United States v. Willie Harris ( 2009 )

In the
United States Court of Appeals
For the Seventh Circuit
Nos. 08-1138 & 08-1161
U NITED S TATES OF A MERICA,
Plaintiff-Appellee,
v.
R OOSEVELT P OWELL and W ILLIE H ARRIS,
Defendants-Appellants.
Appeals from the United States District Court
for the Northern District of Indiana, Hammond Division.
No. 06 CR 197—Philip P. Simon, Judge.
A RGUED A PRIL 9, 2009—D ECIDED A UGUST 7, 2009
Before M ANION, R OVNER, and W OOD , Circuit Judges.
M ANION, Circuit Judge. A grand jury indicted Willie
Harris, a Gary, Indiana, lawyer, and Roosevelt Powell,
who collected property taxes on behalf of Lake County,
Indiana, for their role in the sale of two properties to the
Gary Urban Enterprise Association. A jury found Harris
and Powell guilty of wire fraud, conspiring to defraud
the United States, and filing a false tax return. They
appeal. We affirm their convictions and Harris’s sen-
2 Nos. 08-1138 & 08-1161
tence, but vacate Powell’s sentence and remand to the
district court for further proceedings.
I.
Indiana’s enterprise zone program was devised in 1983
in an attempt to provide incentives for businesses to
locate or expand in distressed and blighted areas.
Jim Landers & Dagney Faulk, In the Zone: A Look at Indi-
ana’s Enterprise Zones, Ind. Bus. Rev., Summer 2005, at 7.
Businesses inside the enterprise zone receive tax incen-
tives in exchange for donating a percentage of the tax
savings to the local urban enterprise association. Id. at 9.
The Gary Urban Enterprise Association (“GUEA”) was
such an association; businesses located within the Gary
enterprise zone contributed heavily to it in lieu of paying
inventory taxes. However, due to a combination of a
large pot of money at the GUEA’s disposal—as much as
five million dollars a year—and minimal oversight over
how the money was to be spent, the GUEA attracted a
corrupt abuse of the funds. The GUEA was ultimately
dissolved after an investigation revealed that the
GUEA’s executive director, JoJuana Meeks, was treating
the GUEA as her personal bank account. Prior to its
demise, however, the GUEA had embarked on a property-
purchasing spree, acquiring many properties in Gary
for the purpose of redeveloping them. The convictions of
defendants Roosevelt Powell and Willie Harris in this
case resulted from their roles in the sale of two properties
in Gary to the GUEA: a former grocery store located at
6300 Miller, and a vacant building located at 768 Broad-
way.
Nos. 08-1138 & 08-1161 3
A. 6300 Miller1
Towards the end of 1999, the owners of 6300 Miller, who
had long ceased operating the building on the property
as a grocery store, let the members of the Lake County
Council know that they intended to donate the property
to a public charity. William Smith, one of the councilmen
and—later—a co-defendant of Powell and Harris, got
wind of the intended donation and indicated that he
knew of an organization that might have some interest
in the property. Harris, an attorney who owned the law
firm Willie Harris & Associates in Gary, then contacted
Gerald Bishop, one of the lawyers for the owners of
6300 Miller, about the property. He told Bishop that the
Gary Historical and Cultural Society (“Historical Society”),
a local nonprofit organization, would accept 6300 Miller
as a donation. Dharathula Millender, Harris’s 84-year-old
aunt by marriage, was the Historical Society’s president,
and Harris was its attorney. The papers for the transfer
were drawn up and signed at Harris’s law office on
December 27, 2000. At the time of the donation, 6300 Miller
was appraised for $397,500 and had $37,000 in accrued
property taxes, which the Historical Society assumed.
Harris, Smith, and Powell then attempted to sell the
property. In the spring of 2001, Powell called Meeks at the
GUEA and told her about it. Powell knew her from his
work at SRI, a company hired to run the delinquent
1
We base our account of the facts on the evidence presented
at trial, taken in the light most favorable to the government.
United States v. Hach, 162 F.3d 937, 942 (7th Cir. 1998).
4 Nos. 08-1138 & 08-1161
property tax sale auctions in Lake County. Powell had
seen Meeks attend several auctions on behalf of the
GUEA and, after finding out what she was doing, offered
to help her. He eventually assisted Meeks in buying “a lot”
of property for the GUEA—including a house he owned
in his daughter’s name.
Powell and Smith showed Meeks the property at
6300 Miller. Powell told her that the property was in
the process of being transferred from the county to the
Historical Society (which was not true) and that she
could buy it once the transfer was completed. They then
discussed a purchase price. Powell stated that they
wanted $450,000. After Meeks told him that the GUEA
“couldn’t do that,” the parties quickly agreed on a price
of $200,000. Property taxes were not discussed—even
though, by this point, the unpaid property taxes had
ballooned to $73,000. Powell directed Meeks to prepare
a purchase agreement in the name of the Historical
Society and to make out the check to that organization.
A purchase agreement was prepared and addressed to
Millender but signed by Harris on behalf of the
Historical Society. While the agreement called for the
GUEA to pay the outstanding property taxes, no
amount was listed. Meeks assumed that taxes would not
be an issue because the county was transferring the
property to the Historical Society.
Property taxes did indeed turn out to be a non-issue, but
not for the reason Meeks assumed. In addition to his
work for SRI, Powell also owned and operated a
company named US Research Consultants, Inc. (“US
Nos. 08-1138 & 08-1161 5
Research”), which had a contract with Lake County to
collect delinquent property taxes on its behalf. On
October 2, Lee Christakis, an attorney working for US
Research who acted on Powell’s instructions, filed a
lawsuit against the Historical Society regarding the delin-
quent taxes owed on 6300 Miller. Despite the fact that
the building was in decent shape and the GUEA was
paying $200,000 to buy it in order to use it as a training
center, the complaint stated that the property was in a
state of disrepair necessitating its demolition in order to
be restored to a tax-paying basis. Harris personally ac-
cepted service of the complaint on behalf of the
Historical Society three minutes after the complaint was
filed. An agreed order was entered later that day
reducing all property taxes due on the property to
$15,000, which Harris paid. The Lake County Treasurer—
whose permission US Research was required to seek
before reaching a settlement with a taxpayer—was not
aware of either the lawsuit or settlement.
On the same day as the lawsuit to reduce the property
taxes, Powell picked up the $200,000 check from the
GUEA. The check was deposited into Harris’s law firm
trust account on October 3. At the same time, Harris wrote
a check from the trust account to himself (postdated
October 4) for $50,000 and deposited it into his law firm’s
business account. He also wrote a check to Smith for
$75,000, one to Powell for $25,000, and another to the
Historical Society for $50,000. Bank records showed that
Smith deposited his check shortly thereafter, while
Powell deposited his check about a week later.
6 Nos. 08-1138 & 08-1161
Millender deposited the $50,000 check in the Historical
Society’s bank account a week after Powell. According to
her testimony at trial, Millender’s entire understanding of
how the Historical Society obtained the $50,000 rested on
a conversation she had with Smith, during which he had
asked her if “they” could “borrow” the Historical Society’s
501(c)(3) status 2 for $50,000 “to get a building for a training
program for young people.” Although Millender was
present at the short meeting in Harris’s law office during
which the documents donating the property to the His-
torical Society were completed, and even signed the
document transferring the property from the former
grocery store owners to the Historical Society, she testified
that she did not know that the Historical Society ever
owned 6300 Miller. Rather, she stated that she had com-
plete trust in her attorney Harris: “if he said sign it,
I would sign it. I wouldn’t read it. I would sign it, if he
said it’s something you’re supposed to do.”
Millender was not told that the Historical Society would
have to own any property in order to receive the $50,000.
She testified that she would never have taken title to 6300
Miller because the cash-strapped Historical Society had
difficulty meeting expenses for the old school building
it currently possessed. She was surprised when FBI
agents showed her the $200,000 check from the GUEA to
2
Section 501(c)(3) of title 26 exempts from federal income
taxation “[c]orporations, and any community chest, fund, or
foundation, organized and operated exclusively for religious,
charitable, scientific, testing for public safety, literary, or
educational purposes.”
Nos. 08-1138 & 08-1161 7
the Historical Society; she did not know about that check
either, or that Smith, Powell, and Harris had pocketed
$150,000 of the proceeds. Millender also was never in-
formed about the property taxes owed on the property
or the lawsuit filed against the Historical Society. Her
signatures both on the $200,000 check and the deed trans-
ferring 6300 Miller to the GUEA were forged. She did
acknowledge receiving and depositing the $50,000 check
on behalf of the Historical Society.
B. 768 Broadway
The second property sale involved in this case was the
sale of the vacant building located at 768 Broadway to
the GUEA. Harris paid $2,600 for the property in Septem-
ber 1999. Because he was having marital problems at
the time, Harris hid his ownership of the property from
his wife by titling the property in the name of Dorothy
Ard, a close family friend. Harris told Ard he would pay
for the property, its maintenance, and any taxes.
In August 2001, Powell contacted Meeks and told her
that 768 Broadway was available, claiming that his client
was Dorothy Ard, “an elderly woman who was trying to
divest herself and move back south.” After viewing the
property, Meeks again spoke with Powell, who stated
Ard was looking for at least $60,000. Meeks offered $40,000,
and Powell said he would contact Ard. Powell called
back and claimed that he had spoken to Ard and that she
would settle for $51,500. Meeks agreed and gave Powell a
GUEA check for $51,500 made out to Dorothy Ard. The
check was deposited into Harris’s law firm business
8 Nos. 08-1138 & 08-1161
account. Powell received $14,000 from Harris for the sale
of the building.
At trial, Ard testified that Harris told her in 2001 that
he had reconciled with his wife and asked Ard to sign a
deed transferring the property back to him. Based on
Harris’s representation, Ard signed the deed. Harris did
not tell Ard he was selling the property; the deed that Ard
signed was in fact the deed transferring the property to
the GUEA. Ard also did not know that the GUEA had
purchased the property for $51,500. Her signature on
both the check from the GUEA and the deeds filed in the
state auditor’s office were forged.
A jury convicted Harris and Powell under 18 U.S.C. §§ 2and 1343 of wire fraud in relation to the sale of 6300 Miller
and under 18 U.S.C. § 371 for conspiring to commit theft
of government funds by reducing the property taxes on
6300 Miller. It also found Powell guilty under 26 U.S.C.
§ 7206(1) for willfully filing a false tax return due to his
failure to report the income he received from the sales
of 6300 Miller and 768 Broadway. Lastly, the jury con-
victed Harris under § 7206(1) for failing to report his
income from the sale of 768 Broadway as a capital gain.
For their sentences, Powell received 37 months’ imprison-
ment, while Harris received 55 months’ imprisonment.
Both Powell and Harris appeal.
II.
On appeal, both Powell and Harris present several
challenges to their convictions and sentences. We turn
Nos. 08-1138 & 08-1161 9
first to Powell’s challenge to the sufficiency of the gov-
ernment’s evidence supporting his wire fraud conviction.3
Our review of a challenge to the sufficiency of the
evidence is quite deferential. We examine the evidence
in the light most favorable to the government, United
States v. Useni, 516 F.3d 634, 646 (7th Cir. 2008), looking
only at whether evidence exists from which “any
rational trier of fact could have found the essential ele-
ments of the crime beyond a reasonable doubt.” Hach,
162 F.3d at 942. That standard, by itself, presents “a
nearly insurmountable hurdle to the defendant.” Id.(quoting United States v. Teague, 956 F.2d 1427, 1433 (7th
Cir. 1992)).
The wire fraud statute, 18 U.S.C. § 1343, prohibits the
use of the interstate wires in “any scheme or artifice to
defraud, or for obtaining money or property by means
of false or fraudulent pretenses, representations, or prom-
ises.” To convict a defendant of wire fraud, the government
must prove three elements: (1) the defendant participated
in a scheme to defraud; (2) the defendant intended to
defraud; and (3) a use of an interstate wire in furtherance
of the fraudulent scheme. United States v. Turner, 551
F.3d 657, 664 (7th Cir. 2008). Powell argues that the evi-
3
Harris states in his brief that he “adopts and incorporates by
reference, without repeating, the standard of review and the
argument on the wire fraud issue . . . as presented in the Ap-
pellant’s Brief of co-appellant Powell.” Because Harris
does not provide any further argument besides his incorpora-
tion of Powell’s arguments, we will discuss only Powell’s
contentions.
10 Nos. 08-1138 & 08-1161
dence was insufficient to support a jury finding that
he knowingly participated in a scheme to defraud involv-
ing the use of the interstate wires in furtherance of the
scheme.
We examine first Powell’s claim that there was no
scheme to defraud. “A scheme to defraud requires ‘the
making of a false statement or material misrepresentation,
or the concealment of [a] material fact.’ ” United States v.
Sloan, 492 F.3d 884, 890 (7th Cir. 2007) (quoting United
States v. Stephens, 421 F.3d 503, 507 (7th Cir. 2005)). Powell
asserts that there was no false statement or material
misrepresentation because Millender and the Historical
Society got the benefit of the bargain: Smith promised
Millender and the Historical Society $50,000 if “they” could
“borrow” the Historical Society’s 501(c)(3) status, and
Millender and the Historical Society received $50,000.
Thus, Powell contends, there was no fraud perpetrated
on the Historical Society.
Powell’s argument ignores the defendants’ failure to give
Millender the whole story on how the Historical Society
was to receive the $50,000. Neither Smith nor Harris nor
Powell disclosed to Millender that the Historical Society
needed to take title to 6300 Miller, and therefore assume
all the burdens of owning that property—including a
hefty property tax bill. Nor did they tell her that they
were able to sell the property for $200,000, or that they
were going to keep nearly three-quarters of the pro-
ceeds for themselves. These were significant omissions:
Millender testified that she would never have taken title
to 6300 Miller because the cash-strapped Historical
Nos. 08-1138 & 08-1161 11
Society could not even meet the expenses for the other
building it possessed.
Powell claims that Millender should have known that
the Historical Society owned 6300 Miller because she was
present at Harris’s office when the documents were
executed transferring 6300 Miller to the Historical Society.
But the jury reasonably could have concluded otherwise.
Millender testified that she completely trusted Harris,
who was her nephew-in-law and the Historical Society’s
attorney, and that she would sign whatever he put in
front of her without reading it. She also repeatedly denied
ever knowing that the Historical Society owned 6300
Miller. A jury was entitled to take Millender at her word.
“[I]t is not our role, when reviewing the sufficiency of the
evidence, to second-guess a jury’s credibility determina-
tions.” United States v. Buchmeier, 255 F.3d 415, 420 (7th
Cir. 2001).
Moreover, even if Powell could show beyond dispute
that Millender knew the Historical Society owned 6300
Miller, he does not contest that neither he nor Smith
nor Powell disclosed to Millender the sale of the property
to the GUEA for $200,000. Nor does he contest that they
failed to tell Millender that they would pocket three-
quarters of the proceeds from that sale. Those omissions
are material; absent them, the impoverished Historical
Society stood to gain an additional $150,000 in badly
needed funds. Significantly, Smith, Powell, and Harris
did not merely fail to tell Millender about the sale and
their profiting from it. They actively concealed the sale
from her, going so far as to forge her signature on both
12 Nos. 08-1138 & 08-1161
the $200,000 check from the GUEA and the deed transfer-
ring 6300 Miller to the GUEA so that she would never
know about the transaction. As we have said before, a
failure to disclose information may constitute fraud if
the “omission [is] accompanied by acts of concealment.”
United States v. Stephens, 421 F.3d 503, 507 (7th Cir. 2005).
A reasonable jury certainly could have concluded that is
what occurred here. The government thus presented
sufficient evidence of a scheme to defraud the Historical
Society.
But, Powell asserts, even granting that there was a
scheme to defraud, he did not knowingly participate in it.
That argument was not raised in either of Powell’s Rule 29
motions in the district court, which challenged only the
sufficiency of the evidence supporting the scheme to
defraud. Powell has therefore forfeited it, and we review
only for plain error. United States v. Groves, 470 F.3d 311,
324 (7th Cir. 2006). Under the plain error standard,
Powell must show “that a ‘manifest miscarriage of justice
will occur if his conviction is not reversed.’ ” United
States v. Hensley, ___ F.3d ___, 2009 WL 2178650, at *5 (7th
Cir. July 23, 2009) (quoting United States v. Irby, 558 F.3d
651, 653 (7th Cir. 2009)). “Put another way, reversal is
warranted only if the record is devoid of evidence
pointing to guilt, or if the evidence on a key element was
so tenuous that a conviction would be shocking.” Id.There is no such lack of evidence in this case. Powell
characterizes his role in the sale of 6300 Miller as merely
that of a real estate agent receiving a commission for
bringing “together a willing seller with a willing buyer.”
Nos. 08-1138 & 08-1161 13
Such a characterization, however, does not square with
the evidence of Powell’s willingness to drop more than
50% off the asking price (and appraised value) of
6300 Miller on the day of the sale,4 since it is highly un-
likely that a legitimate real estate agent would settle so
quickly on such a reduction. Nor does it mesh with
Powell’s role in the fraudulent lawsuit filed on behalf of
Lake County to reduce the property taxes owed on 6300
Miller, which he does not challenge in this court.5 That
lawsuit was a fraud on the court. Powell obtained the
property tax reduction by falsely representing to the
judge through his attorney that 6300 Miller needed to be
demolished and by failing to tell the judge that the prop-
erty was being sold the same day for $200,000—an amount
easily sufficient to satisfy the back property taxes. A real
estate agent receiving a legitimate commission does not, on
the same day as the sale, orchestrate a dishonest lawsuit
that results in an unauthorized reduction of property taxes
to the tune of $58,000. A jury was therefore entitled to
reject Powell’s real-estate-agent gloss to his involvement
4
Recall that the property recently had been appraised for
$397,000 and that Powell had initially told Meeks that his
“client” was looking for $450,000.
5
Both in his reply brief and at oral argument, Powell’s attor-
ney expressly admitted that, if the jury chose to believe Lake
County Treaurer Peggy Katona’s testimony that Powell
had not gotten her required authorization for the property tax
reduction, the evidence was sufficient for a jury to find
against him on count two of the indictment, the § 371 count,
which charged a conspiracy based on the fraudulent reduc-
tion of the property taxes owed on 6300 Miller.
14 Nos. 08-1138 & 08-1161
in the sale of 6300 Miller. See United States v. Humphreys,
468 F.3d 1051, 1054 (7th Cir. 2006) (“[A]lternative ex-
planations alone, even if plausible, do not ordinarily
overcome the defendant’s burden in challenging the
sufficiency of the evidence.” (quoting United States v.
Romero, 57 F.3d 565, 570 (7th Cir. 1995))).
Powell disputes that the property tax reduction had
any relationship to the scheme to defraud, but that argu-
ment is a non-starter. A reasonable jury could have con-
cluded that any tax savings advanced the scheme by
going straight to the defendants’ bottom line. While the
purchase agreement called for the GUEA to pay the
outstanding property taxes, no amount was listed. Meeks
testified that the defendants had given her the impression
that property taxes would not be an issue because they
had told her the Historical Society was in the process of
obtaining the property from the county. Meeks’s testimony
is backed by the fact that Harris, and not the GUEA, paid
the remaining $15,000 due after the fraudulent lawsuit
reduced the property taxes. Because the property tax
reduction allowed the schemers to keep more of their ill-
gotten gains, it was part and parcel of the overall
scheme to defraud.
Powell, however, compares his lot to that of the defen-
dant in United States v. Rahseparian, 231 F.3d 1257 (10th Cir.
2000). Like Powell, the defendant in Rahseparian was
also convicted on circumstantial evidence. But that is
where the similarity ends. In Rahseparian, the defendant’s
participation in the illegal scheme was limited to acts that,
by themselves, were innocent: doing the banking for his
sons, who ran the fraudulent telemarketing scheme at
Nos. 08-1138 & 08-1161 15
issue there, and purchasing “lead sheets” for them, a
common and perfectly legal way for telemarketing busi-
nesses to identify potential customers. The Tenth Circuit
held that those activities, in and of themselves, did not
support an inference that the defendant knew that his
sons’ business was defrauding its customers. 231 F.3d
at 1263.
In contrast, the lawsuit filed by Powell’s company, US
Research, which caused a substantial reduction of the
property taxes owed, was inherently fraudulent. It repre-
sented that 6300 Miller needed to be demolished when
in fact it was being sold that day for a substantially dis-
counted $200,000. As we have discussed above, the
lawsuit furthered the overall scheme by leaving more
money for the defendants to divide amongst themselves.
Considering that the evidence showed that Powell
himself received $25,000 from the sale of 6300 Miller, the
jury could reasonably infer that Powell had knowledge
of, and intended to further, the scheme to defraud the
Historical Society.
Powell also challenges the use-of-the-wires element of
his wire fraud conviction. He claims that there was insuf-
ficient proof that the wires were used in furtherance of
the fraudulent scheme. Again, Powell’s failure to raise
this argument in his Rule 29 motions means that we
review only for plain error. Groves, 470 F.3d at 324.
Our recent decision in United States v. Turner, 551 F.3d
657 (7th Cir. 2008), spells out the current state of the law
on the use-of-the-wires element:
The mail- and wire-fraud statutes are not intended to
reach all frauds but only those in which a mailing or
16 Nos. 08-1138 & 08-1161
use of an interstate wire is part of the scheme. Schmuck
v. United States, 489 U.S. 705, 710, 109 S. Ct. 1443, 103 L.
Ed. 2d 734 (1989). The use of the mail or wire need not
be an indispensable part of the fraud to satisfy the “in
furtherance of” element of the offense; it need only “be
incident to an essential part of the scheme . . . or a step
in [the] plot.” Id. at 710-11 (alteration in original)
(internal quotation marks & citation omitted). “In
other words, the success of the scheme must in some
measure depend on the mailing [or wire transmis-
sion].” United States v. Seward, 272 F.3d 831, 836 (7th
Cir. 2001). The defendant himself need not
personally cause the mailing or use of the wire; it is
enough that the use of mail or wire “will follow in the
ordinary course of business, or where such use can
reasonably be foreseen, even though not actually
intended.” Pereira v. United States, 347 U.S. 1, 8-9, 74 S.
Ct. 358, 98 L. Ed. 435 (1954) (“Where one does an act
with knowledge that the use of the mails will follow in
the ordinary course of business, or where such use can
reasonably be foreseen, even though not actually
intended, then he ‘causes’ the mails to be used.”);
United States v. Hickok, 77 F.3d 992, 1004 (7th Cir. 1996).
The mailing or use of the wires need not itself contain
false or fraudulent material; a “routine or innocent”
mailing or use of the wire can supply this element of
the offense, as long as the use of the mail or wire is part
of the execution of the scheme. Schmuck, 489 U.S. at
714-15, 109 S. Ct. 1443; United States v. Brocksmith, 991
F.2d 1363, 1368 (7th Cir. 1993).
Turner, 551 F.3d at 666 (internal footnote omitted).
Nos. 08-1138 & 08-1161 17
To satisfy the use-of-the-wires element in this case, the
government relied on the transfer of the $200,000 sale
proceeds of 6300 Miller from the GUEA’s bank through
an interstate wire to Harris’s trust account. As the object
of the scheme to defraud the Historical Society was the
money, the actual receipt of the funds into Harris’s trust
account was an essential part of the scheme. See Turner,
551 F.3d at 668. Powell argues, however, that the $200,000
wire transfer is insufficient to support his conviction
because the fraud was already completed when the
money was received by the bank. Harris’s law firm trust
account was credited with $200,000 on October 3, 2001,
while the interstate wire transfer did not occur until
October 5. To support that argument, Powell relies primar-
ily on United States v. Kann, 323 U.S. 88 (1944). Kann held
that the use of interstate means to collect a check does not
violate § 1341 because the scheme was complete as soon
as the depository bank paid the check:
The banks which cashed or credited the checks, being
holders in due course, were entitled to collect from the
drawee bank in each case and the drawer had no
defense to payment. The scheme in each case had
reached fruition. The persons intended to receive the
money had received it irrevocably. It was immaterial to
them, or to any consummation of the scheme, how the
bank which paid or credited the check would collect
from the drawee bank. It cannot be said that the
mailings in question were for the purpose of
executing the scheme, as the statute requires.
323 U.S. at 94; see also United States v. Maze, 414 U.S.
395 (1974).
18 Nos. 08-1138 & 08-1161
We previously considered Kann in United States v. Franks,
309 F.3d 977 (7th Cir. 2002), a case involving a medical
clinic worker who stole checks from her clinic and depos-
ited them in her personal bank account. There we held
that the bank’s use of interstate couriers to forward
the checks for collection was sufficient for purposes of
§ 1341. We distinguished Kann thusly:
Kann predates the Uniform Commercial Code, which
makes it easy for a customer’s bank to reverse the
credit if the instrument cannot be collected. Franks
deposited the checks into her personal account. Even
if she drew off the embezzled funds promptly, her
own funds remained and could have been debited to
cover the loss, had the checks not been sent out of
state and paid in due course. This made interstate
transportation essential to the scheme’s success.
Franks, 309 F.3d at 978. That same distinction also
applies here. While Harris’s trust account may have been
credited with the $200,000 immediately, the bank easily
could have withdrawn such provisional credit until
it received the $200,000 wire transfer. See Ind. Code §§ 26-1-
4-201(a), 26-1-4-214(a). Had the bank done so, the defen-
dants would have failed to fully execute their scheme
to enrich themselves at the Historical Society’s expense.
(Powell certainly would not have benefitted because he
did not cash his check until well after the transfer.) Thus,
while the defendants in Kann may have received the
funds “irrevocably,” 323 U.S. at 94, Harris and his co-
schemers did not until after the wire transfer of the funds.
A jury could therefore have reasonably concluded that
Nos. 08-1138 & 08-1161 19
a use of the wires was in furtherance of the scheme and
find the use-of-the-wires element satisfied on that basis.
We next turn to the defendants’ challenges to the suffi-
ciency of the evidence supporting their tax convictions.
Powell contests his conviction for failing to accurately
report his total income on his 2001 tax return in viola-
tion of 26 U.S.C. § 7206(1). He claims that there was not
enough evidence of willfulness to convict him. Because
Powell did not raise any challenge to that conviction in
either of his Rule 29 motions, our review of this issue is for
plain error only. Groves, 470 F.3d at 324. Recall that,
under that standard, the record need only contain some
evidence pointing to guilt; as long as the record is not
completely devoid of such evidence, we will affirm.
Irby, 558 F.3d at 653.
We conclude that the record contains sufficient evidence
of Powell’s guilt on the § 7206(1) count to clear that low
hurdle. For conviction, § 7206(1) requires that a defendant
“[w]illfully make[ ] and subscribe[ ] any return, statement,
or other document, which contains or is verified by a
written declaration that it is made under the penalties
of perjury, and which he does not believe to be true and
correct as to every material matter.” See also United States
v. Pree, 408 F.3d 855, 865-66 (7th Cir. 2005). In other words,
a conviction “under section 7206(1) requires proof that:
(1) a person made or subscribed to a federal tax return
which he verified as true; (2) the return was false as to a
material matter; (3) the defendant signed the return
willfully and knowing it was false; and (4) the return
contained a written declaration that it was made under
20 Nos. 08-1138 & 08-1161
the penalty of perjury.” United States v. Presbitero, 569 F.3d
691, 700 (7th Cir. 2009).
Here, it is undisputed that Powell’s 2001 return, which
he signed under penalty of perjury, did not report either
the $25,000 Powell received from the sale of 6300 Miller or
the $14,000 he received from the sale of 768 Broadway.
While the return was prepared by his accountant, the
accountant testified that she relied upon her clients for the
information she placed in the returns. Failure to supply
an accountant with accurate information is evidence of
willfulness. See Useni, 516 F.3d at 650. Moreover, the jury,
when considering Powell’s income omission, had before
it the evidence of the defendants’ fraudulent scheme to
profit off of the sale of 6300 Miller. Because the $25,000
was obtained through fraud, Powell had a strong
incentive to refrain from reporting the income. See United
States v. Ytem, 255 F.3d 394, 397 (7th Cir. 2001) (“[T]he fact
that illegal income is taxable is widely known, even
among lay people.”).
In arguing against the government’s evidence of willful-
ness, Powell highlights the fact that he filed an amended
return in 2004, after a civil audit, that included the
$39,000, the aggregate amount he received from the
fraud. However, for what it was worth, Powell was able to
put that evidence in front of the jury. And the probative
value of it was minimal because it only raised the
question of why the information was not included in the
first place. United States v. Ross, 626 F.2d 77, 81 (9th Cir.
1980). The critical time-frame for determining willfulness
is when Powell signed the return, not two years after-
Nos. 08-1138 & 08-1161 21
wards. See United States v. McClain, 934 F.2d 822, 835 (7th
Cir. 1991); see also United States v. Radtke, 415 F.3d 826, 840-
41 (8th Cir. 2005).
Powell also makes much of the fact that his accountant
lost the information that he had provided her about his
2001 income, and that as a result she could not verify for
certain that he had failed to provide her the information
about the $39,000 he received from Harris for the sale of
6300 Miller and 768 Broadway. Yet that fact was also
presented to the jury, and the jury still convicted Powell.
In light of the evidence of willfulness we have discussed,
the jury’s guilty verdict on the § 7206(1) count cannot
be seriously challenged; it certainly was not “shocking.”
Irby, 558 F.3d at 653. We therefore will not disturb
Powell’s conviction for failing to accurately report his
total income on his 2001 tax return.
Harris also challenges his conviction under § 7206(1).
Like Powell, Harris failed to raise this issue in his Rule 29
motion in the district court, so our review again is for
plain error only. Groves, 470 F.3d at 324. Harris was con-
victed for willfully failing to report on his 2001 return,
as a capital gain, the $34,900 in profit he made from the
sale of 768 Broadway. Harris claims that his conviction
should be reversed because he reported that income—just
not as a capital gain. At trial, Harris introduced through
his wife—who did the accounting work for his law
firm—accounting schedules. Those schedules, supposedly
used to prepare Harris’s 2001 taxes, contained entries for
each deposit into the law firm’s bank account. One of
the entries was the $51,500 check from the GUEA for the
22 Nos. 08-1138 & 08-1161
sale of 768 Broadway. Because the total income from the
deposits listed on the schedules matched the amount
Harris reported for total income on Schedule C, Harris
claims that he reported the income from the sale of 768
Broadway on Schedule C.
The government, however, presented evidence casting
doubt on that claim. The accounting schedules upon
which Harris relied were time-stamped March 31, 2007,
one week after the superseding indictment that added the
tax count against Harris was handed down. Harris did not
provide them to the government until shortly before
trial—which was almost a year after the grand jury had
subpoenaed them. Moreover, at the time they were sub-
poenaed, Harris, citing an unspecified “computer crash,”
told the grand jury that he did not have any papers sup-
porting his 2001 tax return. Such timing of the schedules’
disclosure, coupled with the fact that they were under the
control of Harris’s wife—who had a strong motive to
doctor the records—cast doubt on their reliability. See
United States v. Spano, 421 F.3d 599, 604 (7th Cir. 2005).
Moreover, the schedules were inaccurate. Despite the
testimony of Harris’s wife that the entries on the schedules
would match the actual deposits made into the law firm
bank account, they did not. In fact, they were off by more
than $200,000. That substantial discrepancy between the
record of actual deposits and the accounting schedules
reinforces the inference that they were altered. Since
those schedules were the only evidence Harris offered to
show that he reported the income from the sale, the jury
reasonably could have chosen to disbelieve Harris’s
Nos. 08-1138 & 08-1161 23
claim that he reported the income from the sale. At the
very least, Harris has failed to establish plain error.
We turn now to the sentencing issues raised by the
defendants.6 Both Harris and Powell question the amount
of loss used to compute their sentences. After grouping
their convictions on count one (the wire fraud offense) and
count two (conspiring to commit theft of Lake County’s
funds by reducing the property taxes on 6300 Miller), the
court enhanced both Harris’s and Powell’s sentences
twelve levels based on a loss of $208,000. See U.S.S.G.
§ 2B1.1(b)(1)(G). The district court reached that loss
amount by adding $150,000 (the loss to the Historical
Society, or alternatively the gain to the defendants, from
the diverted proceeds of the sale of 6300 Miller) to $58,000,
the money the defendants stole from Lake County by
illegally reducing the property taxes owed on 6300 Miller
from $73,000 to $15,000.
6
Harris’s brief states that it “adopts and incorporates by
reference, without repeating, the standard of review and the
argument on the coerced jury issue” as well as “on the conspir-
acy to commit theft form [sic] the Historical Society and from
Lake County issue, as presented in the Appellant’s Brief of co-
appellant Powell.” Powell, however, did not appeal those
issues. Harris has therefore incorporated two non-existent
arguments. Because Harris does not present any argument or
cite any legal authority in his own brief on those issues, he
has waived appellate review of them. Useni, 516 F.3d at 658 (“It
is not the obligation of this court to research and construct
the legal arguments open to parties, especially when they are
represented by counsel.”).
24 Nos. 08-1138 & 08-1161
“We review a district court’s loss calculations, which
need only be ‘a reasonable estimate of the loss,’ U.S.S.G.
§ 2B1.1 cmt. 3(C), for clear error.” United States v. Watts,
535 F.3d 650, 658 (7th Cir. 2008). We see no clear error
here. The GUEA paid $200,000 for 6300 Miller, so the “fair
market value of the property unlawfully taken” was at
least that amount. U.S.S.G. § 2B1.1 application note 3(C)(i)
(2007); see also United States v. Radziszewski, 474 F.3d 480,
487 (7th Cir. 2007); United States v. Hardy, 289 F.3d 608, 613
(9th Cir. 2002). That amount is offset by the $50,000 the
Historical Society received, see U.S.S.G. § 2B1.1 application
note 3(E)(i) (2007), leaving $150,000 as the loss to the
Historical Society from the sale or, alternatively, the
amount the defendants unlawfully gained. Similarly,
Lake County received $15,000 in property taxes when,
absent the defendants’ duplicitous lawsuit, it was entitled
to $73,000, a difference of $58,000. Adding those two
amounts, as the district court did, yields $208,000, thereby
justifying the application of U.S.S.G. § 2B1.1(b)(1)(G).
We reject the defendants’ arguments for a lesser loss.
Powell and Harris argue that, by including both the loss
to the Historical Society and the loss to Lake County, the
district court impermissibly double-counted. But that
argument ignores the fact that two separate entities
suffered distinct losses, as embodied by the two counts
of conviction. In count one, the Historical Society lost
(or the defendants improperly gained) $150,000 because,
as the owner of the property (at least on paper), it was
entitled to the full proceeds from the sale. And in count
two, the county lost $58,000 in property tax revenue
that could have been paid from the proceeds of the sale.
Nos. 08-1138 & 08-1161 25
Those are different losses, and the district court was
right to include both of them.
In a variation on their first argument, the defendants
also argue that the district court should have reduced
the amount of property taxes payable from its calcula-
tion of the loss to the Historical Society, or the gain to the
defendants, from the sale of 6300 Miller. According to
Powell and Harris, had the Historical Society received the
full $200,000, it would have had to pay the $73,000 in
property taxes; thus, they claim that the $73,000 in prop-
erty taxes ought to have been deducted from the loss.
Alternatively, because Harris paid $15,000 in property
taxes, they claim that amount should have been deducted
from the $150,000 the district court calculated as the
defendants’ gain.
Neither Harris nor Powell cite any authority to sup-
port reducing either the loss or gain that way, and the
commentary to the Guidelines do not provide for that type
of reduction. See U.S.S.G. § 2B1.1 application note 3(D)-(E)
(2007). Moreover, Harris’s $15,000 payment of the
property taxes was to further the fraudulent scheme.
We have held that such expenses in furtherance of the
unlawful activity need not be excluded from the gain. See
United States v. Marvin, 28 F.3d 663, 664-65 (7th Cir. 1994).
Furthermore, the loss to the Historical Society is undimin-
ished by the property taxes because the purchase agree-
ment between the GUEA and the Historical Society
expressly obligated the GUEA, not the Historical Society,
to pay any outstanding property taxes. The defendants’
arguments concerning the reduction of the loss amount
therefore have no merit.
26 Nos. 08-1138 & 08-1161
Harris raises two other objections to his sentence.
First, he challenges his two-level enhancement under
U.S.S.G. § 3C1.1 for obstruction of justice. We review a
district court’s factual findings supporting a § 3C1.1
enhancement for clear error. United States v. Strode, 552
F.3d 630, 635 (7th Cir. 2009). The district court’s factual
findings will stand as long as they are “plausible in light
of the record in its entirety.” United States v. White, 368
F.3d 911, 916 (7th Cir. 2004).
Harris’s obstruction enhancement was based on his
failure to comply with a grand jury subpoena requesting
copies of tax returns and accounting schedules used to
prepare the returns. In September 2006, FBI agents served
Harris’s law firm with the subpoena. In a signed state-
ment, Harris responded to the subpoena by claiming
that the law firm did not have the accounting schedules
due to a “computer crash.” However, on March 31, 2007,
one week after the grand jury returned a superceding
indictment adding a tax count against Harris, Harris’s
wife, who was the law firm’s accountant, printed out the
accounting schedules. At trial, she testified that Harris
never gave her the subpoena and that she did not
know that the grand jury had subpoenaed the law firm’s
accounting schedules until after the indictment.
According to the commentary to the obstruction en-
hancement, “concealing . . . evidence that is material to an
official investigation” is obstruction. U.S.S.G. § 3C1.1
application note 4(d) (2007). The district court concluded
that Harris’s behavior was just that. We agree. At the very
least, it was obstructive for Harris to fail to tell the one
Nos. 08-1138 & 08-1161 27
person in his law firm who had control over the subpoe-
naed documents—his wife—about what documents the
subpoena requested, since those documents were
material to the investigation. Moreover, the computers’
fortuitous recovery in time for Harris to use the ac-
counting schedules in his own defense strongly suggests
that Harris’s “computer crash” excuse was unworthy of
belief. The district court did not commit clear error in
applying the obstruction enhancement.
Harris’s second objection to his sentence is what he
views as an unwarranted disparity between his sentence
(55 months) and Powell’s (37 months). Harris claims their
conduct was similar and therefore warranted similar
sentences. We reject that argument, first, because it is
wrong on the law, United States v. Omole, 523 F.3d 691,
700 (7th Cir. 2008) (“This court refuses to view the dis-
crepancy between sentences of codefendants as a basis
for challenging a sentence.”), and, second, because it is
wrong on the facts. In many ways, Harris’s conduct was
more culpable than Powell’s. The most important differ-
ence between the two is that Harris was the one who
abused his position as the Historical Society’s lawyer to
pull off the sale of 6300 Miller. Indeed, it was Harris’s
own law firm and its trust account that was the locus of
the fraud. Moreover, as we have discussed above, Harris
obstructed justice by failing to turn over documents the
grand jury had ordered him to produce. Given those
significant differences, we see no error in the district
court’s decision to mete out a stiffer sentence to Harris
than to Powell.
28 Nos. 08-1138 & 08-1161
We turn now to Powell’s final challenge to his sentence.
He claims that the district court improperly disregarded
his arguments at sentencing for leniency based on his
advanced age and health problems. Regarding those
arguments, the district court stated the following when
it pronounced sentence:
I specifically have taken into consideration every-
thing that Mr. Milner has brought to my attention.
The defendant’s age, his lack of criminal history, his
health problems. Those are certainly factors that
weigh greatly on me and bear on the history and
characteristics of the Defendant, but they are, of course,
also taken into account by the guidelines themselves.
It is not clear what the district court meant by that last
phrase that we have emphasized; it appears to be a mis-
statement of the law. Although the Guidelines do
account for a defendant’s criminal history, see U.S.S.G.
§§ 4A1.1, 4A1.2, they do not factor in a defendant’s age
and health. Instead, the Guidelines list advanced age
and serious health conditions as grounds for departure,
though in limited circumstances: the commentary to the
Guidelines states that, although age and health are “not
ordinarily relevant in determining whether a departure
may be warranted,” they may be a “reason to depart
downward” when a defendant is either “elderly” or
“seriously infirm.” U.S.S.G. §§ 5H1.1, 5H1.4. Of course,
post-Booker, those departures are “obsolete.” United States
v. Johnson, 427 F.3d 423, 426 (7th Cir. 2005). While the
district court can still use them for guidance, United States
v. Filipiak, 466 F.3d 582, 584 (7th Cir. 2006), it has the
Nos. 08-1138 & 08-1161 29
authority to consider Powell’s physical impairments and
advanced age when determining the sentence it believes
appropriate under 18 U.S.C. § 3553(a). United States v.
Millet, 510 F.3d 668, 680 (7th Cir. 2007).
Because the district court appeared to misapprehend its
authority under § 3553(a), a remand is appropriate to give
the district court an opportunity to clarify its ruling.7 On
remand, the district court should consider Powell’s argu-
ments about his advanced age and infirm health in light
of the factors outlined in 18 U.S.C. § 3553(a).
III.
The government presented sufficient evidence that
Powell and Harris knowingly participated in a scheme
to defraud the Historical Society that involved the use
of the interstate wires, and both Powell’s and Harris’s
7
The district court did state later on during its pronounce-
ment of the sentence that, “[o]n the other issues of the defen-
dant’s age, and his lack of criminal history, I just don’t think
that those are enough to persuade me that a nonguideline
sentence is appropriate in this case.” However, that ambiguous
statement, while coming closer to a correct understanding of
the court’s § 3553(a) authority, does not mitigate the court’s
previous statements, which appeared to rely on an invalid
ground to reject Powell’s arguments. A remand is therefore
necessary. Cf. United States v. Smith, 562 F.3d 866, 874-76 (7th Cir.
2009) (finding no remand necessary where it was clear
from context that the district judge did not rely on his
previous misstatement of the law when pronouncing sentence).
30 Nos. 08-1138 & 08-1161
convictions under 26 U.S.C. § 7206(1) survive review for
plain error. Furthermore, the district court properly
calculated the loss amount used to determine both
Harris’s and Powell’s sentences by adding the $150,000
proceeds the defendants purloined from the sale of 6300
Miller to the $58,000 Lake County lost in property taxes
as a result of the fraudulent lawsuit. The district court
also correctly enhanced Harris’s sentence based on his
failure to comply with the grand jury subpoena requiring
him to hand over accounting schedules material to the
government’s investigation of his 2001 tax returns. And
the disparity between Harris’s sentence and Powell’s
was warranted. We therefore A FFIRM the defendants’
convictions and Harris’s sentence. However, because the
district court appeared to improperly reject Powell’s
arguments for leniency based on his advanced age and
poor health, we V ACATE and R EMAND Powell’s sentence
for further proceedings consistent with this opinion.
8-7-09