United States v. Dewayne Preacely

In the
United States Court of Appeals
For the Seventh Circuit
No. 12-1714
U NITED S TATES OF A MERICA,
Plaintiff-Appellee,
v.
D EW AYNE P REACELY,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 09 CR 77—Suzanne B. Conlon, Judge.
A RGUED O CTOBER 22, 2012—D ECIDED D ECEMBER 7, 2012
Before B AUER and R OVNER, Circuit Judges, and R ANDA,
District Judge.Œ
R OVNER, Circuit Judge. DeWayne Preacely pleaded
guilty in 2009 to one count of tax fraud in violation of
26 U.S.C. § 7206(2). The district court sentenced him to
Œ
The Honorable Rudolph T. Randa, District Judge for the
United States District Court for the Eastern District of Wis-
consin, sitting by designation.
2 No. 12-1714
18 months’ imprisonment to be followed by a three-
year term of supervised release. After his release from
prison, the district court revoked Preacely’s supervised
release when the court concluded that he had violated
a special condition of his supervised release prohibiting
him from participating in his former occupation of tax
preparer. Preacely appeals from the district court’s deci-
sion to sentence him to a nine-month term of re-imprison-
ment followed by an additional three months of super-
vised release.
I.
The facts on appeal are simple and undisputed. By
way of brief background, Preacely’s underlying convic-
tion stemmed from his involvement in procuring fraudu-
lent tax refunds for clients of his business, Personal Tax.
Preacely’s clients received illegitimate refunds by in-
cluding on their tax returns items such as nonexistent
business losses and dependents. Thus, in addition to
the standard conditions of supervised release, Preacely’s
2009 conviction contained the following special condi-
tion of supervised release: “Defendant is not to act di-
rectly or indirectly as a tax preparer during the term
of supervised release except for his own family.” When
the district court imposed the special condition of super-
vised release, Preacely’s counsel asked the following
question by way of clarification: “Judge, may he own
the business if he himself does not prepare any taxes
himself?” The court responded, “No. No. I think he has
compromised his integrity with a significant number of
No. 12-1714 3
fraudulent tax returns, and you should not engage in
the business of tax preparation directly or indirectly.”
Preacely was released from prison and began his term
of supervised release in October 2010. Shortly thereafter,
he transferred ownership of Personal Tax, at least on
paper, to his wife. In early 2012, Preacely received a
new probation officer, Mary Pierpauli. Pierpauli met
with Preacely in February 2012, at which time she
asked him about his involvement with Personal Tax.
Preacely told Pierpauli that he no longer worked for
Personal Tax, and that he was self-employed as a book-
keeper.
Meanwhile, the IRS had initiated another investigation
of Personal Tax after discovering that in 2011, 99.5% of
the 1,762 tax returns filed by Personal Tax claimed
refunds—of which over half were claims of self-employ-
ment income for alleged in-home childcare providers
or beauticians. During its investigation, the IRS sent an
undercover agent to Personal Tax; when the agent was
there he inquired about a job and asked to speak to
the vice-president. He was directed to Preacely, who
told the undercover agent that if he had inquired earlier
during the tax season Preacely would have hired him.
As part of its investigation the IRS also executed a
search warrant at Personal Tax and interviewed a
number of Personal Tax employees. The picture that
emerged from these interviews painted Preacely as con-
siderably involved in the business operations of Personal
Tax. It came to light that Preacely hired employees, in-
stalled computer software and trained employees to use
4 No. 12-1714
it, signed employee paychecks, handled at least one
complaint from a client, and had answered employees’
questions while they prepared tax returns. Based on
this information, the government moved for an arrest
warrant and a rule to show cause why Preacely’s super-
vised release should not be revoked. A probation officer
submitted a report charging Preacely with two Grade C
violations of his supervised release: (1) lying to his proba-
tion officer by denying that he worked for Personal
Tax, and (2) acting indirectly as a tax preparer through
his involvement with Personal Tax. The recommended
range of re-imprisonment for a Grade C violation is
between three and nine months.
In March 2012, the district court held a rule to show
cause hearing. Preacely essentially conceded the facts
outlined by the government, but argued that they failed
to establish that he had acted “directly or indirectly as a
tax preparer.” Instead, he contended that he had been
involved only administratively with the business by
doing things such as dropping off food, office supplies,
and signing paychecks (because his name had always
been on the account). He maintained that such behavior
was not prohibited by the specific terms of his super-
vised release, and also argued that if the supervised
release term were intended more broadly to bar his
affiliation with Personal Tax entirely then it should
have specified as much. He also argued that the
special condition of supervised release, unless narrowly
construed to bar only the direct or indirect preparation
of tax returns, was ambiguous and violated his due
process rights.
No. 12-1714 5
The district court was unimpressed with Preacely’s
arguments and found by a preponderance of the
evidence that he had violated the terms and conditions
of his supervised release. The court chastised Preacely
for taking the position that he had not violated the
terms of his supervised release, noting that the evidence
established that he was “running a tax preparer’s busi-
ness.” The court further noted that Preacely’s narrow
view of the term of supervised release coupled with his
lie to the probation officer “violated the very essence of
the punishment imposed in this case.” The court thus
sentenced Preacely to a nine-month term of re-imprison-
ment. Preacely appeals.
II.
Our review of a sentence for violating a term of super-
vised release is highly deferential. Indeed, we have
noted that “it might be comparable to ‘the narrowest
judicial review of judgments we know,’ ” which is judicial
review of prison disciplinary sanctions. United States v.
Robertson, 648 F.3d 858, 859 (7th Cir. 2011) (quoting
United States v. Kizeart, 505 F.3d 672, 675 (7th Cir. 2007)).
The district court may revoke supervised release if
a violation of a condition of supervised release is
proven by a preponderance of the evidence. 18 U.S.C.
§ 3583(e)(3). We review the revocation of supervised
release only for an abuse of discretion, and we re-
view the district court’s factual findings supporting
that revocation for clear error. United States v. Musso,
643 F.3d 566, 570 (7th Cir. 2011).
6 No. 12-1714
Preacely’s primary argument on appeal is that the
evidence adduced at his revocation hearing did not
establish by a preponderance of the evidence that he
acted directly or indirectly as a tax preparer. Unsur-
prisingly, to support his argument Preacely takes the
most narrow possible view of what he was forbidden
from doing by the special term of supervised release.
Specifically, he argues that he was simply performing
“administrative duties” associated with running
Personal Tax and that no evidence directly establishes
his involvement in the precise act of preparing income
tax returns.
Preacely’s argument misses the mark. First, he fails to
acknowledge the district court’s clarifying comments
at sentencing reflecting that Preacely should neither
continue owning Personal Tax nor “engage in the
business of tax preparation” directly or indirectly. There
is no question that the evidence recounted at the super-
vised release revocation established Preacely’s involve-
ment in the “business of tax preparation.” And the
district court did not clearly err by concluding that by
involving himself in the business of Personal Tax,
Preacely was indirectly acting as a tax preparer. Preacely
accepted the facts outlined by the government at the
hearing—contesting only the “inferences” drawn from
the facts. Those facts established that, among other
things, Preacely answered questions for employees
at Personal Tax preparing tax returns. That fact alone
establishes by a preponderance of the evidence that
Preacely acted indirectly as a tax preparer.
No. 12-1714 7
Preacely’s statement to his probation officer that he
was no longer involved with Personal Tax buttresses
the district court’s conclusion that Preacely’s behavior
violated the terms of his supervised release. Indeed,
although Preacely now protests that he did not under-
stand the prohibition against acting as a tax preparer
to include managing day-to-day affairs at Personal Tax,
the district court would not be clearly erroneous to
infer otherwise from the fact that Preacely falsely
denied his involvement in the business when his proba-
tion officer inquired. In short, the district court did not
abuse its discretion when it concluded that Preacely’s
rather extensive involvement with Personal Tax violated
the very essence of the special condition of supervised
release prohibiting Preacely from directly or indirectly
working as a tax preparer.
In a related vein, Preacely argues that the prohibition
on working directly or indirectly as a tax preparer is
unconstitutionally vague. Specifically, he claims that the
condition fails to adequately specify what is and is not
forbidden. He also maintains that because the district
court did not adequately define what constituted
working “indirectly as a tax preparer,” he did not
receive fair notice that his activities at Personal Tax
were prohibited by the terms of his supervised release.
We are unconvinced by Preacely’s due process chal-
lenge to the special condition of supervised release. A
condition of supervised release is unconstitutionally
vague if it fails to provide a person of reasonable intelli-
gence adequate notice of what conduct is prohibited.
8 No. 12-1714
United States v. Schave, 186 F.3d 839, 843 (7th Cir. 1999).
The primary problem with Preacely’s argument is that he
raises it too late. The time for Preacely to challenge the
condition was at sentencing or on direct appeal, not at
his revocation hearing. See United States v. Flagg, 481
F.3d 946, 950 (7th Cir. 2007) (“The proper method for
challenging a conviction and sentence is through direct
appeal or collateral review, not a supervised release
revocation proceeding.”). In any event, we are unper-
suaded that the contested special condition of super-
vised release failed to make it clear that Preacely should
avoid being involved in the day-to-day operation of
Personal Tax, particularly when the provision is con-
sidered in conjunction with the district court’s com-
ments at sentencing.
Finally, Preacely concedes that the district court’s
choice of nine months’ re-imprisonment, which was
within the statutory limits and the applicable recom-
mended range of imprisonment under the Sentencing
Guidelines policy statements, is not plainly unreasonable.
See United States v. Berry, 583 F.3d 1032, 1034 (7th Cir.
2009); Kizeart, 505 F.3d at 674-75.
III.
For the foregoing reasons we A FFIRM the judgment of
the district court.
12-7-12