United States v. Russell McLaughlin Jr., in No. 96-1982. United States of America v. Mark McLaughlin in No. 96-2000

OPINION OF THE COURT

SCHWARZER, Senior District Judge.

Russell and Mark McLaughlin (the “McLaughlins”) appeal from their convictions and sentences for income tax evasion. The McLaughlins and their relatives own Building Inspection Underwriters (“BIU”), a close corporation that conducts building inspections for various New Jersey and Pennsylvania municipalities. Russell was president of BIU, and Mark was an officer of the corporation. In 1988, BIU opened two bank accounts, one with New Jersey National Bank (“NJNB”) and the other with First Fidelity Bank (“First Fidelity”). During 1988, over $700,000 in corporate receipts was deposited in each of those accounts. Neither BIU nor the McLaughlins declared the roughly $1,400,000 deposited in the accounts as income on BIU’s 1988 federal tax returns.

Both McLaughlins were convicted of attempting to evade assessment of BIU’s 1988 income taxes in violation of 26 U.S.C. § 7201. Russell was also convicted of subscribing and filing a false 1988 income tax return on behalf of BIU in violation of 26 U.S.C. § 7206(1). They were acquitted of conspiring to defraud the United States. See 18 U.S.C. § 371. The McLaughlins were sentenced on the basis of an adjusted offense level of 17. The district court sentenced them both to twenty-four months in custody and three years supervised release and fined each $100,000.

The district court had jurisdiction under 18 U.S.C. § 3231, and we have jurisdiction under 28 U.S.C. § 1291.

I. APPLICATION OF THE FIFTH AMENDMENT PRIVILEGE TO NON-PRODUCTION OF SUBPOENAED DOCUMENTS

In 1989, the IRS served a summons on Russell, in his capacity as BIU’s corporate custodian, requesting production of certain financial records. At trial, the government was permitted to show that Russell produced records and that the production did not include any record of the NJNB account. The government was also allowed to argue that this omission was evidence of intentional evasion of tax assessment.¹

Russell contends that admission of this evidence violated his Fifth Amendment privilege against self-incrimination. Relying on Braswell v. United States, 487 U.S. 99, 108 S.Ct. 2284, 101 L.Ed.2d 98 (1988), he argues that because he produced corporate records under compulsion of a subpoena directed to him as corporate custodian, see Baltimore v. Bouknight, 493 U.S. 549, 555-56, 110 S.Ct. 900, 905-06, 107 L.Ed.2d 992 (1990) (quoting Fisher v. United States, 425 U.S. 391, 411, 96 S.Ct. 1569, 1581, 48 L.Ed.2d 39 (1976)); Bellis v. United States, 417 U.S. 85, 94 S.Ct. 2179, 40 L.Ed.2d 678 (1974); Wilson v. United States, 221 U.S. 361, 31 S.Ct. 538, 55 L.Ed. 771 (1911); Hale v. Henkel, 201 U.S. 43, 26 S.Ct. 370, 50 L.Ed. 652 (1906), the Fifth Amendment’s Self-Incrimination Clause barred the government from offering evidence of his personal failure to comply adequately with the subpoena. Russell raised the objection in a motion in limine, which the district court denied by “a definitive ruling ‘with no suggestion that it would reconsider the matter at trial.’” Government of V.I. v. Joseph, 964 F.2d 1380, 1385 (3d Cir.1992) (citing American Home Assur. Co. v. Sunshine Supermarket, Inc., 753 F.2d 321, 325 (3d Cir.1985)). Thus, the issue is properly before us, see United States v. Mejia-Alarcon, 995 F.2d 982, 986 (10th Cir.1993) (citing American Home, 753 F.2d at 324-25), and we exercise plenary review. See In re Grand Jury Subpoena, 957 F.2d 807, 809 (11th Cir.1992).

A. Existence of a Testimonial Privilege

“[B]ecause the act of complying with [a] government [subpoena] testifies to the existence, possession, or authenticity of the things produced,” such production may implicate Fifth Amendment rights. Bouknight, 493 U.S. at 555, 110 S.Ct. at 905; Fisher, 425 U.S. at 410, 96 S.Ct. at 1580-81; Curcio v. United States, 354 U.S. 118, 125, 77 S.Ct. 1145, 1150, 1 L.Ed.2d 1225 (1957). Since a corporate custodian produces documents in his representative rather than his personal capacity, he may not invoke his right against self-incrimination in order to resist a subpoena for corporate records.² Hale, 201 U.S. at 69-70, 26 S.Ct. at 376-77. Thus, in Braswell, the Court wrote that:

[T]he government concede[d], as it must, that it may make no evidentiary use of the “individual act” against the individual.... [T]he Government may not introduce into evidence ... that the subpoena was served upon and the corporation’s documents were delivered by one particular individual, the custodian____ Because the jury is not told that the defendant produced the records, any nexus between the defendant and the documents results solely from the corporation’s act of production and other evidence in the case.

487 U.S. at 118, 108 S.Ct. at 2295.

The government contends that Braswell does not apply here because Braswell concerned production of documents rather than their nonproduction. The distinction is without a difference. The government’s concession in Braswell that it may make no evidentiary use of the “individual act” against the individual is not restricted to material actually produced but is instead broad enough to encompass the implications of production, including its incompleteness. As Justice Kennedy has noted:

An individual who produces documents may be asserting that [the documents] satisfy the general description in the subpoena, or that they were in his possession or under his control. [In either case, those] assertions can convey information about that individual’s knowledge and state of mind as effectively as spoken statements ....

Id. at 122, 108 S.Ct. at 2297 (Kennedy, J., dissenting) (emphasis added); see Fisher, 425 U.S. at 410, 96 S.Ct. at 1580-81; Curcio v. United States, 354 U.S. 118, 125, 77 S.Ct. 1145, 1150, 1 L.Ed.2d 1225 (1957). Thus, the testimonial aspect of production is not limited to the act of handing material over to the government — it also may include the custodian’s exercise of discretion over which material to produce and which to omit. Incomplete production may therefore be as communicative as complete production.

While “[t]he act of producing documents in response to a subpoena ... has communicative aspects of its own, wholly aside from the contents of the papers produced[,] ... whether the tacit averments of the taxpayer are both ‘testimonial’ and ‘incriminating’ for purposes of applying the Fifth Amendment ... depend on the facts and circumstances of particular cases____” Braswell, 487 U.S. at 103, 108 S.Ct. at 2287 (quoting Fisher v. United States, 425 U.S. 391, 410, 96 S.Ct. 1569, 1580-81, 48 L.Ed.2d 39 (1976)). In this case, we find that the government’s use at trial of evidence concerning Russell’s nonproduction makes plain both its testimonial and its incriminating qualities. Cf. Fisher, 425 U.S. at 410-11, 96 S.Ct. at 1580-81 (resolving the case on the appellate record even though the determination was factual). The government introduced evidence of nonproduction not only as an overt act in furtherance of the conspiracy to evade assessment, see Superseding Indictment at 8-9, but also as testimonial evidence of a guilty mind, see Superseding Indictment at 9; Trial Tr., Mar. 12, 1996, at 142-43 (government’s closing argument); Trial Tr., Mar. 1, 1996, at 82, 88 (direct testimony of investigating agent regarding receipt of corporate records and meeting with Russell); Trial Tr., Feb. 27, 1996, at 15 (government’s opening statement).³ The government’s repeated reference to Russell’s incomplete act of production as evidence of his culpability flies in the face of Braswell and vitiated Russell’s Fifth Amendment privilege.⁴

B. Waiver

The government contends that Russell waived the Fifth Amendment privilege when he failed to claim it at the time when he produced the subpoenaed documents. See Rogers v. United States, 340 U.S. 367, 370, 71 S.Ct. 438, 440, 95 L.Ed. 344 (1951) (“The privilege is deemed waived unless invoked.”). The government’s argument that the privilege may be waived by making a voluntary statement is not apposite to the issue before us, which concerns the evidentiary use of a response to a subpoena for the production of documents. While the Fifth Amendment is generally not self-executing, where a testimonial act is, as in this case, compelled, the defendant does not waive the privilege by failing to invoke it. See Adams v. Maryland, 347 U.S. 179, 179-83, 74 S.Ct. 442, 444-45, 98 L.Ed. 608 (1954) (holding the Fifth Amendment self-executing where testimony was compelled by a congressional grant of use immunity).

As with congressional testimony elicited pursuant to a summons that promises use immunity, see id., a subpoena to the corporate custodian for corporate records cannot be refused. The personal privilege against being identified as the individual who complied with the subpoena is a “ ‘necessary concomitant’ of the fact that a corporate, or government, custodian acts in a representative rather than a personal capacity.” United States v. Dean, 989 F.2d 1205, 1210 (D.C.Cir.1993).⁵

C. Harmless Error Analysis

The district court’s erroneous admission of evidence concerning Russell’s production of documents mandates reversal of his conviction unless it was “harmless beyond a reasonable doubt.” Chapman v. California, 386 U.S. 18, 24, 87 S.Ct. 824, 828, 17 L.Ed.2d 705 (1967). The government bears the “burden of showing the absence of prejudice.” United States v. Olano, 507 U.S. 725, 741, 113 S.Ct. 1770, 1781, 123 L.Ed.2d 508 (1993). Although the government did not argue harmless error, we have discretion to consider it. United States v. Giovannetti, 928 F.2d 225, 227 (7th Cir.1991); see United States v. Rose, 104 F.3d 1408, 1414 (1st Cir.) (adopting discretionary standard for overlooking government failure to raise harmlessness), cert. denied, — U.S.-, 117 S.Ct. 2424, 138 L.Ed.2d 187 (1997); Horsley v. Alabama, 45 F.3d 1486, 1492 n. 10 (11th Cir.1995) (same), cert. denied, — U.S.-, 116 S.Ct. 410, 133 L.Ed.2d 328 (1995); United States v. Langston, 970 F.2d 692, 704 n. 9 (10th Cir.1992) (same); Lufkins v. Leapley, 965 F.2d 1477, 1481 (8th Cir.1992) (same); United States v. Pryce, 938 F.2d 1343, 1348 (D.C.Cir.1991) (same).

In deciding whether to exercise that discretion,

the controlling considerations are the length and complexity of the record, whether the harmlessness of the error or errors found is certain or debatable, and whether a reversal will result in protracted, costly, and ultimately futile proceedings in the district court.

Giovannetti, 928 F.2d at 227. Here the record is complex, and “[t]he certainty of harmlessness does not appear with such clarity from an unguided search of the record that we should raise the issue on our own motion.” Id. Although a reversal may be costly, we must vacate Russell’s convictions.

II. ADEQUACY OF THE INDICTMENT

Mark McLaughlin complains that because the indictment charged him with evasion of payment of taxes rather than with evasion of assessment of taxes, see 26 U.S.C. § 7201, there was a failure of proof at trial. Because the McLaughlins did not raise this claim before the district court, plain error analysis applies. Fed.R.Crim.P. 52(b). Section 7201 states, in relevant part: “Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall ... be guilty of a felony....” 26 U.S.C. § 7201. Count Two of the indictment charged that the McLaughlins

willfully attempted to evade and defeat the payment of a large part of the income tax due and owing by [BIU] ... by concealing and attempting to conceal from BIU’s accountant and the Internal Revenue Service the nature and extent of BIU’s income and the location thereof, and by making false statements to BIU’s accountant with respect to the nature and extent of BIU’s income.

Section 7201 includes two distinct offenses: evading assessment and evading payment. Sansone v. United States, 380 U.S. 343, 354, 85 S.Ct. 1004, 1011-12, 13 L.Ed.2d 882 (1965). These offenses require different elements of proof, compare United States v. McGill, 964 F.2d 222, 229 (3d Cir.1992) (listing elements of “evasion of payment”) with Cohen v. United States, 297 F.2d 760, 770 (9th Cir.1962) (listing various means to evade assessment), but “they frequently overlap.” United States v. Mal, 942 F.2d 682, 688 (9th Cir.1991); see United States v. Dunkel, 900 F.2d 105, 107 (7th Cir.1990) (stating that although “[s]ometimes it is convenient to say that different methods are different ‘crimes’ ... nothing in the text or history of § 7201 requires an indictment to treat § 7201 as if it were two sections of the United States Code”), vacated on other grounds by 498 U.S. 1043, 111 S.Ct. 747, 112 L.Ed.2d 768 (1991).

Had the government charged the McLaughlins with evasion of payment, it would have had to prove a valid assessment from which the McLaughlins hid assets. United States v. England, 347 F.2d 425, 430 (7th Cir.1965). The government did not prove that element. Thus, the conviction may stand only if the government’s proof at trial did not amend the indictment and if the language of the indictment was sufficiently broad to put the McLaughlins on notice that the government would proceed under the evasion-of-assessment theory.

With respect to amendment of the indictment, two types of amendments are impermissible: “First, ... any amendment that transforms an indictment from one that does not state an offense into one that does ... [and second,] any charge that tends to increase the defendant’s burden at trial.” United States v. Milestone, 626 F.2d 264, 269 (3d Cir.1980). Despite its vagueness, the indictment clearly states an offense. And though the count may have been poorly articulated, it did not increase the McLaughlins’ burden at trial. Thus, there was no impermissible amendment of the indictment.

We next consider whether there was a “variance [between the indictment and the crime proved] [that] actually prejudiced] the defendant.” United States v. Somers, 496 F.2d 723, 744 (3d Cir.1974). Variances “are examined on a case-by-case basis and constitute reversible error only if the defendant was prejudiced.” United States v. Smith, 789 F.2d 196, 200 (3d Cir.1986). In this case, no prejudice occurred: (1) a reading of the entire indictment makes clear that the government intended to proceed on a theory of evasion of assessment; (2) Mark’s own attorney addressed the evasion-of-assessment theory at trial; and (3) Count Two itself specified conduct relevant only to an evasion-of-assessment theory (e.g., concealing income from BIU’s own accountants). As in United States v. Waldeck, 909 F.2d 555 (1st Cir.1990), “it was clear at the start of trial that the government was proceeding on an evasion-of-assessment theory.” Id. at 558.

III. FAILURE TO ISSUE SUMMONSES AND GIVE NOTICE UNDER 26 U.S.C. §§ 7602(a)(2), 7609(a)

The IRS interviewed BIU’s former accountant and received records from him without first issuing a summons, see 26 U.S.C. § 7602(a), and giving the McLaughlins concomitant notice of its request for records. See 26 U.S.C. § 7609(a). The McLaughlins’ motion to suppress the evidence so obtained was denied by the district court. Mark McLaughlin contends that the IRS’s failure to issue the summons and give notice violated 26 U.S.C. § 7609(a). Our review is plenary. United States v. Emanuele, 51 F.3d 1123, 1127 (3d Cir.1995).

If the IRS had issued a summons to a third-party record-keeper and the summons had “require[d] the production of any portion of records made or kept of the business transactions or affairs of’ BIU, the McLaughlins would have been entitled to receive notice of the summons. 26 U.S.C. § 7609(a)(1). In this case, the IRS issued no summons and therefore gave no notice of the informal interview and voluntary document delivery. See id. (stating that notice is required “[i]f ... any summons ... is served____” (emphasis added)).

The IRS has broad discretion on how it conducts its investigations. See 26 U.S.C. § 7602. As the Ninth Circuit has said:

Section 7602 provides three separate means of ... inquiry. Section 7602(a)(1) provides for an informal, noncompulsory means of inquiry. If an informal inquiry proves inadequate, Sections 7602(a)(2) and 7602(a)(3) provide mechanisms for the formal compulsion of the production of documents and testimony.

Speck v. United States, 59 F.3d 106, 108 (9th Cir.1995). “Nothing ... in the text of Section 7602 suggests that subsection (a)(2) should be read to exclude informal or noncoereive attempts to obtain information about possible failures to report income.” Id. Section 7602(a) permits the government to conduct a formal investigation and issue summonses or to proceed informally. In this case, the government chose to proceed informally, and BIU’s former accountant cooperated with the investigation. It was entitled to do so without notifying Mark.

IV. ADMONITION TO DEFENSE COUNSEL IN PRESENCE OF JURY

During the defense’s recross of BIU’s accountant, who appeared under government subpoena, the court interrupted and questioned the propriety of defense counsel’s asking leading questions of the witness whom the McLaughlins were compensating for his time at trial. Defense counsel argued that the witness had been subpoenaed by the government and that his compensation was irrelevant. The judge later conceded that he had been rough with defense counsel and gave a curative instruction to the jury, in which he praised the integrity of counsel.⁶ Mark now seeks a new trial on the ground that the district court’s intervention in the questioning was reversible error.

Though the court’s comments reflected unfavorably on defense counsel, the court did not “lose[ ] its color of neutrality [or] tend[ ] to accentuate and emphasize the prosecution’s case.” United States v. Bland, 697 F.2d 262, 265 (8th Cir.1983). The court’s comments neither undermined the McLaughlins’ defense nor buttressed the government’s case. They at most implied frustration with the form of counsel’s questions and some discomfort with the witness’ relationship with defendants. The inferences that a jury could have drawn from the court’s comments are not “of such a serious nature as to constitute reversible error, particularly in view of the court’s [curative instruction].” Sleek v. J.C. Penney Co., 324 F.2d 467, 477 (3d Cir.1963); see United States v. Price, 13 F.3d 711, 723 (3d Cir.1994); United States v. Stayback, 212 F.2d 313, 319 (3d Cir.1954).

V. SENTENCING GUIDELINE ISSUES⁷

Mark McLaughlin was sentenced on the basis of an adjusted offense level of 17. The Pre-Sentence Report (“PSR”), which the court adopted, assigned Mark a base offense level of 15, see U.S. Sentencing Guidelines Manual § 2T1.1 (1988) (“U.S.S.G.”), and recommended a two-point upward adjustment for obstruction of justice. See U.S.S.G. § 3C1.1. Mark appeals the sentence on three grounds: (1) the tax loss upon which he was sentenced was artificially inflated by including income on which taxes were already being paid; (2) the Sentencing Commission exceeded its authority by including interest in the computation of tax loss; and (3) the upward adjustment for obstruction of justice was not warranted. The district court rejected these arguments.

A. Determination of Loss Amount for Sentencing Purposes

Mark McLaughlin contended at both trial and sentencing and argues again here that taxes were being paid on the income in the First Fidelity account and therefore that no tax loss was attributable to the income deposited in that account. The district court rejected the argument and at sentencing took into account all funds deposited in both the NJNB and First Fidelity bank accounts, which amounted to roughly $1,400,000 in income.

In his brief, Mark recites trial evidence bearing on the issue of whether the First Fidelity account was a reserve against future claims and argues that the jury may have rendered a verdict based solely on the nonreporting of the NJNB account. The jury returned a general verdict of guilty that does not distinguish between the accounts. Cf. United States v. Bailin, 977 F.2d 270, 282 (7th Cir.1992) (“When a case involves a general verdict, establishing that the verdict neeessarily determined any particular issue is extremely difficult.”).

Where the jury does not determine the amount of tax evaded, the determination must be made by the trial judge. United States v. Olbres, 99 F.3d 28, 31 (1st Cir.1996). The district court received extensive briefing on the question of loss, conducted a hearing, and made a finding that:

With respect to the accountability for the $770,000 [in the First Fidelity account], in my view, viewing the record as a whole, it clearly makes these defendants accountable for both of the accounts in the criminal context.⁸

We review the district court’s determination of the amount of loss for clear error. United States v. Colletti, 984 F.2d 1339, 1345 (3d Cir.1992).

Mark contends that the First Fidelity account was a reserve against future warranty claims and that its balance therefore was being treated as accrued income over ten years. He claims that BIU or another McLaughlin-related affiliate has treated a prorated portion of the account as income on every return since 1988, before BIU was aware of the government investigation. The government argues in response that the McLaughlins’ fraudulent activities extended to both accounts and that, even if the jury’s verdict rested on only one account, the court could have considered fraudulent conduct with respect to the other as relevant conduct. See U.S.S.G. § lB1.3(a). The government moreover points to evidence indicating that funds in the First Fidelity account were used to capitalize other ventures.

The record is complex and the facts were hotly disputed. On the record before us, we cannot say that the district court’s finding was clearly erroneous.⁹

B. Including Interest in Loss Amount

Mark contends that the Sentencing Commission exceeded its statutory authority when it included interest on unpaid taxes in the computation of tax loss. See U.S.S.G. § 2T1.1 app. n. 2. The provision in the Code that describes the authority of the Commission states that the Guidelines should “provide] certainty and fairness in sentencing and reduc[e] unwarranted sentence disparities.” 28 U.S.C. § 994(f). Mark argues that including accumulated interest in the calculation of tax loss exacerbates sentencing disparities by causing defendants’ sentences to depend largely on when the government brings its case (and therefore how much interest accumulates) rather than on the amount of income hidden from assessment.

Including interest in computing tax loss to the government merely recognizes the time value of money. Far from being beyond the Commission’s authority, it is a rational calculation of the real loss sustained as a consequence of a taxpayer’s illegally concealing his income from assessment. Whatever capacity the government has to affect the magnitude of a defendant’s sentence by choosing strategically when to indict an allegedly wayward taxpayer, no allegation of any impropriety is made here. Furthermore, it is always within the taxpayer’s power to pay the deficiency and to stop interest from accruing. In short, “we fail to see how th[e] general statutory provision, outlining the purpose of the guidelines, supports [Mark’s] contention.” United States v. Sanchez, 995 F.2d 468, 470 (3d Cir.1993).

C. Two-level Enhancement for Obstruction of Justice

In imposing a two-level enhancement for obstruction of justice on the McLaughlins, the district court found:

Finally, with respect to obstruction of justice, in addition to what was related to me as the taping and garnering of alleged evidence or effort so to do in preparation for the [pretrial] hearing ... it seems to me that was going mighty far stretching the envelope of advocacy, frankly, in an effort to come up with some evidence to try to derail this prosecution.

But looking at what the Government has said on pages 11 and 12 of its brief, which are clearly made out by the record and I find them to have factual basis, in my view, that does constitute going that extra step, which is required in the United States versus Dunnigan ... demonstrating a willful impediment, seeking to establish a willful impediment to obstruction of justice, or an attempt to do the same perjuriously.

For example, when Mark McLaughlin testified ... that, in order to add additional money to “the reserve,” “we formed a bank account in South Jersey into which we deposited cash into that account.” The defense concedes that the jury convicted the Defendants of failing to report this income____

We review the sufficiency of the district court’s findings supporting the imposition of a sentence enhancement for clear error. See U.S. v. Maurello, 76 F.3d 1304, 1308 (3d Cir.1996) (“If a decision is ‘essentially factual,’ we apply a clearly erroneous standard.”).

Section 3C1.1 of the Sentencing Guidelines authorizes a two level increase in the offense level “[i]f the defendant willfully obstructed or impeded ... the administration of justice during the. investigation, prosecution or sentencing of the instant offense____” U.S.S.G. § 3C1.1. Application Note 3(a) lists as an example of conduct to which the enhancement applies “threatening, intimidating, or otherwise unlawfully influencing a ... witness ... directly or indirectly, or attempting to do so.” U.S.S.G. § 3C1.1 app. n. 3(a).

The conduct to which the court referred in the first part of its findings, as described in the government’s brief, consisted of the McLaughlins’ sending investigators to obtain tape-recorded statements from witnesses in an effort to demonstrate that the investigating IRS agent had violated the McLaughlins’ constitutional rights. The investigators evidently did not disclose their identities and made secret recordings of their interviews. While the secret tape-recording of statements by persons who concealed their identity may be prohibited under the laws of some states (as the district court observed), it does not amount to conduct encompassed by the Application Note. There is no contention, nor any evidence, that the McLaughlins “threaten[ed], intimidat[ed] or otherwise unlawfully influene[ed]” any witness or “attempt[ed] to do so.” See id.

The court’s second ground for imposing the enhancement was that the McLaughlins gave perjured testimony. Application Note 3 includes perjury as one of the types of conduct for which the enhancement may be imposed. In United States v. Dunnigan, 507 U.S. 87, 113 S.Ct. 1111, 122 L.Ed.2d 445 (1993), the Court held that a finding of perjury for purposes of the guideline enhancement requires proof that false testimony was given “with the willful intent to provide false testimony, rather than as a result of confusion, mistake or faulty memory.” Id. at 94, 113 S.Ct. at 1116. The Court added:

[A] district court must review the evidence and make independent findings necessary to establish a willful impediment to or obstruction of justice ... under the perjury definition ... set out [above].

Id. at 95, 113 S.Ct. at 1117. Here the district court based its finding principally on Mark’s testimony that the First Fidelity account was a “reserve,” i.e., one with respect to which he claimed income was accrued and taxes paid when earned.¹⁰ Application Note 1 directs that the “alleged false testimony ... by the defendant ... be evaluated in a light most favorable to the defendant.” U.S.S.G. § 3C1.1 app. n. 1. Relying on that note, we have held that this note requires that the sentencing court refrain from imposing a § 3C1.1 enhancement for giving perjurious testimony unless the government satisfies its burden of “clearly convincing the court] that it is more likely than not that the defendant has been untruthful.” United States v. Arnold, 106 F.3d 37, 44 (3d Cir.1997). Here, the court failed to hold the government to its burden of proof.

Even assuming that Mark’s conviction for “willful evasion of tax” implies that the jury rejected all of Mark’s explanations for the failure to declare either account’s balance as income,¹¹ that alone would not be sufficient to support a finding that Mark testified “with the willful intent to provide false testimony.” As we held in United States v. Colletti, 984 F.2d 1339 (3d Cir.1992):

[I]n order to warrant the two point enhancement for obstruction of justice, the perjury of the defendant must not only be clearly established, and supported by evidence other than the jury’s having disbelieved him, but also must be sufficiently far-reaching as to impose some incremental burdens upon the government, either in investigation or proof, which would not have been necessary but for the perjury.

984 F.2d at 1348 (emphasis added).

Accordingly, we conclude that imposition of the section 3C1.1 enhancement was clear error. We vacate Mark McLaughlin’s sentence.

VI. CONCLUSION

We VACATE Russell McLaughlin, Jr.’s convictions and REMAND for a new trial. We VACATE Mark McLaughlin’s sentence and REMAND for resentencing consistent with this opinion.

1 . Count One of the indictment (the conspiracy count) specifically referred to Russell’s failure in responding to the summons to disclose to the IRS the NJNB account and to provide books and records concerning it. Count Two inferenlially referred to Russell’s nonproduction by charging him with "concealing ... from the Internal Revenue Service the ... location [of BIU income].”

2 . Judge Becker expresses concern over the application of agency principles to situations such as this case. However, when the government serves a subpoena on a person as corporate custodian, it designates that person to serve as the corporation’s agent. See Braswell, 487 U.S. at 118 n. 11, 108 S.Ct. at 2295 n. 11 ("[A] corporate custodian acts as an agent and not an individual when he produces corporate records in response to a subpoena addressed to him in his representative capacity.”). The government could hardly contend, after it has received a response and to circumvent Braswell, that in some particular respect, the custodian was not acting as corporate agent. If the custodian acts negligently, or even dishonestly, he is no less acting in the course of that agency, even if a claim may lie against him for malfeasance. It could, of course, be that a person served with a subpoena is not authorized to produce corporate documents, in which case he is not acting as corporate custodian and all bets are off; a former employee, for example, who produces purloined corporate documents is obviously not within the scope of the Braswell rule. But we do not go behind the assertion of the Fifth Amendment privilege in other situations to ensure that the claim is legitimate — to do so would obviously undermine the privilege. The attack on the "devious custodian" or the "non-producing custodian” is by way of contempt proceedings, not by an examination into his "agency” or the legitimacy of his personal Fifth Amendment privilege. In sum, the outcome is perfectly symmetrical — the corporate custodian qua custodian must comply with a records subpoena and the government is barred from offering the testimonial and incriminating aspects of that production (including non-production) against him.

3 . It thus bore not only on Count Two but also on Count Three ("willfully” making and subscribing a false return). 26 U.S.C. § 7206(1).

4 . The government would have us make an exception to the Fifth Amendment where the custodian’s nonproduction is in furtherance of his alleged offense. While such exceptions to certain privileges do exist (e.g., crime or fraud exception to the attorney-client privilege, see In re Sealed Case, 107 F.3d 46 (D.C.Cir.1997)), the Fifth Amendment admits no such limitation (except in one narrow circumstance where the privilege against self-incrimination embedded in the Miranda warning is overcome by the public’s interest in safety, see New York v. Quarles, 467 U.S. 649, 657-60, 104 S.Ct. 2626, 2632-34, 81 L.Ed.2d 550 (1984)). Indeed, the government’s exception would swallow the privilege in its entirety.

5 . A statement voluntarily given to the government by a custodian may be admissible against him in a later criminal proceeding. See United States v. Washington, 431 U.S. 181, 186-87, 97 S.Ct. 1814, 1818-19, 52 L.Ed.2d 238 (1977). The government alleges that statements made by Russell in conjunction with his handing over requested documents amounted to a voluntary statement and thereby waived all rights against self-incrimination described in Braswell. Review of the trial testimony belies the government's contention. The investigating officer conceded at trial that the meeting “was not an interview of Russell" and that Russell’s only testimonial act was to produce a list of the documents that he had delivered.

6 . The court gave the following curative instruction to the jury:

[Sjome matters took place this morning and I perhaps got a little grumpy with counsel. I want to tell you that you in no way should draw any adverse inference against the lawyers or against the defendants in this case. I can attest that these lawyers are all swell guys. I like them personally, and they are ethical as the day is long.

And you should not draw any adverse inference whatsoever. They are fine fellows and they are doing their jobs and they are doing it very ably. A little matter came up and you shouldn’t concern yourselves with that at all.

7 . All parties agree that the 1988 Sentencing Guidelines apply.

8 . The McLaughlins did not challenge the inclusion of the NJNB account in the calculation.

9 .Mark also contests the inclusion of four smaller amounts totaling roughly $200,000 in the computation of tax loss. That argument was rejected by the district court in its disposition of this matter. The court’s findings were not clearly erroneous.

10 . The government in its brief referred to in the court’s finding also mentions a statement made by the McLaughlins to the agent during the investigation claiming the account to be a reserve, testimony by Russell that he had told the agent an account was a warranty account, and testimony by him that he did not know BIU's 1988 return omitted substantial amounts of BIU income.

11 . As we noted earlier, see supra p. 137, the jury’s general verdict does not disclose whether the jury rejected all or only part of Mark’s testimony.