United States v. Clements ( 1996 )

UNITED STATES COURT OF APPEALS
FIFTH CIRCUIT
____________
No. 94-30519
____________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
JOHN M. CLEMENTS,
Defendant-Appellant.
__________________________________________________
Appeal from the United States District Court
for the Middle District of Louisiana
__________________________________________________
January 22, 1996
Before HIGGINBOTHAM, EMILIO M. GARZA, and BENAVIDES, Circuit
Judges.
EMILIO M. GARZA, Circuit Judge:
Defendant John M. Clements appeals his conviction for
attempting to evade or defeat the payment of federal income tax, in
violation of 26 U.S.C. § 7201, and for making a false statement to
a federal agency, in violation of 18 U.S.C. § 1001. We affirm.
I
As an architect and business man, Clements was involved in
several different business entities in Baton Rouge, Louisiana.
One was a real estate management company called Clements
Properties. Another was Clements Blanchard and Associates, Inc.
("CBA"), an architectural firm. Clements caused these companies to
incur large tax liabilities by directing them not to turn over to
the Internal Revenue Service ("IRS") the payroll taxes which had
been withheld from employees' salaries. In addition to his own
personal income tax liability, Clements was eventually personally
assessed the payroll tax liability for these two companies in his
capacity as a "responsible person."
The IRS officer assigned to his case, June Dow, spent many
months attempting to work out ways for Clements to pay off his tax
liability. Aside from the prospect of future projects or the sale
of stock, Clements repeatedly told Dow that his only source of
income was CBA, the architectural firm. Clements assured Dow that
he would be able to satisfy the tax liability once CBA was paid on
its contract with Hannover Corporation for services performed in
connection with Place Vendome, a shopping mall project in Baton
Rouge. Despite repeated assurances, the IRS never received any
money, and Dow eventually decided to file a lien on CBA's property
and to levy the firm's contract with Hannover, as well as Clements'
personal bank accounts. None of these actions were successful in
securing any funds to pay down Clements' tax liability.
When Clements met with Dow that summer, he told her that CBA
had been dormant since the lien had been filed and that he had
discharged all of his employees. Clements also told her that he
had no income from any source and that his wife was paying all
their necessary living expenses. Evidence at trial established
that none of this was true. Most significantly, Clements had
signed a separate, personal contract with Hannover Corporation,
-2-
replacing the original contract between Hannover and CBA, and was
receiving substantial sums of money from the Place Vendome project.
Clements never told Dow or the IRS that he had entered into a new
contract or that he was receiving any income.
Following a two-count indictment, a jury convicted Clements of
attempting to evade taxes by hiding the receipt of over $150,000
paid in connection with the Place Vendome project, and of making
false statements to an employee of the Internal Revenue Service.
At sentencing, the district court decided to depart upwards from
the Sentencing Guidelines because Clements had obstructed justice
after he was convicted. The district court sentenced Clements to
a term of imprisonment of fifty-one months, and ordered to pay a
fine and make restitution to the IRS. Clements filed a timely
notice of appeal from both his conviction and sentence.
II
Clements argues that the district court made a number of
evidentiary errors. The decision whether to admit testimony or
other evidence is committed to the sound discretion of the trial
judge. United States v. Okoronkwo, 46 F.3d 426, 435 (5th Cir.),
cert. denied, ___ U.S. ___, 116 S. Ct. 107, 133 L. Ed. 2d 60
(1995). We review the district court's evidentiary rulings for
abuse of discretion. United States v. Scott, 48 F.3d 1389, 1397
(5th Cir.), cert. denied, ___ U.S. ___, 116 S. Ct. 264, ___ L. Ed.
2d ___ (1995).
A
Clements contends that the district court erroneously excluded
-3-
several letters he wrote relating to his financial projects.
Having reviewed the record, we conclude that Clements never
attempted to introduce the letters into evidence, and the district
court was therefore never required to rule on whether the letters
were admissible. The record contains only three instances in which
defense counsel brought the letters to the district court's
attention.
During the cross-examination of IRS officer June Dow, the
Government objected on hearsay grounds to defense counsel's attempt
to elicit testimony regarding a letter Clements wrote to Dow prior
to the period of the indictment. The district court held a bench
conference on the objection and the possible grounds for sustaining
it. After some lengthy discussion, the district court eventually
requested defense counsel to "go through a trial run" of his cross-
examination of Dow outside the presence of the jury. At the
conclusion of the trial run, defense counsel stated, "If we handle
it that way, then I'll bypass the letter entirely." The letter was
never offered into evidence, and the district court never ruled it
was inadmissible.1
Clements argues that prior to the trial run the district court had
already ruled the letter was inadmissible. The record does not support this
claim. During the bench conference, the district court discussed several
possible grounds for excluding testimony regarding the contents of the letter.
The district court also ruled at one point that defense counsel was permitted to
cross-examine Dow regarding her independent recollection of matters discussed in
the letter, and the accuracy of any notes she took, but that defense counsel was
not permitted to use the letter to impeach her. The district court had not,
however, ruled on the Government's objection, and the court made its lack of
ruling perfectly clear to defense counsel, Mr. Lorenzi, immediately prior to the
trial run:
MR. LORENZI: I'll tell you what I'll do, then, in light -- first of
all, in light of the court's ruling, and I don't want my proceeding
-4-
During the direct examination of Clements, defense counsel
sought to elicit testimony that Clements had written to Dow and
notified her about a proposal by Hannover Corporation to purchase
a block of CBA stock. The district court again conducted a trial
run of the testimony outside the presence of the jury. At this
bench conference, the district court asked to see the letter
Clements wrote to Dow about the negotiations with Hannover
Corporation. The district court then ruled that Clements could
testify that he was trying to sell CBA in order to raise money to
pay the tax owed, that he notified Dow of this fact, and that he
later withdrew from the negotiations. Concerned about the
prejudicial nature of the testimony, the district court, however,
would not allow Clements to testify about misrepresentations or
other misconduct by the promoters of Place Vendome in order to
explain why he withdrew from the proposed agreement. At no point
did the district court rule that the letter itself was
inadmissible, and defense counsel never attempted to introduce the
this way, obviously, to be a waiver, your honor. We would ask that the objection
be noted for the record.
THE COURT: I haven't overruled it.
MR. LORENZI: Okay. I thought you had. That's why I'm somewhat
confused.
THE COURT: No. I told you -- I said, let's go through a trial
run.
MR. LORENZI: I'll tell you what I would do, then, would be to ask
-- well, first of all, do you want to instruct the witness not to
actually answer the question?
THE COURT: I want him to answer -- I want her --
MR. LORENZI: Oh, you do want her to answer.
THE COURT: -- to answer it now, and then if I say it's
admissible, we'll do it again in front of the jury. If I say it's
not admissible, it's your proffer.
MR. LORENZI: All right. Then I understand how to proceed.
-5-
letter into evidence.2
Similarly, the first time the letters were discussed, during
the cross-examination of William G. Hayes, whose financial
consulting firm was appointed receiver for Place Vendome, Inc.,
defense counsel did not offer any of the letters into evidence, and
the district court did not rule any of them inadmissible. We
therefore decline to reach any of Clements' arguments regarding the
admissibility of these letters.3
B
Clements argues that the district court erroneously excluded
testimony as to why he believed he could not open a checking
Moreover, defense counsel acknowledged at one point that he did not
intend to introduce into evidence the documents relating to the proposed
transaction with Hannover Corporation:
THE COURT: I mean, being fair to both sides now. You know, it
would be very easy for the Government to say, "Put everything in
there is about Mr. Recile and Ms. Phillips and everybody else," and
then that's the typical argument that people make. If one's guilty,
everybody's guilty. I've been doing the best job I can to keep out
that other situation to the extent that I can understand the facts.
So I'll let him testify, since the May time period is involved.
I'll let him testify that he was trying to sell the company to get
some value to pay the taxes and that he notified Ms. Dow of the
fact, if in fact, he did, and that he withdrew from this agreement,
or the agreement didn't go through for whatever reason, and that's
where we are. And that's what I'll let happen.
MR. LORENZI: Well, I haven't produced any of that to the witness.
It's questionable hearsay.
THE COURT: Well, it is, but you don't need the documents to show
--
MR. LORENZI: No, I don't need the documents.
Clements's failure to make an offer of proof to the trial court as
to which letters, or portions of the letters, he believed admissible means that
he has also failed to preserve the record for our review. Even if we accepted
Clements' argument that the trial court made a ruling during the these bench
conferences with respect to the letters, we are unable to determine from this
record exactly which letters are being discussed. We are therefore unable to
adequately determine the propriety and harmfulness of any such ruling by the
district court. See United States v. Scott, 48 F.3d 1389, 1397 (5th Cir. 1995)
(holding that defendant did not preserve the issue for appeal where he failed to
make an offer of proof to the district court as to which portions of the criminal
record of the government's witness should have entered into evidence).
-6-
account. Clements contends on appeal he would have testified that
because of his poor rating by "CheckFax"))the result of a
bankruptcy and bounced checks))"it was his impression that banks
would not allow him to open an account." The district court
sustained an objection to defense counsel's question regarding the
CheckFax rating on the basis of hearsay. Clements argues that his
testimony was not hearsay because it was not being introduced "to
prove the truth of the matter asserted." FED. R. EVID. 801(c).
We find that Clements has failed to preserve any error for our
review. Rule 103(a)(2) of the Federal Rules of Evidence provides
that error may not be predicated upon a ruling which excludes
evidence unless a substantial right of the party is affected and
"the substance of the evidence was made known to the court by offer
or was apparent from the context within which questions were
asked." FED. R. EVID. 103(a)(2).4 "[T]his circuit will not even
consider the propriety of the decision to exclude the evidence at
issue, if no offer of proof was made at trial." United States v.
Winkle, 587 F.2d 705, 710 (5th Cir.), cert. denied, 444 U.S. 827,
100 S. Ct. 51, 62 L. Ed. 2d 34 (1979). Although a formal offer is
not required to preserve error, the party must at least inform the
trial court "what counsel intends to show by the evidence and why
it should be admitted." United States v. Ballis, 28 F.3d 1399,
1406 (5th Cir. 1994).
The rule also provides that we are not precluded from "taking notice
of plain errors affecting substantial rights although they were not brought to
the attention of the court." FED. R. EVID. 103(d). We find there was no plain
error.
-7-
Defense counsel in this case made no attempt to inform the
district court that Clements' testimony about his CheckFax rating
was being sought to prove something other than the truth of his
rating. See United States v. Grapp, 653 F.2d 189 (5th Cir. 1981)
(declining to consider a hearsay exception as a basis for the
admissibility of evidence where the argument was not presented to
the trial court); United States v. Wells, 525 F.2d 974, 976 (5th
Cir. 1976) ("Inasmuch as no suggestion was made at the time that
the evidence sought would fall within some exception to the hearsay
rule, appellants cannot properly contend now that it was error to
sustain Government objections to the questions in issue."); cf.
United States v. Gonzalez, 700 F.2d 196, 201 (5th Cir. 1983)
(holding that defendant had sufficiently explained basis for
hearsay exception to trial judge to preserve it for review).5 We
therefore find that the district court did not abuse its
discretion.
C
Clements next contends that the district court erred by
allowing the Government to admit evidence of prior "bad acts" under
Moreover, the record reveals that the district court subsequently
overruled an objection to the following question by defense counsel: "Did you
know back in March though July 1991, why you couldn't open a bank account?" This
question was designed to elicit directly testimony regarding Clements'
understanding of why he was unable to open an account, including the effect of
his CheckFax rating. After the objection was overruled, however, defense counsel
did not instruct Clements to answer the question, but proceeded instead to a new
line of questions regarding whether Clements had ever attempted to open a bank
account.
-8-
Rule 404(b).6 The Government elicited testimony from two witnesses
that Clements was aware of the payroll tax liability at the time it
arose. The first witness, William A. Clark, had worked for CBA as
comptroller, with responsibility for the company's accounting and
financial administration. The second witness, William P. Gaines,
Jr., had worked as comptroller for Clements Properties. Both
testified that they repeatedly discussed with Clements the
outstanding payroll tax that was due and that he intentionally
decided not to pay the tax at that time.
Clements failed to object to this testimony at trial and must
therefore show "plain error." See FED. R. CRIM. P. 52(b).7 Under
the "plain error" standard, we correct forfeited errors only where
they are "clear" or "obvious" and "affect substantial rights."
United States v. Olano, 507 U.S. 725, ___, 113 S. Ct. 1770, 1776-
79, 131 L. Ed. 2d 508 (1993); United States v. Calverley, 37 F.3d
160, 162-64 (5th Cir. 1994) (en banc), cert. denied, ___ U.S. ___,
FED. R. EVID. 404(b) provides:
Evidence of other crimes, wrongs, or acts is not admissible to prove
the character of a person in order to show that he acted in
conformity therewith. It may, however, be admissible for other
purposes, such as proof of motive, opportunity, intent, preparation,
plan, knowledge, identity, or absence of mistake or accident,
provided that upon request by the accused, the prosecution in a
criminal case shall provide reasonable notice in advance of trial,
or during trial if the court excuses pretrial notice on good cause
shown, of the general nature of any such evidence it intends to
introduce at trial.
Clements incorrectly argues that he has preserved a higher standard
of review by filing a pretrial objection to the Government's Rule 404 Notice
(which contained no mention of the two comptrollers or their testimony). See
United States v. Graves, 5 F.3d 1546, 1551-53 (5th Cir. 1993) (reviewing for
plain error where defendant did not make contemporaneous objection to admission
of evidence that was subject of pretrial ruling on motion in limine), cert.
denied, ___ U.S. ___, 114 S. Ct. 1829, 128 L. Ed. 2d 459 (1994).
-9-
115 S. Ct. 1266, 131 L. Ed. 2d 145 (1995). Even where the errors
are clear or obvious, we will not exercise our discretion to
correct the forfeited errors unless they seriously affect the
fairness, integrity, or public reputation of judicial proceedings.
Olano, 507 U.S. at ___, 113 S. Ct. at 1776; Calverley, 37 F.3d at
162.
In deciding whether the admissibility of evidence of "other
bad acts" is governed by Rule 404(b), we must determine if the
evidence in question is "intrinsic" or "extrinsic." United States
v. Williams, 900 F.2d 823, 825 (5th Cir. 1990). "Other act
evidence is intrinsic when the evidence of the other act and the
evidence of the crime charged are inextricably intertwined or both
acts are part of a single criminal episode or the other acts were
necessary preliminaries to the crime charged." Id. (internal
quotation marks omitted). As one of the elements of the tax
evasion charge, the Government needed to prove that Clements acted
"wilfully." United States v. Terrell, 754 F.2d 1139, 1144 (5th
Cir.), cert. denied, 472 U.S. 1029, 105 S. Ct. 3505, 87 L. Ed. 2d
635 (1985). Direct evidence that Clements was aware of his tax
liability, even though prior to the time period of the indictment,
was "inextricably intertwined" with the crime charged. We
therefore find that the testimony was "intrinsic" evidence which
does not fall within the meaning of Rule 404(b). See United States
v. Dula, 989 F.2d 772, 777 (5th Cir.) ("In developing proof of
intent and motive, the prosecution may offer all of the surrounding
circumstances that were relevant."), cert. denied, ___ U.S. ___,
-10-
114 S. Ct. 172, 126 L. Ed. 2d 131 (1993). The district court
committed no error by admitting this evidence, plain or otherwise.8
III
Clements contends that the jury charge was defective because
the district court did not give a requested instruction that
"attempting to postpone the payment of taxes" is not sufficient to
constitute evasion. We review jury instructions "to determine
whether the court's charge, as a whole, is a correct statement of
the law and whether it clearly instructs jurors as to the
principles of law applicable to the factual issues confronting
them." United States v. Box, 50 F.3d 345, 353 (5th Cir.), cert.
denied, ___ U.S. ___, 116 S. Ct. 309, ___ L. Ed. 2d ___ (1995)
(internal quotation marks omitted). We review the district court's
refusal to give an instruction for abuse of discretion. United
States v. Pennington, 20 F.3d 593, 600 (5th Cir. 1994). "The
refusal to give a jury instruction constitutes error only if the
instruction (1) was substantially correct, (2) was not
Clements makes several other assertions of error regarding evidence
that was or was not admitted, all of which we find to be without merit. Clements
argues that the district court erred by excluding statements made by Dow. Having
reviewed the record, we conclude that the district court did not abuse its
discretion with respect to any statement made by Dow.
Clements also argues that the district court erred by allowing the
Government to introduce the rebuttal testimony of Carolyn Herbert, Dow's "group
manager," because it was in response to Clements' testimony elicited by the
Government on cross-examination. Clements did not object at trial, and we find
there was no "plain error." See United States v. Martinez, 962 F.2d 1161, 1165-
66 & n.10 (5th Cir. 1992) (holding it was not plain error to admit testimony to
rebut statement made by defendant on cross-examination).
Finally, Clements contends that the Government violated the Jencks Act by
not turning over additional investigatory histories by Dow. Clements, however,
did not request that the district court review the statements in camera, nor has
he requested that the statement be produced for review on appeal. See United
States v. Edwards, 702 F.2d 529, 531 (5th Cir. 1983). We therefore find that
Clements has failed to establish any error on this ground.
-11-
substantially covered in the charge delivered to the jury, and (3)
concerned an important issue so that the failure to give it
seriously impaired the defendant's ability to present a given
defense." Id.
Under count one, the district court instructed the jury that
the evidence must establish beyond a reasonable doubt that Clements
knowingly and intentionally attempted to evade or defeat the
payment of taxes owed.9 This instruction accurately sets out the
elements the Government must prove to establish a violation of 26
U.S.C. § 7201. See Terrell, 754 F.2d at 1144. Because we conclude
that the charge to the jury substantially covers Clements' proposed
instruction, we find that the district court did not abuse its
discretion.10
IV
Clements contends that the district court made several errors
in calculating his sentence. We review the district court's
application of the Sentencing Guidelines de novo. United States v.
Radziercz, 7 F.3d 1193, 1195 (5th Cir. 1993), cert. denied, ___
U.S. ___, 114 S. Ct. 1575, 128 L. Ed. 2d 218 (1994). The district
The district court specifically instructed the jury that the
Government had to prove beyond a reasonable doubt "[t]hat when the defendant
engaged in the above-mentioned acts or acts, he did so with the purpose of
evading or attempting to evade the payment of taxes."
Clements also contends that the district court should have granted
a new trial because of the errors asserted above. "The ruling on a new trial
motion is reviewed for abuse of discretion; new trials are granted only upon
demonstration of adverse effects on substantial rights of a defendant." United
States v. Cooks, 52 F.3d 101, 103 (5th Cir. 1995) (footnote omitted). Having
rejected Clements' claims of error, we also conclude that the district court did
not abuse its discretion by denying his motion for a new trial.
-12-
court's factual findings will be affirmed unless they are clearly
erroneous. United States v. Brown, 7 F.3d 1155, 1159 (5th Cir.
1993). "A factual finding is not clearly erroneous as long as the
finding is plausible in light of the record as a whole." Id.
(internal quotation marks omitted).
A
Clements argues that the district court improperly computed
the loss amount for both counts in determining the base offense
level. Under count one for tax evasion, Clements argues that the
tax loss should be limited to the value of the assets he attempted
to hide from the Internal Revenue Service. Had the offense been
successfully completed, Clements contends, he would only have
evaded $150,000 in taxes.11
The district court determined the base offense level using the
sum of the tax assessments against Clements by the IRS as of the
indictment period, exclusive of interest and penalties. The total
tax liability evaded was calculated to be $258,712.03.12 The 1990
Sentencing Guidelines13 define "tax loss" as "the total amount of
the tax that the taxpayer evaded or attempted to evade." U.S.S.G.
We note that the indictment alleged that Clements "received more than
$150,000.00 in cash and checks payable to CLEMENTS from the Place Vendome
promoters," and there was undisputed evidence at trial that Clements in fact
received approximately $270,000 from Place Vendome during the time period of the
indictment. (emphasis added).
This figure represents the sum of the following assessments: (1)
Clements' 1989 personal income tax liability))$19,527.70; (2) Clements' tax debt
as a "responsible person" for CBA))$233,524.45; and (3) Clements' tax debt as a
"responsible person" for Clements Properties))$5,659.88.
Clements does not dispute that the district court properly used the
1990 Sentencing Guidelines.
-13-
§ 2T1.1(a). In United States v. Brimberry, 961 F.2d 1286 (7th
Cir. 1992), the defendant argued that the "tax loss" should be the
value of her hidden assets (jewelry worth approximately $69,000,
plus $8,000 equity in her house)))the amount of money the IRS could
actually recover from her))rather than, as the district court
found, the $7 million assessed income tax deficiency. While
recognizing that its interpretation of "tax loss" could lead to
some strange results if the discrepancy between the tax deficiency
and the hidden assets grew too wide, the Seventh Circuit concluded
that the plain language of § 2T1.1 required it to affirm the
district court's finding that $7 million was the "tax loss" that
she attempted to evade. 961 F.2d at 1292. We agree, and hold that
the "tax loss" evaded means the tax deficiency assessed, exclusive
of interest and penalties, rather than the amount that the IRS
could actually recover.14 See also United States v. Moore, 997 F.2d
55, 60-62 (5th Cir. 1993) (concluding that "tax loss" is to be
calculated in the same manner under § 2T1.4, for assisting tax
fraud, § 2T1.3, for false statements on tax returns, and § 2T1.1,
for tax evasion, and holding that "tax loss" under § 2T1.4 means
Clements argues that the district court erred by not considering a
1993 clarifying amendment. See U.S.S.G. § 1B1.11(b)(2) ("[I]f a court applies
an earlier edition of the Guidelines Manual, the court shall consider subsequent
amendments, to the extent that such amendments are clarifying rather than
substantive changes."). Clements argues that the district court should have
considered the following language: "If the offense involved tax evasion . . .
that tax loss is the total amount of the loss that was the object of the offense
(i.e., the loss that would have resulted had the offense been successfully
completed)." See 1993 Guidelines Manual, Appendix C, amendment 491. We note
that this amendment also states, "If the offense involved willful failure to pay
tax, the tax loss is the amount of tax that the taxpayer owed and did not pay."
Id. (emphasis added). We find that this clarifying amendment is entirely
consistent with our holding.
-14-
the "intended" tax loss rather than the government's actual tax
loss).
Under count two for false statements, the district court used
the same $258,712.03 figure in determining the loss amount.
Clements was sentenced in consideration of § 2F1.1 for offenses
involving fraud or deceit, which provides that "if a probable or
intended loss that the defendant was attempting to inflict can be
determined, that figure would be used if it was larger than the
actual loss." U.S.S.G. § 2F1.1, comment. (n.7). We have
previously held that a district court is to be given wide latitude
in determining the amount of loss caused by false statements, and
that it is "proper to calculate loss based on the risk engendered
by the defendant's criminal conduct, even where the actual loss was
lower." United States v. Brewer, 60 F.3d 1142, 1145 (5th Cir.
1995).15 We find that the district court did not err by equating
the "loss amount" with the sum of Clements' tax liability for
purposes of calculating the offense level under count two.16
B
Clements next contends that the district court erred by
Section 2F1.1 also states that where offenses involving fraudulent
statements are prosecuted under a general statute like 18 U.S.C. § 1001, we
should apply the more specific guideline if it is more apt. U.S.S.G. § 2F1.1,
comment. (n.13). The crime of false statements to a government officer is more
aptly covered by § 2T3.1. Id. We have held that under § 2T3.1 and § 2T1.1, "tax
loss" is to be calculated in a similar manner in both provisions. United States
v. Moore, 997 F.3d 55, 58-59 (5th Cir. 1993) (holding that "tax loss" was
properly calculated as "intended" loss rather than actual loss).
Clements also argues that the $258,712.03 figure was inaccurate
because he should have received credit for property previously seized by the IRS.
The district court concluded that the IRS had already appropriately applied the
value of these properties to Clements' tax liabilities. Having reviewed the
record, we do not find this conclusion to be clearly erroneous.
-15-
providing a two-level enhancement to the sentence imposed under the
tax evasion count for the use of "sophisticated means." The 1990
Sentencing Guidelines provide, "If sophisticated means were used to
impede discovery of the nature or extent of the offense, increase
by two levels." U.S.S.G. § 2T1.1(b)(2). The Guidelines define
"sophisticated means" as including "conduct that is more complex or
demonstrates greater intricacy or planning than a routine tax-
evasion case. An enhancement would be applied for example, where
the defendant used offshore bank accounts, or transactions through
corporate shells." U.S.S.G. § 2T1.1, comment. (n.6). The
background comments to the Guidelines also state, "Although tax
evasion involves some planning, unusually sophisticated efforts to
conceal the evasion decrease the likelihood of detection and
therefore warrant an additional sanction for deterrence purposes."
U.S.S.G. § 2T1.1, comment. (backg'd). We review the district
court's factual finding that Clements used sophisticated means to
impede discovery of his offense for clear error. United States v.
Charroux, 3 F.3d 827, 836-37 (5th Cir. 1993). "We will not find a
district court's ruling to be clearly erroneous unless we are left
with the definite and firm conviction that a mistake has been
committed." Id.
Clements argues that his use of cashier's checks merely
constituted the acts of his offense, and was necessitated by his
lack of a bank account. When Clements' scheme to evade taxes and
impede discovery of his offense is viewed in its entirety, however,
we find no clear error in the district court's finding of
-16-
"sophisticated means." In early 1991, IRS agent Dow informed
Clements that she had finally decided to file a lien against CBA,
and to levy the firm's bank accounts and contract with Hannover
Corporation regarding the Place Vendome project. Shortly
thereafter, Clements entered into a personal contract with Hannover
Corporation for continuing architectural services, supplanting the
contract between CBA and Hannover.17 Pursuant to this new contract,
Clements received over $270,000 during the indictment period from
March through July. Of the twenty-three checks he received in this
period, almost all of them were converted into multiple cashier's
checks, sometimes as many as thirteen. Some of these cashier's
checks were made out to creditors, but most of them were made
payable to John Clements himself. These latter cashier's checks,
if they were not cashed, were then often deposited into the
separate bank account of Clement's wife or converted into
additional cashier's checks.
Even though Clements' transactions did not involve the use of
offshore bank accounts or fictional entities, his use of multiple
cashier's checks and his wife's separate bank account to obscure
the link between the money and Place Vendome or himself undeniably
made it more difficult for the IRS to detect his evasion. This
case does not present the situation in which an individual taxpayer
merely "completed his individual 1040 form with false information
to avoid paying some of his federal taxes." Charroux, 3 F.3d at
The original contract, dated September 5, 1990, was for a one-year
term.
-17-
837 (internal quotation marks omitted). The district court's
finding of sophisticated means was not clearly erroneous. See id.
(affirming a finding of sophisticated means where the defendants
participated in a "land flip" scheme to purchase property for
inflated prices and had sought the advice of tax professionals "in
order to lend the appearance of legitimacy to the dealings"); cf.
United States v. Rice, 52 F.3d 843, 849 (10th Cir. 1995) (finding
clear error where defendant "merely claimed to have paid
withholding taxes he did not pay").
C
Clements contends that the district court also erred by
providing for a two-level enhancement because the offense involved
"more than minimal planning." U.S.S.G. § 2F1.1(b)(2)(A). Under
the Guidelines, more than minimal planning "is deemed present in
any case involving repeated acts over a period of time, unless it
is clear that each instance was purely opportune." U.S.S.G.
§ 1B1.1, comment. (n.1(f)). More than minimal planning is also
defined as "more planning than is typical for commission of the
offense in a simple form," or is deemed to exist "if significant
affirmative steps were taken to conceal the offense." Id. We
review the district court's determination of the existence of "more
than minimal planning" for clear error. United States v. Brown, 7
F.3d 1155, 1159 (5th Cir. 1993).
His "repeated acts," Clements argues, were merely the
repetition of the same false statement to Dow that he had not
received any money from Hannover, and this repetition was purely
-18-
opportune because he was simply responding to further questioning
by Dow. We disagree. The record reveals that Clements had
frequent contact with Dow over an extended period of time and made
numerous false statements to Dow and her group manager, Carolyn
Herbert. The mere fact that the meetings and conversations were
initiated by Dow does not make Clements' false statements "purely
opportune." Clements' repeated false statements were all
deliberate actions in furtherance of the one central scheme to
evade his payroll taxes. See United States v. Channapragada, 59
F.3d 62, 65-66 (7th Cir. 1995) (affirming enhancement for "repeated
acts" where defendant misrepresented value of collateral and
repeated lie three more times). The Seventh Circuit in
Channapragada rejected the argument that the defendant was not
responsible for the repetition of his lie merely because he had not
foreseen that the loan would be broken up into several smaller,
less risky loans. Id. Similarly, Clements is not shielded from
the consequences of his repeated actions by the vigilance of the
IRS agent. The district court's finding of "more than minimal
planning" was not clearly erroneous.
V
Clements contends that the district court erred by departing
upward four levels on the basis of multiple acts of obstruction of
justice committed by Clements following his conviction. A district
court may depart from the sentencing range set by the Guidelines
when the court finds "an aggravating or mitigating circumstance of
a kind, or to a degree, not adequately taken into consideration by
-19-
the Sentencing Commission in formulating the guidelines." 18
U.S.C. § 3553(b); see also U.S.S.G. § 5K2.0. We will affirm a
departure from the Sentencing Guidelines if it is based on
"acceptable reasons" and the degree of departure is "reasonable."
United States v. Velasquez-Mercado, 872 F.2d 632, 637 (5th Cir.),
cert. denied, 493 U.S. 866, 110 S. Ct. 187, 107 L. Ed. 2d 142
(1989) (internal quotation marks omitted); see also United States
v. Lambert, 984 F.2d 658, 663 (5th Cir. 1993) (en banc).18
A
As an initial matter, Clements argues that he did not receive
adequate notice of the district court's intention to upward depart.
A district court must give "reasonable notice" that it is
contemplating an upward departure, and such "notice must
specifically identify the ground on which the district court is
contemplating an upward departure." Burns v. United States, 501
U.S. 129, 138-39, 111 S. Ct. 2182, 2187, 115 L. Ed. 2d 123 (1991).
The evening prior to the original sentencing hearing, the district
court faxed to all parties a notice of its intention to consider an
upward departure. At the sentencing hearing the next day, the
district court explained that it was considering an upward
departure because of misleading statements in the pre-sentence
report and other instances of obstruction of justice subsequent to
conviction, including Clements' actions in transferring certain
Because of this additional reasonableness requirement, "the judge
must offer reasons explaining why the departure is justified in terms of the
policies underlying the sentencing guidelines." United States v. Mejia-Orosco,
867 F.2d 216, 221 (5th Cir. 1989).
-20-
stock certificates into a trust for his children despite the IRS
lien on his property. With Clements' consent, the sentencing
hearing was then rescheduled for six days later. Having reviewed
the record, we find that the district court provided Clements with
reasonable notice of its intent to upward depart and the grounds
for such departure.
B
The district court based its upward departure on a finding of
at least four instances of obstruction of justice. In calculating
the appropriate departure, the district court took guidance from
§ 3C1.1, which states, "If the defendant willfully obstructed or
impeded, or attempted to obstruct or impede, the administration of
justice during the investigation, prosecution, or sentencing of the
instant offense, increase the offense level by 2 levels." U.S.S.G.
§ 3C1.1. An example of the type of conduct to which this
enhancement applies is "providing materially false information to
a probation officer in respect to a presentence or other
investigation for the court." U.S.S.G. § 3C1.1, comment. (n.3(h)).
The district court also found relevant the following example of
applicable conduct: "destroying or concealing or directing or
procuring another person to destroy or conceal evidence that is
material to an official investigation or judicial proceedings . .
. or attempting to do so." U.S.S.G. § 3C1.1, comment. (n.3(d)).19
The commentary to the Guidelines states, "'Material' evidence, fact,
statement, or information, as used in this section, means evidence, fact,
statement, or information that, if believed, would tend to influence or affect
the issue under determination." U.S.S.G. § 3C1.1, comment. (n.5).
-21-
The district court imposed an upward departure for only two of the
violations, for a total departure of four levels.
In determining whether the upward departure was based on
acceptable reasons, we review the district court's factual findings
at sentencing for clear error. See United States v. Edwards, 65
F.3d 430, 432 (5th Cir. 1995). At sentencing, a district court
"may consider relevant information without regard to its
admissibility under the rules of evidence applicable at trial,
provided that the information has sufficient indicia of reliability
to support its probable accuracy." U.S.S.G. § 6A1.3.; United
States v. Bermea, 30 F.3d 1539, 1576 (5th Cir. 1994), cert. denied,
___ U.S. ___, 115 S. Ct. 1825, 131 L. Ed. 2d 746 (1995).
First, the district court found that Clements had reported a
$212,500 unsecured debt to his probation officer when in fact it
was secured by his stock in Capitol Lake Properties, Inc. The
district court implicitly concluded that this intentional
misrepresentation was material to the probation officer's efforts
to calculate Clements' ability to pay restitution. More
significantly, the district court found that Clements had misled
the IRS when he sold his stock in Capitol Lake Properties, Inc.,
valued at $292,000, to a trust in the name of his two children and
payable in installments over a ten-year period. When asked a day
before entering into this transaction what his plans were for the
stock, Clements had replied that his only options were to sell the
stock back to the corporation or its shareholders. Clements had
been specifically instructed by another IRS agent to call her
-22-
before finalizing any sale of the stock. There was testimony at
the sentencing hearing that the IRS would not have approved of the
sale in light of the payment period over ten years. Clements also
failed to inform the IRS that the stock had been moved from the
bank where, the day before, he had represented it was located.
Having reviewed the record, we find that the district court was not
clearly erroneous in concluding that Clements willfully misled the
IRS regarding the sale of his stock which he knew was subject to an
IRS lien and about which the IRS had made repeated specific
inquiries.20 Accordingly, we find that the district court based its
upward departure on acceptable reasons. See United States v.
George, 911 F.2d 1028, 1033-34 (5th Cir. 1990) (affirming upward
departure based on obstruction of justice following conviction).
Clements argues that even assuming that an upward departure
was appropriate, the four level enhancement imposed was
unreasonable. "The reasonableness determination looks to the
amount and extent of the departure in light of the grounds for
departing." Williams v. United States, 503 U.S. 193, ___, 112 S.
Ct. 1112, 1121, 117 L. Ed. 2d 341 (1992). The presentence report,
which the district court adopted, calculated Clements' offense
level as eighteen, with a range of twenty-seven to thirty-three
months imprisonment. Because of Clements' obstruction of justice,
the district court adjusted the offense level upward to twenty-two,
Clements argues that his conduct cannot be considered obstruction of
justice because it was undertaken with the advice of counsel. Even if Clements'
counsel advised him to enter into the transaction itself, this advice cannot
protect him from the consequences of his decision to mislead the IRS and hide the
sale of the stock until after the transaction was final.
-23-
with a range of forty-one to fifty-one months imprisonment. The
district court then imposed the maximum sentence under this range,
fifty-one months.21 Clements' secret sale of his stock in Capitol
Lake Properties, Inc., was essentially the same type of conduct for
which he had been convicted. We find that the upward departure
imposed by the district court was not unreasonable. See George,
911 F.2d at 1030-31 (affirming upward departure to fifty months
sentence from Guidelines range of fifteen to twenty months because
of obstruction of justice following conviction); United States v.
Sanchez, 893 F.2d 679, 681-82 (5th Cir. 1990) (affirming upward
departure to thirty-six months sentence from Guidelines range of
eighteen to twenty-four months because of continued criminal
conduct while released on bond).
VI
For the foregoing reasons, we AFFIRM both the conviction and
sentence.
The maximum statutory term of imprisonment for each count is five
years. 26 U.S.C. § 7201; 18 U.S.C. § 1001.
-24-