1 ) a n y i n c o m e t a x a b o v e t e n p e rc e n t i s “ c o n f i s c a ti o n ”

-2- a n d “ e v e r yb o d y i s t r yi n g t o c h e a t ” th e I R S ; ( 2 ) t h e “ w h o l e p o in t ” o f th e

t r u s t s h e e m p l o ye d w a s t h a t t h e I R S d i d n o t u n d e r s t a n d t h e m ; ( 3 ) t h e t r u s t s

a r e l i k e a “ D o u b l e K - 1 d i s a p p e a r i n g t a x l i a b i l it y t r i c k ” ; a n d ( 4 ) t h e t r u s t s

w e r e “ to o g o o d t o b e tr u e .”

U n f o rt u n a te ly f o r M r. D ie s e l, th e y w e r e n o t. I n J a n u a r y 2 0 0 5 , a

federal grand jury returned a three-count indictm ent against M r. Diesel,

c h a r g i n g h im , i n t e r a l i a , w i t h t h r e e f e l o n y v i o l a t i o n s u n d e r 2 6 U . S .C .

§ 7 2 0 6 ( 1 ) f o r h i s w i l l f u l f il i n g o f 1 9 9 8 , 1 9 9 9 , a n d 2 0 0 0 ta x r e tu r n s t h a t

f a il e d to r e p o r t o v e r $ 3 m i l l i o n o f ta x a b le in c o m e t o h i m . M r . D i e s e l e le c te d

to proceed to jury trial.

D u r in g t ri a l, M r . D i e s e l p u t o n a g o o d - f a i th d e f e n s e ; t h e d i s tr ic t c o u r t

i n s t r u c te d th e ju r o r s t h a t, i f th e y f o u n d th i s d e f e n s e c re d ib l e , i t n e g a te d th e

m e n s r e a r e q u ir e d b y t h e c ri m e s c h a rg e d . I n a id o f h is s t r a te g y, M r . D i e s e l

c a l l e d h i s a tto rn e y, S c o tt G ro s s , 1 w h o s e r v e d a s M r . D ie s e l’ s s o le w itn e s s .

M r . G r o s s t e s t i f ie d t h a t , w h i le h e i s n o t a ta x a t to r n e y, 2 h e h a d a d v i s e d M r .

D i e s e l i n 2 0 0 1 t h a t t h e A e g i s t r u s t p l a n w a s “ a p p r o p r ia t e a n d c o r r e c t ,” s o

1 M r . G r o s s i s a l s o o n e o f M r . D i e s e l ’ s a p p e l l a t e a t t o r n e ys o n t h i s c a s e . T h e g o v e rn m e n t h a s n o t o b j e c te d to t h e p r o p r i e ty o f th i s u n u s u a l arrangement, and accordingly w e do not address it here. 2 S e e , e .g ., I V T r . T r a n . a t 5 9 9 ( “ W e ll , I r e a ll y d i d n ’ t h a v e a t a x b a c k g ro u n d a t t h e ti m e I w e n t t o t h e s e m i n a r . T h e o n ly t a x b a c k g r o u n d I h a d w a s o n e c l a s s i n l a w s c h o o l . ” ) ; i d . a t 6 1 3 ( s ta t i n g t h e o n e c o u r s e w a s “ ju s t b a s i c f e d e ra l in c o m e ta x ” ).

-3- l o n g a s p r o p e r l y f o ll o w e d . B u t M r . G r o s s a ls o a d m i t t e d th a t h e k n e w t h a t

t h e U n i t e d S t a te s T a x C o u r t , a s e a rl y a s 1 9 9 8 , h a d r u l e d th e A e g is t r u s t p l a n

i l l e g a l – a n d th a t h e c o m m u n i c a te d th i s v i a le tt e r t o h i s c li e n ts , i n c lu d i n g

M r. Diesel.

T h e ju r y f o u n d M r . D i e s e l g u i l t y o n a ll t h r e e c o u n t s , a n d th e d is t r i c t

c o u r t d e n ie d M r . D i e s e l’ s m o t i o n f o r j u d g m e n t o f a c q u i t t a l. A t s e n te n c in g ,

t h e p r o b a ti o n o f f ic e re c o m m e n d e d a G u i d e li n e s - b a s e d s e n te n c e o f 3 7 to 4 6

m o n t h s b a s e d , i n p a r t , o n a t w o - l e v e l e n h a n c e m e n t u n d e r U .S .S .G .

§ 2T1.1(b)(2) for M r. D iesel’s use of “sophisticated means” to conceal his

t a x e v a s i o n o f f e n s e . M r . D i e s e l o b j e c te d to t h i s e n h a n c e m e n t o n f a c t u a l

g r o u n d s , a r g u i n g t h a t h e h a d c o n c e a l e d n o th i n g . M r . D i e s e l a ls o o b j e c te d

t h a t a p r o p e r c o n s i d e r a t i o n o f t h e f a c t o r s e n u m e r a t e d u n d e r 1 8 U . S .C .

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