United States v. Patricia Fountain
2015 U.S. App. LEXIS 11913
| 3rd Cir. | 2015Background
- From 2007–2012 Patricia Fountain (an IRS employee), Larry Ishmael, and Calvin Johnson, Jr. led interconnected schemes submitting fraudulent IRS refund claims (TETR, FTHBC, AOTC) and recruiting claimants to receive cash refunds in exchange for personal information and fees.
- Fountain used internal knowledge of IRS review thresholds (e.g., TETR claims under $1,500) and insulated her identity by using intermediaries (recruiters, hairstylists) to collect fees.
- Deborah Alexander (a salon client recruited via Fountain’s hairstylist) paid $400 after her refund claim was filed; she never dealt directly with Fountain but knew Fountain worked for the IRS.
- A jury convicted Fountain, Ishmael, and Johnson of conspiracy and filing false claims; Fountain was also convicted under the Hobbs Act for extortion under color of official right and for false tax returns.
- District Court imposed lengthy Guidelines sentences (Fountain 228 months, Ishmael 144 months, Johnson 216 months) and various enhancements (sophisticated means, use of a minor, leadership role, loss calculations).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of Hobbs Act extortion (color of official right) against Fountain | Gov't: Alexander paid $400 because she reasonably believed Fountain would use her IRS position to secure the refund; Fountain knew that belief and received payment not entitled. | Fountain: Alexander did not subjectively believe Fountain could influence refunds; no reasonable person would think a CSR could affect IRS decisions. | Held: Evidence sufficient — payor's reasonable belief and defendant's knowledge are required; a payment obtained because payor reasonably believed official would perform official acts supports conviction. |
| Whether payor’s belief must be reasonable and/or whether an actual official act is required | Gov't: Reasonableness of payor’s belief is relevant where official authority is contested; actual official act need not be proved. | Fountain: No reasonable belief here; insistence on actual use of office for inducement. | Held: Unified standard: (1) payor made payment because of a reasonable belief defendant would perform official acts; and (2) defendant knew of that motivation. No proof of actual official act required. |
| Sophisticated means enhancement under U.S.S.G. §2B1.1 | Gov't: defendants used inside knowledge, concealment tactics, recruiters, routing accounts, and other planning to avoid detection — justifies enhancement. | Defendants (Fountain, Johnson): tactics not especially sophisticated (no shells/offshore accounts); enhancement improper. | Held: Enhancement affirmed — sophisticated means can include planning, duration, concealment, use of insider knowledge; record shows conduct beyond a typical fraud. |
| Other Guidelines issues: use-of-minor (§3B1.4), leadership (§3B1.1), loss attribution, and reasonableness of sentences | Gov't: Court properly applied enhancements and loss estimates based on conservative Government methodology; sentences within Guidelines reasonable. | Defendants: §3B1.4 inapplicable because crime was complete before minor collected; leadership/loss not attributable/reasonably foreseeable; sentencing procedural/substantive errors. | Held: Enhancements and loss calculations not clearly erroneous; use-of-minor enhancement valid; leadership and loss attribution supported; district court adequately considered §3553(a) factors and imposed reasonable Guidelines sentences. |
Key Cases Cited
- United States v. Manzo, 636 F.3d 56 (3d Cir. 2011) (distinguishing coercive bases of Hobbs Act extortion)
- Evans v. United States, 504 U.S. 255 (1992) (to convict under color of official right government need only show official obtained payment he was not entitled to, knowing payment was made in return for official acts)
- United States v. Antico, 275 F.3d 245 (3d Cir. 2001) (no official act need be proved; focus on payor motive and official's knowledge)
- United States v. Urban, 404 F.3d 754 (3d Cir. 2005) (upholding conviction where payors paid to influence governmental authority and official knew payments were for that purpose)
- United States v. Mazzei, 521 F.2d 639 (3d Cir. 1975) (en banc) (payor’s reasonable belief that official could influence outcome can sustain color-of-official-right theory even if defendant lacked de jure power)
- United States v. Bencivengo, 749 F.3d 205 (3d Cir. 2014) (extends Mazzei to cases where payor reasonably believes official has influence, not necessarily de jure or de facto power)
- United States v. Fumo, 655 F.3d 288 (3d Cir. 2011) (sophisticated-means enhancement applies where conduct shows greater planning/concealment than typical fraud)