UNPUBLISHED

UNITED STATES COURT OF APPEALS 

FOR THE FOURTH CIRCUIT 

No. 09-4138

UNITED STATES OF AMERICA, 

 Plaintiff - Appellee, 

 v. 

EDDIE BURL SMITH, 

 Defendant - Appellant. 

Appeal from the United States District Court for the Southern 

District of West Virginia, at Charleston. John T. 

Copenhaver, Jr., District Judge. (2:08-cr-00056-1) 

Submitted: October 27, 2009 Decided: November 30, 2009 

Before WILKINSON and AGEE, Circuit Judges, and HAMILTON, Senior 

Circuit Judge. 

Affirmed by unpublished per curiam opinion. 

John E. Jessee, JESSEE & READ, P.C., Abingdon, Virginia, for 

Appellant. Charles T. Miller, United States Attorney, R. Booth 

Goodwin II, Assistant United States Attorney, Charleston, West 

Virginia, for Appellee.

Unpublished opinions are not binding precedent in this circuit. 
PER CURIAM: 

 Eddie Burl Smith (Smith) pled guilty to conspiracy to 

defraud the United States, 18 U.S.C. § 371 (2006) (Count One), 

and fraudulent receipt of bankruptcy property, 18 U.S.C. 

§§ 152(2), 2 (2006) (Count Eight), and was sentenced to a term 

of fifty-seven months imprisonment. Smith appeals his sentence, 

contending that the district court clearly erred in finding that 

he was an organizer or leader in the conspiracy, U.S. Sentencing 

Guidelines Manual § 3B1.1(a) (2008), and that he abused a 

position of trust, USSG § 3B1.3. We affirm. 

 Smith was president of Carl E. Smith, Inc. (CESI), a 

West Virginia corporation which built pipelines for oil and gas. 

The company had been started by Smith’s father; at his death in 

1987, Smith and his brothers, Larry and Donald, became equal 

shareholders. From 1998 to 2006, the period of the conspiracy, 

Smith’s brother Donald was vice-president of CESI, and Smith’s 

son, Edward Michael Smith, was secretary and treasurer. After 

civil litigation initiated by Larry in 1999 revealed 

questionable financial practices and a lack of proper accounting 

at CESI, the IRS began an investigation, which led to Smith’s 

eventual guilty plea to the instant offenses. According to 

information in the presentence report, CESI’s “principals and 

officers” defrauded the IRS by using corporate funds extensively 

for personal vehicles and other personal purchases without 

2 
reporting the assets acquired as personal income. In addition, 

the company used color-coded checks to avoid payroll reporting 

requirements. Some employees were paid with both yellow payroll 

checks and blue expense checks. Wages that were paid as expense 

reimbursement were not reflected in the employee’s W-2 forms and 

taxes were only withheld from the payroll check. With respect 

to these funds, CESI failed to meet its obligation to collect 

the required “employment taxes,”1 hold them in trust, and deposit 

them in an authorized financial institution at intervals. In 

2003, Smith and his son, Edward Michael Smith, filed for Chapter 

11 bankruptcy on behalf of CESI and its subsidiaries. A month 

later, they formed Smith Well Service (SWS), a limited liability 

company unrelated to CESI and its subsidiaries. Edward Michael 

Smith was the sole proprietor. During the CESI bankruptcy, 

Smith and his son engaged in certain transactions which 

benefitted SWS without the knowledge or approval of the 

bankruptcy court. 

 At sentencing, the district court determined that 

Smith had a leadership role in the conspiracy and that there 

were at least five participants: Smith; his son, Edward Michael 

Smith; his brother, Donald Smith; and Donald’s wife and 

 1

 “Employment taxes” include both the employee’s and the 

company’s share of federal income tax, Social Security, and 

Medicare taxes. 

3 
daughter, Judith and Jaclyn Smith. The court found that Smith 

had the primary responsibility for manipulation of the payroll 

and expense checks to carry out the fraud involving trust fund 

taxes and that his position as president afforded him discretion 

that facilitated the offense. Smith contests these rulings on 

appeal. 

 The district court’s determination of the defendant’s 

role in the offense is a factual finding reviewed for clear 

error. United States v. Kellam, 568 F.3d 125, 147-48 (4th Cir. 

2009). A four-level increase is provided under § 3B1.1(a) for a 

defendant who is an organizer or leader of an offense which 

involved more than five participants or was otherwise extensive. 

To qualify, the defendant must have been the organizer or leader 

of “one or more other participants.” USSG § 3B1.1 cmt. n.2. 

Factors to be considered include: 

the exercise of decision making authority, the nature 

of participation in the commission of the offense, the 

recruitment of accomplices, the claimed right to a 

larger share of the fruits of the crime, the degree of 

participation in planning or organizing the offense, 

the nature and scope of the illegal activity, and the 

degree of control and authority exercised over others. 

USSG § 3B1.1 cmt. n.4. 

 Smith contends that he had “no more control or 

ownership of the company” than Donald, that there was no 

evidence he recruited accomplices, and that much of the benefits 

went to his son or to Donald’s family and friends. He argues 

4 
that there is little evidence as to whether he participated in 

planning or organizing the scheme to defraud the IRS, and that 

family members acted independently when they used the company to 

pay for personal purchases. He argues that, as president and 

signer of the fraudulent expense checks in the blue-check 

scheme, he exercised control over property, not people, noting 

that control of property alone does not warrant a four-level 

leadership adjustment. USSG § 3B1.1 cmt. n.2; see also United 

States v. Capers, 61 F.3d 1100, 1108-13 (4th Cir. 1995). Smith 

also maintains that there were fewer than five participants 

because there was no evidence either Jaclyn Smith or Brian 

Tanner2 was a “knowing culpable participant” in the conspiracy. 

 With respect to the number of participants, 

Application Note 1 to § 3B1.1 states that “[a] ‘participant’ is 

a person who is criminally responsible for the commission of the 

offense, but need not have been convicted.” Smith acknowledged 

at sentencing that he knew Jaclyn was on the CESI payroll and 

was paid for work she did not do. He did not dispute the 

information in the presentence report on which the district 

court relied in deciding that Judith and Jaclyn were 

participants; specifically, that in addition to being paid as 

 2

 Brian Tanner pled guilty to income tax evasion. The 

district court did not find him to be a participant in the 

conspiracy. 

5 
CESI employees, Judith and Jaclyn used a CESI car and credit 

card, that CESI paid the expenses for the horse farm where they 

lived, and that they did not report these benefits as income, 

which caused each of them to file a false tax return, and also 

caused “the inflation of corporate expenses and the filing of 

false corporate tax returns.” We conclude that these facts were 

sufficient for the district court to find that Jaclyn was a 

criminally responsible participant. In addition, as the 

government argues, the blue-check/yellow-check scheme required 

the participation of CESI employees such as payroll clerks and 

in-house accountants.3 

 By virtue of his position as president of the company, 

Smith had the authority to endorse or to stop the scheme to 

defraud the IRS. Smith’s statements at the Rule 11 hearing 

disclose that he actively engaged in and thus promoted the 

fraudulent scheme. Therefore, the district court did not 

clearly err in finding that he had a leadership role. 

 A two-level adjustment should be made “[i]f the 

defendant abused a position of public or private trust . . . in 

 3

 This argument was not made in the district court, but is 

an alternative ground for finding the required number of 

participants. We may affirm for any reason appearing in the 

record. United States v. Smith, 395 F.3d 516, 519 (4th Cir. 

2005) (“We are not limited to evaluation of the grounds offered 

by the district court to support its decision, but may affirm on 

any grounds apparent from the record.” (citation omitted)). 

6 
a manner that significantly facilitated the commission or 

concealment of the offense.” USSG § 3B1.3. A position of 

“[p]ublic or private trust” means a position “characterized by 

professional or managerial discretion (i.e., substantial 

discretionary judgment that is ordinarily given considerable 

deference).” USSG § 3B1.3 cmt. n.1. The district court’s 

decision that a defendant had a position of trust is a factual 

determination reviewed for clear error. United States v. 

Bollin, 264 F.3d 391, 415 (4th Cir. 2001). The question must be 

examined from the perspective of the victim. United States v. 

Godwin, 272 F.3d 659, 671 (4th Cir. 2001). 

 Smith contends that no relationship of trust existed 

between him and the IRS, which was identified as the victim of 

the offense in the presentence report. He relies on two tax 

evasion decisions from other circuits where the adjustment was 

not applied. In United States v. Guidry, 199 F.3d 1150, 1160 

(10th Cir. 1999), the appeals court held that the defendant 

“[d]id not occupy a position of trust vis-à-vis the government, 

the victim in his case.” In United States v. Barakat, 130 F.3d 

1448, 1455-56 (11th Cir. 1997), the appeals court held that the 

defendant occupied a position of trust, but did not use it to 

commit or conceal his tax evasion. 

 In this case, however, as an employer, Smith was 

placed in a position of trust by the government. He was 

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entrusted with collecting, holding, and depositing funds 

designated in part for Social Security and Medicare and his 

failure to carry out this responsibility victimized taxpayers. 

United States v. Adam, 70 F.3d 776, 781-82 (4th Cir. 1995) 

(victims of Medicaid fraud are American taxpayers). Similarly, 

in United States v. Turner, 102 F.3d 1350 (4th Cir. 1996), we 

held that mine operators occupied a position of public and 

private trust, which they abused by declining to follow mine 

safety laws or provide adequate safety training for miners. 

Their abuse of that trust victimized both the miners and “the 

rest of society.” Id. at 1360. 

 We have held that physicians and medical care 

providers who defraud Medicaid abuse a position of trust. See

United States v. Bolden, 325 F.3d 471, 504-05 (4th Cir. 2003). 

In Bolden, we observed that, “[b]ecause of the discretion 

Medicaid confers upon care providers . . . such providers owe a 

fiduciary duty to Medicaid. Indeed, we see it as paramount that 

Medicaid be able to ‘trust’ its service providers.” Id. at 505 

n.41. Similarly, it is essential that the government be able to 

trust employers to collect, hold in trust, and deposit the 

“employment taxes” owed by the employees and the company. The 

government maintains that Smith had both a fiduciary obligation 

to the IRS to carry out this responsibility, and a fiduciary 

relationship with the employees of CESI which carried the same 

8 
9 

obligation, notwithstanding the willingness of some employees to 

participate in the scheme to defraud. We agree, and conclude 

that the district court did not clearly err in applying the 

adjustment for abuse of a position of trust. 

 We therefore affirm the sentence imposed by the 

district court. We dispense with oral argument because the 

facts and legal contentions are adequately presented in the 

materials before the court and argument would not aid the 

decisional process. 

AFFIRMED