The Hon. Richard S. Arnold stepped down as Chief Judge of the United States 1

Court of Appeals for the Eighth Circuit at the close of business on April 17, 1998. He

has been succeeded by the Hon. Pasco M. Bowman II.

The Hon. Robert W. Pratt, United States District Judge for the Southern District 2

of Iowa, sitting by designation.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

_____________

No. 97-4105NE

_____________

United States of America, *

*

Appellee, *

* On Appeal from the United

v. * States District Court

* for the District of

* Nebraska.

Tommy G. Georges, *

*

Appellant. *

___________

Submitted: April 16, 1998

Filed: June 4, 1998

___________

Before RICHARD S. ARNOLD, Chief Judge, LOKEN, Circuit Judge, and PRATT, 1 2

District Judge.

___________

RICHARD S. ARNOLD, Chief Judge.

Angela and Tommy Georges were convicted by a jury of two counts of filing

false income tax returns. Angela Georges was sentenced to probation and has not
The Hon. Richard G. Kopf, United States District Judge for the District of

3

Nebraska.

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appealed. Tommy Georges was sentenced to a year and a day’s imprisonment, and he

appeals his conviction, arguing sufficiency of the evidence, and his sentence, arguing

that the District Court erred in including as relevant conduct the treatment of a certain

$5,000 loan as a deductible business expense. Specifically, Mr. Georges argues that

the District Court erred when it included the loan, made by the Georgeses to a long- 3

time friend, in the calculation of tax loss. Because the inclusion of the loan resulted in

a one-level increase under the Sentencing Guidelines, Mr. Georges was ineligible for

a split sentence. The evidence presented at trial was more than sufficient to convict

Mr. Georges, and we affirm his conviction and sentence. Although an extensive review

of the evidence is not necessary, we briefly summarize the government’s case.

In the late 1980’s, the Georgeses formed and were equal partners in a business

called Cable Construction Specialists, Inc., which installed television cable for local

cable companies in several states. Mr. Georges had worked in the cable business for

many years, and he had been involved in running corporations since the mid-1970’s.

The Georgeses hired an outside accountant to assist them with various bookkeeping

tasks, including the preparation and filing of income tax returns. While the Georgeses

provided their accountant with various corporate documents and bank records, they did

not provide him with all of their records. Moreover, the Georgeses did not deposit all

of the income generated by the company into corporate accounts. Some of the income

was deposited into accounts separately maintained by the Georgeses. As a result,

income earned by the corporation, taxable to the Georgeses since it was a Subchapter

S corporation, was significantly underreported to the Internal Revenue Service. At

sentencing, the District Court ordered more than $70,000 in restitution.

Relevant conduct is defined as all acts and omissions “that were part of the same

course of conduct or common scheme or plan as the offense of conviction . . ..” 
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U.S.S.G. § 1B1.3(a)(2). Mr. Georges argues that the taxes saved by his deduction of

the loan of $5,000 to a long-time friend, Rose Harbour, should not have been included

in computing the loss to the Internal Revenue Service. The loan, made in 1989 out of

corporate funds, was repaid by Mrs. Harbour the next year. The repayment, however,

was not deposited into the corporate account but into the Georgeses’ personal account.

The accountant, who did not have access to the Georgeses’ personal records, treated

the loan as a deductible business expense, thereby reducing the corporation’s taxable

income. The loan was not a business expense.

Mr. Georges advances several points. First, he argues that the accountant wrote

the loan off on his own accord, and that he was never informed by the accountant that

the loan had been written off. Second, Mr. Georges argues that because the loan was

written off as a deductible business expense, an exhaustive, line-by-line review of the

tax return by him would not have revealed the fact that the loan had been written off.

Third, Mr. Georges argues that the accountant simply made a mistake when he listed

the loan as a deductible business expense. The loan to Rose Harbour was characterized

as an employee travel expense, and the accountant, who prepared the corporation’s W2’s, should have known that Rose Harbour was not an employee.

The Commentary to the Sentencing Guidelines provides that “[i]n determining

the total tax loss attributable to the offense . . . all conduct violating the tax laws should

be considered as part of the same course of conduct or common scheme or plan unless

the evidence demonstrates that the conduct is clearly unrelated.” U.S.S.G. § 2T1.1

comment. n. 2. We believe the deposit of the loan repayment into the Georgeses’

personal account and the deduction of the loan were acts inextricably tied to the long

pattern of conduct engaged in by the Georgeses to conceal income, or at least the

District Court could have so found. While the accountant testified that he did not

specifically tell either Mr. or Mrs. Georges that he was treating the Rose Harbour loan

as a deduction, we think his testimony may be understood to say that there was a

general discussion about loans and employee advances, not likely to be collected, that
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were simply written off. In addition, Mr. Georges’s arguments concerning the Rose

Harbour loan were made during trial, and, by adopting the government’s version of the

conduct at sentencing, the District Court implicitly rejected Mr. Georges’s defense that

he was unaware that the loan had been treated as a deductible business expense.

Whether an act or omission is relevant conduct is a factual determination subject

to review under the clearly erroneous standard. United States v. Prendergast, 979 F.2d

1289, 1291 (8th Cir. 1992). We cannot say the District Court’s finding that the tax loss

caused by the deduction of the $5,000 loan should be included as relevant conduct for

sentencing purposes was clearly erroneous. When the loan was repaid the next year,

Mr. Georges knowingly kept his accountant in the dark when the repayment was not

deposited into the corporate account.

Affirmed.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.