F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

U N I T E D S T A T E S O F A M E R I C A , Plaintiff-Appellee

,

v

.

R O B E R T D A V I D K A H R E , AKA Robert D. Kahre, Defendant-Appellant

. N o. 09-10471

D.C. No. 2:05-cr-00121- DAE-RJ J -1

U N I T E D S T A T E S O F A M E R I C A , Plaintiff-Appellee

,

v

.

L O R I A. K A H R E , AKA Donna Hall, Defendant-Appellant

. N o. 09-10528

D.C. No. 2:05-cr-00121- DAE-RJ J -11

U N I T E D S T A T E S O F A M E R I C A , Plaintiff-Appellee

,

v

.

A L E X A N D E R C. L O G L I A , Defendant-Appellant

. N o. 09-10529

D.C. No. 2:05-cr-00121- DAE-RJ J -12

OPI NI ONU N I T E D S T A T E S V

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A H R E 2

A ppeal from the United States District Court

for the District of Nevada David A. Ez ra, District J udg e, Presiding

Arg ued and Submitted J une 11, 2012—San F rancisco, California

F iled December 5, 2013

B efore: Proctor Hug , J r., J ohnnie B . Rawlinson, and Sandra S. I kuta, Circuit J udg es.

Per Curiam OpinionU N I T E D S T A T E S V

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A H R E 3

SUMMARY *

Crim inal Law

The panel affirmed three d efendants’ convictions and o ne defendant’s sentence for c r i m i n al tax offenses a rising from their use of g old and silver coins to pay wag es and thus avoid the reportingof pay

roll and income tax es.

Rejecting the defendants’ contention that dismissal of the indictments was warranted, the panel held that the defendants h a d s u f f icient notice of the illeg a lity of rely ing on the face value of coins to avoid pay ing tax e s.

The panel held that the district c our t d id not a buse its discretion in deny ing the defendants’ motions to disqua lify
t he prosecutor due to his status a s a defendant in a Bi v e n s lawsuit filed by defendants Robert and L ori Kahre. The panel held that the d e fendants failed to p resent clear and convincing evidence of a conflict.

The panel held that the district court properly d e n i ed a s moot Robert’s initial motion to suppress because none of the seiz ed e v i d e n c e was introduced at trial. The panel h eld alte r n a t i vely that Robert’s arrest and the corresponding search

were leg ally conducted pursuant to a state b e nch warr ant. The panel held that the district court c o r r ectly denied Robert’s subsequent s u

p p r e s s i o n m o tion b ecause the warrants i n c o r p o r a t e d t h e a ccompany

ing affidavit, which possessed th e requisite specificity

limiting the ag ents’ discretion.

* T h is su m m ary co n stitu

tes n o part o f th e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.U N I T E D S T A T E S V

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A H R E 4

The panel held that the district c ourt di d n ot a buse its discretion in ex cluding evidence challeng ing the leg al import of its ruling that g old and silver coins used to pay wag es were t o be assessed at fair market value for tax purposes. T h e panel held that the district court correctly recog niz ed that the coins w ere tax able as pro p er ty b a sed on their fair market value.

The panel held th at the district court did not commit reversible error in ex cluding testimony of the defendants’ contemporaneous statements concerning their tax theories. The p a n e l e x plained that in e ach instance the ex clusion was neither an abuse of discretion nor p re judicial, and held that the district c ourt acted within its discretion when it ex cluded,

as irrelevant and prejudicial, eviden ce of the federal ag ents’

use of force d

uring ex ecution of the searc h w a r ra n ts. The panel held that the district cour t did not eng ag e in any misconduct warranting

a new trial.

The panel held that the district court’s calcul a t i o n o f Robert’s tax liability at sentencing a n d the corresponding restitution amount was supported by the evidence presented
at trial and the jury ’s f inding s, that an enhancement for obstruction of justice and the denial o f a d ownward adjustment f

or acceptanc e o f r esponsibility were consistent with the historical record, and that Robert’s below-g uidelines
sentence was reasonable and was not disproportion ately

severe.U N I T E D S T A T E S V

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A H R E 5

COUNSEL

Michael K. Powell and Michael J

. Kennedy (arg ue d ), Assistant F e deral Public De f enders, Reno, Nevada, for Appellant L ori A. Kahre.

L isa A. Rasmussen, L as Veg as, Nevada, for Appellant Robert D. Kahre.

J oel F . Hansen, Hansen Rasmussen, L as Veg as, Nevada, for Appellant Alex ander C. L og lia.

Greg o r y Victor Davis, Mark S. Determan (arg ued), Departmen t of J ustice, W ashing ton, D.C., for Appellee United States.

OP INION

PER CURI AM:

Appellants Robert Kahre (Kahre), L ori Kahre (L ori) and Alex a nder L og lia (L og lia) challeng e their convict i o ns for various criminal tax o ffenses a r i s i ng from their use of g old and silver coins to pay wag es a nd thus avoid the reporting o f
pay roll and income tax es d ue. Appellants contend that dismissal o f t he indictments was warranted because A p pellants lacked the r equisite notice that their cond u ct viol a t e d a pplicable tax laws. Appellants also assert that a

n ew trial was in order because the prosecutor should hav e been disqualified due to his status as a defendant in a Bivens 1

1 Biven s v. S ix Un kn o w n Na med Ag en ts of Fed

. Bu rea u o f Na r co tics
, 4 0 3 U.S. 3 8 8 (1 9 7 1 ).U N I T E D S T A T E S V

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A H R E 6

l a wsuit f iled by the K ahres, and because the district cour t ’s prejudi c ial conduct a

nd e rroneous evidentiary ruling s deprived them of a fai r trial. I n addition, Robert Kahre challeng es the district court’s denial of his moti o ns to suppress a

nd the sentenc e i m posed. W e affirm Appellants’ convictions and Kahre’s sentence.

I. BACK G ROUND

A. Third Superseding Indictm ent (Indictm ent) 2

The I ndictment alleg ed that A ppell a n t s eng ag e d in a conspiracy to avoid the pay ment of pay

roll and income tax e s by utiliz ing a pay

r oll sy stem pursuant to which employ ees received their wag es in g old a n d s i l v e r coins, which were la t e r ex chang ed for cash. According to the I ndictment, “the face amount of the coins w as one-eig hth of the amount of pay that the employ ee actually earned and receive d i n the envelope of c ash[ .] ” The I ndictment a lleg ed that Appellants failed to withhold the required federal income tax es, m e dicaid
tax es, and social security tax es fro m the employ ees’ wag es, and that Appellants created f alse invoice s to conceal the
pay roll ex p enses. The I ndictment also all eged that Kahre marketed the pay

roll service to other contractors and charg ed an administrative fee for use of the pay r o ll service.

The I ndictment charg ed all three d efendants wit h o ne count of conspiracy in v iolation of 18 U.S.C. § 371, a nd o ne count of att e m p ting to interfere with the administration o f internal revenue laws in vio lation of 26 U.S.C. § 7212(a). Robert a nd L ori Kahre were charg ed with an additional count

2 T h e T h ird Su

persed in g In d ictm en t w as th e in d ictm en t in ef f ect at th e tim e o f th e trial at issu e in th is ap p eal.U N I T E D S T A T E S V

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A H R E 7

of attempting to interfere with the adm inistration of internal revenue laws in violation of 26 U.S.C. § 7212(a).

The I ndictment c harg e d Robert Kahre with forty -eig ht
counts of failure to pay e m p l oy ment tax es in violation o f 26 U .S.C. § 7202; four counts o f attempting to evade o r defeat tax es in violation of 26 U.S.C. § 7201; and one count of wire fraud in violation of 18 U.S.C. § 1343.

The I ndi c t m e n t charg ed L ori Kahre with one count o f making f a l s e s tatements to a bank in violation of 18 U .S.C. § 1014, and eig ht counts of a tt e m p t ing to e vade or defeat
tax es in violation of 26 U.S.C. § 7201.

F inally

, the I ndictment charg ed L og lia with one count o f filing false income tax returns in violation of 26 U .S.C. § 7206(1), and ten counts of attempting t o e v a de o r defeat
tax es in violation of 26 U.S.C. § 7201.

B. P retrial Motions

1. Kahre’s Motions To Suppress

I n his search warrant affidavit, I nternal Revenue Service ( I R S ) Special Ag ent J ared H alper observed that, althoug h Kahr e’s b usinesses were g enerating sig nificant revenues, Kahre h ad not filed business tax returns or employ ment tax e s since the e arly 1990s. Kahre also h ad not filed individual tax returns since 1991.

Ag ent Halper averred that Kahre leased employ e es to various contractors, and withdrew cash from B a nk of t h e W es t for the pay

roll. According to Ag ent Halper, Kahre withdrew $24,096,012 in cash between J anuary 17, 2002, a ndU N I T E D S T A T E S V

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A H R E 8

October 3 1 , 2002. Kahre’s employ e es collected their wag e s at a wa rehouse located at 6270 Kimberly Avenue in L a s Veg as. The employ ees received nominal amou n t s o f g old certificates or g old chips, which they immediately ex chang ed for envelopes of c ash. Kahre alleg edly withheld “ six ty percent of the employ

ees’ pay r oll. . . .”

B a sed on Kahre’s conduct, Ag ent Halper stated that there

was probable c ause to believ e t h a t K ahre was eng a g ed in a conspira cy to e vade tax es and to interfere with the administration of the tax laws by the I RS. Ag e n t Ha l per’s affidavit reflected that evidence o f Kahre’s criminal activities could b e found at the 6 270 K imberly A venue, 6295 Grand Cany on, and 1 5 5 5 B ledsoe L ane addresses (The Kimberly

, Grand Cany

o n, and B ledsoe properties).

I n his declaration, Ag e nt Halper related that I RS ag ents reviewed the search warrant affidavit prior to the s e a rc h es. Kahre was subsequently a rrested at B ank of the W e st pursuant to a state bench w arrant for failure to appear, a nd the
ag ents seiz e d $230,913 in cash, which wa s p ro v i ded to the I RS to satisfy Kahre’s “ unpaid federal income tax liabilities.” According to Ag ent H alper, Kahre had unpaid tax assessments of approx imately $2,000,000.

The d i s trict court ruled that Kahre’s motion to suppress evidence seiz ed when Kahre w as arrested at B ank o f the W e st

was moot because the seiz ed evidence w ould not be used at trial. The d istrict c ourt also determined that the g overnment

was not required to return the cash seiz e d from Kahre because it was used to offset Kahre’s tax liabilities.

The district court g r an t ed in part and d enied in part Kahre’s amended motions to suppress evidence seiz ed fromU N I T E D S T A T E S V

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A H R E 9

the K imberly

, B ledsoe, and Grand Cany on properties. B ecause Kahre was not present during the ex ecution of the

s earch w arrants, the district court held that Kahre lac k e d
st a n d ing to challeng e the manner in which the search
warrants were ex ecuted. T h e district court concluded that, because the search war rant properly incorporated the search
warrant affidavit, the war r a n t was not overly broad. The district c o u r t a lso held that the ag ents properly seiz ed g old and s i l v e r coins relating to Kahre’s pay roll scheme. However, the d istrict cour t g ranted Kahre’s motion to suppress information and docum e n t s that were unrelated to the time periods specified in the warrants.

2. Appellants’ Motions To D i s qualify the P rosecutor For Conflict of Interest

On October 30, 2003, several plai n t iffs, including the K a h r e s, filed a Bivens action a g ainst the federal prosecutor,

as well as other federal d efendants. The compl ai n t a lleg ed, i n t er alia

, that the f

ederal defendants o rchestrated an illeg a l raid o f Kahre’s properties, improperly arrested Kahre a nd stole $230,913 in cash from him.

On O ctober 4, 2004, the district court in the Bivens action de n i e d the prosecutor’s motion to dismiss premised on absolute immunity

. T re a t i ng the complaint’s alleg ations a s true, the court denied abso l u te immunity because of the prosecutor’s alleg ed involvement in planning the raids.

The g o vernment subsequently filed two indictments
ag ainst Appellants, and the d is t r i ct court in the Bivens case g ranted the g overnment’s e merg ency motion to stay the
pr o c e eding s based on the pending criminal prosecutions. During the first trial, the jury was unable to reach v e r dicts,U N I T E D S T A T E S V

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A H R E 10

and the g overnment subsequently filed the Third Superseding I ndictment.

Prior to the second trial, Kahre renewed a prior motion to disqualify the prosecutor because of a conflict of interest. I n

an attached declaration, Kahre’s counsel related that the prosecutor had remarked that Kahre’ s c o u nsel h ad “threatened [ his] job and [ h i s ] p e n sion,” making the case “personal.” Kahre filed a subsequent motion to disqualify the prosecutor because of his pecuniary and emotional interests in the Bivens action, a

n d because the prosecutor had filed the indictments as retaliation for b eing named in the Bivens action.

The district court d e n ied Kahre’s motion, ruling that automatic disqualification was not warranted due to the pendency of a Bivens action, and t hat the prosecutor’s comments did not require disqualification on the merits.

3. Appellants’ Motions To Dismiss the Indictments Based on the Gold and Silver Coins’ Valuation

Appellants asserted that they lacked the r e q u isite notice that their pay

roll pay ments in g old and sil v e r coins were tax able at the coins’ fair market value and that their conduct violated the tax laws. They contended that the lack of notice in the statutory lang uag e compelled application of the rule o f lenity

, resulting in a construction of the statute that was most favorable to them. The district court rejected the Appellants’
arg ument, ex p laining that the applicable statutes were unambig uous reg arding the elements of c onspiracy to defraud the g overnment and of willful failure to truthfully a ccount for
tax es owed. The district c o urt added that the statutes’ scienter requirements mi t ig ated any vag ueness and that theU N I T E D S T A T E S V

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A H R E 11

tax p rovisions patently articulated r epor t i n g and filing requirements.

The district c ourt eschew ed A ppellants’ arg ument that they did n o t defraud the g overnment because g old and silver

c o i ns used to pay employ ees should have been a ssessed a t face value, r ather than fair market value, for tax purposes. I f, for ex am p l e , an employ ee was paid with ten silver d ollar coins, Ap pellants would a rg ue that the employ ee received only ten dollars in wag e s. However, if each silver dollar h ad

a fair market value of fifty dollars, the g overnm e n t a ssessed the wag es at 10 x $50 or $500.0 0

. Th e d i strict court was persuaded that Ninth Circuit precedent, as we l l a s that o f other courts including the Tax Court, required tax ation of the coins at f air market v a lue. T h e district court observed that the tax c ode and corresponding Treasury reg ulations t r e a ted property , such as g old and silver coins used as compensation for services rendered, as tax able at fair market value.

C. Trial Testim ony and Verdicts

Georg e Rodrig uez (Rodrig uez ), who pled g u ilt y to tax evasion, served as a foreman and superintendent for Kahre’s business, W rig h t Painting and Dry wall

. A ccording to Rodrig ue z , a ll employ ees were required to sig n an independent contract ag reement in order to receive their pay

. The a g r e e m e nt was d esig ned to shield Kahre and his employ e es from tax o blig ations b y e s tablishing a sy stem o f
wag e pay ments in g old and silver.

Alt h o u gh Kahre told Rodrig uez that he was an independent c ontractor, Rodrig uez described himself a s an employ e e of Robert Kahre’s business. Kahre had the authority to d i r ect Rodrig uez in the performance o fU N I T E D S T A T E S V

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A H R E 12

Rodrig uez ’s duties, including what work to perform a nd when the work was to b e p erformed. Kahre also instructed Rodrig uez reg a

rding the timing of hiring additional w orkers,

a nd reg arding where to purchase supplies and tools. Ka h r e also had the rig ht to terminate Rodrig uez ’s employ ment.

According to Rodrig uez , he and the other employ e es were paid in g old and s i l v e r on a weekly basis based on a sy stem developed b y Kahre a

n d administered by L ori. Each week, Rodrig uez received a sing le g old coin which he immediately

ex c h a ng e d for an envelope containing h is $500 weekly salary in cash. A ll employ e e s were required to accep t p ay ment in
g old or silver coins, which coins were later ex c hang ed for cash. Rodrig u ez never r e c e ived W -2 forms reflecting his
wag es, and no dedu c t i o n s were made from his wag es for income tax purposes.

R o drig uez obtained tubes o f g old a nd silver which he

ex c h a ng e d for envelopes of cash to d ist r i b u te to the other employ e es. Rodrig uez confirmed pay roll pay ments after consulting pay

roll sheets g enerated by L ori. Pay rolls were met with cash pay

ments, a n d Rodrig u ez did not re c a l l any employ e e who actually retained the g o l d or silver coins a s wag e pay ments.

Heidi Molesworth ( Molesworth), who also pled g uilty to tax evasion, was employ ed in Kahre’s pay roll office for five
y ears. Kahre informed Molesworth that she was an independent contr ac t o r and she sig ned a n independent

c o n t r a c t o r a g r e e m e n t

. N e v e r t h e l e s s , K a h r e p a i d Molesworth’s wag es in g old and silver c o ins that she immediately ex chang ed fo r envelopes of cash. MolesworthU N I T E D S T A T E S V

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A H R E 13

did not r eceive W -2 or 1099 forms, 3 a n d n e v er f iled a tax return. Molesworth paid K ahre’s employ ees in g old a nd silver coins. I f an employ ee retained the g old or silver coins, the coins’ fair market v a l u e was deducted from the cash
wag es due.

Molesworth testified that she a n d L o r i u s e d false names

on the p a y roll sheets to avoid h aving to pay tax es, and that it

was standard p rocedure to use false n ames on em p loy ment verification forms. Althoug h most other employ ees w e re paid using the g old and silver ex chang e, Molesworth and the Kahres d i d n o t use that sy stem for p ay ment of their o wn wag es. I nstead, envelopes of cash were p repared for pay ment of their wage s

. I n addition, Robert Kahre received fees for administering the pay

rolls of other companies, f or which he used the same coin/cash pay ment sy stem he u t i l i z e d for his employ e es.

I R S Special Ag ent Ry an Rickey testified that, b etween 1999 and 2003, K ahre’s companies paid $22,382,7 6 0

. 42 in
wag es. B etween 1998 and 2003, the companies using Kahre
to administer their pay

rolls paid a total of $95,042,952.14 in
wag es a nd Kahre received $ 14,100,087.10 in fees. Ag ent Rickey a lso testified that return filing h istories reflected that

3 A W

- 2 f orm i s “ [t]h e f

o rm th at an em

p l o y er m u st s en d to an em

p lo y ee

an d t h e IRS at th e en d o f th e y ear. T h e W

- 2 f o rm rep o rts an em

p lo y ee’ s

an n u al w ag es an d th e am o u n t o f tax es w ith h eld f ro m h i s o r h er pay ch eck .” h ttp ://w w w .in v esto p ed i a .co m

/ term s/w /w 2f o rm .asp (last v isited May 2 9
, 2 0 1 3 ).

A 10 9 9 f

o rm is “ [t]h e IRS f

o rm f o r r e p o rtin g pay

m en ts to in d ep en den t co n tr a c t o rs o r in terest earn ed on in v estm en ts o r b an k

acco u n ts . . .” h ttp ://f

in an cial- d i ctio n ary .th ef

reed ictio n ary .co m

/Fo rm + 1 0 9 9 (last v isited

May 2 9, 2 0 1 3 ).U N I T E D S T A T E S V

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A H R E 14

Kahre did not file a n y tax returns between 1991 and 2006; L ori filed false returns from 1996 to 1999, and did not file

a n y returns between 2000 and 2006; a nd L og lia d id not f

i l e returns from 1998 to 2006.

I RS Revenue Ag ent Sue Cu t l e r estimated that, b etween 1999 and 2002, Kahre’s companies paid Kahre a total salary of $1,956,738, and K ahre earned $14,100,087.10 in f ees from other companies using his p a y ro ll services. A g e nt Cutler surmised that Kahre owed $ 2,049,172.97 in income tax es. B ecause Kahre did not f ile any e mploy

ment tax es for his businesses from 19 9 9 to 2003, Ag ent Cutler calculated an additional tax liability of $7,082,138.54.

I n his testimony

, Robert Kahre ex plained th a t he developed his pay

roll sy stem after the I RS seiz ed his property and equipment from a failed business

. K a h r e met J ohn Nelson (Nelson), who authored books and t a u ght classes about the I RS and the monetary sy stem, a n d Nelson’s ideas influenced Kahre to develop the pay ment sy stem at issue.

According to Kahre, h e developed h is g old p ay roll sy stem because the U nited St a t e s g overnment had debauched the national currency a

n d utiliz e d inf

l ation to confiscate the wealth o f U

. S

. c itiz ens. Kahre relied o n court cases and the Gold B ullion Coin Act of 1985 that approved go l d c oins a s leg al tender. Kahre devised the independent contractor ag reements to reflect that the I RS was a foreig n ag ent for the W o rld B ank and the I

nternational Monetary

F u nd (I MF ). I n Kahre’s view, by c o llecting tax es for the I RS, employ ers illeg ally served as foreig n ag ents for the W orld Ba nk a nd I MF

. Kahre r elied on several federal stat u t e s , reg ulations,

a nd “Presidential D ocuments” in the process of d evel o p i n gU N I T E D S T A T E S V

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A H R E 15

h is pay roll sy stem to avoid the c ollection of tax es on beh al f of foreig n a g ents.

L og lia testified that, l i k e Kahre, he was influenced b y Nelson’s ideas about monetary h istory and monetary policy

. L og lia believed that Cong ress approved the use of g old coins

as an alternative to paper currency

. B ecause of his interest in
g old pay ments, L og lia ag reed to work for Kahre, and stopped filing tax re t u r n s in 1993, since h is income, calculated in accordance with the face value o f t h e gold a nd silver coins,

was bel o w t h e filing threshold. L o g lia believed that there

was leg al precedent supporting the g old p ay ment sy stem, a

nd he calculated his income b ased on the coins’ face value on the
g round that coins can be leg ally used to pay debt. L og lia was of the view that federal statutes and the Gold B ullion C o in Act of 1985 supported the g o ld pay ment sy stem, considering that c oins were approved leg al tender, and that g old clause contracts were leg ally

authoriz ed.

L ori Kahre t e s t i fied that she started to work for her brother, Robert, in 1988. I n 1993, Kahre commenced pay ing L ori her wag e s in silver dollars

, a n d L ori thoug ht the coins

were leg al tender based on Cong ressional acts. L o r i was persuaded that the c oins w ere leg al tender b e c a use a c oin shop did not coll e c t t ax es when ex chang ing cash for the coins, and the companies utiliz ing Kahre’s pa y roll sy stem never challeng ed the transactions.

I nitially , L ori filed tax returns based on the face value of the silver coins. I n 2000, L o ri deter m i n e d that she received between $ 63 and $125 wag es per week, based o n the face value of the coins. B ecause her wag es calculated on the face value of the coin s w ere b elow the threshold for filing tax es, L ori did not file any

tax returns between 2001 and 2006.U N I T E D S T A T E S V

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A H R E 16

The jury f

ound Kahre g uilty o n all counts. L o g lia was acquitted of co n spiracy

, b ut convicted on the remaining
counts. The jury found L ori g uilty on all counts with the

ex c e ption of one c o unt o f willfully attempting to evad e o r defeat tax

.

D. Sentencing

T h e p r e s e n

t ence investig ation report (PSR) calcul a t e d t h a t Ka h r e h ad paid $25,572,307.17 in cash w ag es to his employ e es, and f

ailed to withhold $10,891,791.7 2 in tax es. The PSR also determined that Kahre p aid $95,175,992.14 in cash w a ge s to the employ ees of thirty -five c ontracting businesse s and thereby obstructed the collection o f $40,847,545.80 in tax es. The PSR estimated the potential tax loss of Kahre’s pay

roll scheme at $ 51,739,337.52. The PSR estimated an additional $5,696,466.10 in tax liabilities due to Kahre’s f a ilure to file tax returns in 1 992, 1993, 1999, 2000, 2001, and 2002. Combined with the tax losses f rom the
p a y r o l l scheme, the total potential tax lo s s w a s $57,435,803.52. F rom these c alculatio n s , the PSR recommended a total offense level of 39, with a g u ideline sentencing rang e of 262 to 327 months’ imprisonment. 4

The PSR calculated $16,060,104.72 in outs t a nding

r e s t i t u t i o n f

r o m K a h r e ’s personal tax liab i l i t y o f $5,168, 3 13.00, and $10,891,791.72 in tax losses from the
pay roll scheme.

4 T h e P SR also reco m

m en d ed an u

pw ard ad j u stm en t f

o r o b stru ctio n

o f j u stice in lig h t of Kah re’ s f alse trial testim o n

y , an d d en ial o f a d o w

n w ard ad j u stm en t f

o r accep tan ce o f

resp o n sib ility

.U N I T E D S T A T E S V

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A H R E 17

During the sentencing hearing

, the district court determined that a b ase offense lev e l of 3 0 was supported b y the trial testimony and relevant conduct, a nd rejected Kahre’s

o b j ection that the applicable g uideline rang e was 51 t o 6 3 months. The district court held that there was ample support for an obstruction of justice enhancement, a n d that a dow n w ard adjustment for acceptance o f responsibility was unwarranted. The d istrict court co n cluded that the recommended restitution amount was supported by the jury ’s finding s and the evidence at trial. After decid i n g t h a t a downward variance was w arranted, the district court sentenced Kahre to 190 months’ imprisonment a nd three
y ears of supervised release. The district court a lso ordered $16,060,104.72 in restit u tion with $10,891,791.72 “ to be jointly and severally

owed by co-defendants.”

The district court sentenced L o ri to seventy -two months’ imprisonment, four y e a

rs of supervised release, and $31,900 in restitution, and sentenced L o g lia to t w enty -six months’ imprisonment, three y e ars o f supervised release, and $83,000 in restitution.

Appellants timely a

pp ea l e d their c onvictions and Kahre timely appealed his sentence.

II. STANDARDS OF REVIEW

“W e review de novo the district court’ s ruling on a motion to suppress.” United States v. Russell

, 664 F .3d 1279, 1280 n.1 (9th Cir. 2012) (ci t a t ion omitted). “The court’s factual f inding s a re reviewed for clear error

. . .” Id. (citation omitted).U N I T E D S T A T E S V

. K

A H R E 18

“The d istrict court’s determination that the p r edicate law

was clearly established is a question of law which we r eview d e n o v o.” United S

tates v. George
, 420 F .3d 991, 995 ( 9 t h Cir. 2005) (citation omitted).

“The district court’s refusal to disqualify the pros e c u tor is reviewed for abuse of d iscretion.” United States v. Davis
, 932 F .2d 752, 7 63 (9th Cir. 1991), as amen de d (citation omitted).

“W e r eview evidentiary ruling s for abuse of discretion, thoug h we review de no v o the district c ourt’s interpretation of the F ederal Rules of Evidence.

. . .” Uni t e d S t a t e s v

. Urena , 659 F .3d 903, 908 (9th Cir. 2011) (citation omitted).

“This Court reviews the d istrict court’s i n t erpretation o f the Sentencing Guidelines de novo, the district court’s application of the Sentencing Guidelines to the facts o f a case for abuse of discretion, and the distr i c t co urt’s f actual finding s for clear error.” United Stat e s v

. Dann
, 652 F .3d 1160, 1175 (9th Cir. 2011) (citation a n d internal quotation marks omitted).

“A factual finding that a defendant obstruc t e d justice is reviewed f

or clear error.

. . .” United Sta t e s v

. Garro
, 517 F .3d 1163, 1171 ( 9 t h Cir. 2008) ( citation omitted). “A district court’s decision about whether a d efendant has accepted respon s i b ility is a factual determination reviewed for clear error.

. . .” Un i t e d States v. Rosas
, 615 F .3d 1058, 1066 (9th Cir. 2010), as amended (citation omitted).

“A restitution order is r eviewed for an abuse of discretion, provided that it is within the bounds o f the statutory framework. F actual f inding s supporting an order o fU N I T E D S T A T E S V

. K

A H R E 19

restitution a

re reviewed for clear error. The leg ality of a n order of r e stitution is reviewed de novo.” Dann
, 652 F .3d at 1175 (citation omitted).

III. DISCUSSION

A. Denial of

K ahre’s Motions To Suppress

Kahre contends that his arrest and the seiz ure of pay roll funds at B ank of the W est w ere the products o f a n illeg a l, pretex tual search. The district court declined to address this issu e on the merits, concluding that the motion to suppress

was moot bec au s e the g overnment was not introducing the

s e i z ed evidence at trial. The record confirms the distri ct court’s conclusion tha t t h e seiz ed evidence was not introduced at t rial, thereby rendering the motion to suppress moot. See United States v. Arias-Villanueva

, 998 F .2d 1491, 1502 ( 9th Cir.1993), overruled o n oth e r grounds by United States v. Jimenez-Ortega
, 472 F .3d 1 102
, 1 103-04 (9th Cir. 2007).

I n a ny e v e n t, suppression was not required merely because the arrest and corresponding search by federal ag ents

were premise d o n a state warrant. See United States v

. Hudson

, 100 F .3d 1409, 1415–16 (9th Cir. 1996) (upholding the v alidity of a federal ag ent’s arrest and search premised on

a state warrant). B ecause the ag e nts a c ted pursuant to a valid
state arrest warrant, the pay roll funds were properly seiz ed in
t h e search incident to Kahre’s arrest. See United S tates v. Tank , 200 F .3d 627, 631 (9th Cir. 2000).U N I T E D S T A T E S V

. K

A H R E 20

Rely ing o n F ed. R. C r i m

. P

. 41(g ), 5 Kahre contends that the pay roll funds seiz ed during hi s ar r est should h ave been

r e turned. However, Rule 41 is inapplicable, as the sei z e d funds were a

pplied to Kahre’ s tax liabilities pursuant to a notice of levy

. See United S tates v. Fitzen
, 80 F .3d 387, 388–89 (9th Cir. 1996) (“[ A ] n I RS tax levy will defeat a Rule 41(e) motion. . . . Reg ardless of whether the defendant owes federal tax es or state tax e s , t h e e x istence o f a tax levy demonstrates a r ig ht to poss e ssion adverse to that of the defendant.”) (citation omitted). 6 The district court, therefore, properly denied Kahre’s motion to suppress and h i s request for the return of the seiz ed funds pursuant to Rule 41.

F inally

, Kahre as serts that the search warrants for the B ledsoe, Kimberly

, and Grand Cany o n properties were invalid g e neral warrants because th ey did not specify any criminal activity

. To resolve this claim, we “must answer the threshold q

uestion of whether the war r ant[ s] incorporated Special A g ent [ Halper’s] affidavit.” U n i t e d States v. SDI Future Health, Inc.
, 568 F .3d 684, 699 ( 9 t h C ir. 2009), as amended (citation omitted). “I f it was incorporated, then we

5 Fed . R. Crim . P . 4 1(g ) p ro v id es:

A p erso n ag g riev ed b y an u n law f

u l s earch an d seizu re

o f p ro p erty o r b y th e dep riv atio n o f p ro p erty m ay m ov e f o r th e p ro p erty ' s retu rn

. T h e m o tio n m u st b e f iled in th e d istrict w

h ere th e p ro p erty w as seized

. T h e co u rt

m u st receiv e ev i d en ce o n an y f actu al issu e n ecessary to d ecid e th e m o tio n

. If it g ran ts th e m o t i o n , th e co u rt

m u st retu rn th e p ro p erty to t h e m o v an t, bu t m ay im

p ose

reaso n ab le co n d itio n s to p ro tect access to th e p ro p erty

an d its u se in

later p ro ceed in g s.

6 T h e 1 9 9 6 v ersio n o f

Ru le 4 1 (e) co rresp o n d s to th e cu rren t v ersio n o f Ru le 4 1 (g ). S

ee Fed . R. Crim . P . 4 1 (e) (1 99 6 ).U N I T E D S T A T E S V

. K

A H R E 21

evaluate the a ffidavit and the warrant a s a whole, allowing the affidavit to c ure any deficien c i e s i n the naked warrant.” Id. (citation and in ternal quotation marks omitted). “W e

co n s i der an affidavit to be part of a warrant, and therefore potentially curative of any defects, only if (1) the warr a n t

ex p ressly incorporated t h e affidavit by r eference a nd (2) the affidavit either is attached phy sically to the warrant or at least accompanies the warrant whi l e ag e nts ex ecute the search.” Id. (citations o mitted). “A warrant ex p ressly incorporates an affidavit w hen it uses suitable words of refere n ce

. . . . ” Id. (citation a

nd internal quotation ma rks omitted). The challeng ed warrants in this case ex p ressly incorporated the affid av it, and a c opy of the affidavit accompanied the
warrants. As discussed, the a ffi davits detailed criminal activities committed in conjunction w ith Kahre’s operation

– failure to file tax returns, failure to withhold em ploy ment tax es, and conspiracy to e vade tax es and to interfere with administration of the tax laws b y the I RS. B ecause the search warrants, read in tandem w ith the accom p a n y i ng affidavits, described specific crimes, the searche s were not conducted pursuant to an impermissible g eneral war r a n t

. S ee id. at 699–702.

Kahre further contends that, b ecause the warrants lacked
any limitations, s e i z ure of items was improperly left to the
ag ents’ discretion.

“ T he prohibition of g eneral warrants imposes a particularit y limitation, requiring w arrants to specify the items to b e seiz ed and the locations to be searched.

. . . ” United S tates v

. Vasquez
, 654 F .3d 880, 884 (9th Cir. 2 011) (citation and internal quotati o n m a rks omitted). “The description must be speci fic enoug h to enable the person conduct ing the search reasonably to identify the thing sU N I T E D S T A T E S V

. K

A H R E 22

authoriz ed to be seiz e d.

. . . ” United S tates v. Smith

, 424 F .3d 992, 1004 (9th Cir. 2005) (citation and alteration omitted).

Attachment B to the warra n ts sufficiently limited the
ag ents’ d iscretion. Althou gh A ttachment B utiliz ed the
p hrase “all records,” the search was temporally limi t e d t o records “[ f] or the period J anuary 1, 1992, until December 31, 1993; an d J a n uary 1, 1997 to present date[ .] ” 7 The

7 A ttach m en t

B sp ecif ied th e search p aram eters as:

F o r t he p erio d Jan u ary 1
, 1 99 2
, u n til Decem b er 3 1
, 1 9 9 3 ; an d J an u ary

1 ,1 9 9 7 to p resen t d ate:

A

. A ll reco rd s w

h ich deal w ith : Ro bert Kah re, B o b b y Kah re, o r A L P S, B o b b y K’ s Carp et Serv ice, B o bb y K’ s Ho m e Care Serv ice, In c. , G o ld Co n tracts an d A sso ciates, HGK P ro d u cts, In c., Master P ain ts Distrib u tin g , Master Pain ts, P ro d u ctio n E lectric, P ro d u ctio n Metal, P r o d u ctio n P lu m b in g an d A ir Co n d itio n in g , P u

n ch o u t In du stries, Sh erm an Carp ets, Sh erm a n T ile an d Marb le, Sh erm an Gran i te an d T ile, Un i o n P acif

i c, Un io n P acif

ic C o n s tru ctio n , W rig h t P ain t in g an d Dry

w all, W rig h t P ain tin g , W r i g h t P ro d u c t s , In c., an d an y o th er b u sin ess en tities

asso ciated o r related to R o b ert Kah re, in clu d in g b u t n o t lim ited t o , led g ers, j o u rn als, p ro p o sals, estim ates, b id s,

co n t racts, co rresp o n d en ce to an d f ro m g en eral

c o n t r a c t o r s / s u b

- c o n t r a c t o r s / c l i e n t s / c u s t o m e r s / s t a t e ag en cies, lab o r reco rd s , em plo y ee reco rd s, tim e card s,

ex p en se reco rd s, in co m e reco rd s, tax d o cu m en ts, tax retu rn s, s t ate reco rd s, p ay ro l l reco rd s, in su

ran ce

reco rd s, in co rp oratio n reco rd s, in co rp o ratio n f ilin g s, f in an cial reco rd s , r e c o rd s sh o w in g th e d isp o s itio n of fu n d s an d acq u isitio n o f assets, scales, w eig h in g d ev i ce(s), reco rd s o f th e acq u isitio n o f g o ld o r silv er, d isp o si t i o n o f g o l d o r s i lv er, co n tracts an d

co rresp o n d en ce th at d eal w ith t h e acq u isit i o n an dU N I T E D S T A T E S V

. K

A H R E 23

d isp o sitio n o f g o ld o r silv er, literatu re d escrib in g th e

u se o f g o ld o r silv er, en v elo p es w h ich ap p ear to b e u s ed f o r p ay ro ll p u rp o s es, lab els, em p lo y ee listin g s,

em p l o y ee id en tif

y in g in f o rm atio n an d f

iles, reco rd s of

o f f

- site s to rag e, reco rd s o f secu rity alarm s o r perso n n el.

B

. A ll reco rd s w

h ich d eal w ith Ro b ert Kah re, o r an y

o f th e id en tif

ied en t ities listed ab o v e, o r an y o th er b u sin ess en tities asso ciated o r related to Ro b ert Kah re

o r Dan ille Clin e, Rich ard W e llm an , My ra W ellm an (a.k .a. My

ra B u o n o m o / My

ra Kah re), Gary B o w ers, L o ri Rasm

u ssen (a.k .a. L o ri Kah re), in clu d in g b ut n o t lim ited to , em

p lo y m en t reco rd s, f

in an cial reco rd s,

reco rd s sh o w in g th e d isp o sitio n o f fu n ds an d /o r acq u isitio n o f assets, an d an y o th er d o cu m en ts or

reco rd s th at i n c l u d e s a ref eren ce to th e ab o v e n am ed

en tities an d in div id u als.

C. A ll reco rd s w

h ich d eal w ith Ro b ert Kah re, o r an y

o f th e id en t if

ied en tities o r in div id u als listed ab o v e, or

an y o th er b u sin ess en tit i es asso ciated o r related to Ro b ert Kah re o r : P acif ic T ile an d Marb le, D & L Fram in g , L L C, R J Co m

p an y Fram in g , L L C (a.k .a. D & L Fram in g ), Mitch ell Fram in g C o n tracto rs, In c., Mitch ell Dry

w a l l Sy s tem s, In c., Mitch ell Gen eral Co n tracto rs, In c., R J Co m p an y , Natio n al B u ild ers, In c., Natio n al B u ild ers, Oly m p ic Fram ers, In c., B rav o , In c., Rh o d es Fram in g , R

h o des Desig n & Dev elo p m en t Co rp o ratio n , Ro ck

y T o p P ain t an d Dry

w all, B ro n co Co n stru ctio n , First P rem ier Dry w all an d Pa i n

t, B ran d on L L C, B rick er Co n stru ctio n , In c., A B C Ro o f in g an d Sid in g , Ro b ert D illo n F r a m in g , T o ro Co n crete, In c., B ig B ear C o n crete, A ctio n C o n crete, A M Co n crete, B u ll Co n crete, Co n crete S y stem s, o r an y o th er b u sin ess

en tities o r in d iv id u als asso ciated w ith p ay ro ll,

em p l o y ee l easin g , cash pay m en ts, receip t o f g o l d or g o ld certif

icates, reco rd s to in clu de b u t n o t lim ited to

co n t racts, ag reem en t s, p ro o f o f p a y m en ts, f in an cial

reco rd s, in v o ices, co rresp o n d en ce to o r f ro m an y o f th eU N I T E D S T A T E S V

. K

A H R E 24

search was thus confined to records associated with Kahre’s corporate entities and with the use of g old and silver
pay ments. The search warrant affidavits furnished probable

cause to search for the enum er a ted items. As a result, the search warrants provided the r equisite specificity to limit the
ag ents’ discretion. See Smith , 424 F .3d at 1004–06. 8

W e affirm the district court’s denial of Kahre’s motion to suppress ev idence seiz ed f rom the B ledsoe, K imberly

, a nd Grand Cany

o n properties.

B. The District C ourt’s D e t e rm ination of Tax Valuation Based on the F air Ma r k e t Value of the G old and Silver Coins

Appellants contend that the district court erred in deny ing their motions to dismiss the indictments because they did not know that their use of g old and silv e r c o i n s for pay roll
pay ments w a s i l l e g al under the tax laws. Appellants specifically maintain that the district court’s t a x valuation predicated on the f

air market value o f t he g old and silver

a b o v e , an d an y o th er do cu m en ts, reco rd s o r ev id en c e related to em

plo y ees an d / o r p ay

ro ll.

8 Kah re’ s relian ce o n Un ited S ta t es v. Brid g es , 3 4 4 F.3 d 1 0 1 0 (9 th Cir. 2 0 0 3 ) is m isp laced

. In Brid g es , IRS ag en t s search ed a b u sin ess p rem i s ed

o n a w arran t th at “ d elin eate[d ] n o clear m aterial l im itatio n o r b o u n dary as to its sco p e.” Id

. at 1 0 17

. U n l ik e t h e w arran ts in th is case, th e w arran t in Brid g es lack ed an y tem

p o ral p aram eters o r lim itatio n s reg ard in g th e ty pes

o f d o cu m en ts asso ciated w i th th e alleg ed crim in al activ ity

. See id

. (“ T h e list is a co m

p reh en siv e lau n dry list o f su n d ry g o o d s an d in v en t o ry th at on e

w o u ld read i l y ex p ect to d isco v er in an y sm all o r m ed iu m

- sized b u sin ess in th e Un ited States. . . .”). T h e w arran t in Brid g es also f ailed to sp ecif

y

an y crim in al activ ity an d d id n ot in co rp orate th e af f id av it. S ee id

. at 1 0 1 8

.U N I T E D S T A T E S V

. K

A H R E 25

coins unfairly imput e d criminal intent to their unknowing actions.

“The element of wilfulness cannot o btain in a criminal tax evasion case unless the law clearly prohibited the co n d uct alleg ed in the indictment.” George
, 420 F .3d at 995 (citations and internal quotat i o n marks o mitted). “W ithout sufficient clarity in the law, tax p ay ers lack the fair notice demanded b y due process so that they may c o nform their conduct to the law.” Id. ( c i t a tion and internal quotation marks omitted). “However, a lack of prior appellate ruling s on the topic does
not ren d er the law vag ue, nor does a lack of previously litig ated fact patterns deprive tax pay ers of fair notice.” Id. at 995–96 (citation a nd internal quotation marks omitted). “Thus, criminal prosecution is p ermissible when it is clear bey ond any doubt that the conduct is illeg al under e stablished principles of tax law.” Id. a t 9 9 6 (citation, alterations, a nd internal quotation marks omitted).

Appellants’ arg ument is unpersuasive, as we have

ex p ressly held that coins are tax able as property when their fair market v alue ex ceeds their f ace v a l ue. I n Cordner v

. United States
, 671 F .2d 3 67 (9 t h C i r. 1982), the appellants received $20 Double Eag le g old coins as corporate dividends. See id. at 368. After the appellants r eported the dividends at the coins’ f

a c e v a l u e, the I RS charg ed the appellants with a tax able d i v idend equivalent to the coins’ fair market value. See id. W e held that the I RS correctly assessed the c o i ns a s property based on their fair market value:

W e have no difficulty in holding that the g old

c o ins here, thoug h leg al tender and hen c e money for some p urposes, are a lso property to be tax ed at fair mar ket value because theyU N I T E D S T A T E S V

. K

A H R E 26

have been withdrawn from circulation and have numismatic w orth. W h en leg al t ender, by reason o f its value to c o llectors or the intrinsic wor t h of its contents, has a fair

m ar k e t value in ex cess of its face value o r t e n d e r, then it should be d eemed property other than money

. . .

Id. (citations and internal quotation marks omitted).

I n Cal. Fed. Life I

ns. Co. v. Comm’r
, 680 F .2 d 8 5 (9th Cir. 1 982), the appellant ex chang ed Swiss francs for $20 g old coins, and claimed a capital loss premised on the coins’ face value. S

e e id. at 86. W e affirmed the tax court’s determination that the g old coins w ere tax a b l e as property based o n their fair market value. See id. W e held that usag e

o f t h e term “money ” in I .R.C. § 1001(b) required a realis t i c assessment of the coins as property :

Section 1001(b) is clearly i n t ended to permit

a r ealistic assessment of the economic g ain o r loss a ttending a sale or ex change

. T hat
p u r p o s e w o u l d b e f r u s t r a t e d b y a n interpretation that c ompelled g old coins to be
tr e at e d at a fraction of their true value. W e therefore conclude that m oney in § 1001(b) refers to the currently c irculating medium o f

ex c h ang e, while property includes coins that have, by r eason of their value to collectors or the intrinsic worth of their contents , a fair market value in ex cess of their face value. B e cause the key element is the ex cess o f market over face value

, it is immaterial thatU N I T E D S T A T E S V

. K

A H R E 27

such coins may be legal tender at their face value.

Id. (footnote reference a

nd internal quotation marks omitted).

Appellants attempt to disting uish Cordner and Cal. Fed. Life Ins. Co. because those cases involved coins that had been withdrawn from circulation. H owever, in Cal. Fed. Life Ins. Co.
, we decli ned to r ecog niz e this very distinction because

we “ag ree[ ed] with the Tax Court’s con c l usion that the technical status of the c oins a s leg a l tender is immaterial

. . . ” Cal. Fed. Life Ins. Co.
, 680 F

. 2 d at 8 6 n.3 ( citation a nd internal quotation marks omitted )

. R ather, we emphasiz ed that “[ b] ecause the key element is the ex cess of market over face value, it is immaterial that s u c h c o ins may be leg al
t e n d er at their face value.

. . .” Id. at 86 (footnote referen c e omitted).

Other courts have held that coins in circu l ation may be assessed at their fair market value. I n Joslin v. U nited States
, 666 F .2d 1306 (10th Cir. 1981), the Tenth Circuit considered whether the tax pay er should have r e p orted pay ments in silver dollars at their numismati c v a l u e. S ee id. I n that case, an attorney received 200 silver dollars for leg al services, a nd reported the income as $200, instead of the fair market value of $1,000. See id. a t 1 3 0 6–07. The Tenth Circuit observed that “[ i] f a tax pay er receives p r o p e rty other than cash a s

co mpensation, the tax pay er’s income is measured by the property ’s fair market v alue.” Id. at 1307 (citation omitted). B ased on g e neral tax principles, the Tenth Circuit held:

Unquestionably

, a silver dollar has both a face value and a separate value refl e c ting the coin’s numismatic wo r t h

. To this ex tent aU N I T E D S T A T E S V

. K

A H R E 28

silver dollar combines the chara c teristics o f cash and property

. W hen a tax pay er barg ai n s for and benefits from the hig her market value of silver coin s , he or she must include this

amo u n t in income. That silver dollars a re desig nated leg al tender w i t h a nominal value of o n e dollar acceptable at the U nited States Treasury to discharg e o ne dollar o f d e bt, o r

ex c hang eable for a o ne dollar F ederal Reserve note, does not require a different result. . . .

Id. (citations and footnote reference omitted).

I n Stoecklin v. Comm’r , 865 F

. 2d 1221 (11th Cir. 1989), the Eleventh Circuit reached a similar conclusion. I n that

ca s e , t h e a

ppellant, who was the trustee of an equity trust, formed a c orporation for his accounting practice, of which he was the o nly shareholder and e mploy ee. See id. at 1222–23. The corporation paid the appellant’s trust 2 50 silver d o l l a rs per month for the appellant’s services. S e e id. at 1223. Althoug h the corporation deducted the coins’ f a i r market value as ex p enses, the appellant only reported the face value of the coins as income. S

e e id. The I RS subsequently soug ht

a deficiency premised o n the fair market value of the coins. See id. Apply ing the precepts developed in Cordner a nd Joslin

, the Eleventh Circuit rejected the appellant’s arg ument that coins still in circulation were assessed at face value, a nd held that the I RS properly soug h t a deficiency premised on the fair market value o f the c oins. S e e id. at 1225; see also Lary v. Comm’r
, 842 F

. 2d 296, 299 (11th Cir. 1 988) (“W here coins have a fair market value i n e x c e ss of their f ace value,U N I T E D S T A T E S V

. K

A H R E 29

their potential use as leg al tender is irrelevant.

. . .”) (citation omitted). 9
, 1 0

B a sed on this long standing and consistent precedent, we

c onclude that A ppellants had ample notice that their pay r o l l scheme, premised on the ex c h a ng e of g old and silver coins for envelopes of c ash, tri gge r ed the requirement to remit
pay roll tax es to the I RS a

nd to report the pay

ments a s income based o n the fair market val u e o f t h e coins. See George
, 420 F .3d at 995–96. 1 1

9 A p p ellan ts co n ten d th at g old an d silv er co in s are statu to rily v alu ed at f ace v alu e. Ho w ev er, th is ap p eal d oes n o t really co n cern t he statu to ry

v alu e o f g o ld an d silv er co in s w h en u tilized as leg al ten d er. S ee Co rd n er , 6 7 1 F.2 d at 36 8 ; S to ecklin

, 8 6 5 F.2 d at 1 2 2 5. In stead

, th is ap p e a l ad d resses A

p p ellan ts’ p ay

m en t o f w ag es in g o ld an d s i lv er co in s in a sch em e to av o id p ay

ro ll tax es, a s e v id en ced b y th e f acts th at Kah re’ s

em p l o y ees w ere req u ired t o im m ed i ately retu rn th e co i n s f o r cash an d

, th at if an em p lo y ee r e t ain ed t

h e co in s , h is w ag es w ere red u ced b y th e f air

m ark et v alu e o f

th e co in s.

1 0 T h e T ax Co u rt h as also o p in ed th at co in s are tax ed as p ro perty at f air

m ark et v alu e w

h en u sed as co m

p en s atio n f

o r s erv ices o r g o o d s. S

ee S m ith

v. Co mm’r
, T .C.Mem o. 1 9 9 8

- 1 4 8
, 1 9 98 W L 19 1 8 3 5
, at * 3 (U.S. T ax Ct. 1 9 9 8 ) (“ W h en th e f

air m ark et v alu e of leg al ten d er ex ceed s its f ace v alu e,

su ch leg al ten d er is p ro p erty o th er th an

m o n ey .”) (citatio n s o m itted ).

11 In th eir req u est f

o r j u d icial n o tice, A

p p ellan ts p ro f

f er a m em oran d u m fr o m IRS Sen i o r Co u n sel Mark Ho w ard as co n f irm atio n th at th e IR S

assesses co in s at f

ace v alu e, an d t

h at A p p ellan ts’ p ay

m en ts i n g o ld an d silv e r co i n s w ere co n sisten t w ith IRS p o licy

. Ho w ev er, th e ref eren ced

m em o ran d u m p rim arily an aly zed w h eth er a tax p ay er co u ld p ay a tax bill

w ith g o ld an d silv er co in s at f ace v alu e. C itin g Jo slin

, Co rd n er , an d Ca l. Fed . Life In s. Co

. , th e m em o ran d u m o p in ed th at “ th e tax p ay er m ay h av e tak en h is p ay o u t o f t

h e b u sin ess in g o ld an d silv er co in s an d rep o rted o n ly th e f ace v alu e of th e co i n s as i n co m e. W e n o te th at o th ers h av e t ried su ch

an ap pro ach in t

h e p ast

. I n each o f th ese cases, th e co u rts req u ired th e tax pay ers t o reco g n i ze in co m e b ased o n th e m ark et v alu e an d n o t o n th eU N I T E D S T A T E S V

. K

A H R E 30

W e a re not persuaded by A ppellants’ arg ument that t h e Gold B ullion Coin Act of 1985, Pub. L

. No. 99-185, 99 Stat. 1177, overruled prior leg al precedent that coins are assessed
at fair market value. Al t houg h the Gold B ullion Coin A ct p r o v i d es the Secretary of the T reasury with the authority t o mint g old and silver c oin s for circulation, see 31 U .S.C. § 5112(a)(7)–(11) (2010), 1 2 there is no statu t o r y lang uag e reflecting Cong ressional intent to overrul e p r ior leg al precedent or to establish the tax able value of the coins a s their face value. See id. ; see also S klar v

. Comm’r
, 5 49 F

. 3 d 1252, 1262 (9th Cir. 2008) (observing that if Cong ress intended to overrule judicial precedent concerning tax law s , “ i t would have ex pressed its intention more clearly ”) (citation omitted). F urther, the leg islative history o f the Act reflects, if any thing

, Cong r essional intent t h a t g old coins retain their f a ir market value. See 131 Cong

. Rec. H10 528-05, 1985 W L 721189 (Cong

. Rec. Dec. 2
, 1 985) (statem e n t of Rep. Annunz io) (“The g old c oins will be sold at the market price of g old plus

a small charg e for minting

, marketing and d i stribution, beg inning October 1, 1986.

. . .”); see also id. (stat e m en t o f Rep. L ewis) ( “The actual denomination of thes e n e w coins will be obvious to every one- 1 t roy ounce, half-ounce,
qua r t er-ounce, a

nd tenth-ounce. Their value will be determined by the free market, just as the values of all other

f ace v alu e o f

th e co in s. T h is case m ay p ro v id e ev id en ce o f so m e so rt o f

o n g o in g s ch em e

. . .” T he m em o ran d u m d o es n o t su p p o rt A p p ellan ts’
arg u m en t th at th eir p ay

ro ll p ay m en ts w ere co n s isten t w ith IRS p o licy

. S ee Co n so lid ated A

p p ellan ts’ Req u est to T ak e J u d icial No tice o f Go v ern m en t Reco rd s an d F a cts Co n tain ed T h erein T h at C an B e A ccu rately an d Read ily Determ in ed

, March 5
, 2 0 1 2
, Ex h

. 1, at 2
, 5
, Case No

. 0 9

- 1 0 4 7 1
, Do ck et No . 7 0.

12 T h e G o l d B u llio n Co i n A ct o f 1 9 8 5 is cu rren tly co d if ied at 3 1 U.S.C. § 5 1 1 2 (2 0 1 0 ).U N I T E D S T A T E S V

. K

A H R E 31

g oods and services are determined.”). The leg islative record contains no l i n gu istic or historical support for Appellants’ contention that the Gold B ullion Coin Act of 1985 overruled prior leg al precedent f

o rmulating tax assessments for go l d and silver coins.

Appellants’ relia n c e on 31 U.S.C. § 5118(a) and (d) in support of their arg ument that the d istrict court’ s ruling violated t h eir rig ht to c ontract is similarly misplaced. According to A p p e llants, § 5118 leg aliz es c ontracts like theirs, that contain “g old clauses.”

Section 5118 provides in relevant part:

(a) I n this section—(1) g old c la u se means a pr o v i s ion in or related to an oblig ation alleg ing to g ive the oblig ee a r ig ht to require
pay ment in—(A) g old; (B ) a p articular United States coin or currency ; o r (C) United States
money measured i n g o ld or a p a rticular United States coin or currency

.

. . . (d)(1) I n this subsection, o blig ation means any oblig ation ( ex cept United States currency )
pay a ble in United Stat es money

. (2) An oblig ation issued containing a go l d clause o r g overned by a g o ld clause is disc h a r ge d on pay ment (dollar for dollar) in U nited States coin or currency that is leg al tender at the time of p ay ment. This parag raph does not apply to an oblig ation issued after October 27, 1977.U N I T E D S T A T E S V

. K

A H R E 32

Id. (internal quotation marks omitted).

Assuming arguendo that § 5 118 does “leg aliz e” contracts containing g old clauses, it would b e of no help to Appellants, because Appellants’ sche m es did not implicate g old clause
contracts as defined i n § 5 118. See § 5118(a)(1) (defining “g old c lause” as an oblig ation purporting to g ive the oblig ee the rig ht to demand pay

ment in, among other thing s , go l d ) ;

see also 60 Am.J ur.2d Pay ments § 26 (2012) (“A g o ld clause is a provision in or related to an oblig ation alleg ing to g ive the oblig ee a rig ht to requ i re p ay ment in g old, a particular United States coin o r currency , or United States mon ey

measu r ed in g old or a particular United States coin o r currency

. An oblig a tion issued containing a g old clause o r g overned by a g old clause is discharg ed on p a y m e nt (dollar f or dollar) in United States c oin o r currency that i s l e ga l tender at the time o f pay

ment.

. . .”) (footnote references a nd internal quotation marks omitted). Rather th a n u tiliz ing a g old clause, i.e. , a clause desig ned to g ive employ ees a rig ht
to demand pay

ment in g o ld, Appellants evaded income a nd
pay roll tax oblig ations by requiring e m p l o yees to ex chang e g old and silver coins for c ash in order to receive their weekly
wag es. This practice turne d t h e gold clause standard on its head. Rathe r t h a n the oblig ee (the employ ee) demanding
pay ment in g old from the oblig or (Kahre), the oblig or (Kahre) required the o blig ee (the employ ee) to accept pay ment in g old that would then be repaid w ith cash. Nothing in 31 U .S.C. § 5118 o r c ases i n t e r

preting that statute validates Kahre’s practice.

N o tably

, if an employ ee r etained a g old or silver c o i n i n lieu o f c a s h, the fair market value of the coin, as opposed to its face value, was deducted from the employ ee’s wag es. The evidence at trial also e s tablished that the Kahres did notU N I T E D S T A T E S V

. K

A H R E 33

participate in th e g old and silver coin ex chang e r equired o f Kahre’s empl o y e e s, a clear indication of the illeg itimacy o f the practice. Given the inapplicability of § 5118 to Kahre’s scheme, Appellants’ arg um e n t reg a r ding their rig h t to contract pursuant to that section is unpersuasive.

I n the alternative, Appellants maintain that the Department of J ustice and t h e I RS lack authority to value coinag e. I n essence, Appellants erroneously assume that the I RS thwarted Cong r ess’ mon etary powers, including the valuation of money

. The f law in Appellants’ assumption is that the I RS did n ot establish valuation of coinag e as a matter of monetary policy

. Rather, the I RS interpreted and a pplied the tax code defining the tax able value of go ld and silver coins as property when used as c ompensation for services rendered. The I RS’s actions in no w ay v iolated the separation of powers, as the I RS is “ the authority on the interpretation and application of the I nterna l R e venue Code

. . .” Tua l a t i n Valley B uilders Supply, Inc. v. United States
, 522 F .3d 9 3 7
, 9 42 (9th Cir. 2008); see also 2 6 U .S.C. § 7805(a) (deleg a ting authority concerning the I nter n al Revenue Code).

Appellants ag ain urg e application o f the rule of lenity to

reverse their convictions, pointing to the “uncertainty ” o f their tax oblig ations. “The rule of lenity o n l y a pplies, however, where there is a g rievous ambig uity or uncertainty in t h e l ang uag e and structure of the statute, such that even after a c ourt has seiz ed ever y t h i n g from which a id can be derived, it is still left with an ambig u ous statute.

. . .” United States v. Carona
, 660 F .3d 3 60, 369 (9th Cir. 2 0 1 1 )

, as amended (citation, alterations, and intern a l quotation marks

o mitted). “B e cause the meaning of lang uag e is inher e n t l y contex tual, we have declined to d eem a statute ambig uous forU N I T E D S T A T E S V

. K

A H R E 34

purposes o f lenity merely because it w as possible to articulate

a construction more n arrow than that urg ed b y the
g overnment.

. . .” Id

. (citation and alteration omitted) (emphasis in the orig inal).

As discussed, several federal courts, as well as the Tax Court, have held th a t g old and silver coins are a ssessed at their fair market value when used for compensation for services rendered. The applicable tax laws and corresponding
reg ulations also establish th at , when property is used a s

co m p e n s a tion, it is assessed a t f air market value. See 26 U.S.C. § 61(a)( 1 ) ( defining g r oss income as including “[ c] ompensation for services, including fees, commissions, fring e benefits, and similar items

. . .”); 26 C.F .R. § 1.61-2(d)(1) (“[ I ] f services are paid for in property , the fair market v alue of the p ropert y taken in pay ment must be included in income a s compensation.

. . .”). Ad ditionally

, Appellants were charg ed with violati n g 26 U.S.C. § 7202, with the operative I ndictment alleg ing that App e l l ants

“ willfully fail[ e d] to collect or truthfully account for and pay

over such tax

. . . ” (emphasis added). I nclusion of a scienter requirement “ mitig ates a law’s vag ueness, especially with respect to the adequacy

of notice to the complainant that his conduct is proscribed.” United States v. Guo
, 6 34 F

. 3 d 1119, 1123 ( 9th Cir. 2011) (citations, alteration, a n d internal quotation marks omitted). 1 3

1 3 A p p ellan ts p o sit t

h at th e g o v ern m en t’ s co n f u sio n co n cern in g t h e

v alu atio n o f g o ld an d silv er co in s d em on strates th at th e law is u n settled

. In su p p o rt of th e p rem ise th at th e g o v ern m en t is in f act co n fu sed

, th ey p o in t to th e in d ictm en t in Un ited S ta tes v. vo n No th a u s , Case No

. 5 :0 9

- 2 7 (W .D. N.C.) (v o n No t Hau s In d ictm en t). A p p ellan ts assert th at g o v ern m en tal co n f

u sio n is ev i d en ced b y th e alleg atio n in th e v o n No th au s In d ictm en t t

h at co in s c o n s t i t u te Un i ted States cu rren cy , rath er th an p ro p erty

. H o w ev er, vo n No th a u s in v o lv ed th e creatio n an d p ro m o tio n ofU N I T E D S T A T E S V

. K

A H R E 35

W e hold that the dis t r i ct court correctly determined that
g old a nd silver coins used to p ay wag es were properly

assesse d at their fair market value, and that Appellants h ad sufficient n o tice that their conduct was illeg al under the tax laws.

C. Disqualif

ication of the P r osecutor

A lthoug h we have h eld that the mere threat of ci v i l litig ation does not warrant a prosecutor’s disqualification, see United States v

. W

encke

, 604 F .2d 607, 611 (9th Cir. 1979),

we have not ex tensively addressed d isqualification premised

on an ex tant civi l a c t ion a g ainst the prosecutor. I n United States v. Kember

, 685 F .2d 451 (D

. C

. C i r. 1982), the D.C. Circuit addressed an analog ous claim. I n Kember

, the defendants soug ht disqualification of two federal prosecutors who were named as defendants in a l a w s u it concerning a search conducted in bad faith. See i d

. a t 458. T h e D.C. Circuit held that the l a w suit a lone did not require disqualification, ex plaining that:

The potential conflict of intere s t that mig ht resul t f rom a personal civil suit filed ag ainst

an A s s istant United States Attorney (AUSA) by a defendant in a criminal case f or acts undertaken by the AUSA i n his official capacity in the c riminal matter would have to be very strong before disqualification would be justified. I t could not be justified by mere

a priv ate co in as co m

p etin g cu rren cy , an d n o t v io latio n s o f th e tax co d e th ro u g h th e u se o f w ag e p ay m en ts in g o ld an d s ilv er co in s to av o id p ay in g p ay ro l l tax es. A s in th i s case, th e leg al an aly sis tu rn ed o n th e m an n er in

w h ich th e co in s w ere u sed

.U N I T E D S T A T E S V

. K

A H R E 36

inference from the filing of the suit but would require proof, b y clear a n d convincing evidence, of a prima f

acie case of misconduct

on the part of the AUS A

. T he defendants failed to produce the p roof required by t h i s standard.

Id. at 4 59 (citation omitted); see also United States v. Heldt

, 668 F .2d 1 2 3 8
, 1275–77 (D.C. Cir. 1 981) (per c uriam), as amended ( clarify

ing that a lawsuit fil e d by a criminal defenda n t a ga inst a p rosecutor d oes not result in automatic disqualification of that prosecutor). 1 4

Appellant s c o ntend that the district court improperly applied a clear and convincing standard of proof in resolving the disqualification issue bec a u s e the Supreme Court overruled Kember in Y

oung v. United S

tates ex rel. Vuitton Et Fils

, 481 U.S. 787 (1987) (Vuitton). I n Vuitton
, the Supreme Court considered w hether a private atto r n e y , who was the

14 A pp ellan ts co n ten d th at th e den ial of q u alif ied im m u n ity in th e Biven s actio n w as a u n iq u e ev en t d em o n stratin g th e im p erm issib le m otiv atio n f

or th e crim in al p ro secu tio n

. W e d i sag ree. T h e d istrict co u rt i n th e civ i l actio n w as req u ired t o assu m e th at th e alleg atio n s o f im p erm issib le

m o tiv atio n w ere tru e. S

ee Ctr. fo r Bio -Eth ica l Refo rm, In c. v. L o s An g eles Cn ty. S h eriff Dep ’t
, 5 3 3 F.3 d 78 0
, 7 9 8 (9 t h C ir. 2 0 0 8 ) (assu m in g th e tru th

o f alleg atio n s i n th e Co m plain t f o r th e p u rp ose o f q u alif

ied im m u n ity

an aly sis). Giv en th e p o stu re o f th e civ il case, th e d istrict co u rt’ s d en ial of
q u alif ied im m u n ity d o e s n o t ref

lect a “ u n iq u e ev en t” d istin g u ish in g th is

case f ro m Kemb ler

. W e also d o n o t c o n s id er th e p ro secu to r’ s d ism issal

o f th e ap peal in th e Biven s case as an ad m issio n o f m i sco n du ct, o r p ro of

o f an im p erm issib le co n f

lict o f in teres t

. T he r eco rd sim p ly ref lects th at A p pellan t s an d th e p ro secu t o r, as o n e o f sev eral d ef en d an ts, d ism issed th e ap p eal b ased on th e p arties’ stip u latio n s. Mo reo v er, th e g o v ern m en t h ad

an ex cep tio n ally stro n g case a g a i ns t A p p ellan ts irresp ectiv e o f th e p ro secu to r’ s in v o lv em en t

.U N I T E D S T A T E S V

. K

A H R E 37

beneficiary of an injunction reg a rding a trademark, could be appointed to prosecute contempt charg es for violations of the injunction. See id. a t 790–91. The Supreme Court observed that “ [ p] rivate attorney s ap pointed to prosecute a criminal contempt action r epresent the United States, not the p arty that i s t h e b e neficiary o f the court order alleg edly violated.

. . . ” Id. at 804. “A private attorney appointed to prosecute a criminal contempt therefore certainly should be a s disinterested as a public prosecutor who undertak e s such a prosecution.” Id. (footnote reference omitted). The Supreme Court held that “counsel for a party that is the beneficiary

of

a court order may n ot be appointed as prosecutor in a contempt action alleg ing a violation of that order.” Id. at 809 (footnote reference omitted). The Supreme C o u r t also h eld that harmless error re view was inapplicable because the appointment of an interested prosecutor constitutes structural

error. See id. at 809–10.

Althoug h the Supreme Co u r t h eld that, in c ertain situations, appointment of a prosecuto r w i th a conflict o f interest constitutes r eversible error, the Court did not alter the standard for determining whether a disqualify ing conflict

ex ists, or e ven discuss Kember

. Concluding that a conflict

ex isted in Vuitton was an easy c all. The appointed p rosecutor

was a private attorney who represented L ouis Vuitton, the beneficiary of the injunction being enforced. S e e id. at 791–92. The Supreme Court identified the pecuniary interest of the retained counsel/prosecutor as a n “inherent c o nflict.” Id. at 807. I n recog n ition o f t h a t inherent conflict, the Supreme Court he l d t hat “counsel for a party that is the beneficiary of a court order may not be a p p ointed a s prosecutor in a contempt action alleg ing a violation of that order.” Id. at 8 0 8 ( f

o o tnote reference omitted). B ecause o f the stark difference in facts between V u itton a nd this case, weU N I T E D S T A T E S V

. K

A H R E 38

are not persuaded that Vuitton is app l i c able h ere. W e are, however, persuaded by a nd adopt the reasoning of the D.C. Circuit in Kember

. W e therefore hold that proof of a conflict

mu s t b e clear and convincing to justify removal of a pro s e cutor from a c a se. Otherwise, as noted in H eldt

, prosecutors could be removed sim p l y b y the filing o f an action ag ainst them. See Heldt , 668 F .2d at 1276.

This rule is cons i s t e n t w ith our precedent, w hich has treated the Supreme Court’s r u l i n g i n Vuitton as a narrow

one. See F.T.C. v

. A m. Nat’l Cellular

, 8 68 F .2d 315, 319 (9th Cir. 1989) (“The Vuitton opinion focused quite n a r r owly on the c onflicts of interest f aced by private attorney s tr y i n g to represent simultaneously both their private cl i en t s’ interests and the public interest in p r o secuting contemnors. Specifically

, the Court in Vuitton appears larg ely to have been concerned with conflicting financial interests.

. . .”) (citation omitted) (emphasis in the orig inal). I n Am. Nat. Cellular

, we compared the conflict in Vuitton to the financial interests that would foreclose the participation of a g overnment prosecutor. See id. (referencing 18 U.S.C. § 208(a), whic h prohibits
g overnment employ ees from p articipating in matters in which they have a financial interest )

. I t is undisputed that the prosecutor’s alleg ed conflict of interest in this case arose a fter he was already involved in the c ase as a g overnment attorney , and in n o way involved a financial interest on the part of the prosecutor. T he dichotomy between the private attorney ’s appointment in Vuitton and non-prejudicial p o t e n t i a l c o nflicts of interest a

rising in other contex ts is ex emplified by the facts of United S

tates v. Lorenzo
, 995 F .2d 1448 (9th Cir. 1993). I n tha t p o s t

- Vuitton case, we considered whether the United States Attorney ’s Office in Hawaii shou l d h ave been disqualified because some o f its employ ees were victims o f

a tax protest scheme. See id. at 1 451–52. Rely ing on H eldt

,U N I T E D S T A T E S V

. K

A H R E 39

we held that disqualification was not w a r r a nted because the defendants failed to demonstrate prejudice. See id

. a t 1 453. Lorenzo establish e s t hat, at a minimum, d efendants must demonstrate p r e

j u d i c e f r o m the prosecutor’s p otential conflict of interest. See id. Moreover, under Kember

, w hich was not overruled b y V

u itton
, clear and convincing evidence o f
pro s e c u torial misconduct must be presented. See Kember

, 685 F .2d at 459. This burd e n of presentation is log ical, otherwise a ny defendant c ould d isqualify a prosecutor b y simply filing a Bivens action without presenting c l e a r a nd convincing evidence of prosecutorial misconduct, but only “complain[ ing ] of some action taken by the p ro secutor outside of his quasi-judicial capacity

. . .” Heldt

, 6 68 F

. 2 d at 1276.

Appellants contend that the prosecutor’s c omments reg arding threats to h is pension from the Bivens a c t i o n a nd his statement that the case was “persona l ” demonstrate the requisite misconduct. W e do n ot ag r ee. As the district court observed, the prosecutor’s remarks occurred in 2008, almost
t h ree y ears after the filing o f the initial indictments in 20 0 5
, and thereby could not have been the impetus for filing the crimina l charg es. Moreover, even inflammatory c omments made during a trial d o n o t necessarily w arrant reversal. See H e i n v

. Sullivan

, 601 F .3d 897, 913, 9 16 (9th Cir. 2 010) (holding that a prosecutor’s derog atory comments in closing
arg ument r eg arding defendants and defense counsel were not prejudicial). The p rosecutor’s isolated remarks do not constitut e c lear and c onvincing evidence of misconduct stemming from an impermissible conflict of interest. See id. at 916.

I n a similar vein, Appellants maintai n t h a t d i s q ualification

was justified because of the h e ig h tened prosecutorialU N I T E D S T A T E S V

. K

A H R E 40

discretion in tax cases, i.e.
, tax defi c iencies may be pursued criminally

or civilly

. However, this arg u ment overlooks the reality that an Assist an t U nited States Attorney does not possess unbridled discr e t i on to pursue prosecution in tax

cases. Rather, the Department of J u stice’s Tax Division must approve all c riminal tax prosecutions. See U.S.A.M. § 6

- 4:010 (“To a chieve uniform, broad, and balanced criminal tax enforc e m e nt, the Attorney General has authoriz e d the Tax Division to oversee all federal criminal tax enforcement and
to authoriz e or decline investig ations a nd prosecutions in tax

ma t t e rs.

. . .”) ( citation omitted). Appellants do not persuasively contend that the D e partment o f J ustice’s Tax Division operated under any conflict or that its supervisory role was ineffective in this case.

Appellants nex t arg ue that the prosecutor’s trial conduct manifested his conflict of interest. F or ex ample, Appellants
assert that the prosecutor, due to h is conflict of interest, failed to elicit from Molesworth that her testimony in the first trial

was perjured. H owever, Appellants fail to identify a ny aspect of Moleworth’s testimony that was f a l s e

. S ee United States

v. B ingham

, 653 F .3d 9 83, 9 9 5 (9th Cir. 2 011) ( “W e cannot presume that the prosecutor knew that the prior inconsistent
statement was true but elicited pe rjured testimony any way , and [ Appellants] point[ ] to nothing in the record that shows the i n t e n t ional use of perjured testimony

. . . .”) (citation, alteration, a

nd internal quotation marks omitted). Appellants in no way c h a l leng e the d istrict court’s ruling that the
g overnment properly d isclosed to Appellants prior to trial Molesworth’s statement that she h ad previo u sly p erjured herself a nd that Appellants’ counsel effectivel y crossex a mined Molesworth on that point. The district court’s unchalleng ed ruling r ebuts A ppellants’ alleg ations o f prosecutorial misconduct.U N I T E D S T A T E S V

. K

A H R E 41

F inally

, Appellants contend that the p rosecutor suborned
p e rjury because one witness’ testimony was contradicted b y other witnesses. H o w e v e r, Appellants fail a g ain to effectively challeng e the district court’s ruling that t he contradictory testimony presented a credibility issue

, n ot perjury

. Therefore, the d i s trict court did not abuse its discretion in rul i n g that the prosecutor should not be dismissed on this basis. S ee Davis , 932 F .2d at 761–62. 1 5

B e cause Appellants failed to present clear and convincing

ev i d e n c e of an impermissible conflict of interest or o f prejudice, we conclude that the district court properly denied Appellants’ motion to disqualify the prosecutor. See L o r e nzo , 995 F .2d at 1453; see also Kember

, 685 F .2d at 459.

15 A p pellan ts p o sit a litan y o f alleg ed d isco v ery v io latio n s ref lectin g th e p ro secu to r’ s co n f

lict o f in terest. Ho w ev er, th e d istrict co u rt d id n o t f in d

an y su ch v i olatio n s, an d its ru l in g s w ith resp ect to d isq u alif icatio n o n th ese bases d id n o t co n stitu te an ab u se o f d iscretio n

. S ee U n ited S t a tes v. Hin kso n , 5 8 5 F.3 d 1 2 4 7
, 1 2 6 3 (9 th Cir. 2 0 0 9 ) (en ban c) (h o l d i n g th at

rev ersal f o r “ ab u se o f d iscretio n ” is p erm issib le o n ly w h en th e ru lin g or f in d in g b ein g rev iew ed “i s illo g ical, im p lau sib l e, o r w ith o u t su

p p o rt in in f eren ces th at m ay

b e d raw n f ro m th e f acts in th e reco rd ”).

A p pellan t s also accu se th e p ro secu to r o f m i srep resen t in g t h e f actu al b asis f o r a su m m ary ch art th at w as rece i v e d in to ev id en ce. T h e d istrict

c o u rt ru led th at th e su

m m ary ch art w as ad m issib le, an d th at it d i d n o t

“ h u rt t h e d ef en d an t i n a n y w ay , sh ap e, or f o rm .” Here to o , th e d istrict

co u rt d id n o t ab u se its d i scretio n b y d eclin in g to d isq u alif y th e pro s ecu to r.U N I T E D S T A T E S V

. K

A H R E 42

D. Evidentiary Rulings

1. Evidenc e Concerning the Legality of G o ld Clause Contracts

Appellants c h alleng e the district court’s ex c lusion o f evidence concerning the leg a lity of g old clause contracts.

As discussed, the district co u rt properly determined that
g old and silver coins should be assessed at fair market value when used a s compensation for services. B a se d o n t h is
correct leg al conclusion, the district court held that p roffered

e v i d e nce attempting to otherwise establish the requirements of g overn i n g t ax law was irrelevant to the issue o f willfulness. However, A ppellants were permitted to introduce statutes, I RS pamphlets, tax provisions a n d other

sources upon which Appellants relied in g ood faith during the duration of their wag e pay ment sy stem.

The district court’s ruling fully comported with our precedent. I n United States v. P o wel l

, 955 F .2d 1206 (9th Cir. 1992), as amended, we observ e d t h at, in a criminal tax
case, “ a district court may ex clude evidence of what the law is or should b e

. . .” Id. at 1214 (citation omitted) (emphasis in the or ig inal). I n contrast, the district court “ordinarily
cannot ex clude evidence relevant to the jury ’s determination of what a defendant t h o u g ht the law was

. . . because willfulness is an element of the offense.” Id. (emphasis in the orig inal). “[ S] tatutes or case law upon which the defend a n t claims to have actually relied are admissible to disprove that element if the defendant lay s a proper foundati on which demonstrates such reliance.” Id. (citations and em p hasis omitted). “L eg al materials u pon w hich the defendant d o e s not c laim to have relied, howe v er, can b e ex cluded a sU N I T E D S T A T E S V

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A H R E 43

irrelev a n t a

nd unnecessarily confusing because only the defendant’s subjective belief is at issue: the court remains the jury ’s sole source of the law.” Id. “I n a ddition, the court may instruct the j u r y t h at the leg al material admitted at trial is relevant only to the defendant ’s s t a t e of mind and not to the requirements of the law, and may g ive othe r p roper cautionary

and limiting instructions as well.” Id.

The d istrict court, therefore, properly ex cluded evidence, including proffered ex p ert testimony

, that conflicted with its
correct leg al ruling that c o i n s w e re assessed at fair market value for tax purposes irrespective of their use as leg al tender. See id. 1 6

Appella nts’ contention that the district court’s evidentiary ruling s improperly diluted the burden o f proof and precluded

a complete defense is unpersuasive. Althoug h the district
court ex c luded evidence that contradicted its c orrect leg al ruling reg a

rding valuation of g old and sil ver coins for tax purposes, the court properly instructed the jury

that:

A defendant’s conduct is not willful if that person acts due to a g ood f

aith misunderstanding of the law. B ecause the g ove r n m e nt has the burden o f

16 A p p ellan ts’ assertio n th at th e d istrict co u rt erred in ex clu d in g ev id en ce th at i ts ru lin g w as th e f

irst in th e n atio n is u n av ailin g

. T h e d istrict co u rt’ s

ex cl us i o n o f t

h e p ro f f ered ev id en ce d i d n o t im p act th e p resen tatio n of

ev id en ce o f A

p p ellan ts’ g o o d f

aith b elief

s, as th e co u rt’ s ru lin g on

v alu atio n o f th e co in s o ccu rred su b seq u en t to th e c h a r g ed co n d u ct an d

co u ld n o t h av e been relied u p o n b y A p pellan ts in i m

p l em en tin g th eir w ag e p ay m en t sy s tem

. S

ee Po well

, 9 5 5 F.2 d at 1 21 4 (in stru ctin g th at ev id en ce is ad m issib l e o n ly if relied u p o n b y d ef

en dan ts). In an y ev en t, as a f actu al

m atter, t h e d i strict co u rt’ s ru lin g w as n ot th e f irst in th e n atio n

. Rath er, i t

w as p rem ised o n

p rio r leg al p reced en t.U N I T E D S T A T E S V

. K

A H R E 44

p roving a defendant acted willfully

, t h e g ove r n m ent also has the burden o f neg ating a d e f e n d a n t ’ s c l a i m t h a t b e c a u s e o f a misunderstanding of the law, the defendant had a g oo d faith belief that he was not violating the relevant provisions of the tax code.

The district court’s ruling and corresponding instructions
encompass e d A ppellants’ g ood faith defense. See Powell

, 955 F .2d at 1214 (“I n addition, the court may instruct the jury that the leg al material admitted at trial is relevant only to the defendant’s state of m i n d a n d not to the requirements of the law, a n d may g ive other proper c a utionary and limiting instructions as well.”).

2. Other Evidence C oncerning Appellants’ G ood F aith Belief That The Wage Pa y ments Were Not Taxable

Appellants contend that the d istrict court erred under F ed. R. Evid. 803(3) 1 7 when it ex cluded testimony o f the Kahres’

1 7 P u rsu an t to Fed

. R. Ev id

. 8 03 (3 ), as i t ex isted at th e tim e o f th e trials at issu e in th is case:

T h e f ollo w in g are n o t ex clu d ed b y th e h ea rsay ru le,

ev en th o u g h th e d eclaran t is av ailab le as a w itn ess:

(3 ) A st a t em en t o f t

h e d eclaran t ’ s th en

- ex istin g s tate of

m in d

, em o tio n , sen satio n , o r p h y s ical co n ditio n (su ch as in ten t, p lan

, m o tiv e, d esig n , m en tal f eelin g , p ain

, an d b o d ily h ealth ), b u t n o t in clu din g a statem en t o f m em o ry o r belief to p ro v e t h e f act rem em

b ered o r b eliev ed u n less it relates to th e ex ecu t i o n , rev o catio n , id en tif i catio n , o r term s o f th e d eclaran t’ s w ill.U N I T E D S T A T E S V

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A H R E 45

contemporaneous statements reg arding their g ood faith belief that the pay

ments were leg al and non-tax able.

Appellants challeng e only two r u ling s by the district
court. I n the first challeng ed ruling

, the district c o u rt sustained the g overnment’s objection to testimony in wh i ch the witness ex plained that Kahre told him coins w e re tax ed at their face v alue. I n the second challeng e d ruling

, the district
court ex c lude d t estimony that L ori Kahre instructed another witness to pay her own tax es. 1 8 This proffer e d t estimony

, if admitted, “ would have been hearsay

. . . about d e f endants’
state of mind at the time, a subject about which they could be

ex a mined and cross-ex amined if they took the stand. B u t as

a second-hand statement of memory or belief to p r ove the fact remembered

. . . it is n o t only hearsay

, but irrelevant hearsay .” United States v. Bishop

, 2 91 F

. 3 d 1 1 0 0
, 1110–11 (9th Cir. 2 002) (internal quotat ion marks omitted). 1 9 Therefore, the district court did not plainly err in e x cluding it.

Reg ardless, any error i n e x cluding the testimony was harmless. See id. at 1108 (“Not every hearsay error amounts to a constitutional violation. At a mini m u m , a defendant

18 B ecau se A

p p ellan ts d id n o t arg u e b ef o re th e d istrict co u r t t h a t t h e testim o n y w as ad m issib le p u rsu an t to Fed

. R. Ev id

. 8 03 (3 ), w e rev iew f or p lain erro r. S

ee Un ited S ta t es v. Orm Hien g , 6 79 F.3 d 1 1 3 1
, 1 1 3 5 ( 9 th Cir

. 2 0 1 2 ) (“ W e rev iew ev id en tiary ru lin g s to w h ich n o o b

j ectio n w as

m ad e f o r p lain erro r.”) (citatio n

o m itted ).

19 A p p ellan ts m ak e th e a d d i t i o n al arg u m en t th at th e d istrict co u rt

v io lated th eir du e p ro cess rig h ts by ad m ittin g ev i d en ce o f th eir g oo d f aith b elief s o n ly if A

pp ellan t s t estif

ied

. H o w e v er, th e d istrict co u rt actu ally
p erm i tted A

p pellan ts to o f

f er p ro o f o f t h e i r go o d f

aith b elief

s t h ro u g h

o th er so u rces. A

p p ellan t s also testif

ied d u rin g trial, p ro v id in g th e best

ev id en ce o f th eir g o od f

aith b elief

s. S ee Bish o p , 2 9 1 F .3 d at 1 1 10 (“ T h e b est ev id en ce w ou ld b e th e d ef en d an t’ s o w

n testim o n y . . . .”).U N I T E D S T A T E S V

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A H R E 46

must demonstrate tha t t he ex cluded evidence was important
to his de f e n se.

. . .”) (citation and alteration omitted). Not only w as the g overnment’s case ex ceptionally st r o n g , but Ka h re, L ori, a

nd L og lia e a ch testified ex tensively a bout the
go o d faith underly ing their belief that the g o ld pay m e n t sy stem was leg al. See Bishop

, 291 F .3d at 1 110 (“Such [ th ird-party ] testimony may f all under the state of mind

ex c e ption to the rule ag ainst hearsay

, but i t wo u l d still be self- serving

, and duplicative of the defendants’ o wn testimony about their stat e o f mind, if they chose to testify . . . .”) (internal quotation marks omitted). 2 0

E. The District Court’s P artiality

Appellants contend that a new trial is warranted because of the d istrict court’s partiality

, as evidenced by its improper comments and conduct.

“ W e w i l l reverse a trial court for ex cessive judicial intervention only in c ases of actual bias

. . . or if the judg e’s remarks and questioning of witnesses projected to the jury an appearance of advocacy o r pa rtiality

, and the alleg ed

20 A p pellan t s f

u rth er co n ten d th at th e d i strict co u rt erred in ex clu d in g an IRS ag en t’ s rep ort th at a p rio r in v estig atio n h ad b een clo sed f o r lack of crim in al i n ten t. Ho w ev er, A pp ellan ts w ere n o t p rej u d iced

, a s th e IRS
ag en t testif

ied an d co n f

irm ed h i s co n clu sio n s reg ard in g th e lack of p ro of

o f crim in al in ten t

.

A p pellan t s also arg u e th at t h e d i s t rict co u rt erred in ex clu d in g

ev id en ce co n cern in g th e am o u n t o f f orce u sed ag ain st L o ri Kah re d u rin g th e search

. A lth o u g h A

p p ellan ts cited n o sp e c i f

ic ru lin g , it ap pears th at th e d istrict co u rt ex clu d ed ev id en ce related to th e search es as irrelev an t

an d po ten t ially p rej u d icial. Here t o o , t h e ex clu sio n at issu e w a s n o t p rej u d icial, b ecau se L o ri’ s testim o n y co m p letely elu cid ated ev ery asp ect

o f h er d ef en s e.U N I T E D S T A T E S V

. K

A H R E 47

m i s c onduct had a prejudicial effect on the trial.” Unite d States v. Scott
, 642 F .3d 791, 7 99 (9th Cir. 2011) (citation a nd interna l q uotation marks omitted). “B efore a jury ’s verdict will b e overturned because of the c o n d u c t o f a trial judg e in rebuking o r punishing an attorney or otherwise intervening in the proceeding s, it must appear that the conduct measured b y the facts of the case presented tog ether with the result of the trial, was clearly prejudicial to the rig hts of the party .” Id. (citation omitted). “The assessment is to be made, moreover, in lig ht of the evidence of g u ilt.” Id. (citation omitted).

Appellants urg e the conclusion that the d istrict cou r t utiliz ed p rejudicial analog ies when ex p laining its evidentiary ruling s to the jury

. F or ex ample, the district court ex p lained that the silver c oins could be placed into evidence, b ut could
not be sent b a c k with the jury for jurors to ex amine, just a s narcotics can be placed in evidence, b ut not sen t b a c k with the jury

. T h e d i s t rict court a nalog iz ed the chain of c ustody utiliz ed in narcotics cases to the intr o duction of records seiz ed from a residence. The district court also utiliz ed what it characteriz ed as the “ r idiculous e x a mple” of an org a niz ed crime fig u re having a business purpose in the pr o ce s s o f addressing whether a wi tness could testify reg arding a possible business purpose underly ing Kahre’s p ay roll sy stem.

Althoug h the d istrict court utiliz ed analog ies, its
comments did not undermine Appellants’ defense. I t is
presum e d that the jury followed the district court’s instructions that it was not to g iv e a n y we ig ht to the court’s

ex p lanatory comments. See Scott
, 642 F .3d at 8 00

. T h e se comments d o not justify a new trial, particularly in view o f the strong evidence of g

u ilt. See id. at 799.U N I T E D S T A T E S V

. K

A H R E 48

Althoug h Appellants c o mplain that the district court improperly objected to the defense’s cross-ex amination a nd denig rated counsel, the record does not reflect that the district
court interfered with or i m p e ded the defense’s crossex a mination a t all. Contrary to Appellants’ assertion that the district c ourt denig rated counsel by impermissibly objecting
to the defense’s cross-ex amination, the record reflects that the district court i n t e r r upted those questions that were deemed ir r e l ev a nt or inappropriate. F or e x ample, the district court interrupted d efense counsel when he as k e d a witness if

escrow could close if “the person may not have remembered sig ning it because they were in t o x icated when they sig n ed it[ .] ” T he district court a lso int e r r u p t e d a witness who was reading from documents althoug h the witness lacked any personal knowledg e of the transaction related to the documents. W hen defense co u n sel arg ued that g overnment witnesses had been allowed to rea d f rom documents, the district court replied that “[ t] o the ex tent the Government did it and nobody

objected, they

shouldn’t have. . . .” The other asserted instances in which the distri ct c ourt interrupted

cross-ex amination similarly reflect t h at the district court properly intervened to f

r ame the question ing

. Appellants mad e n o showing that the district court’s ruling s in controlling the proceeding s were incorrect, or that they were unable to mount an effec t i v e defense. I n sum, the district
court d id not improperly impede A ppellants’ p resentation o f their c a s e

. S

e e U nited States v. Gurolla

, 333 F .3d 944, 958 (9th Cir. 2003) (ex plaining that the district court’ s r u l ing s reg arding c ross-ex amination constitute r eversible e rror o n ly in the event the ruling s resulted in the denial of a fair trial).

Appellants’ assertion that the district court inter r upted L og lia’s testimony

and denig rated L og lia’s g ood faith belief in the wag e pay

ment sy stem is similarly

unavailing

. DuringU N I T E D S T A T E S V

. K

A H R E 49

his testimony

, L og lia stated that he relied in p a rt on Civil War

era c ases fo r his use of g old and silver coins for w ag e pay ments. The district court did not denig rate L o g lia’s reliance o n the case law. Rather, the district court accurately

c l arified that the weig ht the jury g ave to a leg al op i n i o n

a d mitted into evidence may be affected by chang es in l e ga l
pre c e dent. B y way of ex ample, the district court simply remarked that an individual could not r ely in g ood faith on

“ Plessy v. Fe r

g uson that used to say separate but equal was okay in schooling

. . . .” The district court also did not commit reversible e rror w hen it me r e l y observed that prior case law did not “represent the law that applies to this case, nor did it ever, by the way

. I t’s the effect on Mr. L og lia that counts.”

Contrary to Appellants’ a ssertions, n e ither did the district
court d enig rate L og lia’s re l i a n ce on an I RS letter that purportedly supported the wag e pay ment sy stem. T h e g overnment objected to admission of the letter b ased on its lack of authentication, a nd the distric t court innocuously remarked that it was not uncommon for g overnment letters to be fabricated. However, the district court admitted the letter into evidence because “ if [ L og lia] actually g ot the document and relied on it, thinking it was real, that’s what counts. I t’s not whether in fact it was real.”

Appellants further contend that the distri ct court impermissibly ex plained the g overnment’s theory of the case when making its evidentiary r uling s. Appellants fault the district court for commenting on the g overnment’s theory that L ori Kahre acted as a straw buy er for the silver coins; that the
g overnment’s charg es w ere b ased on a conspiracy ; that the
g overnment’s arg ument w a s that the g old c lause contracts

were a sham; and that t h e government’s challeng e to a witness was premised on the witness’s bad acts. Howe ver,U N I T E D S T A T E S V

. K

A H R E 50

the r ecord reflects that the district court d id not impermissibly

ex p lain the g overnment’s theory

. I nstead, the dist rict court merely remarked that “ [ o] n e of the contentions of the Government in this case is that Ms. Kahre was simply a straw buy er a nd that the real o wner was Mr. Kahre

. . . So that’s for the jury to decide,” and that “ it is the Go vernment’s contention these people were a ll in c onspiracy t o ge t h er. So I don’t k

now what y our objection is.” I n perm i t t i n g testimony c oncerning an unind i c t e d c o c o n spirator, the district
court simply observed that wa i v e r o f the hearsay r ule was warranted “[ b] ecause it’s the whole g overnment theory the

reason [ the unindicted c oconspi r a t o r] was doing all these

c h i c aneries was because he was i n l e a gu e w i t h [ Appellants]

. . . .” The district court also passively noted the
g overnment’s position that a g o ld clause contract utiliz ed b y Appellants was “a sham b ecause it’s a device by which they

are alleg ing Mr. Kahre used to avoid pay ing tax e s

. T h at is what they ’re claiming .”

I n each case, the district court r eferred to the
g overnment’s theory as it related to e videntiary issues a nd

c larified that it was within the p r ovince of the j u r y t o determine the validity of the g overnment’s theory

. Thus, we conclude that A ppellants are not entitled to a new trial based

on the district court’s c omments or conduct. Our conclusion is further supported by the streng th of the g overnment’s c ase, and the c ourt’s curative instructions. See Scott
, 64 2 F. 3 d at 800.

F

. Robert K ahre’s Sentence

Kahre challeng es the d i s t r i ct court’s calculation of his adjusted offense level and of the applicable g uideline rang e ,U N I T E D S T A T E S V

. K

A H R E 51

both of which were larg ely attributable to the tax loss associated with his crimes of conviction.

“T h e g o vernment bears the burden of establishing the base offense level, and, hence, here, the amount of tax loss, by a prepo n d e r ance of the evidence.” U nited S tates v

. Montano
, 250 F

. 3 d 709, 713 (9th Cir

. 2 0 0 1 ) (citation omitted). “Under the p reponderance of the evidence standard, the relevant facts must be shown to be more likely
true than not.” Id. (citations and internal q uotation marks omitted). “I n determining the total tax loss attributable to the offense, all conduct violating the tax laws s h ould be considered as part of the same course of conduct or common scheme o r plan unless th e evidence demonstrates that the conduct is clearly unrelate d

. ” B i shop

, 291 F .3d at 1115 (citation and alteration omitted). “Tax loss is de t e r m i n ed from the reasonably f

oreseeable c o nduct of all co-actors, not just the defendant’s own conduct.

. . .” Id. (citation a nd alteration omitted).

Kahre asserts that, because his workers were independent contractors, the d istrict court erred in c a l c u lating a tax loss premised on pay

roll tax es for employ ees.

The I RS has established a twe n ty

- factor test to differentiate an employ ee from an independent contractor for
tax pur poses. S

ee I RS Rev. Rul. 87-41 (1987). 2 1

2 1 T h e f acto rs in clu d e: (1 ) th e em p lo y er’ s rig h t to req u ire th e w o rk er’ s

co m plian ce w ith in stru ctio n s; (2 ) th e em plo y er’ s train in g req u irem en ts; (3 ) th e in teg ratio n

o f th e w ork er’ s serv i ces in to th e em plo y er’ s b u s in ess; (4 ) th e w o rk er’ s p erso n al ren d erin g o f serv ices; (5 ) th e em p lo y er’ s h irin g , su p erv isio n , an d p ay

m en t o f assistan

ts; (6 ) a co n tin

u in g relat i o ns hip b etw een t h e em p lo y er an d th e w o rk er; (7 ) th e em p lo y er’ s settin g o f h o u rs; (8 ) th e em

p lo y er’ s req u irem en t o f f u ll- tim e s e rv ice; (9 ) p erf o rm an ce ofU N I T E D S T A T E S V

. K

A H R E 52

“[ G] enerally the relationship of employ er and employ ee

ex ists when the person or persons for whom the services are performed have the rig

ht to control and direct the individual who performs the services, not only as to the result t o be accomplished by the work but also as to the details and means by which that result is accomplished.

. . .” Id. “Thus, if such

a relationship ex ists, it is of no c o n s equence that the employ e e is desig nated as a partner, coadventurer, ag ent, independent contractor, or the like.” Id.

Th e t r i al testimony amply supports the district court’s finding that Kahre’s employ e es were not independent
contractors. Rodrig uez testified at leng th reg arding the control K ahre ex e rcised over his employ ees’ work, a nd

ex p ressly a cknowledg ed that the employ ees were not independent contractors. The district court instructed the jury that it was r equired to apply the t wenty -factor test a nd determine w hether Kahre’s w orkers were employ ees o r independent contractors. Having followed that instruction, the jury found Kahre g uilty on all counts. Given the evidence and the jury ’s finding s from that evidence, t h e d i strict court did not err in finding that Kahre failed to pay the requisite
pay roll tax es for his employ ees, or in calculating the amount

w o rk o n t

h e em plo y er’ s p rem ises; ( 1 0 ) t h e w o rk er’ s p erf

o rm an ce of

se r v i c e s in a seq u en ce set b y th e em p lo y er; (1 1 ) th e em

plo y er’ s req u irem en t th at th e w ork er su b m it o ral o r w

ritten rep o rts; (1 2 ) p ay

m en ts

o n a n h o u r l y , w eek ly

, o r m o n th ly b asis; (1 3 ) th e em p lo y er’ s p ay

m en t of b u sin ess or trav el ex p en s es; (1 4) t h e em plo y er ’ s f u rn ish in g o f m aterials

o r to o ls; (1 5 ) lack o f sig n if ican t i n v estm en t in th e f

acilities b y th e w o rk er; (1 6 ) lack o f realizatio n

o f lo ss o r p ro f

i t b y th e w o rk er; (1 7 ) lack

o f w ork f o r m u ltip le f irm s b y th e w ork er; (1 8 ) lack o f av ailab ility o f th e w o rk er’ s

serv ices to th e g en eral pu b lic; (1 9 ) th e em

p lo y er’ s rig h t to d isch arg e th e

w o rk er; an d (2 0 ) th e w o rk er’ s rig h t to term in ate h er or h is s erv ices. S ee IRS Rev . Ru l. 8 7

- 4 1

.U N I T E D S T A T E S V

. K

A H R E 53

o f l o s s from the tax scheme. See Bishop

, 291 F .3d at 111 5 (reasoning that tax loss is to be c a lculated in view of the totality of the tax evasion scheme). 2 2

Kahre maintains that he was not responsible for withholding tax es from w ag es paid to employ e e s o f the thirty -five businesses that utiliz ed his pay roll se r v i ces. However, “ [ i] n determining the total tax loss attributable to the offense, all conduct v io l a t i n g the tax laws should be considered as part of the same course of conduct or common scheme o r plan unless the evidence demonstrates that the conduct is clearly

unrelated. . . .” Id. ( citation and alteration omitted) ( emphasis added). Kahre was respons ible for “the reasonably foreseeable conduct of a ll co-actors, not just [ his]

own conduct.

. . .” Id. This means that K a h r e w as indeed responsible for the conduct of the b usinesses that utiliz ed his
pay roll services, particularly since trial testimony revealed that Kahre devised these pay roll services, an d administered them in the same illicit manner as his own. The district court, therefore, did not e r

r in determining it was mo r e l i k ely than
not that the tax loss incurred from these utiliz ing companies was attributable to Kahre.

22 K a h r e m ain tain s t

h at tw o of h is s ev eral h u n d red em p lo y ees w ere in d ep en den t co n tracto rs as n o ted in t h e i r p lea ag reem en ts. Ho w ev er, clas s i fi c atio n o f tw o in d iv id u als as in d ep en d en t co n tracto rs w ou ld n o t

u n d erm in e t

h e d istric t c o u rt’ s f

i n d in g s reg ard in g th e statu s o f th e

o v erw h elm in g m aj o rity o f th e em p lo y ees. S

ee Mo n ta n o , 2 5 0 F .3 d at 7 1 3 (“ Un d er th e p rep o n d eran ce o f th e ev id en ce stan d ard

, th e relev an t f acts

m u st b e sh o w

n to b e m o re lik ely t

ru e th an n o t .”) (citatio n s an d in tern al
q u o t a t i o n m ark s o m itted ). Giv en th e trial testim o n y ref l ectin g th e

ex ten siv e n atu re o f Kah r e ’s p ay ro ll s ch em e in v o lv in g sev eral h u n d red

em p l o y ees, Kah re’ s arg u m en t is u n av ailin g

.U N I T E D S T A T E S V

. K

A H R E 54

C o ntrary to Kahre’s a ssertions, the evidence elicit e d during tr i a l also supports the d istrict court’s adoption of the

c a l c ulation in the PSR of a total tax liability o f $ 5 7
, 4 3 5
, 8 0 3

. 5 2

. T h e t o t a l t a x l i a b ility in cl u d e d $ 51,739,337.52 in unpaid pay roll tax es and $5,696,466

. 1 0 Kahre owed in income tax e s from 1992 to 2008. Ag ent Rickey testified that Kahre earned un r eported income o f $10,758,167.32 i n fe es from his pay roll services, and Ag ent Cutler ca l cu l a ted that Kahre earned unreported income o f $1,956,739 from his companies. These fig ures more than

su f f i c iently support the district court’s tax liability determination. 2 3

Kahre nex t t a k e s i ssue with the obstruction of justice enhancement, arg uing that he did not attempt to concea l h is
g old and silver pay

roll sy s t e m from the I RS, testified h o nestly a

bout his failure to pay his personal income tax e s , and had a g ood faith belief that his activities were leg a l. However, the obstructio n o f justice enhancement was premised on Kahre’s false trial testim o n y

. The indictment alleg ed that Kahre e ng a g ed in a conspiracy to defraud the I RS by placing “real property , which he in fact owned, controlled

23 K ah re also ap p ears to ch allen g e th e am o u n t o f restitu tio n stem m in g f ro m th e calcu latio n o f h is t o tal tax liab ility

. A lth o u g h Kah re asserts th at th ere w as n o f

actu al b asis f

o r th e restitu

tio n a m o u n t, th e PSR ex p lain ed th at th e $ 1 6 ,0 0 0 ,0 0 0 restitu t io n am ou n t w as calcu lated f

ro m $ 5,1 6 8 ,3 1 3 d u e in in co m e tax es an d $ 1 0 ,8 91 ,7 9 1.7 2 d u e in p ay ro ll tax es. B ecau se th e d istrict co u rt p ro p erly d eterm in ed Kah re’ s tax l iab ility u sin g t h ese f i g u res, Kah re can n o t estab lish clear e r r o r i n sim ilarly calcu latin g th e restitu tio n

am o u n t. S e e U n i t e d S ta tes v. Yeu n g , 6 7 2 F .3 d 5 9 4
, 6 00 (9 th C ir. 20 1 2) (“ W e rev iew f

actu al f in d i n g s su

p po rtin g an o rd er o f r e s t i t u tio n f o r clear

erro r.”) (citatio n o m itted ); see a lso Un ited S ta t es v. Jen kin s , 8 8 4 F.2 d 4 3 3
, 4 4 0 (9 t h Cir. 1 9 8 9 ) (o b serv in g th at restitu tio n is b ased o n th e to tal tax liab ility ).U N I T E D S T A T E S V

. K

A H R E 55

and otherwise b enefitted from, located at 6295 Grand Cany on Drive, L a s Veg as, Nevada, in the name of a n ominee, specifically defendant Danille D. Cline.” During trial, Kahre testified that he could not have sig n ed a false loan a pplication

on b e h a l f of Cline in L as Veg as on September 11, 2001, because he was in Oreg o n o n that d ate. Kahre’s testimony

was belied by currency transaction reports reflecti n g t hat Kahre cashed checks for $65,000, $143,918, and $26,031 around that date in L as Veg as. The PSR recommended an

o bstruction enhancement because Kahre “provided m a t e r i a l l y false information while testify ing at trial.” I n support of the PSR’s r e c ommendation, the g overnment arg ued that “[ t] he

e n h a n c ement relates to the false testimony that

. . . Kahre made a t trial concerning his wher ea b o uts on September 11, 2001, the d ay when he a nd defendant Cline met with Tom B rowne to sig n a false home loan application for the purchase of 6295 N. Grand Cany on D rive.” The d istrict court adopted the PSR’s recommendation and held tha t the obstruction o f just i c e enhancement was supported “by more than a preponderance of the evidence, in fact, by clear a nd convincing evidence

. . .” Kahre doe s not e ffectively rebut the district court’s f

inding that he committed perjury when he testified. See United S

tates v. Ar m s trong , 620 F .3d 1172, 1176 (9th Cir. 2010) (“A witness commits perjury if he g ives false testimony under o ath or a ffirmation, concerning a material matter, with the w illful intent to p r o vide false testimo n y , r ather than as a r esult of c onfusion, mistake, o r faulty mem o ry

. T he sentencing judg e need only f ind by a preponderance of the evidence that the defendant committed perjury .”) (citations, footnote reference, and internal quotation marks omitted).

The district court’s obstruction of justice enhancement is
not neg ated because Kahre terminated his pay roll sy stem a fterU N I T E D S T A T E S V

. K

A H R E 56

the district court ruled that it was illeg a l. As discussed, there

was ample leg al precedent establishing the i l leg ality o f Kahre’s c o nduct prior to the district c ourt’s ruling to that

e f fect. Unsurprising ly

, the district court relied on t h at

ex isting leg a l precedent to formulate its conclusion that Kahre’s conduct was illeg al. Kahre continued to use the g old and silver coins a fter the search warrants were ex ecuted, a nd apparently only ceased use of his scheme after being indicted. W e affirm the district court’s c alcul a tion of the g uidelines
rang e an d its related determination of the restitution amount. 2 4

Kahre’s a rg ument that his sentence is disproportionate is
not persuasi v e. “The district c ourt was not required to conform the s e n t e n c e to those imposed in similar cases

. . . Althoug h comparability is a leg iti m ate sentencing f actor, diverg ence f

rom sentences i m p osed in similar c ases is permissible so long a s the c ourt is a t tentive to relevant sentencing factors, as the district court was here.” U n i t e d States v. Burgum
, 633 F

. 3d 810, 813–14 (9th Cir

. 2 0 1 1 ) (citation o mitted). “A district court n e e d not, and, as a practical matter, cannot compare a p r o p o s e d sentence to the
sentence of e v e r y c riminal defendant who has ever been sentenced before. T o o many factors dictate the ex e rcise o f sound sentencing discr e t i o n in a particular case to make the inquiry [ Kahre] u rg es h elpful or even feasible.

. . . ” United States v. Treadwell

, 5 9 3 F

. 3d 990, 1012 (9th Cir. 2 010) (citation omitted). Kahre’s below-g uidelines sen t e nce

24 B ecau se t

h e d istrict co u rt d id n o t clearly err w h en it en h an ced Kah re’ s

sen ten ce f

o r o bstru ctio n o f j u stice, Ka hr e can n ot estab lish clear erro r in
t h e co u rt’ s rej ectio n o f a d o w n w ard ad j u stm en t f

o r accep t an c e o f

r e sp o n sib ility

. S

ee Ro sa s , 6 1 5 F .3 d at 1 0 6 6

– 6 7 (ex p lain i n g th at an

o b stru ctio n o f j u stice en h an cem en t “ ord in arily in d icates” th at th e d ef en d an t h as f ailed to accep t resp o n sib ility ).U N I T E D S T A T E S V

. K

A H R E 57

imposed for the ex tensive illeg al p ay roll scheme with its associated t a x loss, was comparable to sentences f o r similar crimes, and w as reasonable. Se e Un i t ed States v. Bendtzen

, 5 42 F .3d 722, 729 (9th Cir. 2008) (“B ecause a Guid e l i n e s sentence will usually be reasonabl e , [ Kahre’s] belowGuidelines sentence, supported by the district court’s specific reasoning

, is reasonable.”) ( citation and inter n a l quotation marks omitted).

IV. CONCLUSION

W e affirm Appellants’ convictions and Robert Kahre’s
sentence. Dismissal of the indictments was n o t warranted. Appellants h ad sufficient notice of the illeg ality of rely ing on t he face value of coins to a void pay ing tax es. L ong sta n d i n g and consistent statutory , reg ulator y , and c ourt p recedent informed the public that g old and silver coins are assessed at fair market value for tax

purposes when used to pay wag es.

W e hold that prosecuto r s m u st b e r emoved from a case only if “clear and c o nvincing evidence of a conflict is presented.” Kember

, 685 F .2d at 4 5 9. Appellants failed to present such “clear and convincing evidence.” I t follows that the district court did not abuse i t s discretion in deny ing Appellants’ motions to disqualify the prosecutor.

The d istrict court properly denied as moot Kahre’s initial motion to suppress because none of the seiz ed evidence was introduced a t t rial. Alternatively

, Kahre’s arrest and the corresponding search were leg a lly c o n ducted pursu a nt to a state bench warrant. The district c ourt correctly d enied Kahre’s subsequent motion to suppress because the warrants incorporated the accompany ing affidav i t , w h i c h p o s s e s s e d the requisite specificity

limiting the ag ents’ discretion.U N I T E D S T A T E S V

. K

A H R E 58

The district court did not abuse its d iscretion in ex cluding evidence challeng ing the leg al import o f its ruling t h a t g old and silver coins used to pay wag e s were to b e assessed at fair

ma r ket value for tax purposes. The district court correctly
recog niz ed that the coins were tax able a s property based on their fair market value. S ee Cal. Fed. Life Ins. Co.
, 680 F .2d
at 86. Neither did the d istrict court commit r e v e r s i b l e error in ex c lu d i ng testimony of Appellants’ contemporaneous statements c oncerning their tax theories. I n each instance the

ex c lusion was neither an a b u se of discretion, se e Hinkson

, 585 F .3 d a t 1 2 6 3, nor p rejudicial. The district court also acted within its discretion when it ex cluded, as irrelevant a nd prejudicial, evidence of the federal ag ents’ use of force during

ex e c ution of the search warr a n t s

. I n sum, the district court did not eng ag e in any

misconduct warranting

a new trial.

F inally

, the d istrict c ourt did n o t err when sentencing Robert Kahre. The district court’s calculation of Kahre’s tax liability and the corresponding restitution amo u n t was supported by the evidence presented at trial and by the jury ’s findings. The district court’s e n hancement o f Kahre’s
sentence f or obstruction of justice and denial of a d ownward adjustment f

or acceptance of r e s p o n sibility were consistent with the historica l record. Kahre’s below-g uidelines sentence

was r easonable and was not disproportionatel y severe when compared to analog ous sentences.

AF F IRMED.