Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-06-04191/USCOURTS-ca8-06-04191-0/pdf.json

Parties Involved:
Clifford B. Marston
Appellant
United States of America
Appellee

Document Text:

1

The Honorable Jimm Larry Hendren, Chief United States District Judge for the

Western District of Arkansas.

2

 The elements of tax evasion are willfulness, the existence of a tax deficiency,

and an affirmative act constituting evasion or attempted evasion of the tax. 26 U.S.C.

§ 7201; Sansone v. United States, 380 U.S. 343, 351 (1965).

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 06-4191

___________

United States of America, *

*

Plaintiff - Appellee, *

* Appeal from the United States

v. * District Court for the Western

* District of Arkansas.

Clifford B. Marston, *

*

Defendant - Appellant. *

___________

Submitted: November 13, 2007

Filed: March 10, 2008

___________

Before WOLLMAN, JOHN R. GIBSON, and BENTON, Circuit Judges.

___________

JOHN R. GIBSON, Circuit Judge.

Following jury trial, Clifford B. Marston was convicted on May 19, 2006 in the

district court1

 on nine counts of tax evasion, 26 U.S.C. § 7201,2 twelve counts of filing

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3

 To be convicted of perjury under the statute, the defendant must “[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.” Id. at

§ 7206(1).

4

 To be convicted for aiding and assisting the preparation or presentation of a

false or fraudulent tax document, the defendant must “[w]illfully aid[] or assist[] in,

or procure[], counsel[], or advise[] the preparation or presentation under, or in

connection with any matter arising under, the internal revenue laws, of a return,

affidavit, claim, or other document, which is fraudulent or is false as to any material

matter, whether or not such falsity or fraud is with the knowledge or consent of the

person authorized or required to present such return, affidavit, claim, or document.”

Id. at § 7206(1).

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false tax documents, 26 U.S.C. § 7206(1),3

 and four counts of assisting in the

preparation of false returns or other documents, 26 U.S.C. § 7206(2).4

 In order to

prove the scienter necessary to convict Marston under the three statutes, the

government was required to show that he acted willfully in failing to report his own

taxable income and the income distributed to his employees. During trial, Marston’s

chief argument was that he held a good faith belief that his domestically earned

income was not taxable because it did not amount to a “source” of income under § 861

of the Internal Revenue Code, 26 U.S.C. § 861. Marston contended that § 861

authorizes taxes only upon foreign sources of income, not domestic income. The

issue at trial was not whether Marston correctly interpreted the tax code, but whether

he held a genuine belief that his interpretation was correct. He raises five issues on

appeal: (1) that the government indicted him on a theory of the case that required

proof of filing false tax returns, but the documents he filed with the IRS did not meet

the legal definition of a “tax return;” (2) that the district court erred when it permitted

the government to reference the documents as tax returns; (3) that the district court

erred when it allowed the government to introduce testimony relating to the bad tax

conduct of other persons; (4) that the district court erred in refusing to admit into

evidence a videotape explaining Marston’s beliefs; (5) that the district court erred in

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issuing a willful blindness jury instruction; (6) and lastly, that the district court erred

by imposing a sentence derived from the use of judge-found facts in violation of

Cunningham v. California, 127 S. Ct. 856 (2007), and by treating the advisory

Sentencing Guidelines range as presumptively reasonable. We affirm.

Clifford Marston, a Doctor of Podiatry, practiced in Springfield, Missouri until

1996, when his practice began to decline as big hospitals bought up patient pools in

the area. To combat the decline, Marston moved to Mountain Home, Arkansas, where

he opened a practice under his existing Missouri corporation, Sunshine Foot Clinic.

Sunshine experienced an initial boom period of robust growth before the arrival of a

competing doctor slowed the practice’s development. When the practice failed to

grow as Marston expected, he began to experience considerable financial strain,

causing Marston to accrue approximately $93,000 in credit card debt in addition to

loan debt he incurred by taking salary advances from Sunshine.

In January of 1999, Marston’s daughter’s father-in-law exposed him to a

website, which taught that an individual had no legal duty to pay taxes on

domestically earned income. After reviewing the website and conducting his own

review of the tax code, Marston, according to his testimony at trial, allegedly came to

the conviction that Congress had not authorized the collection of taxes on domestic

income. On December 6, Marston acted upon this alleged belief and filed several

amended employer’s quarterly tax return forms 941 with the I.R.S., revising to zero

all previously reported wages paid by Sunshine for the 1996, 1997, and 1998 tax

years, and requesting a refund of taxes previously paid in each corresponding year.

Marston filed additional forms 941on February 7, 2000 and March 23, 2000, revising

to zero all of the employee wages paid by Sunshine for the 1999 tax year. The I.R.S.

rejected each of Marston’s requests for a refund and described his position as having

no legal basis. For the 2000 tax year, Marston reported to the I.R.S., on original forms

941, zero wages for the first two quarters and left blank all wage fields for the later

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two quarters. For the first quarter of 2001, he again filed a form 941 without any

markings in any of the wage fields.

On April 5, 2000, Marston and his wife filed a 1040-EZ form with the I.R.S.,

reporting that he received $6,620.77 in total wages. This amount did not reflect any

income earned by Marston from Sunshine, but reflected income received by Marston’s

wife that was reported to the government and income received from an investment

account and reported by Firstar Mutual Fund Services, LLC on a Form 1099-R.

According to Marston’s disclosure statement, he listed these sources as taxable

income despite his conviction that they were not in order to “avoid difficulties with

the IRS.” On January 4, 2001, Marston reported to the I.R.S. on a 1998 Form

1040EZ that he had zero income in the tax year 1998. He attached a supplementary

disclosure statement, Form 8275, justifying his filing by stating that he had received

no income from any of the sources listed in 26 C.F.R. § 1.861-8(f)(1). The I.R.S.

replied to Marston in a letter dated April 20, 2001, classifying his Form 1040EZ as

“frivolous,” describing his position as “having no basis in law,” and encouraging him

to seek the advice of an attorney. On October 2, 2001, Marston sent to the I.R.S. a

1040EZ tax return form for the 2000 tax year that listed zero income. 

Sunshine also supplied two employees, Misty Davis and Loretta Jelinek, with

federal W-2 forms showing zero wages paid for the tax years 1999 and 2000. Davis

and Jelinek subsequently filed tax return forms 1040 for those years, reporting no

wages earned from Sunshine. Davis and Jelinek, in consultation with the I.R.S.,

would eventually report their wages and pay the taxes owed on those wages, along

with amounts due on those wages for contribution to the Medicare and Social Security

funds.

At trial, Marston argued that he held a good faith belief that domestic sources

of income were not taxable. In essence, he argued that the government failed to prove

that he acted willfully in making false statements to the I.R.S., in aiding or assisting

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Jelinek or Davis in filing false returns, or in evading the payment of income taxes. The

jury convicted him of all twenty-five counts. Subsequently, the district court found

that the applicable amount of potential tax loss attributable to Marston’s conduct was

$404,582.37. The district court sentenced Marston to 26 months’ imprisonment on

each count, to run concurrently.

I.

A.

Marston’s first argument presupposes an incorrect reading of the indictment

against him. According to Marston, the indictment describes him as having filed false

tax returns and aiding and abetting other persons to file false tax returns. Marston

argues that none of the documents filed with the I.R.S. meet the legal definition of the

phrase “tax return.”

We have given the phrase “tax return” a narrow and specific meaning when

deciding whether a tax protester has violated 26 U.S.C. § 7203 of the Internal Revenue

Code, willful failure to file a tax return. A defendant can be guilty of failure to file a

tax return even if he actually files a form with the I.R.S. if that form does not contain

“sufficient information [] from which the IRS can calculate tax liability.” United

States v. Grabinski, 727 F.2d 681, 686 (8th Cir. 1984). Applying this standard, courts

have held that a return that contains only zeroes and no information regarding gross

income or deductions claimed or only protest information is not considered a valid

“tax return,” so that a person may be convicted for willfully failing to file a return.

Id. at 686 (stating “the IRS should not have to accept on faith the taxpayer's assertions

regarding taxable income or tax liability without knowledge of circumstances

regarding, among other things, gross income received or deductions claimed.”);

United States v. Silkman, 543 F.2d 1218, 1219 (8th Cir. 1976) (per curium) (holding

that form containing only constitutional objections to taxation is not a return); United

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States v. Mosel, 738 F.2d 157, 158 (6th Cir. 1984) (per curium) (same); United States

v. Rickman, 638 F.2d 182, 184 (10th Cir. 1980) (holding that form listing income as

zero was not an “adequate” return); United States v. Porth, 426 F.2d 519, 522-23 (10th

Cir. 1970) (holding that form listing income as zero and containing constitutional

objection to the imposition of a tax, was not a return); see also United States v.

Francisco, 614 F.2d 617, 619 (8th Cir. 1980) (filing requirements were not satisfied

by a return that contained “no income information from which tax liability [could] be

calculated”). Marston argues that the indictment refers to the documents that are the

basis of the criminal charges as “tax returns,” although they do not provide sufficient

information to calculate a tax liability, and therefore the government has necessarily

failed to prove an essential element alleged.

Contrary to Marston’s reading of it, the indictment does not allege, as elements

of the crimes, that he filed “tax returns” as they are legally defined for § 7203

purposes. The indictment alleges that he filed a “Form 1040EZ an individual income

tax return,” an “Employer’s Quarterly Federal Tax Return, Form 941,” and advised

his employees to file an “Individual Income Tax Return Form 1040" with the I.R.S.,

containing false information (reporting, in most instances, zero wages). By referring

to the forms using their full descriptive titles, including the moniker “form,” the

indictment is merely indicating which documents it is relying upon to form the basis

of the crimes alleged. Because these documents are tax return forms, that is how they

were alleged in the indictment. Whether those documents contain the necessary

information to be “tax returns,” adequate to satisfy § 7203, is irrelevant because none

of the relevant statutes are limited to “tax returns.” See 26 U.S.C. § 7201 (attempt to

evade a tax may be committed “in any manner”); § 7206(1) (willfully making false

statements in “any return, statement, or other document” under penalty of perjury is

punishable) (emphasis added); § 7206(2) (willfully aiding in the preparation or

presentation of false returns, affidavits, claims or other documents is unlawful). The

critical allegation in each count of the indictment is that Marston filed, or assisted in

filing, documents which the filer intended to be a tax return, which falsely stated the

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amount of income earned by Marston or his employees. Consequently, we hold that

the language of the indictment does not require that the government prove these

documents were “tax returns.”

B.

In the alternative, Marston argues that the prosecutor committed misconduct by

referring to the documents as tax returns during trial and that the district court

committed error in allowing the prosecutor to do so. We review this argument for

plain error because Marston did not timely object to the prosecutor’s conduct. United

States v. White, 241 F.3d 1015, 1023 (8th Cir. 2001). In order to succeed under plain

error review, Marston must show that the district court committed a legal error that

was obvious and affected his substantial rights. Id. “Furthermore, our authority to

correct a forfeited error is discretionary, and we will not exercise that discretion unless

the error seriously affects the fairness, integrity or public reputation of judicial

proceedings.” Id. (internal quotation marks omitted). The defendant bears the burden

of proving plain error.

Marston’s argument fails. Both he and his attorney referred to the documents

as “tax returns.” Even if we were to find that the reference to the documents as tax

returns was error, we cannot see how the fairness, integrity or reputation of the

judicial proceedings are in any way diminished if we refused to notice an alleged error

that the defendant and his counsel embraced at trial.

II.

A.

According to his testimony, Marston formed the opinion that his income was

non-taxable from several sources, including the statements of Thurston Bell and

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Larkin Rose, individuals who once maintained separate Internet websites advancing

the so-called 861 defense, an argument that contends section 861 of the Internal

Revenue Code permits taxation of only income derived from foreign sources. Over

Marston’s objection the government was permitted to ask Marston if he knew that

Rose had been convicted of willful failure to file a tax return and that Bell had been

enjoined from operating his website. Marston admitted that he had learned these facts,

but only after he had sent to the I.R.S. the documents referenced in the indictment. 

The government’s purpose for eliciting the evidence was to show that Marston did not

have a good faith belief that his domestically earned income from Sunshine was nontaxable. On appeal, Marston argues that his knowledge of the injunction and

conviction was irrelevant because that knowledge was gained after the alleged acts for

which his beliefs serve as a defense to the element of willfulness. We review the

district court’s admission of the evidence for an abuse of discretion. See United States

v. Roenigk, 810 F.2d 809, 815 (8th Cir. 1897).

Although the acts of the offense occurred before Marston learned of the

indictment and injunction, he admitted that he continued to rely upon Larkin and Rose

as a basis for his beliefs long afterwards, even at trial. The fact that Marston

continued to espouse a belief that his income was not taxable, even though he knew

its proponent had been convicted of tax evasion, reflects negatively on his credibility.

Because his defense at trial rested largely upon his own testimony that his beliefs were

genuine, circumstantial evidence with regard to his credibility was relevant. Cheek

v. United States, 498 U.S. 192, 203-204 (1991) (stating that while a good faith belief

does not have to be reasonable, “the more unreasonable the asserted beliefs or

misunderstandings are, the more likely the jury will consider them to be nothing more

than simple disagreement with known legal duties imposed by the tax laws and will

find that the Government has carried its burden of proving knowledge”); United States

v. Collorafi, 876 F.2d 303, 305-06 (2d Cir. 1989) (“[P]roof that a defendant continued

a tax practice that already had been held unlawful by a federal judge is strong

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circumstantial evidence of wrongful intent.”). Therefore, the district court did not

abuse its discretion in admitting the evidence.

B.

Next, Marston argues that the district court erred in refusing to admit into

evidence a video tape of Larkin Rose describing his § 861 teachings. Marston

admitted, during an in camera hearing regarding admission of the video, that the tape

did not exist until 2002. The alleged acts occurred between 1999 and 2001, well

before the video tape was created. Before testimony began, the district court ruled

that the tape would not be admitted because it was irrelevant to Marston’s belief at the

time of the allegedly illegal acts. Later, during the government’s cross-examination

of Marston, an issue was made of Marston’s continued beliefs. Marston did not renew

his request to reintroduce the video tape. At the time the district court ruled the tape

was irrelevant and Marston waived his argument that it later became relevant by

failing to renew the request. The district court’s evidentiary ruling was not an abuse

of discretion.

C.

Marston also argues that he was prejudiced by inflammatory remarks made by

the prosecutor during closing arguments. Having conducted a review of the closing

arguments, we conclude that the district court did not abuse its discretion in permitting

the allegedly inflammatory remarks.

III.

Marston’s argument that the district court erred in giving the jury a willful

blindness / deliberate ignorance instruction is foreclosed by circuit precedent, United

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States v. Dykstra, 991 F.2d 450, 452-53 (8th Cir. 1993) (holding that instruction on

deliberate ignorance was proper where defendant was charged with filing false tax

documents); United States v. Bussey, 942 F.2d 1241, 1249 (8th Cir. 1991), that we are

without the power to overrule. United States v. Hessman, 493 F.3d 977, 982 (8th Cir.

2007) (only the court en banc may overrule circuit precedent), cert. denied, 2008 WL

114245 (Jan. 14, 2008). 

IV.

A.

Marston argues that the district court erred by interpreting the law to require

that it impose a “reasonable” sentence and by presuming reasonable a sentence within

the advisory Guidelines range. Since the time of Marston’s sentencing, the Supreme

Court has issued three important decisions clarifying our review of a district court’s

sentencing decisions. See Rita v. United States, 127 S. Ct. 2456 (2007); Gall v.

United States, 128 S. Ct. 586 (2007); Kimbrough v. United States, 128 S. Ct. 558

(2007). Pursuant to Gall, we are directed to engage in a two-part systematic

sentencing review. See United States v. Washington, ___F.3d___, 2008 WL 216597,

at * 2 (8th Cir. Jan. 28, 2008); United States v. Bolds, 511 F.3d 568, 578-79 (6th Cir.

2007). First, we consider whether the district court committed a significant procedural

error in reaching its sentence, “such as failing to calculate (or improperly calculating)

the Guidelines range, treating the Guidelines as mandatory, failing to consider the §

3553(a) factors, selecting a sentence based on clearly erroneous facts, or failing to

adequately explain the chosen sentence-including an explanation for any deviation

from the Guidelines range.” Gall, 128 S. Ct. at 597. Such errors are necessarily an

abuse of discretion by the district court. See id. Assuming that there was no

significant procedural error, we engage in a “deferential abuse-of-discretion” review

of the sentence imposed for substantive reasonableness. Id. Marston’s argument

focuses on how the district court reached its sentence, not whether the district court

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5

 We previously applied plain error review to a factually similar case in an

unpublished opinion. United States v. Heavner, 2007 WL 4355951 (8th Cir. 2007)

(unpublished). Because unpublished opinions carry no precedential value in our

circuit, see 8th Cir. R. 32.1A, we treat this issue as a matter of first impression. We

also note that the “plain error principle applies even when, as here, the error results

from a change in the law that occurred while the case was pending on appeal.” United

States v. Pirani, 406 F.3d 543, 549 (8th Cir. 2005) (en banc).

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reached a reasonable sentence, and therefore it calls for us to engage in procedural

review. 

We apply the plain error standard to our review because Marston did not object

at sentencing that the district court’s interpretation of the law was incorrect.5

 See

United States v. Pirani, 406 F.3d 543, 550 (8th Cir. 2005) (en banc). Plain error

review is governed by a four-part test: there must be error, it must be plain, and it must

affect substantial rights; only if all three conditions are met may an appellate court

exercise its discretion to notice a forfeited error, and only then if “the error seriously

affects the fairness, integrity, or public reputation of judicial proceedings.” Id.

(quoting United States v. Olano, 507 U.S. 425, 734-35 (1993)). Unlike harmless

error, under plain error review, the defendant bears the burden of proof. Id. 

During sentencing, the district court at least twice referred to a sentence within

the Guidelines as being presumptively reasonable: “It is generally the general rule of

law that a sentence that is then pronounced that is within those advisory guidelines is

presumptively reasonable.” (emphasis added). Later, the court said,

So it's not just an unfettered discretion that the Court has post-Booker,

to ignore and sentence outside the advisory guidelines. The Court is

obliged, I think, to start there. That's what all the cases I've read say.

That's where you start, is determine what the guidelines are, and then

start there, presuming that you're in a reasonable area to start with, and

then determine if there's a basis to go outside of it.

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6

 This case was submitted before the Supreme Court decided Gall and

Kimbrough. Neither party requested permission to supplement their arguments in

light of those cases. Therefore, we take no position with respect to whether Gall or

Kimbrough affected the holding in Pirani.

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(emphasis added). In Rita, the Supreme Court approved of such a presumption, but

only when it is applied on appellate review of a sentence, not when it is applied during

imposition of a sentence. 127 S. Ct. at 2465. The reason for such a limited use of the

presumption is evident in the justification for applying it: the sentencing judge has

reached a discretionary decision, using the § 3553(a) factors, in accord with the

Sentencing Commission’s decision applying the same factors when it promulgated the

Guidelines. Id. Thus, in hindsight, which is how we review interpretations of law, the

district court plainly erred by treating a sentence within the Guidelines as

presumptively reasonable. See United States v. Greene, 513 F.3d 904 (8th Cir. 2008)

(district court erred in applying presumption of reasonableness); United States v. Huff,

___F.3d___, 2008 WL 239031, at *2 (8th Cir. Jan. 30, 2008) (same).

By presuming the guidelines reasonable, there is a risk that the district court

afforded the Guideline’s recommendation too much weight, to the detriment of the

other § 3553(a) factors, which is contrary to a sentencing judge’s duty to “make an

individualized assessment based on the facts presented,” Gall, 128 S. Ct. at 597. The

error committed by the district court is much like the procedural error we considered

in Pirani, treating the Guidelines as mandatory instead of advisory. 406 F.3d at 552.

In Pirani, we held that the defendant must show prejudice as a result of the error: there

must be a reasonable probability that the district court would have imposed a lesser

sentence but for the error. Id. Likewise, in this case, Marston must produce evidence

from the record that the district court might have imposed a more favorable sentence

except for application of the erroneous presumption.6

 Pirani, 406 F.3d at 550.

Marston points to no evidence in his brief that the district court, exercising its

discretion, was inclined to impose a more favorable sentence. Despite counsel having

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told us at oral argument that the record would show the district court “felt too

constrained” by the presumption, our review of the record reveals no hesitance on the

part of the district court. The district court imposed a sentence of 26 months against

an advisory Guidelines range of 24-30 months. It expressly noted that the facts of this

case neither warranted a sentence at the top nor the bottom of the Guidelines, but one

in the middle. Moreover, the district court gave very astute and precise explanations

of the Guidelines, this court’s interpretations of them, and its own thoughts on the

need for just punishment. The sentencing judge engaged in an extended colloquy with

regard to a similar sentencing case in our circuit, United States v. Ture, 450 F.3d 352

(8th Cir. 2006), the need for citizens to obey even the laws they do not agree with, the

fact that it did not think Marston set out with an intent to steal $400,000 from the

government, and the need to impose a sentence that has “serious consequences to it.”

Even though the district court engaged in an extended discussion on each of these

points, it never expressed disagreement with our holdings, the advisory Guidelines

range, or the policy judgments reflected therein.

In contrast, we recently remanded two cases for re-sentencing where the district

court applied the improper presumption. In both of those cases, however, the district

court expressed constraint by the presumption. Greene, 513 F.3d 904 (quoting the

district court, “I do not believe based on current Eighth Circuit law that I am permitted

to do a variance in this case. However, if I had an opportunity to do a variance based

on Booker, I would have done so”); Huff, ___F.3d___, 2008 WL 239031, at *2

(quoting the district court, “I might have departed more in this case but for the Eighth

Circuit precedent in the Claiborne case. And if, in fact, that case were to be overturned

on appeal, then I would hope that we would have an opportunity to review this

sentence . . . I would have given him less of a sentence if I thought that I had the

ability to do so”). Similarly, in United States v. Ross, 501 F.3d 851 (7th Cir. 2007)

(per curium), the Seventh Circuit reversed a sentence where the district court

expressed concern that the Guideline range was “too harsh.” Id. at 853-54 (not

conducting plain error review).

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In this case, the district court never expressed that it felt constrained by the

presumption. Moreover, it was very clear that the district court did not rely solely

upon the Guidelines, but tried to “take into account everything that [it] can pull into

the equation as proper for [it] to consider.” Consequently, Marston has failed to meet

his burden under plain error review. He has been unable to point to any evidence in

the record that suggests the district court would exercise greater discretion if given the

opportunity to do so. Accordingly, we hold that his substantial rights were not

violated by the district court’s erroneous interpretation of the law.

B.

Next, Marston argues that the district court violated his Sixth Amendment right

to a trial by jury when it considered judge-found facts, such as the amount of his tax

deficiency, to impose a sentence under the United States Sentencing Guidelines.

“[A]ny fact that increases the penalty for a crime beyond the prescribed statutory

maximum must be submitted to a jury, and proved beyond a reasonable doubt.”

Apprendi v. New Jersey, 530 U.S. 466, 490 (2000). But “[j]udicial fact-finding is

permitted provided that it is done with the understanding that the guidelines are to be

applied in an advisory fashion.” United States v. Morell, 429 F.3d 1161, 1164 (8th

Cir. 2005). Marston’s argument that the recent Supreme Court decision in

Cunningham v. California, 127 S. Ct. 856 (2007), requires otherwise is flawed.

Cunningham involved the California state sentencing scheme, which the Court said

“does not resemble the advisory system the Booker Court had in view.” Id. at 870.

That scheme required the California sentencing judge to impose a sentence above the

statutory maximum based on judge-found facts. Cunningham, 127 S. Ct. at 868. In

contrast, Marston’s sentence of 26 months for violating 26 U.S.C. § 7201 (tax

evasion) is well below the five year statutory maximum sentence authorized by the

jury verdict. Moreover, as we have discussed, the district court expressly recognized

the advisory nature of the Guidelines. Therefore, we find no Sixth Amendment

violation in the imposition of Marston’s sentence. 

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C.

Marston does not raise a substantive review argument. Therefore, we are not

called upon to review the reasonableness of his sentence. We note that, as a result, we

need not decide whether a sentence imposed under an erroneous presumption of

reasonableness also enjoys a presumption of reasonableness on review. We leave that

question for another day.

V.

For the reasons set forth, we affirm the judgement of the district court.

______________________________

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