U.S. v. O'doherty

• Decision Date: 14 June 2011
• Docket Number: No. 10–2720.,10–2720.
• Parties: UNITED STATES of America, Plaintiff–Appellee,v.Kevin T. O'DOHERTY, Defendant–Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

643 F.3d 209

107 A.F.T.R.2d 2011-2491

2011-1 USTC P 50,448

UNITED STATES of America, Plaintiff–Appellee,

v.Kevin T. O'DOHERTY, Defendant–Appellant.

No. 10–2720.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 17, 2011.Decided June 14, 2011.

John F. Podliska (argued), Attorney, Office of the United States Attorney, Chicago, IL, for Plaintiff–Appellee.Marc W. Martin (argued), Attorney, Marc Martin, Ltd., Chicago, IL, Brian H. Mahany, Mahany & Ertl, LLC, Milwaukee, WI, for Defendant–Appellant.Kevin T. O'Doherty, Chicago, IL, pro se.

Before EASTERBROOK, Chief Judge, and RIPPLE and TINDER, Circuit Judges.

RIPPLE, Circuit Judge.

Kevin Thomas O'Doherty was charged in a six-count indictment with various offenses related to his failure to file income tax returns or to pay taxes from 2001–2003. After entering into an agreement with the Government, Mr. O'Doherty pleaded guilty to one count of tax evasion, in violation of 26 U.S.C. § 7201. At sentencing, the district court calculated an offense level of 21, carrying a range of 37–46 months' imprisonment under the sentencing guidelines. The district court imposed a 24 months' sentence, more than a year below the advisory guidelines range. Mr. O'Doherty now raises several challenges to the guidelines calculation. We agree with the district court's sentencing calculations and therefore affirm the judgment of the district court.

IBACKGROUND

A. Facts

Mr. O'Doherty was a commodities trader for thirty-nine years. At some point during this period, he paid for the services of a fraudulent tax consultant, and, under that individual's guidance, he did not file individual income tax returns for the better part of a decade.

In the mid-to-late 1990s, Mr. O'Doherty used the firm Refco as his clearing broker. Apparently, during this period, Mr. O'Doherty traded in his own name, and Refco reported his gross income from trades on 1099 forms filed with the Internal Revenue Service (“IRS”).

During 2001, Mr. O'Doherty “changed tactics” from trading in his own name to “creat[ing] shell corporations” to conduct his trading activities. R.34 at 8. Specifically, he set up four accounts at two different financial institutions, each in the name of a separate entity. Those accounts received his trading profits, partnership distributions, consulting fees and payments from traders for seat leases during the charged period. He used the funds in the accounts to pay his personal expenses. He also used the entities to conceal what was essentially his personal ownership of assets. Through these entities, Mr. O'Doherty received gross income of $158,480, $617,809 and $337,848 in tax years 2001–2003, respectively.

In 2007, the Government instituted a civil action against Mr. O'Doherty; it alleged that Mr. O'Doherty had failed to file tax returns in 1994, 1995, 1997, 1998 and 2000, and that his total tax liability for those years was $917,801. That tax liability was calculated on the basis of Mr. O'Doherty's 1099s prepared by Refco. The civil proceeding was not resolved at the time of Mr. O'Doherty's criminal prosecution, but instead was stayed, apparently at Mr. O'Doherty's request.

B. District Court Proceedings

In this criminal action, commenced in 2009, the Government charged Mr. O'Doherty with three counts of tax evasion, in violation of 26 U.S.C. § 7201, and three counts of failing to file federal income tax returns, in violation of 26 U.S.C. § 7203. The charged conduct related only to tax years 2001, 2002 and 2003.

1. The Plea Agreement

Mr. O'Doherty entered into an agreement with the Government in which he pleaded guilty to one count of tax evasion for tax year 2001. The agreement included specific information relating to the tax losses from the charged conduct:

The parties agree that the base offense level for tax evasion is determined by the amount of the tax loss. The defendant acknowledges that the government can prove, by at least a preponderance of the evidence, that the total tax loss resulting from defendant's conduct during the time period discussed in paragraph 6 above, is $425,766. The parties acknowledge that this tax loss figure, that is more than $400,000 and less than $1 million, results in a base offense level of 20.

R.18 at 6 (citing U.S.S.G. §§ 2T1.1(a)(1), 2T4.1(H), 1B1.3). Paragraph 6 set forth the factual basis for the charges related to Mr. O'Doherty's failure to file returns from 2001 through 2003. That paragraph also includes specific language memorializing that the defendant admitted the facts underlying the charges and that these facts “constitute relevant conduct pursuant to Guideline § 1B1.3.” Id. at 2.

The agreement also included a lengthy section relating to the parties' positions on the appropriate guidelines calculation:

d. Anticipated Advisory Sentencing Guidelines Range. Therefore, based on the facts now known to the government, the government's position is that defendant's anticipated offense level is 19, which, when combined with the anticipated criminal history category of I, results in an anticipated advisory Sentencing Guidelines range of 30–37 months' imprisonment, in addition to any supervised release, fine, and restitution the Court may impose. Defendant's position is that the anticipated offense level is 17, which, when combined with the anticipated criminal history category of I, results in an anticipated advisory Sentencing Guidelines range of 24–30 months.

e. Defendant and his attorney and the government acknowledge that the above Guideline calculations are preliminary in nature, and are non-binding predictions upon which neither party is entitled to rely. Defendant understands that further review of the facts or applicable legal principles may lead the government to conclude that different or additional Guideline provisions apply in this case. Defendant understands that the Probation Office will conduct its own investigation and that the Court ultimately determines the facts and law relevant to sentencing, and that the Court's determinations govern the final Guideline calculation. Accordingly, the validity of this Agreement is not contingent upon the probation officer's or the Court's concurrence with the above calculations, and defendant shall not have a right to withdraw his plea on the basis of the Court's rejection of these calculations.

f. Both parties expressly acknowledge that this plea agreement is not governed by Fed.R.Crim.P. 11(c)(1)(B), and that errors in applying or interpreting any of the Sentencing Guidelines may be corrected by either party prior to sentencing. The parties may correct these errors either by stipulation or by a statement to the Probation Office or the Court, setting forth the disagreement regarding the applicable provisions of the Guidelines. The validity of this Plea Agreement will not be affected by such corrections, and defendant shall not have a right to withdraw his plea, nor the government the right to vacate this Plea Agreement, on the basis of such corrections.

Id. at 8–9. The agreement also set forth the parties' opposing positions on the proper application of the sophisticated means enhancement found in U.S.S.G. § 2T1.1(b)(2). Finally, the agreement noted that “[e]ach party is free to recommend whatever sentence it deems appropriate” to the court. Id. at 9.2. The Plea Hearing

At the plea hearing, the Government advised the court that both parties understood that there might be further adjustment in the total tax loss and pointed out that the plea agreement specifically allowed for a change in that figure. The court advised Mr. O'Doherty that there could be no guarantee as to the sentence that he would receive and specifically noted that the court was not bound by the guidelines calculations but only by the statutory maximum of five years. Mr. O'Doherty told the district court that he understood that no promises had been made to him and that the only understanding that he had with the Government was the one set forth in the plea agreement.

3. The Positions of the Parties at Sentencing

During the preparation of the presentence investigation report (“PSR”), the Government submitted a memorandum to the probation office. That memorandum included the same calculation that the Government had used in the plea agreement, including an estimation that the appropriate base offense level was 20 (tax loss of more than $400,000 and less than $1 million dollars). It further took the position that the facts of the case supported an upward adjustment of two levels for the use of a sophisticated means to mask the unpaid taxes and a three-level downward adjustment for the acceptance of responsibility. The resulting total offense level was 19. With a criminal history category of I, the resulting advisory guidelines sentencing range was 30–37 months. The Government recommended a sentence within that range.

When it filed its presentence report, the Probation Office took a different view. It reached a much larger tax loss figure by adding tax losses from uncharged conduct occurring from 1994–2000 together to the charged conduct from 2001–2003. In estimating the loss attributable to the uncharged conduct during the earlier period, the PSR used the figure sought in the civil action covering those earlier years, $917,801. When this figure was combined with the tax losses admitted in the plea agreement, the resulting total tax loss calculation was more than $1 million but less than $2.5 million. This calculation resulted in a base offense level of 22, two levels higher than if the losses had remained at the level suggested by the Government and noted in the plea agreement.

Mr. O'Doherty responded to the PSR by filing a motion to continue the sentencing hearing. He noted that, after the plea agreement had been reached, he filed amended returns for tax years 2001–2003 that showed a tax liability of less than $400,000 during that charged period. He pointed out that the PSR failed to account for this reduced...