Court: Court of Appeals for the Ninth Circuit; May 20, 1999; Federal Appellate Court
Appellants Alice Hopper, Terry Ingram, George Kendall Reed, David Ries, George Loren Reed, Janice Mallen, Robert McKendrick, and Roger Knight appeal their convictions for conspiracy to obstruct agency proceedings, obstruction of agency proceedings, false personation of a government official, and HUD fraud, under various statutes including 18 U.S.C. 371, 1505, 912, and 1010. The court has jurisdiction under 18 U.S.C. 3742(a) and 28 U.S.C. 1291, and affirms in part, reverses in part, and remands for further sentencing consistent with its opinion.
The Appellants were affiliated with the Juris Christian Assembly (JCA), a group founded by Everett Thoren, who claimed it was a tax-exempt religious organization. The JCA managed members' properties through a trust, paying their bills while retaining a ten percent administrative fee. Members, including Ingram, declared themselves tax-exempt. IRS agent Mary Ryan investigated Ingram for unpaid taxes, placing a levy on his wages. Thoren assured Ingram that the JCA would address this levy. Subsequently, Ries and another member attempted to pressure Modesto Toyota to lift the levy, which they refused.
Ries and Knight prepared a series of fraudulent documents, purportedly from various government offices, and mailed them to Ryan. These included an arrest warrant for Ryan, demands for admissions, a complaint for refund, and threats regarding the enforcement of the levy. Ryan discovered that the warrants were fake and reinstated Ingram’s tax obligations.
George Reed, another member, failed to pay over $100,000 in collected withholding taxes, accruing a total of over $416,000 in debt due to fees and interest. IRS agent Michael Cash investigated Reed, leading to liens on his property. Assistant U.S. Attorney Diana Noweski prosecuted Reed’s case and received similar fraudulent documents, including threats of conspiracy against her.
Kendall Reed attempted to satisfy a judgment against George Reed's property by presenting a "Government Article I. 1, 2 Warrant" to U.S. Marshal’s Service employee Colleen Maloney, who refused to accept it. The same warrant was sent to the Treasury Department, which returned it to George Reed, indicating it would not be accepted as payment. In December 1993, both Kendall and George Reed sought to have liens removed from George's property at the Stanislaus County Recorder’s office, but Karen Mathews, the county recorder, denied their requests. Mathews had received a letter from Knight referencing the Supreme Court case Simmons v. United States, emphasizing that no constitutional right should be forfeited to assert another. Knight’s letter included a threat regarding the enforcement of a "void 'unlaw'" and was followed by a violent incident where Mathews was assaulted by Roger Steiner, who threatened her life if she did not comply with document filings. As a result of these events, the Appellants were indicted for conspiracy to obstruct legal proceedings before the IRS. On appeal, they argued insufficient evidence for a single conspiracy charge. The legal standard requires that a rational jury, viewing the evidence favorably to the prosecution, could find essential elements of the crime beyond a reasonable doubt. A single conspiracy is defined as an overarching agreement to achieve specific objectives, which can be inferred from the actions of the conspirators. The case involved a scheme to evade tax liabilities involving members of the JCA organization, with all defendants participating in various overt acts aimed at preventing lawful tax collection. The evidence sufficiently demonstrated that the Appellants were engaged in a single conspiracy.
Kendall and George Reed contest the sufficiency of evidence regarding their alleged obstruction of an IRS proceeding, as indicted under 18 U.S.C. 1505. The indictment claims that Kendall attempted to impede tax collection by using a fraudulent instrument titled "Government Art I. 1,2 Warrant." The Reeds argue their actions, while potentially obstructive to a federal court judgment, do not fall under 1505 because federal courts are not classified as "departments" or "agencies."
Referencing United States v. Aguilar, the Supreme Court ruled that obstruction of a judicial proceeding requires an action that naturally and probably interferes with justice. The Court clarified that mere falsehoods to investigators who may or may not testify do not constitute obstruction without a direct connection to a judicial proceeding.
In this case, the Reeds' actions are found to likely obstruct the IRS proceeding, as acceptance of the fraudulent warrant could have halted tax collection and enforcement of IRS liens. The Reeds were aware that the judgment pertained to their tax liabilities, and their fraudulent warrant was directed to the U.S. District Court/IRS. Following its rejection, they attempted to submit it to the Treasury Department for IRS payment. The Reeds understood that if the warrant were accepted, it would satisfy their tax debt and impede collection, thereby fulfilling criteria for obstruction.
The Reeds also cite Hubbard v. United States, which differentiated between judicial and agency proceedings, asserting their actions did not obstruct an agency. However, Hubbard involved only a bankruptcy court and did not demonstrate the necessary interference with agency proceedings, making it distinct from the current case where the IRS's collection efforts were directly affected by the Reeds' actions.
The IRS was involved in the judicial proceeding concerning the collection of delinquent taxes, and the fraudulent warrant obstructed this collection. Enforcement of tax liens is an IRS matter, and even though the IRS had to pursue its lien in federal court, it remained an IRS proceeding. Although the Reeds noted that collection was to be executed by the U.S. Marshal rather than the IRS, funds collected by the Marshal would ultimately go to the IRS, meaning that preventing this collection obstructed the IRS's efforts. Consequently, the Reeds were correctly convicted under 18 U.S.C. § 1505.
During the trial, the Appellants argued that the Ingram wage levies were invalid and claimed this invalidity exempted them from criminal responsibility for obstructing those levies. The district court instructed the jury that an alleged invalidity of a levy is not a defense. This instruction was upheld as accurate law, consistent with Fourth Circuit precedent, which holds that issues of levy validity must be addressed in civil actions, not as defenses in criminal obstruction charges. The court's refusal to provide the Appellants' requested instruction was therefore not erroneous.
Additionally, the Appellants contested the district court's inclusion of penalties and fees when calculating the amount of loss for sentencing. Under the U.S. Sentencing Guidelines, tax loss calculations should exclude interest and penalties. Despite acknowledging that excluding these amounts may not fully reflect the conspiracy's nature, the court was bound by the Guidelines' language. Therefore, the district court incorrectly included penalties and fees in the loss amount, leading to the decision to vacate the Appellants' sentences and remand for re-sentencing.
Appellants contested their sentencing under guideline 2T1.9, arguing it should have been under 2J1.2. The court referenced U.S.S.G. § 1B1.2, which directs sentencing based on the most applicable offense guideline for the conviction. The Statutory Index is not an exhaustive list of applicable guidelines, allowing for discretion in atypical cases. Appellants were convicted of conspiracy under 18 U.S.C. § 371 and obstruction of proceedings under 18 U.S.C. § 1505. The district court determined that 2T1.9 was appropriate due to the nature of the offense, as it addresses conspiracies that obstruct tax-related proceedings. Although 1505 typically aligns with 2J1.2, the court found that 2J1.2 did not sufficiently reflect the seriousness of the Appellants' actions, particularly concerning tax liability and the violent nature of the conspiracy, thus justifying the use of 2T1.9.
Regarding the enhancement of sentences for violent conduct, Reed and Knight argued against the increase based on acquitted charges. The court reviews factual findings for clear error, allowing consideration of acquitted conduct if proven by a preponderance of evidence. Although a significant increase in sentence could require a higher standard of proof, the court determined that Knight's four-level increase did not meet this threshold. Even if a stricter standard were applied, the court found sufficient evidence that Knight authored a threatening letter related to the case, as the letters shared identical language and were sent to the same individual involved in the tax matter.
The district court correctly determined that Knight sent a threatening letter to George Reed, which resulted in a seven-level sentence increase for Reed—three levels for being an official victim and four for violent conduct—raising his sentencing range from 24-30 months to 63-78 months. This increase met the Restrepo extremely disproportionate impact test, leading to the conclusion that the court should have applied a clear and convincing standard, necessitating the vacation of Reed's sentence and remand for re-sentencing.
Regarding enhancements under U.S.S.G. 2T1.9, Reed contested the application of both a four-level increase under 2T1.9(b)(1) and a two-level increase under 2T1.9(b)(2). The guidelines stipulate that only the greater enhancement should apply, and the district court erred by applying both, warranting a similar vacating of Reed's sentence for this issue.
Ingram challenged the inclusion of George Reed's tax liabilities in his relevant conduct. Under U.S.S.G. 1B1.3(a)(1)(B), relevant conduct includes all foreseeable acts in furtherance of the conspiracy. Although the tax liabilities had reached judgment before Ingram joined, obstruction efforts continued post-joining, making him liable for the tax loss. The court noted Ingram's awareness of others using the JCA for similar purposes, affirming his responsibility for the Reed tax liabilities.
Other points raised by the Appellants were considered and affirmed by the district court. In conclusion, the court affirmed in part, reversed in part, and remanded for further proceedings, while noting that Steiner's appeal had been severed from this case. The existence of inconsistent jury verdicts was determined insufficient for reversing any convictions.
