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Criminal – Tax Fraud – Sentence – Loss Calculation

In sentencing defendant for tax and wire fraud, a district court erred in calculating the tax loss from a non-random sample of audited returns, but the error was harmless and the 4th Circuit affirms defendant tax preparer’s conviction and his sentence for 48 months imprisonment.

The indictment charged defendant with knowingly causing to be transmitted in interstate commerce by means of wire communications certain wire transfers relating to client fees from certain banks, to defendant’s business account at Wachovia Bank. At trial, rather than proving that the wire transmissions originated in Michigan, the government proved the tax returns were processed through Drake Software, located in North Carolina.

The variance here did not prejudice defendant. There is nothing in the record that indicates that defendant would have prepared differently for his defense if the indictment had charged that the wire communication was between North Carolina and Maryland rather than Michigan and Maryland. Despite the variance, the evidence at trial proved the same scheme to defraud using the Refund Anticipation Loan program as that described in the indictment. Therefore, we affirm the convictions for wire fraud.

Defendant also argues that the district court erred in calculating the tax loss for sentencing purposes.

The district court found that the audited returns revealed a pattern of numbers reported for various deductions that was strikingly similar to the returns proved fraudulent at trial.

There was ample evidence to support the court’s finding that it was more probable than not that defendant fraudulently prepared the audited returns such that they could be used to calculate the tax loss.

However, the district court did err in using a sample to extrapolate the tax loss for a larger group. The error was harmless, though, because in determining defendant’s sentence, the district court chose the offense level that corresponded to a tax loss range of $1 million to $2.5 million. Because a reasonable estimate of the tax loss in this case would be in excess of $1 million, the court’s error in arriving at its estimate did not result in a longer sentence for defendant.

Judgment affirmed.

Concurrence

Shedd, J.: Having written parts I and IIA, I write separately on part IIB because I cannot join the majority in finding clear error (albeit, harmless) in the district court’s calculation of the tax loss. There is no requirement that the sample be random so long as the district court takes measures to make sure the estimate is a reasonable one. The district court’s calculation of tax loss here was a reasonable estimate.

U.S. v. Mehta (Shedd, Duncan, JJ.) No. 08-4489, Feb. 5, 2010; USDC at Greenbelt, Md. (Chasanow) David Schertler for appellant David I. Salem for appellee. VLW 010-2-043, 12 pp.

VLW 010-2-043

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