United States v. Smith

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, 
Plaintiff-Appellee, No. 03-10548
v.  D.C. No.
DAVID L. SMITH, CR-00-00229-MCE
Defendant-Appellant.

UNITED STATES OF AMERICA,  No. 03-10604
Plaintiff-Appellee,
v.  D.C. No.
CR-00-00229-MCE
HERBERT A. BATES,
OPINION
Defendant-Appellant.

Appeals from the United States District Court
for the Eastern District of California
Morrison C. England, District Judge, Presiding
Argued and Submitted
May 9, 2005—San Francisco, California
Submission Vacated May 31, 2005
Resubmitted September 2, 2005
Filed September 13, 2005
Before: Andrew J. Kleinfeld, Michael Daly Hawkins, and
Susan P. Graber, Circuit Judges.
Opinion by Judge Hawkins
13069
13074 UNITED STATES v. SMITH
COUNSEL
John Balazs, Sacramento, California, for defendant-appellant
Smith.
UNITED STATES v. SMITH 13075
Victor S. Haltom, Sacramento, California, for defendant-
appellant Bates.
Samantha S. Spangler, Assistant United States Attorney, Sac-
ramento, California, for the plaintiff-appellee.
OPINION
HAWKINS, Circuit Judge:
Defendants David Larry Smith (“Smith”) and Herbert
Arthur Bates (“Bates”) appeal their convictions on multiple
counts of tax fraud, mail and wire fraud, money laundering,
and conspiracy, as well as their sentences. Defendants chal-
lenge: (1) arraignment by a magistrate judge, (2) multiplicity
of the indictment resulting in a multiplicitous sentence on the
three conspiracy counts, (3) an indictment passed on by grand
jurors not questioned about their feeling towards the IRS, (4)
denial of a suppression motion based on alleged defects in the
arrest and search warrants, (5) sufficiency of the evidence on
the tax counts, (6) denial of a motion for a new trial based on
alleged petit juror bias, and (7) denial of a multiple conspiracy
instruction. In addition to disputing the district court’s appli-
cation of various sentencing guidelines, Smith and Bates
make a United States v. Booker, 125 S. Ct. 738 (2005), chal-
lenge to sentencing based on facts not found by a jury, and an
ex post facto challenge to application of an advisory guideline
system to their sentences. We have jurisdiction under 28
U.S.C. § 1291 and affirm the convictions in all respects and
remand on sentencing pursuant to United States v. Ameline,
409 F.3d 1073 (9th Cir. 2005) (en banc).
FACTS AND PROCEDURAL HISTORY
The government brought Smith and Bates1 to trial for
1
Smith and Bates were tried as co-defendants with another alleged par-
ticipant in the conspiracy, Charlotte Wadsworth. Wadsworth was acquitted
by the jury.
13076 UNITED STATES v. SMITH
enlisting hundreds of clients to set up trusts known as Unin-
corporated Business Organizations, or “UBOs,” which pur-
portedly avoided taxes on income streamed into them; the
defendants charged their clients to set up and conduct transac-
tions for the UBOs, only to later steal their clients’ money.
The defendants advised their clients to transfer all of their
income and assets — including their businesses, homes, rela-
tive’s homes, furniture, jewelry, cars, and even pets — into
the UBO. Defendants also advised clients to ask their employ-
ers to issue pay checks, commission checks, or other income
sources in the names of their UBOs instead of in their names.
Moreover, the defendants assured clients that they could
use the UBOs to pay a variety of expenses, to be deducted as
“business expenses” from the UBO’s income. These business
expenses included everything from mortgage and utility pay-
ments to business equipment to haircuts, pet needs, laundry,
clothes, and lawn care. As one client testified, “practically
everything we did could be seen as a legitimate deduction.”
Another client echoed that “pretty much everything could be
deducted or be used as legitimate business expenses. . . .
Probably certain personal items were not exempt, so to speak.
Like toothpaste.”
Numerous clients testified at trial how defendants (usually
Smith2) advised them that they did not have to pay taxes once
they paid the defendants to establish a UBO. For example,
Phyllis Ellen Denby testified that Bates advised her to estab-
lish a UBO to distribute stock profits in a way the IRS would
not be aware of them. Bates told Denby and her husband that
no taxes need be paid on “any money” that was in the UBO.
Charles Michael Stoker testified that Smith told him and his
wife that by placing their home into the UBO, the home could
be sold and yet he could withhold the proceeds from tax fil-
2
Bates told clients that he took care of dealings with the IRS and legal
advice, while Smith provided investment advice.
UNITED STATES v. SMITH 13077
ing. David Vette testified that Smith informed him that “as
long as the UBO did not have a profit at the end of the year,
there was no taxable consequence. I did not have to file a tax
return.” Ronald J. Herrema testified that Smith told him that
UBOs are never audited and do not have any filing require-
ments. Smith strongly recommended that Herrema “get rid of
any cash” in the UBO at the end of the year to “not raise a
flag to the Internal Revenue Service,” and thus “never [be]
subject to filing requirements or IRS audit inspections.” And,
Smith “highly suggested” that he and his wife kept their
income below $10,500, the ceiling below which married cou-
ples were not required to file tax returns.
Similarly, James Allen Herrema testified that Smith told
him that the benefit of the UBO receiving his income is that
he “would not have to file personal income tax on that
income.” Smith plainly stated that income into the UBO “fell
into a category of not being taxable.” When Herrema specifi-
cally asked whether he had to continue filing personal tax
returns, Smith said “it was not necessary.” Sharon Ludders
testified that she was told that everything she owned could be
transferred into the UBO, and that the trust would “take care”
of her obligations to pay personal income taxes. Judith Reitz
testified that Smith told her that “it wasn’t necessary” for her
UBO to file a tax return; “[i]n fact, it was really not desir-
able.” When Ms. Reitz said she planned to continue filing per-
sonal income tax returns, Smith explicitly told her not to file.
Michael Joseph Young was told by Smith that trust
expenses would be deducted from the income into the trust,
to achieve a zero balance at the end of the year. “You didn’t
have to worry about filing a return or anything like that on it.”
Young understood from Smith that the money that went into
the UBO did not need to be reflected on his personal income
tax return, either. Lawrence Newton Craig testified that Smith
said that UBOs did not have to file any tax returns. Smith said
UBOs were “basically a tax shelter.”
13078 UNITED STATES v. SMITH
In addition to the above advice, Smith had a “particular
way” at “particular bank[s]” to set up the UBO accounts,
which he did in person. Smith established non-interest-
bearing accounts for the UBOs, which the government argued
kept the banks from filing with the IRS to report interest
income.
Smith told clients not to discuss their UBOs with qualified
accountants or attorneys. Bates told one set of clients to not
even tell their closest relatives about their UBO. Smith told
another client that she did not have the authority to provide
UBO-related documents to the IRS because a vote of the
trustees was needed. Bates and Smith also insisted on han-
dling correspondence with the IRS. For example, Bates would
write the IRS requesting legal authority for reporting certain
income to the IRS, as well as asking the IRS to review certain
portions of the Constitution regarding the power to collect
taxes. The letters attempted to avoid paying taxes. Indeed,
with or without such letters, most of the defendants’ clients
did not file tax returns and/or filed tax returns that omitted
substantial income.
In order to make the UBO scheme work, many clients were
told that they had to make “distributions” out of their UBOs
to avoid filing taxable income within them. As one client put
it, “if there was a [UBO] profit, we would do a distribution,
and that would eliminate any of the profit, and there would be
no taxable occurrence.” Clients were told that their “distribu-
tion” was “going offshore into an investment program . . . and
it would earn a profit . . . and [they] would have access to it
down the road.” Smith offered several ways to get the distri-
bution money back, including an out-of-country credit card
account or a direct payment to Smith to move the money off-
shore for an eleven percent charge. Although clients could
access their distribution or investment money for a while,
Smith eventually transferred the money to another bank, and
the clients could no longer access their money. Client losses
ranged from $20,000 to $400,000.
UNITED STATES v. SMITH 13079
Agent Bridgette O’Keeffe (“Agent O’Keeffe”), the govern-
ment’s summary witness, testified, among other things,
regarding (1) each of the tax returns charged in the counts
pertaining to aiding and assisting false or fraudulent returns,
and (2) the numerous mail fraud and wire fraud counts,
explaining the monies she traced that clients had invested
with the defendants that ended up in Cayman Islands
accounts.
The jury found Bates guilty of: (1) conspiracy to defraud
the United States in the ascertainment, computation, or assess-
ment of taxes, in violation of 18 U.S.C. § 371; (2) multiple
counts of aiding and assisting in the preparation and presenta-
tion of false and fraudulent tax returns, in violation of 26
U.S.C. § 7206(2); (3) conspiracy to engage in mail or wire
fraud, in violation of 18 U.S.C. § 371; and (4) conspiracy to
launder money, in violation of 18 U.S.C. § 371. The jury also
found Smith guilty of the above charges, as well as multiple
counts of each of the following: (1) mail fraud, in violation of
18 U.S.C. § 1341; (2) wire fraud, in violation of 18 U.S.C.
§ 1343; (3) money laundering, in violation of 18 U.S.C.
§§ 1956(a)(1)(A) 1956(a)(1)(B); and (4) engaging in financial
proceeds of unlawful activity, in violation of 18 U.S.C.
§ 1957.
Bates and Smith moved for a new trial based on the alleged
lack of impartiality of Jurors #9 and #1. Juror #9 wrote Agent
O’Keeffe after the trial suggesting they “get acquainted.”
Juror #9 did not converse with Agent O’Keeffe during the
trial, at most exchanging a smile across elevators. The district
court considered allegations of Juror #9’s bias, and found “ab-
solutely no tangible evidence that there was any extraneous
information or extraneous influence on this juror by anyone.”
During deliberations, Juror #1 wrote that she was criticized
by the foreperson and felt intimidated. The district court ques-
tioned Juror #1 outside the presence of other jurors, where-
upon Juror #1 told the court she felt able to return to
13080 UNITED STATES v. SMITH
deliberations and make future decisions based on her own
conscience and belief. After considering the evidence as to
Jurors #1 and #9, the district court denied the motion for a
new trial.
At the close of the evidence, Smith moved for judgment of
acquittal on the counts charging him with aiding and assisting
in the preparation and presentation of false tax returns and
conspiracy to commit tax fraud. The district court denied the
motion as to both Smith and Bates, and denied the renewed
motion after the verdict as to all defendants.
Smith was sentenced to 151 months’ imprisonment; Bates
to 136 months’ imprisonment. The district court also ordered
three defendants, including Smith and Bates, to forfeit $1 mil-
lion, pursuant to the parties’ stipulation.
DISCUSSION
I. Magistrate Judge’s Authority to Conduct Arraignment
Magistrate Judge John F. Moulds presided over Smith’s
hearing for the entry of a plea. The magistrate judge asked
Smith’s counsel, Scott Tedmon, for the entry of the plea to the
indictment. Smith’s counsel had no objection and stated that
his client was prepared to enter a plea of not guilty and
requested a jury trial. The magistrate judge then scheduled a
status conference before District Judge Lawrence Karlton.
Smith now argues that the magistrate judge had no author-
ity to arraign Smith under Rules 5 and 10 of Criminal Proce-
dure, and that Judge Karlton erroneously denied his motion to
dismiss the indictment on this ground. We review de novo the
district court’s refusal to dismiss an indictment for lack of
jurisdiction. United States v. Phillips, 367 F.3d 846, 854 (9th
Cir.), cert. denied, 125 S. Ct. 479 (2004).
Rule 5 pertains to initial appearances before a magistrate
judge for “arrest[s] under a warrant issued upon a complaint
UNITED STATES v. SMITH 13081
or any person making an arrest without a warrant.” Fed. R.
Crim. P. 5(a) (2000). Thus, Rule 5(c)’s provision that a mag-
istrate judge may not accept a plea in a felony case is inappo-
site.
Nor does Smith cite any violations of Rule 10 (stating the
requirements for an arraignment in open court) either, except
to say that magistrate judges are not authorized to conduct a
Rule 10 arraignment. Smith is mistaken. Rule 72-302(b)(1) of
the Local Rules of the United States District Court for the
Eastern District of California grants authority to magistrate
judges to handle pretrial matters in felony cases, and does not
exclude the arraignment process for a not guilty plea. Thus,
the magistrate judge had authority to arraign Smith.
II. Multiplicity of Conspiracy Counts & Plain Error
The three conspiracy counts are: (1) conspiracy to defraud
the United States in the ascertainment, computation, or assess-
ment of taxes, in violation of 18 U.S.C. § 371; (2) conspiracy
to engage in mail or wire fraud, in violation of 18 U.S.C.
§ 371; and (3) conspiracy to launder money, in violation of 18
U.S.C. §§ 371 and 1956(h). Bates and Smith3 argue that these
three conspiracy counts are multiplicitous because there was
only one combined scheme, i.e., one conspiracy. Bates asserts
that the convictions and consecutive sentences on these counts
violate the Double Jeopardy Clause and separation of powers
principles. Bates bases these claims not on the multiplicity of
the indictment, but rather the multiplicity of sentences
imposed by the district court.
Typically, whether a defendant’s double jeopardy rights
have been violated is reviewed de novo. United States v. Stod-
dard, 111 F.3d 1450, 1454 (9th Cir. 1997). However, Bates
3
It appears from the joint reply brief that Smith joins Bates in this argu-
ment. (“[A]ppellants’ consecutive sentences on the three conspiracy
counts in this case are multiplicitous and constitutionally infirm.”)
13082 UNITED STATES v. SMITH
did not clearly raise the multiplicity of sentences issue below.
Though Bates claims that he raised the issue when his counsel
argued at the sentencing hearing that “the Government’s case
against [Bates] was one set of acts done for a common pur-
pose, and that he, therefore, should be sentenced accordingly
rather than for multiple reasons,” this one sentence is insuffi-
cient to raise a double jeopardy objection with respect to the
three conspiracy counts.
Nevertheless, a multiplicious sentence cannot be waived.4
See Launius v. United States, 575 F.2d 770, 772 (9th Cir.
1978) (per curiam) (“[I]f sentences are imposed on each count
of [a] multiplicious indictment the defendant is not forced to
serve the erroneous sentence because of any waiver.”) (inter-
nal quotations and citation omitted). Because Bates failed to
raise this issue before the district court, plain error review
applies. See United States v. Freeman, 6 F.3d 586, 600-01
(9th Cir. 1993) (consecutive sentences for duplicitous charges
subject to plain error review); United States v. Hernandez-
Guardado, 228 F.3d 1017, 1028-29 (9th Cir. 2000) (failure to
raise double jeopardy claim based on a second trial not
waived absent evidence of a voluntary and knowing relin-
quishment of right against double jeopardy).
For Bates to prevail under plain error review, he must show
(1) an error, (2) that is plain, (3) that affects substantial rights,
and (4) that seriously affects the fairness, integrity, or public
reputation of judicial proceedings. Johnson v. United States,
520 U.S. 461, 467 (1997).
[1] “The Double Jeopardy Clause prohibits subdivision of
a single criminal conspiracy into multiple violations of one
conspiracy statute.” United States v. Montgomery, 150 F.3d
983, 989 (9th Cir. 1998) (internal quotations and citation
4
Multiplicity of sentences is unlike the issue of the multiplicity of an
indictment, which can be waived if not raised below. United States v.
Klinger, 128 F.3d 705, 708 (9th Cir. 1997).
UNITED STATES v. SMITH 13083
omitted). Because all three conspiracy counts in this case vio-
late the same statute—18 U.S.C. § 3715 —this court uses the
five-factor test adopted in Arnold v. United States, 336 F.2d
347, 350 (9th Cir. 1964), rather than the test articulated in
Blockburger v. United States, 284 U.S. 299, 304 (1932). See
United States v. Luong, 393 F.3d 913, 916 (9th Cir. 2004),
cert. denied, 125 S. Ct. 1953 and 1963 (2005); Montgomery,
150 F.3d at 990.
[2] The Arnold analysis has been summarized by Stoddard:
To determine whether two conspiracy counts charge
the same offense and so place the defendant in dou-
ble jeopardy, we consider five factors: (1) the differ-
ences in the periods of time covered by the alleged
conspiracies; (2) the places where the conspiracies
were alleged to occur; (3) the persons charged as
coconspirators; (4) the overt acts alleged to have
been committed; and (5) the statutes alleged to have
been violated.
111 F.3d at 1454 (internal quotations and citation omitted).
Rather than focus on any one factor, the court considers all
the factors together to determine if there was more than one
agreement. “ ‘The fact that there is some interrelationship
between conspiracies does not necessarily make them the
same criminal enterprise,’ where one conspiracy involves
unlawful transactions ‘quite distinct in their means of execu-
tion and their objects.’ ” United States v. Guzman, 852 F.2d
1117, 1121 (9th Cir. 1988) (quoting United States v. Ingman,
541 F.2d 1329, 1331 (9th Cir. 1976) (per curiam).
5
Title 18 U.S.C. § 371 states, in part:
If two or more persons conspire either to commit any offense
against the United States, or to defraud the United States, or any
agency thereof in any manner or for any purpose, and one or
more of such persons do any act to effect the object of the con-
spiracy, each shall be fined under this title or imprisoned not
more than five years, or both.
13084 UNITED STATES v. SMITH
On appeal, the defendant has the burden of showing that
the multiple conspiracies charged are based on a single agree-
ment, i.e., that the conspiracies are “indistinguishable in law
and in fact.” Montgomery, 150 F.3d at 990 (citing Guzman,
852 F.2d at 1119-20). This issue is based on sufficiency of the
evidence, examining the evidence “in the light most favorable
to the prosecution to determine if any rational trier of fact
could have found that more than one conspiracy existed.” Id.
A. Time Frame
[3] The government alleged that the Count 1 conspiracy
spanned from August 14, 1981 to June 13, 1997, the Count 25
conspiracy from August 14, 1981 to February 1, 1998, and the
Count 64 conspiracy from January 1, 1987 to June 13, 1997.
Thus, there is substantial overlap in timing. It is worth noting
here that the government argued that “from the very begin-
ning” of the Count 1 agreement, there was a plan to steal the
clients’ money, which would involve mail and wire fraud
(Count 25) and money laundering (Count 64). (“From the
very beginning of the agreement between the parties, the
agreement was to engage in tax crimes together with mail and
wire fraud crimes together with money laundering crimes.”)
B. Geographic Locations
[4] Bates contends that the vast majority of activities rele-
vant to all three counts occurred in Sacramento, California,
and the Cayman Islands. The government does not dispute
this contention. The indictment and the evidence at trial sup-
port Bates’s contention that the overt acts for all three counts
occurred in the same geographic locations.
C. Participants
All four defendants were charged in Count 1, and all defen-
dants except Charlotte Wadsworth were charged in Counts 25
and 64. However, the third factor depends not only on overlap
UNITED STATES v. SMITH 13085
in membership, but also the roles of the overlapping mem-
bers. Stoddard, 111 F.3d at 1455. Bates contends that the
roles were the same in all three counts.
[5] The government argued at trial that the defendants each
played different roles in the various schemes. However, that
many overt acts are incorporated by reference between the
conspiracy counts supports the defendants’ argument that the
(different) role of each defendant was similar across the three
alleged conspiracies.
D. Overt Acts
[6] Although the overt acts for three counts are not identi-
cal, they substantially overlap. For Count 1, the government
alleged 166 overt acts; for Count 25, 151 of the 166 overt acts
are incorporated by reference, and 23 new overt acts are
added; for Count 64, overt acts are incorporated by reference
from Counts 1 and 25.
The overt acts in Count 1 generally relate to defendants: (1)
forming various UBOs, (2) accepting fees (in the form of
checks or wire transfers) for the UBOs, (3) depositing fees,
(4) serving as agents or trustees for the UBOs, (5) advising
clients they need not file taxes, (6) writing letters to clients
and the IRS, (7) forming corporations and bank accounts in
the Cayman Islands, (8) opening bank accounts in California,
and (9) authorizing wire transfers between various accounts.
Count 25 adds overt acts pertaining to specific fraudulent
investments defendants persuaded the UBO clients to pursue.
E. Statutes Violated
[7] The three conspiracy counts allege a violation of the
same statute — 18 U.S.C. § 371 — although Count 64 also
alleges a violation of 18 U.S.C. § 1956(h). However, the fifth
factor considers not only the violation of the same statute, but
13086 UNITED STATES v. SMITH
also whether the goals of the conspiracies were similar. Stod-
dard, 111 F.3d at 1456.
The government specifically addressed in closing argument
how 18 U.S.C. § 371 can relate to three separate crimes. In
arguing that “the conspiracy counts are very different,” the
government first pointed to the two distinct types of crimes
covered by § 371: (1) conspiracy to defraud the United States
in the exercise of its lawful governmental functions, and (2)
conspiracy to violate a specific section of the United States
Code. The government further explained that Count 1, the
first type of conspiracy, related to defrauding the IRS in the
assessment of taxes, whereas Counts 25 and 64 related to vio-
lations of different code sections (mail or wire fraud sections,
and money laundering sections, respectively).
However, the government argued to the jury that the goals
of defrauding the government, and engaging in mail and wire
fraud and money laundering, were all inter-related:
This case is a situation where the defendants had
a single unified plan from the very beginning. This
is not a situation where the defendants that engaged
in one type of activity and then did that for a while
and then decided to get into some other type of activ-
ity which might be fraudulent and then to launder
money at the end of day.
The defendants had a single, unified plan from, as
I say, the very get-go in this case. From the very
beginning of the agreement between the parties, the
agreement was to engage in tax crimes together with
mail and wire fraud crimes together with money
laundering crimes. That’s the only way the defen-
dants’ actions and their activities make any sense at
all is to look at all the actions as pieces of a bigger
essentially three-dimension, circular-type of a
scheme.
UNITED STATES v. SMITH 13087
The tax scheme was set up in a certain way specif-
ically for the purpose to create the ability to engage
in mail and wire fraud. . . . And the defendants could
not engage in mail and wire fraud if they did not
launder money. . . . So from the very beginning, the
defendants had it in their mind the aspect of stealing
— effectively stealing, to use a generic term, money
from the investors and use the promotion of the tax
vehicle as a way to accomplish that fraud.
The government concluded closing arguments with the point
that all the counts were fraud crimes to enrich the defendants
— with respect to the tax crimes, to collect fees on the UBOs;
with respect to money laundering, “to move the money
around and get what [defendants] need without being caught”;
and with respect to mail and wire fraud, more monetary
motives.
[8] Given the government’s contention that the goal for all
three conspiracies was one and the same — to steal money —
it appears under Stoddard that they should be treated as one
conspiracy, at least for the purpose of sentencing. Considering
all five Arnold factors, it was arguably error for Bates and
Smith to be sentenced to consecutive terms on the three con-
spiracy counts.
[9] However, an error is not plain unless it is “clear” or
“obvious.” United States v. Olano, 507 U.S. 725, 734 (1993).
Plain error “is so clear-cut, so obvious, a competent district
judge should be able to avoid it without benefit of objection.”
United States v. Turman, 122 F.3d 1167, 1170 (9th Cir. 1997)
(citing United States v. Frady, 456 U.S. 152, 163 (1982)). In
this complex case, with hundreds of overt acts, multiple
defendants, and weeks of trial, it was not plain or obvious that
only one conspiracy transpired. Indeed, the government con-
vinced the jury that the defendants engaged in three separate
conspiracies.
13088 UNITED STATES v. SMITH
[10] To muddle the multiplicity issue further, defendants
did not merely fail to argue that there was one overarching
conspiracy for double jeopardy purposes; they argued the
opposite position: that each of the three conspiracy counts
were themselves duplicitous, encompassing multiple agree-
ments and conspiracies in each one. That is, they asserted that
there were even more conspiracies. As to Count 1, Smith dis-
puted one overarching conspiracy to defraud the United States
because the overt acts covered six alleged UBOs, with differ-
ing (1) time periods, (2) identity of defendants involved, (3)
identity of taxpayers involved, and (4) specific transactional
facts. Smith posed the “same argument and analysis” from
Count 1 to Counts 25 and 64. Thus, it was not clear or obvi-
ous that the three conspiracies were multiplicitous, even at the
sentencing stage. The defendants have failed to show plain
error.
III. Dismissal of Indictment Based on Potentially Biased
Grand Jury
Smith argues that the district court erred in denying his
motion to dismiss the indictment because the grand jurors
were not questioned about their contacts with the IRS to
ensure that they could serve as impartial jurors.
We review de novo the district court’s denial of a motion
to dismiss an indictment. United States v. Rivera-Sillas, 376
F.3d 887, 889 (9th Cir. 2004). A district court may not dis-
miss an indictment for error in a grand jury proceeding unless
the error prejudiced the defendant. Bank of N.S. v. United
States, 487 U.S. 250, 254 (1988). “Substantial proof of grand
jury bias is required to overturn an indictment.” United States
v. Miller, 105 F.3d 552, 555 (9th Cir. 1997).
[11] Smith bases his grand juror (potential) bias claim on
28 U.S.C. § 1866(c)(2), which states in part that “no person
or class of persons shall be disqualified, excluded, excused, or
exempt from service as jurors: Provided, That any person
UNITED STATES v. SMITH 13089
summoned for jury service may be . . . (2) excluded by the
court on the ground that such person may be unable to render
impartial jury service.” Not surprisingly, neither § 1866(c)(2)
nor any Ninth Circuit case6 requires probing the grand jurors
with questions about their feelings toward the IRS.
[12] Given that Smith makes no factual allegation of actual
bias on the part of any grand juror in his case, he has not
shown “[s]ubstantial proof of grand jury bias,” see Miller, 105
F.3d at 555, let alone prejudice, see Bank of N.S., 487 U.S. at
254. Thus, the district court did not err in denying dismissal
of the indictment on this ground.
IV. Search and Arrest Warrants
Smith argues that the district court erred by denying his
motion to suppress evidence based on defects in the search
and arrest warrants, alleging that: (1) the search warrant
lacked particularity and was facially overbroad, (2) the gov-
ernment agents flagrantly seized items outside the scope of
the warrant, (3) the agents failed to provide a complete copy
of the warrant at the outset of the search, and (4) the search
and arrest warrants were invalid because they lacked a court
seal and the magistrate judge did not sign the arrest warrant.
6
Smith mischaracterizes United States v. Hashimoto, 878 F.2d 1126,
1134 n.9 (9th Cir. 1989), as determining that “general questions that did
not delve into a juror’s attitudes and dealings with the IRS are inadequate
to expose bias of petit jurors in criminal tax cases.” In Hashimoto, the trial
court refused defendant’s request for a jury panel list to investigate
whether the jurors had been audited by the IRS, as he was entitled to do
under 26 U.S.C. § 6103(h)(5). 878 F.2d at 1129-33. Because of the speci-
ficity of the § 6103(h)(5) inquiry, general questions on juror impartiality
did not overcome the presumption of prejudice from the denial of the list.
Id. at 1134 n.9. However, the court found that the presumption of preju-
dice could be overcome by juror voire dire on past audits and attitudes
toward the IRS. Id. at 1134. Hashimoto does not hold that grand jurors in
tax cases must be asked such questions.
13090 UNITED STATES v. SMITH
We review de novo the district court’s denial of a motion
to suppress, and the factual findings supporting the denial for
clear error. United States v. Mann, 389 F.3d 869, 874 (9th Cir.
2004), cert. denied, 125 S. Ct. 1719 (2005).
A. Particularity and Overbreadth
[13] “The Fourth Amendment requires that a warrant par-
ticularly describe both the place to be searched and the person
or things to be seized.” United States v. Spilotro, 800 F.2d
959, 963 (9th Cir. 1986). As Spilotro explained, “[t]he
description must be specific enough to enable the person con-
ducting the search reasonably to identify the things authorized
to be seized.” Id. The purpose of the breadth requirement is
to limit the scope of the warrant “by the probable cause on
which the warrant is based.” In re Grand Jury Subpoenas, 926
F.2d 847, 856-57 (9th Cir. 1991). Both the particularity and
breadth requirements prevent “general, exploratory rummag-
ing in a person’s belongings.” Id. at 857 (quotation marks and
citations omitted).
Smith argues the warrant in this case “failed to restrict gov-
ernment agents in any meaningful way, converting the war-
rant into the type of general, overbroad warrant prohibited by
the Fourth Amendment.” Specifically, Smith argues that para-
graphs 1 through 11 of the search warrant’s Attachment B
“authorized the seizure of virtually all of Smith’s personal and
business records, electronic documents, photographs, films,
and videotapes . . . ‘for the period of January 1990 through
the current date.’ ”
Attachment B describes the items to be seized as follows:
For the period January 1990 through the current
date:
1) The following documents relating to the promo-
tion of UBOs: seminar tapes, presentation docu-
UNITED STATES v. SMITH 13091
ments, video tapes, literature, flyers, advertising, and
business cards.
2) UBO client files to include UBO names, individ-
uals names, addresses, telephone numbers, and other
identifying information; contracts of “UBO Organi-
zation”; copies of minutes; domestic and foreign
bank account statements; wire transfer documents;
canceled checks; deposit slips; copies of money
orders; copies of cashier’s checks; correspondence
to, from, and on behalf of UBO clients including
correspondence with the IRS; copies of Forms SS-4,
Request for Employer Identification Number;
records of payments from and to UBO clients
reflecting dates and purpose of such payments;
invoices; receipts; memoranda; copies of tax returns,
and any documents used in the preparation of tax
returns.
3) All documents relating to any alleged defense
contractor loan investment program including litera-
ture, contracts, agreements, notes, financial state-
ments and records, correspondence, memoranda,
receipts, advertising, and other records; copies of let-
ters and invoices or monthly statements to investors.
4) All documents pertaining to the purchase, and/or
sale, and/or transfer of real property including
escrow statements, deeds, deeds of trust, mortgages,
notes, correspondence, closing statements, mortgage
payments and down payments including documents
reflecting the form, amount, and date of such pay-
ments. Documents pertaining to the purchase/sale of
personal property including vehicles, furniture, and
other items to include receipts, contracts, agree-
ments, financial statements, purchase agreements,
and correspondence.
13092 UNITED STATES v. SMITH
5) All books and records of UBO businesses,
including general journals, general ledgers, financial
statements, balance sheets, income statements, cash
receipts and disbursements journals[.]
6) All documents relating to the receipt and dis-
bursement of income, by or from any UBO, includ-
ing credit card receipts and statements, receipts,
invoices, statements of accounts at domestic and for-
eign banks, check registers, cancelled check, money
orders, cashier’s checks, wire transfer documents,
bank drafts, safety deposit box records, stocks,
bonds, and other securities, investment records, loan
applications, and other financial statements, promis-
sory notes, telephone toll records and bills, personal
calendars, address and telephone books, rolodex
indices, records relating to domestic and interna-
tional travel including tickets, reservations, hotel
receipts, travel logs, itineraries, and receipts, Forms
1099 and other tax documents; any other records
used to reconstruct income and expenses; records
relating to safe deposit box rental.
7) All documents reflecting current ownership,
occupancy, and use of premises including utility
bills, receipts, correspondence, monthly statements,
photographs, film, and video tapes.
8) All information and/or data stored in the form of
magnetic or electronic coding on computer media or
on media capable of being read by a computer or
with the aid of computer-related equipment. This
media includes, but is not limited to, floppy disket-
tes, fixed hard disks, removable hard disk cartridges,
laser disks, video cassettes, and any other media
which is capable of storing magnetic coding.
9) All electronic devices which are capable of ana-
lyzing, creating, displaying, converting, or transmit-
UNITED STATES v. SMITH 13093
ting electronic or magnetic computer impulses or
data. These devices include, but are not limited to,
computers, computer components, computer periph-
erals, word processing equipment, modems, moni-
tors, printers, plotters, encryption circuit boards,
optical scanners, external hard drives, and other
computer related electronic devices.
10) All instructions or programs stored in the form
of electronic or magnetic media which are capable of
being interpreted by a computer or related compo-
nents. The items to be seized include, but are not
limited to, operating systems, application software,
utility programs, compilers, interpreters, and any
other programs or software used to communicate
with computer hardware or peripherals either
directly or indirectly via telephone lines, radio, or
other means of transmission.
11) All written or printed material which provides
instructions or examples concerning the operation of
a computer system, computer software, and/or any
related device which is present at the scene.
[14] The warrant’s Attachment B describes with sufficient
specificity the types of documents and property sought.
Potentially problematic is its breadth: though limited in time
period and subject matter (UBO businesses and loan invest-
ment program since 1990), the warrant is quite broad as it
relates to those enterprises. However, even an “extraordinarily
broad” warrant authorizing the seizure of essentially all busi-
ness records may be justified when there is “probable cause
to believe that fraud permeated the entire business operation.”
United States v. Offices Known as 50 State Distrib. Co., 708
F.2d 1371, 1374 (9th Cir. 1983). This is just such a case. The
magistrate judge reviewed Agent O’Keeffe’s affidavit in sup-
port of the application for the search warrant, which detailed
her comprehensive investigation of the UBO scheme. The
13094 UNITED STATES v. SMITH
affidavit concluded that “the entirety of the businesses oper-
ated by Bates, Smith and their associates are criminal in
nature.” Agent O’Keeffe’s affidavit provided ample probable
cause to meet the “permeated-with-fraud” exception to the
particularity and breadth requirements.
B. Seizure Outside the Scope of Warrant
Smith claims that federal agents flagrantly seized innocu-
ous personal items outside the scope of the warrant, such as
Christmas gifts, computer monitors, and computer games.
However, computer monitors and computer games (to the
extent they were on computer diskettes) were within the scope
of the warrant. The alleged Christmas gifts remain unidenti-
fied in the record. Thus, there is no evidence that there was
any evidence seized outside the scope of the warrant.
C. Defects in Providing Warrant to the Smiths
The district court held that the warrant “was provided to the
Smiths on a prompt basis.” The district court further held that,
although Agent O’Keeffe’s affidavit was not attached to the
warrant, the warrant was valid and served the purpose of pro-
viding notice to the Smiths that the officers were executing a
search under the color of law. Smith argues that the search of
his home violated Federal Rule of Criminal Procedure 41(d)
(1997)7 because (1) agents failed to provide a copy of the
search warrant at the outset of the search, and (2) the warrant
was incomplete without the affidavit that was incorporated by
reference into the warrant.
7
Rule 41(d) stated, in relevant part: “The officer taking property under
the warrant shall give to the person from whom or from whose premises
the property was taken a copy of the warrant and a receipt for the property
taken or shall leave the copy and receipt at the place from which the prop-
erty was taken.”
UNITED STATES v. SMITH 13095
1. Failure to Provide Search Warrant at Outset of
Search
At the evidentiary hearing, there was some discrepancy as
to the length of time after the search began before Smith and
his wife received a copy of the warrant. It is clear that the
search did not start as soon as the agents entered the home,
as they initially conducted a safety sweep for approximately
fifteen minutes. The district court established that a delay of
thirty to forty-five minutes occurred before the Smiths
received the warrant.
[15] Under United States v. Gantt, 194 F.3d 987, 1001 (9th
Cir. 1999), “[a]bsent exigent circumstances, Rule 41(d)
requires service of the warrant at the outset of the search on
persons present at the search of their premises.” While the
court recognized that “ ‘technical’ violations of Rule 41(d)
require suppression only if there was a ‘deliberate disregard
of the rule’ or if the defendant was prejudiced,” it held that
suppression was justified due to the deliberate violation in
Gantt’s case. Id. at 1005. Gantt was not served with the search
warrant until after she was arrested, hours after the search and
hours after she requested to see the warrant. Id. at 1000.
[16] In Smith’s case, there is neither deliberate disregard of
Rule 41(d) nor any prejudice. Gantt’s interpretation of Rule
41(d) to require service of the warrant at the outset of the
search was issued in 1999, whereas the search of Smith’s
home took place in 1997. Agent Adams’s testimony reveals
he did not know of an obligation to show the warrant at the
outset of the search — Adams “never” before had presented
a warrant at the time of entry. Instead, his team typically did
a safety sweep first, as was done in the Smith home.
Furthermore, unlike in Gantt, after Mrs. Smith asked for
the warrant, she got one. The timing may be disputed — ten
minutes after the request or half an hour later — but regard-
less, she and her husband received the warrant near the outset
13096 UNITED STATES v. SMITH
of the search. As the district court found, the delay was not
unreasonable.
[17] Nor was the delay prejudicial. Upon receiving the war-
rant, Mrs. Smith “just kind of glanced at it” and believes that
her husband “might have looked at it” more than she did. She
admits that she chose not to review the warrant. Neither of the
Smiths disputed the warrant after having access to it, and the
search went on for another several hours. Thus, under Gantt,
there was only a technical violation of Rule 41(d), which does
not require suppression.
2. Warrant Missing Affidavit
[18] That the Smiths were given the search warrant without
the affidavit of Agent O’Keeffe, though incorporated by refer-
ence in the warrant, does not require suppression. Smith
argues that Gantt held that “when a warrant incorporates by
reference the supporting affidavit, the affidavit comprises part
of the warrant itself and must be provided with the rest of the
warrant. 194 F.3d 987, 1001 n.7.” The cited footnote 7 states:
“Showing Gantt the face of the warrant without Attachment
A certainly did not satisfy Rule 41(d). Without Attachment A,
the warrant violated the Fourth Amendment’s particularity
requirement and for purposes of Rule 41(d) was not a valid
warrant.”
What Smith leaves out is the content of Attachment A in
Gantt’s case, which is substantively different from the
O’Keeffe affidavit. In Gantt, “[i]nstead of describing the
items to be seized, the warrant stated ‘see Attachment A.’
Attachment A was a two-page, typed list of items to be
seized.” Id. at 996. In Smith’s warrant, Attachment B, which
described the items to be seized, was attached. It was Agent
O’Keeffe’s affidavit, admittedly important in the magistrate
judge’s probable cause determination, that was missing.
Agent O’Keeffe’s affidavit was not related to the particularity
requirement, which was satisfied by Attachment B.
UNITED STATES v. SMITH 13097
Smith confuses the “well-settled principle that a warrant’s
overbreadth can be cured by an accompanying affidavit that
more particularly describes the items to be seized,” United
States v. Luk, 859 F.2d 667, 676 (9th Cir. 1988), with the con-
tention, unsupported by case law, that an affidavit incorpo-
rated by reference must always be attached for the search
warrant to be valid — even if the warrant is not overbroad
without the attachment. For example, in United States v.
Hayes, 794 F.2d 1348, 1355 (9th Cir. 1986), the court held
that the affidavit could not be considered because it did not
accompany the warrant; nevertheless, the court went on to
examine the warrant “on its face” for overbreadth, determin-
ing it met the breadth requirement and did not require sup-
pression, id. at 1355-56.
[19] Thus, here, the warrant without the affidavit was
facially valid standing alone. The failure to attach the affidavit
does not require suppression.
D. No Court Seal on Search and Arrest Warrants; No
Magistrate Judge’s Signature on Arrest Warrant
Smith argues that the search and arrest warrants are void
because (1) the arrest warrant was initialed only by the court
clerk, but not signed by the magistrate, in violation of Rule
4(c)(1) of Criminal Procedure, and (2) neither warrant con-
tained the seal of the court. The district court found that nei-
ther alleged defect invalidated the warrants.
First, Rule 9, rather than Rule 4(c)(1), governs arrest war-
rants on an indictment. Rule 9(b)(1), pertaining to the form of
the warrant, states it must be signed “by the clerk,” not the
magistrate judge.
Smith’s second argument that the court seal must be affixed
to both the search and arrest warrants also fails. The argument
relies on 28 U.S.C. § 1691, which states: “All writs and pro-
cess issuing from a court of the United States shall be under
13098 UNITED STATES v. SMITH
the seal of the court and signed by the clerk thereof.” How-
ever, the Federal Rules of Criminal Procedure for arrest war-
rants on an indictment (Rule 9) and search warrants (Rule 41)
make no mention of the requirement for a court seal. The
arrest warrant and search warrant follow the stated dictates of
Rules 9 and 41, respectively. The magistrate judge unques-
tionably issued a bench warrant without bail on Smith, and a
deputy clerk signed an arrest warrant, as required by Rule 9.
The search warrant was issued and signed by a magistrate
judge on January 3, 1997.
[20] Thus, there appears to be only a technical violation of
28 U.S.C. § 1691. None of this circuit’s cases has suppressed
evidence for lack of a court seal. Cf. Ystrom v. Handel, 252
Cal. Rptr. 110, 114 (Ct. App. 1988) (lack of court’s seal “is
a mere technicality and does not render [a summons] ‘sub-
stantially defective’ ”).
[21] We have refused to suppress evidence or reverse con-
victions based on technical rule violations. In a similar con-
text, “ ‘technical’ violations of Rule 41(d) require suppression
only if there was a ‘deliberate disregard of the rule’ or if the
defendant was prejudiced.” Gantt, 194 F.3d at 1005. Here,
there is no evidence in the record that officers executing either
warrant relied in bad faith on them because they lacked the
court seal, and certainly no evidence of deliberate disregard
of 28 U.S.C. § 1691. Neither is there a scintilla of prejudice
to the defendant: if the warrants did have the court seal,
Smith’s home would still have been searched, and his person
still arrested. Thus, neither suppression nor reversal of
Smith’s conviction is warranted by this technical violation of
28 U.S.C. § 1691.
V. Sufficiency of the Evidence
Smith and Bates argue that the evidence is insufficient to
sustain their convictions for: (1) multiple counts of aiding and
assisting in the preparation and presentation of false tax
UNITED STATES v. SMITH 13099
returns, under 26 U.S.C. § 7206(2); and (2) conspiracy to
defraud the United States in the ascertainment, computation,
or assessment of taxes, under 18 U.S.C. § 371.
After the jury verdict, the district judge denied a Federal
Rules of Criminal Procedure 29 motion for judgment of
acquittal as to all defendants. We review de novo the district
court’s ruling on a motion for acquittal. United States v. John-
son, 357 F.3d 980, 983 (9th Cir. 2004). The evidence is
reviewed in the light most favorable to the prosecution to
determine “whether any rational trier of fact could have found
the essential elements of the crime beyond a reasonable
doubt.” Id. (internal quotations and citations omitted).
Section 7206(2) pertains to any person who:
Willfully aids or assists in, or procures, counsels, or
advises the preparation or presentation under, or in
connection with any matter arising under, the inter-
nal revenue laws, of a return, affidavit, claim, or
other document, which is fraudulent or is false as to
any material matter, whether or not such falsity or
fraud is with the knowledge or consent of the person
authorized or required to present such return, affida-
vit, claim, or document[.]
[22] Under § 7206(2), the government must prove that “(1)
the defendant aided, assisted, or otherwise caused the prepara-
tion and presentation of a return; (2) that the return was fraud-
ulent or false as to a material matter; and (3) the act of the
defendant was willful.” United States v. Salerno, 902 F.2d
1429, 1432 (9th Cir. 1990). Defendants argue that the govern-
ment presented insufficient evidence on all three elements.
A. Aid, Assist In, Procure, Counsel, or Advise
[23] Although Smith and Bates did not actually prepare
their clients’ tax returns, the plain language of § 7206(2) is
13100 UNITED STATES v. SMITH
satisfied by aid, assistance, procurement, counsel, or advice in
the preparation or presentation of a false or fraudulent return
— there need not be actual preparation of the return at issue.
Unsurprisingly, we do not require defendants engaged in tax
schemes to physically “prepare” the tax returns to be found
guilty of § 7206(2). See, e.g., United States v. Crum, 529 F.2d
1380, 1382 (9th Cir. 1976) ( “[T]he reach of Section 7206(2)
is clearly not limited to acts of tax return ‘preparers[.]’ ”).
[24] A review of the record reveals ample evidence of aid,
assistance and advice in the preparation of the defendants’ cli-
ents’ false tax returns. To promote their tax shelter scheme,
the defendants explicitly advised their clients to transfer all of
their income and assets to the UBO, and then not to file any
tax returns (for the business trust, personal income, or other-
wise). Smith advised UBO clients to have their employers
issue pay checks, commission checks, or other income
sources in the name of the UBO instead of the clients’ names.
Further, defendants established mechanisms for the UBO
income to go undetected by the IRS, such as keeping end-of-
the-year income below a certain threshold through “distribu-
tions,” false “business deductions,” and non-interest-bearing
accounts. These actions directly caused clients to file false
and fraudulent returns.8
8
Defendants mistakenly argue that this case is “indistinguishable” from
United States v. Dahlstrom, 713 F.2d 1423, 1429 (9th Cir. 1983), which
held that “[p]rosecution for advocacy of a tax shelter program in the
absence of any evidence of a specific intent to violate the law is offensive
to the first and fifth amendments of the United States Constitution.” Dahl-
strom’s holding is limited to pure advocacy or speech cases. See United
States v. Schulman, 817 F.2d 1355, 1359 (9th Cir. 1987) (Dahlstrom is
properly read as an advocacy case); United States v. Russell, 804 F.2d 571,
576 (9th Cir. 1986) (Ferguson, J., concurring) (as a member of the Dahl-
strom panel, describing the case as “primarily a First Amendment case
involving pure advocacy”).
UNITED STATES v. SMITH 13101
B. Fraudulent or False Return
Smith argues that the particular 1040 personal returns or
1065 partnership tax returns were not false for omitting
income or revenue that should have been reported on a sepa-
rate 1041 trust return. However, IRS Agent Brown testified
that although revenue in a business trust such as a UBO
would typically be reported on a form 1041, as a default the
income could also be reported on a 1040 personal income tax
return. In any event, the income had to be reported on some
IRS form. Thus, the under-reporting of income on the clients’
personal returns, that could have been but was not reported
elsewhere, made the personal returns “false” or “fraudulent.”
[25] Agent O’Keeffe methodically went through each
allegedly false or fraudulent return, and testified to the sub-
stantial understatement of income on each one. Viewing the
evidence in the light most favorable to the prosecution, there
is sufficient evidence from which a rational juror could find
that the returns were false or fraudulent.
C. Willfulness
Smith argues that the evidence was insufficient to show
that he acted willfully “with specific intent to defraud the gov-
ernment in the enforcement of its tax laws.” Salerno, 902 F.2d
at 1432. While there is nothing “inherently unlawful with an
UBO,” and the government told the jury during closing argu-
ment to assume UBOs are “legitimate,” the government pro-
vided ample evidence that Smith gave advice to unlawfully
use UBOs to file false or fraudulent tax returns (or not to file
at all).
Smith further argues that there was no evidence presented
that Smith was advised by the IRS that UBOs must file a tax
return or that his actions were illegal. However, Smith worked
in concert with Bates, who kept busy drafting “response” let-
13102 UNITED STATES v. SMITH
ters to the IRS disputing the IRS’s contention that taxes
needed to be paid.
Finally, Smith argues that “even under the government’s
own theory, Smith’s purpose was to steal money or defraud
the persons who purchased UBOs from him; he did not have
the specific intent to defraud the government in the enforce-
ment of its tax laws.” Smith ignores that stealing from clients
and defrauding the government are not mutually exclusive —
and that the evidence is sufficient to establish both purposes.
Smith argues that this case is analogous to Salerno, where
this court reversed the defendants’ § 7206(2) convictions
because, although they were guilty for implementing a
scheme to embezzle millions from the casino, “the govern-
ment failed to prove the scheme had as a purpose the violation
of the federal tax laws.” 902 F.2d at 1430. The government
had to show that the defendants engaged in the scheme “not
merely for their own benefit but with a specific intent to cause
the casino to file false tax returns.” Id. at 1432. However,
there was neither evidence that the defendants had anything
to do with preparation of tax returns, nor “evidence that the
defendants had any motive for conducting a scheme to
defraud the government, [n]or that they ever mentioned their
own taxes, much less the tax returns of the casino.” Id.
Unlike in Salerno, Smith and Bates had as “a purpose,”
although not their sole purpose, the violation of tax laws.
They specifically advised clients that the UBO income need
not be reported on any kind of tax return, and told them not
to consult friends, family, or accountants about their UBOs.
The evidence was sufficient to prove that the defendants had
a “specific intent to cause” their clients to file false returns.
[26] Further unlike Salerno, Smith and Bates had a “mo-
tive” for conducting a scheme to defraud the government: to
hook the clients into giving them control over the clients’
money so they could steal it. Finally, unlike in Salerno, here
UNITED STATES v. SMITH 13103
there was ample mention of the clients’ tax returns within the
scheme. Thus, there was sufficient evidence, viewing the evi-
dence in the light most favorable to the prosecution, to find
that the defendants willfully intended to cause false or fraudu-
lent returns to be filed.
D. Conspiracy Count 1
Smith argues that the reasons for the insufficiency of the
§ 7206(2) counts apply to invalidate the Count 1 conspiracy
conviction. Because his arguments with respect to the
§ 7206(2) counts fail, they fail equally with respect to the con-
spiracy count.
VI. Alleged Juror Bias & Misconduct
Smith and Bates argue that they are entitled to a new trial
because of two instances of alleged juror misconduct and bias.
We review a district court’s denial of a post-verdict evidenti-
ary hearing for an abuse of discretion, United States v. Saya,
247 F.3d 929, 934 (9th Cir. 2001), and its denial of a new trial
on the assertion of juror misconduct or bias for abuse of dis-
cretion as well, United States v. Hanley, 190 F.3d 1017, 1031
(9th Cir. 1999). “Because of the trial judge’s unique opportu-
nity to observe the jurors during trial, to hear the defenses
asserted, and to hear the evidence, the judge’s conclusion
about the effect of the alleged misconduct deserves substantial
weight.” Saya, 247 F.3d at 937 (quotations and citations omit-
ted).
A. Juror #9’s Alleged Bias
[27] “The Sixth Amendment guarantees criminal defen-
dants a verdict by impartial, indifferent jurors.” Dyer v. Cal-
deron, 151 F.3d 970, 973 (9th Cir. 1998) (en banc). “A court
confronted with a colorable claim of juror bias must under-
take an investigation of the relevant facts and circumstances.”
Id. at 974. However, “[a]n evidentiary hearing is not man-
13104 UNITED STATES v. SMITH
dated every time there is an allegation of jury misconduct or
bias. Rather, in determining whether a hearing must be held,
the court must consider the content of the allegations, the seri-
ousness of the alleged misconduct or bias, and the credibility
of the source.” Hanley, 190 F.3d at 1031 (quotations and cita-
tion omitted). An evidentiary hearing is not necessary where
the court knows “the exact scope and nature” of the bias alle-
gation. Saya, 247 F.3d at 935 (internal quotations and cita-
tions omitted).
About a month after the jury returned the verdicts in this
case, Juror #9 wrote the following letter to Agent O’Keeffe:
Dear Bridget,
My name is Brandt Mayer and I was juror #9 in
the Bates/Smith/Wadsworth trial in Sacramento
recently. As a sworn in juror as you know, we were
not allowed to converse with anyone on the case.
Now that it’s over and forgotten by me (thank
god) I would like the opportunity to be able to talk
with you. Not about the case of course, or your pro-
fession or mine, but in a casual way.
I was deprived not being allowed to just walk up
and start a conversation with you, which normally
for me is completilly [sic] out of character, as I am
a bit timid.
After listening to you on the stand [you] showed
a very “kind” aura about you. You’re [sic] sofistica-
tion [sic] also impressed me. You’re [sic] introduc-
tion led me to believe that you are a single woman
and has given me the comfort and insentive [sic] to
write you.
I am hoping that you remember who I was: You
were getting off the elevator one day on the 10th
UNITED STATES v. SMITH 13105
floor and I leaned out of the elevator accross [sic]
from you as we (the jurors) were heading down. I
purposly [sic] gave you a smile. It appeared that you
returned a smile back to me. In fact the jurors teased
me about that for days afterward, but that’s ok, I told
them that the smile was for me and not them.
Could it be possable [sic] to send an e-mail to me?
A “get aquianted” [sic] type. I will surely respond.
But if you are finding this type of approach odd,
tastless [sic], or in anyway [sic] out of line, or that
you’re simply not interested, I will surely understand
and appollogize [sic]. I couldn’t think of any other
way to give it a try and I thought it couldn’t hurt.
Take care.
Agent O’Keeffe promptly reported the letter to prosecutors
who in turn reported the letter to the court and opposing coun-
sel. Thereafter, Smith and Bates moved for a new trial based
on Juror #9’s claimed bias; Bates also requested an evidenti-
ary hearing. Both sides submitted briefs on the issue and
argued the motion before the district court ruled. After consid-
ering the evidence, the district court denied the motion with-
out conducting an evidentiary hearing.
With Juror #9’s letter in hand, the district court understood
the exact nature and scope of the bias allegation. Cf. Saya,
247 F.3d at 935. The district court examined the content of
the allegations from the letter and never doubted the credibil-
ity of the source to which defendants pointed — Juror #9 him-
self. Cf. Hanley, 190 F.3d at 1031. In analyzing the
seriousness of the allegations, the district court took into
account that (1) Agent O’Keeffe was one of the last witnesses
to take the stand after six weeks of trial (thereby limiting her
influence on Juror #9), (2) Agent O’Keeffe was a summary
witness who presented no new evidence, (3) other than the
“kind aura” statement, there was “absolutely no tangible evi-
13106 UNITED STATES v. SMITH
dence that there was any extraneous information or extrane-
ous influence on this juror by anyone,” (4) there was
“absolutely no evidence that Juror Number 9 did anything
inappropriate during the trial” (noting at most a smile was
exchanged), and (5) there was no evidence filed by defendants
or declarations from any of the jurors that there was extrane-
ous information or influence.
The district court logically reasoned it was unlikely that
this juror was attempting to impress Agent O’Keeffe by find-
ing defendants guilty, since he voted to acquit Charlotte Wad-
sworth, to acquit Bates of 88 out of 111 counts against him,
and to acquit Smith on three counts. Furthermore, Juror #9
explicitly wrote Agent O’Keeffe that he had no desire to dis-
cuss the case with her, making the argument that he was try-
ing to impress her with guilty verdicts even more attenuated.
An evidentiary hearing to listen to Juror #9’s testimony
regarding the trial would likely not have produced any valu-
able information. When inquiring into the validity of a ver-
dict, pursuant to Federal Rule of Evidence 606(b),
a juror may not testify as to any matter or statement
occurring during the course of the jury’s delibera-
tions or to the effect of anything upon that or any
other juror’s mind or emotions as influencing the
juror to assent to or dissent from the verdict or
indictment or concerning the juror’s mental pro-
cesses in connection therewith, except that a juror
may testify on the question whether extraneous prej-
udicial information was improperly brought to the
jury’s attention or whether any outside influence was
improperly brought to bear upon any juror.
(emphasis added). Thus, even if the juror’s thought process
was biased with his alleged “infatuation” with Agent
O’Keeffe, the court was not free to hear evidence in this
regard. Further, it was clear from Juror #9’s letter that there
UNITED STATES v. SMITH 13107
was neither extraneous prejudicial information from Agent
O’Keeffe (a smile can hardly be so deemed), nor “outside
influence [that] was improperly brought to bear.”
[28] The district court did not abuse its discretion in deny-
ing the evidentiary hearing and a new trial. Even if this juror
had something of a crush on Agent O’Keeffe, his letter made
clear that he diligently performed his duty as a juror, never
speaking to Agent O’Keeffe during the trial, and at most
exchanging a smile with her. It is unlikely that any trial goes
by without one juror finding one witness nice or attractive.
The only unusual thing about this case is that Juror #9 put his
feelings in writing. The district court was well within its dis-
cretion in finding no evidence of juror misconduct and no
extraneous influences on the juror, such that an evidentiary
hearing was not required.
B. Juror #1’s Alleged Intimidation
The district court also denied defendants’ motion for a new
trial based on the alleged intimidation of Juror #1. During the
trial, Juror #1 wrote an e-mail explaining her disagreement
with the foreperson regarding her approach to analyzing the
mail and wire fraud counts without first considering the basis
of the conspiracy charges. She explained:
I have been criticized by the foreperson and conse-
quently have felt intimidated into proceeding on a
ruling on more than two dozen counts without hav-
ing first established the underlying business relation-
ship of the defendants. She criticized me for wanting
to review my notes; she criticized me for wanting to
look at the evidence, and specifically she criticized
me for wanting to look at evidence relative to count
one. At one point she accused me of having already
made up my mind because I suggested that we con-
sider the prosecution’s foundation for the case. The
foreperson then threatened to throw me off the jury.
13108 UNITED STATES v. SMITH
The district court questioned Juror #1 outside the presence
of the other jurors about her feelings of intimidation. After the
juror reiterated her concerns from the e-mail, the judge told
her:
Each of you [jurors] must decide the case for your-
self, but you should do so only after you have con-
sidered all the evidence, discussed it fully with the
other jurors, and listened to the views of your fellow
jurors.
Do not be afraid to change your opinion if the dis-
cussion persuades you that you should. But do not
come to a decision simply because other jurors think
it is right. It is important that you attempt to reach a
unanimous verdict, but, of course, only if each of
you can do so after having made your own conscien-
tious decision. Do not change an honest belief about
the weight and effect of the evidence simply to reach
a verdict.
Although Juror #1 told the judge that she did not believe her
decisions were made based upon her own beliefs up to that
point, after hearing the above instruction, she felt able to
return to deliberations and make future decisions (including
those on verdicts that may have been rendered previously)
based on her own conscience and belief.
The attorneys for defendants and the government then had
a long discussion about whether the jury should be instructed
to start deliberations anew or be instructed again on their role
as jurors, and whether to keep Juror #1 on the jury. The court
then brought Juror #1 back in, and asked more questions
regarding whether she still felt intimidated, to which she
answered she did not. The court was convinced that Juror #1
made “very clear that she is not intimidated at this point, that
she understands her duty as a juror, and that she is ready to
continue her deliberations in this case after the entire jury is
UNITED STATES v. SMITH 13109
reinstructed as to 34 and 39” (which had been reread to Juror
#1).
[29] Smith argues that the foreperson’s bullying of Juror #1
“demonstrates that the jury was not impartial and that the jury
deliberation process was not functioning properly.” However,
if anything, the foreperson’s misconduct ran to the defen-
dants’ favor by discounting the prosecution’s theories. This
alleged misconduct was thoroughly investigated by the dis-
trict court, and its effect cured by ensuring that Juror #1 no
longer felt intimidated. The district court did not abuse its dis-
cretion in refusing a new trial on this ground.
VII. Duplicity and Multiple Conspiracies Jury Instruction
Before trial, Smith moved to dismiss Counts 1, 25, and 64,
the three conspiracy charges of the indictment, arguing that
each one encompassed multiple conspiracies (and thus that
each one was duplicitous). Bates joined this motion. Defen-
dants disputed that there was one overarching conspiracy
within any of these counts because the overt acts covered six
alleged UBOs, with differing: (1) time periods, (2) identity of
defendants involved, (3) identity of taxpayers involved, and
(4) specific transactional facts.
The government opposed the motion, arguing that Counts
1, 25, and 64 each contained a singular conspiracy. As to
Count 1, the government asserted that defendants entered into
an agreement to impair and impede the IRS through the use
of UBOs “in a fashion which knowingly and intentionally
understated income and overstated legitimate deductible
expenses.” Although the UBOs were marketed to 249 or more
taxpayers, the government argued that the Count 1 conspiracy
was not “taxpayer specific”; it involved “one agreement,
regardless of the number of taxpayers whose income tax
return[s] were involved.” As to Count 25, the government
argued that there was one agreement to use the mail and inter-
state wire communications in furtherance of a scheme to
13110 UNITED STATES v. SMITH
defraud. Finally, Count 64, though involving different money
laundering sections (18 U.S.C. §§ 1956(a)(1)(A), 1956(a)
(1)(B), and 1957), encompassed only one agreement to
engage in money laundering. The government summarized its
argument as “[o]ne agreement; one count.”
After considering the pre-trial briefs and supplemental
briefs of all the parties on this issue, the district court found
the indictment not duplicitous as to Counts 1, 25, and 64.
After the trial, during the jury instruction conference, Smith
renewed the motion to dismiss these counts, claiming that the
government had “not been able to show an overarching con-
spiracy but rather ha[d] shown individual conspiracies.” The
district court denied the motion, and sustained the govern-
ment’s objection to a multiple conspiracy instruction.
The district court’s ruling that there were no duplicitous
counts appears correct, and defendants do not dispute it on
appeal. Instead, defendants now argue that the district court
erred in denying the request for the multiple conspiracy
instruction. However, this argument is not based on any of the
pretrial briefing arguments or post-trial jury instruction con-
ference arguments that each conspiracy count encompassed
multiple conspiracies. Rather, defendants argue (based on
their multiplicitous sentence argument) that three conspiracy
counts inherently require a multiple conspiracy instruction.
This argument was never made below, and thus was
waived. Even if it were not waived, the argument miscon-
strues the nature of a multiple conspiracy instruction, which
pertains to multiple conspiracies within a conspiracy count.
The district court correctly denied the multiple conspiracy
instruction.
VIII. Application of Sentencing Guidelines
Smith and Bates argue that the district court erred in
enhancing their sentences under the Sentencing Guidelines.
UNITED STATES v. SMITH 13111
“Even though the Guidelines are no longer mandatory after
the Supreme Court’s decision earlier this year in United States
v. Booker, 125 S. Ct. 738 (2005), the district court should still
consult them for advice as to the appropriate sentence, id. at
767.” United States v. Kimbrew, 406 F.3d 1149, 1152 (9th
Cir. 2005). We review “the district court’s interpretation of
the Sentencing Guidelines de novo, the district court’s appli-
cation of the Sentencing Guidelines to the facts of this case
for abuse of discretion, and the district court’s factual findings
for clear error.” Id. at 1151 (citation omitted).
A. U.S.S.G. § 3D1.2
[30] Smith and Bates argue the district court erred by
grouping the tax counts separately from the money laundering
and mail and wire fraud counts, which resulted in a two-point
increase in each of their offense levels. The Guidelines pro-
vide that “[a]ll counts involving substantially the same harm
shall be grouped together into a single Group.” U.S.S.G.
§ 3D1.2. In part, “same harm” means the counts involve the
“same victim.” Id. § 3D1.2(a), (b).
The government argued at sentencing that the counts in
question encompassed different harms and different victims.
The Presentence Investigation Reports (“PSRs”) for Bates and
Smith both found that the victim as to the tax fraud counts is
the United States government, whereas the victims as to the
mail fraud and wire fraud counts “are the clients who had
their money stolen by the defendants.” The district court
adopted the PSRs’ findings and declined to group all counts
together.
[31] The district court’s factual finding that multiple vic-
tims were involved is not clearly erroneous, and the district
court did not abuse its discretion in applying U.S.S.G.
§ 3D1.2.
13112 UNITED STATES v. SMITH
B. U.S.S.G. § 3B1.1(c)
The U.S.S.G. § 3B1.1(c) aggravating role two-level
enhancement applies “[i]f the defendant was an organizer,
leader, manager, or supervisor in any criminal activity”
involving less than five participants and that was not other-
wise extensive. Smith’s PSR recommended this enhancement
because Smith managed the activities of Christopher Bates
and Charlotte Wadsworth. The district court’s adoption of this
factual finding was not clearly erroneous.
IX. Increasing Smith’s Sentence Based on Allocution
Near the end of Smith’s sentencing hearing, the district
court stated its intention “to depart somewhat from the Proba-
tion Officer’s recommendations and to sentence Mr. Smith to
the low end of [the] guideline range of 121 months imprison-
ment.” Defense counsel and the prosecution presented nothing
further. Then, the district court asked whether Smith wished
to address the court; Smith did.
Smith made a lengthy speech, denying (1) the jurisdiction
of the district court, (2) that he had any connection to any
state or the United States, (3) the existence of the United
States, California, Sacramento, the district court, the prosecu-
tor, defense counsel, Judge England, a list of UBOs, and even
himself, and (4) that he is a Fourteenth Amendment “person.”
Smith contested that the offenses he was charged with were
committed by anyone, and argued that the prosecution had
“failed to show any actual or threatened injury as a result of
the challenged conduct.” Smith demanded that the court “re-
consider and withdraw the proposed sentence, reverse the
conviction, enter judgment of acquittal, vacate the charges
against [him], quash the indictment, dismiss the complaint
and otherwise . . . set [him] free.”
The district court responded to Smith’s speech:
UNITED STATES v. SMITH 13113
The defendant’s statements to the Court that were
just read have made it abundantly clear to this Court
that Mr. Smith has absolutely no remorse for his
actions. And further, he has directly challenged this
Court and its ultimate authority. Accordingly, I find
that this defendant is appropriate to be sentenced not
at the lower end of the guideline range but at the
upper end.
Mr. Smith apparently just simply does not get it.
He is a direct and continuing threat to the financial
safety of the public. And this Court has the belief,
well-founded belief that if he were to be released
from custody at any earlier time, he would immedi-
ately resume the criminal activity for which he was
on trial here in this court.
The district court then sentenced Smith to 151 months instead
of 121 months. Smith’s counsel made no objection to the
increased sentence.
[32] Smith argues that his First Amendment free speech
and Fifth Amendment due process rights were violated
because he was punished with a higher sentence for express-
ing his views on the district court’s lack of jurisdiction. But
the district court made it clear that it was increasing the sen-
tence based on Smith’s lack of remorse, and his threat to the
financial safety of the public when released. These are legiti-
mate sentencing factors under 18 U.S.C. § 3553(a), which
include considering the “characteristics of the defendant” and
the need for the sentence “to promote respect for the law,” “to
afford adequate deterrence to criminal conduct,” and “to pro-
tect the public from further crimes of the defendant.”
[33] The district court may indicate a tentative sentence and
then hear from the defendant before making a final sentencing
determination. See United States v. Laverne, 963 F.2d 235,
236 (9th Cir. 1992). The district court here “was able to con-
13114 UNITED STATES v. SMITH
sider the defendant’s statement and was free to alter its view
of the sentence if the defendant offered a sufficient reason for
changing its view.” Id. at 237. That the district court consid-
ered Smith’s lack of remorse in sentencing him is by no
means a novel concept. See United States v. Malquist, 791
F.2d 1399, 1402-03 (9th Cir. 1986) (“inclusion of [defen-
dant’s] lack of repentance in the court’s sentencing calculus
was permissible”). The district court did not err in taking
Smith’s statement into consideration for sentencing. The Sen-
tencing Guidelines, in either their mandatory or advisory sta-
tus, do not insulate a defendant from his or her own
foolishness.
X. Reconsideration of Bates’s sentence
At sentencing, the district court stated its tentative intention
to sentence Bates at the low end of the guideline range (121
months) because of Bates’s medical condition. The govern-
ment made “another pitch for the mid-range of 136 months”
because “the defendant’s criminal history is actually substan-
tially understated.” Although Bates was found not criminally
liable, he was found civilly liable for fraud in the amount of
$4,687,984.71.
The district court sentenced Bates to 136 months, explain-
ing: “I have reconsidered my initial decision, and I am going
to follow the recommendation of Probation for 136 months.”
The court further stated:
The Court wants to make it clear that the reconsid-
eration of the sentencing is based upon not only the
words that Mr. Twiss [AUSA] stated here today in
open court, but also a further review of the Presen-
tence Report and also the Court’s own recollection
of the magnitude of the scheme in which Mr. Bates
was involved, which led to the losses of substantial
sums of money, upwards of 1.8 million dollars, from
varying individuals and ages, some who have lost
UNITED STATES v. SMITH 13115
their entire retirement system under this scheme of
unincorporated business organizations.
And I want the record to reflect that as being the
basis for the Court following the mid-term recom-
mendation of 136 months.
Thus, the district court relied at least in part on proper fac-
tors, such as the magnitude of the scheme and the loss
incurred by victims, in determining placement in the sentenc-
ing range. See 18 U.S.C. § 3553(a)(2)(A) (sentence “to reflect
the seriousness of the offense”). Furthermore, the Guidelines
state that the “history” of the defendant may be considered.
Id. § 3553(a)(1). A civil judgment against a defendant could
be a factor in the defendant’s history. Thus, it does not appear
that the district court relied on improper factors in sentencing
Bates to the middle of the Guidelines range.
XI. Booker Issue
[34] Both Smith and Bates argue that they must be resen-
tenced under Booker because their sentences are based on
facts not found by a jury beyond a reasonable doubt. Because
the defendants did not challenge their sentences on Sixth
Amendment grounds in the district court, and because the
record in this case does not “provide a reliable answer to the
question of whether the judge would have imposed a different
sentence had the Guidelines been viewed as advisory,” we
grant a limited remand to the district court to answer this
question. United States v. Ameline, 409 F.3d 1073 (9th Cir.
2005) (en banc).
XII. Ex Post Facto Issue
Smith and Bates argue that upon resentencing, their sen-
tences must be capped by the maximum terms of imprison-
ment authorized by the unenhanced base offense levels, under
ex post facto principles. We have rejected that argument in
13116 UNITED STATES v. SMITH
United States v. Dupas, 2005 U.S. App. LEXIS 15938 (9th
Cir. 2005).
CONCLUSION
For the foregoing reasons, the judgments of conviction are
affirmed and the cases are remanded pursuant to Ameline.