United States v. Morris , 573 F. App'x 712 ( 2014 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT July 28, 2014
Elisabeth A. Shumaker
Clerk of Court
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
No. 12-1474
v. (D.C. No. 1:10-CR-00317-REB-1)
(D. Colo.)
CURTIS L. MORRIS,
Defendant - Appellant.
ORDER AND JUDGMENT*
Before BRISCOE, Chief Judge, HOLLOWAY**, Senior Judge, and PHILLIPS,
Circuit Judge.
* This order and judgment is not binding precedent except under the doctrines of law
of the case, claim preclusion, and issue preclusion. It may be cited, however, for its
persuasive value consistent with Federal Rule of Appellate Procedure 32.1 and Tenth
Circuit Rule 32.1.
** The late Honorable William J. Holloway, Jr., United States Senior Circuit
Judge, participated as a panel member when this case was heard but passed away
before final disposition. “The practice of this Court permits the remaining two panel
judges if in agreement to act as a quorum in resolving the appeal.” United States v.
Wiles, 106 F.3d 1516, 1516 n.* (10th Cir. 1997); see also 28 U.S.C. § 46(d) (noting
circuit court may adopt procedures permitting disposition of an appeal where
remaining quorum of panel agrees with the disposition). The remaining panel
members have acted as a quorum with respect to this order and judgment.
The evidence at trial proved that Curtis L. Morris played an integral part in a tax-fraud
conspiracy. Although complicated in its implementation, the basic premise of the
conspiracy’s scheme was fairly simple: Morris would claim nonexistent tax withholdings
on tax returns, and, ideally for the conspirators, the Internal Revenue Service (IRS) would
then pay a refund when the tax withholdings were greater than the tax liability. In all, he
fraudulently prepared tax returns that led the IRS to pay out more than $2.2 million in
undeserved tax refunds. After the jury convicted him, the district court varied downward
and sentenced him to 120 months in prison. Morris now challenges his conviction and
sentence. We conclude that the district court committed no error and affirm.
BACKGROUND
Morris has a bachelor’s degree in accounting and had long worked for various
businesses as a bookkeeper or accountant. He also operated a side business preparing tax
returns for individuals. Through this side business he prepared returns that misused Form
1099-OID to help clients obtain unjustified tax refunds. The IRS requires financial
institutions to generate Form 1099-OID if they issue or hold certain investments for their
clients. See generally I.R.S. Publication 1212, 2013 WL 6859821 (Dec. 20, 2013). In this
circumstance, the institutions then send the form to the IRS and also to the taxpayer to
enable the taxpayer to report income and income tax withheld from those investments.
Id. at *12.
Morris fabricated Forms 1099-OID for his clients to deceive the IRS into believing
that the forms had originated from various financial institutions. Although these financial
-2-
institutions had indeed lent Morris’s clients money for mortgages, car loans, and credit
cards, they had not held any investment for the clients that required a Form 1099-OID.
Despite this, Morris’s falsified Forms 1099-OID that reported his clients’ outstanding
debt with the institutions as income and income tax withheld.1 Next, he prepared and
filed tax returns with the fabricated Forms 1099-OID attached, claiming false tax
withholdings.
The scheme worked when the IRS matched the withholdings claimed in the tax
returns to the Forms 1099-OID and paid refunds after being fooled into believing that
more taxes had been withheld than required. For his services, Morris charged a modest
fee, but requested 1% of the refund from two clients and actually received that amount
from one of them. In total, Morris prepared Forms 1099-OID and returns for himself and
20–25 clients requesting $21,166,468.00 in refunds. The IRS mistakenly paid
$2,299,775.26.2
By July 2009 the game was up. An IRS team led by Agent Greg Flynn secured a
warrant and searched Morris’s house. During the search, Morris agreed to answer Agent
Flynn’s questions. Agent Flynn asked about Morris’s personal use of Forms 1099-OID: “I
asked Mr. Morris, Sir, why do you think the Internal Revenue Service owes you $74,000?
He replied, ‘You don’t.’” R. vol. 6, at 1481. Morris admitted that he, not the financial
institutions, had prepared Forms 1099-OID and that he lacked authority to do so. He also
1
The basis for Morris’s misuse of Form 1099-OID originated with a publication
that supposedly supported the questionable theory with historical facts and law.
2
The IRS was able to recover $382,944.30 of the total amount paid out.
-3-
said he’d individually filed his 2008 return with falsified Forms 1099-OID “to keep his
wife out of harm’s way.” Id. at 1492. Finally, Morris told Agent Flynn that, although he
believed that he was owed the tax refunds, his “preparation of the Forms 1099-OID
without the authority of banks or creditors was wrong.” Id. at 1517.
Eventually, Morris was arrested, and a grand jury returned a 28-count superseding
indictment against him and two others—Richard Kellogg Armstrong and Larry Ray Hall.
The indictment charged Morris with three counts of mail fraud in violation of 18 U.S.C.
§§ 1341 and 2 (counts 1–3), 17 counts of making false claims against a department or
agency of the United States in violation of 18 U.S.C. §§ 287 and 2 (counts 6–22), and one
count of conspiracy to defraud the government in violation of 18 U.S.C. § 286 (count 28).
Armstrong and Hall were similarly charged, but Hall died before trial.
In the ensuing joint trial, the jury convicted both Armstrong and Morris of all counts
charged. The district court sentenced Morris to 120 months in prison. Morris now appeals
his conviction and sentence. Now we turn our discussion to the facts relevant to his
challenges.
1. Armstrong’s Statements During Trial
Armstrong chose to represent himself at trial. Although he wasn’t combative with the
district court, he repeatedly made nonresponsive and nonsensical remarks when the court
sought his comments as pro se counsel. From the beginning, Armstrong attempted to
present some sort of procedural defense to the charges against him. In his opening
statement, Armstrong began:
-4-
Good morning, ladies and gentlemen of the jury. I conditionally accept these
proceedings on proof of claim that I am not here today as the paramount security
interest holder in all property and collateral, both registered and unregistered,
belonging to Richard Kellogg Armstrong appearing specially, not generally, and
on proof of claim that there is not a notice before this Court to continue this public
proceedings [sic] pending completion of the ongoing private administrative record
which, when completed, will have the likelihood to set off, settle, and resolve this
matter without wasting valuable public resources.
I now move this Court to continue these proceedings, these public proceedings,
for 60 days to resolve the matter privately. Thank you.
R. vol. 6, at 34.
Armstrong repeated this “proof of claim” mantra when asked for his position on
objections and the introduction of evidence. Almost every time Armstrong made a remark
of this variety, the court cut him off. Eventually, the court “enjoined and restrained”
Armstrong from repeating these comments. Id. at 473.
Undeterred, Armstrong continued to bring up “proof of claim” and alleged that the
court was forcing him to answer under duress:
Your Honor, so I am not in contempt of court, I conditionally accept on proof of
claim I’m not in contempt. I will say whatever you want me to say or do, whatever
you want me to do under threat of duress and coercion, and I will sit down and be
quiet.
Id. at 568. The court addressed Armstrong’s behavior outside the hearing of the jury and
warned Armstrong that he would be held in contempt if he continued to make irrelevant
comments. In all, the court found Armstrong in contempt ten times but never in the jury’s
presence.
Before trial, Morris had unsuccessfully moved for severance, arguing generally that a
pro se codefendant’s potential “to commit frequent and serious missteps at trial” would
undermine his defense. R. vol. 1, at 310. Morris renewed his severance motion three
-5-
times during trial, but the district court denied his repeated requests. In doing so, the court
noted the protective measures it had taken to lessen any effect Armstrong’s self-
representation might have on Morris: the court appointed standby counsel, it advised
Armstrong that he would be held to the rules of law and evidence, and it instructed the
jury that it couldn’t consider as evidence Armstrong’s comments while acting as his own
attorney.
2. Lay Testimony of Armstrong’s Accountant
The government called Kenneth Chafin as a lay witness. Chafin had worked as a
Certified Public Accountant for 30 years and had prepared Armstrong’s taxes for 20 years
before Armstrong took his business to Morris. Chafin testified that in mid-December
2008 Armstrong emailed him about using Form 1099-OID to recover debts that the
government supposedly owed taxpayers. Armstrong boasted that he had recovered $1.6
million from the IRS using Form 1099-OID and suggested that Chafin adopt the practice
as well. Concerned, Chafin sent Armstrong an email explaining why he believed the
scheme was illegal and advising Armstrong to return all of the funds. In the email, Chafin
warned of potential criminal penalties:
Regardless of your opinion or interpretation, the courts will authorize the United
States to confiscate your assets to repay the funds they sent you and may
criminally prosecute you as well. I can guarantee that the Treasury Department
will criminally prosecute the promoters of this arrangement and will probably
criminally prosecute the accountant who prepared your tax returns.
Id. at 1175.
-6-
At trial, Chafin testified about this email exchange. He explained that he had decided
to warn Armstrong because he had prepared Armstrong’s original returns—which Morris
later amended and refiled under the Form 1099-OID scheme. He knew of no basis for the
claimed refunds. He also testified that he had found nothing supporting the legality of
Armstrong’s use of Form 1099-OID in IRS publications, and further that the IRS’s paying
the refunds didn’t mean the IRS thought the tax return was correct.
On cross-examination, Chafin acknowledged that a hypothetical taxpayer who in
good faith files a tax return and receives a refund is entitled to keep that money until the
IRS says otherwise. On redirect, Chafin testified that a tax preparer who knowingly files
a false return acts criminally. When asked if being an accomplice to filing a false tax
return would be a federal crime, he answered, “You bet.” Id. at 1205. Chafin testified that
he wouldn’t have filed the amended returns because he believed them to be “fraudulent
return[s]” with no valid support. Id. at 1206. Finally, Chafin testified that when he sent
the email warning Armstrong of the illegality and potential ramifications of participating
in the 1099-OID scheme, he’d seen no “gray area” in the IRS’s interpretation that the
1099-OID scheme was illegal. Id. at 1209.
3. Closing Arguments
One of Morris’s defenses was that the IRS had pursued his prosecution out of anger
for mistakenly paying out refunds. His counsel began his opening statement as follows:
“Mr. Morris sits here today because of the incompetency of the Internal Revenue Service
of paying out substantial refunds to individuals who should have been flagged and should
-7-
not have been paid.” Id. at 23. He blamed the prosecution on the IRS’s being “mad
because something broke down” within the agency. Id. at 24.
In closing, Morris argued that the IRS had unfairly targeted him because of its anger
at having paid out public funds: “They aren’t happy that they used our money and paid
Mr. Armstrong a lot of money. They’re not happy about it.” Id. at 2127 (emphasis added).
He concluded as follows:
Mr. Morris is not guilty, and despite the fact that the Government is not happy
about paying out a lot of money, our money, and the fact they may not be able to
find his money or some of the other individuals’ money, that doesn’t mean their
anger should be directed toward this defendant and that he’s guilty.
Id. at 2146–47 (emphasis added).
In rebuttal closing, the government argued that Morris and his complicit clients had
ignored reality to rationalize their fraudulent refunds:
If they get the money . . . they rationalize it and say, you know what? I am
owed that money. Just like that case, in this case, if they get the money from the
man, they say, you know, it’s the IRS. They’re a big organization. It’s their
mistake. They should go after the banks anyway. So they rationalize it that way.
They say to themselves, all I did was get one over on the man.
Well, ladies and gentlemen of the jury, the man is you. The man is you. The
man is me. The man is all of us. And what these people are doing at the end of the
day is trying to get one over on us.
I ask you at this point don’t let them do it again. Hold them criminally
accountable by doing the only thing you can in this case, speaking with one voice
and returning an indictment [sic] holding these defendants accountable. Thank
you.
Id. at 2159–60.
Four days later—the same day the jury returned its verdict—Morris filed an objection
to the government’s rebuttal closing, contending that the government had argued “that
jurors should take into account the fact that their tax dollars had been misappropriated by
-8-
Mr. Morris.” R. vol. 1 at 1033. He alleged that this constituted a “naked appeal to the
personal interests of the jury” and that the government’s statements improperly asked the
jury to convict “on the need to protect society rather than the facts of the case.” Id. at
1033. The court denied this motion because the government’s remarks “addressed with
precision Mr. Morris’s closing argument suggesting that the government prosecuted this
case out of a sense of embarrassment or wounded pride with concomitant frustration and
anger over its failure to more quickly identify the improper claims of Mr. Morris and his
clients, referring in that context to the [IRS’s] mismanagement of ‘our money.’” Id. at
1167.
4. Sentencing
The United States Probation Office for the District of Colorado prepared a
Presentence Investigation Report (PSR). The PSR calculated a total offense level of 35.3
This total resulted from a base offense level of 7 together with another 28 levels from
four guideline enhancements: 22 levels because the intended loss was over $20 million
(U.S.S.G. § 2B1.1(b)(1)(L) (2011)), 2 levels because the offenses involved sophisticated
means (§ 2B1.1(b)(10)(C)), 2 levels because Morris used a special skill to commit the
offense (§ 3B1.3), and 2 levels because he obstructed justice (§ 3C1.1). With a total
offense level of 35 and a criminal history category of I, the advisory guideline range was
3
The PSR included U.S.S.G. calculations based on the 2011 edition. The district
court used the 2012 edition to sentence Morris, but only after it found that the
relevant provisions were the same and there were no ex post facto issues. We will
refer to the 2011 edition when discussing the PSR and the 2012 edition when
discussing the court’s sentence.
-9-
168–210 months for each of counts 1–3, 60 months for each of counts 6–22, and 120
months for count 28.
Morris objected to all of the recommended enhancements except for his use of a
special skill. He also requested a downward variance based on the 18 U.S.C. § 3553(a)
sentencing factors, and a downward departure based on his belief that the intended loss
overstated the seriousness of the crime. See U.S.S.G. § 2B1.1 cmt. n.19(C). The district
court rejected these objections to the PSR’s calculations and also denied a downward
departure. Nonetheless, the court did vary downward 48 months based on its belief that
the advisory guideline range didn’t adequately credit a number of mitigating factors—
namely, Morris’s lack of a criminal record, his otherwise productive life, and the
unlikelihood of his committing more crimes. Ultimately, the court imposed concurrent
sentences of 120 months for counts 1–3, 60 months for counts 6–22, and 120 months for
count 28.
DISCUSSION
Morris raises five issues on appeal. First, he claims that the district court abused its
discretion by denying his severance motions. Second, he argues that Chafin testified as an
expert without having been disclosed or certified as one, and, further, that Chafin
improperly testified that Morris was guilty of fraud. Third, he complains that the
government committed prosecutorial misconduct during closing argument by “inflaming
the passions and prejudice of the jury.” Appellant’s Br. 29. Fourth, he challenges the
procedural and substantive reasonableness of his sentence. And fifth, he claims that these
- 10 -
errors—even if harmless standing alone—denied him a fair trial when considered
cumulatively. We address and reject each argument in turn.
1. Severance
We review the denial of a severance motion for abuse of discretion. United States v.
Clark, 717 F.3d 790, 818 (10th Cir. 2013). In considering whether an abuse occurred, we
keep in mind the general rule that persons indicted together should be tried together.
Zafiro v. United States, 506 U.S. 534, 537 (1993); United States v. Evans, 970 F.2d 663,
675 (10th Cir. 1992). This rule applies most strongly in conspiracy cases. United States v.
Pursley, 577 F.3d 1204, 1215 (10th Cir. 2009) (“[W]e recognize a presumption in a
conspiracy trial that coconspirators charged together preferably should be tried
together.”); Evans, 970 F.2d at 675. Accordingly, we won’t disturb the district court’s
denial of severance absent a “strong showing of prejudice.” Evans, 970 F.2d at 675.
“Prejudice occurs when there is a serious risk that a joint trial will compromise a specific
trial right of one of the defendants, or prevent the jury from making a reliable judgment
about guilt or innocence.” United States v. Edwards, 69 F.3d 419, 434 (10th Cir. 1995)
(internal quotation marks omitted). It isn’t enough “that separate trials might have offered
a better chance for acquittal of one or more of the accused.” Evans, 970 F.2d at 675
(internal quotation marks omitted).
Generally, when reviewing a denial of a severance motion, we evaluate the
nonexhaustive McConnell factors to determine whether a district court has abused its
discretion:
- 11 -
1) the likelihood that the co-defendant would in fact testify at the movant’s
severed trial and waive his Fifth Amendment privilege; 2) the significance of the
testimony in relation to the defendant’s theory of defense; 3) the exculpatory
nature and effect of such testimony; 4) the likelihood that the co-defendant’s
testimony would be impeached; 5) the extent of prejudice caused by the absence
of the testimony; 6) the effect of a severance on judicial administration and
economy; [and] 7) the timeliness of the motion.
United States v. McConnell, 749 F.2d 1441, 1445 (10th Cir. 1984). But Morris fails to
address these factors. See Clark, 717 F.3d at 818–19 (affirming a severance denial, in
part, because appellant “offer[ed] nothing [under the McConnell factors] that would
permit us to meaningfully evaluate the district court’s severance decision”). Here, the
only McConnell factor weighing in Morris’s favor is his timely moving for severance.
But a separate judicial administration factor weighs against him—two lengthy trials
wouldn’t serve the interest of judicial economy.
Rather than address the McConnell factors, Morris argues that the district court
abused its discretion, not because of prejudice to a specific trial right, but because
Armstrong’s repeated legally irrelevant statements denied him a fair trial. He asserts that
Armstrong “engender[ed] contempt with the court and also the jury,” Appellant’s Br. 22,
and that the jury undoubtedly traced Armstrong’s “aberrant behavior and thinking” back
to him, id. at 23. The prejudice, in other words, was that “[t]he jury lumped Mr. Morris
with Mr. Armstrong as a ridiculous tax protester.” Id. at 24. He contends that the jury’s
verdict proves as much because he and Armstrong “were both found guilty of every
single charge.” Id.
We agree with Morris that Armstrong didn’t make cogent legal arguments and that he
“did nothing to bolster the defense.” Id. at 22. Perhaps Armstrong even engendered the
- 12 -
contempt or frustration of the jury despite the court’s disciplining him outside the jury’s
presence. But even if Armstrong appeared “ridiculous,” it doesn’t follow that the jury
found Armstrong guilty as a result, and it’s even more of a stretch to speculate that the
jury somehow found Morris guilty because of his codefendant’s efforts. By Morris’s own
admission, Armstrong’s remarks throughout trial were “meaningless,” id. at 23—they
may not have bolstered Morris’s defense, but they didn’t undermine it. Armstrong never
suggested that Morris had committed tax fraud. In fact, Armstrong’s courtroom
statements never even referred to Morris or the crimes charged against him. In the end,
we agree with the district court that Armstrong’s conduct, “obstreperous or contumacious
as it may have been,” didn’t prejudice Morris.4 R. vol. 6, at 888.
The jury’s verdict doesn’t lead us to a different conclusion. We see strong evidence in
the record proving that both Morris and Armstrong were guilty of the crimes charged.
Morris implicated himself in the crimes charged when questioned by Agent Flynn during
the search of his home. The jury’s convicting both Morris and Armstrong of all counts
charged doesn’t persuade us that the joint trial prejudiced Morris.
4
In this key respect, Morris’s challenge resembles those brought by represented
defendants against pro se codefendants in United States v. Cross, 928 F.2d 1030,
1039–40 (11th Cir. 1994), and United States v. Tracy, 12 F.3d 1186 (2d Cir. 1993),
both of which Morris cites in his brief. In Cross, the appellant failed to explain how
his pro se codefendant’s comments or testimony implicated him. 928 F.2d at 1039.
And in Tracy, the court found that prejudice would only have existed if the pro se
codefendant had introduced evidence at trial that was inadmissible against the
appellant. 12 F.3d at 1194. Morris fails to explain how he has shown prejudice where
the similarly situated defendants in Cross and Tracy didn’t.
- 13 -
Finally, the record shows that the district court minimized any prejudice to Morris that
may have resulted from Armstrong’s self-representation. Apart from silencing and
disciplining Armstrong when appropriate, the court gave limiting instructions. See Zafiro,
506 U.S. at 540 (“[L]imiting instructions, often will suffice to cure any risk of
prejudice.”). The court instructed the jury that it could decide the case based only on the
evidence, that statements by counsel and Armstrong (including opening statements and
closing argument) weren’t evidence, and that in reaching separate verdicts the jury was to
consider the evidence against each defendant. We presume that a jury follows the
instructions of the court. United States v. Fleming, 667 F.3d 1098, 1106 (10th Cir. 2011).
Accordingly, even if Armstrong’s comments were potentially prejudicial, they didn’t
prevent the jury from making a reliable judgment about Morris’s guilt. See United States
v. Espinosa, 771 F.2d 1382, 1398–400 (10th Cir. 1985) (affirming the denials of
severance and mistrial motions when a pro se defendant made an opening statement that
allegedly incriminated his codefendants because the court gave similar limiting
instructions).
2. Chafin’s Testimony
At trial, Morris objected to some testimony offered by Kenneth Chafin, Armstrong’s
previous accountant, but failed to object to other testimony now challenged on appeal.
For testimony admitted over Morris’s objection, we review for an abuse of discretion.
United States v. Brooks, 736 F.3d 921, 929 (10th Cir. 2013). For testimony first
challenged on appeal, we review for plain error. Id. at 929–30; see Fed. R. Crim. P. 52(b)
- 14 -
(“A plain error that affects substantial rights may be considered even though it was not
brought to the court’s attention.”). “Plain error occurs when there is (1) error, (2) that is
plain, which (3) affects substantial rights, and which (4) seriously affects the fairness,
integrity, or public reputation of judicial proceedings.” Brooks, 736 F.3d at 930 (internal
quotation marks omitted).
Morris attacks Chafin’s testimony on four grounds. He contends that (1) Chafin
testified in violation of a scheduling order of the district court; (2) the government never
disclosed Chafin as an expert in violation of Federal Rule of Criminal Procedure 16; (3)
Chafin’s opinions lacked foundation under Daubert; and (4) “Mr. Chafin cannot opinion
[sic] that what Mr. Morris did was fraud as an essential element of the crimes or that if
he, Mr. Chafin, did what Mr. Morris did that would amount to a crime,” Appellant’s Br,
27–28.
We begin by addressing Morris’s first three challenges, all of which depend on
whether Chafin testified as an expert witness—a point Morris implies but never asserts.5
According to the district court’s scheduling order and Federal Rule of Criminal Procedure
16(a)(1)(G), the government needed to disclose a written summary of testimony and
opinions of any expert witness it intended to call in its case-in-chief. Because the
government didn’t list Chafin as an expert before trial, the district court had no reason to
consider the admissibility of expert opinion under Daubert v. Merrell Dow
Pharmaceuticals, Inc., 509 U.S. 579, 592 (1993). Even so, the lack of notice was proper
5
Morris’s fourth and final challenge also depends on whether Chafin testified as
an expert, but we address that challenge separately.
- 15 -
unless Morris first establishes that Chafin in fact testified not as a lay witness but as an
expert.
In three ways, Federal Rule of Evidence 701 sets boundaries on opinion testimony
from lay witnesses. United States v. Contreras, 536 F.3d 1167, 1170 (10th Cir. 2008).
First, the testimony must be “rationally based on the witness’s perception.” Fed. R. Evid.
701(a). Second, it must be “helpful to clearly understanding the witness’s testimony or to
determining a fact in issue.” Id. 701(b). And third, it must not be “based on scientific,
technical, or other specialized knowledge within the scope of Rule 702.” Id. 701(c). Rule
702, in turn, governs expert opinion testimony by witnesses with specialized “knowledge,
skill, experience, training, or education.” Fed. R. Evid. 702. Expert witnesses may give
opinion testimony if their expertise will help the trier of fact, if their testimony is based
on sufficient facts or data and is the product of reliable principles and methods, and if
they have reliably applied those principles and methods to the facts of the case. Id.
Morris doesn’t explain how Chafin’s testimony exceeded the scope of Rule 701, nor
does he precisely identify the opinions he challenges. Over three pages in his briefing,
Morris merely recites Chafin’s various opinions and concludes that “[t]here are numerous
problems here”—the first three of which all relate to whether Chafin’s testimony
exceeded the scope of Rule 701. Appellant’s Br. 27. Without any clarification from
Morris, we are left to review the several pages of testimony that Morris cites to see
whether the testimony complied with Rule 701 generally. Having done so, we find no
abuse of discretion by the district court.
- 16 -
Three times the district court overruled Morris’s objections to Chafin’s testimony now
challenged on appeal.6 First, the district court overruled Morris’s objection when the
government asked Chafin if there was “any basis in what [he’d] seen written by the IRS
about these 1099-OIDs that supports [Armstrong’s] view?” R. vol. 6, at 1169. Chafin
responded, “Absolutely not.” Id. at 1171. Second, the district court overruled Morris’s
objection when the government asked about “the significance of the IRS paying a large
refund” or, more precisely, whether he thought “that signif[ied] that the return that’s used
as a vehicle to get the refund is approved and correct?” R. vol. 6, at 1184. Chafin again
responded, “Absolutely not.” Id. at 1185. And third, the court overruled Morris’s
objection when the government asked, “When you formulated your response to Mr.
Armstrong’s email explaining to you how he was using the OID program, had you seen
any gray areas with the IRS’s position on that?” Id. at 1207. Chafin responded, “No.” Id.
at 1207, 1209.
Notably, Morris doesn’t challenge the admission of Chafin’s emails warning
Armstrong that his use of Form 1099-OID was illegal. From our perspective, the
challenged testimony communicated little more than did the emails themselves.
Moreover, we think the opinions Morris challenges were based on Chafin’s first-hand
perceptions as Armstrong’s tax preparer of 20 years, not on his specialized accounting
6
The second of these objections had nothing to do with Rule 701 or 702 and we
therefore doubt that Morris properly preserved the issue for appeal. See United States
v. Mendoza-Salgado, 964 F.2d 993, 1008 (10th Cir. 1992) (“On appeal, the specific
ground for reversal on an evidentiary ruling must mirror the objection raised at
trial.”). Still, we need not apply the more demanding plain-error standard because
Morris isn’t entitled to relief even when we review for abuse of discretion.
- 17 -
knowledge. See Ryan Dev. Co., L.C. v. Ind. Lumbermens Mut. Ins. Co., 711 F.3d 1165,
1171 (10th Cir. 2013) (citing First Annapolis Bancorp, Inc. v. United States, 72 Fed. Cl.
204, 207 (2006) (“[A] lay witness accountant may testify on the basis of facts or data
perceived in his role as an accountant based on his personal knowledge of the
company.”)). The government’s questions asked Chafin to explain his thinking in drafting
the warning emails to Armstrong and to shed light on whether Armstrong knew that the
scheme was illegal. Fed. R. Evid. 701(a), (b).
Admittedly, the government proceeded to elicit more general testimony about
Armstrong’s conduct as it related to tax law—questions that arguably called for opinions
beyond the experience of a lay witness. For example, the government asked Chafin if the
concept of tax withholding was difficult for tax preparers to understand and to explain the
IRS’s position about taxpayer refunds through use of Forms 1099-OID. In both of these
instances, however, Morris objected and the government withdrew its questions. The
district court sustained the balance of Morris’s objections to Chafin’s testimony without
exception.7 In fact, the court went out of its way to exclude certain testimony under Rule
7
The district court sustained objections to the following specific questions:
 Had Chafin’s colleagues expressed a misunderstanding of the basic concept of
income tax withholdings?
 Why Chafin had no interest in getting involved with Armstrong’s OID
arrangement?
 Was it a federal crime to be an accomplice to filing a false tax return?
 Was there anything gray in Chafin’s view about what Armstrong was doing in
getting refunds through OID forms?
 Did the IRS treat Armstrong’s Form 1099-OID interpretation as a gray area?
 What remedies did a taxpayer have when he disagreed with the IRS?
- 18 -
701 even though Morris didn’t object on that ground. On this record, Morris can’t
successfully argue that the district court abused its discretion. And Morris’s challenges to
the admission of testimony to which he didn’t object fail because he doesn’t explain how
he satisfies the four prongs of the plain-error standard.
We turn now to Morris’s argument that “Mr. Chafin cannot opinion [sic] that what Mr.
Morris did was fraud as an essential element of the crimes or that if he, Mr. Chafin, did
what Mr. Morris did that would amount to a crime.” Appellant’s Br. 27–28. With this
challenge, Morris attacks two portions of Chafin’s testimony: (1) that it would be a
federal crime for a taxpayer to file a false return, and that a tax professional could also
face criminal consequences for preparing false returns; and (2) that Chafin wouldn’t have
filed Armstrong’s amended returns because he thought they were “fraudulent” and
incorrect on their face. R. vol. 6, at 1206. As to the first portion, Morris objected only to
the final question and answer in that section of testimony: “Is that a federal crime?
[Chafin:] You bet.” Id. at 1205. The district court sustained that objection. As to the
second portion, Morris didn’t object.8 Morris asserts that this testimony was directed at
“the ultimate issue” in the case—“namely, that he is guilty of a crime [sic] fraud”—and
was therefore improper no matter “whether it is lay or expert opinion.” Appellant’s Br.
27.
8
We review this second portion of Morris’s challenge for plain error. Brooks, 736
F.3d at 929–30. Even if Morris had properly objected, we would affirm under either
standard of review.
- 19 -
Morris challenges this aspect of Chafin’s testimony by comparing it to testimony
disallowed in United States v. Banks, 262 F. App’x 900 (10th Cir. 2008). There, the
district court had allowed lay testimony from a police officer about his training and
experience in investigating drug-trafficking and about the opinions he had reached about
the presence of items found in Banks’s apartment. Id. at 906. The Banks court concluded
that the police officer’s testimony exceeded the scope of Rule 701 because it was based
on specialized knowledge. Id. at 907. The court also took issue with the officer’s
testimony that “Banks, was most definitely distributing illegal methamphetamine for the
purpose of obtaining money.” Id. at 903. The court observed that “[e]ven if Officer
Kelley had been qualified as an expert and the expert disclosure requirements were
satisfied, it still would have been error to allow him to testify Banks was ‘most definitely’
guilty of drug trafficking.” Id. at 907. According to our ruling in Banks, expert testimony
of this variety violates Rule 704(b) and also usurps the function of the jury. Id. at 907–08.
Because we have already determined that Chafin’s testimony didn’t violate Rule 701,
Morris’s best argument stemming from Banks is that Chafin’s testimony violated Rule
704(b). But this argument also fails because Chafin testified as a lay witness and Morris
doesn’t effectively argue otherwise. Rule 704 only prohibits certain expert opinions about
“whether the defendant did or did not have a mental state or condition that constitutes an
element of the crime charged or of a defense.” Fed. R. Evid. 704(b). The rule doesn’t
prohibit lay witnesses from testifying about a defendant’s mental state, or any other
“ultimate issue.” United States v. Goodman, 633 F.3d at 968–69 (10th Cir. 2011).
- 20 -
Accordingly, Chafin’s opinions simply don’t fall within the scope of Rule 704(b), unlike
the testimony in Banks.
Morris nonetheless says that lay witness testimony can improperly extend to an
ultimate issue when the witness testifies as a “thirteenth juror.” Appellant’s Br. 28–29.
We will accept this much for the sake of argument, but we can’t accept that Chafin
usurped the role of the jury here. Unlike the police officer in Banks, Chafin didn’t testify
as to Morris’s guilt. He merely testified that he believed it was illegal to falsify tax
documents. We think this testimony was helpful to the jury, even if it stated the obvious.
See United States v. Parris, 243 F.3d 286, 289 (6th Cir. 2001) (upholding a lay witness’s
characterization of a scheme as “illegal” considering that the defendant “offered
prospective customers the opportunity to have their income tax obligations completely
eliminated”). What’s more, Chafin didn’t explicitly tie Morris to the scheme or speculate
as to Morris’s probable guilt or mental state.9 Cf. United States v. Anderskow, 88 F.3d
245, 250–51 (3d Cir. 1996) (finding a violation of Rule 701(b)’s helpfulness requirement
where the lay witness directly testified that the defendant “must have known” about the
alleged fraud). Instead, those inferences were left where they belong—with the jury. See
United States v. Richard, 969 F.2d 849, 854–55 (10th Cir. 1992) (upholding lay testimony
that implied the defendants’ mens rea but didn’t “expressly draw that [ultimate]
9
For this reason, even if we were to find that Chafin testified as an expert, we would
still conclude that his testimony didn’t violate Rule 704(b)’s proscription against “mental
state” opinions.
- 21 -
conclusion or inference for the jury”). After reviewing Chafin’s testimony, we can’t find
an abuse of discretion, let alone any plain error.
In any event, Morris’s alleged errors wouldn’t warrant reversal even if we were to find
violations of Rules 701 or 704(b). The evidence of Morris’s guilt was overwhelming,
especially considering his statements to Agent Flynn during the search of his home. We
are convinced that if any error stemmed from Chafin’s testimony, it didn’t substantially
influence the outcome of Morris’s trial. See United States v. Toombs, 713 F.3d 1273, 1278
(10th Cir. 2013). We would still reach the same ultimate conclusion as Banks—that any
error was harmless.10 Banks, 262 F. App’x at 908.
3. Prosecutorial Misconduct
Morris claims that the government’s closing argument was improper. He challenges
the following remarks the prosecutor made about Morris and Armstrong and their view of
the IRS:
If they get the money . . . they rationalize it and say, you know what? I am
owed that money. . . . they say, you know, it’s the IRS. They’re a big organization.
It’s their mistake. They should go after the banks anyway. So they rationalize it
that way. They say to themselves, all I did was get one over on the man.
Well, ladies and gentlemen of the jury, the man is you. The man is you. The
man is me. The man is all of us. And what these people are doing at the end of the
day is trying to get one over on us.
10
Because portions of Morris’s challenge to Chafin’s testimony are subject to plain
error, he bears the burden of showing that any error was not harmless—i.e. that it affected
his substantial rights. See United States v. Gonzalez-Huerta, 403 F.3d 727, 736 (10th Cir.
2005) (“[P]lacing the burden on the appellant is one of the essential characteristics
distinguishing plain error from harmless error.”). But his briefing never addresses any
aspect of plain error, and he didn’t file a reply brief when the government asserted that
standard applied.
- 22 -
R. vol. 6, at 2159–60. With these comments, Morris contends the government implied
that everyone, including the jury, was “the man” Morris and Armstrong meant to defraud.
This, he says, inflamed the passion of the jurors and invited them to decide the case based
on pecuniary or personal interest rather than the evidence. In his view, the comments
were so improper that they affected the fairness of his trial and warrant reversal.
We review this challenge for plain error because Morris didn’t contemporaneously
object to the prosecutor’s statements.11 See United States v. Taylor, 514 F.3d 1092, 1095
(10th Cir. 2008). When, as here, a defendant fails to object to a prosecutor’s statement,
“reversal is warranted only when: [(1)] the prosecutor’s statement is plainly improper and
(2) the defendant demonstrates that that the improper statement affected his or her
substantial rights.” United States v. Anaya, 727 F.3d 1043, 1053 (10th Cir. 2013) (internal
quotation marks omitted). Applying these principles, we find no cause for reversal here.
In this case, the prosecutor drew a connection between the IRS and taxpayers. In
doing so, the prosecutor implied that stealing from the IRS, “the man,” amounted to
stealing from everyone—the jury included. Potentially, these general types of comments
could be improper. See, e.g., United States v. Palma, 473 F.3d 899, 902 (8th Cir. 2007)
(“Remarks invoking the individual pecuniary interests of jurors as taxpayers are
universally viewed as improper.”).
11
Morris instead filed a written objection four days later—the same day the jury
returned its verdict. Raising an objection four days later is four days too late to
qualify as timely. Cf. Miller v. Mullin, 354 F.3d 1288, 1294–95 (10th Cir. 2004)
(approving of the Oklahoma appellate court’s plain-error review when the habeas
corpus petitioner had made a “belated” prosecutorial-misconduct objection after the
case had been submitted to the jury).
- 23 -
However, “we must view the statement in context.” Fleming, 667 F.3d at 1105.
Considering the government’s statements in context here persuades us that they weren’t
improper. Importantly, twice in his closing argument—which of course preceded the
government’s rebuttal argument referencing “the man”—Morris blamed the IRS for any
mistaken use of “our money.” R. vol. 6, at 2127, 2146. In a sense, Morris himself sought
to inflame the passions of the jury against the IRS because the IRS had lost taxpayer
dollars—“our money”—i.e. the jury’s dollars too. Morris can’t now fault the government
for arguing that he was to blame for this same communal loss.12 See United States v.
Young, 470 U.S. 1, 12 (1985) (“[T]he reviewing court must not only weigh the impact of
the prosecutor’s remarks, but must also take into account defense counsel’s opening
salvo.”). In cases where the defendant first broaches a topic, we afford prosecutors
considerably more latitude. Fleming, 667 F.3d at 1105.
Alternatively, even had the prosecutor gone too far, we don’t believe his comments
affected the outcome of trial or otherwise amounted to unfair prejudice. United States v.
Olano, 507 U.S. 725, 735 (1993) (“Normally . . . the defendant must make a specific
showing of prejudice to satisfy the ‘affecting substantial rights’ prong of Rule 52(b).”). It
would surprise no jury to learn that IRS refunds consist of taxpayer dollars—and that
fraudulently obtaining refunds depletes tax revenues. Finally, the evidence at trial
12
At other points in trial, the jury learned that Morris and Armstrong’s
justification for using Forms 1099-OID to claim refunds rested on the theory that the
IRS held money that rightfully belonged in the hands of United States citizens. We
think the prosecutor’s closing argument also responded to this notion that Morris and
Armstrong were simply taking their due; the prosecutor’s comments pointed out that
taxpayer dollars are intended to serve the public.
- 24 -
overwhelmingly showed that Morris knew his claimed refunds were unjustified. Nothing
about the prosecutor’s statements require reversal.
4. Sentencing
“On appeal, the district court’s sentence is reviewed for reasonableness under an
abuse-of-discretion standard.” Peugh v. United States, 133 S. Ct. 2072, 2080 (2013).
Sentencing review proceeds in two steps. First, we examine whether the court committed
procedural error. United States v. Lente, 647 F.3d 1021, 1030 (10th Cir. 2011). This step
includes reviewing the district court’s Guidelines calculation—in that process, legal
conclusions are reviewed de novo and factual findings for clear error. United States v.
Kristl, 437 F.3d 1050, 1055 (10th Cir. 2006) (per curiam); see United States v. Fonseca,
473 F.3d 1109, 1112 (10th Cir. 2007) (analyzing a challenge to the denial of a downward
departure as procedural error). When reviewing a court’s application of sentencing
enhancements, “we view the evidence and inferences therefrom in the light most
favorable to the district court’s determination.” United States v. Mozee, 405 F.3d 1082,
1088 (10th Cir. 2005).
Second, “[a]ssuming that the district court’s sentencing decision is procedurally
sound,” we turn to substantive reasonableness, which we review for an abuse of
discretion. Gall v. United States, 552 U.S. 38, 51 (2007). The sentence must fall within
the range of permissible choice. United States v. McComb, 519 F.3d 1049, 1053 (10th Cir.
2007). “The court of appeals may, but is not required to, presume that a within-
Guidelines sentence is reasonable.” Peugh, 133 S. Ct. at 2080. We have held that this
- 25 -
rebuttable presumption applies to below-Guidelines sentences as well. United States v.
Balbin-Mesa, 643 F.3d 783, 788 (10th Cir. 2011).
Procedural Reasonableness. Procedural error “relates to the method by which the
sentence is calculated,” including calculating the Guidelines range. Lente, 647 F.3d at
1030 (internal quotation marks omitted). Morris claims that the district court incorrectly
calculated his Guidelines range by erroneously applying enhancements for (1) his
intended amount of loss, (2) his using sophisticated means, and (3) his obstructing justice.
We address each challenge in turn.
First, after finding that the offense involved more than $20 million in intended losses,
the district court applied a 22-level enhancement under U.S.S.G. § 2B1.1(b)(1)(L)
(2012). Morris argues that he shouldn’t have been sentenced based on intended losses but
instead only on actual loss. Morris also claims that the IRS itself caused any losses by not
immediately detecting his “ridiculous” scheme. Appellant’s Br. 36. Morris not only
believes that he should have been sentenced on actual loss, but that he also deserved a
downward departure under § 2B1.1 application note 19(C), which provides that
downward departures may be warranted where the calculated offense level “overstates
the seriousness of the offense.”
We reject Morris’s contention that the district court should have calculated his
sentence based on actual loss. Section 2B1.1 application note 3(A) specifically defines
loss as “the greater of actual or intended loss.” Here, it is undisputed that the intended
loss was $21,166,468.00. Accordingly, the court correctly applied the 22-level
enhancement based on intended loss. We also reject Morris’s request to apply the “zero
- 26 -
loss rule” because—regardless of his claim that the IRS should have stopped him
sooner—it is beyond debate that his scheme caused actual loss, which precludes the rule’s
application. See United States v. Flanders, 491 F.3d 1197, 1217–18 (10th Cir. 2007).
Furthermore, we lack jurisdiction to consider Morris’s argument that the
circumstances of his case warranted a downward departure. See Fonseca, 473 F.3d at
1112. “[T]his court has no jurisdiction to review a district court’s discretionary decision
to deny a motion for downward departure on the ground that a defendant’s circumstances
do not warrant the departure.” Id. (internal quotation marks omitted). Here, the district
court did just that: “I decline to exercise my authority to depart downward because the
circumstances of Mr. Morris do not warrant such a downward departure.” R. vol. 6, at
2215. We may review a denial only if a district court interprets “the Guidelines as
depriving it of the legal authority to grant the departure.” Fonseca, 473 F.3d at 1112.
Here, the district court recognized its authority. Therefore, we lack jurisdiction to review
the denial of the downward departure for procedural reasonableness.13 See United States
v. Angel-Guzman, 506 F.3d 1007, 1017–18 (10th Cir. 2007) (citing Fonseca in declining
to review a procedural-error challenge to a downward-departure denial).
Second, the district court applied a two-level enhancement because the offense
involved “sophisticated means” under U.S.S.G. § 2B1.1(b)(10)(C). Sophisticated means
13
We do, however, have jurisdiction to consider “the defendant’s asserted
grounds for departure when reviewing the sentence for [substantive] reasonableness.”
United States v. Chavez-Diaz, 444 F.3d 1223, 1229 (10th Cir. 2006). As discussed
below, we are convinced that the district court’s sentence wasn’t substantively
unreasonable in any aspect, let alone because of the amount of loss.
- 27 -
are “especially complex or especially intricate offense conduct pertaining to the execution
or concealment of an offense.” § 2B1.1 cmt. n.9(B). Morris argues that the Form 1099-
OID scheme was simple and that it amounted only to inflating the income tax withheld.14
We disagree. From start to finish, the mechanisms by which Morris defrauded the IRS
were intricate. United States v. Weiss, 630 F.3d 1263, 1279 (10th Cir. 2010) (“The
Guidelines do not require every step of the defendant’s scheme to be particularly
sophisticated”; rather, the enhancement focuses on the complexity of the whole scheme.).
As the district court found, Morris used his specialized knowledge of the IRS to fabricate
Forms 1099-OID from various financial institutions, creating an impression that his
customers held investments subject to withholdings. He then used those forms to back up
amended returns in which he had falsely claimed income tax withheld in amounts
matching his customer’s debts. The court also found that Morris took a number of steps
to avoid the IRS’s detection or discovery of the millions of dollars in fraudulent refunds.
He carefully selected depository banks and instructed his customers to limit the amounts
of their withdrawals. Viewing the conspiracy as a whole, we agree with the district
court’s finding that the complexity of the Form 1099-OID scheme supported the
application of the sophisticated-means enhancement.
14
Morris also claims he was a victim of “double counting” because the district
court applied two-level enhancements for sophisticated means under §
2B1.1(b)(10)(C) and for using a special skill to carry out the scheme under U.S.S.G.
§ 3B1.3. But, as the government points out, Morris fails to develop this argument—it
consists of one sentence without legal citation or any indication that it was raised
below—subjecting it to waiver in this court. McKissick v. Yuen, 618 F.3d 1177,
1189–90 (10th Cir. 2010).
- 28 -
Morris cites United States v. Ambort, 405 F.3d 1109 (10th Cir. 2005), and attempts to
distinguish it from his case even though he admits Ambort is “strikingly similar.”
Appellant’s Br. 38. But that case lends him no support—the striking similarities between
that case and the one before us almost necessitate that the district court correctly applied
the sophisticated-means enhancement. Ambort, a case involving various convictions
related to filing false tax returns, enforced the sophisticated-means enhancement because
the defendant (1) had created a program teaching history and case law for participants to
use when called upon to justify a fraudulent refund; and (2) had instructed the
participants how to falsify portions of their tax returns to evade detection. Id. Here,
Morris told clients that they were entitled to erroneous refunds and backed that claim up
with a bogus publication supposedly based on historical facts and law, and he falsified
Forms 1099-OID that accompanied the tax returns. Morris fails in his attempt to
distinguish his case from Ambort because the findings that supported the enhancement
there are found here as well.
Third, the district court applied a two-level enhancement for obstruction of justice
under U.S.S.G. § 3C1.1. Directing “another person to destroy or conceal evidence that is
material to an official investigation or judicial proceeding” or attempting to do so
qualifies as an obstruction of justice. § 3C1.1 cmt. n.4(D); United States v. Rowlett, 23
F.3d 300, 306 (10th Cir. 1994), overruled on other grounds by United States v Goff, 314
F.3d 1248, 1249–50 (10th Cir. 2003). Morris doesn’t deny that he told one of his Form
1099-OID clients to “delete all of your e-mails”—i.e., all emails addressed to or from
Morris. R. vol. 6, at 413. Rather, he claims that this act of obstruction didn’t amount to a
- 29 -
material hindrance to the investigation because law enforcement recovered almost all of
the client’s emails anyway.
We disagree with Morris’s reading of the Guidelines commentary. In the context of an
obstruction-of-justice enhancement, the material-hindrance requirement only applies
when the obstruction is contemporaneous with arrest. § 3C1.1 cmt. n.4(D); see Rowlett,
23 F.3d at 306 (interpreting an earlier but identical version of § 3C1.1 cmt.4(D) to allow a
non-contemporaneous enhancement “regardless of whether actual hindrance to an official
investigation or prosecution results”). Here, the obstruction wasn’t contemporaneous with
arrest. The IRS searched Morris’s home on July 1, 2009. That same day, Morris
instructed his client to destroy emails and to tell another person to do so, too. Morris
wasn’t arrested until June 2010—nearly a full year later. Therefore, the degree of
hindrance is irrelevant; all that matters, as the district court found, is that Morris
attempted to obstruct the investigation. The court correctly applied the obstruction
enhancement.
Substantive Reasonableness. To determine a sentence’s substantive reasonableness we
consider its length given the case’s circumstances and the § 3553(a) factors. United States
v. Chavez, 723 F.3d 1226, 1233 (10th Cir. 2013). We may presume that below-Guidelines
sentences are reasonable, and we do so here. Peugh, 133 S. Ct. at 2080; Balbin-Mesa,
643 F.3d at 788. Morris has failed to rebut that presumption as he must.
In attacking the substantive reasonableness of his sentence, Morris confines his
argument to the 18 U.S.C. § 3553(a) sentencing factors. While he admits that the need to
- 30 -
deter criminal conduct was a factor weighing against him, he claims that all of the other
§ 3553(a) factors weighed in his favor.
This argument does little to rebut our presumption of reasonableness. At sentencing,
the district court not only spoke of the need to deter other tax protestors, but it also relied
heavily on the nature and characteristics of the offense. See § 3553(a)(1). In finding
Morris’s crimes especially serious, the court noted that Morris was instrumental in the
scheme and that he knowingly participated in the scheme for personal financial gain. The
serious nature of the crime and Morris’s flagrant disrespect for tax laws arguably would
have justified a greater sentence, but the district court nonetheless granted a generous
downward variance. Again, the advisory guideline range was 168–210 months in prison,
but the district court varied downward by 48 months to 120 months. In doing so, the court
considered the very things Morris says the court apparently didn’t consider well
enough—including his law-abiding past and the unlikelihood that he would commit more
crimes. Under the circumstances, we can’t fault the district court’s sentencing.15
15
Since there aren’t “two or more” instances of harmless error, we don’t need to
consider Morris’s cumulative error argument. See United States v. Harlow, 444 F.3d
1255, 1269 (10th Cir. 2006).
- 31 -
CONCLUSION
For the reasons discussed, we affirm Morris’s conviction and sentence.
Entered for the Court
Gregory A. Phillips
Circuit Judge
- 32 -