United States v. Robert Kahre
737 F.3d 554
9th Cir.2013Background
- Robert and Lori Kahre and Alexander Loglia ran a payroll system paying workers in gold/silver coins which employees immediately exchanged for cash; payroll taxes and regular tax returns were not filed.
- Government indicted defendants on conspiracy, tax evasion/attempted evasion, failure to collect/pay employment taxes, false statements, and related counts; trial resulted in multiple convictions.
- IRS agents executed search warrants at properties; Robert was arrested and cash seized pursuant to a state bench warrant and later applied to his tax liabilities.
- Defendants argued coins should be valued at face value (not fair market value) and thus that they lacked notice/willfulness; they also sought disqualification of the prosecutor (named in a Bivens suit) and suppressed evidence from searches.
- District court denied suppression (or found motions moot), refused to disqualify prosecutor, excluded certain evidence challenging valuation, and sentenced Robert to 190 months with substantial restitution.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of indictments / notice of illegality (valuation) | Gov: law and precedent made valuation at fair market value clear; defendants had notice. | Defs: coins should be taxed at face value; law was ambiguous so rule of lenity applies. | Valuation at fair market value is established by precedent; defendants had sufficient notice; convictions affirmed. |
| Prosecutor disqualification (conflict from Bivens suit) | Gov: mere filing of civil suit does not disqualify; no clear & convincing proof of misconduct or prejudice. | Defs: prosecutor was a defendant in related Bivens action, had pecuniary/emotional motive; remarks showed bias. | Denial affirmed: disqualification requires clear and convincing evidence of conflict; defendants did not meet that standard. |
| Motions to suppress / warrant particularity & seized funds | Gov: warrants incorporated affidavit; temporal and subject limits adequate; seized Bank cash applied to tax liabilities and was not used at trial. | Defs: warrants were general/overbroad; arrest/search at bank was pretextual; funds should be returned. | Motions were moot as seized funds not introduced; warrants valid (affidavit incorporated and attachment limited scope); seizure lawful. |
| Admissibility of evidence on coin valuation and contemporaneous state of mind | Gov: court may exclude legal materials not actually relied on; valuation law is settled so proffered contrary evidence irrelevant. | Defs: needed to show good-faith misunderstanding of law; excluded statements and materials undermined willfulness finding. | Court properly excluded evidence inconsistent with settled law but allowed proof of actual reliance; exclusions were not prejudicial. |
| Sentencing (tax loss, obstruction, acceptance) | Gov: PSR tax-loss calculations supported by trial evidence; obstruction enhancement justified by false testimony. | Defs: many workers were independent contractors; tax loss overstated; no obstruction; sentence disproportionate. | District court’s tax-loss, restitution, obstruction enhancement, and denial of acceptance adjustment upheld; below-guidelines sentence was reasonable. |
Key Cases Cited
- Cordner v. United States, 671 F.2d 367 (9th Cir. 1982) (gold coins with numismatic/intrinsic value are property taxed at fair market value)
- Cal. Fed. Life Ins. Co. v. Comm’r, 680 F.2d 85 (9th Cir. 1982) (coins treated as property for tax purposes when market value exceeds face value)
- Joslin v. United States, 666 F.2d 1306 (10th Cir. 1981) (payments in silver dollars taxed at coins’ fair market value)
- Stoecklin v. Comm’r, 865 F.2d 1221 (11th Cir. 1989) (reaffirming fair-market valuation for coins used as compensation)
- United States v. George, 420 F.3d 991 (9th Cir. 2005) (willfulness requires clear statutory prohibition; lack of prior appellate rulings does not automatically render law vague)
- United States v. SDI Future Health, Inc., 568 F.3d 684 (9th Cir. 2009) (warrant incorporates affidavit only if reference and attachment/accompanying requirements met)
- United States v. Powell, 955 F.2d 1206 (9th Cir. 1992) (court may exclude legal materials not actually relied on by defendant; evidence of relied-upon law is admissible for willfulness/state of mind)
- Kember v. United States, 685 F.2d 451 (D.C. Cir. 1982) (civil suit against prosecutor does not automatically disqualify; removal requires clear and convincing proof of misconduct)
- Young v. United States ex rel. Vuitton Et Fils, 481 U.S. 787 (1987) (appointment of an interested private prosecutor in contempt proceedings creates structural error; narrow holding)