United States v. Wardell

Opinion

F I L E D United States Court of Appeals Tenth Circuit UNITED STATES CO URT O F APPEALS January 11, 2007 TENTH CIRCUIT Elisabeth A. Shumaker Clerk of Court

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

Plaintiff-Appellee, No. 05-1492 v. (D . of Colo.) W ENDEL ROBERT W ARDELL, JR., (D.C. No. 03-CR-415-REB)

Defendant-Appellant.

OR D ER AND JUDGM ENT *

Before M U RPH Y, A ND ER SO N, and TYM KOVICH, Circuit Judges. **

W hile incarcerated in a Colorado state prison, W endel R. W ardell and other

prisoners engaged in a scheme to obtain fraudulent tax refunds by submitting

false tax returns. The scheme involved submitting false tax returns in their ow n

names, and in the names of other inmates, to obtain refunds to w hich they were

not entitled. W ardell was eventually convicted of seventeen counts of tax fraud

* This order and judgment is not binding precedent except under the doctrines of law of the case, res judicata and collateral estoppel. It may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1 (eff. Dec. 1, 2006) and 10th Cir. R. 32.1 (eff. Jan. 1, 2007). ** After examining the briefs and the appellate record, this three-judge panel has determined unanimously that oral argument would not be of material assistance in the determination of this appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1(G). The cause is therefore ordered submitted without oral argument. and one count of conspiracy. The district court sentenced him to a total of ninety-

six months imprisonment: (1) sixty months for the conspiracy charge, and (2)

thirty-six months for each tax fraud count, each to be served concurrently. On

appeal, W ardell challenges three sentence enhancements applied by the district

court: (1) the use of sophisticated means to commit the crimes; (2) W ardell's role

as a leader or organizer; and (3) W ardell's obstruction of justice by submitting a

false document during the prosecution.

W e affirm.

I. Background

On August 20, 2003, W ardell was indicted on 20 counts related to tax

fraud: (1) one count of conspiring to defraud the United States, in violation of 18

U.S.C. § 371; (2) four counts of making false statements in tax returns, in

violation of 26 U.S.C. § 7206(1); and (3) fifteen counts of aiding and assisting the

presentation of false tax returns, in violation of 26 U.S.C. § 7206(2). Carl W .

Pursley, Jr., a fellow prisoner, was also indicted on the conspiracy charge and tw o

counts of aiding and assisting the preparation of false tax returns.

After a jury trial, W ardell was acquitted on two counts of presenting false

tax returns and was convicted on the remaining eighteen counts. Pursley, who

was tried at the same time, was convicted of three counts brought against him. 1

1 Pursley separately appealed his conviction, which we affirmed in United States v. Pursley, 05-1428.

-2- Prior to the court’s sentencing hearing, the probation department filed a

presentence report (PSR ) and addendum with the district court. Based upon an

intended tax loss to the Internal Revenue Service of $74,916, the PSR computed a

base offense level of 14. The PSR also recommended three enhancements: (1) a

tw o-level enhancement because the offense involved “sophisticated means,”

USSG § 2T1.4(b)(2) (2004); (2) a two-level enhancement because the defendant

was a leader of the criminal activity, id. at § 3B1.1(c); and (3) a two-level

enhancement for obstruction of justice, id. at § 3C1.1. The adjustments yielded a

total offense level of 20. Based upon the 30 criminal history points, the PSR

concluded the defendant was in criminal history category VI, with a resulting

imprisonment range of 70–87 months. W ardell objected to the three

enhancements. The government responded by citing trial evidence that supported

the enhancements.

At sentencing, the district court adopted the PSR’s recommendations.

Addressing W ardell’s criminal history, the court found that he “has adopted and

cultivated essentially a philosophy characterized by a life of crime, involving

fraudulent behavior of many kinds, evincing, frankly, a total disrespect for the

law and an absolute disregard for the rights and property of others.” ROA, vol X ,

at 36. The court noted W ardell’s criminal record was “so extensive that it earns

criminal history points of 30, which is essentially off the chart for purpose of the

-3- Federal Sentencing Guidelines.” Id. The court concluded that it was appropriate

to impose the maximum sentences permitted by law.

In justifying its sentence, the court considered the sentencing factors set in

18 U.S.C. § 3553(a)(1)–(7) and the applicable advisory Sentencing Guidelines.

On the conspiracy conviction, the court sentenced W ardell to sixty months

imprisonment, the statutory maximum. On the seventeen convictions for making

or assisting in the making of false tax returns, the court sentenced W ardell to

thirty-six months on each count to be served concurrently, but consecutive to the

conspiracy conviction, yielding a total sentence of ninety-six months

imprisonment.

II. Analysis

W ardell challenges the district court’s upward adjustment of his sentence

based on the three sentencing enhancements. Since United States v. Booker, 543

U.S. 220 (2005), we review sentence calculations made pursuant to applicable

advisory Guidelines for reasonableness. United States v. Kristl, 437 F.3d 1050,

1054 (10th Cir. 2006). Reasonableness is presumed if “the district court

considered the applicable G uidelines range” and “sentences the defendant within

that range.” Id. at 1055. In assessing the Guidelines’ application, we review the

district court’s factual findings for clear error and its legal conclusions de novo.

Id. at 1054. W e examine each enhancement in turn.

A. Sophisticated M eans

-4- The Guidelines provide for a two-level sentence enhancement when

“sophisticated means” are used to conceal the tax offense. USSG § 2T1.4(b)(2)

(2004). The commentary to the Guidelines defines “sophisticated means” as

“especially complex or especially intricate offense conduct pertaining to the

execution or concealment of an offense.” Id. at § 2T1.4(b)(2) cmt. n.3. The

district court imposed this enhancement after agreeing with the government’s

contention that this was not a routine tax evasion case.

W ardell argues that defining this tax fraud scheme as complex or intricate

would make virtually every fraudulent tax return eligible for the sophisticated

means enhancement. He suggests that because his scheme lacked shell

corporations, offshore accounts, dummy boards of directors, blind paper trails, or

multi-national transactions (in addition to the fact that his actions w ere patently

detectable), his tax scheme was routine and conventional. Based on the

applicable precedents, we disagree.

To begin with, W ardell’s fraudulent conduct was not a garden variety

fraud. His was not simply a case of claiming to have paid withholding taxes not

paid, United States v. Rice, 52. F.3d 843, 849 (10th Cir. 1995), or of not

disclosing income to one’s accountant, United States v. Stokes, 998 F.2d 279,

281–283 (5th Cir. 1993), two situations where courts have overturned

sophisticated means enhancements. Instead, W ardell’s conduct reflects a much

more elaborate scheme.

-5- W ardell was incarcerated in a state prison. Nonetheless, he w as able to use

numerous individuals and fictitious entities, addresses, and paperwork to create

the illusion that he earned income and was entitled to multiple tax refunds. He

filed a large number of false returns in the names of inmates without their

knowledge, used false addresses outside of the Colorado prison system, and

intentionally mislabeled his mail as “legal mail” in order avoid detection. 2

W ardell also sent false returns to multiple IRS service centers around the country,

created and used false W -2 Forms and other paperwork to legitimize his and

Pursley’s claims. He conspired with other inmates to further the scheme.

W ardell’s conduct fits well w ithin our precedent applying the enhancement.

See, e.g., United States v. Guidry, 199 F.3d 1150, 1159 (10th Cir. 1999)

(defendant had fraudulent checks made payable to a bank, not her, to avoid

detection; structured transactions to avoid filing of currency reports; and stashed

valuable clothes and jew elry in multiple storage units); United States v. Ambort,

405 F.3d 1109, 1120 (10th Cir. 2005) (defendant offered tax seminars on how to

avoid making tax returns easily traceable by withholding a proper address and

social security numbers).

W e find W ardell’s fallback argument equally unpersuasive. He contends

that since he deposited the refund checks into his own account which were easily

2 W hile prison authorities normally open and scan ordinary outgoing mail, “legal mail” is unopened by the Colorado Department of Corrections.

-6- traceable, his scheme was simplistic and easily detectable, negating a finding of

sophisticated means. Again, we disagree. His tax scheme was far “more complex

or demonstrates greater intricacy or planning than a routine tax-evasion case,”

Ambort, 405 F.3d at 1120 (quoting USSG § 2T1.1(b)(2) (1991)), fitting well

within the type of conduct targeted by the enhancement.

In sum, the district court did not err in applying the sophisticated means

enhancement.

B. Leadership Role

W ardell’s next argument is that the district court erred in making a two-

level enhancement for his role as “an organizer, leader, manager, or supervisor in

any criminal activity.” USSG § 3B1.1 (2004). According to the adopted findings

of the court, W ardell “supplied the addresses and W -2s used to perpetrate the

fraud, filled out the false returns, recruited Jessie Cluff and likely Carl Pursley,

and appeared likely to receive the bulk of the refunds associated with the refunds

filed in the names of other inmates.” Government’s Sentencing Statement at 12.

W ardell challenges both these factual findings and whether the findings support

an enhancement under § 3B1.1.

Under the clear error standard, we affirm the district court’s findings of

fact. The record indicates that two witnesses identified W ardell’s handwriting on

Pursley’s 1040 forms, revealing that W ardell filled out the tax forms in the

scheme. Furthermore, Pursley’s fraudulent W -2 forms claim income from

-7- Cimarron Farms, a farm purportedly owned by W ardell. Pursley would not have

known this information had W ardell not supplied it. W hile this evidence does not

prove that W ardell recruited Pursley for the criminal enterprise, it does lead to the

inference that W ardell played an organizing role as far as Pursley was concerned.

Jessie C luff also testified at trial that he received direction from W ardell in

submitting his fraudulent tax return. Cluff testified that W ardell initiated their

conversations about obtaining tax refunds, and Cluff later agreed to submit tax

forms in his own name. He indicated that he signed his tax forms before W ardell

prepared them in Cluff's name, and that they claimed income from Cimarron

Farms, again an enterprise only knowable through W ardell. Cluff also testified

that the explanation section of his tax return was prepared by W ardell. According

to Cluff, he and W ardell agreed that if a refund was received that W ardell would

receive half of the proceeds. This testimony strongly supports the conclusion that

W ardell recruited Cluff into this tax scheme.

Taken together, we agree that the district court was justified in finding

W ardell to be an “organizer” of the tax fraud scheme. W ardell supplied the

addresses, information, and tax forms to the enterprise. He recruited others to

participate in the scheme and received a larger share of the proceeds. W ardell’s

role in this case fits comfortably with cases which have upheld a § 3B1.1(c)

enhancement. See, e.g., United States v. Valdez-Arieta, 127 F.3d 1267, 1272

(10th Cir. 1997) (arranging the drug supply, directing the time and place of the

-8- delivery of the drugs, and deciding the financial arrangement was sufficient for a

§ 3B1.1(c) enhancement); United States v. Billingsley, 115 F.3d 458, 465 (7th Cir.

1997) (devising scheme, recruiting accomplices, serving as main participant in

offense, and receiving largest share of benefit of criminal enterprise qualified

defendant as an organizer under § 3B1.1(c)); United States v. Giraldo, 111 F.3d

21, 24 (5th Cir. 1997) (recruiting accomplices and providing money necessary for

a drug transaction constitutes acting as an organizer under § 3B1.1(c)).

W ardell contends that because Cluff engaged in some action independent of

him that he could not have served as an “organizer” of the operation. Yet

absolute dominion over subordinates is not a requirement of a § 3B1.1(c)

enhancement. Valdez-Arieta, 127 F.3d at 1272 (“[A] defendant may be punished

as an organizer under § 3B1.1(c) for devising a criminal scheme, providing the

wherewithal to accomplish the criminal objective, and coordinating and

overseeing the implementation of the conspiracy even though the defendant may

not have any hierarchical control over the other participants.”).

Considering this record, we find that the district court’s findings under this

enhancement was not “without factual support in the record, . . . [nor are we] left

with the definite and firm conviction that a mistake has been made.” United

States v. M andilakis, 23 F.3d 278, 280 (10th Cir. 1994) (stating the criterion to

reverse a district court’s finding under the clearly erroneous standard).

Accordingly, the district court did not err in applying this enhancement.

-9- C. O bstruction of Justice

W ardell’s last argument is that the enhancement for obstruction of justice

was not warranted. According to the Guidelines, this enhancement is appropriate

if “(A) the defendant willfully obstructed or impeded, or attempted to obstruct or

impede, the administration of justice during the course of the investigation,

prosecution, or sentencing of the instance offense of conviction, and (B) the

obstructive conduct related to (i) the defendant’s offense of conviction and any

relevant conduct; or (ii) a closely related offense.” USSG § 3C1.1 (2004).

This final enhancement stems from W ardell’s pro se motion in limine to

exclude any references at trial to his association with the Aryan Brotherhood. H e

attached to his motion an internet article describing himself as “an Aryan Brother

assoc.” and Pursley as a “suspected top general of the Aryan Brotherhood.” The

article mentioned that both were being indicted for tax fraud. It was subsequently

determ ined that the article had been altered to include the reference to the two

defendants. In an affidavit from IRS Special Agent Arleta M oon, the government

showed that the article attached to W ardell’s motion was changed to contain false,

additional language when compared to the original internet article. Furthermore,

the article’s dateline w as 2002, a patent error given that W ardell’s and Purlsey’s

indictments did not occur until 2003.

At sentencing, W ardell’s defense counsel conceded that the article was

false, but argued that W ardell did not willfully submit the misinformation. First,

-10- his counsel contended that W ardell had no access to computer equipment to

manufacture the false article and that W ardell might have felt that the 2002 date

was a typographical error. In fact, Wardell changed the date of the article to

“200[3]” in his motion in limine to emphasize the problematic date of the article.

In making its determination, the district court expressly adopted the

government’s findings and legal analysis from (1) the PSR, and (2) arguments

made at Wardell’s sentencing hearing. Accordingly, we treat the government’s

findings as the court’s own. See U nited States v. Laury, 985 F.2d 1293, 1308

n.18 (5th Cir. 1993). The court appeared to rely heavily on the government’s

contention that W ardell’s submission of the article,

merits applying the obstruction of justice enhancement because it is substantially similar to several examples listed in the commentary to U.S.S.G. §3C1.1, including committing perjury, id. §3C1.1, App. N.4(b), producing a false or altered document during a judicial proceeding, id. §3C1.1, App. N. 4[(c)], and providing materially false information to a judge, id. §3C1.1, App. N. 4(f).

Second Addendum, PSR.

And at the sentencing hearing, responding to the argument that

W ardell did not willfully submit the altered article, counsel for the

government contended:

The argument . . . from the defense that this [enhancement] shouldn’t apply is that . . . this was simply a mistake. That M r. W ardell didn’t realize that this document had been altered, and was submitting it in good faith.

-11- And the government does take the position described already by [W ardell’s defense counsel], that the fact that in the text of his motion, that M r. W ardell had noticed the discrepancy in the date and changed it within the text of his motion to eliminate the impossibility that otherwise existed with respect to that added text, shows that M r. W ardell knew, or at a minimum should have known, that there was something wrong with this document and that it was not a document that he should have been submitting with the intent that the court rely on it in ruling on a motion he had made to the court. . . .

[T]he government does argue that in considering what M r. W ardell’s state of mind was at the time this altered document was submitted, that it is relevant for the court to consider that, on previous occasions, M r. W ardell had taken efforts to try to prevent the discovery of accurate information from the government with respect to . . . the activities he had been engaged in, not just the various efforts he had taken during the course of the scheme to prevent its discovery, but the efforts he took after he became aware that he was under investigation to keep the truth from being known to the government, such as him telling M r. Cluff to keep his mouth shut when any investigators came to talk to him. 3

ROA, vol. X at 24–25. Sentencing Hearing Transcript 24–25.

For the “willful obstruction” provision of USSG § 3C1.1 to apply, we have

held that “the defendant must consciously act with the purpose of obstructing

justice.” United States v. Bedford, 446 F.3d 1320, 1325 (10th Cir. 2006) (internal

quotations omitted). Accordingly, if W ardell knowingly submitted the altered

article to influence the court’s proceedings, then this requirement is satisfied.

3 In the government’s sentencing statement, it alleged that W ardell attempted to prevent Cluff from talking to government investigators. [G ov’t Sentencing Statement, PSR at 12.]. The government conceded that this would not be enough to support an independent enhancement for obstruction of justice.

-12- The district court’s adopted findings on this enhancement, while not detailed,

supports a conclusion that W ardell knew or should have known that the article’s

authenticity was suspect, and that he submitted it to the court in order to deceive

it.

The government produced no evidence to show how W ardell manufactured

or obtained the false document. Circumstantial evidence, however, shows his

knowledge of the document’s falsity. The government’s affidavit demonstrates

that the article clearly does not appear on the internet in the form presented by

W ardell and that the date on the article w as a full year before his indictment (a

fact obviously know n to Wardell because of the bracketing in his motion). As

W ardell’s defense counsel argued at sentencing, only two possible explanations

exist: (1) W ardell knew that the article was altered and attempted to cover up the

alteration by changing the “2002” to “200[3]” in his motion in limine, or (2)

W ardell thought the date was a typographical error and simply intended to correct

it in his motion. The district court chose to believe the former theory and W ardell

offers no compelling reason to overturn that decision. For the reasons articulated

in the district court’s adopted findings, we hold that the district court’s

determination that W ardell’s conduct was “willful” under § 3C1.1 was not clearly

erroneous.

W ardell argues that the altered article was immaterial to the case and does

not warrant an obstruction of justice enhancement. Although “the threshold for

-13- materiality under USSG . § 3C1.1 is conspicuously low,” Bedford, 446 F.3d at

1326 (internal quotations omitted), we agree that some question exists as to the

materiality of the document because of the lack of district court findings. In this

case, the purpose of the motion in limine was to exclude any reference to

Pursley’s and W ardell’s Aryan Brotherhood or racist ties. W ithout more, it is not

self-evident to us that an article naming W ardell as a member of the Aryan

Brotherhood would have affected the disposition of this motion. Reference to

W ardell’s and Pursley’s Aryan affiliation would be seemingly irrelevant to the

prosecution of the case whether or not Wardell’s name appeared in an obscure

article. But cf. United States v. Hernandez-Ramirez, 254 F.3d 841, 843–44 (9th

Cir. 2001) (holding that a false affidavit submitted to a magistrate judge was

material whether or not it affected the judge’s decision).

Nevertheless, considering the multiple, cumulative grounds on which the

district court based this enhancement, we find no error. In contrast to other types

of obstructive conduct listed in the Guidelines, the submission of false or altered

documents (N ote 4(c)) does not contain any qualifier that the documents

materially mislead federal authorities. W hile we can only speculate as to the

Guidelines’ purpose in the incongruent treatment of a false statem ent to a judge

under Note 4(f) (requiring materiality) and a false document to a judge under

Note 4(c), w e see no reason to wander from the plain text of the Guidelines.

Accordingly, since W ardell’s conduct plainly fits into the fact pattern

-14- contemplated under N ote 4(c) of the G uidelines, we affirm the district court’s

obstruction of justice enhancement.

III. Conclusion

For the foregoing reasons, we affirm W ardell’s sentence. 4

Entered for the Court

Timothy M . Tymkovich Circuit Judge

4 W ardell’s appointed counsel, M ark D. Jarmie, filed a motion to withdraw as his appellate counsel. W e hereby grant the motion. M r. W ardell filed a pro se combined motion on July 24, 2006, and two further pro se motions on August 31, 2006 and September 18, 2006. W e deny those three motions. To the extent that W ardell asks that Judge Tymkovich recuse himself from this case based on his service as Colorado's solicitor general during W ardell's initial state convictions, Judge Tymkovich has reviewed the matter and has determined that no conflict exists. The request is denied.

-15-