U.S. v. Scholl

• Decision Date: 17 March 1999
• Docket Number: Nos. 97-10143,97-10248,s. 97-10143
• Parties: -902, 99-1 USTC P 50,230, 51 Fed. R. Evid. Serv. 308, 99 Cal. Daily Op. Serv. 7373, 1999 Daily Journal D.A.R. 921 UNITED STATES of America, Plaintiff-Appellee, v. William L. SCHOLL, Defendant-Appellant. United States of America, Plaintiff-Appellant, v. William L. Scholl, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 964

166 F.3d 964

83 A.F.T.R.2d 99-902, 99-1 USTC P 50,230,

51 Fed. R. Evid. Serv. 308,

99 Cal. Daily Op. Serv. 7373,

1999 Daily Journal D.A.R. 921

UNITED STATES of America, Plaintiff-Appellee, v. William L. SCHOLL, Defendant-Appellant.

United States of America, Plaintiff-Appellant, v. William L. Scholl, Defendant-Appellee.

Nos. 97-10143, 97-10248.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Oct. 7, 1998.

Submission Vacated Nov. 20, 1998.

Resubmitted Jan. 20, 1999.

Decided Jan. 27, 1999.

As Amended on Denial of Rehearing and Suggestion for

Rehearing En Banc March 17, 1999. ^*

Robert J. Hirsh and Jeffrey J. Rogers, Hirsh, Bjorgaard & Rogers, P.L.C., Tucson, Arizona, for the defendant-appellant-cross-appellee.

Robert L. Miskell, Assistant United States Attorney, Tucson, Arizona, for the plaintiff-appellee-cross-appellant.

Appeals from the United States District Court for the District of Arizona Roslyn O. Silver, District Judge, Presiding.

Before: BEEZER, HALL and RYMER, Circuit Judges.

RYMER, Circuit Judge:

William L. Scholl appeals his conviction in the district court on four counts of filing false tax returns in violation of 26 U.S.C. § 7206(1) and three counts of structuring currency transactions in violation of 31 U.S.C. § 5324. The government cross-appeals the district court's imposition of sentence. We affirm in each instance.

I

Scholl was a Superior Court Judge in Tucson, Arizona, from 1984 until he was indicted. He was a compulsive gambler who took numerous trips to Las Vegas to gamble. Throughout the 1980s, he gambled on credit lines established at various casinos. In 1989, he had outstanding balances on credit lines from six different casinos totaling $163,000. In the latter part of 1989 and the beginning of 1990, Scholl settled his outstanding credit line balances, paying a total of $50,000. From that point through 1994, he continued to gamble as a cash player.

Once he became a cash player, Scholl would purchase a cashier's check from his checking account or bank credit line payable to the casino where he was staying. He would deposit the cashier's check in the cage of that casino upon his arrival and draw against his deposit to gamble at various casinos during the trip. After the end of the trip, he would withdraw his deposit in the form of cash and transport the cash back to Tucson. Records were not kept of these withdrawals.

Upon returning to Tucson, Scholl would put the currency into the gun safe at his house. When he went to work, he would take one bundle of $5,000 in his pocket. At lunch time, he would deposit the money into a bank. He was aware that currency forms may be generated when a person deposits more than $10,000 in currency at a bank, and part of the reason he broke up deposits into amounts less than $10,000 in currency was to avoid the preparation of those reports. Scholl made numerous deposits in various accounts that avoided the reporting requirements and, in addition, made sub-$10,000 deposits into a personal credit line that was his main account for gambling.

Scholl's accountant, Ken Silva, had a conversation with Scholl in 1987 in which he told Scholl that both gambling winnings and gambling losses must be reported separately on Scholl's tax return. Scholl's 1987 return reflected "gambling winnings" of $128,680 and an itemized deduction for "gambling losses" of $128,680. In connection with preparation of Scholl's 1988 tax return, Silva asked Scholl if he had any gambling winnings. Scholl responded that he did not have any, or that he had "lost his ass there." Scholl's tax returns for 1990 and 1993 do not reflect any gambling income or losses, and his returns for 1991, 1992, and 1994 reflect only small amounts. In each of those years, the only gambling income reported was gambling income of the type reflected on a Form W-2G, which he was required to file with the IRS.

Scholl testified to his belief that he could "net out" his gambling wins and losses in any particular year and, if losses exceeded wins, nothing needed to be reported on the return. He did not, however, "net out" gambling winnings that were reflected on Forms W-2G.

On December 5, 1995, a grand jury in Tucson, Arizona, returned an indictment charging Scholl with filing false tax returns for the years 1989 through 1994, in violation of 26 U.S.C. § 7206(1) (Counts 1 through 6), and five counts of structuring currency transactions to avoid the Treasury reporting requirements, in violation of 31 U.S.C. § 5324 (Counts 7 through 11). Trial to a jury began September 24, 1996. The court granted Scholl's motion for judgment of acquittal on Count 8. On November 19, the jury found Scholl guilty of counts 2, 3, 4, 6, 7, 9, and 10, but acquitted him on counts 1, 5, and 11. On February 27, 1997, the court sentenced Scholl to five years probation on each count, to run concurrently. Although Casino Market Analysis Center Reports and eyewitnesses indicated that Scholl had substantial unreported winnings, the district court did not find them a sufficiently reliable indicator of tax loss to make a reasonable estimate for purposes of determining Scholl's offense level under the Guidelines.

Scholl timely appeals his conviction. The government cross-appeals from sentence, challenging the district court's failure to calculate Scholl's offense level based on a reasonable estimate of tax loss.

II

Scholl first argues that he was substantially prejudiced when the district court moved the trial from Tucson, where he lives, to Phoenix. His request for change of venue back to the Tucson division was denied. The denial of a motion for transfer should be overruled only if the district court abused its discretion. United States v. Herbert, 698 F.2d 981, 984 (9th Cir.1983). We see none here.

Federal Rule of Criminal Procedure 18 provides, in relevant part The court shall fix the place of trial within the district with due regard to the convenience of the defendant and the witnesses and the prompt administration of justice.

The district court emphasized the convenience of a trial in Phoenix to witnesses (relying in part on the availability of more daily flights from Las Vegas to Phoenix than from Las Vegas to Tucson); the unavailability of a courtroom in Tucson to conduct the trial as scheduled; the effect such a transfer would have on resolution of pending motions and discovery issues in other matters; substantial pretrial publicity in Tucson; and the efficiency to be gained by not transferring the matter to another judge. On the other hand, Tucson was the site of the offense and the home of the defendant, counsel for both the government and Scholl, and most of the principal witnesses; Scholl had particularly weighty family obligations; and trial in Tucson imposed burdens of travel and expense that would not otherwise have existed. While we might have decided the matter differently, the court considered the relevant facts in applying the proper standard. As such we cannot say that the denial of the transfer was an abuse of discretion. See United States v. McMullen, 98 F.3d 1155, 1159 (9th Cir.1996), cert. denied, 520 U.S. 1269, 117 S.Ct. 2444, 138 L.Ed.2d 203 (1997) ("Under the abuse of discretion standard, an appellate court may not simply substitute its judgment for that of the lower court ...").

III

Scholl maintains that he was unable to present a meaningful and truthful defense because the district court improperly and prejudicially limited the testimony of his compulsive gambling psychological expert; limited the number of character witnesses he was allowed to call; excluded evidence that would have laid the foundation for his compulsive gambling expert's testimony; excluded other defense evidence and witnesses; and excluded Scholl's expert witnesses on accounting and tax law. We disagree.

A

Scholl sought to have Dr. Robert Hunter, his expert on compulsive gambling, testify that pathological gamblers have distortions in thinking and "denial," which impact their ability and emotional wherewithal to keep records. He would have testified that compulsive gamblers do not want to keep records because that would force them to confront the reality of losses, which creates too much upheaval. Hunter also would have opined that a pathological gambler is not motivated by money, but believes that the next "big win" will fix their lives.

In a published opinion the district court applied the two-part analysis ¹ set out in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). See United States v. Scholl, 959 F.Supp. 1189, 1194 (D.Ariz.1997). The court concluded that a diagnosis of compulsive gambling disorder satisfied the validity prong of Daubert, and ruled that Hunter could testify that Scholl was a compulsive gambler at the time the alleged crimes occurred. However, the court limited Hunter's testimony to the ten diagnostic criteria for pathological gambling set forth on page 618 of the Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition (DSM-IV), and excluded proffered evidence regarding distortion in thinking and denial of the existence of a gambling problem. Distortion and denial are "Associated Descriptive Features" but are not regarded as sufficiently sensitive or specific to be recognized as diagnostic criteria.

The district court also excluded the proffered testimony under Federal Rules of Evidence 402 and 403, noting among other things that Hunter said it was not his opinion that gamblers could not truthfully report on their income tax returns. Hunter did not state that compulsive gamblers have no memory of what occurred when they prepare their tax returns. Accordingly the court ruled that Hunter's opinion on denial was not relevant and could be confusing, inconsistent, and misleading to the jury.

Meanwhile, we rendered decisions in United States v. Morales, 108 F.3d 1031 (9th Cir.1997), and United States v. Bighead, 128 F.3d...