Filed: Jan. 13, 2010
Latest Update: Feb. 12, 2020
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 08-4493 UNITED STATES OF AMERICA, Plaintiff - Appellant, v. MARTIN LOUIS BAUCOM, Defendant - Appellee. Appeal from the United States District Court for the Western District of North Carolina, at Charlotte. Graham C. Mullen, Senior District Judge. (3:02-cr-00147-GCM-1) No. 08-4512 UNITED STATES OF AMERICA, Plaintiff - Appellant, v. PATRICK GRANT DAVIS, Defendant - Appellee. Appeal from the United States District Court for the W
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 08-4493 UNITED STATES OF AMERICA, Plaintiff - Appellant, v. MARTIN LOUIS BAUCOM, Defendant - Appellee. Appeal from the United States District Court for the Western District of North Carolina, at Charlotte. Graham C. Mullen, Senior District Judge. (3:02-cr-00147-GCM-1) No. 08-4512 UNITED STATES OF AMERICA, Plaintiff - Appellant, v. PATRICK GRANT DAVIS, Defendant - Appellee. Appeal from the United States District Court for the We..
More
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 08-4493
UNITED STATES OF AMERICA,
Plaintiff - Appellant,
v.
MARTIN LOUIS BAUCOM,
Defendant - Appellee.
Appeal from the United States District Court for the Western
District of North Carolina, at Charlotte. Graham C. Mullen,
Senior District Judge. (3:02-cr-00147-GCM-1)
No. 08-4512
UNITED STATES OF AMERICA,
Plaintiff - Appellant,
v.
PATRICK GRANT DAVIS,
Defendant - Appellee.
Appeal from the United States District Court for the Western
District of North Carolina, at Statesville. Graham C. Mullen,
Senior District Judge. (5:02-cr-00026-GCM-CH-1)
Argued: September 23, 2009 Decided: January 13, 2010
Before TRAXLER, Chief Judge, WILKINSON, Circuit Judge, and
Margaret B. SEYMOUR, United States District Judge for the
District of South Carolina, sitting by designation.
Vacated and remanded by unpublished per curiam opinion.
ARGUED: David Alan Brown, Sr., OFFICE OF THE UNITED STATES
ATTORNEY, Charlotte, North Carolina, for Appellant. Noell Peter
Tin, TIN, FULTON, WALKER & OWEN, PLLC, Charlotte, North
Carolina; Ross Hall Richardson, FEDERAL DEFENDERS OF WESTERN
NORTH CAROLINA, INC., Charlotte, North Carolina, for Appellees.
ON BRIEF: Gretchen C. F. Shappert, United States Attorney,
Charlotte, North Carolina, for Appellant. Claire J. Rauscher,
Executive Director, FEDERAL DEFENDERS OF WESTERN NORTH CAROLINA,
INC., Charlotte, North Carolina, for Appellee Martin Louis
Baucom.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
The government appeals the sentences imposed on Martin
Baucom and Patrick Davis after remand by the Supreme Court. We
vacate the sentences and remand for new sentencing proceedings
before a different district court judge. 1
I.
Appellants operated Baucom-Davis and Associates, a land
surveying and computer consulting business. From 1990 until
2002, Baucom and Davis failed to file personal income tax
returns and failed to file income and employment tax returns for
the business.
In May 2002, Baucom and Davis were separately charged with
three counts of failure to file income tax returns. Through a
superseding indictment, the government consolidated the cases
and added a fourth count, charging both with conspiracy to
defraud the United States. In August 2003, the case finally
proceeded to trial, and Baucom and Davis were convicted on all
counts.
1
During the sentencing proceedings that took place after
remand, the district court declared its intention to recuse
itself from any further proceedings involving these defendants.
See J.A. 187. We hereby direct that the case on remand be
assigned to a different district court judge.
3
According to the information set out in the presentence
reports (“PSRs”), Baucom owed $347,134.40 in unpaid taxes, while
Davis owed $365,618.31. These amounts included unpaid federal
and state income taxes from 1993 to 1997. Although the PSRs
noted that the defendants had not paid taxes for the years 1998
through 2002, the amounts for those years could not then be
determined and thus were not included in the loss amount
calculated by the PSR. The PSRs recommended two-level
acceptance-of-responsibility adjustments for each defendant,
bringing the total offense level to 16 and yielding a 21-27
month Guidelines sentencing range for Baucom and for Davis.
A sentencing hearing was held for Baucom in November 2004.
The district court refused to include unpaid state taxes as
relevant conduct, believing it was unfair to consider state-law
violations when sentencing for a federal crime. The court
announced a sentence of 21 months, but delayed entering judgment
until after Davis was sentenced. After the Supreme Court
announced its decision in United States v. Booker, 543 U.S. 220
(2005), the district court set aside Baucom’s sentence and
indicated that it would hold a new sentencing hearing.
The district court finally convened sentencing hearings for
Baucom and Davis in February 2006. The district court again
refused to consider state tax losses as relevant conduct, and
the court declined to permit the government to present evidence
4
of the tax losses for the years 1998-2002, evidence that had
become available since the PSRs were prepared in 2004. Over the
government’s objections, the district court granted two-level
acceptance-of-responsibility adjustments for each defendant.
The district court’s calculations yielded offense levels of 16
and advisory sentencing ranges of 21-27 months for each
defendant.
As to Baucom, the court described him as a “scofflaw” who
had ignored the tax laws for 12 years, J.A. 146, and failed to
take any steps to correct his tax problems. The court
nonetheless varied downward from the advisory Guidelines range
and sentenced Baucom to 15 months’ imprisonment. As to Davis,
the court likewise concluded that a downward variance was
appropriate. The district court noted Davis’s “extraordinary
charitable works,” J.A. 129, his efforts to become current on
his tax liability, and the hardship that the employees of
Davis’s business would suffer if he were sent to prison. The
district court therefore sentenced Davis to four years’
probation, conditioned on the service of 12 months’ house
arrest.
The government appealed the sentences to this court. We
vacated and remanded for resentencing, concluding, among other
things, that the district court erred by granting acceptance-of-
responsibility adjustments and by refusing to consider unpaid
5
state taxes as relevant conduct. See United States v. Baucom,
486 F.3d 822, 829-30 (4th Cir. 2007) (“Baucom I”).
Davis filed a petition for a writ of certiorari. After the
Supreme Court issued its opinion in Gall v. United States, 552
U.S. 38 (2007), the Court granted the petition, vacated our
decision, and remanded to this court for reconsideration in
light of Gall. See Davis v. United States,
128 S. Ct. 870
(2008) (mem). We issued an order remanding the case to the
district court for resentencing in accordance with principles
set forth out in Gall.
Prior to the second sentencing hearing for the defendants,
the probation agent filed supplements to the initial PSRs. The
supplemental PSRs eliminated the acceptance-of-responsibility
reductions that we had previously found improper and included
the federal and state tax losses for 1998-2002, information that
had been unavailable when the PSRs were first prepared. The
inclusion of the information from those years raised the tax
loss to more than $580,000 for Baucom and for Davis, which
raised the offense level for each defendant from 18 to 20 and
yielded 33-41 month advisory sentencing ranges.
At the re-sentencing hearing for Baucom, the district court
initially indicated that it agreed with the calculations of the
PSR supplement. The district court, however, reversed course,
refusing to permit the government to present evidence of the
6
additional tax losses that had not been included in the original
PSRs and refusing to increase the offense level based on those
losses. The court therefore determined Baucom’s total offense
level to be 18.
Counsel for Baucom sought a downward variance, arguing that
the five years between Baucom’s conviction and sentencing had
taken a toll on his family. Counsel noted that while Baucom had
not yet paid any of his federal taxes, he had filed tax returns
for the years 2003 through 2005 and was prepared to file his
2006 return. In response, the government noted that Baucom had
not filed federal tax returns for 12 years, had only managed to
file three federal tax returns since his conviction, but still
had failed to file a single state tax return. The government
pointed out that Baucom had not paid any of his federal or state
tax liabilities, and had even declared himself to be a
subcontractor rather than an employee so as to avoid any tax
withholding. The government argued that an upward variance was
appropriate and sought a prison term of 84 months.
The district court appeared to agree with the government,
stating that, “[r]egrettably, Mr. Baucom presents a continued
scofflaw. I think the government’s argument is largely
correct.” J.A. 164. The court noted that “[h]e has not paid
any of his state taxes. . . . He continues to reject the
seriousness of the offense. He continues not to abide by the
7
law. . . . [C]ertainly if he’s not going to pay his taxes, all
we can do basically is punish him for that.” J.A. 165. Despite
the tenor of the court’s comments, the district court still
concluded that a downward variance was appropriate, and the
court sentenced Baucom to the 15-month term of imprisonment
originally imposed.
Davis was resentenced later that day. Counsel for Davis
had not yet seen the supplemental PSR, and the district court
offered to re-schedule the hearing. As counsel for Davis
reviewed the supplemental PSR, the government noted that the
issues were the same as in Baucom’s resentencing and that it
suspected the district court would resolve the issues in the
same manner. The district court then explained the differences
in the supplemental PSR: “You know you lose the two points for
acceptance of responsibility and that the Presentence Report
calls for an 18 [total offense level] and one [criminal history
category].” J.A. 171. Counsel for Davis then stated, “I guess
it’s two levels up from what it was previously,” to which the
court responded, “That’s correct. The Court of Appeals tells me
. . . I should not have accepted the recommendation in the
Presentence Report, and that therefore it was 18 and one.” J.A.
171.
Counsel for Davis agreed to proceed with the sentencing and
urged the district court to again impose a probationary
8
sentence. Counsel explained that Davis had filed all his tax
returns since the conviction and was actively working with the
IRS to negotiate and pay his tax liabilities. Counsel noted
that Davis was still running his company and was involved in the
same charitable activities as he had been at the time of the
original sentencing. For its part, the government argued that a
term of incarceration was required. The government noted that
while Davis was current with his tax filings, Davis had not yet
repaid any of the back taxes. The government contended that
Davis had structured his personal finances and business
operation so as to put most of his assets beyond the reach of
the government, thus making himself effectively judgment-proof,
and that Davis facilitated Baucom’s ongoing tax avoidance by
agreeing to treat Baucom as an independent contractor rather
than an employee.
The district court concluded that a probationary sentence
was warranted for Davis. The court explained that
the situation with Mr. Davis is completely different
from Mr. Baucom. Mr. Davis has stepped up. He has
filed his taxes. . . .
He has no criminal record. The circuit took
umbrage with me talking about his charitable work, but
I think I can consider that. I don’t give it
particularly great weight in this. I think the
support he provides his family, his gainful
employment, I think the effect on large numbers of
employees who would be out of work tells me that I did
the right thing the first time for the right reasons.
. . .
9
J.A. 185. The district court therefore sentenced Davis to the
same sentence previously imposed -- four years’ probation,
conditioned on the service of 12 months’ house arrest.
The government appeals and again challenges the sentences
imposed on Baucom and Davis.
II.
Although the Sentencing Guidelines are now advisory, see
United States v. Booker, 543 U.S. 220, 245 (2005), “district
courts in the post-Booker landscape must follow specific steps
to arrive at an appropriate sentence.” United States v. Abu
Ali,
528 F.3d 210, 260 (2008). The court must first calculate
the appropriate advisory Guidelines range, making factual
findings as necessary. After giving the parties the opportunity
to argue for the sentence they believe to be warranted, the
court must consider the advisory sentencing range in conjunction
with the factors set out in 18 U.S.C.A. § 3553(a) (West 2000 &
Supp. 2009) and impose the sentence it concludes is appropriate
under all the circumstances. See
Gall, 552 U.S. at 49-50; Abu
Ali, 528 F.3d at 260. When imposing sentence, the district
court “must make an individualized assessment based on the facts
presented,”
Gall, 552 U.S. at 50, and the court “must adequately
explain the chosen sentence to allow for meaningful appellate
review,”
id.
10
Our review of the district court’s sentencing decision is
limited to determining, under a deferential abuse-of-discretion
standard, whether the sentence imposed is reasonable. See
id.
at 40-41. This reasonableness review requires us to determine
whether the court committed any procedural errors, “such as
failing to calculate (or improperly calculating) the Guidelines
range, treating the Guidelines as mandatory, failing to consider
the § 3553(a) factors, selecting a sentence based on clearly
erroneous facts, or failing to adequately explain the chosen
sentence-including an explanation for any deviation from the
Guidelines range.”
Id. at 51. If there are no procedural
errors, we then consider the substantive reasonableness of the
sentence. “Substantive reasonableness review entails taking into
account the totality of the circumstances, including the extent
of any variance from the Guidelines range.” United States v.
Pauley,
511 F.3d 468, 473 (4th Cir. 2007) (internal quotation
marks omitted).
On appeal, the government contends that the sentences
imposed by the district court are procedurally and substantively
unreasonable. The government claims that the district court
miscalculated the Guidelines range by refusing to consider the
additional tax losses, that the district court failed to
properly consider the § 3553(a) factors, and that the district
11
court failed to adequately explain its reasons for the sentences
imposed.
A.
We begin with the government’s claim that the district
court improperly calculated the advisory sentencing range under
the guidelines. The government contends that the state and
federal tax losses for the years 1998-2002 were part of the
relevant conduct and therefore should have been considered by
the district court when determining the defendants’ offense
level. We agree.
The base offense level for tax evasion charges is
determined by the tax loss, see U.S.S.G. § 2T1.1(a) (1998), and
the tax loss includes the losses flowing from the offense of
conviction and all relevant conduct, see U.S.S.G. § 1B1.3(a).
The superseding indictment charged Baucom and Davis with
conspiring to violate the tax laws beginning in 1993 and
continuing through the date of the indictment – December 2002.
The tax losses, both state and federal, for the years 1998 –
2002 are thus part of the relevant conduct for the offense of
conviction. See U.S.S.G. § 2T1.1, cmt., n.2 (“In determining
the total tax loss attributable to the offense . . ., all
conduct violating the tax laws should be considered as part of
the same course of conduct or common scheme or plan unless the
evidence demonstrates that the conduct is clearly unrelated.
12
The following examples are illustrative of conduct that is part
of the same course of conduct or common scheme or plan: (a)
there is a continuing pattern of violations of the tax laws by
the defendant. . . .”). The defendants do not challenge the
substance of this conclusion -- that is, they do not argue that
the 1998-2002 tax losses do not fall within the Guidelines’
definition of relevant conduct. Instead, Baucom and Davis
advance separate arguments as to the government’s claim that the
district court erred in calculating the offense levels.
Baucom contends that the loss amounts for 1998-2002 cannot
be included now because the government did not present evidence
establishing those losses at the sentencing proceedings in 2006.
See United State v. Parker, 30 F.3d 542, 553-54 (4th Cir. 1993)
(“[T]he prosecution has already been given one full and fair
opportunity to offer whatever proof about Tonsler Park it could
assemble. Having failed to seize that opportunity, the
Government at resentencing should not be allowed to introduce
additional evidence to prove that Tonsler Park contained a
playground [and thus that a sentencing enhancement would apply].
One bite at the apple is enough.”).
In this case, however, the government has not had “one full
and fair opportunity” to offer evidence of the 1998-2002 losses.
The original PSRs, prepared in 2004, did not include the tax-
loss figures for the years 1998-2002, because that information
13
could not be determined at that time. The PSRs, however, did
note that losses of an as-yet undetermined amount had occurred
for those years. Information about those losses had become
available by the time of the sentencing in 2006, but the
district court refused to permit the government to present that
evidence. See J.A. 117-19. While the primary focus of our
opinion in Baucom I was the district court’s error in excluding
the state tax amounts, our opinion also made clear that the
district court erred by not permitting the government to present
the evidence of the 1998-2002 tax losses. As we explained in
Baucom I, inclusion of the state tax amounts alone would not
have affected the defendants’ offense levels, but we nonetheless
rejected the defendants’ claim that the state-tax error was
harmless. We reasoned that because “the district court did not
include in its calculations tax losses from the years 1998
through 2002, nor did it consider updated figures offered by the
Government at Davis’ sentencing hearing,” Baucom I, 486 F.3d at
829, the total loss amount at that point was uncertain, and we
therefore could not conclude that the state-tax error was
harmless.
Our opinion in Baucom I thus required the district court on
remand to allow the government to present evidence of the 1998-
2002 tax losses and to consider those losses when calculating
the defendants’ offense levels. The Supreme Court’s decision to
14
vacate Baucom I for reconsideration in light of Gall gives us no
reason to question that conclusion now. The 1998-2002 tax
losses are clearly part of the defendants’ pre-indictment
pattern of tax evasion and thus are properly considered relevant
conduct, and the original PSRs discussed the defendants’ failure
to file returns from 1998 through 2002. That information about
the amount of those tax losses was not available for inclusion
in the PSRs should not have precluded the government in the
original sentencing hearing from presenting the (then) newly
available information, as we concluded in Baucom I. 2 Because the
government has never had an opportunity to present this
evidence, Parker’s one-bite-at-the-sentencing-apple rule simply
has no applicability here.
For his part, Davis contends that the district court in
fact set his offense level at 20, the level sought by the
government on appeal, and that, accordingly, there was no error
in the district court’s Guidelines calculation. We disagree.
The 2006 PSR set Davis’s offense level at 20, and two of
those points were attributable to the 1998-2002 tax losses.
When the district court summarized the changes in the PSR for
2
If the defendants at the original hearing had not been
prepared to address the 1998-2002 tax loss information, the
district court could have granted a brief continuance to give
counsel an opportunity to prepare.
15
Davis’s attorney, the court told counsel that the difference was
the elimination of the acceptance-of-responsibility reduction,
and the court twice told counsel that the offense level was 18.
See J.A. 171. Since the district court had just sentenced
Baucom and had in that proceeding refused to include the two-
point increase for the 1998-2002 tax losses, it is apparent that
the district court likewise took those two points off Davis’s
offense level, thus giving him an offense level of 18, as the
district court stated to counsel.
As support for his claim, however, Davis points to an
exchange between the district court and the government at the
end of the hearing, when the government was putting its
objections to the sentencing on the record. As noted above,
the PSR set the offense level at 20, but the government at
sentencing sought a sophisticated-means enhancement that would
have brought the offense level to 22. At the end of the
hearing, the government noted its objection “to the Court’s
ruling that [the offense level and criminal history score]
should not be 22 and one.” J.A. 187. The district court
interjected, “20 and one. 20 and one.” J.A. 187. The
government then explained that its “position is it should have
been 22 and one, Your Honor,” to which the district court
responded, “Based on what you[] argued, yeah. Okay.” J.A. 187.
We disagree with Davis’s claim that the district court’s mention
16
of “20 and one” means that the court actually used an offense
level of 20 for Davis. We think it clear from the context of
this conversation that the district court was briefly confused
about the offense level the government had sought and thought
the government had only sought an offense level of 20. The
court’s statement in no way indicates that the court actually
used an offense level of 20 when sentencing Davis.
Because the 1998-2002 state and federal tax losses were
clearly relevant conduct, the district court erred by excluding
those amounts from the tax loss calculation. See United States
v. Hayes, 322 F.3d 792, 802 (4th Cir. 2003) (“[A] court has no
discretion to disregard relevant conduct in order to achieve the
sentence it considers appropriate.”). This error in the
Guidelines’ calculation renders the sentences procedurally
unreasonable and requires us to remand for resentencing. See
United States v. Diaz-Ibarra,
522 F.3d 343, 347 (4th Cir. 2008)
(“An error in the calculation of the applicable Guidelines
range, whether an error of fact or of law, infects all that
follows at the sentencing proceeding, including the ultimate
sentence chosen by the district court, and makes a sentence
procedurally unreasonable even under our deferential abuse-of-
discretion standard.” (internal quotation marks omitted)).
17
B.
Although the Guidelines-calculation error in and of itself
requires re-sentencing, we briefly address other issues raised
by the government that might arise again on remand.
We agree with the government that the district court failed
to adequately consider the need for deterrence and failed to
consider the policy statements expressing the Sentencing
Commission’s views that tax evasion is a serious offense, its
concerns about the pre-Guidelines frequency of probationary
sentences for tax evaders, and its belief that deterrence of
others should be a primary consideration when sentencing tax
evaders. See U.S.S.G. Ch. 2, Pt. T, introductory cmt.; id. at
Ch. 1, Pt. A, introductory cmt 4(d). As we explain in United
States v. Engle, No. 08-4497, an opinion also filed today, the
district court is not required to agree with the Commission’s
policy views, but it is required to consider those views.
We also agree with the government that the district court’s
explanation for the sentences was inadequate. A district
court’s sentencing decision must be premised on an
“individualized assessment based on the facts presented,” Gall,
552 U.S. at 50, and the court’s explanation of its sentencing
must be sufficient “to satisfy the appellate court that [the
district court] has considered the parties’ arguments and has a
reasoned basis for exercising his own legal decisionmaking
18
authority,” Rita v. United States, 551 U.S. 338, 356 (2007).
The district court’s explanation need not necessarily be
“elaborate or lengthy,” particularly when the sentence is within
the advisory Guidelines range. United States v. Carter,
564
F.3d 325, 330 (4th Cir. 2009). In this case, however, the
sentences significantly deviated from the advisory Guidelines
range, thus warranting a more detailed explanation from the
district court. See
Gall, 552 U.S. at 50 (explaining that if
the sentencing judge “decides that an outside-Guidelines
sentence is warranted, he must consider the extent of the
deviation and ensure that the justification is sufficiently
compelling to support the degree of the variance. We find it
uncontroversial that a major departure should be supported by a
more significant justification than a minor one.”). And as to
Baucom, the explanation offered by the district court, which
characterized Baucom is a “continued scofflaw,” would have
supported an upward variance, but it in no way provides any
support for a downward variance in any amount, much less the
significant downward variance imposed by the district court in
this case.
Finally, we also agree with the government that the
district court improperly focused on the effect that a term of
imprisonment for Davis would have on Davis’s employees.
Sentencing a defendant to prison will always have an effect,
19
often a very serious negative effect, on the lives of others --
families lose caretakers and providers, and employees sometimes
lose their employers. In the usual case, however, the effect of
the sentence on others is an insufficient basis for rejecting a
term of imprisonment. Moreover, because defendants who have
employees are more likely to be wealthy, the approach taken by
the district court in this case would, as the government argues,
have the effect of “reward[ing] the wealthy with probationary
sentences while punishing the impoverished with incarceration.”
Brief of Appellant at 23. While the socio-economic status of a
defendant may sometimes be relevant to certain aspects of the
sentencing process, it should not play the kind of role that it
played in the district court’s decision in this case to entirely
disregard the sentence recommended by the Guidelines. See
Engle, No. 08-4497, section II(B).
III.
Accordingly, for the foregoing reasons, we hereby vacate
the sentences and remand for resentencing before a different
district judge. On remand, the district court shall permit the
government to present evidence of the state and federal tax
losses for the years 1998 through 2002, and the court shall
20
include those amounts when determining the defendants’ offense
levels.
VACATED AND REMANDED
21
