UNITED STATES of America, Plaintiff-Appellee, v. Thomas R. JENNINGS, Defendant-Appellant. United States of America, Plaintiff-Appellee, v. David J. Feuerborn, Defendant-Appellant.
Nos. 11-50315, 11-50325
United States Court of Appeals, Ninth Circuit
April 3, 2013
Submitted Feb. 4, 2013.*
We conclude that the district court committed legal error in denying restitution because of Salyer‘s claimed financial status and the potential availability of civil remedies. See
Accordingly, the petition for a writ of mandamus pursuant to
GRANTED and REMANDED with instructions.
* The panel unanimously concludes this case is suitable for decision without oral argument. See
Neil C. Evans, Sherman Oaks, CA, for Defendant-Appellant David Feuerborn.
Robert E. Dugdale and Eric D. Vandevelde, Assistant United States Attorneys, Los Angeles, CA, for Plaintiff-Appellee.
Before: DIARMUID F. O‘SCANNLAIN, STEPHEN S. TROTT, and RICHARD R. CLIFTON, Circuit Judges.
OPINION
CLIFTON, Circuit Judge:
Defendants appeal the application of a two-level enhancement imposed by the district court in determining their sentences following convictions for tax fraud, because their offenses involved “sophisticated means,” under section 2T1.1(b)(2) of the federal Sentencing Guidelines.1 We affirm the district court‘s application of the enhancement. Conduct need not involve highly complеx schemes or exhibit exceptional brilliance to justify a sophisticated means enhancement. Defendants’ effort to conceal income by using a bank account with a deceptive name wаs sufficiently sophisticated to support application of the sentencing enhancement.
I. Background
Defendants Thomas Jennings and David Feuerborn owned and operated Environmental Soil Sciences, Inc. (“ESS“). They
ESS hired a vendor, Eco-Logic Environmental Engineering, to develop machinery that would use the purported technology to capture oil. ESS paid Eco-Logic Engineering approximately $2.5 million dollars, typically by check or direct deposit.
Meanwhile, Defendants opened and maintained a separate bank account of their own named “Ecologic.” Defendаnts wrote checks from the ESS business account and deposited them into the Ecologic account. A check to the Ecologic account would often contemporaneously mirror a legitimate payment to Eco-Logic Engineering. Defendants deposited more than $2.5 million from the ESS account into their Ecologic account. They never told ESS investors, accountants, or board members about the Ecologic account.
ESS generated no substantial revenues. But the Ecologic account funded Defendants’ new homes, cars, and cash payments to family members. Defendants did not report that money to thе IRS as income.
Defendants were both convicted by a jury of conspiring to defraud the United States under
When calculating the advisory sentencing range under the Sentencing Guidelines, the probation office recommended in its presentence report a two-level enhancement under section 2 T1.1 of the Guidelines based on Defendants’ use of “sophisticated means” to accomplish their crime. Over Defendants’ objection, the district court agreed and applied the two-level enhancement because, the district court concluded, Defendants’ use of the Ecologic account disguised income as company expensеs in a manner that was “more complex” than found in a typical tax fraud case. The enhancement resulted in an offense level of twenty-four and a recommended sentencing range of fifty-three to sixty-onе months of imprisonment under the Guidelines. The district court sentenced each Defendant to forty-eight months in prison, a little below the low end of the Guideline range.
II. Discussion
Defendants challenge the application of the two-level enhancement. We review the district court‘s interpretation of the Guidelines de novo, its application of the Guidelines to the facts for an abuse of discretion, and its factual findings for clear error. United States v. Williams, 693 F.3d 1067, 1072 (9th Cir. 2012).
Under the Guidelines, a two-level sentencing enhancement should be imposed when a defendant‘s offense “involved sophisticated means.”
Defendants argue thаt they did not employ means as sophisticated as those listed in the application note. They argue,
In O‘Doherty, for example, the Seventh Circuit affirmed an application of the enhancement where a commodities trader funneled trading profits from corporations’ trading accounts into four corporate bank accounts at two different financial institutions. 643 F.3d at 211. He then used the accounts, which appeared to be corporate assets, to pay personal expenses without reporting the accounts’ holdings as assets. Id. The defendant argued that his scheme was not “especially complex or intricate” and that the shell corporations had legitimate purposes. Id. at 220. The Seventh Circuit rejected defendant‘s argumеnt because the enhancement “does not require a brilliant scheme, just one that displays a greater level of planning or concealment than the usual tax evasion case.” Id. at 220 (quoting United States v. Fife, 471 F.3d 750, 754 (7th Cir. 2006)).
The method emplоyed by Defendants here reflected a sophisticated effort to conceal income. They syphoned money from ESS to themselves through a bank account that they named “Ecologic.” The use of thаt name was no accident. It mimicked the name of the company‘s primary vendor, Eco-Logic Environmental Engineering. Payments to the Ecologic account thus appeared to be payments to Eсo-Logic Engineering for legitimate business expenses. No legitimate reason for Defendants’ use of an account with the name “Ecologic” was established.
Defendants contend that the enhancement should not apply to them because the Ecologic account was opened under Jennings‘s real name and social security number. But the fact that the concealment might not have been total does not mean that there was no effort at concealment or that the method employed was not sophisticated. Application of the enhancement does not necessarily turn on the scheme‘s likelihood of success in remaining undetected. See Fife, 471 F.3d at 754 (noting that defendant‘s argument “confuses ‘sophisticated’ for ‘intelligent’ “).
Opening the account under Jennings‘s real name and social security number might have made it somewhat less likely that the diversion of funds would go undetected, but the scheme could have been figured out only by someone who knew that the Ecologic account was controlled by Jennings, or who knew to look at both the ESS records and the Ecologic account ownership records. Someone looking only at ESS‘s records would not have been able to tell that payments to the Ecologic account went to an account actually controlled by Jennings. Someone looking only at the Ecologic account records would not know that the funds deposited in that account were not proper businеss receipts.
Defendants also argue that they opened the account for legitimate purposes and regularly used it for ESS business but that does not alter our conclusion, either. The fact that an acсount was also used for lawful payments does not immunize its use for improper purposes.
III. Conclusion
Defendants’ effort to disguise funds taken for their own personal use as money
AFFIRMED.