UNITED STATES COURT OF APPEALS For the Fifth Circuit
No. 92-3789
UNITED STATES OF AMERICA,
Plaintiff- Appellee,
VERSUS
ELIZABETH ANN PRATT STOKES,
Defendant-Appellant.
Appeal from the United States District Court for the Eastern District of Louisiana (August 9, 1993)
Before KING, HIGGINBOTHAM, and DeMOSS, Circuit Judges.
DeMoss, Circuit Judge: I.
Stokes was employed as the office manager of a satellite
Tulane University Medical Center Cardiology Clinic (Tulane) in
Hammond, Louisiana, from March 30, 1985, until June 2, 1987. In
this capacity, she had signature authority on the clinic's bank
account.
Stokes used money embezzled from Tulane to open two bank
accounts in the name of Cardiology Associates of Hammond. She deposited $134,000 into the first Cardiology Associates account and
$71,000 into the second. Stokes's husband, Jimmy, was the only
person authorized to withdraw money from the second account.
Stokes wrote checks on the first Cardiology Associates account
to herself and Jimmy for approximately $20,000 in 1986, and $30,000
in 1987.
Stokes purchased a money order for $15,000 with a check
written to herself from the Cardiology Associates accounts and
bought a car. Stokes then purchased a second money order for
$15,000 with a check written to herself and bought some land.
Stokes and her husband, Jimmy, filed joint income tax returns
in 1986 and 1987. The Stokes's 1986 return reflected their income
as $30,876. Their 1987 return reflected their income as $20,464.
Stokes never gave her tax accountant any information about the
checks that came from the first Cardiology Associates accounts.
Nor did the tax preparer ever see any statements from the second
Cardiology Associates. Therefore, none of the amounts from these
checks were declared on the Stokes's income tax returns. Rather,
Stokes only reported the amounts reflected on her W-2 forms
received from Tulane Medical Center.
On June 5, 1992, a jury convicted Stokes of making a
fraudulent income tax return for the tax years 1986 and 1987, in
violation of Title 26, U.S.C. § 7206(1). The probation officer
recommended in Stokes's presentence investigation (PSI) report that
the district court adjust Stokes's base offense level upward two
levels for using sophisticated means to impede discovery of the
2 nature or extent of her offense pursuant to U.S.S.G. § 2T1.3. The
district court adopted the PSI recommendations and made the upward
adjustment.
On appeal to this Court, Stokes contends that the district
court improperly qualified an expert witness; the evidence at trial
was insufficient to find Stokes guilty of the indictment; and the
trial court erred in making a two level enhancement for the use of
sophisticated means.
We AFFIRM in part and AMEND in part.
II.
WHETHER THE DISTRICT COURT IMPROPERLY QUALIFIED AN EXPERT WITNESS.
Michael Susano, a revenue agent and eighteen year employee of
the IRS, was permitted by the district court to testify as an
expert in the calculation and compilation of income and taxes.
Stokes objected at trial to Mr. Susano's admission as an
expert because Mr. Susano had not prepared tax returns for
taxpayers for almost thirty years, all of his relevant experience
had been as a revenue agent with the IRS, and there was no
indication that he had ever been considered an expert in his field
outside of the Internal Revenue Service.
Whether a witness is shown to be qualified as an expert is a
preliminary question to be determined within the sound discretion
of the trial judge.
Trial judges have commonly allowed IRS agents to qualify as
experts in the field of tax computations in criminal tax cases.
See e.g. United States v. Mohney, 949 F.2d 1397, 1406 (6th Cir.
3 1991); United States v. Windfelder, 790 F.2d 576, 581 (7th Cir.
1986).
The trial judge did not abuse his discretion in allowing an
IRS revenue agent to testify as an expert in the calculation of
income and taxes.
III.
WHETHER THERE WAS SUFFICIENT EVIDENCE TO FIND THE DEFENDANT GUILTY OF THE INDICTMENT.
Stokes next complains that the evidence did not establish that
she was aware that the proceeds in the checks she wrote to her
benefit from the clinic's account should have been included in the
computation of her income.
A conviction cannot stand unless the evidence supporting it is
such that when it is viewed in the light most favorable to the
prosecution, it can be found that any rational trier of fact could
have found all the elements of the offense beyond a reasonable
doubt. Jackson v. Virginia, 443 U.S. 307, 99 S. Ct. 2781, 61 L.
Ed. 2d 560 (1979).
Stokes could have asked her accountant whether the $30,000
used to purchase the car and real estate was taxable income. Since
she never told the accountant about the money, the jury was free to
make the inference that this was a calculated decision by her.
Criminal willfulness can be inferred when a defendant does not
supply her tax preparer with evidence of substantial items of
income. United States v. Frank, 437 F.2d 452, 453 (9th Cir. 1971),
cert. denied, Frank v. United States, 402 U. S. 974 (1971).
Moreover, evidence of a consistent pattern of under reporting large
4 amounts of income will support the necessary inference of
willfulness. Escobar v. United States, 388 F.2d 661, 661 (5th Cir.
1967), cert. denied, Escobar v. United States, 390 U.S. 1024
(1968).
IV.
WHETHER THE TRIAL COURT ERRED IN MAKING A TWO LEVEL ENHANCEMENT FOR THE USE OF SOPHISTICATED MEANS.
Stokes finally contends that the district court erred in
giving her a two level adjustment, pursuant to § 2T1.3(b)(2) of the
Sentencing Guidelines, for using sophisticated means to impede
discovery. Stokes argues that since the enhancement authorized by
§2T1.3(b)(2) is directed toward concealment of the offense and that
as she did nothing tending to conceal or to impede discovery of the
purported tax offense, she should not be penalized.
The government asserts that the evidence proves otherwise. It
points out that Stokes set up two clinic accounts under the name of
Cardiology Associates of Hammond. One account was under her
signature authority, but did not have a taxpayer identification
number. The second account was under her husband's signature
authority. She wrote $50,589 worth of checks from the first
account. Of this amount, two checks, each in the amount of
$15,000, were written by her and then transferred into cashier's
checks and these checks were then used to purchase the car and
land. The government contends that the only possible purpose
behind exchanging clinic checks for cashier checks would be to
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UNITED STATES COURT OF APPEALS For the Fifth Circuit
No. 92-3789
UNITED STATES OF AMERICA,
Plaintiff- Appellee,
VERSUS
ELIZABETH ANN PRATT STOKES,
Defendant-Appellant.
Appeal from the United States District Court for the Eastern District of Louisiana (August 9, 1993)
Before KING, HIGGINBOTHAM, and DeMOSS, Circuit Judges.
DeMoss, Circuit Judge: I.
Stokes was employed as the office manager of a satellite
Tulane University Medical Center Cardiology Clinic (Tulane) in
Hammond, Louisiana, from March 30, 1985, until June 2, 1987. In
this capacity, she had signature authority on the clinic's bank
account.
Stokes used money embezzled from Tulane to open two bank
accounts in the name of Cardiology Associates of Hammond. She deposited $134,000 into the first Cardiology Associates account and
$71,000 into the second. Stokes's husband, Jimmy, was the only
person authorized to withdraw money from the second account.
Stokes wrote checks on the first Cardiology Associates account
to herself and Jimmy for approximately $20,000 in 1986, and $30,000
in 1987.
Stokes purchased a money order for $15,000 with a check
written to herself from the Cardiology Associates accounts and
bought a car. Stokes then purchased a second money order for
$15,000 with a check written to herself and bought some land.
Stokes and her husband, Jimmy, filed joint income tax returns
in 1986 and 1987. The Stokes's 1986 return reflected their income
as $30,876. Their 1987 return reflected their income as $20,464.
Stokes never gave her tax accountant any information about the
checks that came from the first Cardiology Associates accounts.
Nor did the tax preparer ever see any statements from the second
Cardiology Associates. Therefore, none of the amounts from these
checks were declared on the Stokes's income tax returns. Rather,
Stokes only reported the amounts reflected on her W-2 forms
received from Tulane Medical Center.
On June 5, 1992, a jury convicted Stokes of making a
fraudulent income tax return for the tax years 1986 and 1987, in
violation of Title 26, U.S.C. § 7206(1). The probation officer
recommended in Stokes's presentence investigation (PSI) report that
the district court adjust Stokes's base offense level upward two
levels for using sophisticated means to impede discovery of the
2 nature or extent of her offense pursuant to U.S.S.G. § 2T1.3. The
district court adopted the PSI recommendations and made the upward
adjustment.
On appeal to this Court, Stokes contends that the district
court improperly qualified an expert witness; the evidence at trial
was insufficient to find Stokes guilty of the indictment; and the
trial court erred in making a two level enhancement for the use of
sophisticated means.
We AFFIRM in part and AMEND in part.
II.
WHETHER THE DISTRICT COURT IMPROPERLY QUALIFIED AN EXPERT WITNESS.
Michael Susano, a revenue agent and eighteen year employee of
the IRS, was permitted by the district court to testify as an
expert in the calculation and compilation of income and taxes.
Stokes objected at trial to Mr. Susano's admission as an
expert because Mr. Susano had not prepared tax returns for
taxpayers for almost thirty years, all of his relevant experience
had been as a revenue agent with the IRS, and there was no
indication that he had ever been considered an expert in his field
outside of the Internal Revenue Service.
Whether a witness is shown to be qualified as an expert is a
preliminary question to be determined within the sound discretion
of the trial judge.
Trial judges have commonly allowed IRS agents to qualify as
experts in the field of tax computations in criminal tax cases.
See e.g. United States v. Mohney, 949 F.2d 1397, 1406 (6th Cir.
3 1991); United States v. Windfelder, 790 F.2d 576, 581 (7th Cir.
1986).
The trial judge did not abuse his discretion in allowing an
IRS revenue agent to testify as an expert in the calculation of
income and taxes.
III.
WHETHER THERE WAS SUFFICIENT EVIDENCE TO FIND THE DEFENDANT GUILTY OF THE INDICTMENT.
Stokes next complains that the evidence did not establish that
she was aware that the proceeds in the checks she wrote to her
benefit from the clinic's account should have been included in the
computation of her income.
A conviction cannot stand unless the evidence supporting it is
such that when it is viewed in the light most favorable to the
prosecution, it can be found that any rational trier of fact could
have found all the elements of the offense beyond a reasonable
doubt. Jackson v. Virginia, 443 U.S. 307, 99 S. Ct. 2781, 61 L.
Ed. 2d 560 (1979).
Stokes could have asked her accountant whether the $30,000
used to purchase the car and real estate was taxable income. Since
she never told the accountant about the money, the jury was free to
make the inference that this was a calculated decision by her.
Criminal willfulness can be inferred when a defendant does not
supply her tax preparer with evidence of substantial items of
income. United States v. Frank, 437 F.2d 452, 453 (9th Cir. 1971),
cert. denied, Frank v. United States, 402 U. S. 974 (1971).
Moreover, evidence of a consistent pattern of under reporting large
4 amounts of income will support the necessary inference of
willfulness. Escobar v. United States, 388 F.2d 661, 661 (5th Cir.
1967), cert. denied, Escobar v. United States, 390 U.S. 1024
(1968).
IV.
WHETHER THE TRIAL COURT ERRED IN MAKING A TWO LEVEL ENHANCEMENT FOR THE USE OF SOPHISTICATED MEANS.
Stokes finally contends that the district court erred in
giving her a two level adjustment, pursuant to § 2T1.3(b)(2) of the
Sentencing Guidelines, for using sophisticated means to impede
discovery. Stokes argues that since the enhancement authorized by
§2T1.3(b)(2) is directed toward concealment of the offense and that
as she did nothing tending to conceal or to impede discovery of the
purported tax offense, she should not be penalized.
The government asserts that the evidence proves otherwise. It
points out that Stokes set up two clinic accounts under the name of
Cardiology Associates of Hammond. One account was under her
signature authority, but did not have a taxpayer identification
number. The second account was under her husband's signature
authority. She wrote $50,589 worth of checks from the first
account. Of this amount, two checks, each in the amount of
$15,000, were written by her and then transferred into cashier's
checks and these checks were then used to purchase the car and
land. The government contends that the only possible purpose
behind exchanging clinic checks for cashier checks would be to
break the link between Stokes and Tulane. It states that by
transferring the checks in this manner, Stokes impeded discovery.
5 Likewise, the government argues, the second account in her
husband's name also could have had no other purpose than to create
a distance between herself and the $71,000.
The tax fraud guideline directs a district court to add two
levels to a defendant's base offense level "[i]f sophisticated
means were used to impede discovery of the nature or extent of the
offense." U.S.S.G. § 2T1.3(b)(2).
However, the guideline adjustment for the use by a defendant
of sophisticated means in committing an offense provides that the
sophisticated means be tied to the offense of conviction. Any
sophisticated means that Stokes employed to hide the money that she
took from Tulane occurred in her scheme to embezzle from Tulane. It
did not involve the evasion of taxes, the offense for which Stokes
was convicted. There is nothing sophisticated about simply not
disclosing income to your accountant. Simply put, Stokes didn't
try to hide the money because she didn't want to pay her taxes.
She hid it from Tulane because she didn't want Tulane to know that
she had taken money from their accounts.
We find therefore, that the trial court misinterpreted the
guidelines when it ordered a two level increase for sophisticated
means.
Additionally, the record reflects that the trial judge
erroneously considered Stokes's sentence to be a Class D felony.
Stokes was convicted pursuant to 26 U.S.C. § 7206(1), which imposes
a maximum term of three years of imprisonment.
6 Count 1 relating to 1976 taxes was a pre-guideline offense and
therefore the guideline provisions do not apply to that Count.
However, as to Count 2 of the indictment, based on a total offense
level of 11 and a criminal history category of I, the PSI found the
guideline imprisonment range to be eight to fourteen months.
The PSI considered Count 2 to be a Class D felony, which
carries with it a term of supervised release of not more than three
years. 18 U.S.C. § 3583(b)(2).1 Pursuant to § 5D1.1, the PSI
stated that the Court shall order a term of supervised release to
follow imprisonment when a sentence of imprisonment of more than
one year is imposed; and that as to Count 2, a Class D felony, the
term of supervised release should be at least two years but not
more than three years. § 5D1.2(b)(2).
The district court followed the PSI recommendation outlined
above and sentenced Stokes to four months imprisonment and three
years supervised release as to Count 2.2
The PSI erred in classifying Stokes's offense as to Count 2 as
a Class D felony. We agree with the PSI's assertion that the term
of imprisonment authorized under 26 U.S.C. § 7206(1) is not more
than three years. However, we find that Stokes's offense as to
Count 2 is a Class E felony and not a Class D felony. 18 U.S.C. §
1 Since Count 1 does not fall under the sentencing guidelines, a period of supervised release is not applicable, and the defendant may become eligible for parole as to that count. 2 The amount of loss in the pre-guideline count was included as Relevant Conduct in arriving at the total loss figure on which the guideline enhancement is based. This was considered in determining that the pre-guideline count was ordered to run concurrently with regard to the guideline count.
7 3559(a)(1)(5). The authorized term of supervised release for a
Class E felony is not more than a year. 18 U.S.C. § 3583(b)(3).
Therefore, pursuant to 18 U.S.C. § 3576 and 18 U.S.C. §
3583(b)(3), we vacate the lower Court's sentence of three years
supervised release and amend the supervisory release term as to
Count 2 to a one year term. See United States v. DiFrancesco, 449
U.S. 117, 101 S. Ct. 426, 66 L. Ed. 2d 328 (1980).
CONCLUSION
We find Stokes's objection to the qualification of the expert
witness meritless; and find the evidence sufficient. However, the
trial court misinterpreted the guidelines when it ordered the two
point increase for the use of sophisticated means. Further, we
hold that the trial court clearly erred when it sentenced Stokes to
a period of supervised release applicable to a Class D felony
rather than to a Class E offense. Corrections of the error
regarding the enhancement for sophisticated means by the trial
court would not result in a change in the prison term.
We AFFIRM the conviction and sentence as to Count 1. We
AFFIRM the conviction as to Count 2 and AMEND the sentence of
supervised release to one year, and as amended AFFIRM the sentence
in Count 2.
c:br:opin:92-3789p:jm/nb 8 HIGGINBOTHAM, Circuit Judge, concurring in part and dissenting in
part.
I concur in the majority's opinion except its holding that the
district court erred in adjusting the offense level because
sophisticated means were used to impede discovery of the nature or
extent of the offense. Whether the means of Stokes were more than
the planning of a routine tax-evasion case is a close question. To
me there was no misinterpretation of the legal effect of the
guidelines that we ought to examine de novo. Rather, this was a
judgment call of whether means used were "sophisticated." I find
no basis for upsetting this call and would affirm.
At its essence sentencing is inevitably an exercise of
judgment. The guidelines guide but cannot supplant that judgment.
Imposing our view in circumstances as these pretends an objective
standard that does not exist. We assume a role in sentencing that
Congress surely did not intend.
c:br:opin:92-3789p:jm/nb