U.S. v. Iskander

• Decision Date: 09 May 2005
• Docket Number: No. 04-4188.,04-4188.
• Citation: 407 F.3d 232
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Adel Habib ISKANDER, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

407 F.3d 232

UNITED STATES of America, Plaintiff-Appellee, v. Adel Habib ISKANDER, Defendant-Appellant.

No. 04-4188.

United States Court of Appeals, Fourth Circuit.

May 9, 2005.

Argued: March 18, 2005.

Decided: May 9, 2005.

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ARGUED: Rhonda Anne Anderson, Coral Gables, Florida, for Appellant. Jonathan Mark Mastrangelo, Assistant United States Attorney, Office of the United States Attorney, Baltimore, Maryland, for Appellee. ON BRIEF: Jennifer C. Smith, Assistant United States Attorney, Baltimore, Maryland, for Appellee.

Before WILKINSON and GREGORY, Circuit Judges, and Frederick P. STAMP, Jr., United States District Judge for the Northern District of West Virginia, sitting by designation.

Affirmed in part, vacated in part and remanded by published opinion. Judge GREGORY wrote the opinion, in which Judge WILKINSON and Judge STAMP joined.

OPINION

GREGORY, Circuit Judge:

This case arises out of an investigation of Adel Habib Iskander ("defendant" or "Iskander"). The United States ("government") alleges he systematically skimmed cash receipts and corporate checks received by two hotels he owned and operated, while simultaneously paying no federal corporate or individual income tax. Iskander was indicted, and after a three week trial, a jury found him guilty of three counts of tax evasion and one count of structuring financial transactions to evade reporting. The district court subsequently sentenced Iskander to a term of imprisonment of forty-one months and ordered him to pay a $800,000 fine. On appeal, Iskander challenges the district court's evidentiary rulings, the sufficiency of the evidence, and his sentence. We find, after careful review, no reversible error in the district court's evidentiary rulings, and that the evidence in this case was sufficient to support the convictions. However, in following United States v. Hughes, 401 F.3d 540 (4th Cir.2005), our recently published opinion giving guidance to the application of United States v. Booker, ___ U.S. ___, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005), we find plain error in Iskander's sentencing, exercise our discretion to notice the error, vacate the sentence, and remand to the district court for resentencing. Thus, we affirm in part, vacate, and remand in part.

I.

Defendant was originally charged in a fifteen-count indictment with conspiracy, tax evasion, and structuring currency transactions, in violation of 18 U.S.C. § 371, 26 U.S.C. § 7201, and 31 U.S.C. § 5324(a)(3), respectively. A superseding indictment was filed one month before trial, charging defendant and his wife, Cynthia Lafon Iskander, with one count of conspiracy to structure transactions so as to evade reporting requirements in violation of 31 U.S.C. § 5324(a)(3), and eleven counts of structuring financial transactions to evade reporting requirements in violation of 31 U.S.C. § 5313(a)(3). The superseding indictment also charged Iskander individually with three counts of tax evasion in violation of 26 U.S.C. § 7201. All the foregoing conduct allegedly occurred in 1994, 1995, and 1996.

During the relevant time period, Iskander controlled two corporations, Ocean Properties, Inc., and Fenwick Properties, Inc. ("Ocean Properties" and "Fenwick Properties"), each of which operated a hotel. For most times relevant to the indictment Iskander was the sole shareholder of both companies. At trial the government alleged that between 1993 and 1996 defendant deposited approximately $780,000 in currency into personal accounts under his control for his benefit and the benefit of his family. The government provided evidence that defendant and his wife at various times deposited approximately $935,000 worth of corporate checks into personal investment accounts they held with Merrill Lynch and T. Rowe Price. In furtherance of the scheme, the government demonstrated, through bank records, that Iskander systematically structured cash deposits to banks to be under $10,000 to avoid the respective financial institutions' federal currency transaction reporting requirements. During this time, defendant reported no taxable income for either of the corporations, or for himself individually—thus, zero tax was paid to the federal government.

The government alleged that Iskander's tax evasion scheme involved skimming cash and credit card proceeds from both hotel properties and under-reporting the gross receipts actually earned by the two hotels—allowing him to conceal the diversion of funds. On his corporate tax returns, defendant claimed that the two hotels were losing money. In fact, he personally "wrote off" alleged loans he made to one of the hotels based on an assertion that the investment represented a "bad" (i.e., uncollectible) debt. At trial, the government presented evidence showing that the gross receipts of the hotels exceeded the amounts stated on defendant's corporate tax returns by hundreds of thousands of dollars—thus, showing that the hotels were likely profitable and capable of repaying the alleged loans.

The government also provided evidence that Iskander attempted to establish an explanation for the skimming and for hiding his tax evasion scheme, by placing shareholder loan balances on the corporate tax returns. Doing that allowed him to characterize the skimmed receipts as non-taxable repayments of loans. According to the government, these stated loan balances were patently false and the diverted funds were taxable income.

The government contended that Iskander was trained in business and accounting in his native Egypt and taught business classes in Egypt before emigrating to the United States. The government called one of Iskander's former hotel desk clerks, Sam Soliman ("Soliman"), who testified that Iskander had told him that he had been trained as an accountant. Iskander's accountant, John Vardavas ("Vardavas"), also testified that defendant rescinded a statement he had previously made to Vardavas averring that defendant had been a CPA in Egypt. The government also presented documentary evidence, in the form of a Dun & Bradstreet report and an affidavit, listing defendant's employment history as an accountant and as a controller. The report was admitted over defendant's hearsay objections. In rebuttal, defendant put forth testimony from Vardavas, who stated that defendant's record keeping skills were poor and that the records seized upon execution of the search warrant were incomplete and disorganized.

After a three week trial, a jury found Iskander guilty of three counts of tax evasion and one count of structuring financial transactions to evade reporting. Mrs. Iskander was acquitted.¹ Iskander timely filed this appeal.

II.

We review the district court's decision as to admissibility of evidence for abuse of discretion, and we will not find an abuse unless a decision was "arbitrary and irrational." United States v. Weaver, 282 F.3d 302, 313 (4th Cir.2002) (discussing abuse of discretion standard in context of "decisions as to admissibility of evidence").

To prevail on a sufficiency of the evidence claim, Iskander must show that when evidence is viewed in the light most favorable to the government, see United States v. Stewart, 256 F.3d 231 (4th Cir. 2001), no "rational trier of fact could have found" beyond a reasonable doubt, that he acted willfully, see Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979).

In light of the new sentencing scheme announced in Booker, we state in Hughes that we will review Sixth Amendment sentencing challenges, raised for the first time on appeal, under plain error analysis. 401 F.3d at 547.

III.

Iskander challenges two evidentiary rulings made by the district court and the sufficiency of the evidence. First, he argues that the district court erred in excluding defendant's evidence supporting his defense,² specifically by refusing to allow defendant's expert to testify about unclaimed depreciation deductions he alleges were available to his hotels; defendant asserts that such testimony would have rebutted both the government's tax witness, who testified that the "bad-debt" deductions taken on defendant's personal tax returns were improper and therefore taxable income, as well as the government's evidence that the appellant was a sophisticated accountant, and therefore "willfully" violated 26 U.S.C. § 7201 and 31 U.S.C. § 5324(a)(3). Second, Iskander argues that the district court erred by admitting a Dun & Bradstreet report that contained information regarding the defendant's educational background and employment history.³ Third, defendant

contends that the government's evidence was insufficient to support the three tax evasion convictions.

In addition, Iskander makes two related challenges to his sentence. First, he alleges that the district court did not make the required factual findings necessary to support the $800,000 fine imposed at sentencing. Second, defendant asserts that under Blakely v. Washington, ___ U.S. ___, 124 S.Ct. 2531, 159 L.Ed.2d 403 (2004) and Booker, the district court's sentence violated his right to a jury trial insofar as it rested on factual findings made by the judge at the sentencing hearing. We address each of defendant's arguments in turn.

A.

Defendant contends that the district court abused its discretion in excluding evidence that supported his defense. In an effort to rebut the government's expert, defendant retained an accounting expert, Ivan B. Mehler ("Mehler"). The defense proffered, fourteen days into trial, that Mehler's testimony would show that Iskander had failed to use the depreciation schedules to which he was entitled and "as a result, utilizing any accounting or reconstruction method the government preferred, no tax was owed." Appellant's Br. at 23. According to defendant, Mehler's testimony would have shown that contrary to the government's assertions, "defendant was not cheating the IRS; [he] was not a sophisticated accountant, and that any...