United States v. Jody Smith, Sr.

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-4756
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
JODY ALTON SMITH, SR.,
Defendant - Appellant.
Appeal from the United States District Court for the Western
District of Virginia, at Roanoke. James C. Turk, Senior
District Judge. (7:07-cr-00079-jct-1)
Argued: September 23, 2011 Decided: December 1, 2011
Before AGEE and WYNN, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Affirmed by unpublished per curiam opinion.
ARGUED: Gilbert Kenneth Davis, GILBERT K. DAVIS & ASSOCIATES,
LLC, Fairfax, Virginia, for Appellant. Thomas Ernest Booth,
UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for
Appellee. ON BRIEF: Timothy J. Heaphy, United States Attorney,
Sharon Burnham, Assistant United States Attorney, OFFICE OF THE
UNITED STATES ATTORNEY, Roanoke, Virginia; Lanny A. Breuer,
Assistant Attorney General, Greg D. Andres, Acting Deputy
Assistant Attorney General, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, D.C., for Appellee.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
Jody Alton Smith, Sr. (Smith) was convicted of numerous
charges arising from his illegal liquor operation and his
fraudulent receipt of Social Security Administration (SSA)
funds. He was sentenced to forty-eight months’ imprisonment.
On appeal, three issues are presented: (1) whether the district
court erred in denying Smith’s motion to suppress; (2) whether
there is sufficient evidence in the record to support Smith’s
conviction for the fraudulent receipt of SSA funds; and (3)
whether the district court erred in calculating the tax loss for
purposes of sentencing. We affirm.
I
In this part of the opinion, we first set forth the legal
landscape and facts concerning Smith’s illegal liquor operation,
followed by the legal landscape and facts concerning his
fraudulent receipt of SSA funds. We then set forth the relevant
procedural history.
A
1
Any person can engage in the business of producing
distilled spirits by obtaining a permit from the Alcohol & Trade
Tax & Trade Bureau (TTB). 27 U.S.C. § 203(b). A person in the
business of distilling spirits is required to, among other
3
things, register the still or distilling apparatus, 26 U.S.C.
§ 5179, provide a bond covering the operation of the still or
distilling apparatus, id. § 5173, and pay the requisite taxes,
id. 5001(a)(1). Failure to register the still, post the
appropriate bond, or pay the requisite taxes can result in fines
and criminal penalties, id. § 5601.
The federal government imposes a tax on distilled spirits
either produced in or imported into the United States. Id.
§ 5001(a)(1). The tax is $13.50 on each “proof gallon” of
distilled spirits produced in or imported into the United
States. Id. A proof gallon of distilled spirits is a gallon
which contains at least one half of its volume in ethyl alcohol.
Id. § 5002(a)(10). The tax attaches as soon as the distilled
spirits are produced. Id. § 5001(b). The distiller is
responsible for paying the tax, id. § 5005(a), which is payable
to the TTB, id. § 5061. The taxes owed must be paid at the time
the distilled spirits are removed from the bonded premises, id.
§§ 5006(a)(1) & 5007. 1
2
Smith, with the help of several others, ran an illegal
liquor operation on an eight acre piece of property (the Halifax
1
The Commonwealth of Virginia imposes its own tax on
distilled spirits. The tax equals 20% of the sales price. Va.
Code Ann. § 4.1-234(B).
4
Property or the Property) in Halifax County, Virginia. The
Property had three structures on it: a single-wide trailer; a
barn converted into a storage shed; and a building, which housed
a still. The Property also had four video surveillance cameras
which were used to monitor the Property.
In the summer of 2005, federal and state law enforcement
agents began to investigate Smith’s operation after receiving
information from confidential informants. Eventually, the
investigation centered on the Halifax Property. Land records
showed that Dale Shrock sold the property to Danny Davis on
January 17, 2003 for $20,000.00. Davis put 10% down, and Shrock
financed the remainder through a deed of trust and a promissory
note. In March 2004, Davis applied for building permits and
other services on the land, giving the business address and
phone number of a business owned by Smith called Smith’s Auto
Sales. With the assistance of Patricia Waldron, an employee of
Smith’s Auto Sales, Davis requested and received a $112.50
refund “for renewal of septic system” from the Halifax County
Health Department. (J.A. 460). The refund was sent to the
business address of Smith’s Auto Sales.
On April 19, 2004, an electrical service account for the
Halifax Property was established in the name of Rhonda Hall.
The account was transferred to Margaret Smith, Smith’s
companion, on September 28, 2004. From April 2004 to December
5
2004, electrical use at the Property was “minimal.” (J.A. 773).
In December 2004, electrical use at the Property almost tripled.
Electrical use stayed “consistently high” through May 2006.
(J.A. 773). In January 2006, electrical use was more than eight
times the use in November 2004.
In March 2005, Margaret Smith purchased the Halifax
Property from Davis. According to Margaret Smith’s accountant,
Cynthia Hudgins, the purchase price was $11,568.00, which was
the remaining balance on the promissory note.
In early 2006, law enforcement agents drove by the Halifax
Property one evening and heard sounds consistent with liquor
production. The law enforcement agents did not enter the
Property because they saw video surveillance cameras there. As
a result, on March 3, 2006, the agents installed a surveillance
video recorder on land next to the Halifax Property to record
the persons and vehicles arriving and leaving the Property.
From March 3, 2006 to April 18, 2006, the surveillance video
recorded Smith and several others arriving and leaving the
Halifax Property. On April 18, 2006, the law enforcement agents
discovered that their surveillance video recorder was missing.
On May 12, 2006, a search warrant was executed at the
Halifax Property. In the building, the law enforcement agents
found a partially dismantled still, four 1,200 gallon still
pots, approximately 119 empty 100-pound bags of sugar, six full
6
100-pound bags of sugar, some bags of barley, numerous bags of
yeast, and other things used in the distillery process,
including liquor jugs, jug caps, fueling oil, an oil heater,
cooling boxes, proofing barrels, and a sump pump.
On May 18, 2006, a search warrant was executed at Smith’s
residence. Numerous items consistent with illegal liquor
trafficking were found, including liquor jugs, jug caps,
hydrometers, a thermometer, and $70,000.00 in United States
currency. The law enforcement agents also found a set of keys
that fit the locks at the Halifax Property, including the
building on the Property. In Smith’s wallet, the law
enforcement agents found a business card for “CKS Packaging” in
Graham, North Carolina, and a handwritten note stating “NEPCO,
Northern Plastic Corporation, 1902 New Butler Road, New Castle,
Pennsylvania.” (J.A. 918). The handwritten note also states
“Cap style: 38mm tamper-evident caps.” (J.A. 918). The law
enforcement agents found a time-lapse video recorder, and they
also found camera mounting equipment that had the same serial
numbers as the video surveillance cameras found at the Halifax
Property. 2 In a trailer located on land owned by Smith that was
2
Greg Thomas, an employee of State Electronics in
Collinsville, Virginia sold Smith the time-lapse video recorder,
the four video surveillance cameras, and the camera mounting
equipment in January 2005. The receipt for the sale indicates
(Continued)
7
adjacent to his residence, the law enforcement agents found
large plastic containers similar to the proofing barrels
recovered on the Halifax Property.
Also on May 18, 2006, a search warrant was executed at
Smith’s Auto Sales. During the search, Margaret Smith was
interviewed by Bart McEntire, an ATF agent. During the
interview, Margaret Smith stated that she agreed to take over
Davis’ payments on the promissory note because he “wanted to get
out from under the loan” he had on the Halifax Property. (J.A.
516). According to Margaret Smith, she rented the property as a
hunt club to “Mr. Jones.” (J.A. 516). Margaret Smith had “no
information on Mr. Jones whatsoever,” except that “about every
three months,” she would meet him and collect $1,200.00 in rent.
(J.A. 516). Out of the rent received, Margaret Smith paid the
monthly electric bill and the property taxes on the Property. 3
At trial, the government built its case around the
testimony of numerous witnesses, including Smith’s codefendant,
Jarman Johnson, who testified on behalf of the government. The
government’s evidence established that, from November 2005 to
these items were sold to the “Rock Creek Hunting Club.” (J.A.
595).
3
According to Waldron, on one occasion, Smith paid the
property taxes for the Halifax Property.
8
April 2006, under a variety of names (including “May’s,” “May’s
Deli,” and “May’s Diner,” (J.A. 1395)), Smith purchased in
twenty-two transactions a total of 124,100 pounds of sugar for
$58,402.00 from William R. Hill & Company in Richmond, Virginia.
The evidence further established that, from mid-2005 to April
2006, John Taylor purchased liquor from Smith on approximately
ten occasions, buying fifty to sixty cases of liquor each time.
Smith initially charged Taylor $80.00 per case, but increased
the price to $90.00 to $95.00 per case when gas prices started
to rise.
Johnson, who was a driver and still hand for Smith,
testified that he purchased sugar from William R. Hill &
Company, signing receipts in the name of “James Jones.” (J.A.
632). In February 2006, accompanied by Johnson, Smith drove a
tractor trailer to CKS Packaging in Haw River, North Carolina
and purchased 12,000 liquor jugs. 4 On April 4, 2006, Smith,
4
According to Debbie Evans, a sales associate with CKS
Packaging, the phone order for the liquor jugs was placed by a
“Mr. Jones.” (J.A. 582). During the phone order, “Crossroads
Dairy” was the name of the billing address given by Mr. Jones.
(J.A. 581). At the time of pickup, no sales tax identification
number was provided to CKS Packaging. Evans allowed the sale to
proceed because a fax number for Crossroads Dairy was provided
and she received assurances that a sales tax identification
number would be sent by fax. Evans never received a sales tax
identification number for the sale.
9
accompanied by Johnson, purchased a sump pump for the still at a
Lowe’s in Rocky Mount, North Carolina.
At the still, Johnson worked with Smith and others. To
make a batch of liquor, Johnson would put eleven 100-pound bags
of sugar in each of four still pots, which yielded twenty-five
to thirty cases of liquor per pot. Each case consisted of six
liquor jugs. Afterwards, Johnson would load the liquor jugs
into distribution trucks.
B
1
The SSA issues disability insurance payments to certain
qualifying disabled persons. In order to qualify for disability
insurance benefits, a person must establish that he suffers from
a disability, which is defined as the “inability to engage in
any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to
last for a continuous period of not less than twelve months.”
42 U.S.C. § 423(d)(1)(A). If disability benefits are awarded,
the SSA must periodically conduct continuing disability reviews.
20 C.F.R. § 404.1594.
A recipient of disability insurance benefits who returns to
work first enters a “trial work period.” Id. § 404.1592(a). A
trial work period is a period to give the recipient the
10
opportunity to test his ability to work for up to nine months
within a consecutive sixty-month period without fear of losing
his benefits. Id. The nine-month period need not be
consecutive, id., and the trial work performed by the recipient
may be legal or illegal, id. § 404.1592(b). For a self-employed
worker, work will be considered trial work if the self-employed
worker works more than eighty hours a month or his net monthly
earnings pass a certain threshold. Id. § 404.1592(b)(2)(ii).
However, all recipients of disability insurance benefits must
notify the SSA if his condition improves, he returns to work, or
he increases the amount of his work. Id. § 404.1588.
2
In 1999, Smith contacted the SSA to apply for disability
insurance benefits. Richard Lowery, a claims representative
with the SSA, talked to Smith by phone and explained the
application process to him. Lowery expressly told Smith that he
had to be sufficiently disabled such that he could not work, and
that if he returned to work, that would affect the amount of his
payments. Thereafter, Lowery sent a disability insurance
benefits application form to Smith.
Smith submitted a written application for disability
insurance benefits to the SSA based on his claim that he could
not work due to his disabilities. Smith’s application contained
11
a specific provision that he had to notify the SSA if his
condition improved or he returned to work. Smith stated that
his disabilities had caused him to surrender his car business to
his daughter in 1998. In 2001, the SSA approved Smith’s
application and awarded him $27,391.75.
In 2003, the SSA sent Smith a form entitled “Report of
Continuing Disability” to determine whether Smith remained
eligible for disability insurance payments. (J.A. 735). Smith
completed and signed the form, and returned it to the SSA. On
the form, Smith checked a box indicating that he had not worked.
He also stated that he was still disabled due to shoulder, back,
and leg problems. Smith explained that he was doing less due to
pain and that he did very little walking or moving around.
In September 2003, by letter, the SSA notified Smith that
he would receive disability insurance payments in the future.
The letter also stated that a recipient of SSA payments had to
notify the SSA if his condition improved or he returned to work.
In August 2006, Antonio Watkins, a claims representative
with the SSA, received an anonymous report that Smith was self-
employed. Watkins sent a letter to Smith and, after receiving
no reply, tried to call Smith several times. Finally, Watkins
reached Smith by telephone and was informed that Smith was not
working and that his back problems had gotten worse. Referring
to Watkins’ letter, Smith reiterated that he had not worked
12
since he had become disabled. Based on Smith’s replies, the SSA
continued to send disability insurance payments to Smith.
Watkins testified that, even if Smith had been entitled to
collect disability insurance payments while working in a trial
work period, Smith was overpaid by more than $10,000.00 because
a trial work period is limited to nine months, but Smith worked
for more than nine months, and his actual income would have
caused a substantial reduction in his disability insurance
payments.
C
On March 13, 2008, a federal grand jury sitting in the
Western District of Virginia charged Smith and six others in a
thirty-two count superseding indictment. Smith was charged in
thirty-one of the thirty-two counts. In Count One, Smith was
charged with conspiracy to produce untaxed liquor, 18 U.S.C.
§ 371 (Count One). In Counts Two through Eight, he was charged
with interstate travel or communication to promote trafficking
in untaxed liquor, id. § 1952(a)(3). In Count Nine, he was
charged with possession of an unregistered still, 26 U.S.C.
§ 5601(a)(1), and, in Count Ten, failure to post bond, id.§ 5601(a)(4). In Count Eleven, Smith was charged with unlawful
production of distilled spirits, id. § 5601(a)(8), and, in Count
Twelve, he was charged with fraudulent receipt of government
(SSA) funds, 18 U.S.C. § 641. Smith was charged with conspiracy
13
to commit money laundering in Count Thirteen, id. § 1956(h),
and, in Counts Fourteen through Twenty-Eight, he was charged
with money laundering, id. § 1956(a)(1)(A)(i). In Count Twenty-
Nine, Smith was charged with perjury, id. § 1623, and, in Count
Thirty-One, he was charged with obstruction of justice, id.
§ 1503(a). Count Thirty-Two charged Smith with witness
tampering, id. § 1532(c)(2). The indictment also contained a
forfeiture allegation.
Prior to trial, Smith pleaded guilty to the obstruction of
justice count (Count Thirty-One), and the district court
dismissed, on the government’s motion, the witness tampering
count (Count Thirty-Two). At the conclusion of the trial, Smith
was convicted of the remaining counts pending against him.
Prior to sentencing, the district court granted Smith’s motion
for judgment of acquittal on the counts related to money
laundering (Counts Thirteen to Twenty-Eight). At sentencing,
the district court sentenced Smith to forty-eight months’
imprisonment. This timely appeal followed.
II
Smith first argues that the district court erred when it
denied his motion to suppress based on violations of the Fourth
Amendment. The Fourth Amendment guarantees “[t]he right of the
people to be secure in their persons, houses, papers, and
14
effects, against unreasonable searches and seizures.” U.S.
Const. amend. IV. “[T]he underlying command of the Fourth
Amendment is always that searches and seizures be reasonable.”
Wilson v. Arkansas, 514 U.S. 927, 931 (1995) (citation and
internal quotation marks omitted). In resolving whether a
search or seizure violates the Fourth Amendment, we review the
district court’s factual findings for clear error and its legal
conclusions de novo. United States v. Perkins, 363 F.3d 317,
320 (4th Cir. 2004).
The facts concerning Smith’s Fourth Amendment argument are
not in dispute. On March 1, 2006, Senior Special Agent Jay
Calhoun of the Virginia Department of Alcohol and Beverage
Control entered a piece of land in Pittsylvania County owned by
Smith. He entered the land, which was located approximately
fifty miles from the Halifax Property, without a warrant. Upon
entry, he saw an unhitched tractor trailer that Agent Calhoun
believed belonged to Smith. The tractor trailer was “a good
distance from any structure, hundreds of yards from any
structure.” (J.A. 318). The tractor trailer had a new
inspection sticker decal with an expiration date of February
2007. The tractor trailer was locked and closed, but there was
an open gap in the rubber stripping at the right-hand corner of
the tractor trailer. From outside the tractor trailer, Agent
Calhoun pointed a flashlight in the open gap, enabling him to
15
see that there were liquor jugs inside the tractor trailer. His
ability to observe the liquor jugs at that time apparently was
impaired because pallets of liquor jugs were flush with the
tractor trailer’s door, limiting his field of vision.
During the night of March 9, 2006, Agent Calhoun went back
to the tractor trailer, again without a warrant. This time,
there were wooden pallets outside the tractor trailer. Because
the door opening was no longer blocked, Agent Calhoun was able
to more fully observe the inside of the tractor trailer. He
stuck a two-foot “carpenter’s scope” through the crack in the
rubber stripping of the tractor trailer and saw some liquor jugs
inside, but they appeared to have been restacked since his March
1 visit. (J.A. 364).
In the district court, Smith raised Fourth Amendment
arguments concerning both the March 1 and March 9, 2006 entries
onto his land in Pittsylvania County, as well as the March 9
search of the tractor trailer. The district court rejected
these arguments. Of relevance here, the district court first
held that Agent Calhoun’s warrantless entries onto Smith’s land
did not implicate the Fourth Amendment because Smith’s land was
an “open field.” Second, the district court held that Agent
Calhoun’s view of the interior of the tractor trailer with a
flashlight on March 1 was not a Fourth Amendment search because
Agent Calhoun did not physically enter the locked tractor
16
trailer. Third, the district court held that Agent Calhoun’s
insertion of the carpenter’s scope into the tractor trailer on
March 9 was a search, but it was justified under the “automobile
exception” to the Fourth Amendment’s warrant requirement because
the tractor trailer was a vehicle and Agent Calhoun had probable
cause to believe that it contained evidence of illegal liquor
trafficking. Fourth, the district court characterized any
impact on Smith’s Fourth Amendment rights as a result of Agent
Calhoun’s actions as de minimis. On this final point, the
district court emphasized that the government had begun its
video surveillance of the Halifax Property before March 9 and
that the evidence seen on March 9 inside the tractor trailer was
cumulative to the evidence found at the Property on May 12,
2006.
On appeal, Smith first takes issue with the district
court’s ruling that the Pittsylvania County land constituted an
“open field.” In Hester v. United States, 265 U.S. 57 (1924),
the Supreme Court held that the Fourth Amendment does not extend
to open fields. Id. at 59. The Court’s holding in Hester was
clarified in Oliver v. United States, 466 U.S. 170 (1984). In
Oliver, the Court held that “an individual may not legitimately
demand privacy for activities conducted out of doors in fields,
except in the area immediately surrounding the home [the
curtilage].” Id. at 178. The Court further noted that an open
17
field “need be neither ‘open’ nor a ‘field’ as those terms are
used in common speech. For example . . . a thickly wooded area
nonetheless may be an open field as that term is used in
construing the Fourth Amendment.” Id. at 180 n.11.
In United States v. Dunn, 480 U.S. 294 (1987), the Supreme
Court stated that the critical component of the open
fields/curtilage inquiry is “whether the area harbors the
intimate activity associated with the sanctity of a man’s home
and the privacies of life.” Id. at 300 (citation and internal
quotation marks omitted). The Court in Dunn went on to list
four factors that should be considered in this analysis: “the
proximity of the area claimed to be curtilage to the home,
whether the area is included within an enclosure surrounding the
home, the nature of the uses to which the area is put, and the
steps taken by the resident to protect the area from observation
by people passing by.” Id. at 301.
Applying these factors, it is clear that the district court
did not err when it concluded that the land in Pittsylvania
County was an open field. There is no evidence that the land
was near the curtilage of a home or that there were any domestic
uses for the land. In addition, there is no indication in the
record that Smith took meaningful steps to prevent this land
from being observed. The land must be characterized as an open
field and, therefore, Smith cannot challenge either Agent
18
Calhoun’s March 1 or March 9, 2006 entry onto his land in
Pittsylvania County.
Smith also argues that Agent Calhoun’s shining of the
flashlight into the open gap in the rubber stripping of the
tractor trailer on March 1, 2006 constituted an illegal search. 5
With regard to this argument, we find no Fourth Amendment
violation.
Police officers do not conduct a search under the Fourth
Amendment when, stationed in a place where they have a right to
be, they observe objects in plain view, or use a flashlight to
illuminate the area where the object is located. See id. at 305(“Here, the officers’ use of the beam of a flashlight, directed
through the essentially open front of respondent’s barn, did not
transform their observations into an unreasonable search within
the meaning of the Fourth Amendment.”); Texas v. Brown, 460 U.S.
730, 739-40 (1983) (“It is likewise beyond dispute that Maples’
action in shining his flashlight to illuminate the interior of
Brown’s car trenched upon no right secured to the latter by the
Fourth Amendment.”). Thus, Agent Calhoun did not search the
5
The government does not contend that Smith had no
reasonable expectation of privacy in the tractor trailer.
However, we agree with the district court that Smith had such an
expectation of privacy in the tractor trailer. Cf. United
States v. Wright, 991 F.2d 1182, 1186 (4th Cir. 1993) (holding
that defendant had reasonable expectation of privacy in a barn
in an open field).
19
tractor trailer when, standing outside of it, he pointed his
flashlight in the open gap in the rubber stripping of the
tractor trailer, which exposed the liquor jugs inside the
tractor trailer.
Smith’s challenge to Agent Calhoun’s use of the carpenter’s
scope on March 9, 2006 is equally without merit. Initially, we
note that the government concedes that Agent Calhoun’s use of
the carpenter’s scope constituted a warrantless search. See New
York v. Class, 475 U.S. 106, 114-15 (1986) (noting that a search
of an automobile occurs when a police officer physically enters
the automobile).
An established exception to the warrant requirement is the
“automobile exception.” United States v. Kelly, 592 F.3d 586,
589 (4th Cir.), cert. denied, 130 S. Ct. 3374 (2010). Under
this exception, a police officer may search a vehicle without a
warrant if “probable cause exists to believe it contains
contraband” and the vehicle is “readily mobile.” Pennsylvania
v. Labron, 518 U.S. 938, 940 (1996). If both conditions are
met, the police officer may conduct a warrantless search “that
is as thorough as a magistrate could authorize in a warrant.”
United States v. Ross, 456 U.S. 798, 800 (1982). Furthermore,
such a search may cover all areas of the vehicle, including any
of its “secret compartments.” United States v. Bullock, 94 F.3d
896, 899 (4th Cir. 1996).
20
In California v. Carney, 471 U.S. 386 (1985), the Supreme
Court held that the police did not need a warrant in order to
enter a motor home parked in a public place where probable cause
to search was present. Id. at 393-94. The motor home was
capable of functioning as a home; it was stationary; and the
shades were drawn, including one across the front window. Id.
at 388. Indeed, the Court observed that the motor home
“possessed some, if not many of the attributes of a home.” Id.
at 393. Nevertheless, the Court held that it is “clear that the
vehicle falls clearly within the scope” of the automobile
exception to the warrant requirement. Id. The Court relied on
“two requirements for application of the [automobile]
exception.” Id. at 394. The first is “the ready mobility of
the vehicle,” and the second is its “presence . . . in a setting
that objectively indicates that the vehicle is being used for
transportation.” Id. Even though the motor home in Carney was
parked and not being used for transportation at the moment, it
satisfied the second test presumably because it was not located
in a place “regularly used for residential purposes—temporary or
otherwise.” Id. at 392. The Court held that “the vehicle was
so situated that an objective observer would conclude that it
was being used not as a residence, but as a vehicle.” Id. at
393.
21
Following Carney, courts have applied that case to travel
trailers, see United States v. Ervin, 907 F.2d 1534, 1537 (5th
Cir. 1990) (upholding warrantless search of travel trailer under
the automobile exception), and tractor trailers, see United
States v. Navas, 597 F.3d 492, 498-500 (2d Cir.) (upholding
warrantless search of tractor trailer under the automobile
exception even though cab was not attached to tractor trailer),
cert. denied, 131 S. Ct. 320 (2010).
In Navas, in a thorough opinion, the Second Circuit held
that the automobile exception applied to a tractor trailer
unhitched from its cab, even when the defendants were already
placed under arrest at the time of the search. Id. at 501. The
court reiterated that “a vehicle’s inherent mobility—not the
probability that it might actually be set in motion—is the
foundation of the [automobile exception’s] mobility rationale.”
Id. at 498. Thus, “the mobility rationale . . . does not turn
on case-by-case determinations by agents in the field regarding
either the probability that a vehicle could be mobilized or the
speed with which movement could be achieved.” Id.In this case, the automobile exception applies to the
tractor trailer on the land in Pittsylvania County. The tractor
trailer clearly was inherently mobile, and counsel for Smith
conceded at oral argument that the tractor trailer could be
moved by simply attaching a cab to the tractor trailer.
22
Moreover, the recent unloading activity at the tractor trailer
suggested that it might be moved when all of the liquor jugs
were unloaded. In short, embracing Smith’s position here would
contravene the sound reasoning of both Carney and Navas.
The remaining question is whether Agent Calhoun had
probable cause to conduct the search on March 9, 2006. Probable
cause exists “where the known facts and circumstances are
sufficient to warrant a [person] of reasonable prudence in the
belief that contraband or evidence of a crime will be found.”
Ornelas v. United States, 517 U.S. 690, 696 (1996). Probable
cause is a “commonsense conception that deals with the factual
and practical considerations of everyday life.” Kelly, 592 F.3d
at 592 (citation and internal quotation marks omitted). In
assessing whether probable cause exists, courts must “examine
the facts from the standpoint of an objectively reasonable
police officer, giving due weight to inferences drawn from those
facts by local law enforcement officers.” Id. (citation,
internal quotation marks, and ellipsis omitted).
At the time Agent Calhoun inserted the carpenter’s scope
into the tractor trailer, he had probable cause to believe that
evidence of illegal liquor trafficking was in the tractor
trailer. Agent Calhoun knew that liquor jugs are commonly used
to transport illegal liquor; he had seen multiple liquor jugs
inside the tractor trailer on March 1; he heard evidence of
23
illegal liquor manufacturing at the Halifax Property before
March 9; and he believed that individuals had unloaded some
liquor jugs from the tractor trailer between March 1 and March 9
because the liquor jugs had been reconfigured inside the tractor
trailer, and there were loading pallets outside the tractor
trailer on March 9. Such facts would lead a reasonably prudent
person to believe that “contraband or evidence of a crime
[would] be found.” Ornelas, 517 U.S. at 696.
In sum, we hold the district court did not err when it
rejected Smith’s Fourth Amendment arguments. 6
III
Next, Smith challenges the sufficiency of the evidence
supporting his conviction for fraudulent receipt of SSA funds
under 18 U.S.C. § 641. We review challenges to the sufficiency
of the evidence de novo. United States v. Kelly, 510 F.3d 433,
440 (4th Cir. 2007). “A defendant challenging the sufficiency
of the evidence to support his conviction bears a heavy burden.”
United States v. Beidler, 110 F.3d 1064, 1067 (4th Cir. 1997)
(citation and internal quotation marks omitted). We will uphold
a jury’s verdict “if, viewing the evidence in the light most
6
In light of this holding, we need not address the district
court’s conclusion that any impact on Smith’s Fourth Amendment
rights as a result of Agent Calhoun’s actions was de minimis.
24
favorable to the government, it is supported by substantial
evidence.” United States v. Reid, 523 F.3d 310, 317 (4th Cir.
2008). Substantial evidence is present if “a reasonable finder
of fact could accept [the evidence] as adequate and sufficient
to support a conclusion of a defendant’s guilt beyond a
reasonable doubt.” United States v. Burgos, 94 F.3d 849, 862
(4th Cir. 1996) (en banc). “[W]e do not weigh the evidence or
assess the credibility of witnesses, but assume that the jury
resolved any discrepancies in favor of the government.” Kelly,
510 F.3d at 440.
To be convicted under § 641, the government must prove
beyond a reasonable doubt that: (1) the money described in the
indictment belonged to the United States or an agency thereof;
(2) the defendant stole, fraudulently received, or converted the
money to his own use; and (3) the defendant did so knowingly
with intent to deprive the government of the money. United
States v. McRee, 7 F.3d 976, 980 (11th Cir. 1993). With respect
to the intent element, the defendant must know that his taking
of property is an unlawful conversion. Morissette v. United
States, 342 U.S. 246, 270–71 (1952). “[K]nowing conversion
requires more than knowledge that defendant was taking the
property into his possession. He must have had knowledge of the
facts, though not necessarily the law, that made the taking a
conversion.” Id.25
At trial, the government firmly established that Smith
violated § 641 because he worked while collecting SSA disability
insurance payments based on his fraudulent claim that he could
not work because he was disabled. Smith was informed, and
therefore knew, that he was supposed to notify the SSA if his
condition improved or he returned to work. Not only did Smith
fail to notify the SSA that he was working at his illegal liquor
business, but he also falsely told Watkins that he was not
working. Such evidence is sufficient to support his conviction. 7
IV
Finally, Smith challenges his sentence. We review a
sentence imposed by the district court under the deferential
abuse-of-discretion standard, regardless of whether the sentence
imposed is inside, just outside, or significantly outside the
7
Smith argues that there is insufficient evidence to prove
that he performed trial work beyond the trial work permitted
under 20 C.F.R. § 404.1592(a), and, thus, his § 641 conviction
cannot stand. We reject this argument because it is premised on
a view of the facts that the jury obviously rejected; that is,
that Smith only was involved in the illegal liquor operation for
a nine-month period. Moreover, Watkins testified that, even if
Smith was given the benefit of a trial work period, he still was
overpaid more than $10,000.00. Finally, Smith fails to cite any
authority, and we could find none, suggesting that a recipient
of disability insurance benefits is not required to notify the
SSA under 20 C.F.R. § 404.1588 during a trial work period if his
condition improves, he returns to work, or he increases the
amount of his work.
26
Guidelines range. United States v. Evans, 526 F.3d 155, 161
(4th Cir. 2008); see also Gall v. United States, 552 U.S. 38, 41
(2007). The first step in this review requires us to inspect
the record for procedural reasonableness by ensuring that the
district court committed no significant procedural errors, such
as failing to calculate or improperly calculating the Guidelines
range, failing to consider the 18 U.S.C. § 3553(a) factors, or
failing to adequately explain the sentence. United States v.
Boulware, 604 F.3d 832, 837–38 (4th Cir. 2010). The second step
requires us to consider the substantive reasonableness of the
sentence imposed, taking into account the totality of the
circumstances. Gall, 552 U.S. at 51.
On April 14, 2009, at the government’s urging, the district
court held a sentencing hearing to determine the tax loss. Such
determination was critical because the tax loss would establish
Smith’s base offense level under § 2T2.1 of the United States
Sentencing Guidelines (USSG). Robert Kehoe, an investigator
with the TTB, was the only witness who testified at the hearing.
Investigator Kehoe prepared three tax loss estimates: (1)
$217,795.50; (2) $320,045.85; and (3) $555,984.00. The tax loss
estimates were based in part on the trial evidence, Investigator
27
Kehoe’s professional experience, and an “Alcohol Yield Formula”
(AYF). 8 (J.A. 1385).
Investigator Kehoe’s maximum loss estimate assumed that the
still on the Halifax Property functioned at full capacity from
November 2004 to May 2006, and relied on Johnson’s trial
testimony that the still used 4,400 pounds of sugar for each
weekly run. Application of the AYF yielded 41,184 proof gallons
of distilled spirits and a tax liability of $555,984.00.
Investigator Kehoe’s middle loss estimate was based on the
conclusion that Smith obtained an “undocumented quantity” of
sugar from “other sources” during a “middle period” of the
still’s operation. (J.A. 1388). Investigator Kehoe reasoned
that the significant reductions in Smith’s sugar purchases
during this middle period, when compared to other evidence that
the still was operating in high gear during this same period,
only could be explained by concluding that Smith was obtaining
sugar from another sources. Investigator Kehoe’s application of
the AYF to the middle loss estimate yielded 182,362 pounds of
sugar, 23,707.10 proof gallons of distilled spirits, and
$320,045.85 of tax loss.
8
The AYF is a formula used for determining the alcohol
yield of sugar used in illegal liquor operations. The “average
yield is 13 proof gallons of alcohol per each 100 pounds of
sugar.” (J.A. 1385). Smith does not challenge the
reasonableness of the AYF.
28
Investigator Kehoe’s minimum loss estimate was based on the
documented sugar purchases between November 2004 and May 2006
from William R. Hill & Company. Application of the AYF to the
known 124,100 pounds of sugar purchased yielded 16,133 proof
gallons of distilled spirits and a tax loss of $217,795.50.
Following the hearing, the district court accepted
Investigator Kehoe’s minimum tax loss estimate of $217,795.50
because it was based on the sugar purchase records admitted at
trial and utilized a reliable methodology to determine the tax
loss. The district court also concluded that the AYF was
reasonable given the lack of records of the actual distilled
spirits produced. The district court rejected Investigator
Kehoe’s maximum estimate because it was unrealistic to assume
that the still was always operating at maximum capacity, and
rejected Investigator Kehoe’s middle estimate because it was not
based on documented sugar purchases.
Consistent with the district court’s ruling on the tax loss
issue, a Presentence Investigation Report (PSR) was prepared by
a United States Probation Officer. Because the tax loss was
more than $200,000.00 and no more than $400,000.00, Smith’s base
offense level was 18, USSG § 2T4.1(G). His base offense level
was increased four levels for his leadership role in the
offense, id. § 3B1.1(a), and two levels for perjury, id.
§ 3C1.1. Smith’s total offense level of 24, coupled with a
29
Criminal History Category of I, produced a sentencing range of
51 to 63 months’ imprisonment.
At sentencing, the district court adopted the PSR’s
findings and recommendations. Prior to imposing sentence, the
district court heard from counsel, as well as from Smith,
concerning the appropriate sentence. After considering the
advisory sentencing range, as well as the factors set forth in
18 U.S.C. § 3553(a), the district court sentenced Smith to
forty-eight months’ imprisonment due to his age and physical
condition.
Smith’s challenge to the district court’s tax loss
calculation is premised on the argument that it was procedurally
unreasonable for the district court to base its calculation on
the documented purchases of sugar from William R. Hill &
Company. Smith posits that there was no evidence that Smith
purchased any sugar from the company. Consequently, the tax
loss calculation should have been based on the known liquor
purchases made by Taylor—approximately 3,000 gallons of liquor.
USSG § 2T2.1 provides that the tax loss is the amount of
taxes that the taxpayer “failed to pay or attempted not to pay.”
USSG § 2T2.1(a). The base offense level for USSG § 2T2.1 is
calculated by reference to the Tax Table in USSG § 2T4.1. USSG
§ 2T2.1(a). Under the Guidelines, the tax loss is “determined
by the same rules applicable in determining any other sentencing
30
factor.” USSG § 2T1.1, comment. (n.1). “In some instances,
such as when indirect methods of proof are used, the amount of
the tax loss may be uncertain; the guidelines contemplate that
the court will simply make a reasonable estimate based on the
available facts.” Id.; see also id. § 6A1.3(a) (noting that the
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”). In general, the
district court’s calculation concerning loss is a factual
finding reviewed for clear error. United States v. Loayza, 107
F.3d 257, 265 (4th Cir. 1997).
The district court’s finding that the tax loss was
$217,795.50 is not clearly erroneous. The district court
reasonably relied on the records of sugar purchases and the AYF
to determine the amount of untaxed liquor produced by the still
because detailed records of Smith’s actual production amounts
were unavailable. Moreover, the district court was at liberty
to reject Smith’s contention that the still did not produce
illegal liquor prior to November 2005 by crediting the
circumstantial evidence demonstrating that Smith actively
participated in the conspiracy during the time alleged and went
to great lengths to mask his participation in the conspiracy and
his relationship to the Halifax Property. The district court
31
took the most conservative view of the evidence in accepting
Investigator Kehoe’s lowest tax loss estimate, and we cannot
take issue with this prudent approach in calculating the tax
loss.
V
For the reasons stated herein, the judgment of the district
court is affirmed.
AFFIRMED
32