U.S. v. Hoskins

Decision Date12 August 2011
Docket NumberNo. 10–4131.,10–4131.
PartiesUNITED STATES of America, Plaintiff–Appellee,v.Jodi HOSKINS, Defendant–Appellant.
CourtU.S. Court of Appeals — Tenth Circuit

OPINION TEXT STARTS HERE

W. Andrew McCullough, McCullough & Associates, LLC, Midvale, UT, for Appellant.Alexander P. Robbins (John A. DiCicco, Acting Assistant Attorney General, Frank P. Cihlar and Gregory Victor Davis, Attorneys, and Carlie Christensen, Acting United States Attorney, Of Counsel, with him on the brief) Tax Division, Department of Justice, Washington, D.C., for Appellee.Before BRISCOE, Chief Judge, TYMKOVICH, and GORSUCH, Circuit Judges.TYMKOVICH, Circuit Judge.

This case requires us to consider a sentencing judge's discretion in establishing tax loss resulting from a tax evasion scheme. Jodi Hoskins was convicted of tax evasion after she and her husband 1 failed to pay taxes for income they earned from Companions, a Salt Lake City escort service. The government contended the Hoskinses failed to account for more than one million dollars in income the escorts generated in cash payments and credit card receipts. At sentencing, the government's tax loss was relevant to potential jail time and restitution under United States Sentencing Guidelines ( USSG) § 2T1.1.

To minimize the tax loss for these purposes, the Hoskinses offered to the court hypothetical tax returns (it was too late to submit amended returns to the IRS) that accounted for the unreported income and attempted to take deductions they claimed they would have been entitled to but for the tax evasion. The district court rejected the tax returns and accepted the government's tax-loss estimate. As we explain below, the district court did not err in rejecting the hypothetical return. We also dismiss Jodi Hoskins's challenges to the sufficiency of the evidence supporting her conviction, and the reasonableness of her sentence.

Having jurisdiction under 28 U.S.C. § 1291 and 18 U.S.C. § 3742, we therefore AFFIRM.

I. Background

Beginning in 2000, Jodi Hoskins (Hoskins) managed and operated Companions, a Salt Lake City escort service founded and owned by her then-boyfriend and future husband, Roy Hoskins, who she married in April 2003. Hoskins managed Companions' office, supervised employees, coordinated escort reservations, and maintained Companions' credit card receipt books. Hoskins's name was on Companions' bank account, and with her husband, she oversaw the company's finances. According to a Companions employee, Hoskins “controlled everything and ran the business.” R., Vol. II at 377.

Although they did not marry until 2003, the Hoskinses filed a joint U.S. Individual Income Tax Return, Form 1040, for tax year 2002. As a Schedule C business, Companions did not file its own tax return; rather, the Hoskinses accounted for Companions' income on their personal returns. Thus, the joint 2002 return filed by the Hoskinses, which was prepared by an accountant, reported Companions' income and expenses. Although Roy Hoskins owned Companions and provided most of the information supporting the 2002 return, Jodi Hoskins signed the return as well.

The 2002 return reported $902,750 in gross receipts from Companions. After an investigation, the government discovered that Companions received at least $1,053,552 in credit-card payments alone in 2002. Further, because Companions escorts explained that the company received 50–70% of its payments in cash, the government projected the cash intake for 2002 was equal to the credit-card receipts. Thus, the government estimated that Companions' 2002 gross receipts were $2,107,104—more than $1.2 million in excess of the income claimed by the Hoskinses. The government also contended that some of the escorts were engaged in prostitution, and that Hoskins knew about the criminal activity.

In 2008, a federal grand jury charged Jodi Hoskins with willfully attempting to evade or defeat Roy Hoskins's 2002 federal income taxes, in violation of 26 U.S.C. § 7201. Hoskins was convicted after a three-day bench trial. At sentencing, the district court credited the government's estimates and found that for 2002, the joint tax return filed by the Hoskinses failed to report approximately $1.2 million in gross receipts, which resulted in a tax loss to the government of more than $485,000. The district court rejected Hoskins's alternative accounting of the tax loss based on a hypothetical tax return that indicated a tax loss of $160,202.

Under the USSG, Hoskins was subject to a base offense level of 20 and a criminal history category of III. The district court pointed to the prostitution activities of Companions' escorts and applied a two-level enhancement because it found Hoskins “failed to report or to correctly identify the source of income exceeding $10,000 in any year from criminal activity.” USSG § 2T1.1(b)(1). Accordingly, the presentence report's (PSR) recommended sentencing range was 51 to 63 months. The lower tax-loss estimate offered by Hoskins would have moved the guideline range to 33 to 41 months. The district court used the higher range but applied a downward variance and sentenced Hoskins to 36 months' imprisonment.

Contesting the district court's factual findings, analysis, and sentencing calculation, Hoskins appeals her conviction and sentence.

II. Discussion

Hoskins raises three challenges on appeal: (1) the evidence was insufficient to support her conviction, (2) the district court's calculation of the government's tax loss was clearly erroneous, and (3) the district court erred in applying a sentencing enhancement for failing to report or identify sources of income derived from criminal activity. We discuss each in turn.

A. Sufficiency of the Evidence

Hoskins first contends insufficient evidence supports her conviction. She argues the government failed to establish that she willfully intended to submit false tax returns, because she claims she signed the 2002 return without knowing or understanding the need for and legal consequences of reporting understated income.

We review sufficiency of the evidence de novo. United States v. Parker, 553 F.3d 1309, 1316 (10th Cir.2009). Under due process principles, evidence is sufficient to support a conviction if, viewing the evidence and all reasonable inferences therefrom in the light most favorable to the government, a rational trier of fact could find guilt beyond a reasonable doubt. Id.; see also Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979). We will not weigh conflicting evidence or second-guess the fact-finding decisions of the [district court].” United States v. Summers, 414 F.3d 1287, 1293 (10th Cir.2005).

Hoskins was convicted under 26 U.S.C. § 7201, which makes it a felony for [a]ny person [to] willfully attempt[ ] in any manner to evade or defeat any tax.” To prove evasion under § 7201, “the government must show (1) a substantial tax liability, (2) willfulness, and (3) an affirmative act constituting evasion or attempted evasion.” United States v. Thompson, 518 F.3d 832, 850 (10th Cir.2008) (quotation omitted). Hoskins argues, first, that there was insufficient evidence of her willful intent to commit tax evasion, and second, that signing the 2002 tax return did not constitute an affirmative act of evasion. We are not persuaded by either argument.

1. Willfulness

Under § 7201, “willfulness” means the “voluntary, intentional violation of a known legal duty.” Cheek v. United States, 498 U.S. 192, 201, 111 S.Ct. 604, 112 L.Ed.2d 617 (1991) (quotation omitted). [I]f the Government proves actual knowledge of the pertinent legal duty, the prosecution, without more, has satisfied the knowledge component of the willfulness requirement.” Id. at 202, 111 S.Ct. 604. Actual knowledge is a strict requirement. [C]arrying this burden requires [the government to] negat [e] a defendant's claim of ignorance of the law or a claim that because of a misunderstanding of the law, he had a good-faith belief that he was not violating any of the provisions of the tax laws.” Id. at 202, 111 S.Ct. 604; see also United States v. Chisum, 502 F.3d 1237, 1241 (10th Cir.2007). Hoskins argues she had a good faith belief she was not breaking the tax laws when she signed and submitted the false 2002 return.

Despite § 7201's exacting intent requirement, the record supports the district court's finding that Hoskins willfully evaded her income taxes. At trial, the government demonstrated numerous facts implicating Hoskins in a scheme to evade taxes. First, the record is clear that although in 2002 Roy Hoskins owned Companions, Jodi Hoskins actively managed the company's affairs and held herself out as a co-owner. According to a Companions employee, Jodi Hoskins “was the manager and owner, basically the person in charge of the company.” R., Vol. I at 139. The district court heard evidence that in connection with her managerial role, Hoskins supervised employees, enforced office rules, maintained the company's credit-card receipt book, dealt with the IRS in connection with 2003 tax returns, and had signatory authority over Companions' bank account. Indeed, the accountant retained by the Hoskinses believed Jodi and Roy were equally knowledgeable about the business's finances.

In short, the government established Hoskins (1) was familiar with Companions' finances, (2) knew of the obligation to report all business income on the company's return, (3) in the past, had reminded Companions' escorts of their obligation to report tip income on their personal tax returns, and (4) told an IRS Special Agent that she had been informed of her obligation to file Form 1099s for the escorts' income. This evidence together shows Hoskins knew of her legal duty to file an accurate tax return, and negates an inference that she acted in good faith in signing and filing the return.

Thus, the district court had ample evidence to conclude Hoskins knew of her legal duty to file...

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