United States v. Floyd
740 F.3d 22
| 1st Cir. | 2014Background
- Dion and Floyd (husband and wife) were indicted with others for conspiracies to evade payroll and income taxes and for obstructing the IRS; Dion and Floyd were tried jointly with coconspirator Charles Adams.
- Government alleged two central schemes: (1) a payroll-tax evasion operation using entities (Contract America, Talent Management, ACS) to hide employer/employee relationships and avoid withholding; (2) a "warehouse banking" scheme (Your Virtual Office / Office Services / Calico) commingling client funds in nominee accounts to conceal sources and frustrate IRS detection.
- Evidence included corporate documents, bank records, client testimony (the Alcocks), advertisements targeting tax-resisters (Save-a-Patriot), e-mails, signature stamps, and payments to the defendants through their consulting firm.
- A jury convicted both defendants of: conspiracy to defraud the United States (payroll taxes - Count 1), conspiracy to defraud (warehouse banking/income taxes - Count 2), and separate counts for endeavoring to obstruct the IRS (Counts 4 and 5).
- Defendants appealed, arguing (inter alia) insufficiency of evidence, suppression errors as to three searches (office and two home searches), improper joinder/need for severance, violation of the Federal Register Act, and sentencing disparity for Dion.
Issues
| Issue | Plaintiff's Argument (Government) | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of evidence for payroll-tax conspiracy (Count 1) | Evidence (documents, testimony, bank records, payments, role descriptions) shows agreement, unlawful objective, overt acts, knowing participation | Floyd/Dion denied operating Contract America/being part of conspiracy; claimed lawful explanations | Affirmed: evidence (direct and circumstantial) was sufficient for jury to find guilt beyond a reasonable doubt |
| Sufficiency of evidence for warehouse-banking conspiracy (Count 2) | Advertising to tax-resisters, commingling accounts, sham trusts, referrals, and defendant involvement support unlawful intent and participation | Defendants acknowledged commingling but denied involvement or claimed lawful services | Affirmed: reasonable jury could infer unlawful object and knowing participation |
| Sufficiency for obstruction counts (Counts 4 & 5, 26 U.S.C. § 7212(a)) | Commingled funds, payments to defendants, cash withdrawals, and concealment support corrupt endeavor to impede IRS | Defendants argued lack of proof of tax deficiency, audit, false returns, or that structure alone is insufficient | Affirmed: statute does not require a tax deficiency or audit; jury could infer corrupt intent to obtain unlawful benefit |
| Suppression of search-evidence (2003 office search; 2003 & 2004 home searches) | Warrants were supported by probable cause; officers acted in good faith | Defendants challenged probable cause and staleness of affidavits and asserted some seized-files were innocuous | Affirmed denial of suppression: affidavits and corroborating facts supported probable cause; business records not stale; searches lawful (good-faith alternative also noted) |
| Severance (joinder with Adams) | Joint trial proper; much evidence admissible as to all; limiting instructions mitigated spillover | Joinder prejudiced defendants; Adams's admissions and defense antagonistic and caused spillover | Affirmed denial of severance: defenses were not irreconcilably antagonistic; any spillover was not unfair and limiting instructions sufficed |
| Federal Register Act challenge to § 7212(a) enforcement | Enforcement of § 7212(a) is lawful without Federal Register publication; Act applies to executive regulations/orders not criminal statutes | Defendants argued IRS failed to publish implementing regulations in Federal Register, so enforcement violated notice/due process | Rejected: 44 U.S.C. § 1505(a)(1) does not bar enforcement of self-executing criminal statutes; claim without merit |
| Sentencing disparity (Dion) | Sentencing court considered §3553(a) factors and gave downward variance from guideline range | Dion argued unwarranted disparity with coconspirators similarly situated | Affirmed: district court found greater culpability for Dion (leader/mastermind), larger tax loss; disparity explained and sentence substantively reasonable |
Key Cases Cited
- United States v. Leon, 468 U.S. 897 (warrant good-faith exception)
- United States v. Marek, 548 F.3d 147 (definition and proof under 26 U.S.C. § 7212(a))
- United States v. Hurley, 957 F.2d 1 (elements of § 371 conspiracy)
- United States v. Schaefer, 87 F.3d 562 (staleness and context for probable cause)
- United States v. McElroy, 587 F.3d 73 (refreshing stale information and probable cause)
- United States v. O'Bryant, 998 F.2d 21 (joinder and severance standards in conspiracy cases)