554 F. App'x 5
D.C. Cir.2014Background
- Four defendants (Kahn, Hunter, Tanguay, True) were convicted after a 21-day jury trial of conspiracy to defraud the United States and mail fraud based on operations of American Rights Litigators (ARL), which sold fraudulent "bills of exchange" and inundated the TIGTA with false complaints to impede IRS enforcement.
- ARL operated from ~1996–2004, enrolling thousands of customers; law enforcement searched ARL offices in 2004. A superseding indictment charged the defendants; one co-defendant (Williamson) pled guilty and received a shorter sentence.
- District court sentenced Kahn to 240 months (mail fraud) concurrent with 60 months (conspiracy); Hunter, Tanguay, and True received concurrent 120-month (mail fraud) and 60-month (conspiracy) sentences, fines, and supervised release, below guideline ranges after variances.
- Defendants raised varied grounds on appeal, including jurisdictional/sovereign citizen arguments (Kahn), claim that tax statutes, not mail fraud, should apply, evidentiary challenges to expert testimony, sufficiency of the evidence, and multiple sentencing challenges including loss amount, guidelines applicability, and a §3B1.1 managerial enhancement.
- The court affirmed convictions but vacated and remanded the sentences of Hunter, Tanguay, and True for resentencing because the government failed to prove at sentencing that the §3B1.1(b) supervisory enhancement applied (government first asserted that certain ARL employees were criminally responsible only at oral argument).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether convictions should be limited to tax statutes (i.e., mail fraud improper) | Gov: mail fraud and conspiracy properly charged; tax code is not exclusive | Defs: crimes like these should be prosecuted under tax code (26 U.S.C.) instead of mail fraud | Rejected defendants' claim; precedent allows prosecution under mail fraud (affirmed) |
| Admissibility of gov't expert Kerr and exclusion of defense expert Todd | Gov: Kerr admissible to explain genuine vs. fictitious instruments | Defs: Kerr not proper; Todd should explain monetary history and Redemption Theory belief | Kerr admissible; Confrontation Clause not violated; Todd properly excluded as irrelevant or cumulative; Redemption Theory testimony not shown to bear on actual mens rea (excluded) |
| Sufficiency of evidence re: bills of exchange being "gibberish" | Defs: instruments so implausible they cannot support fraud conviction | Gov: jury may convict even if misrepresentations were unreasonable | Rejected defendants' sufficiency challenge; fraud can exist though no reasonable person would believe representations (affirmed) |
| Discovery-abuse motion ("dump truck" discovery) | Defs: late and voluminous disclosure prejudiced trial | Gov: complied sufficiently | District court denial affirmed; record shows government may have exceeded obligations but no reversal warranted |
| Application of sentencing Guidelines (fraud table v. tax table) | Defs: should use tax-offense guideline §2T4.1 | Gov: §2B1.1 for fraud appropriate | Rejected defendants; mail fraud classification controls sentencing under fraud guideline (affirmed) |
| Loss amount for Guidelines (intended loss $42.7M) | Defs: bills were worthless or they believed they were legitimate; overstates loss | Gov: intended loss may include unlikely losses; jury rejected good-faith claim | Held: district court's loss calculation upheld; alternative defendant positions meritless |
| Official-victim enhancement (§3A1.2) | Gov: IRS employees targeted by false complaints; enhancement applies | Defs: attempt to disclaim responsibility for those complaints | Held: enhancement applied properly; courts have treated government employees as victims in similar schemes (affirmed) |
| Manager/supervisor enhancement (§3B1.1(b)) | Gov: each defendant managed/supervised multiple ARL employees who were participants | Defs: lower-level employees were not criminally responsible participants | Held: remand required — government failed to prove by preponderance that supervised employees were criminally responsible; §3B1.1(b) enhancement vacated for Hunter, Tanguay, True and sentencing remanded |
Key Cases Cited
- Billman v. Comm’r, 847 F.2d 887 (D.C. Cir. 1988) (frivolous sovereign-citizen claims merit no extended discussion)
- United States v. Dale, 991 F.2d 819 (D.C. Cir. 1993) (tax code not exclusive regime for prosecuting tax-fraud schemes)
- Cheek v. United States, 498 U.S. 192 (1991) (good-faith misunderstanding of law relevant to willfulness-based tax offenses; views about statute validity generally irrelevant to willfulness)
- United States v. Maxwell, 920 F.2d 1028 (D.C. Cir. 1990) (fraud may be established even if misrepresentations were patently unbelievable)
- Direct Sales Co. v. United States, 319 U.S. 703 (1943) (stake in venture relevant to conspiracy inquiry)
- United States v. Bapack, 129 F.3d 1320 (D.C. Cir. 1997) (government bears burden to prove sentencing enhancements by preponderance)
- United States v. Southerland, 486 F.3d 1355 (D.C. Cir. 2007) (arguments raised first at oral argument are forfeited)
- Gall v. United States, 552 U.S. 38 (2007) (improper guideline calculation is a significant procedural error)
- United States v. Anderson, 353 F.3d 490 (6th Cir. 2003) (government employees can be victims under §3A1.2 where defendants file false misconduct claims)
- United States v. Hildebrandt, 961 F.2d 116 (8th Cir. 1992) (similar holding on official-victim enhancement)