United States v. Abby Rae Cole
2013 U.S. App. LEXIS 16190
8th Cir.2013Background
- Abby Rae Cole founded and owned Chip Factory, Inc.; her husband Russell ran day-to-day operations while Cole worked part-time and handled purchases, payroll, and reviewed financials. Chip Factory was Best Buy’s primary vendor from 2003–2007.
- Chip Factory exploited a flaw in Best Buy’s Parts Procurement Network (PPN): they submitted low bids to win orders, then changed bids upward after award and invoiced Best Buy for higher amounts; Russell bribed Best Buy employee Robert Bossany to conceal the scheme.
- Cole participated in operational tasks, was present during discussions about the fraud, sent gifts and cash (including envelopes to Bossany), and entered inflated cost-of-goods data into company accounting that reduced reported income.
- Cole met annually with a tax preparer (2004–2007), provided inflated cost figures (without disclosing they were false), deducted personal expenses as business expenses, and did not report diverted income deposited into the Coles’ joint account.
- A jury convicted Cole of: conspiracy to commit mail and wire fraud (18 U.S.C. § 1349), conspiracy to commit tax fraud (18 U.S.C. § 371), and four counts of tax evasion (26 U.S.C. § 7201). The Guidelines range was 135–168 months, but the district court varied downward to three years’ probation concurrent on all counts.
- The Eighth Circuit affirmed the convictions but remanded for the district court to provide a fuller, non-contradictory explanation for the significant below-Guidelines sentence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of evidence for mail and wire fraud conspiracy | Gov: Evidence shows Cole knowingly joined Russell’s scheme (presence, purchases, payments, recorded calls). | Cole: Evidence centered on Russell; she had only minor/passive role; some testimony exculpatory. | Affirmed: Evidence (circumstantial and direct) sufficient to show Cole knowingly and intentionally joined the conspiracy. |
| Sufficiency of evidence for tax evasion and tax fraud conspiracy | Gov: Cole willfully inflated COGS, directed others to do so, provided false figures to tax preparer, deducted personal expenses, and failed to report diverted income. | Cole: Challenges willfulness/affirmative acts and overall sufficiency. | Affirmed: Evidence supports willfulness, affirmative evasion acts, tax deficiency, and conspiracy. |
| Variance between indictment and proof on tax schemes | Cole: Government changed theory/amount on tax liability, producing a prejudicial variance. | Gov: Indictment alleged multiple schemes; corrections made pretrial; no material difference in facts. | Affirmed: No prejudicial variance; evidence fell within indictment’s allegations. |
| Reasonableness and explanation of downward variance sentence | Gov: Probation only sentence (vs. 11–14 yrs Guidelines) is substantively unreasonable and inadequately explained. | Cole: District court considered §3553(a) factors and defendant-specific circumstances (remorse, family disruption, passive role). | Vacated as to sentencing explanation: Court remanded for district court to provide fuller, coherent justification for the major downward variance before substantive-reasonableness review. |
Key Cases Cited
- United States v. Louper-Morris, 672 F.3d 539 (8th Cir. 2012) (standard for reviewing sufficiency of the evidence in criminal cases)
- United States v. Lopez, 443 F.3d 1026 (8th Cir. 2006) (conspiracy liability for even minor roles; use of circumstantial evidence)
- United States v. Renner, 648 F.3d 680 (8th Cir. 2011) (elements of tax evasion: willfulness, deficiency, and affirmative evasion act)
- United States v. Murphy, 957 F.2d 550 (8th Cir. 1992) (elements of conspiracy to defraud the United States under § 371)
- United States v. Buchanan, 574 F.3d 554 (8th Cir. 2009) (variance doctrine and prejudicial variance review)
- United States v. Maybee, 687 F.3d 1026 (8th Cir. 2012) (standard of review for denial of new trial motions)
- United States v. Feemster, 572 F.3d 455 (8th Cir. 2009) (procedural-error review in sentencing appeals)
- Gall v. United States, 552 U.S. 38 (2007) (deferential appellate review of sentencing and requirement for adequate explanation of major departures)
- United States v. Moore, 683 F.3d 927 (8th Cir. 2012) (remand for fuller district-court explanation where major variance from Guidelines occurs)