In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 03-1516

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

BETTE J. PREE, also known as

BETTS PREE,

Defendant-Appellant.

____________

Appeal from the United States District Court

for the Central District of Illinois. 

No. 02 CR 30004—Jeanne E. Scott, Judge.

____________

ARGUED DECEMBER 12, 2003—DECIDED MAY 20, 2005

____________

Before COFFEY, RIPPLE and KANNE, Circuit Judges.

RIPPLE, Circuit Judge. Bette J. Pree was indicted by a grand

jury for one count of failing to file a tax return for the tax

year 1994, in violation of 26 U.S.C. § 7203, and for two

counts of filing false tax returns for the tax years 1995 and

1996, in violation of 26 U.S.C. § 7206(1). After trial, a jury

found Ms. Pree not guilty of the failure to file charge but

guilty of both counts of filing false tax returns. The district

court sentenced Ms. Pree to 18 months’ imprisonment, to be
2 No. 03-1516

1 Prior to this court’s decision vacating Ms. Pree’s sentence, she

had completed her term of incarceration and had begun serving

her term of supervised release. This court directed that any matter with respect to bail should be addressed to the district court.

The Government filed an unopposed motion requesting that the

district court place Ms. Pree on bond with the same conditions

that were in place prior to her reporting to the Bureau of Prisons.

The district court granted this motion.

followed by a one-year term of supervised release, with the

special condition that she pay taxes owed to the Internal

Revenue Service (“IRS”) in the amount of $38,852. Ms. Pree

appealed her convictions. On September 14, 2004, this court

affirmed the judgments of conviction but vacated the

sentence and remanded the case to the district court

for resentencing. We stayed our mandate pending the

Supreme Court’s decision in United States v. Booker, 125

S. Ct. 738 (2005).1

 On January 12, 2005, the Supreme Court

issued its decision in Booker. At this court’s invitation, each

party has submitted a memorandum presenting its views on

the application of Booker to this case. For the reasons set

forth in the following opinion, we revise our prior instructions with respect to Ms. Pree’s sentence. In light of Booker,

125 S. Ct. 738, while retaining jurisdiction of this case, we

remand this case to the district court in accordance with this

court’s decision in United States v. Paladino, 401 F.3d 471 (7th

Cir. 2005).

I

BACKGROUND

A. Facts

Ms. Pree was convicted of filing false returns for tax years

1995 and 1996. To present a coherent background of the
No. 03-1516 3

circumstances upon which those convictions are based, we

first must relate some events that transpired prior to those

tax years.

In 1993, Maurice Furlong, the President of Health Care

Centers of America (“HCCA”) contacted Ms. Pree’s daughter,

a former lobbyist for the Illinois Chiropractic Society, about

a potential job opportunity with HCCA. Ms. Pree and her

daughter met Furlong, and he discussed the company and

its expansion plans with them. After this meeting, Furlong

developed an interest in hiring Ms. Pree as well as Ms. Pree’s

daughter because Ms. Pree was a nurse and held a real

estate license.

After this meeting, Ms. Pree and her daughter moved to

Las Vegas. On December 8, 1993, Ms. Pree signed a lease

that was assigned to “HCCA—Health Care Centers of

America and/or Bette Pree.” Gov’t Ex.81A. Ms. Pree and her

daughter received approximately $4,000 from Furlong for

moving expenses.

Beginning in 1994, Ms. Pree began selling HCCA stock

to friends, family, former co-workers and other acquaintances. In January 1994, Ms. Pree wrote to one former coworker and noted, “This company I work for HCCA Health

Care Centers of America is going on the Stock Market right

away.” Gov’t Ex.91A. Ms. Pree encouraged the co-worker to

buy as much stock as she could. The letter further indicated:

“I’m Exec. Assistant to President of Co.” Gov’t Ex.91A.

Ms. Pree continued selling stock through 1996. In selling

stock, Ms. Pree would provide prospective purchasers with

her HCCA business card on which her title was listed as

“Administrator of Aquisition [sic],” Gov’t Ex.15G, and

would distribute company literature. She also would

correspond on company letterhead. Ms. Pree explained to

prospective purchasers that she had been hired to oversee
4 No. 03-1516

2 According to the stock transfer agent, who later testified at Ms.

Pree’s trial, the restricted stock could be sold in a private transaction.

the opening of an office and “in lieu of salary they [HCCA]

were issuing her stocks in the company to do with what she

chose.” R.67 at 106.

Although Ms. Pree began selling stock in January of 1994,

she first received HCCA stock in May of 1994. The stock she

received consisted of 350,000 shares of restricted stock

formerly registered to Furlong. The restricted stock bore the

statement: “The shares represented by this certificate have

not been registered under the Securities Act of 1933 and

may not be sold, transferred or otherwise disposed of by the

holder unless registered under said Act . . . .” Gov’t Ex.2A.2

When a securities investigator from the Illinois Secretary of

State investigated Ms. Pree’s stock sales, Ms. Pree wrote a

letter in response, justifying the transactions as personal

sales from stock received for services. She described the

stock as 

given to me by Maurice Furlong from his own personal

shares for my assistance in the development and arrangement of the chiropractic presentation and business

plan, and for introducing him to Chiropractors and

Associates in Illinois, as well as assisting with various

administrative duties or tasks.

Gov’t Ex.49.

Throughout the course of Ms. Pree’s stock sales, the prices

at which she sold the stock fluctuated. During 1994, she sold

stock at prices between a nickel and a dollar per share.

During 1995, her stock prices ranged from a quarter to a

dollar per share. In 1996, she sold the stock at prices between nine cents and fifty cents per share. During 1995, Ms.
No. 03-1516 5

3 Ms. Pree also earned $3,622 in gambling income in 1995 and

$7,800 in 1996. Ms. Pree received W-2Gs, gambling income

reporting forms, from the casinos in which these amounts were

won.

4 Specifically, the 1995 return reported no gambling winnings

while the 1996 return reported $3,622 of gambling income (the

amount won in 1995).

Pree received $21,500 from sales of the HCCA stock. In 1996,

Ms. Pree received $60,450 from stock sales.3

 In a 1996

declaration to a casino, Ms. Pree indicated that she had an

annual income of $80,000 from stocks, retirement and social

security.

Ms. Pree did not file her 1995 and 1996 tax returns when

due but instead requested and received automatic extensions to file. She later met with Ann Westphal, a part-time

H & R Block tax preparer, to prepare her 1995 and 1996

returns. Westphal prepared returns indicating pension and

social security income for 1995 in the amount of $3,441, and

pension, taxable interest and gambling income for 1996 in

the amount of $7,231.4

 Neither return included any income

from stock sales, nor did either return include Schedule D,

the schedule on which capital gain or loss from sale of stock

is calculated. Westphal prepared the returns at her home as

a personal favor to Ms. Pree. Westphal did not prepare them

through H & R Block, nor did she sign them. Ms. Pree

ultimately signed and submitted her 1995 and 1996 tax

returns on March 1, 1998. While meeting with Westphal,

Ms. Pree also told her about the opportunity to purchase

HCCA stock, and Westphal agreed to purchase 25,000

shares for $500 from Ms. Pree.
6 No. 03-1516

5 Count I charged Ms. Pree with failing to file an income tax

return for 1994. Ms. Pree was acquitted of that charge, and it is

not at issue in this appeal.

6 Ms. Pree received the stock in 1994 and 1998. Thus, the issue of

whether her initial receipt of the stock from Furlong constituted

taxable income is not relevant in this appeal, which deals with

Ms. Pree’s tax liability for 1995 and 1996.

Ms. Pree later was indicted on several charges.5 Count II

charged Ms. Pree with filing an income tax return for 1995

in which she “listed total income of $3,441, whereas, as she

then and there well knew and believed, she had received

additional income substantially in excess of that amount in

calendar year 1995.” R.1 at 2. Count III charged Ms. Pree

with filing an income tax return for 1996 in which she

“listed total income of $7,231, whereas, as she then and

there well knew and believed, she had received additional

income substantially in excess of that amount in calendar

year 1996.” R.1 at 3.

B. District Court Proceedings

Ms. Pree’s case proceeded to trial. Before trial, Ms. Pree

filed a motion in limine to exclude evidence related to fraud

in her sale of stock to investors. The district court granted

this motion in part, barring testimony as to whether her

investors were satisfied or dissatisfied with their HCCA

investments.

The Government’s theory of the case, pertinent to this

appeal, was that, during the relevant time period, Ms. Pree

worked for HCCA and sold HCCA stock that she received

as compensation for her services.6

 Despite a significant

increase in her income from these stock sales and despite

being informed that she had an obligation to report the
No. 03-1516 7

7 The Government also relied upon unreported income from

gambling wins during those same tax years.

8 Some investors who paid Ms. Pree in 1996 did not receive stock

certificates until 1999, after new HCCA shares had been issued to

Ms. Pree. Ms. Pree received one million additional shares from

Furlong in May of 1998.

income she received from such sales, Ms. Pree filed belated

returns for 1995 and 1996, on which she willfully failed to

report income from her stock sales.7

1. Evidence

At trial, the Government presented evidence pertaining to

the nature of the stock Ms. Pree sold. An officer of the stock

transfer agent for HCCA testified that the stock originally

was registered to Furlong. In May 1994, however, Furlong’s

stock certificate was divided, and one of fifty-eight new

certificates was issued to Ms. Pree. The transfer agent

testified that the stock was restricted and that the effect of

the restriction on the stock certificate was to limit the stock’s

value to “whatever [the seller] can obtain from the purchaser.” R.67 at 25.

Several individuals who obtained stock from Ms. Pree

testified to their purchases. Stipulations pertaining to

Ms. Pree’s stock sales to other investors also were read into

evidence by the Government. The testimony and stipulations together revealed that Ms. Pree sold stock before any

was registered in her name, that she sold stock after she

received her certificate in May 1994, that she sold stock

throughout 1995 and 1996, and that she continued selling

stock after exhausting the shares originally registered in her

name.8
8 No. 03-1516

Additionally, the Government presented the testimony of

an IRS Special Agent who investigated Ms. Pree in 1996. The

Special Agent testified that Ms. Pree had indicated to her

that she was aware of her obligation to report stock sales on

her tax returns in the year of sale. Further, the Government

presented the testimony of Westphal. Westphal testified that

she had prepared Ms. Pree’s 1995 and 1996 taxes in September of 1997. She testified that Ms. Pree had brought her an

interest statement, pension and social security information

and gambling W-2Gs. Westphal indicated that Ms. Pree had

denied any other income: “We went through the return and

I asked her if that was all the information she had, all the

income she had, and she stated to me that it was.” R.67 at

166. Westphal further testified that, after she herself purchased HCCA stock, the two discussed the need to report

income from stock sales, but Ms. Pree did not indicate that

any sales had been made in 1995 or 1996.

In concluding its case, the Government called Michael

Welch, an IRS Revenue Agent, as a summary witness. Agent

Welch had prepared an exhibit summarizing the HCCA

stock sales by Ms. Pree in 1994, 1995 and 1996. The exhibit,

Government Exhibit 101, was prepared from trial testimony,

exhibits and the stipulations, and it was admitted without

objection. Agent Welch also prepared a schedule that

summarized Ms. Pree’s 1994 gross income. The exhibit

included the full amount received from the stock sales in

1994 in the calculation of gross income. It was admitted as

Government Exhibit 102.

Agent Welch did not prepare any summaries for

Ms. Pree’s income for 1995 or 1996. Instead, when asked

where the 1995 stock sales would have been reported on the

1995 tax return, Agent Welch testified: “On Line 13 of the

face of the 1040 would be the gain or loss from sales of

stock. And a schedule D would be required to itemize the
No. 03-1516 9

9 The following colloquy occurred between Ms. Pree’s counsel

and Agent Welch:

Q. . . . You don’t just report the amount of money you receive

from the sale of stocks, isn’t that correct?

A. The Schedule D has several columns, you report the gross

sale and you report the cost basis and report the net gain or

loss.

. . . .

Q. Capital gain or loss is a net figure with respect to the sale

of stock, is that correct?

A. It’s the net of the year’s activity.

Q. So if Ms. Pree sold—received the amount of money you

stated she has in your summaries, that’s the net—that’s the

money she got, that doesn’t necessarily mean it is a gain or

a loss, right?

A. That’s the sales price.

R.68 at 324-25.

various sales.” R.68 at 318. He also testified that “Line 22 is

an accumulation of Line 7 through 21, [it] would include

wages, interest, dividends, gain on sale, pension distributions, and that would be your total income on Line 22. Stock

sales would be included there.” R.68 at 318. Agent Welch

testified similarly when asked about stock sales for 1996.

On cross-examination, Agent Welch testified that income

from stock sales is a net figure derived from the gross sales

and the cost basis of the stock.9

 In response to questions

stemming from the defense theory that Furlong gave

Ms. Pree the stock as a gift, Agent Welch also agreed that to

calculate capital gain or loss on the sale of a gift, you must

know the donor’s basis, the fair market value at the time of

the gift and the amount of any gift taxes paid. Agent Welch
10 No. 03-1516

10 Ms. Pree’s counsel engaged in the following cross-examination

of Agent Welch on this issue:

Q. Now, fair market value of the stock Bette sold was

basically what somebody would pay for it, wouldn’t you

agree?

A. When determining the fair market value of restricted

stock on the day you receive, I would say the value is zero.

You couldn’t go across the street from the courthouse here,

go into Merle Lynch [sic] and sell that stock because it is

restricted, there’s no market. There’s no market selling that

stock. So in my opinion it would be zero.

Q. So that would be your opinion as to the fair market value

as opposed to a taxpayer that may be interpreting that 551 of

fair market value, is that correct?

A. It would be the market value and there is no market. You

would have to go out into a private sale and find someone

and negotiate with them to come up with a price that they

would pay. And that isn’t in place when she receives the

stock. You receive the stock, you can’t go into the brokerage

house across the street and sell it, you have to go out and

find someone to sell it to. So on the day you receive that

stock, the fair market—

Q. The fair market value could be developed with the first

sales transaction, don’t you agree?

A. Are we talking about a gift or for service?

Q. I’m talking about the gift?

A. Well, the gift has nothing to do with—

(continued...)

admitted that he did not have information regarding

Furlong’s cost basis nor whether any amount of gift tax was

paid on the stock Ms. Pree received. Agent Welch testified,

however, that he believed the fair market value of the stock

was zero. 1 0 On redirect, Agent Welch
No. 03-1516 11

10 (...continued)

Q. You are wanting to know what the fair market value is?

A. I can just start over.

Q. Probably a good idea. Actually, I think I’m done.

R.68 at 340-41.

clarified that he relied on the Government’s evidence that

Ms. Pree received the stock as compensation for services

rendered and explained why he treated the stock sales as

income:

Q. Now, you heard the testimony here when you chose

to characterize the 60,000 dollars worth of stock sales in

1996 that weren’t listed on Bette Pree’s return, you

characterized that as unreported income. Why is that?

A. It wasn’t reported on the return, it represents sale of

stock, sale of stock goes on Line 13 as a capitol [sic] gain

or loss. Actually a capitol [sic] gain. And that’s income.

R.68 at 344. When asked to clarify why he attributed a zero

basis to the stock, he explained:

A. It was based on my 18 years of being with the I.R.S.

and the [stock transfer agent] describing the restricted

stock. And the fair market value of something I received

is whatever the market value is. And right across the

street is Merle Lynch [sic], when you walk out the door.

If you receive stock that had value, you should be able

to walk in there, into a brokerage house, and sell that

stock. And from everything I’ve read and understand,

this restricted stock could not be sold in the market.

R.68 at 345. Agent Welch also testified that the transfer

agent said the stock had no market value.

At the close of the Government’s case, Ms. Pree moved for

an acquittal, in part on grounds that the Government had
12 No. 03-1516

11 The following exchange occurred on cross-examination:

Q. You testified that you use [sic] to check the price of stock

before you sold it to investors, isn’t that right?

A. Sometimes.

. . . .

Q. Sometimes you would sell it without any regard at all to

what the current market price was?

A. Yes, I just—yes, I would want some people who maybe

had no money or hard life or whatever to have some of this

stock. And the money wasn’t the main factor in it. The main

thing was that in my heart I felt I wanted them to have some

of it. And it wasn’t to see how much money I could make off

of my relatives and my friends.

R.69 at 617-18.

presented no evidence of capital gains and had presented no

evidence that Ms. Pree knew the law related to capital gains.

The court denied the motion.

In defense, Ms. Pree presented evidence, including her

own testimony, to support her position that the stock was

received as a gift, that she never was employed by HCCA

and that her records of the stock transactions were stolen,

which caused a delay in her tax filing. Ms. Pree testified that

she heard somewhere that the cost basis of her stock was a

dollar and that she did not recall ever selling her stock for

more than a dollar. She testified that she sold the stock to

others to enable them to share in the investment opportunity.11 She further testified that when she met with Westphal

to prepare her 1995 and 1996 taxes, Westphal told her she

did not need to file anything with regard to the stock sales

because she always sold the stock for less than it was
No. 03-1516 13

12 Ms. Pree testified:

A. [Westphal] said that she looked at the information I had

there and she said, well, you didn’t make any money on this

because you sold it for less than it was trading for, so really

you have a loss there and you don’t need to file it. And

she—because I was—and she said, see that, she just wrote it

up and she said see.

She also said, you don’t have to report a sale until a

broker—or until the person has the certificate, until they

have the certificate in their hand. And I said oh, because I

didn’t know.

R.69 at 558-59.

The district court later enhanced Ms. Pree’s sentence on the

ground of obstruction of justice for knowingly false testimony on

a material matter based on her testimony related to her employment and Westphal’s advice.

trading.12 At the close of her case, Ms. Pree renewed her

motion for judgment of acquittal, which the court denied.

2. Jury Instructions and Closing Arguments 

Following the presentation of evidence, the court instructed the jury. The court did not give instructions regarding how to determine the total amount of taxable

income, nor did it instruct the jury how to calculate basis in

stock or net gains from the sale of stock. The defense did not

request or offer any instructions on these issues, nor did it

raise an objection on the ground that such an instruction

should be given. With respect to the summaries, the court

used the following pattern instruction:

Certain summaries are in evidence. They truly and accurately summarize the contents of voluminous books,
14 No. 03-1516

13 The defense requested a minor clarification to reflect that the

instruction referred to Counts II and III of the indictment.

14 Specifically, counsel made the following statement:

Why doesn’t the prosecution want it to be a gift? Well, . . .

because you’ve seen how you tax gifts of stock. That’s why.

(continued...)

records or documents, and should be considered together with and in the same way as all other evidence in

the case.

R.39. The defense did not object to this instruction. Nor did

the defense raise a substantive objection to the elements of

the law instruction.13

In its closing and rebuttal arguments, the Government

emphasized that Ms. Pree was an employee of HCCA,

received the stock as compensation, sold the stock throughout the tax years at issue, was repeatedly made aware of her

obligation to report the stock sales and yet took affirmative

and deceptive steps to avoid reporting that income. The

Government further challenged Ms. Pree’s explanation of

the stock sales as a “favor” to let individuals “share this

investment,” R.83 at 57-58, as well as Ms. Pree’s explanation

of stolen records. The Government summarized its evidence

by emphasizing that the tax returns Ms. Pree filed for 1995

and 1996 willfully excluded the income Ms. Pree received

from her stock sales throughout the relevant time period.

Ms. Pree’s counsel’s closing argument primarily attacked

the Government’s argument that Ms. Pree willfully misfiled.

Emphasizing the defense theory that Ms. Pree received the

stock as a gift, not as compensation, counsel argued that the

calculation of gift tax was too complicated for Ms. Pree

knowingly to have filed a false return.14 Indeed, counsel
No. 03-1516 15

14 (...continued)

Nobody can figure that out. It better not be a gift or she lost.

Because you’ve seen those I.R.S. tax publications and—Mr.

Welch seemed to have a handle on it, but I bet none of you

did.

R.83 at 44. Counsel then proceeded to review gift basis and the

factors related to such a calculation.

suggested, Ms. Pree believed she had sustained a loss on the

sale of her stock. Ms. Pree’s counsel also argued that Ms.

Pree had made good faith attempts to meet her filing

obligations, but stolen and lost records inhibited her ability

to comply. Counsel concluded the argument by urging:

Neither Bette nor her tax preparers had an adequate

knowledge of the law. Or even for that matter had sufficient records in order to satisfy the strict requirements

of the law. That’s not a crime if you had a good faith,

honest belief that you were complying with your duty

to file tax returns.

R.83 at 54. 

3. Jury Verdict

Following deliberation, the jury convicted Ms. Pree of

Counts II and III for willfully filing fraudulent returns for

1995 and 1996. At sentencing, the district court enhanced

Ms. Pree’s sentence on the ground of obstruction of justice

for knowingly false testimony on a material matter based on

her testimony related to her employment and Westphal’s

advice. Ms. Pree appeals the district court’s denial of the

judgment of acquittal on the ground of insufficient evidence. She also appeals the admission of the summary

evidence and the adequacy of the jury instructions. 
16 No. 03-1516

II

DISCUSSION

A. Sufficiency of the Evidence

We review first Ms. Pree’s challenge to the sufficiency of

the evidence. See United States v. Douglas, 874 F.2d 1145, 1150

(7th Cir. 1989), abrogated on other grounds by United States v.

Durrive, 902 F.2d 1221 (7th Cir. 1990). Ms. Pree appeals the

district court’s denial of her motion for a judgment of

acquittal. She submits that the Government presented insufficient evidence of unreported income, as well as insufficient

evidence that she willfully misreported her income.

1. Standard of Review

The district court’s denial of a judgment of acquittal is reviewed de novo. See United States v. Sax, 39 F.3d 1380, 1385

(7th Cir. 1994). The motion should be granted if “the evidence is insufficient to sustain a conviction.” Id. (quoting 2

Charles A. Wright, Federal Rules of Criminal Procedure § 467,

at 655 (1982)). A conviction is reversed only if, viewing the

evidence in the light most favorable to the Government,

no rational trier of fact could have found the essential elements of the offense beyond a reasonable doubt. See id.;

United States v. Chavin, 316 F.3d 666, 672 (7th Cir. 2002). “A

defendant has a heavy burden in challenging a conviction

based on the sufficiency of the evidence.” United States v.

Hoover, 175 F.3d 564, 570 (7th Cir. 1999).

2. Sufficient Evidence of Unreported Income

Prosecution under 26 U.S.C. § 7206(1) requires that a

taxpayer cause to be made and verify as true under penalties of perjury a tax return that the taxpayer knows is not
No. 03-1516 17

15 At one point in the trial, during a sidebar conference, the

Government indicated that it was treating the motion in limine as

precluding evidence of fraud:

Your Honor . . . I believe the Defendant had sought in a

motion in limine to keep out evidence of the fraud. And

(continued...)

true and correct as to every material matter. See 26 U.S.C.

§ 7206(1); see also United States v. Peters, 153 F.3d 445, 461

(7th Cir. 1998). Ms. Pree was indicted for tax returns not true

and correct as to Line 22, the line for total income on the

United States Individual Income Tax Return (Form 1040).

The Government’s evidence showed that Ms. Pree received $21,500 from stock sales in 1995 and $60,450 from

stock sales in 1996. No portion of either amount was reported on the 1995 and 1996 tax returns. Ms. Pree contends,

in this sufficiency challenge, that the Government did not

establish that any portion of these amounts represented a

net gain, and therefore did not establish that her income tax

return was materially false as to total income.

Ms. Pree’s argument is unavailing. It is true that the

Government did not present evidence of technical valuations of the restricted stock. See Valuation of Securities

Restricted from Immediate Resale, Rev. Rul. 77-287, 1977-2

C.B. 319, 321-22 (indicating that factors relevant to the valuation of restricted stock include the earnings, net assets,

and net sales of the corporation, the resale provisions of

the restricted stock, the relative bargaining strength of the

buyers and sellers and the market experience of the corporation’s freely tradeable securities), as amplified by Rev. Rul. 80-

213, 1980-2 C.B. 101, as amplified by Rev. Rul. 83-120, 1983-2

C.B. 170. Nor, apparently, in cautious deference to Ms.

Pree’s motion in limine,15 did the Government ask investors
18 No. 03-1516

15 (...continued)

realistically what this opens the door to is that there is an

enormous fraud by a number of people; and we have made

great pains to keep it out; including the Defendant.

R.68 at 258. The court’s grant of the motion in limine specifically

prevented the Government from asking investors about their

satisfaction with the HCCA stock.

about the value of their purchases. Nevertheless, the

evidence presented by the Government was sufficient to

permit an inference that Ms. Pree sold her stock for a net

gain in both 1995 and 1996.

Agent Welch testified that Ms. Pree possessed a zero basis

in her stock and that the full amount of income received

from stock sales should have been included as gross income

on Line 22. He clarified this conclusion by explaining that

Ms. Pree’s basis in that stock was the fair market value of

the stock when she received it. However, prior to Ms. Pree’s

sales, the stock had no readily ascertainable value because

it was not publicly traded. By virtue of the restriction, the

stock could not be sold in a public transaction. Thus, the

only “market” for the stock was the one Ms. Pree created.

The evidence of Ms. Pree’s sales permitted, but did not

compel, the conclusion that the stock lacked ascertainable

value outside the transactions she orchestrated. Despite the

large number of shares that Ms. Pree sold, over 43,000 shares

in 1995, and well over 150,000 shares in 1996, Ms. Pree

testified that she never knew her basis and did not always

check the value of the stock before selling it. Moreover, to

the extent Ms. Pree or her investors checked the “value”

of HCCA stock, that “value” pertained to publicly traded

stock, not to the restricted stock sold by Ms. Pree. Additionally, the Government’s evidence indicated that, after

exhausting the initial block of shares transferred to her,
No. 03-1516 19

Ms. Pree continued to “sell” stock months and even years

before additional shares were registered in her name. Despite Ms. Pree’s own statement to investors that the stock

represented “the best investment you ever have made,”

Gov’t Ex.15C, Ms. Pree herself apparently retained none of

the initial 350,000 shares transferred to her. Under these

circumstances, one plausible conclusion is that the stock

lacked ascertainable value outside the transactions Ms. Pree

engineered. See 26 C.F.R. § 1.1001-1(a) (indicating that “in

rare and extraordinary cases” property may be considered

to have no fair market value).

As we indicated previously, on a sufficiency challenge, we

view the evidence in the light most favorable to the Government. In this respect, we note the absence of evidence in the

record contradicting the Government’s position that the

restricted stock lacked ascertainable value prior to Ms.

Pree’s sales. Although on appeal Ms. Pree advances a

valuation of the restricted stock based on factors such as net

assets or net sales of the corporation, such evidence is not in

the record and was not considered by the jury. Even

accepting, arguendo, Ms. Pree’s own theory of the stock as

a “gift,” we note that the record contained no evidence as to

the valuation of her “gift basis” in the stock, i.e., evidence of

Furlong’s basis and any gift taxes paid at the time of

transfer. In sum, the trial record will not support a method

of valuation different from that employed by Agent

Welch—that the full amount of stock sales should be

included in income because Ms. Pree possessed a zero basis

in the stock. Indeed, Ms. Pree attempted only to convince

the jury through her own testimony that she sold all the

stock in 1995 and 1996 at a loss or without a gain as a

“favor” to her investors. R.69 at 609. The jury was entitled

to reject that explanation. See United States v. Agostino, 132

F.3d 1183, 1193 (7th Cir. 1997) (reasoning that a rational jury

could have found defendant’s explanation not credible).
20 No. 03-1516

Finally, we think it is important to note that, to establish

falsity as to the 1995 and 1996 returns, the Government

needed only to prove that Ms. Pree had unreported income,

not the exact amount of such unreported income or the

existence of a tax deficiency. See Peters, 153 F.3d at 461

(indicating that the Government need not establish a tax

deficiency in a prosecution under § 7206(1)). Based on the

evidence presented, a rational jury could have determined

that some portion of Ms. Pree’s $21,500 stock sales receipts

in 1995 and some portion of her $60,450 stock sales receipts

in 1996 represented net gain and should have been included

as income on the respective tax returns. Having reviewed

the evidence presented at trial in the light most favorable to

the Government, we must conclude that sufficient evidence

of unreported income exists.

3. Sufficient Evidence of Willful Misfiling

Prosecution under § 7206(1) also requires that the defendant sign the return willfully, knowing it to be false. See 26

U.S.C. § 7206(1); see also Peters, 153 F.3d at 461. The evidence

of willful misfiling is more than sufficient here.

The Government presented evidence that several individuals informed Ms. Pree of her obligation to report income

from stock sales in the year such income was received and

that Ms. Pree admitted understanding her obligation. In

particular, Westphal testified that, following her purchase

of stock from Ms. Pree and while preparing her 1995 and

1996 returns, she informed Ms. Pree of her obligation to

report stock sales in the year the income was received.

Westphal further testified that Ms. Pree failed to reveal any

of the 1995 and 1996 stock sales at that time. Also, the IRS

Special Agent who investigated Ms. Pree in 1996 testified

that she asked Ms. Pree if she was aware that she needed to
No. 03-1516 21

16 The Government also presented unrefuted evidence that

Ms. Pree failed to report her gambling income from 1995 and

under-reported her gambling income in 1996. Ms. Pree contends,

however, that the Government’s evidence that she willfully

misreported this income is not sufficient.

We note that the W-2G forms are dated. Westphal testified that

Ms. Pree presented her with W-2Gs for 1996 only. However, the

amount reported for 1996, $3,662, corresponds with the W-2Gs

for 1995. No combination of the amounts won in 1996 total

$3,662. For these reasons, Ms. Pree contends that “the only logical

explanation for the fact that Pree reported exactly $3,622 on her

1996 return instead of her 1995 return is that Westphal mistakenly

entered the total gambling income for 1995 on the 1996 return

and Pree did not catch her error.” Appellant’s Reply Br. at 8. Ms.

Pree does not address, however, the unreported $7,800 of

gambling income properly attributable to 1996.

We do not reach this issue. Having established that the jury

could have concluded from the evidence presented that Ms. Pree

(continued...)

report income from stock sales in the year the sale was

made, and Ms. Pree responded that she was aware. Furthermore, Ms. Pree acknowledged her stock sales income in a

self-serving forum—the declaration to the casino in which

she indicated income in the amount of $80,000 from retirement, stock sales and social security.

Similarly, the jury was entitled to disbelieve Ms. Pree’s

testimony that she did not understand the law related to

capital gains income. See Agostino, 132 F.3d at 1193 (“The

jury . . . has the choice to disbelieve the defendant’s testimony regarding [her] intent.”). The Government’s evidence—that Ms. Pree had been informed of her obligation

to report income, that she had admitted understanding that

obligation and that she acknowledged her stock sales

income in another forum—is sufficient to support her

convictions.16
22 No. 03-1516

16 (...continued)

willfully failed to report income from stock sales in 1995 and

1996, we need not rely upon the gambling winnings as a basis for

her conviction.

B. Admission of the Summary Evidence

At trial, Agent Welch testified as a summary witness

for the Government. The Government also established his

qualifications before the jury. During his testimony, Government Exhibit 101, summarizing Ms. Pree’s stock sales during

1994, 1995 and 1996, and Government Exhibit 102, calculating Ms. Pree’s 1994 gross income, were offered into evidence. Ms. Pree submits that the court improperly admitted

Agent Welch’s testimony because Agent Welch exceeded his

role as a summary witness. Ms. Pree also argues that the

errors in his testimony were compounded by the district

court’s failure to give a cautionary instruction regarding the

summary evidence. At trial, counsel for Ms. Pree raised no

objection either to Agent Welch’s testimony or to the lack of

a cautionary instruction regarding the summary evidence.

1. Standard of Review 

This court reviews for plain error the admission of

evidence to which an objection was not made at trial. United

States v. Williams, 133 F.3d 1048, 1051 (7th Cir. 1998); see also

United States v. Beall, 970 F.2d 343, 347 (7th Cir. 1992)

(indicating that review of admissibility of IRS agent’s expert

testimony would normally occur under abuse of discretion

but reviewing under plain error standard for lack of an

objection at trial). “[B]efore an appellate court can correct an

error not raised at trial, there must be (1) ‘error,’ (2) that is

‘plain,’ and (3) that ‘affect[s] substantial rights.’ ” Johnson v.

United States, 520 U.S. 461, 466-67 (1997) (quoting United
No. 03-1516 23

States v. Olano, 507 U.S. 725, 732 (1993)). “If all three conditions are met, an appellate court may then exercise its

discretion to notice a forfeited error, but only if (4) the error

seriously affect[s] the fairness, integrity, or public reputation

of judicial proceedings.” Id. at 467 (internal quotations and

citations omitted). The defendant bears the burden of

establishing that the error affected substantial rights, i.e.,

“that the outcome probably would have been different without the error.” United States v. Colvin, 353 F.3d 569, 577 (7th

Cir. 2003) (citing Olano, 507 U.S. at 734).

2. Agent Welch’s Testimony 

It is well-established that “[t]he nature of a summary

witness’ testimony requires that he draw conclusions from

the evidence presented at trial.” United States v. Esser, 520

F.2d 213, 218 (7th Cir. 1975). When a summary witness

simply testifies as to what the Government’s evidence shows,

he does not testify as an expert witness. See United States v.

Swanquist, 161 F.3d 1064, 1073 (7th Cir. 1998).

Ms. Pree’s primary complaint with Agent Welch’s testimony is that Agent Welch concluded from the evidence

presented that Ms. Pree possessed a zero basis in her stock.

We already have determined, however, that this was a permissible inference in light of the Government’s evidence.

That evidence showed that Ms. Pree received the stock as

compensation, that the stock was restricted, which meant

that it only could be sold in private transactions, and that its

worth was limited to what Ms. Pree could obtain in the

market she created. One plausible inference from the

irregular nature of Ms. Pree’s sales was that, prior to those

transactions, the stock lacked ascertainable value. Accordingly, Agent Welch was entitled to treat Ms. Pree’s basis

as zero both in his testimony and in the summaries he
24 No. 03-1516

prepared. See Esser, 520 F.2d at 218 (noting that summary

witness’s testimony was properly admitted in a tax evasion

case when the evidence was sufficient and the witness relied

only on that evidence and was available for full crossexamination).

Ms. Pree contends, however, that Agent Welch exceeded

his role as a summary witness and provided inadmissible

expert testimony in the guise of a summary witness. We believe Agent Welch primarily testified within his role as a

summary witness. However, we acknowledge that, in such

a case as the present, where an IRS Revenue Agent summarizes the evidence for purposes of establishing the tax

consequences, the line between summary testimony and

expert testimony is indistinct. Given the assistance such an

individual can provide to the jury, it has not been unusual

in previous cases for an IRS agent to testify as an “expert

summary witness.” See United States v. Moore, 997 F.2d 55,

58 (5th Cir. 1993); United States v. Mohney, 949 F.2d 1397,

1406 (6th Cir. 1991); United States v. Bosch, 914 F.2d 1239,

1242 (9th Cir. 1990); United States v. Dotson, 817 F.2d 1127,

1132 (5th Cir.), vacated in part on reh’g., 821 F.2d 1034 (5th

Cir. 1987); see also United States v. Benson, 941 F.2d 598, 615

(7th Cir. 1991) (Kanne, J., dissenting) (“A summary witness

need not necessarily be an expert, but experts in accounting

and other disciplines regularly give summary evidence of

the sort envisioned by Federal Rule of Evidence 1006.” (citing 5 D. Louisell & C. Mueller, Federal Evidence § 599, at 540

(1981))), mandate recalled and amended by 957 F.2d 301 (7th

Cir. 1992). “As a summary witness, an IRS agent may testify

as to the agent’s analysis of the transaction which may

necessarily stem from the testimony of other witnesses.

The agent may also explain his analysis of the facts based on

his special expertise.” Moore, 997 F.2d at 58. As an expert

witness, an IRS agent’s “opinion as to the proper tax
No. 03-1516 25

consequences of a transaction is admissible evidence.”

United States v. Windfelder, 790 F.2d 576, 581 (7th Cir. 1986).

“Similarly, . . . an IRS expert’s analysis of the transaction

itself, which necessarily precedes his or her evaluation of

the tax consequences, is also admissible evidence.” Id.

Here, Agent Welch analyzed the stock sales and described

the income tax consequences. Although he was not proffered as an expert witness, his qualifications were in

evidence. Those qualifications included eighteen years of

service with the IRS as a revenue agent, a bachelor’s degree

in accounting and a master’s degree in taxation. While

employed by the IRS, he completed additional classes in

taxation, specialized training and continuing professional

education. At the time of trial, he had conducted approximately two hundred tax audits and had reviewed several

thousand audits of other revenue agents. Agent Welch was

therefore qualified to express “an opinion as to the proper

tax consequences of a transaction” and of the “transaction

itself, which necessarily precedes his . . . evaluation of the

tax consequences.” Id. at 581.

Ms. Pree further contends that Agent Welch’s testimony

was inadmissible to the extent that he stepped into the role

of an expert because he failed to use a recognized means of

valuation of restricted stock. Agent Welch testified that the

stock had no fair market value by virtue of the restriction

because it could not be sold in a brokerage house. Admittedly, Agent Welch’s statements to this effect were somewhat imprecise. Restricted stock does not lack value, per se,

because it cannot be sold on the public market. See Rev. Rul.

77-287, 1977-2 C.B. at 321. Had Ms. Pree raised an objection

to Agent Welch’s testimony, on the ground that it constituted unreliable expert testimony, the district court would

have undertaken the gatekeeping analysis Ms. Pree now

recommends to this court. See Daubert v. Merrell Dow Pharm.,
26 No. 03-1516

Inc., 509 U.S. 579 (1993); see also United States v. Conn, 297 F.3d

548, 557 (7th Cir. 2002) (indicating, in reference to a witness

who was not proffered as an expert but testified in that role,

that “[h]ad the defense had other concerns about the quality

of [the agent’s] training, the quantity of his experience, or

the methodology that he employed in reaching his assessment of [the defendant’s] firearms, it could have raised

those questions during voir dire”).

In the absence of an objection by Ms. Pree to Agent Welch’s

testimony as unreliable expert testimony, however, we do

not perceive plain error. The conclusion that Ms. Pree’s

basis in the stock should be treated as zero was supported

by sufficient evidence. Moreover, Ms. Pree’s counsel had an

opportunity to cross-examine Agent Welch as to his conclusions regarding the value of the stock. See United States v.

Gonzalez, 933 F.2d 417, 429 (7th Cir. 1991) (indicating that

“any questions or problems concerning the expert’s opinion

and testimony may be thoroughly explored during the

cross-examination of the expert witness”).

Ms. Pree also challenges Agent Welch’s testimony as

outside his area of expertise and improperly selective. We

find no error on these grounds. First, Agent Welch’s testimony did not fall outside his area of expertise in violation

of our holding in Benson. In Benson, we held that an IRS

agent’s opinion as to whether the defendant was entitled to

social security benefits was outside the agent’s area of expertise and thus not admissible as expert testimony. See id.

at 605. Unlike the testimony at issue in Benson, Agent Welch’s

testimony dealt directly with the tax consequences of

Ms. Pree’s stock sale transactions and the necessary underlying analysis of those transactions. See Windfelder, 790 F.2d

at 581.

Second, Agent Welch did not make impermissible credibility determinations on the issue of whether Ms. Pree

received the stock as a gift or as compensation. Rather,
No. 03-1516 27

17 The following exchange occurred:

Q. [The stock transfer agent] testified here, did she not, that

the stock had no market value, isn’t that right?

A. Yes, she did.

R.68 at 345. The transfer agent actually had testified that the value

was limited to what could be received in a private transaction.

Agent Welch permissibly relied upon the Government’s

abundant evidence that Ms. Pree received her stock as

compensation. See Moore, 997 F.2d at 58 (“Perhaps, his testimony was selective but that is why cross examination is

allowed.”). Moreover, “[i]f a witness’ expertise would be

helpful to the jury, . . . and the facts which he recounts fall

within his area of expertise, then there is nothing improper

about a selective summary.” Id. (internal citation omitted).

Agent Welch possessed specialized knowledge of the tax

consequences at issue and the evidence necessary to prove

the indictment. The facts he recounted fell within his area of

expertise. Thus, there was nothing improper as to his

selective summary of the Government’s evidence. It is true

that, at one point, Agent Welch mistakenly testified that the

transfer agent had said the stock had no value.17 However,

Ms. Pree’s counsel had an adequate opportunity to conduct

cross-examination following that testimony. Agent Welch’s

mistaken recollection does not create plain error in the

admission of his testimony.

As a final response to Ms. Pree’s various challenges to

Agent Welch’s testimony, we emphasize Ms. Pree’s ample

opportunity to cross-examine and to present her own

evidence. Ms. Pree’s counsel elicited from Agent Welch an

explanation of capital gain as a net figure. Consistent with

the defense theory, counsel then explored the computation

of gift basis and capital gains and losses from the sale of
28 No. 03-1516

gifts with Agent Welch. Counsel also attempted to explore

Agent Welch’s conclusions as to the fair market value of the

stock when Ms. Pree received it, but counsel then abandoned the cross-examination on this point. Ms. Pree also

had an opportunity to present evidence as to her basis and

to the proper valuation of the stock. Given these opportunities, we conclude that no plain error occurred in the district

court’s admission of Agent Welch’s testimony. “[W]here, as

here, the defense conducted a thorough cross examination

of the witness concerning the disputed matters, and also

had the opportunity to present its own version of those

matters, the likelihood of any error in admitting summary

evidence diminishes.” United States v. Norton, 867 F.2d 1354,

1363 (11th Cir. 1989).

3. Summary Charts

Ms. Pree also challenges the admission of Government

Exhibits 101 and 102 without a limiting instruction as

plainly erroneous. Other courts have held that a cautionary

instruction should be given when summary evidence is

admitted. See, e.g., United States v. Bishop, 264 F.3d 535, 547

(5th Cir. 2001) (noting previously approved instructions that

“summaries do not, of themselves, constitute evidence in

the case but only purport to summarize the documented

and detailed evidence already submitted,” and a witness’

summary “is not the evidence, the evidence is the documents themselves that he has been referring to”). We

ourselves have indicated that, when summary charts are

introduced into evidence as a teaching device rather than as

substantive evidence, the “ ‘preferred practice’ ” is “ ‘to give

a limiting instruction regarding this purpose.’ ” United States

v. Doerr, 886 F.2d 944, 959 (7th Cir. 1989) (quoting United

States v. Howard, 774 F.2d 838, 844 n.4 (7th Cir. 1985)).
No. 03-1516 29

No such instructions were given here; rather, a pattern

instruction was given with regard to the summary evidence

that stated that the summaries “truly and accurately

summarize the content of voluminous books, records or

documents, and should be considered together with and

in the same way as all other evidence in the case.” R.39. The

Committee on Federal Criminal Jury Instructions for the

Seventh Circuit advises that this instruction “should only be

given when the accuracy and authenticity of the exhibits are

not in question.” Pattern Criminal Federal Jury Instructions

for the Seventh Circuit 3.15 (1998). The accuracy of Government Exhibits 101 and 102 were not challenged at trial.

Although the “preferred practice” with respect to summary

evidence is to issue an appropriate cautionary instruction,

under the circumstances here, the admission of the summary evidence without such a limiting instruction was not

plain error. See also Swanquist, 161 F.3d at 1072-73 (indicating that the defendant had an opportunity during crossexamination to elicit facts suggesting the inaccuracy of

summary charts and noting that a “party is not obligated . . .

to include within its charts or summaries its opponent’s

version of the facts”). 

C. Jury Instructions

Ms. Pree submits that the district court should have

instructed the jury on the computation of capital gains

income. She failed to request this instruction at trial, however. When a party neither requests an instruction nor

objects to the court’s failure to give it, this court reviews

for plain error the failure to give the instruction. See

United States v. Gee, 226 F.3d 885, 894 (7th Cir. 2000). “Reversal is proper only if the instructions as a whole are

insufficient to inform the jury correctly of the applicable law

and the jury is thereby misled.” United States v. Madoch, 149

F.3d 596, 599 (7th Cir. 1998).
30 No. 03-1516

As a preliminary matter, we note the Government’s argument that Ms. Pree waived, not merely forfeited, an objection to the jury instructions. A waiver is an “ ‘intentional

relinquishment or abandonment of a known right’ ” and

precludes appellate review. United States v. Griffin, 84 F.3d

912, 924 (7th Cir. 1996) (quoting Johnson v. Zerbst, 304

U.S. 458, 464 (1938)). Waiver extinguishes any error. See id.

“A waiver’s operative force depends upon the context in

which it is made and its precise character.” Id. “The right to

object to jury instructions on appeal is waived if the record

illustrates that the defendant approved of the instructions at

issue.” Id.

In Griffin, this court found that the defendant waived

an objection to the given jury instruction because the

defendants’ counsel noted that the defendants “would prefer 53A,” the instruction at issue on appeal. Id. In this case,

Ms. Pree’s counsel approved the instruction regarding the

elements of the offense, suggesting a modification to clarify

only which count of the indictment was involved. However,

unlike the defendant in Griffin, Ms. Pree is not requesting

plain error review of an instruction she previously approved. Rather, Ms. Pree is arguing that an instruction

should have been given that she failed to request. Such

circumstances do not present waiver but dictate plain error

review. See Gee, 226 F.3d at 894.

Ms. Pree contends that the district court’s failure to instruct on the computation of capital gains removed from the

jury’s consideration one of the elements of the offense,

namely falsity as to a material matter. Falsity as to a material matter is an element of a 26 U.S.C. § 7206(1) prosecution.

See United States v. Peters, 153 F.3d 445, 461 (7th Cir. 1998).

“A false statement is ‘material’ when it has ‘the potential for

hindering the IRS’s efforts to monitor and verify the tax

liability’ of the . . . taxpayer.” Id. (quoting United States v.

Greenberg, 735 F.2d 29, 32 (2d Cir. 1984)).
No. 03-1516 31

Although the district court did not instruct on the computation of capital gains income, it specifically did instruct

the jury that it must find falsity as to a material matter: “To

sustain the charge that the defendant willfully made and

caused to be made a false individual income tax return as

charged in Counts 2 and 3, the Government must prove the

following propositions: . . . the income tax return was false

as to a material matter, as charged in the count . . . .” R.39.

The court also charged the jury as follows:

A line on a tax return is a material matter if the information required to be reported on that line is capable of

influencing the correct computation of the amount of

tax liability of the individual or the verification of the

accuracy of the return.

If you find that the defendant willfully understated

the amount of total income on her individual tax return,

and if you find that the amount of gross receipts on a

tax return is essential to a correct computation of the

amount of taxable income or tax or to the verification of

that return, then you may find that the false and fraudulent statements were false as to a material matter.

R.39.

These instructions were fully adequate as to the element

of material falsity. The instructions together with the indictment required the jury to determine whether the amount of

total income reported on Line 22 was false on the 1995 and

1996 tax returns. Line 22 is undoubtedly a material matter.

Such instructions more than adequately encompass the

element of material falsity. Cf. United States v. Fernandez, 282

F.3d 500, 509 (7th Cir. 2002) (declining to find plain error in

jury instructions which did not include instruction on

materiality but, viewed in their entirety, “encompassed the

concept of materiality”). Both parties had ample opportu-
32 No. 03-1516

nity to argue how the facts of Ms. Pree’s stock sales applied

to the element of material falsity.

Additionally, the substantive direction that a capital gains

instruction would have provided was already before the

jury. Ms. Pree’s counsel’s cross-examination of Agent Welch

clarified that income from the sale of stock was a net figure

calculated from the seller’s cost basis and the sales amount.

The cross-examination highlighted the fact that Ms. Pree

only was required to report net gain as income. Thus, the

relevance of capital gain to the element of material falsity

was presented to the jury.

As a final matter, we note that, in the closing argument,

Ms. Pree’s counsel chose to emphasize lack of proof that Ms.

Pree willfully misreported her income, not absence of proof

of capital gain. “When the jury instructions actually given

‘as a whole treat a case fairly and accurately,’ a defendant is

not prejudiced by a district court’s failure to give a particular instruction, and under such circumstances we will not

disturb the jury instructions on appeal.” United States v.

Manjarrez, 258 F.3d 618, 626 (7th Cir. 2001) (quoting United

States v. Koster, 163 F.3d 1008, 1011 (7th Cir. 1998)). The jury

instructions given treated the case against Ms. Pree and her

defense fairly and accurately. There was no plain error in

the court’s failure to sua sponte instruct on the calculation

of capital gain.

D. Sentencing

The district court determined Ms. Pree’s sentence under

the then-mandatory United States Sentencing Guidelines.

The court found that the total amount of tax loss was

$41,535.10, which resulted in a base offense level of 13. See

U.S.S.G. § 2T4.1(H). The court added a two-level enhancement based on its finding that Ms. Pree had obstructed
No. 03-1516 33

18 The district court did not expressly cite to a source of authority

for imposing this special condition of supervised release.

However, it adopted the portion of the presentence report that

had recommended the special condition as required by U.S.S.G.

§ 5E1.1(a)(2).

justice. See U.S.S.G. § 3C1.1. A final offense level of 15 and

a criminal history category of I resulted in a sentencing

range of 18 to 24 months’ imprisonment. The district court

sentenced Ms. Pree to 18 months in prison. In addition, the

district court ordered Ms. Pree to serve a one-year period of

supervised release, with the special condition that she pay

taxes owed to the IRS in the amount of $38,852.18

Ms. Pree did not challenge the constitutionality of her

sentence before the district court or to this court in her

original briefs on appeal. Nonetheless, in light of the sea

change in federal sentencing law wrought by United States

v. Booker, 125 S. Ct. 738 (2005), and this circuit’s precedent

prior to Booker, we believe it unfair to characterize Ms. Pree

as having waived a challenge to the validity of her sentence.

Therefore, we invited each party to submit a memorandum

presenting its views regarding the application of Booker to

this case, which they have done. In these circumstances,

both parties submit that our review should be for plain

error. We agree.

Under the plain error test, “before an appellate court can

correct an error not raised at trial, there must be (1) ‘error,’

(2) that is ‘plain,’ and (3) that ‘affect[s] substantial rights.’ ”

United States v. Cotton, 535 U.S. 625, 631 (2002) (quoting

Johnson v. United States, 520 U.S. 461, 466-67 (1997)). “ ‘If all

three conditions are met, an appellate court may then exercise its discretion to notice a forfeited error, but only if (4)
34 No. 03-1516

the error seriously affect[s] the fairness, integrity, or public

reputation of judicial proceedings.’ ” Id. (quoting Johnson,

520 U.S. at 467).

The Government concedes that the district court committed error that was plain in treating the guidelines as

mandatory and enhancing Ms. Pree’s sentencing range based

on the court’s findings of fact. The Government submits,

however, that Ms. Pree cannot show that the error affected

her substantial rights because she cannot establish that she

would have received a different sentence had the district

court treated the guidelines as advisory, rather than mandatory. The Government also contends that Ms. Pree cannot

show that the error seriously affected the fairness, integrity

or public reputation of the judicial proceeding because judicial findings by a preponderance of the evidence are reliable

and defendants have been sentenced under the guidelines

for eighteen years with the approval of the federal courts.

Moreover, the Government submits that Ms. Pree’s sentence

of 18 months fell within the 12 to 18 months sentencing

range that would have applied had her offense level not

been enhanced.

Ms. Pree, in turn, submits that, because she has completed

her enhanced prison term, remand of that aspect of her

sentence is not necessary. However, she contends that, in

light of Booker, the district court plainly erred by ordering

her to pay the IRS taxes amounting to $38,852 as a condition

of her supervised release based solely upon the court’s

findings of fact. Ms. Pree requests that we vacate this

condition of her supervised release and remand this case to

the district court for reconsideration of the terms and
No. 03-1516 35

19 Ms. Pree additionally requests that we order the district court

not to impose a term of supervised release that exceeds July 21,

2005, which is the date Ms. Pree would have completed her

supervised release had her case not been stayed pending Booker.

conditions of her supervised release.19

Ms. Pree’s restitution obligation was imposed as a condition of her supervised release under the terms of the following sentencing guideline:

§ 5E1.1 Restitution

(a) In the case of an identifiable victim, the court shall—

. . . .

(2) impose a term of probation or supervised release

with a condition requiring restitution for the full amount

of the victim’s loss, if the offense is not an offense for

which restitution is authorized under 18 U.S.C.

§ 3663(a)(1) but otherwise meets the criteria for an order

of restitution under that section.

U.S.S.G. § 5E1.1(a).

We explained in United States v. George, 403 F.3d 470

(7th Cir. 2005), that 

the contention that Booker requires juries rather than

judges to assess restitution is misguided. There is no

“statutory maximum” for restitution; indeed, it is not a

criminal punishment but instead is a civil remedy administered for convenience by courts that have entered

criminal convictions, see United States v. Bach, 172 F.3d

520, 523 (7th Cir. 1999); United States v. Newman, 141

F.3d 531, 537-42 (7th Cir. 1998), so the sixth amendment

does not apply. We have accordingly held that Apprendi

v. New Jersey, 530 U.S. 466, 120 S. Ct. 2348, 147 L.E.2d
36 No. 03-1516

20 See also United States v. Rand, 403 F.3d 489, 495 n.3 (7th Cir.

2005) (noting that, because restitution is civil in nature, and not

criminal punishment, restitution orders are not governed by

Apprendi v. New Jersey, 530 U.S. 466 (2000), or United States v.

Booker, 125 S. Ct. 738 (2005)); accord United States v. Garcia-Castillo,

No. 03-2166, 2005 WL 327698, at *5 (10th Cir. Feb. 11, 2005)

(unpublished) (determining that Booker did not apply because

restitution is not a criminal punishment and concluding that

United States v. Wooten, 377 F.3d 1134, 1144-45 & n.1 (10th Cir.

2004), in which another panel of that court stated that courts

commonly regard restitution as a criminal penalty but rejected

challenge based on Apprendi and Blakely v. Washington, 124 S. Ct.

2531 (2004), because the restitution ordered did not exceed the

value of the damaged property—the maximum allowed by statute—was not controlling because earlier circuit precedent clearly

held that restitution is a criminal punishment).

Other courts of appeals also have held that Apprendi does not

apply to orders of restitution. See United States v. Ross, 279 F.3d

600, 609-10 (8th Cir. 2002) (stating that restitution constitutes a

criminal penalty and deciding that, even if Apprendi does apply

to restitution orders, the amount of restitution ordered was valid

because it fell under any statutory maximum); United States v.

Syme, 276 F.3d 131, 159 (3d Cir. 2002) (holding, under the plain

error standard of review, that although restitution ordered under

18 U.S.C. § 3663 is a criminal penalty, the Apprendi rule did not

apply because the statute does not prescribe a statutory maximum amount); United States v. Bearden, 274 F.3d 1031, 1042 & n.4

(6th Cir. 2001) (noting that most courts have held that restitution

is, at least in part, criminal punishment but holding that restitu-

(continued...)

435 (2000), does not affect restitution, see United States v.

Behrman, 235 F.3d 1049, 1054 (7th Cir. 2000), and that

conclusion is equally true for Booker.

George, 403 F.3d at 473.20
No. 03-1516 37

20 (...continued)

tion order did not conflict with Apprendi because it did not exceed

the relevant statutory maximum).

However, we acknowledge that “[w]hether restitution is a criminal punishment and whether restitution is subject to Apprendi,

Blakely, and Booker are by no means settled questions in courts

across the country.” Garcia-Castillo, 2005 WL 327698, at *5 n.4

(collecting cases); see also United States v. McDaniel, 398 F.3d 540,

554 n.12 (6th Cir. 2005) (noting, without expressing an opinion,

that although courts generally have recognized that Apprendi

did not render the Mandatory Victims Restitution Act unconstitutional, “there is some question as to whether Booker requires us to

reconsider our analysis of criminal defendants’ jury trial rights

with respect to restitution orders”); United States v. Trala, 386 F.3d

536, 547 n.15 (3d Cir. 2004) (rejecting Blakely challenge to restitution order on the ground that the amount of restitution was not

a disputed issue of fact); United States v. DeSoto, No. 04-12307,

2005 WL 901878, at *6 (11th Cir. Apr. 19, 2005) (unpublished)

(“Because neither the Supreme Court nor this Circuit has addressed whether Booker applies to restitution, any error cannot be

plain.”).

In any event, none of these cases speak to the precise issue in

this case: whether the district court erred by imposing restitution,

in any amount, as a condition of supervised release under the

guidelines.

However, George does not deal with the issue that confronts us here. We are not concerned here, as we were in

George, with whether the particular requirements of restitution can be set by a judge or must be determined by a

jury. Rather, here we are confronted with the antecedent

question of whether restitution in any amount should have

been imposed as a condition of supervised release. The sentencing court, realizing that its decision was not governed

by any explicit statutory command, grounded its decision
38 No. 03-1516

solely in the sentencing guideline set forth earlier. Because

the court acted prior to the advent of Booker, it believed that

the guideline mandated the imposition of restitution on the

condition of supervised release. Under our precedent, this

misapprehension on the part of the trial court warrants our

intervention. This is because our cases hold that the mandatory application of the guidelines itself, absent

Sixth Amendment error, can amount to plain error in light

of Booker. See United States v. White, No. 03-2875, 2005

WL 1023032, at *7 (7th Cir. May 3, 2005), United States v.

Schlifer, 403 F.3d 849, 853 (7th Cir. 2005). 

On this record we cannot be certain whether the district

court would have imposed the condition of restitution upon

Ms. Pree’s supervised release had it understood the guidelines to be advisory, rather than mandatory. For that reason,

we believe it appropriate, while retaining jurisdiction, to

direct a limited remand in Ms. Pree’s case for proceedings

consistent with our circuit’s recent decision in Paladino, 401

F.3d at 483-84. See White, slip op. at 13-15 (applying

Paladino-limited remand due to mandatory application of

the guidelines and noting that, with regard to the fourth

prong of plain error, “we can and have predetermined that

if the defendant has been prejudiced by an illegal sentence,

then allowing that illegal sentence to stand would constitute

a miscarriage of justice.” (citing Paladino, 401 F.3d at 483;

United States v. Pawlinski, 374 F.3d 536, 541 (7th Cir. 2004))).

Conclusion

Accordingly, while retaining jurisdiction, we remand this

case to the district court for proceedings consistent with this

opinion and this court’s decision in Paladino, 401 F.3d at 483-

84.

IT IS SO ORDERED
No. 03-1516 39

A true Copy:

Teste:

 _____________________________

Clerk of the United States Court of 

Appeals for the Seventh Circuit 

USCA-02-C-0072—5-20-05