592 F.3d 495 (4th Cir. 2010), 08-4497, United States v. Engle

Docket Nº:08-4497.
Citation:592 F.3d 495
Opinion Judge:TRAXLER, Chief Judge:
Party Name:UNITED STATES of America, Plaintiff-Appellant, v. Frederick L. ENGLE, Defendant-Appellee.
Attorney:Matthew Theodore Martens, Office of the United States Attorney, Charlotte, North Carolina, for Appellant. James Frank Wyatt, III, Wyatt & Blake, LLP, Charlotte, North Carolina, for Appellee. Gretchen C.F. Shappert, United States Attorney, Charlotte, North Carolina, for Appellant. Robert A. Blake,...
Judge Panel:Before TRAXLER, Chief Judge, WILKINSON, Circuit Judge, and MARGARET B. SEYMOUR, United States District Judge for the District of South Carolina, sitting by designation. Chief Judge TRAXLER wrote the opinion, in which Judge WILKINSON and Judge SEYMOUR joined.
Case Date:January 13, 2010
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

Page 495

592 F.3d 495 (4th Cir. 2010)

UNITED STATES of America, Plaintiff-Appellant,

v.

Frederick L. ENGLE, Defendant-Appellee.

No. 08-4497.

United States Court of Appeals, Fourth Circuit.

January 13, 2010

Argued: Sept. 23, 2009.

Page 496

[Copyrighted Material Omitted]

Page 497

ARGUED:

Matthew Theodore Martens, Office of the United States Attorney, Charlotte, North Carolina, for Appellant.

James Frank Wyatt, III, Wyatt & Blake, LLP, Charlotte, North Carolina, for Appellee.

ON BRIEF:

Gretchen C.F. Shappert, United States Attorney, Charlotte, North Carolina, for Appellant.

Robert A. Blake, Jr., Wyatt & Blake, LLP, Charlotte, North Carolina, for Appellee.

Before TRAXLER, Chief Judge, WILKINSON, Circuit Judge, and MARGARET B. SEYMOUR, United States District Judge for the District of South Carolina, sitting by designation.

Vacated and remanded by published opinion.

Chief Judge TRAXLER wrote the opinion, in which Judge WILKINSON and Judge SEYMOUR joined.

OPINION

TRAXLER, Chief Judge:

Frederick Engle pleaded guilty to tax evasion, see 26 U.S.C.A. § 7201 (West 2002), and the district court sentenced him to four years' probation, conditioned on the service of eighteen months' home detention with work release and international travel privileges. The government appeals, challenging the reasonableness of the sentence. For the reasons set forth below, we vacate the sentence and remand for resentencing.

I.

The information presented during the proceedings below and set out in the presentence report establish that Engle, who was 64 years old when he pleaded guilty, had worked as a manufacturing representative in the shoe industry for more than 30 years. His business required frequent and extensive overseas travel every year.

The criminal information charged Engle with tax evasion for the 1998 tax year only, although the information alleged that Engle had evaded taxes for sixteen years between 1984 and 2002 and owed taxes of more than $600,000. With interest and penalties included, Engle's total tax liability exceeded $2 million. Engle's actions to avoid taxes included providing false information to the Internal Revenue Service, placing assets in others' names, and funneling

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income through shell corporations that he controlled.

Engle pleaded guilty to the information in 2004 and proceeded to sentencing almost two years later, in February 2006. Based on a total offense level of 17 and a category II criminal history, the presentence report calculated Engle's advisory sentencing range as 27-33 months. The district court concluded that Engle's criminal history was overstated and therefore reduced Engle's criminal history to category I, yielding an advisory sentencing range of 24-30 months.

The government sought a term of imprisonment within the advisory range. The government noted that it prosecutes relatively few tax evasion cases and generally does so only " under the most egregious circumstances." J.A. 31. The government argued that Engle had avoided his tax obligations for sixteen years and that a period of incarceration was necessary to provide adequate deterrence to others. The district court, however, was primarily concerned with making Engle pay his tax debt. See J.A. 31c (" Right now I've got this guy and I can try to figure out a way to get the money out of him." ). The court concluded that Engle's ability to earn significant amounts of money warranted a variance sentence:

I'm satisfied that a variance is appropriate under the circumstances for the reason that I believe that I can craft a sentence that addresses both the need to deprive this defendant of his physical liberty for a significant period of time ... and leave him free to attempt to generate the income that would permit him to settle up with the Internal Revenue Service.

I'm sympathetic to the government's position. Absent ... the apparent ability to generate the income, I would simply impose a Guideline sentence and be done with it.

J.A. 31e. The court sentenced Engle to four years' probation, conditioned on confinement for eighteen months in a community corrections center. The court directed that Engle, while in the community corrections center, would be permitted to travel to China as required by his job.

Shortly after the district court announced the sentence, the court learned that the Bureau of Prisons would not permit international travel while Engle was housed in a community corrections center. The district court therefore vacated the sentence and indicated that Engle would be resentenced at a later date.

The district court finally reconvened the sentencing proceeding in March 2008, more than two years after the original sentencing proceeding. At the hearing, the district court asked whether Engle had yet paid any of the taxes owed. Counsel for Engle stated that he had $25,000 in his trust account available for immediate payment and that Engle would be receiving $100,000 in commissions in the next month or two that could be applied to the taxes owed. The government, however, pointed out that in the four years since pleading guilty and the two years since the first sentencing proceeding, Engle had paid only $480 on the taxes owed, and that payment was made only two weeks earlier, after Engle was contacted by the IRS. The government again argued that a sentence of imprisonment within the range suggested by the Guidelines was appropriate, given Engle's conduct. Defense counsel argued that Engle's tax problems were not the result of an extravagant lifestyle, but instead were simply " money management" problems, J.A. 61, spurred on by the costs of three divorces and the need to put his children through college and support his current wife and her children. Counsel for Engle noted that since the first sentencing proceeding Engle had repaid a

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$500,000 advance owed to his employer and now had $125,000 available to repay the government. Counsel argued that Engle had " done the best he can under the circumstances" and that he now had the ability " to repay every cent the government is owed in terms of this criminal case, as well as any civil proceedings that may ensue." J.A. 60.

The district court asked the government whether it wanted " blood or money," J.A. 60, and the government again stated that it wanted a sentence within the range set by the Guidelines. The court believed the government was thus asking for " [b]lood[,][b]ecause if I take away his income, you're not going to get" the money. J.A. 60. The court ultimately decided that a sentence similar to the one previously imposed would be appropriate. The court explained its reasoning:

In considering the nature and circumstances of the offense and the history and characteristics of the defendant, I [agree that this is] more of a money management issue than anything else, [and] the issue that I face as judge in trying to deal with this is to try to apply these factors in a way that appropriately punishes Mr. Engle but does not destroy his ability to pay that money.

I find that a very difficult proposition because I think that there is a need to reflect the seriousness of the offense. I'm concerned that I'm not hearing any effort to try to balance this out other than let's put him in jail and take away his livelihood, which will destroy the ability of the government to collect the money. I don't see how that necessarily promotes respect for the law.

Anything at all that happens to make him pay money affords some deterrence to criminal conduct. I don't see any need to protect the public from further crimes of the defendant. He has no need for vocational training or other correctional treatment unless, of course, I were to order him incarcerated, in which case he would need the vocational training.

* * *

It ... seems to me to be appropriate to come up with a variance that would reflect this man's ability to pay this money. And I think that considering all of that-I don't see any unwarranted sentencing disparities. Look at the Gall case. This isn't a particularly terrible ... variance. It seems to be, then, that the sentence I originally thought about[, w]hich was fours years probation, 18 months house arrest on electronic monitoring with work release, and he will be permitted to make trips to China as demanded by his employer.

J.A. 63-64. The district court directed that the $25,000 held by Engle's attorney be paid to the IRS immediately and that Engle pay the $100,000 in expected commissions within 90 days. The district court, however, declined to order full restitution, believing that the IRS " has adequate means to do that." J.A. 65.

The government appeals the sentence imposed by the district court. According to the government, the district court's probationary sentence is inconsistent with the policy considerations underlying prosecutions for income tax evasion, and Engle's substantial earning potential was not a sufficient reason to decline to impose a sentence of imprisonment as recommended by the Guidelines.

II.

Since the Supreme Court's decision in Booker, the Sentencing Guidelines are no longer mandatory but are instead " effectively advisory." United States v. Booker, 543 U.S. 220, 245, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005). When sentencing criminal defendants in the post- Booker

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world, district courts must first correctly calculate the defendant's sentence under the Sentencing Guidelines. The court must then allow the parties to argue for what they believe to be an appropriate sentence and consider those arguments in light of the factors set forth in 18 U.S.C.A. § 3553(a) (West 2000 & Supp.2009). See Gall v. United States, 552 U.S. 38, 49-50, 128 S.Ct. 586, 169 L.Ed.2d 445 (2007); United States v. Abu Ali, 528 F.3d 210, 260 (4th Cir.2008). Sentencing courts are statutorily required to state their reasons for imposing sentence. See 18 U.S.C.A. § 3553(c) (West Supp.2009)....

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