U.S. v. Davis, 05-2489.

• Decision Date: 30 March 2006
• Docket Number: No. 05-2489.,05-2489.
• Citation: 442 F.3d 1003
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Babette DAVIS, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

442 F.3d 1003

UNITED STATES of America, Plaintiff-Appellee, v. Babette DAVIS, Defendant-Appellant.

No. 05-2489.

United States Court of Appeals, Seventh Circuit.

Argued December 5, 2005.

Decided March 30, 2006.

COPYRIGHT MATERIAL OMITTED

Lisa A. Wesley (argued), Office of the United States Attorney, Milwaukee, WI, for Plaintiff-Appellee.

Jean M. Kies (argued), Kies & Wasserman, Kies & Wasserman, Milwaukee, WI, for Defendant-Appellant.

Before POSNER, KANNE, and SYKES, Circuit Judges.

KANNE, Circuit Judge.

Babette Davis pled guilty to one count of tax fraud and appeals the district court's order requiring her to be taken into custody after the first day of her two-day sentencing hearing. Davis also appeals the district court's enhancement of her sentence for obstruction of justice, its denial of a downward adjustment for acceptance of responsibility, and claims that her sentence is otherwise unreasonable. For the following reasons, we affirm.

I. BACKGROUND

Babette Davis devised a scheme to obtain tax refunds by filing falsified federal tax returns. The mechanics of the fraud were simple: Use W-2 Forms to overstate wages, taxes withheld, and the number of dependants, in order for the participants to claim larger refunds from the IRS than they otherwise would be entitled. In addition, the scheme caused many of the participants to become eligible for the Earned Income Credit which increased the amount of the returns by around $3,000 apiece.

Between 1997 and 2001, 32 false returns were filed by 25 participants, most of whom were close relatives and friends of Davis residing in the Milwaukee area. The scheme claimed refunds totaling $136,635, of which the IRS paid $61,745 before detecting the fraud.

At first, the participants provided Davis with their W-2 Forms, which Davis then altered. As the fraud progressed over time, Davis began to use blank W-2 Forms. She supplied the participants with wage and withholding amounts as well as personal information for made-up dependants. Davis suggested to participants that they file their tax returns at particular H & R Block locations. The participants usually filed their returns electronically and then applied for refund anticipation loans from H & R Block. While awaiting the loan disbursements, Davis maintained a watchful eye, sometimes calling H & R Block to learn the loans' status, and also accompanying participants to pick up the loan checks and cash them.

As the mastermind, Davis took a portion of the funds as a fee for her "services," ranging from $500 up to half the value of the refund. Davis was also a participant in the fraud, having filed false claims on her own tax returns for 1997 and 1998. Several patterns emerged in the scheme's execution, causing the IRS to open an investigation. IRS agents met with Davis in July 2002. Davis denied responsibility for the scheme and told the agents that Bo McAfee (by that time deceased) and Lisa Leonard prepared her false W-2 Forms for 1997 and 1998. In fact, Davis had prepared them.

Through re-investigation, IRS agents learned that one of the ringleaders was known as "Miss T," but they did not know Miss T's true identity. Suspecting Davis was more heavily involved than she previously let on, IRS agents, including IRS Special Agent Brandon Bielke, interviewed her three times in August 2002. During these meetings Davis identified Michael Wimpy as the scheme's orchestrator and also stated that Wimpy was Miss T. Davis said that Wimpy falsified the W-2 Forms and that her only involvement was to provide transportation for Wimpy as he delivered the forms to the participants. Davis also claimed she was looking for Wimpy—to assist in the investigation.

Davis's revelations of Wimpy led Bielke to interview other participants and conduct his own research. Beginning his inquiry without having the correct spelling of Wimpy's name, Bielke identified several subjects with the same name. Bielke searched Social Security and IRS records to determine which among them was the person Davis had referenced.

Bielke learned that Wimpy had suffered from AIDS since at least 1998 and was very ill while the scheme took place. Wimpy resided in Minnesota from 1999 to 2000 and then moved to Milwaukee in 2000 to live with his sister, Theresa Shumpert. According to Shumpert, Wimpy did not know how to prepare income tax returns, and she had never heard him mention income taxes nor had she seen him with any tax returns or W-2 Forms. Based upon Wimpy's illness, his whereabouts, and the lack of any corroborating evidence, Bielke concluded that Wimpy had nothing to do with the scheme. Bielke also learned that Wimpy died in July 2002, and that Davis had attended his funeral.

In addition to lying to investigators, Davis sought assistance from participants to conceal her role. In the summer of 2000, after becoming aware of the investigation, Davis told participant Shamela Clark that she was under investigation by the IRS and instructed Clark not to mention her. However Clark admitted to authorities that Davis prepared her fraudulent W-2 Form. As the investigation was gaining momentum, during the summer of 2002, Davis urged participants Damen Olds and Dorothy Glenn to tell agents that Wimpy was the ringleader. Both refused and cooperated with the investigation. In all, 13 participants named Davis as the person responsible for the scheme, and several implicated Davis in her attempts to deflect the IRS's scrutiny.

On February 3, 2004, a grand jury returned an 11-count indictment, the first count charging Davis with conspiracy and the remaining counts charging her with filing false income tax returns. Pursuant to a written plea agreement, on April 27, 2004, Davis pled guilty to Count 2, which charged her with fraudulently filing her own tax return for the 1998 tax year in violation of 18 U.S.C. § 287 and § 2. In exchange, the Government agreed to dismiss the remaining counts at Davis's sentencing. Both sides agreed to dispute the amount of loss and any potential sentencing enhancements.

In the presentence report ("PSR"), the probation officer applied the 1998 version of the United States Sentencing Guidelines (the "Guidelines") and recommended Davis's sentence be enhanced under the Guidelines for loss, role, more than minimal planning, and obstruction of justice. The PSR also recommended that Davis not be given a downward adjustment for acceptance of responsibility. Davis objected to all of them. Davis's sentencing was delayed for a year (apparently because of Blakely/Booker uncertainty) during which time she was free on bail and complied with the conditions of her bond.

On April 29, 2005, the sentencing hearing began. Scheme participants Dorothy Glenn and Angela Evans testified that Davis prepared fraudulent income tax returns for them and for other participants. Agent Bielke testified and summarized the scheme. Bielke also explained how Davis had blamed Wimpy and Bielke's subsequent inquiry. At the conclusion of Bielke's testimony, counsel for Davis requested the hearing be continued to another date for his cross-examination. The court agreed to do so but ordered Davis to be remanded into custody immediately, explaining:

[G]iven what I've heard thus far and the objections which have been raised by the defense it is clear that the Court will be imposing a sentence of incarceration. Also, as I noted earlier, the defendant's demeanor during the course of this hearing leads me to conclude that it would be prudent for me to remand her to the custody of the U.S. Marshal pending the completion of the sentencing hearing . . . .

I certainly understand that [Davis complied with the terms of her bail] and I am not aware of any significant violations at this time unless there is something that has occurred recently that has not been brought to my attention. But regardless, the Court is satisfied that if all of the objections of the defense are sustained it will still be necessary and appropriate that the defendant be remanded to the custody of the U.S. Marshal today. Whether or not the defendant will show up at other proceedings is of secondary concern. Of primary concern, however, is how the defendant will handle herself between now and those proceedings. And so it is my conclusion that this matter be concluded one way or the other today by the defendant going into the custody of the U.S. Marshal.

On May 10, 2005, Davis's sentencing continued, and Bielke was cross-examined. The district court found that the obstruction enhancement was appropriate because Davis lied to investigators before her arrest, leading them on a "wild goose chase," and because Davis attempted to get other people to lie on her behalf. The court did not grant Davis a downward adjustment for acceptance of responsibility. With a total offense level of 21, and criminal history category of II, the court determined the applicable advisory guideline range to be 21 to 41 months' imprisonment. Then the court heard statements from Davis and her counsel. The court concluded:

[T]he Court is mindful of its responsibility under Title 18 Section 3553 to take into account multiple factors in imposing a sentence. And, indeed, the Court has given thought to not only the impact of this offense on the U.S. Treasury and the community but also the need to deter others from engaging in similar conduct and the need to protect [Davis's foster children]. . . . It is also important in this Court's mind to exact an appropriate measure of punishment for Miss Davis's conduct. And I am especially mindful of the need to make clear that the obstruction which took place here has to result in a somewhat harsh penalty. Therefore, on the basis of the plea. . . it is the judgment of the Court after taking into consideration all of the factors as set forth in Title 18 Section 3553(a)(2) and also with due regard for the advisory guidelines that a sentence of 41 months be imposed . . . .

The court also ordered Davis's...