United States v. Tilga

• Decision Date: 08 November 2011
• Docket Number: No. CR 09–0865 JB.,CR 09–0865 JB.
• Citation: 824 F.Supp.2d 1295,2011 USTC P 50722,108 A.F.T.R.2d 2011
• Parties: UNITED STATES of America, Plaintiff, v. Carolynne TILGA and Michael Chandler, Defendants.
• Court: U.S. District Court — District of New Mexico

108 A.F.T.R.2d 2011-7129

2011-2 USTC P 50,722

824 F.Supp.2d 1295

UNITED STATES of America, Plaintiff,

v.Carolynne TILGA and Michael Chandler, Defendants.

No. CR 09–0865 JB.

United States District Court, D. New Mexico.

Nov. 8, 2011.

Joseph M. Giannullo, United Stated Department of Justice, Washington, D.C., and Kenneth J. Gonzales, United States Attorney, Jonathon M. Gerson, Paula G. Burnett, Assistant United States Attorneys, United States Attorney's Office, Albuquerque, NM, for Plaintiff.

Kimberly A. Middlebrooks, Albuquerque, NM, and Roma W. Theus, II, Wellington, FL, for Defendant, Carolynne Tilga.

Erlinda O. Johnson, Law Office of Erlinda Ocampo Johnson, LLC, Albuquerque, NM, for Defendant, Michael Chandler.Angela L. Owens, St. Petersburg, FL, and Kenneth Gleria, Albuquerque, NM, for Defendant, Helen Geer.

MEMORANDUM OPINION AND ORDER

JAMES O. BROWNING, District Judge.

THIS MATTER comes before the Court on: (i) Defendant Carolynne Tilga's Memorandum in Aid of Sentencing of Defendant Carolyne Tilga and Limited Objections to Presentence Report, filed October 6, 2011 (Doc. 161) (“Tilga's Sentencing Memo.”); (ii) Defendant Michael Chandler's Sentencing Memorandum and Request for a Reasonable Sentence, filed August 23, 2011 (Doc. 154) (“Chandler's Sentencing Memo.”); ¹ and (iii) Government's Sentencing Memorandum, filed October 8, 2011 (Doc. 162) (“Gov't Sentencing Memo.”). The Court held an evidentiary hearing on October 13, 2011. The primary issues are: (i) whether the tax loss calculation should be $23,200.00 or $1,937,273.00 (United States Dollars); (ii) whether Defendants Carolynne Tilga and Michael Chandler used sophisticated means to commit the offense of conviction; (iii) whether Tilga and Chandler used special skills to commit the offense of conviction; (iv) whether Tilga should was an organizer, leader, manager, or supervisor of the criminal activity; (v) whether the Presentence Investigation Report on Carolynne Tilga (disclosed July 26, 2011) (“Tilga PSR”) should acknowledge the benefits the United States obtained from the Plea Agreement, filed January 6, 2011 (Doc. 126) (“Tilga Plea Agreement”); and (vi) whether the Tilga PSR should contain explicit recognition that the sentencing guidelines are advisory.² The Court accepts the parties' stipulated tax loss calculation, $23,300.00 (USD), and finds that the foreign tax credit may apply post-indictment. The Court also agrees with and accepts the parties' stipulations in the Plea Agreements that neither Tilga nor Chandler's offenses involved a special skill, an aggravating role, or obstruction of justice. The Court will sustain Tilga and Chandler's objections to the PSRs to the extent that the PSRs are contrary to these findings. The Court finds, however, that Tilga and Chandler used sophisticated means, as defined in U.S.S.G. § 2T1.1, and will not adopt the parties' stipulation to the contrary. The Court concludes that Tilga's objections to the PSR's failure to acknowledge the benefits that the Plaintiff United States of America obtained from the Plea Agreement and failure to explicitly recognize the sentencing guidelines' advisory status are moot.

FACTUAL BACKGROUND

Tilga was born in Bronxville, New York. See Tilga PSR ¶ 51, at 22.³ She attended Cornell University for her undergraduate studies in Hotel Administration and graduated in 1982. See Tilga PSR ¶ 67, at 26; Tilga's Sentencing Memo. at 6. Tilga received her Master of Business Administration from the Wharton School of Business at the University of Pennsylvania in 1986. See Tilga PSR ¶ 69, at 26; Tilga's Sentencing Memo. at 6. In 1997, Tilga moved to Santa Fe, New Mexico. See Tilga PSR ¶ 56, at 23. She has been in a committed relationship with Chandler since 1997, and they have two children. See Tilga PSR ¶ 58, at 24.

Chandler was born in Boston, Massachusetts. See Presentence Investigation Report on Michael Chandler (disclosed July 26, 2011) (“Chandler PSR”). Chandler attended Boston College and Plymouth State University, but did not graduate from either. See Chandler PSR ¶¶ 65–66, at 21. Chandler is a “stay-at-home dad” and works for Taos Ski Academy as ski instructor. See Chandler PSR ¶ 68, at 22.

Tilga and Chandler owned and controlled various businesses, including internet service sites, from 1998 to 2006. See Tilga PSR ¶ 9, at 7. Between 1999 and 2004, Tilga owned and operated an adults-only internet dating service. See Tilga PSR ¶ 17, at 10. Before 2002, Tilga was a partner with two Canadian businessmen, and the internet service sites were located in Canada. See Tilga PSR ¶ 17, at 10; Tilga's Sentencing Memo. at 7. Tilga earned income from the Canadian joint venture, in which she owned a 37.5% share, as part of her trade and business between the tax years 1999 and 2004. See Tilga's Sentencing Memo. at 7 n. 16. After 2002, Tilga expanded the company on her own, using webcam ⁴ sites in addition to the standard internet dating sites with which she was working. See Tilga PSR ¶ 17, at 10.

Tilga was introduced to the Commonwealth Trust Company (“CTC”) in 1998. ⁵ See Tilga PSR ¶ 16, at 9. The CTC was an organization ⁶ that taught individuals how to purchase and manage Pure Trust Organizations (“PTOs”).⁷ See Tilga PSR ¶ 10, at 7. Tilga began purchasing entities from CTC around April 1998. See Tilga PSR ¶ 16, at 9; Tilga's Sentencing Memo. at 7. Each of these entities was a “business” that controlled Tilga's internet sites, her homes, and her vehicles. Tilga PSR ¶ 16, at 9. Between 1998 and 2003, Tilga purchased the following entities from CTC: (i) Cabernet Financial, 1998; (ii) Worldwide Communications, 1998; (iii) General Management Services, 1998; (iv) Bressingham Investments, 1998; (v) Astra Management, 1999; (vi) Vantage Global, 2001; (vii) Batavia Guild Group, 2002; (viii) Triad Universal, 2002; (ix) Alsacia Marketing Services, 2002; and (x) Enchantment Property Management, 2003. See Tilga PSR ¶ 16, at 9–10.

Tilga requested that the revenue from her Canadian business be generated to Cabernet Financial, which used an offshore trust account. See Tilga PSR ¶ 18, at 10. Tilga paid no taxes on her share of the revenues received from her Canadian business. See Tilga PSR ¶ 18, at 10; Gov't Sentencing Memo. at 2. Tilga then transferred funds from Cabernet Financial to various other entities purchased from CTC, which were formed to allow Tilga to purchase real estate and vehicles. See Tilga PSR ¶ 18, at 10; Gov't Sentencing Memo. at 2.

An IRS investigation revealed that Tilga and Chandler used the CTC trusts and offshore companies to purchase assets and set up new offshore accounts. See Tilga PSR ¶ 19, at 10. Between 1999 and 2004, Tilga wired nearly $8.7 million (USD) into the United States from her offshore accounts, but her tax returns usually reported less than $75,000.00 (USD) in income per year. See Tilga PSR ¶ 19, at 10. Tilga used those funds to purchase expensive real estate in New Mexico, Colorado, and Hawaii. See Tilga PSR ¶ 19, at 10–11. Chandler assisted Tilga in wiring money to and from the accounts. See Tilga PSR ¶ 22, at 13; Gov't Sentencing Memo. at 2–3.

For the years 1999 to 2004, Tilga failed to report $5,201,064.00 (USD) in taxable income. See Tilga PSR ¶ 25, at 14. Additionally, neither Tilga nor the vast number of CTC entities that she owned filed tax returns. See Tilga PSR ¶ 26, at 14. Accordingly, the IRS calculated the additional taxes due and owing for those years was $1,937,272.00 (USD). See Tilga PSR ¶ 26, at 15. The United States and Tilga calculated the additional taxes due and owing for those years as a minimum of $1,735,025.00 (USD). See Tilga Plea Agreement ¶¶ 6, 13, at 3, 11; Tilga PSR ¶ 5(f), at 5.

In 2005, the IRS began its investigation of Tilga. See Tilga's Sentencing Memo. at 8. In August 2009, Tilga filed tax returns in the Dominion of Canada for business income earned in each of the years 1999 to 2004. See Gov't Sentencing Memo. at 4. Tilga provided this information to the IRS in April 2010. See Gov't Sentencing Memo. at 4. The Canadian Revenue Agency (“CRA”) sent Tilga a notice on November 19, 2010, stating that she owed $7,424,514.40 (Canadian Dollars) in taxes on her Canadian income. See Tilga PSR ¶¶ 82–83, at 43; Gov't Sentencing Memo. at 4. On April 15, 2010, Tilga attempted to file a notice of claim with the IRS, stating that she was entitled to a credit on her 1999 taxes for taxes owed to the Canadian government for that year. See Gov't Sentencing Memo. at 4. The IRS accepted the notice, but did not consider the notice to have been “filed” and did not process it. Gov't Sentencing Memo. at 4.

PROCEDURAL BACKGROUND

A federal grand jury indicted Tilga and Chandler for a Klien conspiracy ⁸ to defeat the administration of the tax laws of the United States during the period 1998 to 2006 in violation of 18 U.S.C. § 371 and with tax evasion for the years 1999 to 2004 in violation of 26 U.S.C. § 7201. See Redacted Indictment, filed April 9, 2009 (Doc. 2) (“Indictment”). In post-Indictment negotiations with the United States, Tilga asserted that the Internal Revenue Code permitted her to file amended United States tax returns claiming foreign tax credits for the years 1999 to 2004, because there is a special ten-year statute of limitations for foreign tax credits. See Gov't Sentencing Memo. at 3. Tilga argued that, because Canadian taxes are generally higher than United States taxes, the foreign tax credit would wipe out the United States tax deficiency. See Gov't Sentencing Memo. at 3.

On January 6, 2011, the United States entered into plea agreements with Tilga and Chandler. See Tilga Plea Agreement at 1; Plea Agreement at 1, filed January 6, 2011 (Doc. 128) (“Chandler Plea Agreement”); Gov't Sentencing Memo. at 5. Tilga and Chandler both pled guilty to Count One of the Indictment, charging a violation of 18 U.S.C. § 371—the Klein conspiracy. See Tilga Plea Agreement ¶ 3, at 2; Chandler Plea Agreement ¶ 3, at 2. Tilga admitted the...