United States v. David Clum, Jr.

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
Nos. 13-10602, 13-10606, 13-10717, 13-10719
________________________
D.C. Docket Nos. 0:11-cr-60273-WPD-2, 0:11-cr-60273-WPD-3,
0:11-cr-60273-WPD-6, 0:11-cr-60273-WPD-4
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
DAVID CLUM, JR.,
CHRISTOPHER MARRERO,
DALE PETERS,
MICHAEL D. BEITER, JR.,
Defendants-Appellants.
________________________
Appeals from the United States District Court
for the Southern District of Florida
________________________
(April 13, 2015)
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Before MARTIN and FAY, Circuit Judges, and GOLDBERG, * Judge.
PER CURIAM:
David Clum, Jr., Christopher Marrero, Dale Peters, and Michael D. Beiter,
Jr., appeal their convictions and sentences for their involvement in an extensive
tax-fraud conspiracy with a number of defendants. We affirm.
I. BACKGROUND
Peters and Clum met at a tax-protestor seminar on the use of IRS Form
1099-OID to obtain refunds from the government. Some tax protesters believe that
the government maintains secret trust accounts for citizens, which can be accessed
through filing tax forms such as Form 1099-OID. That tax form is an income-
reporting document, similar to a W-2, which is normally used for debt instruments
that are sold at an “original issue discount.” Because the instrument is purchased
for less than it will be worth at maturity, the amount of OID is considered taxable
income. In contrast, tax protestors use Form 1099-OID to receive large refunds by
treating all of a taxpayer’s expenses and personal debt obligations as “interest
income” (“OID Theory”). Because the form also indicates that taxes were
withheld on the “income” amounts, a refund is due to the taxpayer. After the
seminar, Peters and Clum discussed potential business opportunities using the OID
Theory.
*
The Honorable Richard W. Goldberg, United States Court of International Trade Judge, sitting
by designation.
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In early December 2008, Clum appeared on a radio show hosted by Beiter to
discuss the OID Theory. The following week, Clum appeared on another episode
of the same radio show and invited listeners to call in. Clum and Beiter became
acquainted with codefendant Penny Jones, when she called the radio show,
introduced herself as a tax professional, and expressed interest in the OID Theory.
That same month, Beiter, Clum, Peters, and Jones incorporated PMDD Services
(“PMDD”). Through this company, the defendants perpetuated a tax-fraud scheme
by creating and sometimes filing fraudulent 1099-OID forms with the Internal
Revenue Service (“IRS”) on behalf of recruited clients. The forms reported
fabricated income and tax withholding and allowed the defendants to claim false
tax refunds.
To recruit clients for their scheme, the defendants hosted two seminars: one
in December 2008, where they met codefendant Marrero, and a second in January
2009. About twenty people attended each seminar to learn about the OID Theory
and the services PMDD offered. The invitees were promised large payments using
1099-OID forms and were assured the process was legal.
The defendants successfully recruited a number of clients through the
seminars. Through PMDD’s 1099-OID process, the clients were told the IRS
would refund their expenses from the previous three years, including any mortgage
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or automobile-loan payments. The clients again were assured incorrectly the
process was legal.
Before filing forms on behalf of the recruited clients, Clum volunteered as a
test subject and submitted frivolous 1099-OID forms in his name. After the test
run and throughout the scheme, Clum, Beiter, and Peters revised their procedures
to streamline their scam.
Each defendant also participated in other ways. Clum and Beiter recruited
clients. Beiter also managed PMDD’s bank accounts. Peters developed the
company’s computer software, designed e-mails sent to clients, and created the
company’s client worksheet through which they collected client information. He
also signed documents as an authorized agent of PMDD, provided technical
assistance to clients, assigned client identification numbers, and processed client
information needed by Jones to produce the tax forms. Marrero, though not a
partner in PMDD, recruited clients through a referral agreement.
The procedures developed by Clum, Beiter, and Peters required each client
to sign a nonsolicitation agreement, a nondisclosure agreement, a power of
attorney authorizing PMDD to speak to the IRS on the client’s behalf, and a
services agreement, promising to pay PMDD’s $750 preparation fee, plus a ten-
percent commission of any tax refund the client recovered. The defendants also
required each client to complete a fourteen-page information worksheet, listing
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mortgages, loans, lines of credit, and credit cards. After collecting client
information, Jones, an enrolled tax preparer with the IRS, electronically filed some
of the false 1099-OID forms. Because of the large number of forms the IRS
processes each year, some of the false 1099-OID forms went unnoticed and
refunds were paid.
At various points throughout the scheme, each defendant either was
contacted directly by the IRS or was forwarded letters by clients, whom the IRS
had contacted. Despite warning letters regarding the falsity of their 1099-OID
filings, the defendants were undeterred. They continued perpetuating the scheme
and prevented clients from defecting by assuring them the IRS letters were empty
threats to keep citizens from seeking their legal refunds. They also instructed
clients how to avoid the IRS’s collection efforts of the paid refunds.
The forms Jones submitted on behalf of over 400 clients requested
$166,676,471 in tax refunds. Twenty-four of the submitted forms resulted in
payments totaling $7,151,182. When a client received a refund, PMDD collected a
ten-percent commission. If the refund was for a client that Marrero recruited,
PMDD paid him a small portion of the ten-percent commission fee. Marrero also
collected $250 from each of his recruited clients directly.
The IRS began investigating PMDD in 2009. Because PMDD was under
scrutiny, the defendants incorporated a successor company, Forever Grace, to
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continue the scheme. Despite the name change, Forever Grace’s operations and
the defendants’ roles within Forever Grace were the same as with PMDD. The
defendants also changed their e-mail addresses to remove any reference to OID
because they thought it would draw attention. Instead, the defendants used email
addresses that referenced PMDD to give clients comfort that Forever Grace was
still the same operation.
Clum, Beiter, and Peters profited approximately $89,600, $97,400, and
$38,600, respectively. Through his recruiting arrangement with PMDD, Marrero
profited approximately $17,191 from the scheme. Marrero also profited by
submitting fraudulent tax forms in his name. In May 2010, Marrero prepared tax
forms for 2007, 2008, and 2009 and reported fabricated gambling winnings. He
mailed the three forms to three different IRS service centers in Missouri, Texas,
and California. From these three forms, Marrero requested a tax refund totaling
$279,635. Marrero received a fraudulent refund of $90,369, which he quickly
removed from his bank account through a series of large cash withdrawals.
On May 17, 2012, Clum, Beiter, Peters, and Marrero were charged in a
superseding indictment with conspiracy to defraud the United States by obtaining
and aiding the payment and allowance of false, fictitious, and fraudulent claims, in
violation of 18 U.S.C. § 286 (Count One). They also faced multiple individual
charges for making false, fictitious or fraudulent claims to an agency of the United
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States, in violation of 18 U.S.C. § 287 (Counts Two–Forty-Two). 1 Clum, Beiter,
Peters, and Marrero were tried by a jury; each was convicted and sentenced to
imprisonment. 2 They raise various trial and sentencing issues on appeal.
II. DISCUSSION
A. Trial Issues 3
1
The indictment also charged Jones and one other coconspirator, both of whom pled guilty prior
to trial and are not parties in this appeal.
2
Beiter was sentenced to 120 months of imprisonment for Count One, three consecutive 60-
month imprisonment terms for Counts Two, Three, and Four, and a concurrent 60-month
imprisonment term for Counts Five through Forty-Two. Clum was sentenced to 120 months of
imprisonment for Count One, three consecutive 60-month imprisonment terms for Counts Two,
Three, and Four, a consecutive 53-month imprisonment term for Count Five, and a concurrent
60-month imprisonment term for Counts Six through Forty-Two. Peters was sentenced to 120
months of imprisonment for Count One and an imprisonment term of 24 months for each of
Counts Two through Thirty, Thirty-Two, and Forty-Two, to be served concurrently but
consecutive to the sentence for Count One. Marrero was sentenced to 120 months of
imprisonment for Count One and an imprisonment term of 60 months for each of Counts Five,
Fourteen, Eighteen, Forty-Three, Forty-Four, and Forty-Five, to be served concurrently but
consecutive to the sentence for Count One.
3
We address only the trial issues that warrant discussion. The following arguments raised by
defendants regarding trial issues are unavailing and do not merit further commentary because:
(1) PMDD and Forever Grace were part of the same conspiracy; (2) the decision of whether to
grant a severance lies within the district judge’s “sound and substantial discretion,” United States
v. Lopez, 649 F.3d 1222, 1235–36 (11th Cir. 2011); (3) Agent Lavoro’s grand-jury testimony did
not necessitate dismissal of the indictment because, even if Lavoro’s testimony was incorrect, the
defendants have failed to show “unfair or actual prejudice,” United States v. Garate-Vergara,
942 F.2d 1543, 1550 (11th Cir. 1991) (“Conviction beyond a reasonable doubt without the use of
the tainted testimony or alleged misconduct at trial makes it highly improbable that the grand
jury indictment was based on insufficient probable cause.”); (4) the voluminous discovery
provided to defendants did not violate their due process rights, United States v. Jordan, 316 F.3d
1215, 1253 (11th Cir. 2003); (5) the district judge did not abuse his discretion by denying Clum’s
motion for a bill of particulars, United States v. Colson, 662 F.2d 1389, 1391 (11th Cir. 1981);
and (6) the district judge did not abuse his discretion by admitting evidence of Peters’s attempts
to avoid detection and prosecution. “Rule 403 requires a court to ‘look at the evidence in a light
most favorable to its admission, maximizing its probative value and minimizing its undue
prejudicial impact.’” Lopez, 649 F.3d at 1247 (quoting United States v. Alfaro–Moncada, 607
F.3d 720, 734 (11th Cir. 2010)). [T]he balance to be struck is largely committed to the discretion
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1. Sufficiency of the Evidence
At the close of the government’s case and at the close of all evidence, the
defendants moved for judgments of acquittal. The district judge denied the
motions. On appeal, Clum, Peters, and Marrero argue the district judge should
have granted their motions, because the evidence was insufficient to show they
intended to violate the law.
“We review de novo the legal question of whether the record contains
sufficient evidence to support the guilty verdict.” United States v. Tinoco, 304
F.3d 1088, 1122 (11th Cir. 2002) (citing United States v. To, 144 F.3d 737, 743
(11th Cir. 1998)). We assess the evidence in the light most favorable to the
government and resolve “all reasonable inferences and credibility evaluations in
favor of the jury’s verdict.” Id. We leave the defendants’ convictions undisturbed
“‘unless no trier of fact could have found guilt beyond a reasonable doubt.’” Id.(quoting United States v. Calderon, 127 F.3d 1314, 1324 (11th Cir. 1997)). The
defendants were convicted for violating 18 U.S.C. §§ 286 and 287.
This court will sustain a conviction for conspiracy to submit false
claims to the United States [in violation of § 286], if the government
proved “the existence of an agreement to achieve an unlawful
objective, the defendant’s knowing and voluntary participation in the
conspiracy, and the commission of an overt act in furtherance of it.”
of the district court, which has far more experience in evidentiary matters and is better equipped
to decide them than an appellate court.” Id.
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United States v. Gupta, 463 F.3d 1182, 1194 (11th Cir. 2006) (footnote omitted)
(quoting United States v. Suba, 132 F.3d 662, 672 (11th Cir. 1998)).
“Conspiracy may be proven by circumstantial evidence and the extent of
participation in the conspiracy or extent of knowledge of details in the conspiracy
does not matter ‘if the proof shows the defendant knew the essential objective of
the conspiracy.’” Id. (quoting Suba, 132 F.3d at 672). We sustain a conviction for
making false claims in violation of § 287, if the government proved the defendant
knowingly made or presented a false, fictitious, or fraudulent claim to a department
of the United States with the specific intent to violate the law or with a
consciousness that what he was doing was wrong. United States v. Slocum, 708
F.2d 587, 596 (11th Cir. 1983).
The defendants challenge only the sufficiency of the evidence regarding
intent, because they maintain they held a sincere belief in the OID Theory.
Although a defendant’s good-faith belief in a tax theory lacks the requisite criminal
intent, whether the defendants held such a belief is a question for the factfinder.
See Cheek v. United States, 498 U.S. 192, 201–03, 111 S. Ct. 604, 610–11 (1991).
“In rebutting the government’s evidence ‘[i]t is not enough for a defendant to put
forth a reasonable hypothesis of innocence, because the issue is not whether a jury
reasonably could have acquitted but whether it reasonably could have found guilt
beyond a reasonable doubt.’” United States v. Jiminez, 564 F.3d 1280, 1285 (11th
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Cir. 2009) (alteration in original) (quoting United States v. Thompson, 473 F.3d
1137, 1142 (11th Cir. 2006)). The jury in this case reasonably could have found
the requisite intent.
The defendants rely primarily on their own testimony at trial to support their
argument on appeal. Clum, Peters, and Marrero all testified at trial they did not
intend to violate the law. “[W]hen a defendant chooses to testify, he runs the risk
that if disbelieved ‘the jury might conclude the opposite of his testimony is true.’”
United States v. Brown, 53 F.3d 312, 314 (11th Cir. 1995) (quoting Atkins v.
Singletary, 965 F.2d 952, 961 n.7 (11th Cir. 1992)). A jury may use disbelieved
testimony as substantive evidence of guilt. Id. Although the defendants, and other
witnesses who believed the defendants’ sincerity, testified consistently with their
hypotheses of innocence, the jury seeing their demeanor and making credibility
determinations was entitled to disbelieve them. See id. “[W]e assume that the jury
made all credibility choices in support of the verdict.” Jiminez, 564 F.3d at 1285
(citing Thompson, 473 F.3d at 1142). The jury’s credibility determinations in
combination with the other evidence of the scheme, including e-mails, clearly false
tax forms, and the defendants’ profit, presented sufficient evidence to enable the
jury to find the defendants guilty.
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2. First Amendment and Tax-Fraud Activities
Beiter challenges his conviction as violating his First Amendment rights. 4
He recognizes the judge instructed the jury on the First Amendment, but he
contends he merely counseled tax payers without inciting a violation of tax laws.
We review questions of constitutional law de novo. Loyd v. Ala. Dep’t of Corr.,
176 F.3d 1336, 1339 (11th Cir. 1999).
Generally, “‘the First Amendment means that government has no power to
restrict expression because of its message, its ideas, its subject matter, or its
content.’” United States v. Stevens, 559 U.S. 460, 468, 130 S. Ct. 1577, 1584
(2010) (quoting Ashcroft v. Am. Civil Liberties Union, 535 U.S. 564, 573, 122 S.
Ct. 1700, 1707 (2002)). Certain types of speech, however, may be restricted and
punished without raising a Constitutional problem. Id. at 469, 130 S. Ct. at 1585.
One such type of speech is speech that is integral to criminal conduct. 5 Giboney v.
Empire Storage & Ice Co., 336 U.S. 490, 498, 69 S. Ct. 684, 688–89 (1949).
4
Clum, Peters, and Marrero adopted Beiter’s argument challenging their convictions for
violating their First Amendment rights.
5
Beiter relies on United States v. Dahlstrom, 713 F.2d 1423 (9th Cir. 1983). Dahlstrom
addresses a different exception to First Amendment protection—speech that incites imminent
lawless action. Because the defendants were charged with conspiracy committed in part by
speech, the proper analysis is to determine whether that speech was integral to the conspiracy.
See United States v. Meredith, 685 F.3d 814, 820 (9th Cir. 2012). Even under the Dahlstrom
analysis, Beiter’s argument fails. The seminars held by the defendants did far more than
advocate the possibility of filing fraudulent forms. Instead, the defendants actively were
recruiting and signing clients to participate imminently in their scheme.
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Speech that could have First Amendment protection is not protected speech, if it is
part of “a single and integrated course of conduct,” which violates the law. Id.The evidence in this case shows the defendants’ words and acts were not
abstract discussions removed from the conspiracy to defraud the United States.
Instead, the defendants’ seminars were tools to facilitate their illegal tax scheme by
enticing clients, whom they then instructed and advised to claim fraudulent refunds
for taxes the clients never paid. The evidence shows the clients followed the
defendants’ instructions and submitted fraudulent tax forms through the
defendants’ company. Beiter’s claim of First Amendment protection is frivolous.
See United States v. Kelley, 769 F.2d 215, 217 (4th Cir. 1985) (“The claim of First
Amendment protection of his speech is frivolous. His was no abstract criticism of
income tax laws. His listeners were not urged to seek congressional action to
exempt wages from income taxation. Instead, they were urged to file false returns,
with every expectation that the advice would be heeded.”).
Moreover, Beiter’s argument ignores his role in the conspiracy. As
explained in Pinkerton v. United States, 328 U.S. 640, 647–48, 66 S. Ct 1180,
1184 (1946), a conspirator is liable for the acts of his coconspirators if those acts
are in furtherance of the conspiracy. There is substantial evidence to establish a
conspiracy among the defendants. Therefore, although Jones was the only
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defendant to file fraudulent forms, all of the defendants are liable for her
conspiratorial acts. See id.
3. Motions for Mistrial
Clum argues the district judge should have granted a mistrial, when (1) one
of PMDD’s clients characterized his conversations with Beiter as being
antigovernment, and (2) one of the former defendants testified Beiter and Clum
told her to flee the country to avoid prosecution.6 We find his arguments
concerning the challenged testimony unavailing. See United States v. Veteto, 701
F.2d 136, 140 (11th Cir. 1983) (finding a mistrial not warranted, where “prosecutor
did not seek or expect the answer given”); United States v. Hammond, 781 F.2d
1536, 1540 (11th Cir. 1986) (“Courts may consider evidence of attempts to
influence a witness as relevant in showing a consciousness of guilt.”).
Clum also assigns error to the government’s closing, when the prosecutor
argued:
[W]hen you look at some of the other documents, such as this one that
he was shown when he testified, he basically says, I’m not a U.S.
citizen. So when it suits his interest, when it helps him, he is willing
to wrap himself in the flag in these patriot movements. Well, in
reality, when he uses the term patriot it is anti-American and it is
simply a way to cheat people.
ROA at 2054.
6
Peters and Marrero adopted Clum’s argument challenging the denial of the motions for mistrial.
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“The decision of whether to grant a mistrial lies within the sound discretion
of a trial judge as he or she is in the best position to evaluate the prejudicial effect
of improper testimony.” United States v. Perez, 30 F.3d 1407, 1410 (11th Cir.
1994) (citing United States v. Holmes, 767 F.2d 820, 823 (11th Cir. 1985)). “We
will not reverse a district court’s refusal to grant a mistrial unless an abuse of
discretion has occurred.” Id. (citing United States v. Christopher, 923 F.2d 1545,
1554 (11th Cir. 1991)). “[T]here is no prohibition on ‘colorful and perhaps
flamboyant’ remarks if they relate to the evidence adduced at trial.” United States
v. Bailey, 123 F.3d 1381, 1400 (11th Cir. 1997) (quoting United States v. Jacoby,
955 F.2d 1527, 1541 (11th Cir. 1992)).
The judge found the prosecutor’s remarks to be fair comments on the
evidence that did not vitiate Clum’s right to a fair trial. “We give considerable
weight to the district court’s assessment of the prejudicial effect of the prosecutor’s
remarks and conduct.” United States v. Herring, 955 F.2d 703, 710 (11th Cir.
1992). We agree with the district judge. Testimony established a link between tax
protesters referring to themselves as patriots and sovereigns and their beliefs they
are not bound by laws other Americans follow. Since the evidence supported the
prosecutor’s statement, there was no error.
Clum also argues that the accumulation of errors during the trial mandates
reversal of his convictions. We disagree. Clum has failed to show a single error,
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much less the accumulation of many errors. Therefore, his argument under the
cumulative-error doctrine fails.
B. Sentencing Issues 7
Clum and Marrero challenge the two-offense-level points they received for
sophisticated means. “A district court’s finding that sophisticated means were
used is a finding of fact reviewed for clear error.” United States v. Barrington, 648
F.3d 1178, 1199 (11th Cir. 2011) (citing United States v. Barakat, 130 F.3d 1448,
1456–57 (11th Cir. 1997)).
The Guidelines provide for a two-level enhancement for offenses involving
“sophisticated means.” U.S.S.G. §§ 2B1.1(b)(10), 2T1.4(b)(2). “‘[S]ophisticated
means’ means especially complex or especially intricate offense conduct pertaining
7
We address only the issues that warrant discussion. The following arguments raised by
defendants regarding sentencing issues are unavailing and do not merit further commentary,
because the judge (1) properly calculated the amount of tax loss, U.S.S.G. 2T1.1(c), and (2) did
not err in not reducing Peters’s sentence based on minor or minimal role, see generally United
States v. Rodriguez De Varon, 175 F.3d 930 (11th Cir. 1999); (3) the judge did not err in
sentencing Clum as the leader/organizer of the conspiracy; (4) the judge did not err in not
reducing Clum’s sentence based on acceptance of responsibility, see United States v. Gonzalez,
70 F.3d 1236, 1239 (11th Cir. 1995) (describing examples of rare situations in which a defendant
goes to trial contesting factual guilt and still qualifies for a reduction based on acceptance of
responsibility); (5) Clum’s sentence was substantively reasonable and sufficiently explained by
the judge; (6) the judge explained, and Marrero agreed, his base-offense level would have been
the same if the judge had used § 2B1.1 or § 2T1.9 of the Sentencing Guidelines, United States v.
Keene, 470 F.3d 1347, 1350 (11th Cir. 2006) (“[I]t would make no sense to set aside this
reasonable sentence and send the case back to the district court since it has already told us that it
would impose exactly the same sentence . . . .”); and (7) the judge imposed an upward
variance—not an upward departure—when sentencing Marrero, United States v. Kapordelis, 569
F.3d 1291, 1316 (11th Cir. 2009) (holding the district court applied an upward variance, when it
“did not cite to a specific guideline departure provision, and its rationale was based on the
§ 3553(a) factors and its finding that the Guidelines were inadequate”). We conclude the
remaining issues are abandoned. United States v. Jernigan, 341 F.3d 1273, 1283 n.8 (11th Cir.
2003).
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to the execution or concealment of an offense.” U.S.S.G. §§ 2B1.1(b)(10) cmt.
n.9, 2T1.4(b)(2) cmt. n.3. “Conduct such as hiding assets or transactions, or both,
through the use of fictitious entities, corporate shells, or offshore financial accounts
ordinarily indicates sophisticated means.” Id. “There is no requirement that each
of a defendant’s individual actions be sophisticated in order to impose the
enhancement. Rather, it is sufficient if the totality of the scheme was
sophisticated.” United States v. Ghertler, 605 F.3d 1256, 1267 (11th Cir. 2010)
(discussing the sophisticated-means enhancement under U.S.S.G. §
2B1.1(b)(9)(C)).
The judge did not err in enhancing the defendants’ sentences for
sophisticated means. The defendants took substantial steps to conceal their
activities, their identities, and their proceeds from their scheme. To conceal their
central operating business, PMDD, they layered the corporation with a number of
shell corporations. Jones concealed PMDD’s operations by filing the forms as an
individual tax preparer, rather than as an agent of PMDD. To conceal themselves,
the defendants used aliases in their communications. When the IRS began
investigating PMDD, the defendants changed their e-mail addresses and created a
new corporation to continue the scheme without detection. When clients began
receiving large refunds, the defendants counseled them on how to conceal the
assets. Specifically, the defendants told some clients to hide assets in trust
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accounts, and other clients to transfer their refunds into cashier’s checks, deposit
the money into a casino account, and then remove the money from the casino
account to create a false trail as to the origin of the money. The defendants hid
their own proceeds from the scheme in bank accounts of their shell corporations.
The defendants “hid[] assets or transactions, or both, through the use of
fictitious entities, corporate shells, or offshore financial accounts.” U.S.S.G.
§§ 2B1.1(b)(10) cmt. n.9, 2T1.4(b)(2) cmt. n.3. Because their actions fit the
definition of sophisticated means under the Sentencing Guidelines, the district
judge did not err in enhancing the defendants’ sentences. Their convictions and
sentences are AFFIRMED.
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