US v. Sabino
| Decision Date | 11 September 2001 |
| Docket Number | CROSS-APPELLANT,CROSS-APPELLEES,99-3786,99-3785,DEFENDANTS-APPELLANTS,PLAINTIFF-APPELLEE,Nos. 99-3745,99-3863,s. 99-3745 |
| Citation | 274 F.3d 1053 |
| Parties | (6th Cir. 2001) UNITED STATES OF AMERICA,/(99-3863), v. JOE SABINO (99-3745); DANIEL K. STEWART (99-3785); DONNA G. STEWART (99-3786),/ Argued: |
| Court | U.S. Court of Appeals — Sixth Circuit |
Appeal from the United States District Court for the Southern District of Ohio at Cincinnati. No. 96-00046--Herman J. Weber, District Judge. [Copyrighted Material Omitted]
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[Copyrighted Material Omitted] Robert E. Lindsay, Alan Hechtkopf, Gregory V. Davis, United States Department OF Justice, Appellate Section, Tax Division, Washington, D.C., for Appellee.
Richard John Donovan, Richard J. Donovan & Associates, Columbus, Ohio, for Defendant-Appellant/Cross-Appellee in Nos. 99-3745, 99-3863.
Charles E. McFarland, Campbellsburg, Kentucky, for Defendant-Appellant/Cross-Appellee in Nos. 99-3785, 99-3786 and 99-3863.
Before: Daughtrey and Gilman, Circuit Judges; Cohn, Senior District Judge.*
Defendants Daniel Stewart (Mr. Stewart), Donna Stewart (Mrs. Stewart), and Joe Sabino (Sabino) (collectively the defendants) were convicted of conspiracy to defraud the United States by obstructing the functions of the United States Internal Revenue Service in violation of 18 U.S.C. § 371. The Stewarts were also convicted of tax evasion in violation of 26 U.S.C. § 7201.
The Stewarts appeal their convictions, raising the following issues: whether the Speedy Trial Act was violated; whether their Fifth Amendment right to remain silent was violated when their failures to file tax returns were charged as overt acts in the indictment and introduced as evidence at trial; whether the district court erred in allowing an IRS employee to testify as a summary witness for the government; whether the jury was properly instructed; and whether their net worth calculation was erroneous.
Sabino appeals his conviction, arguing that there was insufficient evidence to convict him of conspiracy to defraud the United States in violation of 18 U.S.C. § 371.
The government cross-appeals the district court's sentencing decisions, including: failing to enhance Mrs. Stewart's and Sabino's offense levels for obstruction of justice; failing to enhance each defendant's offense level for sophisticated concealment; reducing Sabino's offense level for a minor role in the offense; and granting Sabino a downward departure.
For the reasons that follow, the defendants' convictions will be affirmed. We find, however, that the district court erred in granting Sabino a minor role reduction and in failing to enhance the Stewarts' and Sabino's offense levels for sophisticated concealment. Therefore, the sentencing determinations will be affirmed in part and reversed in part, and the case will be remanded for re-sentencing consistent with this opinion.
In 1989, the Criminal Investigation Division of the Internal Revenue Service conducted an investigation of Phillip Marsh, the founder of an organization called the Pilot Connection Society (PCS), which, among other activities, instructed individuals on methods to avoid paying federal and state income taxes. Through the execution of a search warrant on Marsh's residence and property, the IRS obtained a list of people who were affiliated with the PCS. Two of the people on the list were defendants Daniel and Donna Stewart. The Stewarts owned and operated Danco Transmission, Inc. (Danco), in the Cincinnati, Ohio, area since 1971.
Because of their connection with PCS, the Civil Division of the IRS investigated the Stewarts' compliance with federal tax laws and discovered in 1992 that they were overdue in submitting their 1990 tax return. The IRS queried the Stewarts about their failure to file the tax return. The Stewarts responded by "revoking" their tax returns from 1955 to 1989 (a declarative act which had no substantive effect on their tax obligations). A series of letters ensued between the IRS and the Stewarts, during which the Stewarts sent the IRS anti-tax information obtained through their connection with PCS and other sources. The Stewarts eventually filed their 1990 income tax return, but they did not file any personal income tax returns for the years 1991, 1992, 1993, and 1994. Danco also failed to file corporate tax returns in 1992, 1993, and 1994.
The IRS then commenced a criminal investigation of the Stewarts. The investigation established that in 1990, the Stewarts closed all of their personal checking and savings accounts, redeemed certificates of deposit and paid off loans. In addition, in 1991, they dissolved Danco pursuant to Ohio law. Danco, however, continued to operate. In reliance on the PCS "untax" instructions, the Stewarts created seven primary trusts and transferred all of their assets, including Danco, to the trusts. Evidence at trial showed that the trusts paid the personal and business expenses of the Stewarts and were used to purchase various personal items for use by the Stewarts and their family. There was no evidence at trial that the IRS received any of the requisite paperwork concerning the trusts; no fiduciary income tax returns were filed on behalf of the trusts from 1992 to 1994.
During the years the trusts "existed," the Stewarts asked relatives, friends, and employees of Danco to serve as trustees of the trusts. The nominal trustee for each of the trusts often changed. Evidence at trial established that many of the trustees did not know the nature of a trust or could not explain the nature of their responsibilities as trustee. Some trustees indicated that Mrs. Stewart guided the daily operations of the trusts. The evidence showed that Sabino served as the trustee for several of the trusts, and his signature or signature stamp appeared on many of the documents regarding transactions undertaken by the trusts.
A federal grand jury returned an indictment against the Stewarts on April 2, 1996, and a superceding indictment on June 19, 1996, adding Sabino as a defendant. The superceding indictment charged Sabino and the Stewarts with conspiracy to defraud the United States by obstructing the functions of the Internal Revenue Service in violation of 18 U.S.C. § 371, and the Stewarts with an additional four counts of willfully attempting to evade income taxes in violation of 26 U.S.C. § 7201. Following a 32 day trial, the jury returned guilty verdicts against the three defendants on all counts, except that Mr. Stewart was acquitted on the charge of willfully attempting to evade income taxes for 1994.
A motion for judgment of acquittal, pursuant to Fed. R. Crim. P. 29, was denied. The district court sentenced each of the Stewarts to 18-month concurrent terms of imprisonment on each count of conviction, three years supervised release, and fined them each $41,750. Restitution totaling $129,000 was ordered.
Sabino was subject to a 12 to 18 month sentence of incarceration under the guidelines. The district court granted a motion for downward departure and sentenced him to five years' probation. Sabino was included in the ordered restitution of $129,000 jointly and severally with the Stewarts.
The Stewarts argue that the district court erred in denying their motion to dismiss the superceding indictment because of a violation of the Speedy Trial Act, 18 U.S.C. § 3161 (the STA), which requires that a criminal defendant be brought to trial within 70 days from the latest date of arrest, the filing of an indictment, or the first appearance before the court. Henderson v. United States, 476 U.S. 321, 323 (1986). The STA provides that if this time limit is exceeded, an indictment "shall be dismissed on motion of the defendant," with or without prejudice. 18 U.S.C. § 3162(a)(2). However, the STA also provides for periods of excludable delay during which the 70-day "clock" does not operate. See id. § 3161(h). The district court has discretion to exclude a delay from the 70 day time limit, and a decision to exclude a delay will only be reversed upon a showing of actual prejudice. United States v. Cianciola, 920 F.2d 1295, 1298 (6th Cir. 1990) (citing United States v. Monger, 879 F.2d 218, 221 (6th Cir. 1989)).
The indictment was returned on April 2, 1996; the superceding indictment was returned on June 19, 1996. The district court granted indefinite ends-of-justice continuances on May 29, 1996, September 20, 1996 and October 31, 1996 on the basis that the case was complex. The Stewarts filed a motion to dismiss the indictment for violating the STA on June 2, 1998. The Stewarts concede that several of their motions delayed commencement of the STA clock. They argue that the STA clock began ticking on April 3, 1997, when the district court acknowledged receipt of IRS jury information, the final information requested in their remaining motion made after their arraignment on May 20, 1996. Discounting excludable delay periods after the clock commenced until the trial on July 7, 1998, the Stewarts argue that 350 non-excludable days passed in violation of the STA.
The district court denied the Stewarts' motion to dismiss on June 3, 1999, relying partially upon a finding that continuances were warranted to serve the ends of justice as a result of the case's complexity. The Stewarts argue that the district court did not make sufficient findings to buttress an ends-of-justice continuance based on the complexity of the case.
According to § 3161(h)(8)(A), delay resulting from a court-ordered continuance is excluded if it is based on a finding that the ends of justice served by the continuance "outweigh the best...
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