U.S. v. Thorson

• Decision Date: 28 January 2011
• Docket Number: No. 07–4787.,07–4787.
• Citation: 633 F.3d 312
• Parties: UNITED STATES of America, Plaintiff–Appellee,v.A. Thomas THORSON, Defendant–Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

633 F.3d 312

107 A.F.T.R.2d 2011-651

2011-1 USTC P 50,191

UNITED STATES of America, Plaintiff–Appellee,

v.A. Thomas THORSON, Defendant–Appellant.

No. 07–4787.

United States Court of Appeals, Fourth Circuit.

Argued: Sept. 24, 2010.Decided: Jan. 28, 2011.

ARGUED: Price Owen Gielen, Neuberger, Quinn, Gielen, Rubin & Gibber, PA, Baltimore, Maryland, for Appellant. Michael Richard Pauze, Office of the United States Attorney, Greenbelt, Maryland, for Appellee. ON BRIEF: Brian M. Boyle, Neuberger, Quinn, Gielen, Rubin & Gibber, PA, Baltimore, Maryland, for Appellant. Rod J. Rosenstein, United States Attorney, Baltimore, Maryland, Diana H. Beinart, Trial Attorney, Office of the United States Attorney, Greenbelt, Maryland, for Appellee.Before NIEMEYER, MOTZ, and GREGORY, Circuit Judges.Affirmed by published opinion. Judge NIEMEYER wrote the majority opinion, in which Judge MOTZ joined. Judge GREGORY wrote a dissenting opinion.

OPINION

NIEMEYER, Circuit Judge:

After a jury convicted Thomas Thorson on one count of conspiring to defraud the United States of tax revenue, in violation of 18 U.S.C. § 371, and on three counts of aiding and assisting in the preparation and presentation of false income tax returns, in violation of 26 U.S.C. § 7206(2), the district court sentenced him to 108 months' imprisonment. Challenging his sentence on appeal, Thorson contends that the district court erred in (1) enhancing his sentence under U.S.S.G. § 3B1.1, as an “organizer or leader” of the tax fraud scheme; (2) enhancing his sentence under U.S.S.G. § 3C1.1, for obstruction of justice in providing falsified documents to the grand jury; and (3) imposing a sentence that did not serve the need “to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct,” 18 U.S.C. § 3553(a)(6).

For the reasons that follow, we reject Thorson's arguments challenging his sentence and affirm the judgment of the district court.

I

In 1995, Thorson and co-conspirators John Ross, Glendle Johnston, Thomas Franks, Paul Decker, and others designed a scheme to solicit others to invest in partnerships to purchase and subsequently donate cemetery lots in order to benefit from tax deductions available to the partnerships. Thorson and the other co-conspirators informed potential investors that the partnership had purchased cemetery sites at a low cost; that the sites would be held for longer than one year; and that the sites would then be donated to a charity at the end of the tax year, creating tax deductions in the amount of a higher appraised value of the sites, yielding a tax benefit to partners. IRS regulations provided that if a taxpayer owned a piece of property for less than a year before making a charitable donation of the property, the deduction for the donation was limited to the purchase price of the property. But if the taxpayer held the property for more than a year and then donated it, the taxpayer could claim a stepped-up deduction for the appraised value of the property.

The partnership had trouble recruiting investors in the beginning because the investors would need to wait two years to receive the tax benefit from their investment. Thus, in order to make the investment attractive, the partnership had to devise a way by which to purchase the cemetery sites, solicit investment participation, and donate the sites to obtain a deduction, all within the period of a single calendar tax year so that the investor could claim the deduction the following April.

For the tax years 1996, 1997, and 1998, Thorson formed three separate partnerships, one for each year, that terminated at the end of the year. During the given year, various co-conspirators, but mainly Johnston, purchased cemetery sites for that year's partnership at low prices and on December 31 of that year, donated the sites to charities (often the same entity from whom the sites were acquired). The partnership then claimed a tax deduction for the substantially higher appraised value of the site on the partnership's tax return for the year. To satisfy the Tax Code requirement that the property be held for more than a year, Thorson fabricated documents to support a purchase date in the December before the beginning of the tax year. On the basis of the fabricated documents, the partnership was able to claim that it had held the cemetery sites for more than a year and, with that claim, was able to make the investment attractive to investors. Over the course of the three relevant years, investors paid the three partnerships more than $2.3 million for partnership interests and received $9.9 million in tax deductions.

Taking 1996 as an example, Johnston purchased cemetery sites for the 1996 partnership between March 1996 and the end of the year at a cost of $30 to $33 for each site. After the partnership donated the sites to charity on December 31, 1996, it claimed a deduction of $650 per site, the amount of the site's claimed market value, for a total deduction of $1.8 million. To participate in the partnership's 1996 tax deduction, investors paid the partnership a total of $494,416 for partnership interests, or 27.5% of the $1.8 million deduction. Because the cemetery sites cost a total of about $92,000, the co-conspirators realized a profit of over $400,000, representing the difference between the cost of the sites and the proceeds from selling the partnership interests to the investors. To be able to claim the deduction for tax year 1996, which was the same year that the sites were purchased, Thorson falsified the purchase documents to show that the sites had been purchased on December 23, 1995, which was more than a year before the sites were donated, on December 31, 1996. If the partnership had accurately reported when it had purchased the sites, it would have been able to claim as a deduction only the amount paid for the sites. In order to receive the stepped-up deduction, the partnership would have had to hold the sites into the next tax year, making the investment in the partnership unappealing to investors, as it would have tied up their money for another year.

Similar facts were shown for the partnerships relating to tax years 1997 and 1998, although the purchase price of the cemetery sites rose each year, to a maximum of $65 per site, and the number of investors increased.

At meetings with potential investors for the sale of partnership interests, Decker was the initial spokesman for the partnership. But to respond to details and concerns about the investment, he referred comments and questions to Thorson, who was a lawyer and who had implemented the legal structure to fraudulently take advantage of the stepped-up tax deduction allowed by the Tax Code. Thorson's participation in the enterprise was also advertised in some of the partnerships' marketing materials, which cited his expertise in tax and non-profit law. While some investors were willing to invest after Decker had made his presentation, others did so only after consulting with and receiving assurances from Thorson.

Over the three years, 1996, 1997, and 1998, Thorson's income from the partnership increased significantly, and he created mechanisms to conceal this income. He assigned his income from the partnerships to a corporation named AGH, Inc., which had recruited a lawyer to serve as president, but in name only. In actuality, Thorson retained all decisionmaking authority for AGH. Under Thorson's direction, AGH opened a Charles Schwab brokerage account, which did not have Thorson's name associated with it, and it deposited Thorson's income from the partnerships in the AGH Schwab account. Thorson did not report this money as income on his tax return but, instead, created paperwork suggesting that the payments to AGH were loans from a company called Mid–Atlantic Mortgage and Marketing Associates, Inc. When Thorson took money from the AGH Schwab account, he did the same. Thus, Thorson prepared a “demand promissory note” in 1998 “evidencing” a purported loan from Mid–Atlantic Mortgage to AGH and similar documents to “evidence” loans from AGH back to him. Several of these agreements were falsely dated. Consistent with this cover-up scheme, the nominal president of AGH filed a 1998 corporate tax return for AGH, reporting that AGH had received a loan from Mid–Atlantic Mortgage and had made a loan to Thorson, and therefore had no income from the transaction.

In 1998, the IRS initiated a civil audit of the 1996 partnership's tax return, and the revenue agent made a formal request to the partnership for partnership agreements, documents related to the acquisition of cemetery sites, and partnership bank records for 1995–96. In responding to the request, Thorson prepared an index for the documents that were provided to the agent, and the documents so provided included an agreement dated December 23, 1995, purporting to evidence the partnership's purchase of a number of cemetery sites on that date. As it turned out, however, Thorson prepared the December 23, 1995 agreement in 1998 after the IRS requested the documents. This fabrication was established not only by the document's computer metadata, but also by contextual inconsistencies.

Even while the civil audit continued, a grand jury investigation began, and the grand jury subpoenaed various documents from the three partnerships. In response to the subpoena, Thorson produced not only the fabricated agreement dated December 23, 1995, but also another fabricated agreement for the purchase of cemetery sites, dated December 22, 1996.

Subsequently, the grand jury indicted Thorson with one count of conspiring to defraud the United States of tax revenue and three counts of filing false tax returns, and a petit jury convicted Thorson on all counts.

In sentencing Thorson, the district court accepted the pre-sentence report's calculation of the offense level, level 21, based on the amount of loss caused by the...