Legal Research AI

United States v. Brennick

Court: Court of Appeals for the First Circuit
Date filed: 1998-01-22
Citations: 134 F.3d 10
Copy Citations
13 Citing Cases
Combined Opinion
                UNITED STATES COURT OF APPEALS
                    FOR THE FIRST CIRCUIT
                                         

No. 96-1969

                  UNITED STATES OF AMERICA,

                          Appellant,

                              v.

                      JOHN A. BRENNICK,

                     Defendant, Appellee.

                                         

         APPEAL FROM THE UNITED STATES DISTRICT COURT

              FOR THE DISTRICT OF MASSACHUSETTS

         [Hon. Nancy J. Gertner, U.S. District Judge]
                                                                

                                         

                            Before

                    Boudin, Circuit Judge,
                                                     

           Godbold and Cyr, Senior Circuit Judges.
                                                             

                                         

Stephen  G.  Huggard, Special  Assistant  United States  Attorney,
                                
with whom  Donald K. Stern, United  States Attorney, was on  brief for
                                  
the United States.
Scott  P. Lopez,  by appointment  of the  court, with  whom  Terry
                                                                              
Philip Segal and Burns & Levinson LLP were on brief for appellee.
                                             

                                         

                       January 20, 1998
                                         


     BOUDIN, Circuit Judge.   John Brennick was  convicted of
                                      

various offenses centered  around his failure to  pay over to

the Treasury income  and social security taxes  withheld from

his  employees' paychecks.  The district court calculated the

range of imprisonment  fixed by the sentencing  guidelines at

41  to 51  months but  then departed  downward and  imposed a

sentence  of 13  months' imprisonment.    The government  now

appeals, arguing that the downward departure was error.

                              I.

     John Brennick was the president and sole proprietor of a

number  of head  injury  treatment centers  in Massachusetts,

Pennsylvania,  Delaware and Maryland.   He also  operated one

head trauma  center in New  Jersey as a  limited partnership,

Brennick  being the  general  partner.   Some of  the centers

provided sophisticated  medical treatment;  others appear  to

have been supported living centers for head injured patients.

Taken as a  whole, the companies were a  large and successful

business venture.

     Employers  like Brennick are required to withhold income

taxes and social security taxes  from employee paychecks on a

periodic basis and to pay those amounts over to the Treasury.

The  Internal Revenue Service specifies the periods for which

such withholding is required.  Employers are required  by law

to deposit the  withheld taxes into the Treasury within three

days after  the end  of each such  period.   Regular returns,

                             -2-
                                         -2-


specifying  the  amounts  withheld and  paid  over,  are also

required on a quarterly basis.

     From 1986 to  1992, Brennick followed a  regular pattern

of withholding the taxes from his employees' pay but delaying

payment of  the monies into  the Treasury  for a  substantial

period beyond  the time  due.  Normally  his payments  to the

government were  between  two and  six months  after the  due

dates.     Brennick   routinely   filed  returns   accurately

describing  the amounts withheld, and when he ultimately made

the  delayed  payments to  the  Treasury,  he  also paid  the

interest and penalties prescribed by law for late payments.

     During this period,  Brennick frequently withdrew  money

from his businesses by means that avoided bank reports to the

IRS  that are  required  when a  person  withdraws more  than

$10,000  from an  individual bank  on a  single  banking day.

Brennick told various of his employees and  family members to

cash checks drawn on Brennick's various business accounts and

to turn  the money over to  him.  The  individual checks were

for less than $10,000 each;  but the total withdrawn from his

company accounts was often well over $10,000 a day.

     There  is  no  claim  that  Brennick  was  forbidden  to

withdraw  the monies from  the companies' accounts;  in fact,

for most  of them  he was the  sole proprietor,  and for  the

remaining one he  was the general partner.   The charge later

brought  against him was that the withdrawals were structured

                             -3-
                                         -3-


to  avoid the filing  of currency transaction  reports and to

deflect the  attention of  the tax authorities.   It  is said

that Brennick took much or all the money he withdrew and lost

it in gambling:  he claims to have lost more than  $1 million

a year.

     During the  second half  of 1992, Brennick's  businesses

began to suffer  financial problems.  Changes  were occurring

in  the health  care industry  adversely affecting  providers

like Brennick.  Insurance reimbursements came more slowly and

for  lower  amounts,  while the  costs  of  providing service

increased.  In December 1992, one of  the banks that had been

lending money to Brennick failed and Brennick could not  find

another lender to replace it.

     At  the  same   time,  the  IRS  began   to  investigate

Brennick's  pattern of  chronically  late  payments.    In  a

meeting with  an  IRS agent  on  October 30,  1992,  Brennick

agreed to  a payment  plan, including  a  commitment to  keep

current on future payments.  He  promised that his businesses

would seek to expedite payments to  the IRS and would cut his

own pay and  the pay of other executives in order to pay back

taxes.  Instead,  Brennick removed another $80,000  cash from

the businesses in November 1992  and almost twice that amount

in December.

     In  addition, Brennick now began to file false quarterly

withholding tax returns for many  of the companies.   Returns

                             -4-
                                         -4-


filed in  the third  and fourth quarter  of 1992  incorrectly

stated   that  Brennick  had  paid  over  to  the  government

virtually all of the withheld taxes; in truth, the  companies

in question had paid  none of the taxes over to the  IRS.  In

two cases Brennick signed the false returns himself; in other

cases they  were signed  by employees,  but Brennick was  the

person responsible for the withholding of the taxes.

     In February  1993, Brennick filed for  reorganization of

his businesses under chapter  11 of the Bankruptcy  Code, and

later  the case was transformed into a chapter 7 liquidation.

At the initial  filing, Brennick owed the  Treasury over $1.4

million in withheld taxes that  should have been, but had not

been,  paid over to  the government.   During reorganization,

Brennick  took additional  funds out  of  the businesses  for

himself while  failing to pay  over the full amount  of taxes

withheld during the same period.

     In  1995,   a  grand  jury  indicted  Brennick.    In  a

superseding indictment,  Brennick was charged  with 22 counts

of  willful failure to  account for, and  pay over quarterly,

specified withholding taxes, 26 U.S.C.   7202; nine counts of

structuring currency  transactions, 31  U.S.C.     5313, 5322

and 5324; and one count  of corruptly endeavoring to obstruct

and impede  the  IRS, 26  U.S.C.    7212(a).    There was  an

additional single  charge of  bankruptcy fraud,  18 U.S.C.   

152, but the jury later deadlocked on that issue.

                             -5-
                                         -5-


     In  December  1995,   Brennick  went  on  trial.     The

government,  in addition to  offering evidence of  the events

already  described,  called  several   of  Brennick's  former

employees who testified that Brennick had known the deadlines

for  paying  over  the withheld  taxes  but  had deliberately

chosen to ignore them even though his employees had sought to

get him  to  pay over  the  taxes on  a  timely basis.    The

bankruptcy  fraud count aside, the jury convicted Brennick on

all remaining counts.

     The   district  court  held   a  two-day  proceeding  to

determine Brennick's sentence and after sentencing, issued  a

memorandum and order explaining the court's analysis.  United
                                                                         

States v.   Brennick, 949 F. Supp. 32  (D. Mass 1996).  After
                                

briefly  setting out  the  background  facts, the  memorandum

calculated the normal  guideline range, referring (as  we do)

to the 1992  version of the guidelines.  Then,  at length, it

set out  the framework for departures and the court's reasons

for departing in this case.

     Brennick  was  convicted  of violating  three  different

statutes--failure to  pay over  withheld taxes,  structuring,

and  obstructing  the  IRS--but   the  conduct  was  arguably

related.  In any event, the district court chose to treat the

offenses  as closely  related  counts  to  be  grouped  under

                             -6-
                                         -6-


U.S.S.G.    3D1.2,  and its  choice is  not disputed  on this

appeal.1  Where counts are  so grouped, the court selects the

offense level for the violation  among the group that had the

highest offense level.  U.S.S.G.   3D1.3(b).

     The  district court ruled that the highest offense level

was  generated by  the  offense  of  corruptly  impeding  tax

officials  under 26 U.S.C.    7212(a).   Although no specific

guideline exists for this offense (unless force is used), see
                                                                         

U.S.S.G.,  appendix  A,  the court  is  directed  to use  the

guideline  for the  offense most  analogous  to the  criminal

conduct of  which the  defendant was  convicted.   U.S.S.G.  

1B1.2.   Here, the district court concluded  that the closest

analogy for  the obstructive conduct  was the offense  of tax

evasion,  a  violation of  26  U.S.C.     7201, for  which  a

specific  tax  evasion  guideline is  set  forth,  U.S.S.G.  

2T1.1.

     Although Brennick was not charged with tax evasion, this

choice of  analogy is not  challenged by either side,  and we

accept it  as reasonable  for purposes of  this appeal.   The

government's obstruction  charge embraced  all of  Brennick's

behavior  (deliberate underpayments,  structuring, and  other

acts of  falsity or  concealment) and  that conduct  includes

                    
                                

     1The government says for the record that the structuring
counts  should  have  been grouped  separately  from  the tax
counts,  which would have  resulted in a  one-level increase.
U.S.S.G.    3D1.4.   But this  caveat was  not raised  in the
district court and is not pursued here.

                             -7-
                                         -7-


withholding  revenues  from   the  government  combined  with

elements of conscious wrongdoing and personal gain.

     The base offense level for the tax evasion guideline  is

driven by  the tax loss  inflicted on the government,  and in

this case  the undisputed  level of  the government's  loss--

"more  than  $1,500,000"--corresponds  to  offense level  18.

U.S.S.G.    2T1.1(a), 2T4.1(M).  The district court added two

levels  on the ground  that Brennick had  used "sophisticated

means" to impede  discovery of  the offense,  see U.S.S.G.   
                                                             

2T1.1(b)(2), and two  more levels for obstruction  of justice

because of  untruthful testimony  by Brennick  at trial,  see
                                                                         

U.S.S.G.   3C1.1.  

     Given  a  total offense  level  of  22 (and  a  criminal

history  category I), the guideline range  for Brennick was a

term  of imprisonment of 41  to 51 months.   From this range,

the district court departed downward  to level 13, for  which

the  prescribed range  for a  defendant  in criminal  history

category  I is  12 to  18  months' imprisonment.   The  court

imposed a sentence of 13 months, as well as a fine  of $6,000

and the  statutory special  assessment, noting that  Brennick

remained personally liable  to the government for  tax losses

he had caused, 26 U.S.C.   6672.

     The court's reasons for the departure were set  forth in

some  detail but  reflect two  central themes:    first, that

Brennick's intent  was not as  wicked as that of  the typical

                             -8-
                                         -8-


tax evader because, despite some conscious wrongdoing, he did

not intend permanently to deprive the government of the funds

he failed to pay over; and second, the ultimate losses to the

government were due  not merely to Brennick's  conduct but to

contributing   causes  as  well,  including  failure  of  his

business's main bank  and adverse developments in  the health

care market.  

     The  government  has  now   appealed  to  challenge  the

sentence.   It  argues  that  the departure  was  based on  a

misconstruction of the  guidelines and that even if  a ground

for departure exists in theory (which the government denies),

the  district  court's  decision  to  depart  and  degree  of

departure were  unreasonable on the  present facts.   We take

the issues in that order.  

                             II.

     Departures from the  guideline range  are allowed  where

"the   court  finds  that  there  exists  an  aggravating  or

mitigating  circumstance  of  a kind,  or  to  a degree,  not

adequately  taken   into  consideration  by   the  Sentencing

Commission in formulating the  guidelines that should  result

in a  sentence different from  that described."  18  U.S.C.  

3553(b).  Sometimes, the guidelines identify a "circumstance"

that  is  a  permissible or  forbidden  basis  for departure,

sometimes further indicating that departure is  encouraged or

discouraged.

                             -9-
                                         -9-


     Absent such explicit guidance, the Commission itself has

told courts that they should  treat each guideline as carving

out  a "heartland"  representing  "a  set  of  typical  cases

embodying  the   conduct  that  each   guideline  describes."

U.S.S.G. ch.  1, pt. A  intro. comment  4(b).  "When  a court

finds  an atypical case, one  to which a particular guideline

linguistically  applies   but  where   conduct  significantly

differs  from the  norm,  the court  may  consider whether  a

departure  is  warranted."   Id.   If  the  characteristic is
                                            

"atypical"  and aggravates or  mitigates the typical conduct,

it may provide a basis for departure.

     Where a district  court does depart, an  aggrieved party

may appeal from both the decision to depart and the extent of

the  departure.  18  U.S.C.   3742.   The  standard of review

varies with the nature of the issue involved, deference being

limited or absent on abstract issues of law but more generous

as to questions of  law application and factfinding.   United
                                                                         

States v. Black, 78 F.3d  1, 8 (1st Cir.), cert.  denied, 117
                                                                    

S. Ct. 254  (1996).  The present case presents  issues of all

three kinds.

     We start  with the  district court's  determination that

Brennick,  although he  had deliberately  failed  to pay  the

government  the withheld wages  and social security  taxes at

the time they were due, genuinely intended to pay them in due

course.   In the  district court's view,  Brennick's main aim

                             -10-
                                         -10-


was to  use the  IRS as  a bank.   It is  not clear  that the

government  directly challenges this finding, but in any case

we think  the finding is not clearly  erroneous, the standard

ordinarily  applied   to  determinations  of   fact  made  at

sentencing.  United States v.  Pineda, 981 F.2d 569, 572 (1st
                                                 

Cir. 1992).

     Brennick's   pattern   before   financial   difficulties

engulfed him was  to retain the use of the  funds in question

for periods of  four to six months  and then to pay  over the

funds, adding penalties  and interests.  The  likelihood that

he would be able to make this repayment obviously declined as

troubles loomed in  late 1992, but  he continued to  scramble

for  resources to  continue payment.   Whether  an intent  to

repay can be  ascribed to all of  the delays in payment  is a

more difficult issue.  See part III below.
                                      

     In the district judge's sentencing memorandum and order,

she relied heavily upon this  intention to repay to carve the

present case out  of the "heartland"  of typical tax  evasion

cases.   The  government says  this  rationale was  a belated

attempt   to  bolster  a  departure  earlier  premised  on  a

different ground, namely, that there were multiple causes for

the  loss  to  the  government.    Our  own  reading  of  the

sentencing  transcript  suggests  that  the  benign  view  of

Brennick's  intent  was  always an  element  in  the district

court's reasoning.

                             -11-
                                         -11-


     The nature of the scienter element in a tax evasion case

is complicated to summarize given that different requirements

may apply  on different issues.  Still,  the taxpayer usually

is  attempting to deprive the government permanently of taxes

owed   to  it.    Typically,  the  instruction  requires  the

government  to prove that the defendant "willfully evaded, or

attempted  to evade,  income  taxes  with  the  intention  of

defrauding the government of  taxes owed."  Leonard B.  Sand,
                      

et al., Modern  Federal Jury Instructions: Criminal    59.01,
                                                               

Instruction  59-8 (1992) (emphasis added).  See, e.g., United
                                                                         

States v. Aitken, 755 F.2d 188 (1st Cir. 1985).
                            

     Admittedly, it would do a  defendant no good to say that

he deliberately understated his income but sincerely intended

to pay the money back to the government  in five years' time.

But  neither is it easy to imagine a fraud conviction where a

defendant files an accurate return, intends shortly to pay in

full, but  remits the funds  with interest shortly  after the
                                                                     

April  15 deadline.    Indeed,  the  guideline  covering  the

failure to  pay over  payroll taxes notes  in the  commentary

that   "[t]he  offense  is  a  felony  that  is  infrequently

prosecuted."  U.S.S.G.   2T1.6, commentary.

     In  all events,  we are  inclined  on the  basis of  the

information we have and our common sense to think that such a

temporary  delay in payment--where  the defendant expected to

pay--is not a "typical" or  "heartland" case of tax  evasion.

                             -12-
                                         -12-


Thus,  even  if  the  evasion  statute  and  guideline  might

"linguistically" be extended to embrace  such temporary delay

cases, the intent  to delay payment  only briefly could  take

the  case out of the  heartland.  And,  as already noted, the

district court made such a finding in this  case, sustainable

at  least as  to much  of  the losses  driving the  guideline

sentence.

     The  district court had  another theme in  its departure

analysis.  It said that the $1.5 million loss suffered by the

government overstated the  seriousness of Brennick's offense,

partly because the  losses were due to  multiple causes, some

of which  were not  Brennick's  fault or  within his  control

(failure   of  his   bank,  the   changes   in  health   care

reimbursement).   The government says that these concepts are

part of  the fraud  guidelines and applying  them to  the tax

crime guidelines is an error of law.

     The  fraud  guidelines,  like  the  tax guidelines,  set

offense  levels  primarily based  upon loss.   But  the fraud

guidelines alone  refer in  comment to the  possibility of  a

departure  where computed  losses  under-  or  overstate  the

seriousness of  the offense;  likewise, the  fraud guidelines

alone at one  time referred to multiple causes  as a possible

example of an overstatement and while that language  has been

deleted, they  retain that  concept in  one of the  examples.

Compare U.S.S.G.    2F1.1,  application note  11 (1990)  with
                                                                         

                             -13-
                                         -13-


application note 10 (1991).   See generally  United States v.
                                                                      

Rostoff, 53 F.3d 398, 406 (1st Cir. 1995).
                   

     We agree with the government that provisions in one  set

of  guidelines  cannot  normally  be  transferred  to another

separate set of guidelines.  See United States  v. Smallwood,
                                                                        

920 F.2d 1231, 1238 (5th Cir. 1991); United States v. Anders,
                                                                        

899 F.2d 570, 580 (6th  Cir. 1990).  The guidelines  for each

offense or set of offenses  tend to function as an integrated

unit,  containing  their  own  tradeoffs and  specifications.

Thus, without laying  down an iron rule, we  view skeptically

any importation  of language from  another offense guideline,

absent an explicit cross-reference.

     Yet this  does not  take the government  very far.   The

notion in the fraud guideline  that the loss table may under-

or overstate the  seriousness of the  offense is little  more

than another  way  of saying  that departures  from the  loss

table may be  warranted for good cause.  Even if we treat the
                                                  

fraud guideline's  language as generously  inviting a  search

for  such causes,  the  fact  remains  that  the  all-purpose

departure provision  remains available for tax cases whenever

the  case falls  outside  the  heartland.   See  18 U.S.C.   
                                                           

3553(b); U.S.S.G.   5K2.0.

     The fraud guidelines' multiple-cause language  is a more

complicated  matter.    The government  says  that  the fraud

guidelines may need  such flexibility because of  the diverse

                             -14-
                                         -14-


situations to which  they must apply.  By  contrast, it says,

"loss" for tax  purposes is based on  calculations, set forth

in the guidelines,  that (in words of the  brief) "focus upon

the amount due and  owing at the time of the offense."   If a

tax evader  repays what was  stolen, says the  government, he

merely   deserves  a  few   levels  off  for   acceptance  of

responsibility.

     Tax  loss seems  to be  a somewhat more  protean concept

than the government implies,2 but we  think that the argument

is  beside  the  point.    We are  here  concerned  not  with

computing the loss--the parties have agreed that it should be

treated as "more than 1.5 million"--but rather with whether a

departure  is proper.   And  we are  dealing not  with  a tax

evader  who stole  the  government's money  and  later had  a

change of heart  but with someone who (accepting the district

court's finding) never intended to steal the money at all (or

at least most of it).

     Further, regardless  of the fraud  guideline, the  facts

mentioned by the district court in its causation analysis are

obviously  relevant  even  if  the   analysis  is  not.    To

distinguish  Brennick from  the ordinary  tax  evader, it  is

essential to show  that he did  intend to  pay over what  was

                    
                                

     2Tax  loss  is  defined  somewhat  differently  for  the
different   tax  offenses,   compare  U.S.S.G.      2T1.1(a),
                                                
2T1.2(a), 2T1.3(a), and 2T1.6(a), and  the tax table at 2T4.1
has changed over time.

                             -15-
                                         -15-


owed and was merely deferring payment.  This premise would be

hard to  sustain unless some  other cause had  contributed to

his later failure to pay over the funds.

     This said, we think that  it merely invites confusion to

treat  "multiple causation"  as an  independent  basis for  a

departure.  And we think that to do so  would be inconsistent

with  the normal presumption that provisions in one guideline

are  not  to be  read  into  the  guideline for  a  different

offense--absent  an  explicit cross  reference or  some other

reason to believe that the  Commission so intended.  We doubt

that  this emendation would alter the district court's desire

to depart, but as a remand is required for other reasons,  it

is free to decide the point for itself.

                             -16-
                                         -16-


                             III.

     While a departure  could be justified in  theory in this

case, we do not think  that either the decision to depart  or

the  amount of the  departure has been  adequately explained.

Our reasons  are not the  usual ones--that  the departure  is

based on  an impermissible ground  or that there has  been no

effort to explain the degree  of departure.  Rather, we think

that factors  weighing against  any departure,  and certainly

one of this degree, received inadequate attention.

     In this case the guideline  range for Brennick was 41 to

51 months; and the 13-month  sentence imposed was less than a

third of the minimum and just over a quarter of the  maximum.

A 13-month sentence would  be the midpoint in the range for a

first time offender who evaded  or sought to evade $40,000 or

more  in taxes  but had  no other  adjustment.   Brennick, of

course, caused the government a tax loss of over $1,500,000.

     It would  be easy enough  to understand the  sentence if

Brennick  had merely  withheld  a large  payment,  reasonably

expecting  to pay  the  money  shortly but  using  it in  the

meantime  for  business  purposes  which  then   unexpectedly

collapsed.   Absent  loss  to  the  government,  there  would

probably  not even  be  a  prosecution in  such  a case;  and

certainly the intent would be less culpable than  in ordinary

tax evasion.  But Brennick's actions and intentions were more

serious than this abstraction allows.

                             -17-
                                         -17-


     First,  Brennick   may  in  some  sense   have  intended

repayment,  but  the  reasonableness,  and perhaps  even  the

possibility, of  such a belief must have  lessened over time.

To  the eve  of bankruptcy  and  apparently beyond,  Brennick

appears  to have  deferred payment  to  the government  while

withdrawing  very substantial sums for  his own use.  Without

more findings, it would be  hard to give Brennick the benefit

of a  bona fide intention to  repay the entire loss,  even if
                                                          

much of it may be encompassed.  

     Second,   even  apart  from   an  intention   to  repay,

Brennick's good faith is marred by dishonesty in at least two

respects, (even apart from his falsehoods at trial which were

the subject of a  separate adjustment).  On  a number of  the

later returns, Brennick falsely stated or had others misstate

that  the amounts due to the government had been paid when he

knew that  they had  not.  And  his elaborate  structuring of

withdrawals was effectively an effort to mislead and conceal,

as   perhaps  also   was  his   use   of  multiple   employer

identification numbers.

     Third, Brennick committed the  crime of structuring  and

the government points out that the structure counts alone, if

no  other offense  had  been  committed,  could  easily  have

produced an  adjusted offense level  of 17,3 and  a guideline

                    
                                

     3That level might  have been anywhere between 15 and 21.
Under the 1992 guidelines, the structuring counts generated a
base offense level  of 13. U.S.S.G.   2S1.3(a)(1),  and would

                             -18-
                                         -18-


sentence of 24 to 30 months.  The minimum is almost twice the
                                                     

amount  of Brennick's actual  sentence after departure.   The

government  has  not  argued  that  this  makes  a  departure

impermissible as a  matter of law, but it  certainly bears on

the reasonableness and degree of departure.

     We  appreciate that where a ground for departure exists,

the district  court's discretion  is at  its zenith  deciding

both whether and  how far to depart.  United  States v. Diaz-
                                                                         

Villafane, 874 F.2d 43, 49-50 (1st cir. 1989).  But  the quid
                                                                         

pro quo for departures is reviewability, including review for
                   

abuse  of discretion,  18 U.S.C.    3742(b)(3);  and even  if

review is hedged by deference,  Koon v. United States, 116 S.
                                                                 

Ct. 2035, 2046 (1996), it has to mean something.

     In this  case,  we fail  to see  how a  departure to  13

months can be justified as reasonable on this record in light
                                                                

of  the three considerations  set forth  above, all  of which

appear to  us relevant.   We have put to  one side Brennick's

gambling, the significance of which is a matter of reasonable

dispute,  and the  government's claim  that  he deprived  his

employees of health care, which was neither a charged offense

nor clearly relevant conduct.    

                    
                                

have been adjusted upward two  levels for the amount of money
involved.  U.S.S.G.    2S1.3(b)(2).     Brennick's  two-level
adjustment for obstruction  of justice would  presumably also
have applied, generating  a level of 17.   A further increase
of four levels  would have resulted  if the court  determined
that  "the defendant  knew or  believed that  the funds  were
criminally derived property."  U.S.S.G.   2S1.3(b)(1).

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     Possibly, even  after these  factors are  considered and

weighed in  full, there  is still  warrant for  a substantial

departure,  but we  think that  some  further explanation  is

essential.   Indeed, while the  district court takes  note of

Brennick's  false  filings,  the  government  says  that  the

discussion  understates  them;4  and   the  district  court's

decision  does  not  squarely   address  our  concerns  about

Brennick's good  faith on the  later losses or the  import of

the structuring guideline.

     The sentence  was  not imposed  casually:  the  district

court conducted  a lengthy  sentencing and  wrote at  length,

addressing itself primarily to  the government's objections--

which  we think  are overstated.   The  area is  complicated;

there   is   little   helpful   precedent;   and   Brennick's

circumstances are  unusual.   If it takes  one more  round to

fine-tune the sentence, this is a price worth paying.

     On  remand, the  district  court  is  free  to  consider

whether   its  inclination  to  depart  is  affected  by  our

conclusion  that the  fraud guideline  should  be put  to one

side.   Assuming  not,  we expect  that  in resentencing  the

district court will  address the considerations that  we have

outlined.   While  expressing  doubt that  a  sentence of  13

                    
                                

     4The district  court  mentioned  two  returns  filed  by
Brennick  falsely claiming that the amount indicated was paid
in full.    The  government notes  that  although  two  false
returns  were  actually  signed  by  Brennick, an  additional
fourteen false returns were signed by his employees.

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months  is justified, we impose no mechanical downward limit.

What  procedure  to follow  on  remand  is entirely  for  the

district court to decide.

     The sentence imposed by the district court is vacated in
                                                                      

its entirety and  the case is remanded to  the district court
                                                  

for further proceedings consistent with this opinion.

     It is so ordered.
                                  

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