U.S. v. D'Ambrosia, 02-1635.

• Decision Date: 16 December 2002
• Docket Number: No. 02-1636.,No. 02-1635.,02-1635.,02-1636.
• Citation: 313 F.3d 987
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Jeffrey D'AMBROSIA and Duane Pede, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

313 F.3d 987

UNITED STATES of America, Plaintiff-Appellee, v. Jeffrey D'AMBROSIA and Duane Pede, Defendants-Appellants.

No. 02-1635.

No. 02-1636.

United States Court of Appeals, Seventh Circuit.

Argued September 27, 2002.

Decided December 16, 2002.

Timothy M. O'Shea (argued), Daniel J. Graber, Office of the U.S. Atty., Madison, WI, for Plaintiff-Appellee.

Marcus J. Berghahn (argued), Hurley, Burish & Milliken, Madison, WI, for Defendants-Appellants.

Before POSNER, RIPPLE, and MANION, Circuit Judges.

MANION, Circuit Judge.

Duane Pede and Jeffrey D'Ambrosia pleaded guilty to using wire communication facilities to transmit wagering information in interstate and foreign commerce in violation of 18 U.S.C. §§ 2, 1084 ("Wire Wagering Act"), and to making false and fraudulent statements on income tax returns in violation of 26 U.S.C. § 7206(1). Pursuant to the terms of their plea agreements, the defendants also stipulated that from 1997 to 1999 they conspired to defraud the Internal Revenue Service by using the profits of an illegal offshore sports bookmaking operation to pay vendors and bettors, and by placing profits from that operation and personal income in offshore bank accounts under nominee names. The district court sentenced each defendant to 60 months' imprisonment. The defendants appeal their sentences, and we affirm.

I.

This case involves an elaborate scheme by Duane Pede and Jeffrey D'Ambrosia to operate an illegal sports bookmaking operation and to conceal income and assets from the Internal Revenue Service. In July 1995, Pede and D'Ambrosia merged their respective sports betting handicapping companies — The Scoreboard, Inc. (Pede) and NSN, Inc. (D'Ambrosia) — to form Sports Spectrum, L.L.C. ("Sports Spectrum").¹ Sports Spectrum provided its customers with: (1) up-to-the-minute betting lines for sporting events over the telephone for a fee; (2) up-to-the-minute scores on sporting events over the telephone for a fee; (3) "guaranteed" winning picks on sporting events over the telephone through handicapping services; (4) sports betting and online casino gambling through one of two sports books; and (5) internet access.

In August 1996, Pede and D'Ambrosia expanded Sports Spectrum's business interests by founding Gold Medal Sports Book ("Gold Medal"),² an offshore internet-based sports bookmaking operation incorporated and located on the island of Curacao in the Netherlands Antilles. Pede and D'Ambrosia placed profits from Gold Medal's operations in offshore bank accounts in the Bahamas under nominee names, some of which they used to pay Sports Spectrum (for printing services, database support, statistical analysis, and consulting and technical support services),³ The Scoreboard (for consulting and technical support services), other vendors, and winning bettors.⁴ The defendants also directed the distribution of Gold Medal profits to offshore banks as part of a deferred compensation program concocted by David Tedder, an attorney in Orlando, Florida, who marketed estate planning and asset protection devices to his clients.⁵ The defendants hired Tedder prior to the commencement of Gold Medal's business operations, and, following his advice, enrolled in a foreign deferred compensation program that he developed and maintained. Under this program, the defendants resigned from Sports Spectrum and entered into employment agreements with Surety Services Limited ("Surety Services"), a corporation located in Dublin, Ireland, which then loaned the defendants out to an independent United States employee leasing company known as Personal Leasing Services Company, Inc. ("PLSC"). PLSC, in turn, contracted with Sports Spectrum for the defendants' services. Sports Spectrum paid PLSC for these services, PLSC transferred the defendants' wages, i.e., "lease payments," to Surety Services, and Surety Services funneled the lease payments to offshore bank accounts in nominee names. According to Tedder, this process rendered the defendants' earnings "tax-free," and made the money available for use by them at any time by way of loans. D'Ambrosia joined Tedder's deferred compensation program in June 1997, placing a sizable portion of his personal savings into the plan from the outset. After entering into the program, D'Ambrosia's untaxed earnings and profits from Gold Medal were placed into an offshore account labeled Corpus Harem # XIII at Barclays Bank in Nassau, Bahamas. From 1997 to 1999, D'Ambrosia's untaxed earnings were approximately $3,638,234. Pede joined Tedder's program in December 1997, and his untaxed earnings and profits from Gold Medal were thereafter placed in an offshore account labeled Corpus Harem # VIII at Surety Bank and Trust in Nassau, Bahamas. From 1997 to 1999, Pede had untaxed earnings of $1,467,352 diverted to this offshore bank account.

In 1999, Pede and D'Ambrosia filed fraudulent income tax returns for tax year 1998. Schedule B, Part III, Line 7(a) of the 1998 1040 form required the defendants, under penalty of perjury, to answer the following question: "At any time during 1998, did you have any interest in or signature or other authority over a financial account in a foreign country, such as a bank account, securities account, or other financial account?" Each defendant falsely answered "no" to this question on their respective tax returns, notwithstanding the fact that they both had financial interest in and signature authority over numerous foreign bank accounts.⁶

On November 16, 2001, a three-count information was filed against Pede and D'Ambrosia. Count One charged the defendants with using wire communication facilities to transmit wagering information in interstate and foreign commerce in violation of 18 U.S.C. §§ 2, 1084. Count Two charged defendant Pede with filing a false income tax return for tax year 1998 in violation of 26 U.S.C. § 7206(1). Count three charged defendant D'Ambrosia with filing a false income tax return for tax year 1998 in violation of 26 U.S.C. § 7206(1).⁷

On December 3, 2001, the defendants waived indictment and pleaded guilty to the three-count information. In written plea agreements, the defendants also stipulated that from 1997 to 1999 they conspired with one another and others to defraud the IRS by using Gold Medal's profits to pay Sports Spectrum, vendors, and bettors, and by placing some of the company's profits in offshore bank accounts under nominee names. The defendants stipulated that the tax loss resulting from this tax conspiracy amounted to $1,429,565. The district court accepted the defendants' guilty pleas, and in doing so held: (1) that the tax offenses and stipulated conduct (i.e., "tax conspiracy offenses") could be grouped together under U.S.S.G § 3D1.2(b) and (d);⁸ and (2) that the tax conspiracy offenses could then be grouped with the wagering offense under U.S.S.G. § 3D1.2(c) "because [the wagering offense] embodies conduct (criminal activity producing the source of income not correctly reported) that is treated as a specific offense characteristic in guideline 2T1.1,⁹ which is applicable to the stipulated conduct that constitutes a separate count for the purpose of sentencing." In calculating the defendants' sentences under the guidelines, the district court concluded that a four-level increase in the offense level was appropriate for their role in the grouped offense because it determined that Pede and D'Ambrosia "were the leaders and organizers of criminal activity that involved more than five participants or was otherwise extensive." The district court then used the offense level for the tax conspiracy (24), pursuant to U.S.S.G. § 3D1.3(a),¹⁰ as the offense level for the grouped offenses, resulting in a sentencing guideline range of imprisonment of 51 to 63 months. The district court then sentenced each defendant to 60 months' imprisonment followed by one year of supervised release, and a fine of $100,000. The defendants appeal their sentences, challenging the district court's decision to group the wagering offense with the tax conspiracy offenses and to apply a four-level increase to their offense levels for being leaders or organizers of the tax conspiracy under U.S.S.G. § 3B1.1(a).

II.

We review the district court's application of the United States Sentencing Guidelines de novo, but defer to the court's findings of fact unless they are clearly erroneous. See, e.g., United States v. Febus, 218 F.3d 784, 795-96 (7th Cir.2000).

The issue before us is whether the district court erred in applying a four-level enhancement to each of the defendants' sentences for being leaders or organizers of a tax conspiracy under U.S.S.G § 3B1.1. The defendants make two arguments on appeal. First, they contend that the district court should have applied the adjustment for role in offense, under § 3B1.1, prior to grouping as required by U.S.S.G. § 1B1.1(d).¹¹ Second, the defendants maintain that the district court erred in grouping the wagering offense with the tax conspiracy offenses, and that but for this error they would not have received four-level "organizer or leader" enhancements for the tax conspiracy offenses. Without the four-level sentencing enhancement, the defendants would have been subject to a lower sentencing range, and therefore, presumably, would have received less prison time.

Because we conclude that the defendants are subject to the four-level "organizer-leader" enhancement regardless of whether the wagering offense and tax conspiracy offenses are analyzed separately or grouped together under § 3D1.2, we need not address whether the district court's grouping of these offenses was proper. See, e.g., Williams v. United States, 503 U.S. 193, 203, 112 S.Ct. 1112, 117 L.Ed.2d 341 (1992) (holding that a remand is not necessary for a district court's misapplication of the sentencing guidelines if we conclude, on the record as a whole, that the error was harmless because it did not affect the district court's selection of the sentence...