UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-4924
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
CELINA V. LORD,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. James C. Cacheris, Senior
District Judge. (1:09-cr-00159-JCC-2)
Argued: October 27, 2010 Decided: December 13, 2010
Before MOTZ and KEENAN, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Affirmed in part, vacated in part, and remanded by unpublished
opinion. Judge Keenan wrote the opinion, in which Judge Motz
and Senior Judge Hamilton joined.
ARGUED: Mark John Petrovich, PETROVICH & WALSH, PLC, Fairfax,
Virginia, for Appellant. Mark Sterling Determan, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON
BRIEF: John A. DiCicco, Acting Assistant Attorney General, Alan
Hechtkopf, Karen Quesnel, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, D.C.; Neil H. MacBride, United States Attorney,
Alexandria, Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
2
KEENAN, Circuit Judge:
Celina Lord appeals her convictions by a jury on six counts
of willfully failing to make payroll tax payments for her
employer, ASSC, Inc. (ASSC), in violation of 26 U.S.C. § 7202.
The district court sentenced Lord to a total of 21 months’
imprisonment followed by three years of supervised release. As
a condition of her supervised release, the district court also
ordered Lord to pay $776,849.47 in restitution to the United
States government. See 18 U.S.C. §§ 3583(d), 3563(b).
Lord contends that the district court erred: 1) in
purportedly permitting an Internal Revenue Service (IRS) revenue
officer to testify about Lord’s state of mind; 2) in providing
the jury a particular definition of negligence; and 3) in
denying Lord’s motion under Rule 29 for a judgment of acquittal,
in which Lord asserted that the evidence was insufficient to
support the convictions. For the reasons discussed below, we
affirm Lord’s convictions and sentences, finding error only in
the amount of restitution ordered by the district court.
I.
The record before us shows that certain types of employers,
including ASSC, are required to withhold employment taxes from
their employees’ wages. See Erwin v. United States, 591 F.3d
313, 319 (4th Cir. 2010). The employer holds the money in
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“trust for the United States” until making a federal tax payment
in the amount of the withheld funds. 26 U.S.C. § 7501(a); see
26 U.S.C. §§ 3102, 3402. Because employment taxes are held in
trust, they commonly are referred to as “trust fund taxes.” See
Plett v. United States, 185 F.3d 216, 218 (4th Cir. 1999).
If the IRS is unable to collect “trust fund taxes” from an
employer, as occurred in this case, the IRS may impose liability
on the employer’s officers or employees when two requirements
are met. First, the officer or employee must have had a duty to
“collect, account for, and pay over” employment taxes for the
employer. See 26 U.S.C. §§ 7202, 6672(a). An individual who
exercises this authority is referred to as a “responsible
person.” See Slodov v. United States, 436 U.S. 238, 246 n.7
(1978); Plett, 185 F.3d at 218-19. Second, this responsible
person must willfully have failed to perform these tax-related
duties. See 26 U.S.C. §§ 7202, 6672(a). If both conditions are
satisfied, the employee may be personally liable to pay civil
penalties under 26 U.S.C. § 6672(a) (trust fund recovery
penalties), or may face criminal sanctions and imprisonment
under 26 U.S.C. § 7202.
In the present case, ASSC failed to pay over employment
taxes to the federal government from the fourth quarter of 2001
through the second quarter of 2004. Celina Lord was the chief
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financial officer and the acting president of ASSC during the
period that ASSC failed to comply with federal tax laws.
II.
The evidence at trial showed that Jannette Green, a revenue
officer for the IRS, was assigned responsibility for collecting
delinquent employment taxes owed by ASSC. As part of her
duties, Green conducted interviews with Lord and Linda Smith,
the president of ASSC, to determine whether they were personally
liable for trust fund recovery penalties under 26 U.S.C. §
6672(a), based on their role in ASSC’s failure to make
employment tax payments. 1
Green first testified regarding her conversations with
Smith. Green stated that she explained to Smith the IRS’s
procedures for determining civil liability to pay trust fund
recovery penalties. Green informed Smith “that [as part of its
collection efforts, the IRS makes] a determination based on
willfulness and responsibility to determine who was actually
responsible for having turned over [withheld employment taxes]
to the government and failed to do so.”
1
Linda Smith had taken a long-term leave of absence from
the company during the first half of 2001, and at some time
thereafter had appointed Lord to serve as acting president
during Smith’s absence.
5
Lord’s counsel raised an objection, asserting that any
statements by Green regarding which individuals at ASSC were
responsible for payment of employment taxes would improperly
invade the province of the jury to decide an element of the
offense charged. Counsel for the government responded,
suggesting that the district court instruct the jury that Green
was only testifying about her discussions with Smith regarding
her liability for civil penalties, and not about conclusions
Green may have drawn about Lord’s responsibility under the
criminal statute. Lord’s counsel accepted the government’s
proposal, stating, “All right.”
After a brief recess, the district court instructed the
jury, “You had some testimony from Ms. Green on responsible
party under her theory. The question of who is the responsible
party is a question of law, and it’s not for Ms. Green to make
that decision.” Lord’s counsel did not object to this
instruction.
Counsel for the government resumed his direct examination
of Green. In response to a question, Green testified, “I would
have told [Smith] that based on the interview I conducted . . .
that I had deemed that [Smith] was both willful and responsible
for . . . having withheld money from employees’ paychecks for
taxes and Social Security and not having paid it over to the
government.”
6
Green gave similar testimony regarding her conversations
with Lord, except that Green did not use the word “willful.”
Lord objected to the government’s questions eliciting this
testimony as leading, and to Green’s testimony as irrelevant.
The district court overruled Lord’s objections. Green
testified, “I told [Lord] how we determined who was responsible.
And I told her that based on the interview, that I would be
holding her responsible for the trust fund [recovery]
penalties.”
A.
We ordinarily review a district court’s evidentiary rulings
for abuse of discretion. See United States v. Johnson, 617 F.3d
286, 292 (4th Cir. 2010). However, when an evidentiary issue is
raised for the first time on appeal, our consideration is
limited to a plain error review. United States v. Lynn, 592
F.3d 572, 577 (4th Cir. 2010); see Fed. R. Crim. P. 52(b).
Under the plain error standard, to constitute reversible error,
the district court’s error must be “plain” and must have
affected a party’s “substantial rights.” Lynn, 592 F.3d at 577.
Lord maintains for the first time on appeal that Green
testified as an expert witness based on her specialized training
as an IRS revenue officer, including her knowledge of the
relevant provisions of the Internal Revenue Code. Lord argues
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that Green improperly rendered opinion testimony regarding
Lord’s mental state in violation of Federal Rule of Evidence
704(b), which prohibits an expert witness from “stat[ing] an
opinion or inference as to whether the defendant did or did not
have the mental state or condition constituting an element of
the crime charged.” Fed. R. Evid. 704(b). Lord further notes
that under Rule 704(b), this inquiry is a “matter[] for the
trier of fact alone.” Id.
In addressing this argument, we initially observe that the
government did not attempt to qualify Green as an expert
witness, and that Lord did not raise an objection in the
district court challenging Green’s statements as being
inadmissible expert testimony. Thus, we review the district
court’s admission of Green’s testimony under the plain error
standard. See Lynn, 592 F.3d at 577.
The jury was charged, pursuant to 26 U.S.C. § 7202, with
determining whether Lord was “required” to “collect, truthfully
account for, and pay over” employment taxes, and whether she
willfully failed to do so. This inquiry did not require
specialized knowledge or involve particular terms of art. See
Fed. R. Evid. 702. The words used in § 7202 carry the same
meaning under the statute that they do in everyday use. Thus,
Green’s testimony describing her conversations with Lord about
Lord’s responsibility to pay over the employment taxes and her
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liability to pay civil penalties did not constitute “expert”
testimony.
Even if we assume, without deciding, that Green effectively
rendered expert testimony, that testimony did not violate Rule
704(b). Green did not opine about Lord’s state of mind
regarding a subjective intent to violate 26 U.S.C. § 7202.
Although Green testified that she told Lord she would be
responsible to pay civil penalties, Green did not make any
statements regarding Lord’s willfulness under § 7202 in failing
to pay over the employment taxes. Additionally, while Green
testified that Smith acted willfully, Green’s statement
regarding Smith was not probative of Lord’s culpability under §
7202, and thus did not have a prejudicial effect on the jury’s
consideration of the issue whether Lord acted willfully. 2
We also note that after the close of all the evidence, the
district court carefully instructed the jury by defining the
terms contained in 26 U.S.C. § 7202. The district court further
stated, “If you find the defendant was not a responsible person,
2
For this same reason, we disagree with Lord’s alternative
argument that if Green testified as a lay witness, her testimony
regarding willfulness violated Federal Rule of Evidence 701(a),
which limits a lay witness’ testimony to opinions “rationally
based on the perception of the witness.” Fed. R. Evid. 701(a).
As stated above, Green did not testify that Lord acted
willfully, and Green’s testimony regarding Smith’s conduct was
not probative of, or prejudicial to, the jury’s consideration of
the issue of Lord’s willfulness.
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then you will not consider any other issue. On the other hand,
if you conclude the defendant was a responsible person, you must
decide whether the defendant acted ‘willfully’ in the failure to
collect, truthfully account for and pay over taxes to the
Government.” These instructions, together with the unchallenged
limiting instruction given to the jury during Green’s testimony,
plainly informed the jurors that they, not Green, had the
ultimate authority to decide whether Lord was a responsible
party who willfully failed to pay over the employment taxes
under the terms of § 7202. We therefore conclude that the
district court did not plainly err in allowing the portions of
Green’s testimony at issue here.
B.
We turn to consider Lord’s challenge to the district
court’s supplemental jury instruction defining negligence. In
its initial charging instructions, the district court defined
the term “willful,” stating, “[t]o act willfully means to act
voluntarily and deliberately and intending to violate a known
legal duty.” The court then explained that “[n]egligent conduct
is not sufficient to constitute willfulness.”
During its deliberations, the jury asked the district court
to define “negligent conduct.” The district court informed
10
counsel that the court would respond that “negligence is a
failure to exercise ordinary, reasonable care.”
Lord objected to this definition, asserting that the
district court either should decline to define “negligent
conduct,” or should include in its definition the phrase “[care
that a] reasonable person would exercise.” The district court
proceeded to instruct the jury in accord with the court’s
initial proposal.
We review the district court’s decision to give this jury
instruction for abuse of discretion. See United States v.
Abbas, 74 F.3d 506, 513 (4th Cir. 1996). Thus, we will not
reverse Lord’s convictions on this basis unless the
instructions, taken together, did not adequately state the
controlling legal principles. United States v. Jeffers, 570
F.3d 557, 566 (4th Cir. 2009).
The parties agree that the determination of willfulness,
for purposes of § 7202, requires a subjective assessment of a
defendant’s conduct. Lord does not challenge the definition of
“willful” given by the district court, but suggests that in
defining negligence for the jury, the district court improperly
implied that willfulness, like negligence, is determined
objectively from the viewpoint of a reasonable person.
We find no merit in Lord’s argument. At the outset, we
note that Lord expressly invited the district court to include
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in its definition of “negligent conduct” language regarding a
“reasonable person.” See United States v. Herrera, 23 F.3d 74,
76 (4th Cir. 1994). Moreover, the district court correctly
defined both “willful” and “negligent” conduct. As stated
above, the district court also expressly distinguished
negligence from willfulness, and instructed the jury that
negligent acts cannot form the basis for a violation of § 7202.
Thus, we hold that the district court did not abuse its
discretion in giving the jury the supplemental instruction at
issue.
C.
We next address Lord’s argument that the district court
erred in denying her motion under Rule 29 for a judgment of
acquittal, in which she argued that the evidence was
insufficient to support her convictions. We review the district
court’s ruling de novo. United States v. Reid, 523 F.3d 310,
317 (4th Cir. 2008).
When a Rule 29 motion is based on a claim of insufficient
evidence, the jury verdict must be sustained if there is
“substantial evidence” to support the verdict, taking the view
most favorable to the government. Id. The evidence is
considered “substantial” if a reasonable finder of fact could
accept the proof as sufficient to support a defendant’s
conviction beyond a reasonable doubt. Id. To obtain a reversal
12
of a conviction on the ground that the evidence was
insufficient, the prosecution’s failure of proof must be clear.
United States v. Moye, 454 F.3d 390, 394 (4th Cir. 2006) (en
banc).
Lord contends first that the government failed to prove
that she “had a duty to collect, truthfully account for, and pay
over” employment taxes on behalf of ASSC. We disagree with
Lord’s argument.
The evidentiary record contains substantial evidence
showing that Lord was a “responsible person” required to pay
over employment taxes on behalf of ASSC. Lord conceded during
her testimony that she exercised authority over the finances of
ASSC. She not only was authorized to sign employment tax
returns, but also had the ability to transfer the sums withheld
for taxes to the accounting service used by ASSC.
Other ASSC employees testified that Lord controlled the
day-to-day operations and finances of ASSC throughout the time
periods at issue. Smith testified that Lord had signature
authority over the bank account used by ASSC to pay all bills,
including payroll taxes. Smith further stated that Lord had
permission to file ASSC’s tax returns and to pay over the
employment taxes. Taken together, this evidence was sufficient
to permit the jury to find beyond a reasonable doubt that Lord
13
was responsible for withholding and paying over employment taxes
on behalf of ASSC.
Lord argues, nevertheless, that the government failed to
prove that her failure to perform this duty was willful. This
argument, however, is refuted directly by the record. The jury
heard evidence that Lord was aware of the importance of filing
tax returns. Prior to accepting the position of chief financial
officer for ASSC, Lord had been an accountant for almost twenty
years. In at least two of her previous jobs, Lord was involved
with, or was in charge of, ensuring that her employer’s payroll
taxes were properly filed and paid. Further, Lord conceded in
her trial testimony that one of her “higher priorities” at ASSC
was to “file and to pay all outstanding taxes.”
Lord repeatedly testified that she was too busy with other
responsibilities, and had to satisfy other debts and pay
employee wages, before she made ASSC’s employment tax payments.
Such acts, of paying wages and of satisfying debts to creditors
in lieu of remitting employment taxes to the IRS, constitute
circumstantial evidence of a voluntary and deliberate violation
of § 7202. See United States v. Gilbert, 266 F.3d 1180, 1185
(9th Cir. 2001). Lord’s willfulness also can be inferred from
her pattern of failing to pay over the taxes for an extended
period of time. See United States v. Ostendorff, 371 F.2d 729,
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731 (4th Cir. 1967); United States v. Greenlee, 517 F.2d 899,
903 (3d Cir. 1975).
Based on this evidence, and viewing the government’s proof
as a whole, we conclude that substantial evidence in the record
supports the jury’s conclusion that Lord willfully violated §
7702. Thus, we hold that the district court properly denied
Lord’s Rule 29 motion for judgment of acquittal, and we affirm
Lord’s convictions.
III.
We conclude, however, that there was error in the amount of
restitution ordered by the district court. Restitution is
allowed only “for the loss[es] caused by the specific conduct
that is the basis of the offense of conviction.” Hughey v.
United States, 495 U.S. 411, 413 (1990). Conduct that is
relevant to the government’s proof but does not form a basis for
the conviction may not be considered in ordering restitution.
United States v. Newsome, 322 F.3d 328, 341 (4th Cir. 2003).
The parties agree that the proper amount of restitution
attributable to the conduct underlying Lord’s conviction is
$330,430.79, rather than the amount of $776,849.47 ordered by
the district court. The government concedes that this error was
not harmless. We therefore affirm Lord’s convictions and
sentences, with the sole exception of the restitution ordered in
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this case. We vacate the restitution provision in the district
court’s final judgment order, and we remand the case to the
district court for the limited purpose of entry of final
judgment reflecting the corrected amount of restitution.
AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED
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