The Hon. Richard S. Arnold st epped down as Chief Judge of the United States 1 Court of Appeals for the Eighth Circ uit 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 S outhern 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. ARNOL D, 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 filin g false income tax returns. Angela Georges was sentenced to probation and has notThe Hon. Richard G. Kopf, United States District Judge for the District o f 3 Nebraska. -2- appealed. Tommy Georges was sentenced to a year and a day’s imprisonment, and he appe als 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 t h e 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 convic t Mr. Georges, and we affirm his conviction and sentence. Although an ex tensive review of the evidence is not necessary, we briefly summarize the government’s case.
In the late 198 0’s, the Georgeses formed and were equal partners in a business called Cable Construction Specialists, Inc., which installed television cable for loca l cable comp anies 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 Geo rgeses hired an outside accountant to assist them with various bookkeepin g tasks, including the preparation and filing of income tax returns. While the Georgeses provided their accountant with various corporate documents a nd 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 int o corporate accounts. Some of the income was d eposited 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 corpor ation, was significantly underreported to the Internal Revenue Service. A t sentencing, the District Court ordered more than $70,000 in restitution.
Relevant conduct is defined as all acts and omissions “that wer e part of the same course of conduct or common scheme or plan as the offense of conviction . . ..”-3-

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 co mputing the loss to the Internal Revenue Service. The loan, made in 1989 out of corporate funds, was r epaid by Mrs. Harbour the next year. The repayment, however, was not deposited into the corporate ac count but into the Georgeses’ personal account. The accountant, who did not have access to the Georgeses’ personal records, treate d 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 point s. First, he argues that the accountant wrote the loan o ff on his own accord, and that he was never informed by the accountant that the l oan had been written off. Second, Mr. Georges argues that because the loan was w r itten 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 H arbour was characterized as an employee travel expense, and the acc ountant, who prepared the corporation’s W2’s, should have known that Rose Harbour was not an employee.
The C ommentary to the Sentencing Guidelines provides that “[i]n determinin g the total tax loss attributable to the offense . . . all conduct violating the tax laws should be considered as part of t

he 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 th e Distri ct Court could have so found. While the accountant testified that he did no t specifically tell either M r. or Mrs. Georges that he was treating the Rose Harbour loan as a deducti on, we think his testimony may be understood to say that there was a general discu ssion about loans and employee advances, not likely to be collected, that-4-

were simply written off. In addition, Mr. Georges’s arguments concerning the Ros e Harbour loan were made during tri al, 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 co nduct is a factual determination subject to review under the clearly erroneous st andard. 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 d eduction 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. Ge orges knowingly kept his accountant in the dark when the repayment was no t deposited into the corporate account.
Affirmed. A true copy.
Attest: CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.