United States v. Clark

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
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No. 96-10559
Summary Calendar
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UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

LESLIEDAWN CLARK, STEVEN LANE JOHNSON,
CHARLES A. DIXON, DONALD ALAN FRIDDELL,
SHIRLEY A. SUMMERS, RICHARD LEE SUMMERS,
LEROY SCHAEFER, and ROXANNE SCHAEFER,

Defendants-Appellants.

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Appeals from the United States District Court
for the Northern District of Texas
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April 17, 1998

Before JOLLY, BENAVIDES, and PARKER, Circuit Judges.

PER CURIAM:

Defendants, Lesliedawn Clark, Steven Lane Johnson, Donald

Alan Friddell, Charles Dixon, Shirley S. Summers, Richard Lee

Summers, Leroy Schaefer, and Roxanne Schaefer, appeal from the

judgments of conviction entered against them by the United States

District Court for the Northern District of Texas. Clark and

Leroy Schaefer also appeal the computation of their sentences.

For the reasons set forth below, we AFFIRM.

I.

Defendants were involved with, and operated in part, the

Pilot Connection Society (“TPCS”), an organization with the
stated purpose of putting the IRS (which it considered “domestic

enemy number one”) out of business. In furtherance of this

objective, TPCS created and sold an “untax package,” which

purportedly taught people how to remove themselves from the

federal tax system. TPCS marketed its untax package through

informational seminars given across the country. TPCS publicized

its seminars through flyers and advertisements, in which it

claimed that taxes were voluntary, that there was no requirement

for a person to file tax returns, that the tax system was

illegal, and that there were legal ways not to pay taxes.

At the seminars,1 TPCS represented that the untax package

provided a way of legally and permanently “untaxing” oneself so

that a person would no longer be required to pay income taxes or

file a return. Seminar attendees were informed, however, that

TPCS was a First Amendment society and that it could not give out

information that could be construed as legal advice except to its

members. Thus, if a person wanted to learn more about the

“untaxing” process, he was required to become a TPCS member, at a

cost of $45.

The $45 membership fee entitled a TPCS member to a two-hour

consultation at a follow-up meeting with a sales representative

of TPCS, referred to as an Associate Member.2 At the follow-up

meeting, the Associate Member attempted to sell the untax package

1
Seminar attendees were often required to sign a statement indicating
that they were not a spy or a government agent.
2
A TPCS member could become an Associate Member for the cost of
$10,000.

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to the new TPCS member. The fee for being untaxed was generally

the greater of $2100 or ten (10) percent of the dollar amount

owed to the government. In addition to selling the untax

package, Associate Members also counseled and assisted new

members in the untaxing process. As compensation, Associate

Members received a percentage of the untaxing fee paid by a new

member.

The untax package included sample letters to be used to

inform the government that the member was not liable for tax.

The package also contained samples of letters to be sent by

members to employers, bankers, and mortgage holders. The sample

letters purportedly provided a method whereby TPCS members could

revoke their signatures from their bank accounts and revoke

previously filed tax returns.

Another part of the untaxing process involved TPCS members

filing new Forms W-4 so that no federal income tax was withheld

from their paychecks. The evidence showed that, although the

Associate Members did not advise TPCS members of the exact number

of exemptions that they should claim, the Associate Members

clearly advised their clients to claim as many exemptions as

necessary to eliminate withholding taxes. Thus, members were

often left to simply guess at the number of exemptions that they

would need to claim. If a member’s first guess was not high

enough to eliminate withholding, TPCS advised the member to file

another Form W-4 claiming an even higher number of exemptions

until he finally found a number high enough to completely

eliminate withholding. Some TPCS members claimed as many as

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thirty (30) exemptions on their new Forms W-4. TPCS further

instructed its members completing new Forms W-4 to write “For

Identification Only” next to their social security numbers and to

write “Without prejudice, UCC 1-207" next to their signatures.

In addition to the untaxing process, the untax package had a

second component for the protection of assets. TPCS advised its

members to close their bank accounts to prevent the IRS from

seizing the funds in those accounts. TPCS also suggested that

its members barter or deal only in cash or money orders. TPCS

further advised its members that all of a member’s money could be

put into a trust fund for protection from the IRS and that the

trust could not be taxed.

Finally, TPCS suggested several methods that its members

should employ in fighting the IRS, including filing a claim for

abatement, suing IRS employees, and filing a Title 15 commercial

lien. TPCS claimed that one of its members filed a commercial

lien against his employer, IRS agents, and others for

$236,000,000. TPCS informed members that the lien would last for

100 years and would appear on the credit report of the public

official against whom it was filed. TPCS also suggested that its

members could have IRS agents attempting to do their jobs

arrested by the sheriff or could make citizen’s arrests.

II.

On June 7, 1995, a sixteen (16) count indictment was

returned against the defendants. Count 1 of the indictment

charged all of the defendants with conspiracy to defraud the

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United States, in violation of 18 U.S.C. § 371. The remaining

counts charged individual defendants with aiding and abetting the

filing of fraudulent Forms W-4, in violation of 18 U.S.C. §

7206(2). Friddell and Shirley Summers, however, were named only

in Count 1. On January 19, 1996, a jury convicted all eight

defendants of conspiracy to defraud the United States; Clark of

Counts 2 and 3; Johnson of Count 8; Dixon of Counts 5 and 7;

Richard Summers of Counts 7, 9, and 10; Leroy Schaefer of Counts

12, 14, 15, and 16; and Roxanne Schaefer of Counts 12, 13, and

14. The jury acquitted Clark of Count 4, Dixon of Count 6, and

Roxanne Schaefer of Count 11. All of the defendants appeal their

convictions. Clark and Leroy Schaefer also appeal the

computation of their sentences.

III.

All of the defendants argue that Count 1 of the indictment

is insufficient as a matter of law. Specifically, the defendants

argue that the indictment is defective because it merely recites

the “generic” language of the statute without identifying the

specific facts underlying the offense and because it fails to

identify the object of the alleged scheme to defraud the United

States.

Although we agree that the indictment is far from a model of

clarity, “[t]he test for validity is not whether the indictment

could have been framed in a more satisfactory manner, but whether

it conforms to minimal constitutional standards.” United States

v. Gordon, 780 F.2d 1165, 1169 (5th Cir. 1986). An indictment is

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sufficient in a constitutional sense if it “(1) enumerates each

prima facie element of the charged offense, (2) notifies the

defendant of the charges filed against him, and (3) provides the

defendant with a double jeopardy defense against future

prosecutions.” United States v. Flores, 63 F.3d 1342, 1360 (5th

Cir. 1995) (quotation and citation omitted). We find that the

conspiracy charge in this case meets these minimal standards.

To allege a violation of § 371, the government must allege

two elements. First, the government must allege that two or more

people agreed to defraud the United States. 18 U.S.C. § 371.

The defraud clause of § 371 reaches both a conspiracy to cheat

the government out of property or money and any conspiracy

designed to impair, obstruct, or defeat the lawful function of

any department of the government. See Hammerschmidt v. United

States, 265 U.S. 182, 187-88, 44 S. Ct. 511, 512 (1924); United

States v. Hopkins, 916 F.2d 207, 213 (5th Cir. 1990). Second, as

in all conspiracies, the government must allege that at least one

of the alleged conspirators committed an overt act in furtherance

of the objectives of the conspiracy. See United States v.

Burton, 126 F.3d 666, 670 (5th Cir. 1997).

In this case, Count 1 of the indictment tracked the language

of the defraud clause of § 371 by charging that the defendants

“conspired, agreed, and combined to defraud the United States.”

Although we agree with the defendants that this language, by

itself, would have been insufficient, the indictment does more

than merely recite the language of the statute. In the “Manner

and Means” section, the indictment outlined the scheme in which

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the defendants engaged, thereby clearly establishing that the

defendants were charged with cheating the government out of money

and with “impairing, obstructing, or defeating” a lawful function

of the IRS -- i.e., collecting taxes. In sum, therefore, when

viewed as a whole, we find that the indictment adequately

informed the defendants of the nature of the charges against them

and was sufficiently specific to enable them to raise the defense

of double jeopardy in any future prosecutions.

IV.

Friddell, Clark, Leroy Schaefer, and Roxanne Schaefer

challenge the sufficiency of the evidence to support their

convictions under § 371. In reviewing the sufficiency of the

evidence, we view the evidence and all inferences to be drawn

from it in the light most favorable to the verdict to determine

if a rational trier of fact could have found the essential

elements of the crime beyond a reasonable doubt. United States

v. Sneed, 63 F.3d 381, 385 (5th Cir. 1995) (citing United States

v. Pruneda-Gonzalez, 953 F.2d 190, 193 (5th Cir. 1992)).

As discussed above, to obtain a conviction under § 371, the

government must prove that the alleged conspirators agreed among

themselves to defraud the United States and that at least one of

the alleged conspirators committed an overt act in furtherance of

the conspiracy. United States v. Chesson, 933 F.2d 298, 306 (5th

Cir. 1991). The agreement, however, need not be an express or

formal agreement -- “a tacit understanding is sufficient.”

United States v. Hopkins, 916 F.2d 207, 212 (5th Cir. 1990).

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 The evidence in this case overwhelmingly showed that the

defendants knowingly participated in a conspiracy to defraud the

United States. Specifically, the evidence showed that each of

these defendants was at least an Associate Member (Clark was also

an “Area Coordinator”) of TPCS, an organization created and

designed to put the IRS out of business by having its members

falsify documents and refuse to pay taxes. As Associate Members,

the defendants were responsible for recruiting new members and

assisting those members in the untaxing process. In short, these

defendants instructed new members how to avoid paying taxes and

assisted them in preparing the necessary documents. Given the

role of the Associate Members in this scheme, and in light of the

evidence introduced at trial as to each of these defendants, we

find that a rational jury could have easily concluded that each

of these defendants conspired to defraud the United States, in

violation of 18 U.S.C. § 371.

V.

Leroy and Roxanne Schaefer also contest the sufficiency of

the evidence that they aided and assisted in the preparation of

false and fraudulent Forms W-4, in violation of 18 U.S.C. §

7206(2). A conviction under § 7206(2) requires proof that the

defendant willfully aided, assisted, counseled, or advised

another in the preparation or presentation under the internal

revenue laws of a document that is fraudulent or false as to any

material matter. 18 U.S.C. § 7206(2).

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 The evidence in this case clearly shows that Roxanne

Schaefer counseled and advised Robert Hennis (Count 12), Kim

Hennis (Count 13), and James Perry (Count 14), and that Leroy

Schaefer counseled and advised Robert Hennis (Count 12), James

Perry (Count 14), and James Campbell (Counts 15 and 16), to file

new Forms W-4 with increased exemptions so that no withholding

taxes would be withheld from their paychecks. It is immaterial

that Mr. and Mrs. Schaefer did not advise these individuals as to

the exact number of exemptions that they should claim or that

they were not present when the forms were completed. The

evidence unmistakably shows that they counseled and advised these

TPCS members to alter their Forms W-4 so that no federal income

taxes were withheld from their paychecks, and that, based on this

advice, those individuals then filed fraudulent Forms W-4.

Consequently, we find that evidence sufficient to support these

convictions.

VI.

Clark and Leroy Schaefer argue that their sentences are

excessive because the district court computed the sentences based

on an erroneous tax loss figure.3 We disagree.

This court reviews the application of the Sentencing

Guidelines de novo, and it reviews the sentencing court’s factual

3
Clark also argues that the Sentencing Guidelines are unconstitutional
and that she should not have received a term of imprisonment because Congress
did not intend for first-time, nonviolent offenders to be sentenced to prison.
These arguments are meritless. See, e.g., United States v. White, 869 F.2d
822, 826-27 (5th Cir. 1989).

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findings for clear error. United States v. Edwards, 65 F.3d 430,

432 (5th Cir. 1995). A factual finding is not clearly erroneous

if it is “plausible in light of the record as a whole.” Id.

(citation omitted). The presentence report is considered

reliable evidence for sentencing purposes. United States v.

Vital, 68 F.3d 114, 120 (5th Cir. 1995). If the defendant does

not submit affidavits or other evidence to rebut the information

in the PSR, the district court may “adopt [the PSR] without

further inquiry or explanation.” Id.

In a tax loss case, a defendant’s sentence may be based on

both the tax loss that he caused directly and the tax loss caused

by his coconspirators, if that loss was reasonably foreseeable to

the defendant. United States v. Charroux, 3 F.3d 827, 838 (5th

Cir. 1993). This court reviews the district court’s

determination of the tax loss for clear error. United States v.

McCord, 33 F.3d 1434, 1453 (5th Cir. 1994).

In this case, the PSR provided that the tax harm reasonably

foreseeable to Clark was $14,832,805 and that the tax loss

reasonably foreseeable to Leroy was $14,244,280. In part, these

figures were based on the foreseeable tax losses to the

government from the date upon which the defendants became

Associate Members in TPCS (i.e., after the defendants joined the

conspiracy). See United States v. Carreon, 11 F.3d 1225, 1233-34

(5th Cir. 1994). Because Clark and Leroy Schaefer objected to

the amounts in the PSR, the government called Special Agent

Sanders to explain how the IRS had arrived at the estimated loss

figures provided to the probation officer. Following extensive

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cross-examination by all defendants, the district court found

that Agent Sanders’s testimony established the foreseeable tax

harm by a preponderance of the evidence. Consequently, the court

adopted the findings in the PSR. After reviewing the testimony

of Agent Sanders and ascertaining that the defendants did not

introduce any evidence to contradict Agent Sanders’s testimony or

rebut the probation officer’s computation of the foreseeable

loss, we conclude that the district court’s determination of loss

for sentencing purposes was not clearly erroneous. See Vital, 68

F.3d at 120.

VII.

Clark also contends that the district court erred in not

instructing the jury on her First Amendment defense. There was,

however, no foundation for such an instruction because the

charged conduct (conspiracy to defraud) was not protected by the

First Amendment. See United States v. Fleschner, 98 F.3d 155,

158-59 (4th Cir. 1996), cert. denied, 117 S. Ct. 2484 (1997).

Accordingly, the district court did not err in refusing to give

such an instruction.

VIII.

Clark next contends that the district court erred in

removing the question of the materiality of the Forms W-4 from

the jury’s consideration. Because Clark did not object in the

district court to the challenged instruction, we review for plain

error. See Johnson v. United States, 117 S. Ct. 1544 (1997).

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 After careful review of the record, we conclude that, even

assuming that it was error to remove the issue of materiality

from the jury, see United States v. Klausner, 80 F.3d 55, 58-61

(2d Cir.1996) (holding that materiality under § 7206(2) was a

question of law for the court because false itemized deductions

necessarily resulted in an inaccurate computation of tax), the

error did not seriously affect the fairness, integrity or public

reputation of judicial proceedings. See Johnson, 117 S. Ct. at

1550. The very purpose of Form W-4 is to determine the amount of

taxes that should be withheld from an employee’s paycheck, and

the amount of withholding depends on the number of exemptions

claimed. Thus, it is beyond reasonable dispute that the number

of allowances claimed on a Form W-4 is a material matter.

Accordingly, we find no plain error.

IX.

In addition to the claims set forth above, defendant Clark

raises the following claims: 1) that the district court erred in

refusing to give her requested instruction as to her good faith

defense; 2) that the government withheld exculpatory evidence

from her in violation of Brady v. Maryland, 373 U.S. 83, 83 S.

Ct. 1194 (1963); 3) that the district court abused its discretion

in excluding certain documents and testimony from evidence; 4)

that the district court engaged in judicial misconduct; 5) that

the government introduced perjured testimony; 6) that the

government’s attorneys made improper statements before the jury;

7) that the prosecution of the defendants was vindictive because

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not all TPCS members were prosecuted; and 8) that she was

excluded from certain stages of the trial. After a careful

review of the record as to each of these points, we find no

reversible error.

X.

For the reasons set forth above, we AFFIRM.

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