United States v. Kahre

• Decision Date: 05 December 2013
• Docket Number: Nos. 09–10471,09–10528,09–10529.,s. 09–10471
• Citation: 737 F.3d 554
• Court: U.S. Court of Appeals — Ninth Circuit
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Robert David KAHRE, aka Robert D. Kahre, Defendant–Appellant. United States of America, Plaintiff–Appellee, v. Lori A. Kahre, aka Donna Hall, Defendant–Appellant. United States of America, Plaintiff–Appellee, v. Alexander C. Loglia, Defendant–Appellant.

737 F.3d 554

UNITED STATES of America, Plaintiff–Appellee,

v.Robert David KAHRE, aka Robert D. Kahre, Defendant–Appellant.

United States of America, Plaintiff–Appellee,

v.Lori A. Kahre, aka Donna Hall, Defendant–Appellant.

United States of America, Plaintiff–Appellee,

v.Alexander C. Loglia, Defendant–Appellant.

Nos. 09–10471, 09–10528, 09–10529.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted June 11, 2012.

Filed Dec. 5, 2013.

Michael K. Powell and Michael J. Kennedy (argued), Assistant Federal Public Defenders, Reno, NV, for Appellant Lori A. Kahre.

Lisa A. Rasmussen, Las Vegas, NV, for Appellant Robert D. Kahre.

Joel F. Hansen, Hansen Rasmussen, Las Vegas, NV, for Appellant Alexander C. Loglia.

Gregory Victor Davis, Mark S. Determan (argued), Department of Justice, Washington, D.C., for Appellee United States.

Appeal from the United States District Court for the District of Nevada, David A. Ezra, District Judge, Presiding. D.C. No. 2:05–cr–00121–DAE–RJJ–1.

Before: PROCTOR HUG, JR., JOHNNIE B. RAWLINSON, and SANDRA S. IKUTA, Circuit Judges.

OPINION

PER CURIAM:

Appellants Robert Kahre (Kahre), Lori Kahre (Lori) and Alexander Loglia (Loglia) challenge their convictions for various criminal tax offenses arising from their use of gold and silver coins to pay wages and thus avoid the reporting of payroll and income taxes due. Appellants contend that dismissal of the indictments was warranted because Appellants lacked the requisite notice that their conduct violated applicable tax laws. Appellants also assert that a new trial was in order because the prosecutor should have been disqualified due to his status as a defendant in a Bivens¹ lawsuit filed by the Kahres, and because the district court's prejudicial conduct and erroneous evidentiary rulings deprived them of a fair trial. In addition, Robert Kahre challenges the district court's denial of his motions to suppress and the sentence imposed. We affirm Appellants' convictions and Kahre's sentence.

I. BACKGROUNDA. Third Superseding Indictment (Indictment)²

The Indictment alleged that Appellants engaged in a conspiracy to avoid the payment of payroll and income taxes by utilizing a payroll system pursuant to which employees received their wages in gold and silver coins, which were later exchanged for cash. According to the Indictment, “the face amount of the coins was one-eighth of the amount of pay that the employee actually earned and received in the envelope of cash[.]” The Indictment alleged that Appellants failed to withhold the required federal income taxes, medicaid taxes, and social security taxes from the employees' wages, and that Appellants created false invoices to conceal the payroll expenses. The Indictment also alleged that Kahre marketed the payroll service to other contractors and charged an administrative fee for use of the payroll service.

The Indictment charged all three defendants with one count of conspiracy in violation of 18 U.S.C. § 371, and one count of attempting to interfere with the administration of internal revenue laws in violation of 26 U.S.C. § 7212(a). Robert and Lori Kahre were charged with an additional count of attempting to interfere with the administration of internal revenue laws in violation of 26 U.S.C. § 7212(a).

The Indictment charged Robert Kahre with forty-eight counts of failure to pay employment taxes in violation of 26 U.S.C. § 7202; four counts of attempting to evade or defeat taxes in violation of 26 U.S.C. § 7201; and one count of wire fraud in violation of 18 U.S.C. § 1343.

The Indictment charged Lori Kahre with one count of making false statements to a bank in violation of 18 U.S.C. § 1014, and eight counts of attempting to evade or defeat taxes in violation of 26 U.S.C. § 7201.

Finally, the Indictment charged Loglia with one count of filing false income tax returns in violation of 26 U.S.C. § 7206(1), and ten counts of attempting to evade or defeat taxes in violation of 26 U.S.C. § 7201.

B. Pretrial Motions

1. Kahre's Motions To Suppress

In his search warrant affidavit, Internal Revenue Service (IRS) Special Agent Jared Halper observed that, although Kahre's businesses were generating significant revenues, Kahre had not filed business tax returns or employment taxes since the early 1990s. Kahre also had not filed individual tax returns since 1991.

Agent Halper averred that Kahre leased employees to various contractors, and withdrew cash from Bank of the West for the payroll. According to Agent Halper, Kahre withdrew $24,096,012 in cash between January 17, 2002, and October 31, 2002. Kahre's employees collected their wages at a warehouse located at 6270 Kimberly Avenue in Las Vegas. The employees received nominal amounts of gold certificates or gold chips, which they immediately exchanged for envelopes of cash. Kahre allegedly withheld “sixty percent of the employees' payroll....”

Based on Kahre's conduct, Agent Halper stated that there was probable cause to believe that Kahre was engaged in a conspiracy to evade taxes and to interfere with the administration of the tax laws by the IRS. Agent Halper's affidavit reflected that evidence of Kahre's criminal activities could be found at the 6270 Kimberly Avenue, 6295 Grand Canyon, and 1555 Bledsoe Lane addresses (The Kimberly, Grand Canyon, and Bledsoe properties).

In his declaration, Agent Halper related that IRS agents reviewed the search warrant affidavit prior to the searches. Kahre was subsequently arrested at Bank of the West pursuant to a state bench warrant for failure to appear, and the agents seized $230,913 in cash, which was provided to the IRS to satisfy Kahre's “unpaid federal income tax liabilities.” According to Agent Halper, Kahre had unpaid tax assessments of approximately $2,000,000.

The district court ruled that Kahre's motion to suppress evidence seized when Kahre was arrested at Bank of the West was moot because the seized evidence would not be used at trial. The district court also determined that the government was not required to return the cash seized from Kahre because it was used to offset Kahre's tax liabilities.

The district court granted in part and denied in part Kahre's amended motions to suppress evidence seized from the Kimberly, Bledsoe, and Grand Canyon properties. Because Kahre was not present during the execution of the search warrants, the district court held that Kahre lacked standing to challenge the manner in which the search warrants were executed. The district court concluded that, because the search warrant properly incorporated the search warrant affidavit, the warrant was not overly broad. The district court also held that the agents properly seized gold and silver coins relating to Kahre's payroll scheme. However, the district court granted Kahre's motion to suppress information and documents that were unrelated to the time periods specified in the warrants.

2. Appellants' Motions To Disqualify the Prosecutor For Conflict of Interest

On October 30, 2003, several plaintiffs, including the Kahres, filed a Bivens action against the federal prosecutor, as well as other federal defendants. The complaint alleged, inter alia, that the federal defendants orchestrated an illegal raid of Kahre's properties, improperly arrested Kahre and stole $230,913 in cash from him.

On October 4, 2004, the district court in the Bivens action denied the prosecutor's motion to dismiss premised on absolute immunity. Treating the complaint's allegations as true, the court denied absolute immunity because of the prosecutor's alleged involvement in planning the raids.

The government subsequently filed two indictments against Appellants, and the district court in the Bivens case granted the government's emergency motion to stay the proceedings based on the pending criminal prosecutions. During the first trial, the jury was unable to reach verdicts, and the government subsequently filed the Third Superseding Indictment.

Prior to the second trial, Kahre renewed a prior motion to disqualify the prosecutor because of a conflict of interest. In an attached declaration, Kahre's counsel related that the prosecutor had remarked that Kahre's counsel had “threatened [his] job and [his] pension,” making the case “personal.” Kahre filed a subsequent motion to disqualify the prosecutor because of his pecuniary and emotional interests in the Bivens action, and because the prosecutor had filed the indictments as retaliation for being named in the Bivens action.

The district court denied Kahre's motion, ruling that automatic disqualification was not warranted due to the pendency of a Bivens action, and that the prosecutor's comments did not require disqualification on the merits.

3. Appellants' Motions To Dismiss the Indictments Based on the Gold and Silver Coins' Valuation

Appellants asserted that they lacked the requisite notice that their payroll payments in gold and silver coins were taxable at the coins' fair market value and that their conduct violated the tax laws. They contended that the lack of notice in the statutory language compelled application of the rule of lenity, resulting in a construction of the statute that was most favorable to them. The district court rejected the Appellants' argument, explaining that the applicable statutes were unambiguous regarding the elements of conspiracy to defraud the government and of willful failure to truthfully account for taxes owed. The district court added that the statutes' scienter requirements mitigated any vagueness and that the tax provisions patently articulated reporting and filing requirements.

The district court eschewed Appellants' argument that they did not defraud the government because gold and silver coins used to pay employees should have been assessed at face value, rather than fair market value, for tax purposes. If, for example, an employee was paid with ten silver dollar coins, Appellants would argue that the employee received only ten dollars in wages. However,...