U.S. v. Larson

• Decision Date: 05 August 2005
• Docket Number: No. 02-2833.,No. 03-2472.,02-2833.,03-2472.
• Citation: 417 F.3d 741
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Dwight D. LARSON, also known as Dennis Larson, and Paul E. Palmer, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

417 F.3d 741

UNITED STATES of America, Plaintiff-Appellee, v. Dwight D. LARSON, also known as Dennis Larson, and Paul E. Palmer, Defendants-Appellants.

No. 02-2833.

No. 03-2472.

United States Court of Appeals, Seventh Circuit.

Argued April 6, 2005.

Decided August 5, 2005.

COPYRIGHT MATERIAL OMITTED

Gregory V. Davis (argued), Brian D. Galle, Department of Justice, Washington, DC, for Plaintiff-Appellee.

Babette P. Salus (argued), Schwing & Salus, Springfield, IL, for Defendant-Appellant.

Paul E. Palmer, Forrest City, AR, pro se.

Before BAUER, RIPPLE, and WOOD, Circuit Judges.

BAUER, Circuit Judge.

A grand jury in the Central District of Illinois indicted Dwight Larson and Paul Palmer in May 2001 for their involvement in a tax evasion scheme. Larson caught wind of the grand jury investigation and fled the area prior to being indicted. He was arrested in October 2001 in Florida where he was living under an assumed name and using a false social security number. Larson pleaded guilty to conspiracy to defraud the United States Department of Treasury, perjury, and willfully making and subscribing fraudulent income tax returns. Palmer proceeded to trial pro se and was convicted on all counts. On appeal, Larson challenges the district court's denial of a downward adjustment for acceptance of responsibility and seeks a remand for resentencing on the basis of United States v. Booker, ___ U.S. ___, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005). Palmer requests reversal of his conviction under the Speedy Trial Act and advances a Booker challenge. For the reasons stated herein, we affirm Palmer's conviction, remand his case for resentencing, and order a limited remand with respect to Larson's sentence.

I. Background

Larson and Palmer were central figures in a conspiracy to avoid or minimize taxes owed by themselves and others. The basic tack was to avoid reporting income and paying corresponding federal income taxes by hiding assets in a series of sham trusts. The defendants' clients would open bank accounts in the names of these trusts and transfer assets to the accounts. Instead of ceding control of the trust assets, which would shift the incidence of taxation from the grantor to the trust, the clients retained full control over the trust assets. See 26 U.S.C. §§ 641, 671-79. But they did not report the income from the nominal trust assets and thereby evaded taxation on the income. Defendants also filed tax returns on behalf of the trusts in which the payments ultimately funneled back to their clients were deducted from the trust income. According to the government, the scheme cost the Internal Revenue Service at least $2.6 million.

Both defendants played important roles in the scheme. Palmer recruited clients, prepared trust papers, and set up the bank accounts. Larson, who operated Larson Accounting, Inc., in Charleston, Illinois, served as the accountant for the clients. He filed returns designed to conceal the fiscal reality of the transactions, and also opened accounts, set up trusts, and recruited clients. In exchange for their services defendants received hundreds of thousands of dollars in direct compensation and Palmer was "loaned" millions more, which he may or may not have repaid.

In late 1995, Larson began encouraging clients to use foreign trusts to decrease their taxes. The foreign trusts were nothing more than trust names with addresses in foreign countries. Larson knew that his clients were retaining control over the trust assets by either not sending any money to the foreign accounts or only sending money for a short period of time. Larson also knew that income taxes should have been paid on the money claimed to exist in the foreign trusts.

Larson prepared individual tax returns, corporate tax returns, and trust tax returns on behalf of clients. The individual and corporate tax returns contained false expenses and deductions and failed to report taxable income. The trust and foreign trust returns falsely represented that the taxable income was distributed to foreign entities when the income was actually still controlled by the taxpayer.

During the grand jury investigation, a subpoena was served on Larson for "[a]ny and all books and records of any type related to income and expenses for the business known as Larson Accounting, Inc. for the period 1/1/93 to [4/5/00]." Larson did not provide any pre-1996 records and later falsely testified under oath that such records had been destroyed in the ordinary course of business. In fact, there was no office policy of regular record destruction and some records from the years in question were discovered at a storage facility where Larson Accounting kept its records.

When Larson was informed in August 2000 that he was a target of the grand jury investigation, he sold his business and other property and moved to Florida, where he lived under an assumed name and used a false social security number. Larson was arrested in Marathon, Florida, in October 2001, five months after he and Palmer were indicted. In January 2002, he pleaded guilty to three counts in the indictment: Count 1, conspiracy to defraud an agency of the United States in violation of 18 U.S.C. § 371; Count 8, willfully making and subscribing a fraudulent tax return in violation of 26 U.S.C. § 7206(1); and Count 13, knowingly making false declarations under oath in violation of 18 U.S.C. § 1623. The district judge sentenced Larson to 55 months' imprisonment and three years of supervised release, and ordered Larson to pay $701,513 in restitution. Larson served his sentence and was released by the Federal Bureau of Prisons on April 11, 2005. See http://www.bop.gov (inmate locator).

Facing one count of conspiracy to defraud a United States agency in violation of 18 U.S.C. § 371 and six counts of aiding and assisting the filing of false federal income tax returns in violation of 26 U.S.C. § 7206(2), Palmer opted to test the government's evidence at trial. The trial date was continued several times for reasons we will explain below. A jury ultimately found Palmer guilty on all seven counts after an eight-day trial in May 2002. The district judge imposed a sentence of 108 months' imprisonment, three years of supervised release, a fine of $150,000, and restitution in the amount of $1,369,662. This appeal ensued.

II. Discussion

The only substantive issue on appeal is Palmer's Speedy Trial Act challenge. The Act provides that no more than 70 days may elapse between arraignment and the commencement of trial. 18 U.S.C. § 3161(c)(1). However, certain periods of time between arraignment and trial are excluded from the Speedy Trial calculation. 18 U.S.C. § 3161(h). Importantly for our purposes, "[a]ny period of delay resulting in a continuance . . . [is excluded] if the judge granted such continuance on the basis of his findings that the ends of justice served by taking such action outweigh the best interest of the public and the defendant in a speedy trial." 18 U.S.C. § 3161(h)(8)(A). "Absent legal error, exclusions of time cannot be reversed except when there is an abuse of discretion by the court and a showing of actual prejudice." United States v. Hemmings, 258 F.3d 587, 593 (7th Cir.2001).

We begin with a procedural timeline to frame Palmer's argument. Palmer was arraigned on September 12, 2001, and his joint trial with Larson was set to commence on November 19, 2001. As of October 4, 2001, however, Larson was still at large. The government moved to continue the trial date until December, with the suggestion of an interim status conference for an earlier trial if Larson's custody status changed. The government argued that the delay period would not count under the Act due to the absence of a codefendant and because no motion for severance had been granted. See 18 U.S.C. § 3161(h)(7). The district court granted the motion in part, setting a new trial date for November 26, 2001, and finding that the extra time was an excludable delay under the Act. Larson was arrested in Florida on October 18, 2001, and arraigned in the Central District of Illinois on November 19, 2001. After Larson's arrest but before his arraignment, the court granted a motion to continue filed by Palmer. Palmer, who at the time was represented by counsel, described the case as "very complicated and complex" and requested a ruling "ordering the jury trial to commence no sooner than March 1, 2002." Palmer's Appx. at 3A, 3C. The district court conducted a hearing on the matter, entertained Palmer's views on delaying the trial, and reset the trial date to February 11, 2002. The judge specifically found that the time was excludable under the Act because it was in the interests of justice to permit defense counsel more time to prepare for trial. Palmer does not question the propriety of either of the foregoing continuances or the district court's rulings that the resulting delays were excludable under the Act.

On February 1, 2002, the district court held what was to be Palmer's final pre-trial conference. At the conference, Palmer expressed dissatisfaction with the Federal Defender's Office's handling of his case, asked to represent himself, and requested a three-month continuance to give himself time to review all of the discovery and prepare for trial. Palmer Tr. 92-96, 128-29. After a colloquy during which the district court strongly advised Palmer against representing himself, the court found that he had knowingly and willingly waived his right to counsel and continued the trial date until May 13, 2002. In granting the continuance, the district court did not specifically find that the delay was excluded under the Speedy Trial Act. On May 2, 2002, Palmer filed a motion to dismiss the indictment based on his claim that more than 70 non-excludable days had passed prior to the commencement of trial. According to Palmer, the Speedy Trial clock began on February 2, 2002, the day after the third continuance was granted, and 89 days had...