Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-00-03030/USCOURTS-caDC-00-03030-0/pdf.json

Parties Involved:
Denise Braxtonbrown-Smith
Appellant
United States of America
Appellee

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 4, 2001 Decided February 12, 2002

No. 00-3030

United States of America,

Appellee

v.

Denise Braxtonbrown-Smith,

Appellant

Appeal from the United States District Court

for the District of Columbia

(No. 99cr00154-01)

Lisa B. Wright, Assistant Federal Public Defender, argued

the cause for appellant. With her on the brief was A. J.

Kramer, Federal Public Defender. Neil H. Jaffee, Assistant

Federal Public Defender, entered an appearance.

David B. Goodhand, Assistant U.S. Attorney, argued the

cause for appellee. With him on the brief were Roscoe C.

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Howard, Jr., U.S. Attorney, John R. Fisher, Roy W. McLeese

III and Mark H. Dubester, Assistant U.S. Attorneys.

Before: Sentelle and Rogers, Circuit Judges, and

Williams, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge Rogers.

Rogers, Circuit Judge: Denise Braxtonbrown-Smith appeals her conviction and sentence on numerous fraud and

money laundering charges. Her principal contention is that

the government failed to prove, by tracing or otherwise, that

any of the funds used in the alleged money laundering

transactions represented the proceeds of unlawful activity.

In turn, she contends, this failure to trace necessarily tainted

other counts of the judgment of conviction. In addition to

several claims of instructional error, she contends that the

district court erred in calculating her offense level, in delegating authority over the terms of her restitution payments to

the Probation Office, and in ordering her to pay past due

income taxes. We affirm the judgment of conviction except

we remand for correction of her sentence and clarification of

the restitution order.

I.

Viewing the evidence, as we must, in the light most favorable to the government, see United States v. Harrison, 204

F.3d 236, 239 (D.C. Cir. 2000) (quoting Jackson v. Virginia,

443 U.S. 307, 319 (1979)), the evidence showed that Braxtonbrown-Smith used Medicaid reimbursements paid to her

company, Psychological Development Associates ("PDA"), for

personal purposes, did not pay taxes on that money, and

attempted to obtain loans through the submission of false

documents. In early 1994, PDA began a day-treatment program for mentally retarded adults called Better Treatment

Centers ("BTC") that enabled it to obtain a provider number

for billing Medicaid for services provided to its Medicaideligible clients. PDA began receiving its first clients in

February 1994 for its day-treatment program, who were

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opmentally Disabled Administration ("MRDDA") of the D.C.

Department of Human Services, at an approved rate of

$175.44 per client, per day. Prior to this time, PDA had been

in desperate financial shape, missing payrolls on occasion

throughout 1994 and failing to pay its debts. Its financial

condition changed by the end of 1994 by which time Medicaid

had reimbursed PDA for over $400,000. The BTC program

accounted for nearly all of the income that PDA was receiving

and by 1995, Braxtonbrown-Smith and Kenneth A. Strachan,

the PDA controller, were able to skim funds from PDA for

personal purposes. For example, numerous checks were

drawn on the PDA operating account at NationsBank, ranging from $6000 to $8000, for Braxtonbrown-Smith's personal

benefit.

In May 1995, PDA obtained a second Medicaid provider

number for services it was to provide through a "freestanding" mental health clinic. Braxtonbrown-Smith's efforts over the next two years to set up the clinic in accord

with Medicaid rules for staffing never proved fruitful. Notwithstanding the fact that PDA had failed to set up and

operate the clinic, Braxtonbrown-Smith, through PDA's controller Kenneth Strachan, used the provider number to bill

Medicaid for services that PDA never actually provided.

This billing scheme continued for several years, surviving

Strachan's dismissal in October 1996 and continuing under

Braxtonbrown-Smith's direction until 1998.

By early 1996, Braxtonbrown-Smith's personal financial

needs were becoming more pronounced, as she had contracted to purchase a $400,000 house and needed to show cash in

her personal account to support a down payment. She also

needed funds for her wedding, honeymoon, improvements on

the new house, and to support an expensive lifestyle. She

would later generate and submit false income tax statements

for this time period to Provident Mortgage Corporation in

order to obtain a mortgage, and to Mellon Bank in order to

obtain a line of credit. By the Spring of 1996, the false

billings escalated. For example, in April 1996 in response to

Braxtonbrown-Smith's growing personal financial needs,

Strachan began submitting false claims to Medicaid repreUSCA Case #00-3030 Document #657762 Filed: 02/12/2002 Page 3 of 13
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senting that BTC clients were receiving psychotherapy from

a psychiatrist every day, despite the fact that the clinic was

not yet operational and many of BTC's clients were noncommunicative and could not speak. Although alerted to

billing irregularities by Arnett Smith, an employee of PDA

and a former MRDDA employee, Braxtonbrown-Smith took

no steps to stop the submission of false bills to Medicaid.

Braxtonbrown-Smith and Strachan together diverted over

$400,000 of funds from PDA accounts for their personal use.

All told, PDA's false claims totaled $1,693,708, representing

approximately 30% of PDA's total Medicaid billings. Additionally, Braxtonbrown-Smith drew down her line of credit

with Mellon Bank to the point that when PDA went out of

business in the summer of 1998, she owed Mellon approximately $440,000.

In 1997 Braxtonbrown-Smith was indicted for conspiracy,

18 U.S.C. s 371 (Count 1); mail fraud, 18 U.S.C. s 1341

(Counts 2 & 3); tax evasion, 26 U.S.C. s 7201 (Counts 4-6);

money laundering, 18 U.S.C. ss 1956(a)(1)(A(ii) &

1956(a)(1)(B)(i) (Counts 7-12); bank fraud, 18 U.S.C. s 1344

(Counts 13 & 14); and wire fraud, 18 U.S.C. s 1343 (Count

15). At trial, Braxtonbrown-Smith's evidence was confined to

six character witnesses who testified regarding her reputation

for truthfulness and honesty in the community. The jury

convicted her on all counts except one count of mail fraud.

The district court sentenced Braxtonbrown-Smith to 60

months imprisonment for conspiracy, mail fraud, tax evasion,

and wire fraud, and to 87 months on the remaining counts,

the sentence on each count to run concurrently. The court

imposed five years of supervised release on all counts, to run

concurrently as well. The district court also ordered that she

make restitution payments including $2,132,484.70 (the total

of her fraudulent Medicaid billings and her Mellon Bank line

of credit spending), to be paid from 50% of her prison

earnings and upon her release from custody at a monthly rate

of "no less than $250 as directed by the probation office."

The court further ordered her to arrange with the Internal

Revenue Service to pay all past and present taxes, interest

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and penalties, and to provide proof of her filing of returns to

the Probation Office.

II.

On appeal, Braxtonbrown-Smith contends that instead of

proving that any of the funds used in the alleged money

laundering transactions represented the proceeds of unlawful

activity, the government relied on a judicially-created presumption that any withdrawal of funds from a commingled

account involves unlawful proceeds, even when the amount of

legitimately earned money in the account exceeds the amount

withdrawn. Because the presumption relieved the government of its burden of proof under the plain language of 28

U.S.C. s 1956(a)(1)(A), she contends that the money laundering counts must be dismissed for insufficient evidence. Failing that, she contends the jury was erroneously instructed on

the unconstitutional commingling presumption, and those

counts must be remanded for a new trial. Likewise, she

contends that she must be granted a new trial on the conspiracy count because the jury was instructed on three alternative conspiracy objects, including money laundering, and it is

impossible to determine from the general conspiracy verdict

that it is not tainted by the allegedly improper money laundering instruction. In addition, she contends that she is

entitled to a new trial on the conspiracy and money laundering counts because the district court's supplemental instruction on the interstate commerce element included a mandatory presumption. Finally, as to her sentence, she seeks

correction of her sentences under the United States Sentencing Guidelines ("Guidelines") and contends that the restitution order impermissibly delegated the court's authority to

the probation office with respect to the terms of the restitution payment and impermissibly required that she make

restitution to the Internal Revenue Service by making payment of past and present federal taxes a condition of her

supervised release.

A.

Section 1956 provides, in relevant part,

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(a)(1) Whoever, knowing that the property involved in a

financial transaction represents the proceeds of some

form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves

the proceeds of specified unlawful activity--

(A)(i) with the intent to promote the carrying on of

specified unlawful activity; or

(ii) with intent to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code

of 1986;

...

shall be [subject to fine and imprisonment].

18 U.S.C. s 1956(a)(1) (2000).

Braxtonbrown-Smith focuses on the phrase "property involved" and the word "represents" in contending that the

government failed to meet its burden to prove that each of

her withdrawals from the PDA account at NationsBank for

her personal use included funds that were diverted from

Medicaid reimbursements to PDA. In other words, Braxtonbrown-Smith contends that the plain language of s 1956(a)(1)

requires the government to demonstrate affirmatively that

the particular illegitimate dollars were laundered and urges

adoption of a presumption, based on the rule of lenity, that

withdrawals from a commingled account are withdrawals of

any "clean" money in the account. Although acknowledging

"substantial" circuit precedent contrary to a complete tracing

requirement, she maintains that the statutory language does

not permit the government to rely on evidence that she

personally spent money she withdrew from an account in

which illegal and legitimate funds were commingled. This is

because millions of dollars from legitimate Medicaid billing

were in the PDA account, and hence there was a sufficient

amount of legal funds in the account to cover the alleged

unlawful transactions under s 1956. As an issue of statutory

construction, our review is de novo. Calloway v. District of

Columbia, 216 F.3d 1, 5 (D.C. Cir. 2000) (citing United States

v. Williams-Davis, 90 F.3d 490, 512 (D.C. Cir. 1996)).

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In construing a statute, the court begins with the plain

language of the statute. Estate of Cowart v. Nickols Drilling

Co., 505 U.S. 469, 474 (1992) (citing Demarest v. Manspeaker,

498 U.S. 184, 190 (1991)). Where the language is clear, that

is the end of judicial inquiry "in all but the most extraordinary circumstances." Id. Where the language is subject to

more than one interpretation and the meaning of Congress is

not apparent from the language itself, the court may be

forced to look to the general purpose of Congress in enacting

the statute and to its legislative history for helpful clues.

E.g. Sante Fe Pacific R.R. Co. v. Sec'y of Interior, 830 F.2d

1168, 1174 (D.C. Cir. 1987). In addressing BraxtonbrownSmith's interpretation of s 1956(a)(1), it is helpful to keep in

mind the Supreme Court's observation in United States v.

American Trucking Ass'ns, Inc., 310 U.S. 534 (1940), that

"even when the plain meaning did not produce absurd results

but merely an unreasonable one 'plainly at variance with the

policy of the legislation as a whole' this Court has followed

that purpose, rather than the literal words." Id. at 543

(quoting Ozawa v. United States, 260 U.S. 178, 194 (1922));

see also United States v. Ron Pair Enter., Inc., 489 U.S. 235,

242 (1989). Thus, the court must avoid an interpretation that

undermines congressional purpose considered as a whole

when alternative interpretations consistent with the legislative purpose are available. American Trucking, 310 U.S. at

543; Haggar Co. v. Helvering, 308 U.S. 389, 394 (1940).

Contrary to Braxtonbrown-Smith's contention, a no-tracing

rule is consistent with the plain language of the statute. The

broad language of the statute suffices to reach transactions

that "involve[ ]" illegal proceeds. As the Seventh Circuit

observed, "money need not be derived from crime to be

'involved' in it; perhaps a particular sum is used as the

bankroll facilitating the fraud." United States v. $445,342.85,

969 F.2d 474, 476 (7th Cir. 1992). Although "involve" might

also be read to mean that the individual transaction must

include illegal proceeds in some amount, no circuit to consider this issue has held that complete tracing of the

sort that Braxtonbrown-Smith urges is required under

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s 1956(a)(1)(A).1 See United States v. Wilkinson, 137 F.3d

214, 222 (4th Cir. 1998); United States v. Tencer, 107 F.3d

1120, 1131 (5th Cir.), cert. denied, 522 U.S. 960 (1997); United

States v. Voigt, 89 F.3d 1050, 1080-81 (3d Cir.), cert. denied,

519 U.S. 1047 (1996); United States v. Cancelliere, 69 F.3d

1116, 1120 (11th Cir. 1996); United States v. Bencs, 28 F.3d

555, 562 (6th Cir. 1994); United States v. Garcia, 37 F.3d

1359, 1365 (9th Cir. 1994), cert. denied, 513 U.S. 1117 (1995);

United States v. Jackson, 935 F.2d 832, 840 (7th Cir. 1991).

This is a necessary result of the fungibility of money, a factor

of which Congress was undoubtedly aware when it enacted

s 1956(a)(1) as part of the Money Laundering Control Act,

the purpose of which was to "punish transactions that are

undertaken with the proceeds of crimes or that are designed

to launder the proceeds of crime." H.R. Rep. No. 99-855, pt.

1, at 7 (1986); United States v. Sperry Corp., 493 U.S. 52, 62

n.9 (1989). The tracing of dollars emanating from a bank

account (as distinct from the tracing of actual bills used in a

particular cash transaction) to specific dollars deposited into a

bank account is no less than "a mathematical impossibility"

where, as in the instant case, "the amount of the transfer was

less than the amount of untainted funds in the account."

Voigt, 89 F.3d at 1081. To create a presumption, based on

the rule of lenity, as Braxtonbrown-Smith urges that withdrawals from a commingled account are withdrawals of any

"clean" money therein would come close to rendering money

laundering invulnerable; a person who deposits $10,000 of

__________

1 The circuits have taken various approaches with regard to the

amount of tracing that is required. First, some courts have held

that any transaction out of a commingled account constitutes laundering. See, e.g. United States v. Ward, 197 F.3d 1076, 1083 (11th

Cir. 2000). Second, some courts have suggested that defendants

will be responsible only for those transactions from a commingled

account that do not exceed the total amount of illegitimate funds.

See, e.g. United States v. Wilkinson, 137 F.3d 214, 222 (4th Cir.

1998). Finally, other courts have decided to treat spending from

commingled accounts as involving "proportional fractions of clean

and dirty money." United States v. Loe, 248 F.3d 449, 467 n.81 (5th

Cir. 2001).

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dirty money in a $100,000 account could later withdraw

$10,000 repeatedly without penalty so long as there were

sufficient clean money in the account to cover the withdrawals. Were such a presumption required under s 1956(a)(1),

Congress' purpose would be undermined because such a

requirement would allow "participants in unlawful activities

[to] prevent their own convictions under the money laundering statute simply by commingling funds derived from both

'specified unlawful activities' and other activities." Jackson,

935 F.2d at 840. This would be a nonsensical outcome in light

of the fact that "[i]t is precisely the commingling of tainted

funds with legitimate money that facilitates the laundering

and enables it to continue." Tencer, 107 F.3d at 1135 (citation omitted).

In contending that the plain language of s 1956(a)(1) requires the government to show complete tracing, Braxtonbrown-Smith downplays these realities about the nature of

money as a fungible commodity and the unreasonable, if not

absurd, results her approach would produce. Her reliance on

United States v. Wynn, 61 F.3d 921 (D.C. Cir.), cert. denied,

516 U.S. 1015 (1995), is misplaced, for the holding in that case

did not rely on a circumstantial inference that the funds at

issue represented illegal proceeds as opposed to legitimate

income. In Wynn, the defendant maintained there was insufficient evidence that the cash used to purchase cashiers'

checks used to purchase a car constituted illegal proceeds

because the source laundering the funds had won $150,000 in

the Maryland lottery and could have used those funds to

make the purchase. Wynn, 61 F.3d at 926. The court did

not resolve the issue of whether tracing was required to be

proven by the government, although it did characterize the

argument as "an uncertain legal proposition." Id. Instead,

and fatal to Braxtonbrown-Smith's position, notwithstanding

evidence of lottery proceeds, the court held that the government presented sufficient evidence from which a reasonable

juror could find that the money used to purchase the cashiers'

checks totaling nearly $9000 flowed directly from the major

narcotics trafficking operation of the source of the funds. Id.

Braxtonbrown-Smith's reliance on United States v. Rutgard,

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116 F.3d 1270 (9th Cir. 1997), is likewise misplaced; Rutgard

involved a prosecution under s 1957, which the Ninth Circuit

explicitly distinguished from s 1956, and its holding that

tracing is required under s 1957 is a minority view. See

United States v. Sokolow, 91 F.3d 396, 409 (3d Cir.), cert.

denied, 519 U.S. 1116 (1997); United States v. Moore, 27 F.3d

969, 976 (4th Cir.), cert. denied, 513 U.S. 979 (1994); United

States v. Johnson, 971 F.2d 562, 570 (10th Cir. 1992).

The risk of unduly harsh consequences that BraxtonbrownSmith maintains could occur in the absence of a tracing

requirement is mitigated by the statute. Under

s 1956(a)(1)(A), the government must prove that the defendant, first, knew that the transaction "represents the proceeds" of unlawful activity, and, second, intended either to

promote the "carrying on of a specified unlawful activity" or

"to conceal or disguise the nature, the location, the source,

the ownership, or the control of the proceeds of specified

unlawful activity." After multiple transactions, then, the

government will have a difficult burden to prove the second

intent for recent transactions based on proof of a single

unlawful dollar deposited long ago.

Furthermore, there is no such harsh result in the instant

case. Braxtonbrown-Smith states in her brief that the government's evidence "was simply that the challenged transactions, totaling approximately $500,000, were conducted using

funds from the PDA operating account at NationsBank and

that of the millions of dollars that went into that account, less

than 30%--approximately $1.6 million--was from illegal Medicaid billings." Appellant's Br. at 13. The amount of money

that the government's evidence showed was involved in the

money laundering scheme is hardly minuscule. In view of

the government's evidence, a reasonable juror could conclude

that the bilking engaged in by Braxtonbrown-Smith was

facilitated by her multitude of false Medicaid claims, which

provided an influx of surplus funds in the PDA account and

that these funds were "involved" in the charged transactions.

See United States v. Harrison, 204 F.3d 236, 239 (D.C. Cir.

2000). That is all the statute requires.

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Accordingly, we need not decide among the various possible

tracing rules, see supra n.1, because it suffices for this appeal

to join our sister circuits in declining to "read Congress's use

of the word 'involve' as imposing the requirement that the

government trace the origin of all funds deposited into a bank

account to determine exactly which funds were used for what

transaction." Jackson, 935 F.2d at 840. Allowing the mere

commingling of legitimate funds to defeat a money laundering

conviction so easily would wholly undermine Congress's intent

and effectively nullify the offense.

B.

Braxtonbrown-Smith's remaining contentions do not require extended discussion. First, her claims of instructional

error fail. Because we reject the contention that the government was required to trace the unlawful funds in each

transaction, we find no error, much less plain error (inasmuch

as Braxtonbrown-Smith did not object in the district court as

required by Fed. R. Crim. P. 30), in the jury instruction that

proof of spending from a commingled account was sufficient

to establish money laundering under s 1956. See U.S. v.

Norris, 873 F.2d 1519, 1524 (D.C. Cir. 1989) (quoting U.S. v.

Campbell, 684 F.2d 141, 148 (D.C. Cir. 1982)). Similarly, the

district court did not impermissibly invade the province of the

jury in instructing on the interstate commerce element of

s 1956. See United States v. Jones, 909 F.2d 533, 538 (D.C.

Cir. 1990). Not only was the instruction, given in response to

a note from the jury, a correct statement of the law, see, e.g.,

United States v. Ladum, 141 F.3d 1328, 1339 (9th Cir. 1998);

United States v. Peay, 972 F.2d 71, 74-75 (4th Cir. 1992), it

merely created a permissive inference from the evidence that

did "not relieve the [government] of its burden of persuasion

because it still requires the [government] to convince the jury

that the suggested conclusion should be inferred based on the

predicate facts proved." Francis v. Franklin, 471 U.S. 307,

314 (1985). Instructions must be viewed in the context of the

entire instructions to the jury, id. at 315, and the district

court instructed the jury that it alone was the finder of fact.

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Second, Braxtonbrown-Smith's challenges to her sentence

are, in the main, meritless. She contends for the first time on

appeal that she was improperly sentenced on an offense level

of 23 based on an application of s 2S1.1(a)(1) of the Guidelines because s 2S1.1(a)(1) only applies to convictions under

s 1956(a)(1)(A), (a)(2)(A), or (a)(3)(A), and it is impossible to

determine whether she was convicted under (A) or (B) from

the jury's general verdict. United States v. Merlos, 8 F.3d

48, 50 (D.C. Cir. 1993). The jury necessarily made the

requisite finding of an intent to evade income tax when it

convicted Braxtonbrown-Smith of tax evasion under 26

U.S.C. s 7201. The evasive acts underlying s 7201 charged

in the indictment are identical to those that form the basis of

the money laundering charges under s 1956(a)(1)(A). See

United States v. Smart, 98 F.3d 1379, 1392-93 (D.C. Cir.

1996). Nor can she show that the district court erred in

considering the total amount of money involved in the

charged transactions--$487,290.78--rather than only some

portion of that amount based on the proportion of illegitimate

funds in the PDA account in calculating the value of the

laundered funds for under s 2S1.1(b)(2) of the Guidelines.

"Section 2S1.1 measures the harm to society that the money

laundering causes to law enforcement's efforts to detect the

use and production of ill-gotten gains," United States v. Allen,

76 F.3d 1348, 1369 (5th Cir.), cert. denied, 519 U.S. 838 (1996),

and Braxtonbrown-Smith cites no authority for her claim of

entitlement to a pro-rata calculation. Indeed, those circuits

that have considered the question are to the contrary. United States v. Owens, 159 F.3d 221, 229 (6th Cir. 1998), cert.

denied, 528 U.S. 817 (1999); Allen, 76 F.3d at 1369; United

States v. Thompson, 40 F.3d 48, 52 (3d Cir. 1994). Additionally, the district court did not clearly err in grouping, for

purposes of s 3D1.2(b) of the Guidelines, the fraud counts

(bank, mail, and wire) separately from the money laundering

and tax evasion counts given the district court's finding that

there were different victims (the Mellon Bank, the D.C.

Medicaid Fund, and the society at large). See United States

v. Kim, 23 F.3d 513, 517 (D.C. Cir. 1994); United States v.

Napoli, 179 F.3d 1 (2d Cir. 1999). United States v. CusumaUSCA Case #00-3030 Document #657762 Filed: 02/12/2002 Page 12 of 13
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no, 943 F.2d 305 (3d Cir. 1991), on which BraxtonbrownSmith relies, is not to the contrary as that case did not

involve fraud counts or involve an express finding of different

victims.

However, as the government concedes on appeal, the district court erred in sentencing Braxtonbrown-Smith to 5

years of supervised release on all counts; counts 1, 3-12, and

15 are either Class C or Class D felonies subject to 3 years of

supervised release. 18 U.S.C. s 3583(b)(2) (2000). Accordingly, we remand the case to the district court to correct the

judgment. In addition, assuming ambiguity in the restitution

order, on remand the district court shall clarify that the

phrase "not less than $250 as directed by the probation

office" does not give the Probation Office authority to modify

the monthly amount of restitution that Braxtonbrown-Smith

is required to make upon release from custody. United

States v. Pandiello, 184 F.3d 682, 688 (7th Cir. 1999); United

States v. Johnson, 48 F.3d 806, 808-09 (4th Cir. 1998). On

remand the district court shall also strike from the judgment

the special condition regarding her participation in a mental

health treatment program for anger control that appears to

have been inadvertently carried over from another case.

Finally, Braxtonbrown-Smith's contention that the district

court's order to pay back taxes was an improper restitution

order is meritless as her obligation to pay back taxes is

established by the relevant provisions of the Internal Revenue Code.

Accordingly, we remand the case to the district court for

correction of Braxtonbrown-Smith's sentence; otherwise we

affirm the judgment of conviction.

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