2009 D e c i sion s O p inion s of the U nit e d S t a t e s C our t of Appe al s for the Thir d C ir c uit 12-2-2009 

# U S A v . J ohn P olt ono wic z P r e c e de n t i al or N on-P r e c e de n t i al : N on-P r e c e de n t i al D ocke t N o . 08-2772

F o l lo w thi s a nd a dd it ion al w ork s a t : h tt p://d i g it alc ommon s .l a w . v i l l a no v a . e du/thir dc ir c uit_2009

Thi s de c i sion i s br ou gh t t o y ou for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t a t e s C our t of Appe al s for the Thir d C ir c uit a t V i l l a no va U niv e r sit y S choo l of L a

w Di g it al Re posit or y

. It h as be e n a c c e pt e d for inclusion in 2009 D e c i sion s b y a n author i z e d a dmini s tr a t or of V i l l a no va U niv e r sit y S choo l of L a

w Di g it al Re posit or y

. F or mor e infor m a t ion, p le as e c on t a ct Be n j a min . C a rl s on@l a

w . v i l l a no va . e du . Re c omme nde d C it a t ion
" U SA v . J o hn P o lt ono w icz " (2009). 2009 D e cisio n s . P ape r 163. h tt p://d i g it alc ommon s .l a

w . v i l l a no v a . e du/thir dc ir c uit_2009/163NO T P RE CE DE NT I AL UN I TE D S TA TE S C OU RT OF AP PE AL S FO R T HE TH IRD C IRCU IT No. 08- 2772 UNI TED STATES OF AMERI CA

v . J OH N J . PO LT ON OW I CZ ,

Appe l l ant On Ap peal from

the Unite d S tate s Dis tr ic t Cou rt f o r th e E astern D istrict o f

P en n sylv an ia ( D. C. Cr i m i na l No. 2- 07- c r - 00052- 1) Distri ct Judg e: Ho n. Jam es T. Gile s Su bm itte d P ursuant t o T hird Circ uit LAR34 .1(a )

Nove m be r 6, 2009 BE FO RE : SCIRICA , Chief Judg e, JORD AN and C OWEN , Cir cuit Judg es ( Fi l e d: De c e m

be r 2, 2009) OP I NI ON COW EN, Ci r c ui t

Judge Jo h n J. P o lto n o w icz, p ro se , a pp ea ls the jud gm ent of con vict ion andse ntence f o llo w in g h is trial co n v ictio n f o r o n e co u n t o f

co n sp iracy

to d ef rau dth e U n itedS tates in vi ol a t i on of 18 U. S. C. § 371, twe l ve c ount s of a i di ng, a s s i s t i ng, and c ouns e l i ng the fi l i ng2

o f f alse tax retu rn s in v io latio n o f 2 6 U .S .C . § 7 2 0 6 (2 ), f

o u r co u n ts o f

m ail f rau din vi ol a t i on of 18 U. S. C. § 1341, thr e e c ount s of wi r e fr aud i n vi ol a t i on of 18 U. S. C. § 1343, f iv e co u n ts o f

m ak in g f alse statem en ts o n lo anap p licatio n s in v io latio n o f 1 8 U .S .C . § 10 14 , andtwo cou nts of m aking f al se st at em ents to the I nter nal Revenue Service (“ IRS”) i n v i o l a t i o n o f

1 8 U . S . C . § 1 0 0 1 . W e w i l l a f f i rm. I . BA CK GR OU ND Po lt on ow ic z began his c ar ee r with the IRS as an analy st in it s Cri m inal I nve s t i ga t i on Di vi s i on. I n 1992, he l e ft the I RS and be gan ope r a t i ng at a x pr e par a t i on bu si ness . Over t im e his bu si ness expand ed to incl ud e a dd it ional off ic es and h e hir ed ad d itio n al tax p rep arers. By 20 03 , the IRS b egan to suspec t fra udand sent an u nd er cover agent t o h is of fice with a r ec ording device . During the course of the ta ped con vers at ion, Po lt on ow ic z i nform e d the a ge nt

tha t he woul d i nc l ude bus i ne s s e xpe ns e s i n he r r e t urn, e ve n though s he re peat edly

told him that she had no bu si ness expenses . Altho ug h the agent never m e nt i one d c har i t abl e c ontr i but i ons , and pr ovi de d hi m wi th no e vi de nc e wha t s oe ve r of any s uc h c ontr i but i ons , he i nc l ude d $2, 190 i n c a s h c ontr i but i ons t o c har i ty and $495 i n nonca sh contri bu ti on s t o chari ty on the a gent’s re turn. As a re sult , the agent’ s t ax re turn sh o w edth at sh e w as en titledto a $ 1 2 ref u n d , in steado f

ref lectin g th at sh e o w ed$ 1 ,0 1 2 in ad d itio n al tax es. S ub sequ en tly , th e ag en t requ esteda m eetin g w ith P o lto n o w icz to d iscu ss a letter sh e receiv edf ro m th e IR S in f

o rm in g h er th at sh e w o u ldb e au d ited .3

Ag ai n, the a gent wo re a r ec ording device . He a dm itte d to the prepar at ion o f a fals e t ax re turn and that he i ncluded the fals e deducti on s t o save her from paying add it ional t axes (a s he operate d u nd er

the a ss um

ption that s he wo uld n ot be audite d). He r ea ss ured her tha t s he woul d not

ge t i n tr oubl e for

the fr audul e nt

r e t urn. Pol t onowi c z a gr e e d t o pl e a d gui l ty t o one c ount

of fi l i ng fa l s e t a x r e t

urns and the IRS revok ed his a

bili ty to file el ec tr on ic tax ret

urns. There afte r, he fo rm ed Matr ix Tax Se rvi c e , I nc . ( “ Ma tr i x” ) i n the nam e of June M. Mc Ma c ki n, hi s l ong- t i m e r oomm a t e and hous e ke e pe r . He fi l e d an a c c ount wi th the I RS unde r

he r nam e t o a ga i n be gi n fi l i ng electro n ic tax retu rn s. P rio r to trial, h e m o v ed , p ro se , t o sup pres s the evidence obtai ned dur i ng s e ar c he s of hi s hom e and Ma tr i x’ s offi c e s . Pol t onowi c z a ppe ar e d a t

the s uppr e s s i on he ar i ng p ro se w ith th e assistan ce o f an atto rn ey

serv in g as a leg al ad v iso r. He t e s t i fi e d tha t

he wa s not

the owne r

of Ma tr i x, tha t

Ms . Mc Ma c ki n owne d Ma tr i x, and tha t s he ha d i nt e rvi e we d and hi r e d hi m . The di s tr i c t c ourt de ni e d hi s m ot i on. A t trial, sev eral f

o rm er em p lo y ees testif

iedth at P o lto n o w icz in stru ctedth em to c l a i m none xi s t e nt

e m pl oy e e bus i ne s s e xpe ns e s , t o ove r s t a t e c har i t abl e c ontr i but i ons , and to u n d erstate in co m e. A d d itio n ally , th ese w itn esses testif iedth at th ey

o b serv edh im p rep are f alse tax retu rn s in th is m an n er o n n u m ero u s o ccasio n s. N u m ero u s clien ts t e s t i fi e d about

the i r fr audul e nt

t a x r e t urns . Som e of the s e c l i e nt s we r e s us pi c i ous of the fi c t i t i ous c har i t abl e c ontr i but i ons , but Pol t onowi c z r e a s s ur e d the m tha t thos e de duc t i ons were st andard and w ou ld no t t ri gg er an audit. Severa l of these cl ie nts had no t r ea li ze dThe gove rnm e nt l a t e r am e nde d the PSR t o r e fl e c t an e s t i m at e d t a x l os s of $419, 1 853. 20. 4 th at th ey h adsub m ittedf

rau du len t tax retu rn s u n til au d itedb y th e IR S . T h e g o v e rn me n t

a l s o p r e s e n t e de v i d e n c e o f h i s a f f i n i ty f o r o v e r s t a t i n g i n c o me w h en b en ef

icial. H e o b tain edth ree m o rtg ag es f o r h is h o m e an da lease f o r an au to m o b ile by prov iding h is cr edit ors with W-2 tax f orm s that overs tate d h is incom e. He prov ided W-2 s f alsif iedin th e sam e m an n er f

o r h is f ath er an dcertain clien ts to assist th em in obt a i ni ng l oans . I n e a c h of the s e i ns t anc e s , the W - 2s ove r s t a t e d i nc om e and we r e not the W- 2s ac tual ly

file d w it h the IRS f

or that part ic ular

y ear. The jury c onvi c t e d Pol t onowi c z of a l l of the c har ge s e xc e pt for two c ount s of m aking f al se st at em ents to ob ta in a l oan in v iolati on of 18 U.S.C. § 1 01 4. Th e parti es then prepare d f

or se ntenci ng , for wh ic h h e r et ai ned cou nsel . The pre-s ente nce i nve s t i ga t i on r e port

( “ PSR” ) e s t i m a t e d the t a x l os s a t $408, 275. Pol t onowi c z m ove d for

1 an order com

pell ing the go vernm ent t o p rodu ce the docum ents on wh ic h it r el ie d. In p articu lar, h e assertedth at th e g o v ern m en t w as requ iredto sup p o rt its estim atedtax lo ss with tax ret

urns, m em oranda of

inte rvie ws of

cl ie nts, and aud it

re po rt s anddem anded pr oduc t i on of the s e doc um e nt s . The gove rnm e nt c ount e r e d tha t

unde r the Se nt e nc i ng Gui de l i ne s , i t

wa s pe rm i tt e d t o s upport i t s e s t i m a t e wi th the 200 audi t e d t a x r e t urns pres ente d at the tr ia l, bu t t hat non ethele ss , he had al l of the re qu es te d d ocum ents on e year p rio r to h is trial.5

Th e dis tr ic t c ou rt

cond ucte d a se ntenci ng hear ing, at wh ic h P oltono wicz appeare d wi th c ouns e l . The gove rnm e nt offe r e d t e s t i m ony

a s t o i t s m e thodol ogy

i n c a l c ul a t i ng the t a x l os s . I t

r e s tr i c t e d the c a l c ul a t i ons t o t a x r e t urns tha t we r e pe r s ona l l y

pr e par e d by Po lt on ow ic z a s opp osed to any of the r et urns prepare d b y

his e m ploy ee s ( despit e e vidence that he e nc our a ge d ands om e t i m e s r e qu i r e d e m pl oye e s t o i nc l ud e fa l s e de du c t i on s ) . Of tha t s ubs e t of t a x r e t urns , the gove rnm e nt

i nc l ude d onl y

thos e tha t

c ont a i ne d one of the m eth o d s o f

f alsif yin g tax retu rn s estab lish edat trial, su ch as f ictitio u s cash an dn o n -cash c har i t abl e c ontr i but i ons , e m pl oy e e non- r e i m

bur s e d e xpe ns e s , and c l a i m s of e l i gi bi l i ty for the e arne d i nc om e t a x c r e di t . The gove rnm e nt fi l t e r e d tha t

s ubs e t t o i nc l ude two ty

pe s of retu rn s: (1 ) retu rn s f

o r w h ich th e IR S h adco n du ctedan au d it an dh adsub sequ en tly assessedth e tax p ay er w ith ad d itio n al tax liab ility b asedo n th e tax p ay er’s in ab ility to substantiate thei r r et

urn, or (2) re turns for taxp ayer s i nter viewed, who conf

ir m ed that they d idn o t p ro v id e an y

ev id en ce o f

th e d edu ctio n s at issu e o r requ est th at th ey b e in clu d ed . Th e e st im at e of $ 41 9,85 3.20 , i n the m anner ca lc ulat ed, was ac tual ly un der i nclusi ve. Pol t onowi c z ar gue d tha t

the c ourt s houl d l i m i t

the c a l c ul a t i on t o thos e t a x r e t urns of form e r c l i e nt s whom

the gove rnm e nt

i nt e rvi e we d, whi c h woul d r e s ul t i n at a x l os s of $8 0,00 0 to $ 20 0,00 0. He ar gu ed that it was i m prop er fo r the go vernm ent t o include tax re turns bas ed sole ly

on audits as som e of tho se fict it ious dedu ct ions m ight have been at th e d irectio n o f

h is clien ts. T h e D istrict C o u rt cred itedth e g o v ern m en t’s testim o n y an df o u n da to tal tax lo ssThe di s tr i c t c ourt ha d jur i s di c t i on pur s uant t o 18 U. S. C. § 3231. W e have 2 jur i s di c t i on pur s uant

t o 28 U. S. C. § 1291. W e r e vi e w fa c t

ua l fi ndi ngs , s uc h a s the c a l c ul a t i on of at ax l os s a ttr i but abl e t o a 3 d ef en d an t’s crim in al activ ity , f o r clear erro r. Se e Uni te d States v . Roman , 121 F. 3d 136, 1 4 0 (3 dC ir. 1 9 9 7 ). 6 i n e xc e s s of $400, 000. The Di s tr i c t Court de t e rm i ne d tha t

e nhanc e m e nt s for

obs tr uc t i on o f j u s t i c e an dth e l e a d e r s h i p r o l e w e r e a p p r o p r i a t e . I t

s e n t e n c e dP o l t o n o w i c z t o f o rtye i ght m onths of i m

pr i s onm e nt , we l l be l ow the gui de l i ne s r ange , and i m pos e d a$10, 000 f in e, a $ 2 ,7 0 0 sp ecial assessm en t, an d$ 4 0 0 ,0 0 0 in restitu tio n . I I . DI SCUSSI ON 2 Po lt on ow ic z a ss erts that

the Dis tr ic t Cou rt

er re d as i t: (1) m is ca lc ulat ed the t ax lo ss, (2 ) reliedo n f

rau du len t tax d ata sub m ittedb y th e g o v ern m en t in sup p o rt o f its s e nt e nc i ng r e c omm e nda t i on, ( 3) i m pr ope r l y a s s e s s e d atwo- l e ve l e nhanc e m e nt for obs tr uc t i on of jus t i c e , ( 4) i m

pr ope r l y a s s e s s e d afour
- l e ve l e nhanc e m e nt for be i ng the l e a de r of c r i m i na l a c t i vi ty , and ( 5) i m pr ope r l y i m pos e d r e s t i t

ut i on i n the am ount

of $400, 000. A . C a lcu la tio n o f

T a x L o ss 3 “For tax o ff

ense s, a defendant’s bas e off ense le vel i s det er

m ined by the t ax loss .” Un ited States v. Gric co , 277 F. 3d 339, 355 ( 3d Ci r . 2002) ( c i t i ng U. S. Se nt e nc i ng G u id elin es M an u al § § 2 T 1 .1 (a)(1 ), 2 T 1 .9 ). “In d eterm in in g th e to tal tax lo ss attrib u tab le t o the offe ns e . . . a l l c onduc t vi ol a t i ng the t a x l aws s houl d be c ons i de r e d a s part of the sam e c ou rs e of con du ct

or comm on sc hem e or plan u nles s the evidence dem on strate s that7

th e co n du ct is clearly

u n related .” U .S . S en ten cin g G u id elin es M an u al § 2 T 1 .1 cmt. n .2 . Furthe r , “ [a ] s e nt e nc i ng c ourt i s pe rm i tt e d t o m ake ‘ ar e a s onabl e e s t i m a t e ba s e d on the avai la ble fac ts ’ where t

he exact am ou nt of

tax loss m ay

be un ce rt ai n.” Gric co , 277 F. 3d at 3 5 6 ; see a lso U.S. Sentenci ng Gu idel ines Manu al § 2 T1 .1 cmt. n.1 (no ti ng that wh en “the am ou nt of

the t ax loss m ay

be un ce rt ai n; the guideli nes c on te m plat e that the court
w ill sim p ly m ak e a reaso n ab le estim ate b asedo n th e av ailab le f acts”). P o lto n o w icz co n ten d s th at th e D istrict C o u rt erredin f in d in g th at th e tax lo ss e xc e e de d $400, 000. At

the s e nt e nc i ng he ar i ng, he ar gue d tha t the e vi de nc e s upport e d a t a x l os s of $80, 000 t o $200, 000. For the fi r s t t i m e , he now a s s e rt s on a ppe a l tha t the e vi de nc e s upport s at a x l os s of $17, 960. He faul t s the Di s tr i c t Court for r e l yi ng on extr apolat ed data

and ass erts that

the Dis tr ic t Cou rt

shou ld have excl ud ed loss es fo r t ax p ay ers w h o m

th e g o v ern m en t d idn o t in terv iew . T h e d istrict co u rt reliedo n ev id en ce p resen tedat trial an dth e sen ten cin g h earin g to re ac h its conclusi on . The go vernm ent e st abli shed the modus ope randi —p re pari ng tax re turns with f

ic ti ti ou s dat a for chari ta

ble c on tr ibutions, e m

ploy ee no n-re im

bu rs ed ex p en ses, an dclaim s o f

elig ib ility

u n d er th e earn edin co m e tax cred it. It d idn o t err in incl ud ing tax re turns i n the tax loss c al culati on wh ic h h ad been subj ec t t o andhad f ai le d an audit by

the I RS , e ven if the go vernm ent did no t i nter view the t ax pay er . Poltono wicz i s on audi ot a

pe i nform i ng apot e nt i a l c l i e nt tha t he kne w e xa c t l y

how t o c l a i m

fi c t i t i ous d edu ctio n s w ith o u t g ettin g cau g h t. In d eed , th e ev id en ce su g g ests a m u ch larg er tax lo ss.8

He pers on al ly

prepare d 2 0,00 0 to 2 5,00 0 tax re turns, y et the gov er

nm ent c al culate d its tax l os s ba s e d on jus t

225 of thos e r e t

urns . One form e r

e m pl oy e e t e s t i fi e d tha t

a t l e a s t 25% of the r et urns Po lt on ow ic z fil ed contai ned f ic ti ti ou s deducti on s. Th e gov er nm ent e xcluded from it s c al culati on any

re turns that wer e pre pare d b y em ploy ee s, even thou gh se vera l em ploy ee s t es ti fied that

he dire ct ed them

to add f ic ti ti ou s deducti on s t o the re turns they fi l e d. On ave r a ge , 50- 54% of r e t urns c l a i m

c har i t abl e c ontr i but i ons ; whe r e a s , 98% of P o lto n o w icz’s clien ts claim edsu ch d edu ctio n s. N o tab ly , h is clien ts u n if o rm ly claim edto dona t e i n one of thr e e pr e c i s e am ount s : $490, $495, and $500. Pol t onowi c z a l s o c ha l l e nge s the gove rnm e nt ’ s c a l c ul a t i on of a ddi t i ona l l os s e s by c om par i ng hi s ave r a ge c l a i m s for c e rt a i n de duc t i ons , s uc h a s the c har i t abl e de duc t i on, w ith th at o f

th e n atio n al av erag e. H e asserts th at it w as im p ro p er to co m

p are h is clien ts to th e n atio n al av erag e b ecau se h is clien ts w ere n o t av erag e tax p ay ers; rath er, h is clien ts co n sistedo f

b lu e-co llar, relig io u s, co n serv ativ e tax p ay ers w h o w ere f ar m o re lik ely

to m ake c har i t abl e c ontr i but i ons than the ave r a ge t a x pay e r . He m ake s a s i m i l ar ar gum e nt with re spec t t o the go vernm ent’ s c om parati ve info rm at ion o n em ploy ee no n-re im

bu rs ed e xpe ns e s . The s e ar gum e nt s l a c k m e r i t . The Di s tr i c t Court di d not r e l y on the go vernm ent’ s c om

parati ve data

in re ac hing it s c on cl usion that t he tax loss e xcee ded $4 00 ,000 . The Distri ct

Co urt bas ed it s c on cl usion o n the audite d ret urns and m enti on ed the a dd it ional s tati st ic al evidence in no ti ng that the gov er

nm ent’ s c al culati on was e xtr e m e l y c ons e rva t i ve . The r e i s no e rr or wi th aDi s tr i c t

Court ’ s c ons i de r a t i on ofW e r e vi e w adi s tr i c t c ourt ’ s r ul i ng on pr os e c ut or i a l m i s c onduc t for abus e of 4 d iscretio n . Se e Uni te d States v . Br e nnan , 3 2 6 F .3 d1 7 6 , 1 8 2 (3 dC ir. 2 0 0 3 ). 9 statistical ev id en ce in a case in v o lv in g up w ard s o f 2 0 ,0 0 0 tax retu rn s. Th e gov er

nm ent pre se nted a c on se rvat ive t ax loss ca lc ulat ion. Th is es ti m at e was r e a s onabl e gi ve n the e vi de nc e be for e the Di s tr i c t Court . W e r e

je c t the c ha l l e nge t o the tax lo ss calcu latio n . B. Prosec utorial Mis cond uct 4 Po lt on ow ic z a ss erts that

the gov er

nm ent s up po rt ed it s c al culati on with se vera l retu rn s th at it kn ew w ere in accu rate to reach th e th resh o ldtax lo ss am o u n t o f $ 4 0 0 ,0 0 0 . T h is co n ten tio n lack s m erit. T h e g o v ern m en t ex clu d edth e retu rn s in qu estio n an dstill reach eda tax lo ss o f

$ 4 1 9 ,8 5 3 .2 0 . P o lto n o w icz p resen tedn o ev id en ce o f an y in accu rate tax ret urns, nor did h e pre se nt any evidence that

wo uld n egat e his li abil it

y fo r the tax loss es identi fied by

the gov er

nm ent. We re

ject Po lt on ow ic z’ s c la im

of prosec utoria l m isco n du ct. C. Obs t r uc t i on of Jus t i c e Fi ndi ng Po lt on ow ic z a ss erts that

the Dis tr ic t Cou rt

er re d in ass es si ng a two -l evel e nhanc e m e nt

unde r § 3C1. 1 of the U. S. Se nt e nc i ng Gui de l i ne s Manua l , for obs tr uc t i on of j u stice relatedto h is testim o n y at th e sup p ressio n h earin g reg ard in g h is in terest in M atrix . H e asserts th at th ere w as n o th in g f alse ab o u t h is testim o n y . T h e reco rdb elies th is assertio n .10

D. Lead erof

Crim inal Acti vity Un der § 3B 1.1 o f the Sentenci ng Gu idel ines , c ou rt s m ay incr ea se a defendant’s of fense l evel by

fo ur le vels “[i]f the defend ant was an organizer or le ader of a c ri m inal a c t i vi ty tha t i nvol ve d fi ve or

m or e part i c i pant s or

wa s othe rwi s e e xt e ns i ve . ” U. S. S en ten cin g G u id elin es M an u al § 3 B 1 .1 . P o lto n o w icz ex ertedco n tro l o v er M cM ack in and o ther s t o f

urther his c ri m inal sc hem e. Tw o f orm er em ploy ee s t es ti fied that

they pr e par e d t a x r e t

urns c ont a i ni ng fi c t i t i ous de duc t i ons a t hi s di r e c t i on. W e r e

je c t the ch allen g e to th is en h an cem en t. E. Re s t i t ut i on Pol t onowi c z c ont e nds tha t the di s tr i c t

c ourt e rr e d i n or de r i ng hi m

t o pay r e s t i t ut i on a s c onvi c t i ons for

t a x fr aud ar e e xc e pt e d fr om thos e c r i m e s for

whi c h r e s t i t

ut i on c an be o rd ered . T h ere is n o leg al au th o rity f o r th is claim . T h e d istrict co u rt h adau th o rity to im p o se restitu tio n u n d er 1 8 U .S .C . § § 3 5 8 3 (d ), 3 5 6 3 (b )(2 ). I I I . CONCLUSI ON W e wi l l a ffi rm

the judgm e nt

of c onvi c t i on and s e nt e nc e of June 12, 2008.