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United States v. Ballard

United States Court of Appeals, Sixth Circuit

March 3, 2017

United States of America, Plaintiff-Appellee,
John V. Ballard, Defendant-Appellant.

         Appeal from the United States District Court for the Western District of Tennessee at Memphis. No. 2:16-cr-20078-1-Sheryl H. Lipman, District Judge.

         ON BRIEF:

          Mary C. Jermann-Robinson, OFFICE OF THE FEDERAL PUBLIC DEFENDER, Memphis, Tennessee, for Appellant.

          Damon Keith Griffin, UNITED STATES ATTORNEY'S OFFICE, Memphis, Tennessee, for Appellee.

          Before: DAUGHTREY, SUTTON, and DONALD, Circuit Judges.


          SUTTON, Circuit Judge.

          John Ballard lied about his income, hid money in family members' bank accounts, and filed then dismissed several Chapter 13 bankruptcy petitions. Through these and other inartful dodges, he tried to avoid paying $848, 798 in taxes arising from his income as a securities broker between 2000 and 2008. The Internal Revenue Service noticed. Even after the IRS started asking questions, Ballard told the agency that he did not have any income in 2009, when in truth he had made over $500, 000 as a broker that year. The lies and deceptions led to a criminal charge, then a guilty plea, for violating 26 U.S.C. § 7212(a), which prohibits "corruptly . . . obstruct[ing] or imped[ing] . . . administration of [the tax laws]."

         The Sentencing Guidelines say that district courts may sentence individuals for violations of that provision as a tax evasion offense or as an obstruction of justice offense, whichever is "most appropriate." U.S.S.G. App. A, Introductory cmt. Ballard urged the court to use the obstruction of justice guideline. The district court disagreed. It rejected Ballard's argument that he never intended to evade paying his taxes but was merely delaying the payments (merely obstructing justice in other words) until he made real money-apparently more than $500, 000 a year. Use of the tax evasion guideline led to a higher offense level for Ballard and an increase in the sentencing range from 8-14 months to 24-30 months, and eventually led to a sentence of 18 months. We affirm.

         Starting in 1998, Ballard worked as a securities broker paid on commission. Not every firm he worked for withheld his income taxes. In 2008, the IRS classified him as a "non-filer" because he filed returns without paying his tax bills. In response to IRS inquiries, Ballard filled out Form 433-A in January 2009, claiming no income and no ability to pay. In truth, he was employed by a securities brokerage in Texas and ended up making over $500, 000 that year. Rather than starting to pay off the more than $800, 000 he owed to the government at that point, Ballard spent that year's income on (1) a new $96, 000 Range Rover, which he titled in his wife's name and then resold six weeks later for cash, (2) $25, 000 in furniture for a new house he started leasing for $6, 000 per month, and (3) an $80, 000, six-week trip to Palm Beach with his family. He also sometimes used his wife's and his mother-in-law's bank accounts to deposit earnings and pay expenses. Unamused, the IRS issued a notice of intent to levy his brokerage income in 2010. Ballard responded by quitting his job, apparently cutting his income to spite the IRS. He filed and later dismissed a Chapter 13 bankruptcy petition, halting the collection efforts of the IRS and his other creditors. This was not the only time he deployed this tactic, having done the same thing five times before (and ten times since).

         These evasive actions triggered a criminal investigation. In 2012, IRS agents interviewed Ballard. He denied having any employment in 2009 and claimed that all of the money he made that year arose from work for prior years. But in fact the money was payment for work he did in January, April, May, June, August, and December of 2009. And he knew it. That lie, charged the local United States Attorney, constituted "corruptly . . . obstruct[ing] or imped[ing] . . . administration of [the tax laws]" in violation of 26 U.S.C. § 7212(a). He pleaded guilty to that single count.

         Ballard raised one objection at sentencing: Rather than sentencing him under the tax evasion guideline, the district court should sentence him under the obstruction of justice guideline, which in his case (though not always) would lead to a lower base offense level. His offense, he claimed, was more akin to obstruction of justice than tax evasion because all that was actually charged was the 2012 lie to IRS investigators, and he had always intended, he claimed, to pay his taxes once he had the money. The district court applied the tax evasion guideline nonetheless, which produced an advisory range of 24-30 months. The district court varied downward and sentenced Ballard to 18 months, and it required him to make full restitution of his unpaid taxes. Ballard appealed the application of the tax evasion guideline, as his plea agreement permitted.

         When a taxpayer violates § 7212(a)'s omnibus clause, as Ballard did, the Guidelines give the sentencing judge two options: § 2T1.1 (tax evasion) or § 2J1.2 (obstruction of justice). U.S.S.G. App. A.

         Section 2T1.1 covers "Tax Evasion; Willful Failure to File Return, Supply Information, or Pay Tax; Fraudulent or False Returns, Statements, or Other Documents." It explains that the base offense level should be calculated under the Guidelines' tax table according to the "[tax] loss that would have resulted had the offense been successfully completed, " and that the applicable "tax loss is not reduced by any payment of the tax subsequent to the commission of the offense." U.S.S.G. § 2T1.1. Other offenses punishable under that section include evading taxes, 26 U.S.C. § 7201, willfully failing to file a tax return, keep records, or supply information as the tax code and regulations require, id. § 7203, making fraudulent statements under penalty of perjury in a "return, statement, or other document, " id. § 7206(1), removing, depositing, or concealing "any [taxed or levied] goods or commodities . . . with intent to evade or defeat the assessment or collection of any tax, " id. § 7206(4), and perpetrating various forms of fraud on the Secretary, id. §§ 7206(3), 7207; see United States v. Neilson, 721 F.3d 1185, 1188 (10th Cir. 2013).

         Section 2J1.2, in partial but not complete contrast, covers "Obstruction of Justice." The section's background note explains that "[n]umerous offenses of varying seriousness may constitute obstruction of justice, " including obstructing a criminal investigation, intimidating jurors, stealing or altering court records, intercepting grand jury deliberations, altering evidence, threatening or injuring witnesses, and impeding the communications of judges or law enforcement. U.S.S.G. § 2J1.2; see 18 U.S.C. §§ 1001, 1503, 1505, 1506, 1508, 1509, 1510(a), 1512, 1513, 1516, 1519; U.S.S.G. App. A. This guideline thus "covers a broad range of conduct that generally involves interfering with the administration of the justice system." Neilson, 721 F.3d at 1188. Its instructions on "specific offense characteristics" tell courts what to do when the offense involves ...

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