United States v. Kurt Scheuneman , 712 F.3d 372 ( 2013 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 11-1554
U NITED S TATES OF A MERICA,
Plaintiff-Appellee,
v.
K URT S CHEUNEMAN,
Defendant-Appellant.
Appeal from the United States District Court
for the Central District of Illinois.
No. 2:09-cr-20061—Michael P. McCuskey, Judge.
A RGUED S EPTEMBER 26, 2012—D ECIDED A PRIL 5, 2013
Before E ASTERBROOK, Chief Judge, and W OOD and
W ILLIAMS, Circuit Judges.
W ILLIAMS, Circuit Judge. After years of disregarding
his obligation to pay income tax, Kurt Scheuneman
was convicted of three counts of tax evasion in viola-
tion of 26 U.S.C. § 7201 and one count of interference
with the Internal Revenue laws in violation of 26 U.S.C.
§ 7212(a). On appeal, Scheuneman argues that a clerical
error in the indictment’s description of the relevant
2 No. 11-1554
date for two of his tax evasion offenses rendered those
counts legally insufficient. He also contends that the
government constructively amended the indictment by
introducing proof regarding dates other than those de-
scribed in the indictment. Aside from his indictment-
related challenges, Scheuneman maintains that the dis-
trict court improperly ordered restitution for losses that
are unrelated to his tax evasion offenses. Scheuneman’s
indictment, while slightly confusing, was legally sufficient
and the government’s proof at trial conformed to the
charges in all material respects. Although the losses
Scheuneman challenges were not caused by the conduct
underlying his tax evasion offenses, they are properly
included as restitution because they were attributable
to his interference with the Internal Revenue laws.
For these reasons, we affirm.
I. BACKGROUND
After years of dutifully paying taxes on wages he re-
ceived for his work as a carpenter, Kurt Scheuneman
suddenly stopped paying federal income tax in 1998. In
1999, in an effort to prevent the IRS from discov-
ering his income, Scheuneman purchased a sham tax
avoidance system from an Arizona company, Innova-
tive Financial Consultants. With the help of these so-
called specialists, Scheuneman formed a limited liability
corporation, Larch Management LLC, and two illegitimate
trusts, Soned Group and Jokur Enterprise. Scheuneman
retained complete control of Larch Management, Soned
Group, and Jokur Enterprise.
No. 11-1554 3
Using these entities, Scheuneman reorganized his
construction business to shield his income from the
United States government. Scheuneman began operating
his business as Larch Management LLC, opened a bank
account in its name, and filed tax returns on the com-
pany’s behalf. In his submissions to the IRS, Scheuneman
represented that all of Larch Management’s income
was distributed to the company’s only partners, two
“foreign trusts” named Soned Group and Jokur Enter-
prise. In reality, however, Scheuneman funneled most
of Larch Management’s profits to himself. From 2001
through 2005, Scheuneman wrote over $300,000 in
checks made out to “cash” from the Larch Manage-
ment account. Although Scheuneman designated many
of these transactions as income distributions to Larch
Management’s partners, it was Scheuneman who en-
dorsed all of these checks. In the end, Scheuneman
used his sham trusts to avoid paying any federal income
tax between 2000 and 2005.
The IRS eventually became suspicious of Scheuneman
after investigating Innovative Financial Consultants and
identifying Scheuneman as one of its customers. In
January 2004, the IRS sent Scheuneman a letter infor-
ming him that he may have become involved in an abu-
sive tax scheme. The IRS instructed Scheuneman to file
an accurate 2003 tax return and to refrain from using
any trust arrangement designed to understate his taxable
income. The letter also notified Scheuneman that the
IRS would audit his 2003 return and warned him that
failure to file an accurate return would result in “the
application of accuracy-related or other appropriate
4 No. 11-1554
penalties.” In his response to the IRS, Scheuneman stated
that he was “not involved in this type of promotion, and
[he] now knows what to look for should [he] ever
be confronted by this type of abusive tax avoidance
transaction.”
After lying to the IRS about his tax avoidance scheme,
Scheuneman only made matters worse for himself.
Despite receiving a written warning from the IRS,
Scheuneman failed to file his federal income tax return
for 2003. He also failed to file his 2004 and 2005 tax
returns and refused to cooperate with an IRS audit of
his finances. From 2003 to 2007, Scheuneman repeatedly
sent frivolous correspondence to IRS personnel. In one
such letter, Scheuneman requested verification that the
IRS was a lawful agency of the United States government.
Eventually, the IRS opened a criminal investigation
into Scheuneman’s activities. In late 2005, IRS agents
traveled to Scheuneman’s home, informed him that he
was the subject of a criminal investigation, and served
him with a summons to appear at a meeting with IRS
agents and to produce certain financial records. Even
when faced with criminal prosecution, Scheuneman con-
tinued to frustrate the IRS in its enforcement efforts. He
disregarded the lawfully issued summons by failing to
appear at the scheduled time and refusing to produce
the requested records.
In August 2009, a grand jury returned an indictment
against Scheuneman charging him with three counts of
tax evasion in violation of 26 U.S.C. § 7201 and one count
of interference with the administration of the Internal
No. 11-1554 5
Revenue laws in violation of 26 U.S.C. § 7212(a). Count 1
of the indictment read as follows:
From approximately early 2002 to on or about
April 15, 2003, in the Central District of Illinois,
the defendant, KURT E. SCHEUNEMAN, did
unlawfully and willfully evade and defeat, and
attempt to evade and defeat, his personal income
tax due and owing to the United States of America
for the 2003 calendar year, on taxable income
of approximately $48,572, none of which income
was declared on an income tax return to the IRS
for the 2003 tax year. All in violation of Title 26,
United States Code, Section 7201.
Count 2 contained a similar formulation of the tax evasion
charge against Scheuneman:
From approximately early 2003 to on or about
April 15, 2004, in the Central District of Illinois,
the defendant, KURT E. SCHEUNEMAN, did
unlawfully and willfully evade and defeat, and
attempt to evade and defeat, his personal income
tax due and owing to the United States of America
for the 2004 calendar year, on taxable income of
approximately $49,797, none of which income
was declared on an income tax return to the IRS
for the 2004 tax year. All in violation of Title 26,
United States Code, Section 7201.
In Count 3, Scheuneman was charged with tax evasion
for his failure to pay personal income tax for the 2005
calendar year. Finally, Count 4 of the indictment stated:
6 No. 11-1554
From about May 2004 or before, and continuing to
at least October 2007, in the Central District of
Illinois, and elsewhere, the defendant, KURT E.
SCHEUNEMAN, did corruptly obstruct and im-
pede and endeavor to obstruct and impede the
due administration of the Internal Revenue laws.
Scheuneman did not file a pre-trial motion alleging a
defect in the indictment nor did he raise such an objec-
tion with the district court either during trial or in post-
trial proceedings.
Scheuneman’s trial began in November 2010. In pre-
liminary instructions to the jurors, the district court
stated that the government, in order to secure Scheune-
man’s conviction for the charges listed in Counts 1
through 3, had to prove that “on April 15th of the year
following the tax years 2003, 2004, and 2005, federal
income tax was due and owing by the defendant.” The
district court also told jurors:
If you find beyond a reasonable doubt that the
defendant had a tax liability for a particular year,
then I instruct you as a matter of law that the tax
was due and owing on April 15 or another date set
by law or legal extension of the following year.
These instructions were also delivered to the jury before
closing arguments.
At trial, the government introduced evidence that
Scheuneman, despite receiving a written warning from
the IRS before the 2003 tax return filing deadline, did
not file federal income tax returns for the years 2003,
No. 11-1554 7
2004, and 2005. Prosecutors also supplied the jury with
ample proof that Scheuneman obstructed the IRS in its
enforcement of the Internal Revenue laws from 2000-2005.
Among other evidence, the government presented testi-
mony and documents regarding Scheuneman’s purchase
of a sham trust tax avoidance system from Innovative
Financial Consultants in 1999 and his use of these illegiti-
mate trusts to understate his income from 2000-2005.
Scheuneman filed Federal Rule of Criminal Proce-
dure 29(a) motions for acquittal at the close of the gov-
ernment’s evidence and at the close of all evidence. Both
motions were presented without argument and were
denied by the district court. On November 18, 2010,
following a four-day jury trial, Scheuneman was con-
victed of all counts in the indictment. On November 22,
2010, Scheuneman filed a motion for a new trial based
on insufficiency of the evidence, which the district
court denied.
The United States Probation Office prepared Scheune-
man’s presentence investigation report (“PSR”) in an-
ticipation of his sentencing. The report contained
detailed calculations of the tax losses resulting from
Scheuneman’s conduct. Specifically, the Probation Office
calculated a tax loss of $48,535 resulting from Scheune-
man’s tax evasion convictions for tax years 2003, 2004,
and 2005. The Probation Office calculated an additional
tax loss of $35,847 for tax years 2000, 2001, and
2002 and designated these losses as relevant conduct
for the court to take into account for purposes of deter-
mining Scheuneman’s guideline range.
8 No. 11-1554
On March 3, 2011, the district court adopted the
findings of the PSR and sentenced Scheuneman to a 36-
month imprisonment term and a 3-year term of super-
vised release. As a condition of supervised release, the
district court also required Scheuneman to pay “restitu-
tion to the IRS in the amount of $84,382, which
represents the tax loss for the years 2000 through 2005.”
Scheuneman now appeals his convictions and sentence.
II. ANALYSIS
A. No Error Resulted from Clerical Mistakes in the
Indictment
Scheuneman presents two challenges based on certain
prefatory language in Counts 1 and 2 of the indictment
describing the dates in which he committed his income
tax offenses. In his first challenge, Scheuneman contends
that these counts were legally insufficient because they
did not state all of the elements of the charged offenses.
Scheuneman also argues that the government construc-
tively amended the indictment at trial by introducing
evidence related to a time period other than that laid
out in Counts 1 and 2.
1. Indictment Was Legally Sufficient
Scheuneman argues that Counts 1 and 2 of the indict-
ment were legally insufficient. Scheuneman did not
raise this objection with the district court, so the indict-
ment “is immune from attack unless it is so obviously
No. 11-1554 9
defective as not to charge the offense by any reasonable
construction.” United States v. Franklin, 547 F.3d 726, 730
(7th Cir. 2008). As a general matter, “tardily challenged
indictments should be construed in favor of validity.”
United States v. Harvey, 484 F.3d 453, 456 (7th Cir. 2007).
“The Fifth Amendment guarantee of the right to indict-
ment by a grand jury, its protection against double jeop-
ardy, and the Sixth Amendment guarantee that a defen-
dant be informed of the nature of the charges against
him establish the minimum requirements for an indict-
ment.” United States v. Fassnacht, 332 F.3d 440, 444 (7th
Cir. 2003). An indictment satisfies these minimum re-
quirements “if it (1) contains the elements of the offense
charged; (2) sufficiently apprises the accused of what he
must be prepared to meet; and (3) enables the accused to
plead a judgment under the indictment as a bar to any
subsequent prosecution for the same offense.” United
States v. McComb, 744 F.2d 555, 562 (7th Cir. 1984).
Scheuneman maintains that Counts 1 and 2 were con-
stitutionally deficient because they did not contain al-
legations necessary to state the elements of tax evasion.
To establish Scheuneman’s liability for tax evasion, the
government needed to prove: “(1) a tax deficiency
existed, (2) the defendant acted willfully, and (3) the
defendant took an affirmative step to elude or defeat
the payment of taxes.” United States v. Collins, 685 F.3d
651, 656 (7th Cir. 2012). In presenting his argument,
Scheuneman relies on two discrepancies in the allega-
tions related to the time period in which he evaded
his income tax obligations. Count 1 accurately stated
that Scheuneman committed tax evasion “for the 2003
10 No. 11-1554
calendar year, on taxable income of approximately
$48,572, none of which income was declared on an
income tax return to the IRS for the 2003 tax year.” How-
ever, the introductory language of Count 1 incorrectly
described the period of the offense as “[f]rom approxi-
mately early 2002 to on or about April 15, 2003” when
it should have said early 2003 to on or about April 15,
2004. Similarly, Count 2 alleged that Scheuneman
evaded his taxes “for the 2004 calendar year, on taxable
income of approximately $49,797, none of which income
was declared on an income tax return to the IRS for
the 2004 tax year.” Once again, however, Count 2 errone-
ously identified the relevant time period for the offense
as “[f]rom approximately early 2003 to on or about
April 15, 2004.”
Despite the potential confusion caused by the errone-
ous dates in the introduction, Counts 1 and 2 still state
all of the elements of tax evasion. In Count 1, the gov-
ernment alleged: (1) Scheuneman owed and did not pay
personal income tax on $48,572 of taxable income for
calendar year 2003; (2) Scheuneman acted willfully; and
(3) Scheuneman failed to declare any of his income on
his tax return to the IRS for the 2003 tax year. Similarly,
in Count 2, the government alleged: (1) Scheuneman
owed and did not pay personal income tax on $49,797
of taxable income for calendar year 2004; (2) Scheune-
man acted willfully; and (3) Scheuneman failed to
declare any of his income on his 2004 tax return. Each
charge alleged the necessary elements of tax evasion. Cf.
United States v. Eley, 314 F.2d 127, 129 (7th Cir. 1963)
(finding no error resulted from variance between indict-
No. 11-1554 11
ment and bill of particulars regarding amount of tax
deficiency).
Although Scheuneman maintains only that Counts 1
and 2 failed to state the necessary elements of tax eva-
sion, we note that they also satisfy the remaining criteria
for a legally sufficient indictment. Counts 1 and 2 in-
formed Scheuneman of what he had to be prepared to
meet by expressly identifying the statute Scheuneman
was accused of violating, the years associated with the
tax obligations Scheuneman evaded, the amount of
taxable income Scheuneman earned in each of those
years, and the affirmative act of evasion he committed
by failing to state his income on his tax return for the
relevant tax year. These allegations were sufficient to
apprise Scheuneman of the nature of the charges against
him. See United States v. Sloan, 939 F.2d 499, 501-02
(7th Cir. 1991). Furthermore, these allegations presented
enough detail to allow Scheuneman to plead double
jeopardy to avoid future prosecution based on the
same conduct alleged in Counts 1 and 2. See id. at
502 (finding that defendant could avoid subsequent
prosecution for conduct listed in tax evasion counts
when “the indictment sufficiently designated the tax,
the tax year, and the specific . . . forms” that were the
instrument of evasion).
Despite the erroneous dates listed in the introductory
language of the indictment, we find that the allegations
of Counts 1 and 2 were legally sufficient.
12 No. 11-1554
2. Date Discrepancy Between Indictment and Proof
Did Not Constitute Plain Error
Aside from his sufficiency challenge, Scheuneman also
claims that the government constructively amended
the indictment by arguing and proving at trial that he
evaded his income tax obligations for 2003 and 2004
even though the prefatory language of the Counts 1 and 2
described dates in 2002 and 2003. Although Scheuneman
couches his argument as a constructive indictment, his
issue is better understood as a variance, an event that
arises “when the facts proved at trial differ from those
alleged in the indictment.” United States v. Longstreet,
567 F.3d 911, 918 (7th Cir. 2009). Because Scheuneman
did not raise his variance claim in the district court, we
review for plain error only. United States v. Haynes, 582
F.3d 686, 698 (7th Cir. 2009).
As an initial matter, Scheuneman has not demon-
strated a material variance between the relevant dates
associated with the charges in the indictment and the
government’s proof at trial. Counts 1 and 2 accurately
identified 2003 and 2004 as the years in which
Scheuneman incurred tax obligations, specified the
amount of his taxable income in each of these years, and
alleged that he evaded the tax by failing to report his
income on his tax return for 2003 and 2004. At trial, the
government presented its case in a manner entirely con-
sistent with these critical temporal allegations and pre-
sented an overwhelming volume of evidence to estab-
lish his guilt on these bases. These consistencies prevent
Scheuneman from succeeding on his variance claim.
No. 11-1554 13
But even if a variance occurred, it was harmless
and certainly did not constitute plain error. In general, a
variance will not constitute reversible error unless it
“change[s] an essential or material element of the charge
so as to cause prejudice to the defendant.” United States
v. Cina, 699 F.2d 853, 857 (7th Cir. 1983) (internal quota-
tion marks omitted). An essential element of a crime “is
one whose specification with precise accuracy is neces-
sary to establish the very illegality of the behavior and
thus the court’s jurisdiction.” United States v. Auerbach,
913 F.2d 407, 411 (7th Cir. 1990). No such precision is
required to establish a violation of the tax evasion
statute; the government need not necessarily prove that
a certain underlying act took place on a specific date to
secure a conviction for tax evasion. See Collins, 685 F.3d
at 656 (reciting elements of tax evasion). Where, as here,
a specific date does not form a crucial component of
the offense, a variance in the dates charged in the in-
dictment and those proved at trial will generally be
harmless if the government “prove[s] that the offense
was committed on any day before the indictment and
within the statute of limitations.” United States v.
Leibowitz, 857 F.2d 373, 378 (7th Cir. 1988). The govern-
ment’s overwhelming evidence that Scheuneman
evaded his income tax obligations by failing to report his
income on his tax returns for the 2003 and 2004 tax
years precludes us from finding that a plain error occurred.
The lack of prejudice to Scheuneman resulting from
the clerical error only reinforces our conclusion. Al-
though Scheuneman contends that the date discrepancy
prevents us from knowing the basis for the jury’s con-
14 No. 11-1554
viction, the arguments, evidence, and jury instructions
presented at trial demonstrate otherwise. In presenting
its case, the government steadfastly maintained that
Scheuneman should be found guilty of Counts 1 and 2
for evading his tax obligations for 2003 and 2004. This
proposition was further reinforced by the district court’s
preliminary and final instructions to the jury. These
instructions clearly stated that the jurors needed to find
that Scheuneman had a tax deficiency outstanding on
April 15 of the year following 2003 and 2004 in order
to convict him on Counts 1 and 2. Taken together, the
consistency of the government’s case and the clarity of
the court’s instructions demonstrate that Scheuneman
suffered no prejudice. We also note that Scheuneman
did not quarrel with the time frame for the govern-
ment’s evidence of tax evasion at trial. No plain error
occurred.
B. No Plain Error in Imposing Restitution
Scheuneman contends that the district court improp-
erly ordered him to pay restitution for losses sustained
by the United States that were unrelated to his offense
conduct. Because Scheuneman failed to object to the
restitution obligation at sentencing, we review for plain
error only. See Fed. R. Crim. P. 52(b); United States v. Noel,
581 F.3d 490, 501 (7th Cir. 2009). To prevail under plain
error review, Scheuneman must demonstrate that (1) the
district court erred in imposing the restitution obliga-
tion; (2) the error was obvious or clear; (3) the error af-
fected Scheuneman’s substantial rights; and (4) the error
No. 11-1554 15
“seriously affected the fairness, integrity, or public rep-
utation of the judicial proceedings.” United States v.
Locke, 643 F.3d 235, 246 (7th Cir. 2011).
In challenging the restitution condition, Scheuneman
argues that the district court improperly required him
to pay restitution for tax losses associated with his “rele-
vant conduct” that were unrelated to the conduct under-
lying his convictions. A district court has “the authority
to impose restitution for tax offenses as a condition
of supervised release.” United States v. Hassebrock, 663
F.3d 906, 923-24 (7th Cir. 2011). As with other forms
of restitution orders, the district court can only impose a
restitution condition for certain categories of losses:
“(1) losses caused by the specific conduct that is the
basis of the offense[s] of conviction; (2) losses caused
by conduct committed during an offense that involves
as an element a scheme, conspiracy, or pattern; and
(3) restitution agreed to in a plea agreement.” United States
v. Frith, 461 F.3d 914, 919-20 (7th Cir. 2006) (internal
quotation marks and citations omitted). Scheuneman
maintains that the district court had no authority to
impose an additional $35,847 in restitution for unpaid
taxes from 2000, 2001, and 2002 because these losses
were “relevant conduct” and had no connection to his
tax evasion convictions.
Despite being labeled as resulting from “relevant con-
duct,” the 2000-2002 tax losses were properly included
within Scheuneman’s restitution obligation because
they were directly attributable to his conviction on
Count 4 for interference with administration of the
16 No. 11-1554
Internal Revenue laws in violation of 26 U.S.C. § 7212(a).
Count 4 of the indictment charged Scheuneman with
violating the “omnibus clause” of section 7212(a), which
prohibits all manner of “activities which may obstruct
or impede the administration of the code.” United States
v. Pansier, 576 F.3d 726, 734 (7th Cir. 2009). Among the
conduct prohibited under this statute: any effort to
“imped[e] the collection of one’s taxes, the taxes of
another, or the auditing of one’s or another’s tax re-
cords.” United States v. Reeves, 752 F.2d 995, 998 (5th Cir.
1985).
In this case, the government established a direct nexus
between Scheuneman’s years of obstruction and the
losses it sustained as a result of Scheuneman’s failure to
pay taxes from 2000-2002. In the indictment, the gov-
ernment charged Scheuneman with interfering with
the due administration of the tax code “from about
May 2004 or before, and continuing to at least October
2007” (emphasis added). Throughout trial, the govern-
ment maintained that Scheuneman knowingly inter-
fered with tax code enforcement for his own benefit
by purchasing the sham trust system in 1999, reorgan-
izing his construction business using these illegitimate
trusts to hide his income from the IRS during 2000-
2005, and misrepresenting the nature of his business in
tax filings to deceive the United States as to his true
tax liability. The government presented an over-
whelming amount of evidence establishing Scheune-
man’s obstruction during the period from 2000 to 2002
and showing that his conduct prevented the IRS from
collecting the income tax from him during these years.
No. 11-1554 17
Under the circumstances, the imposition of restitution
for the United States’s tax losses from 2000-2002 was not
erroneous in light of the conviction on Count 4. In any
event, Scheuneman has not established that a plain
error occurred.
III. CONCLUSION
For the reasons stated above, we A FFIRM Scheuneman’s
conviction and sentence.
4-5-13