[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 08-10038 MAR 20, 2009
________________________ THOMAS K. KAHN
CLERK
D. C. Docket No. 07-00126-CR-IPJ-PWG
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
GREGORY LOUIS CLARKE,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Northern District of Alabama
_________________________
(March 20, 2009)
Before BIRCH and PRYOR, Circuit Judges, and STROM,* District Judge.
BIRCH, Circuit Judge:
*
Honorable Lyle E. Strom, United States District Judge for the District of Nebraska,
sitting by designation.
Defendant-appellant Gregory Louis Clarke (“Clarke”) appeals his
convictions and sentences on three counts of tax fraud in violation of 26 U.S.C.
§ 7206(1). On appeal, Clarke argues that: (1) the district court violated his Sixth
Amendment right to a jury drawn from a fair cross-section of the community when
it denied his motion to strike the jury venire based upon its racial make-up; (2) the
evidence was insufficient to support the guilty verdict; and (3) the district court
erred in calculating the tax loss amount and in applying the “sophisticated means”
enhancement under the United States Sentencing Guidelines (the “guidelines”).
After review of the record and consideration of the parties’ briefs and oral
arguments, we AFFIRM.
I. BACKGROUND
Clarke has been pastor of New Hope Baptist Church (“the church”) and
Superintendent of New Hope Christian School (“the school”) in Birmingham,
Alabama, since 1986. Clarke also served as interim manager of the New Hope
Federal Credit Union (“the credit union”) in 2001. Clarke received separate
compensation, all paid by the church, for the services he rendered in each of these
capacities. Clarke also received a $36,000 per year non-taxable minister’s housing
allowance, which was deposited into an account held by the church at Colonial
Bank.
2
In January 2004, John Quartapella, an agent with the IRS’s Criminal
Investigation Division, began investigating Clarke after receiving an anonymous
letter. As part of his investigation, Quartapella traced payments made by the
church and the school to various sources on Clarke’s behalf or for Clarke’s benefit
between 2000 and 2002 and determined that Clarke failed to report income of
$11,205.94, $28,715.15, and $70,450.01 on his 2000, 2001, and 2002 tax returns,
respectively.1 A federal grand jury subsequently returned a three-count indictment
charging Clarke with willfully filing false tax returns for tax years 2000 (Count
One), 2001 (Count Two), and 2002 (Count Three), all in violation of 26 U.S.C.
§ 7206(1).
Before a jury was selected for Clarke’s trial, Clarke moved to exclude the
jury venire on the grounds that only three of its thirty-eight members were African-
Americans. The courtroom deputy informed the district judge that the venire
“wasn’t specially drawn” and had been called in for both Clarke’s trial and another
criminal case. The district court denied the motion, noting that the venire was “just
a regular jury pool” that was “from the southern division” of the district.
At trial, Lily Walton, Sandra Edwards, and Charles Trull, the individuals
who prepared Clarke’s 2000, 2001, and 2002 tax returns, respectively, testified that
1
William Coker, an IRS auditer who analyzed the information gathered by Quartapella,
confirmed these figures.
3
Clarke’s returns were based solely on the W-2’s and 1099’s Clarke presented to
them and that Clarke did not declare any additional income from other sources. At
no time was Clarke advised that he was not required to report income not reflected
on his W-2’s or 1099’s. Clarke reviewed the returns before they were filed with
the Internal Revenue Service (“IRS”) and never indicated that they were inaccurate
or that they otherwise misstated his tax liability.
Quartapella testified that in 2000, the school paid Clarke’s disability
insurance premiums on his behalf directly to Franklin Life Insurance Company and
also made monthly payments on a loan Clarke had taken out in 1999 to purchase a
Hyundai Tiburon for his daughter. Several other witnesses testified that in 2000
they had paid Clarke fees for speaking engagements; “bird-dog” fees for referring
customers to a local car dealership; referral fees for sending loans to a mortgage
company; and a $6600 “finder’s fee” from Cameron Homes for bringing in
investors to fund a real estate development project. Clarke did not report any of
this income on his 2000 tax return.
With respect to 2001, Quartapella testified that the church paid Clarke’s life
insurance premiums, totaling over $6000, and that the school continued to pay
Clarke’s disability insurance premiums and the monthly payments on Clarke’s
daughter’s car loan. In addition to these benefits, the church paid Clarke a salary
4
of $750 every two weeks ($15,000 per year) for serving as interim manager of the
credit union.2 Mark Nixon, the church’s Chief Financial Officer since 2001,
testified that these $750 biweekly checks, which were drawn from the church’s
operating account, were deposited directly into Clarke’s housing-allowance
account and thus were not routed through the payroll system. According to Nixon,
only he and the chairperson of the church’s board of trustees had the authority to
write checks out of the housing-allowance account.
With respect to 2002, Quartapella’s investigation revealed that the school, in
addition to paying Clarke’s disability insurance premiums and car loan payments,
made various other miscellaneous payments on Clarke’s behalf, including $177.89
on a time-share property Clarke owned; $45 for Clarke’s water bill; and $708 on
Clarke’s homeowner’s insurance policy.3 In total, Clarke received $10,308.21 in
unreported income from the school in 2002.
Most significantly, however, Clarke received $60,000 from the church for
his work at its South Avondale location. According to the 2002 budget for South
Avondale, the $60,000 was designated for “pastor’s housing expenses” and listed
2
Clarke also received fees for speaking engagements and a $100 “bird-dog” fee from
Edwards Chevrolet.
3
The $45 water bill and $708 homeowner’s insurance premium payment were charged
against Clarke as unreported income because the school made these payments over and above
the $36,000 housing allowance.
5
under the heading “salaries.” R5 at 637. Nixon testified that the church did not
give this money directly to Clarke, but deposited it into the church’s savings
account at the credit union. Clarke brought Nixon his bills as they became due and
Nixon paid them at Clarke’s direction until the amounts disbursed totaled $60,000.
Out of this $60,000, Nixon paid off Clarke’s personal credit card debt and the loan
on the Tiburon and also wrote checks to cover Clarke’s cosmetic dentistry and
repairs to Clarke’s home, including repainting and gutter work. Quartapella
testified that although the total amount paid out on Clarke’s behalf was less than
$60,000, the remaining money was transferred into Clarke’s housing allowance
account. None of the checks written out of the church’s accounts for Clarke’s
benefit in 2001 or 2002 were paid directly to Clarke.
Quartapella further testified that despite what Clarke had reported on his tax
returns, Clarke had full knowledge of the extent of his income. Records
Quartapella had subpoenaed during his investigation showed that Clarke had
disclosed an annual income of $113,000 on the credit application he completed in
order to obtain financing for his Lexus RX300, and had disclosed an annual
income of $115,000 both on an application for a platinum MasterCard and on an
application to amend his life insurance policy. Moreover, from 2000 to 2002,
Clarke owned an interest in two time-shares, paid for expensive cosmetic dental
6
work, and purchased numerous luxury items, including a 2.73-carat diamond ring,
a projection television, a camcorder, a DVD player, and custom-made clothes.
According to Quartapella, the excessiveness of Clarke’s lifestyle relative to his
reported income was indicative of fraud.
At the conclusion of the government’s case-in-chief, Clarke moved for a
judgment of acquittal pursuant to Federal Rule of Criminal Procedure 29(a),
arguing that the government failed to prove all the elements of the crimes charged.
The district court denied the motion. Clarke then presented several witnesses who
testified that the $60,000 payment from the church was a “gift” and not
compensation for services rendered. These witnesses conceded, however, that
there was no written evidence, either in the minutes from the meeting in which the
2002 budget was discussed or in the budget itself, that the $60,000 payment was
intended as a gift. They further conceded that this amount was identified in the
2002 budget for “Pastor housing expenses,” and was listed under the heading
“salary.” Id. at 714. Clarke renewed his motion for a judgment of acquittal at the
close of all the evidence, and it was again denied. The jury subsequently convicted
Clarke on all three counts of the indictment.
The court set a sentencing hearing and ordered a presentence investigation
report (“PSI”). The PSI recommended a base offense level of 14, based on a tax
7
loss of $35,684, and applied a two-level enhancement under U.S.S.G.
§ 2T1.1(b)(2) after finding that Clarke used sophisticated means to conceal his
fraud from the IRS. At sentencing, Clarke objected to the tax loss amount, arguing
that it should be calculated as if he had legally amended his tax return to reflect a
filing status of married, filing jointly. He also argued that his was a “routine tax
case” and that the “sophisticated means” enhancement was therefore inappropriate.
R7 at 13. The district court overruled Clarke’s objections, adopted the PSI, and
sentenced Clarke to twenty-one months’ imprisonment. Clarke now appeals both
his convictions and sentences.
II. DISCUSSION
On appeal, Clarke argues that: (1) the district court’s denial of his motion to
strike the jury venire, on the grounds that only three of its thirty-eight members
were African-American, violated his Sixth Amendment right to a jury selected
from a fair cross-section of the community; (2) the evidence was insufficient to
establish guilt beyond a reasonable doubt; and (3) the district court erred in
determining the tax loss amount and in finding that he used sophisticated means to
conceal the fraud. We address each argument in turn.
A. Motion to Strike Jury Venire
“The Sixth Amendment guarantees a criminal defendant the right to be
8
indicted and tried by juries drawn from a fair cross-section of the community.”
United States v. Grisham, 63 F.3d 1074, 1078 (11th Cir. 1995). A defendant
establishes a prima facie violation of the fair-cross-section requirement by showing
that: (1) the allegedly excluded group is a “‘distinctive’ group in the community”;
(2) the representation of this group in the venire from which the jury was selected
was not “fair and reasonable in relation to the number of such persons in the
community”; and (3) the under-representation was due to “systematic exclusion of
the group in the jury-selection process.” Duren v. Missouri, 439 U.S. 357, 364, 99
S. Ct. 664, 668 (1979).
Clarke contends that while African-Americans made up just under eight
percent of the jury panel, the 2000 census as reported by the University of
Alabama showed that African-Americans represented approximately twenty-one
percent of the population of the Northern District of Alabama. See Appellant’s
Brief at 22. While we have held that the second element is not satisfied where the
absolute disparity between the percentage of the distinctive group among the
population eligible for jury service and the percentage of the distinctive group on
the jury panel is ten percent or less, see Grisham, 63 F.3d at 1074, Clarke’s
challenge to the jury selection process is nevertheless unavailing because he has
presented no evidence showing that the under-representation in this case was due
9
to systematic exclusion of African-Americans. Accordingly, Clarke has failed to
establish that the jury selection process violated the Sixth Amendment. See United
States v. Pepe, 747 F.2d 632, 649 (11th Cir. 1984) (failure to establish any element
of prima facie case is fatal to Sixth Amendment challenge to jury selection
process).
B. Sufficiency of the Evidence
We review de novo the sufficiency of the evidence in a criminal trial,
viewing the evidence in the light most favorable to the government, and must
uphold a conviction “unless the jury could not have found the defendant guilty
under any reasonable construction of the evidence.” United States v. Chastain, 198
F.3d 1338, 1351 (11th Cir. 1999). In evaluating the evidence, all reasonable
inferences and credibility choices are made in support of the verdict. See United
States v. Mieres-Borges, 919 F.2d 652, 656 (11th Cir. 1990).
To sustain a conviction under 26 U.S.C. § 7206(1), the government must
prove that: (1) the defendant willfully made and subscribed to a tax return; (2) the
return contained a written declaration that it was made under penalties of perjury;
(3) the defendant did not believe that the return was true as to every material
matter; and (4) the return was false as to a material matter. See 26 U.S.C.
§ 7206(1).
10
Clarke does not dispute that he received over $110,000 from the church,
school, and other sources during the three-year period from 2000 to 2002, but
asserts that his failure to report this income on his tax returns was not willful.
Clarke’s argument is without merit. The government presented ample evidence
that Clarke knew his income exceeded the amounts he reported on his tax returns
and that he had the opportunity to review and correct his returns before filing them
with the IRS. Viewing the evidence in the light most favorable to the government,
we have no difficulty finding that it was sufficient for a reasonable jury to
conclude beyond a reasonable doubt that Clarke willfully filed tax returns in which
he knowingly and significantly under-reported his income for tax years 2000,
2001, and 2002, and that he was aware of their falsity when he signed and
subscribed them under penalties of perjury.
C. Clarke’s Sentence
1. Tax Loss Amount
Clarke argues that the court should have calculated the tax loss based not
upon his tax liability under the original return, which he filed as married, filing
separately, but upon what his tax liability would have been had he amended his
return to reflect a filing status of married, filing jointly. He asserts that if he had
filed as the latter, the loss would have been reduced from $35,811 to $28,186,
11
resulting in a base offense level of 12 rather than 14. See U.S.S.G. § 2T4.1. The
government responds that the tax loss was correctly based on the original returns
because the “tax loss” is the loss the defendant intends when he files the fraudulent
return. Because this claim involves an interpretation of the sentencing guidelines,
our review is de novo. United States v. Hunerlach, 197 F.3d 1059, 1069 (11th Cir.
1999) (reviewing de novo district court’s inclusion of interest and penalties in tax
loss calculation under U.S.S.G. § 2T1.1).
The guidelines provide that where, as here, the offense involved the filing of
a fraudulent or false tax return, “the tax loss is the total amount of loss that was the
object of the offense (i.e., the loss that would have resulted had the offense been
successfully completed).” U.S.S.G. § 2T1.1(c)(1). Although we have not decided
the issue of whether a defendant’s unclaimed deductions or losses may be taken
into account in determining tax loss for purposes of § 2T1.1(c)(1), several other
circuits have taken the government’s position and have held that the “tax loss” is
the amount of loss the defendant intends to bring about, not the amount of loss to
the government that actually results, and therefore, unclaimed deductions or other
reductions in tax liability that are unrelated to the offense of conviction may not be
used to offset the tax loss amount. See United States v. Blevins, 542 F.3d 1200,
1203 (8th Cir. 2008), cert. denied, 129 S. Ct. 1024 (2009); accord United States v.
12
Delfino, 510 F.3d 468, 472-73 (4th Cir. 2007), cert. denied, 129 S. Ct. 41 (2008);
United States v. Phelps, 478 F.3d 680, 682 (5th Cir.) (per curiam), cert. denied,
128 S. Ct. 436 (2007); United States v. Chavin, 316 F.3d 666, 677 (7th Cir. 2002);
United States v. Spencer, 178 F.3d 1365, 1368 (10th Cir. 1999); United States v.
Tandon, 111 F.3d 482, 490 (6th Cir. 1997); United States v. Valentino, 19 F.3d
463, 465 (9th Cir. 1994). But see United States v. Gordon, 291 F.3d 181, 188 (2d
Cir. 2002) (holding that district court erred in refusing to consider potential
unclaimed deductions in sentencing analysis).
We join the majority of the circuits that have addressed this issue and hold
that “tax loss” under U.S.S.G. § 2T1.1(c)(1) is the amount of loss the defendant
intends to create when he falsifies his tax return and must therefore be calculated
based upon the fraudulent return. In this case, the object of Clarke’s offense was
the amount by which he underreported and fraudulently misstated his taxable
income on his 2000, 2001, and 2002 returns. That his tax liability may have been
lower had he filed as married, filing jointly rather than married, filing separately is
thus irrelevant to the determination of the amount of loss to the government that he
intended when he underreported his income. See Chavin, 316 F.3d at 677
(“[R]eference to other unrelated mistakes on the return such as unclaimed
deductions tells us nothing about the amount of loss to the government that
13
[defendant’s] scheme intended to create.”). Accordingly, the district court did not
err in computing the tax loss based on the fraudulent return Clarke actually filed,
and not on the tax return Clarke could have filed but did not.
2. “Sophisticated Means” Enhancement
Clarke also argues that the district court erred in applying the two-level
“sophisticated means” enhancement under U.S.S.G. § 2T1.1(b)(2) because he
never directed anyone to hide the payments that were made on his behalf and the
existence of an audit trail belied any purposeful concealment. We review the
district court’s findings of fact related to the imposition of sentencing
enhancements, including a finding that the defendant used sophisticated means, for
clear error. United States v. Robertson, 493 F.3d 1322, 1329-30 (11th Cir. 2007).
Under this standard, we will not disturb a district court’s findings “unless we are
left with a definite and firm conviction that a mistake has been committed.”
United States v. Crawford, 407 F.3d 1174, 1177 (11th Cir. 2005) (quotation marks
and citation omitted). Notwithstanding the deferential nature of our review, “we
are not required to rubber stamp the district court’s findings simply because they
were entered.” Id. (quotation marks and citation omitted).
The sentencing guidelines allow the district court to enhance a defendant’s
base offense level by two levels if the offense involved “sophisticated means.”
14
U.S.S.G. § 2T1.1(b)(2). The commentary describes “sophisticated means” as
“especially complex or especially intricate offense conduct pertaining to the
execution or concealment of an offense,” including “[c]onduct such as hiding
assets or transactions, or both, through the use of fictitious entities, corporate
shells, or offshore financial accounts.” Id. § 2T1.1(b), comment. (n.4). Although
the mere failure to report income to an accountant does not involve sophisticated
means, see United States v. Barakat, 130 F.3d 1448, 1457 (11th Cir. 1997), a
defendant need not use offshore bank accounts or transactions through fictitious
entities in order for the enhancement to apply, see United States v. Campbell, 491
F.3d 1306, 1315-16. (11th Cir. 2007).
In Barakat, we concluded that where the defendant had a mortgage company
for whom he performed consulting work deposit his $15,000 fee into an attorney’s
trust account, the district court did not clearly err in finding that the defendant had
used “sophisticated means” to conceal his tax evasion. Because the fee was routed
through the trust account, “[the defendant] could fail to disclose the . . . payment[]
knowing that, in the absence of a Form 1099, it was unlikely the IRS would ever
become aware of that income.” Barakat, 130 F.3d at 1457.4 In Campbell, we held
4
In Barakat, the defendant was convicted of and sentenced for both tax evasion and mail
fraud. We found that application of the sophisticated means enhancement with respect to the tax
evasion conviction, though a “close question,” was not clear error, but remanded the case
because it would have been clear error had the district court found that the defendant used
15
that the district court’s application of the sophisticated means enhancement was not
clear error where the defendant was found to have utilized campaign accounts and
credit cards issued to other people to conceal cash expenditures. See 491 F.3d at
1315. In so holding, we noted that “Campbell’s deceptive practices were at least as
sophisticated as the practice at issue in Barakat,” and that, in terms of the degree of
sophistication, hiding assets or transactions through the use of a campaign fund
was no different than hiding assets or transactions through the use of fictitious
entities, corporate shells, or offshore financial accounts. Id.
As in Barakat and Campbell, we are not in this case left with a definite and
firm conviction that the district court erred in finding that Clarke used
sophisticated means to hide his tax evasion scheme. The record reflects that Clarke
concealed the true extent of his income by: (1) depositing his salary from the
church and the credit union into accounts that were not registered in his own name;
(2) instructing the church to make payments out of these accounts directly to his
personal creditors; and (3) having the school and the church pay his life and
disability insurance premiums directly to the insurance carriers. For purposes of
the sophisticated means enhancement, we see no material difference between
concealing income and transactions through the use of third-party accounts, as was
sophisticated means to conceal his mail fraud conspiracy and it was not clear from the record
with respect to which conviction the enhancement was applied. See 130 F.3d at 1457-58.
16
the case here, and using a corporate shell or a fictitious entity to hide assets. See
U.S.S.G. § 2T1.1, comment. (n.4); see Campbell, 491 F.3d at 1315-16. The district
court did not clearly err in finding that Clarke’s activity, which covered a three-
year period and required intricate planning, involved the use of sophisticated
means.
III. CONCLUSION
Clarke appeals his convictions and sentences for tax fraud. We conclude
that: (1) the district court properly denied Clarke’s motion to exclude the jury
venire; (2) there was sufficient evidence from which a reasonable jury could have
found Clarke guilty of the charged offenses; and (3) the district court correctly
calculated the applicable guidelines range. Accordingly, Clarke’s convictions and
sentences are AFFIRMED.
17