NOT RECOMMENDED F OR F ULL-TEXT PUBLICATION F ile Nam e: 12a0169n.06 Nos. 10-1748, 10-1753 UNITED STAT ES COURT OF AP P EALS F OR THE S IXTH CIRCUIT

UNI TED STATES OF AMERI CA, Plaintiff-Appellee ,

v. CRAI G M. STONE, (10- 1748) ROBERT D. L ARSEN, (10-1753) Def endants-A

ppellants. ) ) ) ) ) ) ) ) ) ) On Appea l from th e Uni ted States Dis t ri ct Court for the Western District of Michig an

Be fore : MERRI TT, B OGGS, and CL AY, Circuit J udg es. BO GGS, Circuit J udg e. Co-appellants Craig Stone a nd Robert L arse n wer e prosecuted in district court, L arse n for tax evasion and both defe ndants for conspiring to defr aud the United States
g overnme nt. Both wer e convicted by a jury of all char g es. On this direc t appea l, Stone and L arse n raise a single issue: that the district court violated their rig hts under the Speedy Trial Act. We aff irm the judg ment of the district cour t.

I I n 2004, the I nterna l Revenue Service rec eived a tip that individuals might be using a potentially fra

udulent tax shelter, the Security Trust I nsuranc e Company (STI C), to divert corpor ate income. STI C sold loss-of-income insurance , which allowed corpor ate office rs to purcha se a policyNos. 10-1748, 10-1753

United States v. Stone, e t. al. that would cover loss of income from a slowdown in business or an act of God. STI C’s scheme was
to char g e an excessively high premium for its policies and, in exchang e for a perc entag e of the premium, make the premium pay ment available to be “loane d” back to the pay or. The company ’s promotional materia ls adver tised that the premium would be available for loan afte r one y ear , if the
company had not made any claims on its policy

. I n actua lity , the l oan was avail ab l e i m m ediately afte r the pay

ment of the premium, and there was no expectation that the loan would be repa id. The
money paid for the premium and then returne d to the pay or would be sheltere d from taxation beca use premiums paid for business insurance are deductible as a cost of doing business. See I .R.C §§ 62; 162 (allowing a deduction “all the ordinary and nece ssary expenses paid or incurre d

. . . in car ry ing

on any trade or business”); see also Humana, Inc. v. Comm’r , 881 F.2d 247, 255–56 (6th Cir. 1989) (def ining the test of whether an insurance premium is deductible under § 162 as wh et h er t he insurance shifted risk). A g rand jury investiga tion reve aled that STI C was opera ted by Peter Peg g s, Robert L arse n, and Anthony Merlo; Craig Stone was its marke ter. On Oc t ober 3, 2007, the g rand jury indicted Peg g s, Stone, and L arse n on one count eac h of conspirac y to defr aud the United States. Peg g s and L arse n wer e additionally

eac h char g ed with two counts of tax evasion. A superse ding indictment was filed on Marc h 6, 2008. This indictment added Merlo and another co-de fenda

nt to Count One of

the indictment. Stone and L arse n wer e eac h arr ested on October 29, 2007, and made their initial appea ranc es befor e a ma g istrate judg e that day . Both plea ded not g uilty

.

- 2 -Nos. 10-1748, 10-1753

United States v. Stone, e t. al. On November 8, 2007, co-de fenda nt Peg g s filed an unopposed motion for an ends-of -justice continuance , reque sting “ at least 180 da y s.” On Dec ember

4, Stone joined the motion and L arse n joined on Dec ember

5. The district cour

t gr anted the motion on Dec ember 12, 2007, to the extent of a 180-day continuance

. The court stated that the ends of justice would best be serve d by g ranting the continuance , beca

use the complexit y of the fac ts, the volume of discovery materia ls, and the fac t that many witnesses were located outs ide M ichig an meant that defe ndants neede d additional time to reviewevidenc e and pr epar e their de fense

. On J une 16, 2008, the district court held a status con fe re n ce with the parties, wher e defe ndants orally reque sted another continuance , though there is no rec ord of how much additional time was reque sted. I n an order filed the same day , the district court g rante d a continuance for 180 day s. The one-pa g e order stated th at t h e en d s of justice serve d by g ranting the continuance outweig hed the be st interest of the de fenda nts and the public in a spee dy trial. On Novembe r 6, 2008, the district cour t held another status confe renc e. On the sa me day , the court issued a case -mana g ement order , in which it set the trial date for September 15, 2009. The court did not mention g ranting any ends-of -justice continuanc e in this order. On September 8 , 2 009, the district court held a pretria l confe renc e. I n order for the
g overnme nt to have time to depose a witness, the trial wa s resc heduled to September 22, 2009. On September 21, 2009, the day befor e trial beg an, Stone and L arse n moved for the district
court to dismiss the char g es ag ainst them, alleg ing that the court had violated the Speedy Trial Act. The district cour

t judge addre ssed the motion on the first day of trial, setting forth deta iled finding s of fac t and conclusions of law as to why it g rante d the continuance s. The court stated that - 3 -Nos. 10-1748, 10-1753

United States v. Stone, e t. al. the complexit y of the case justified all three continuance s. T h e co u rt further stated that it had considere d the fac tors in the Speedy Trial Act and deter mined that the ends of justice would best be

serve d by g ranting the continuance s. I t conclude d that the only non-excludable day s on the 70-day trial clock for Stone and L arse n wer e the nine non-excludable day s that elapse d betwee n their initial
appea ranc e befor e the court and Peg g s’s motion for continuance on November 8, 2007. The court then issued an or der de ny ing the motion. After a jury trial, Stone, L arse n, and Peg g s wer e convicted of all char g es ag ainst them—eac h of one count of conspirac y to de fra ud the United States and Peg g s and L arse n of two counts of tax evasion. Stone and L arse n now appea l their conviction. Their sole issue on appea l is whether the 1 d istrict court violated their rig hts under the Speedy Trial Act. Stone and L arse n reque st t h at t h i s
court re verse their convic tion and instruct the district court to dismiss the indictment.

I I The S peedy Trial Act, 18 U.S.C. § 3161–74 (1982), requires that a trial commence within seventy day s of the fil i n g d at e or the date the defe ndant appea red befor e a judicial office r of the court, whicheve r is later. 18 U.S.C. § 3161(c) (1). The Act allows for the tolling of the seventy -day period, howeve r, for “[a]ny period of delay resulting from a continuance g rante d by any judge on his

own motion or at the reque st of the defe ndant or his counsel or at the reque st of the attorney for the
Peg g s pursued his a

ppeal separ ately , but his motion to voluntarily dismiss the appea l w as 1 g rante d by

this court on J uly

30, 2010. - 4 -Nos. 10-1748, 10-1753

United States v. Stone, e t. al. Go v er n m en t , ”as long as “the judge g rante d such continuance on the basis of his finding s that th e ends of justice serve d by taking such action outweig h the best interest of the public and the defe ndant in a spee dy

trial.” § 3161(h) (7)( A). The court is require d to consider cer tai n fa ctors in balanc ing the ends of justice serve d by
g ranting a continuanc e and the best interests of the defe ndant and the public. T hese f actor s are : (i ) Whether the failure to g rant such a continuance

. . . would be likel y t o m ak e a continuation of such pr ocee ding impossible, or re sult in a miscarriag e of justice. (ii) Whether the case is so unusual or so complex, due to the number of defe ndants, the nature of the prosec ution, or the exis tence of novel questions of fac t or law, that it is unreasonable to expect a dequate prepa ration for pretria l proce eding s or for the trial itself within the time lim its established by this section.

. . . . (iv) Whether the failure to g rant such a continuance in a case which, t ak en as a whole, is not so unusual or complex as to fall within clause (ii), would deny the defe ndant a re as o n ab l e time to obtain counsel, would unrea sonably deny the defe n d an t o r the Government continuity of counsel, or would deny counsel for the defe n d an t o r the attorney for the Gover nment the rea sonable time nece ssary for eff ective pr epar ation, taking into account the e x erc ise of due dilig ence . Id. at § 3161(h)( 7)(B ). To conduct a p ro p er ends-of -justice analy sis when g ranting a continuance , a district court
must state in the rec ord, either orally or in writing , its rea sons for deter mining that gra n t ing the continuance outweig hs the public’s and the defe ndant’s interest in a speedy trial, based on the fac tors
set forth in (h)( 7)(B ). 18 U.S.C. § 3 1 6 1 (h)( 7)(A)

. The court does not have to g ive its rea sons contempora

neously with the g rant of the continuance ; it need only g ive the rea sons no later than the

- 5 -Nos. 10-1748, 10-1753

United States v. Stone, e t. al. ruling on t h e d ef

en d an t’s motion to dismiss on Speedy Trial Act g rounds. United States v. Crawf ord , 982 F.2d 199, 204 ( 6th Cir. 1993). Stone and L arse n claim that the district court violated the Speedy Trial Act when it failed to start trial by

J une 5, 2009. The y

arg ue that the district c ourt relied on the g overnme nt’s err oneous calc ulations of excludable day s and failed to consider the fac tors that the Act require s be considere d befor e a judg e may

g rant a continuance

. A district court’s interpre tation of the Speedy Trial Act is subject to de novo revie w. See, e.g. , United States v. Robinson , 887 F.2d 651, 656 (6th Cir. 1989). Howeve r, whether the district c ourt has proper ly deter

mined if cer

tain day s s h o u l d be included or excluded from the trial clock is revie wed for an abuse of discretion. United States v. Howard , 218 F.3d 556, 563 (6th Cir. 2000); United St ates v. T

inson , 23 F.3d 1010, 1012 (6th Cir. 1994). I n this case , Stone and L arse n arg ue that the district court improper ly excluded day s from the trial c lock. The distr ic t c o urt g rante d three continuance s. I n the first continuance order , the district court 2 cited 18 U.S.C. § 3161(h)( 7)(B )(ii), (iv) and deter mined that failing to g rant the continuance would deny defe nse counsel the rea sonable time nece ssary for eff ective prepa

ration in this complex case . The order set forth the court’s analy sis of the § 3161(h) (7 )( B) fac tors in deter mining that a

Peg g s moved for the first continuance on November 8, 2007. The time betwee n November 2 8 and Dec ember 12, the day the continuance was g rante d, is exclud ab l e. The Speedy Trial Act excludes time be tween the filing of a pre- trial motion and hear ing or other prompt disposition. 18 U.S.C. § 3161(h)( 1)(D)

. The Supreme Court rec ently h eld that pre- trial motions automatically exclude time, with no reg ard to whether or not the motion actua lly cause d, or was expected to cause , delay

. See United States v. Tinklenberg , 131 S. Ct. 2007, 2010–11 (2011) (over ruling United States v. Tinklenberg , 579 F.3d 589, 598 ( 6th Cir. 2009)). - 6 -Nos. 10-1748, 10-1753

United States v. Stone, e t. al.

co n t inuance was appropriate

. Def ense counsel’s need for additional time to prepa re an unusuall y complex case is an appropr iate rea son for g ranting a continuanc e. T h er efore, the first 180-day continuance was prope rly excluded from the tria l clock by the district court. The sec ond continuance g rante d by the district court stated tha t “the ends of justice serve d by [gra nting the continuance ] outweig h the best interest of the public and the defe ndants in a speedy trial,” citing 18 U.S.C. § 3161(h)( 8)(A) , (B )(ii), (iv). The district court cited the Act’s fac tors, but it did not set forth its rea soning. Howeve r, in response to defe ndants’ motions to dismiss , the court did provide an explanation on the rec ord. The court stated that the defe ndants had m ad e t h e oral motion for a continuance , that the prosec utor “wa nted to ensure that the defe nse attorney s ha[d] an adequate opportunity to investiga te and prepa re,” and that the defe ndants wer e “all in ag ree ment that [a continuance was] nece ssary , based on the complexit y of the c ase.” The district court did not abuse its discretion in excluding the day s of the second continuance from the trial clock. Gra nting a continuance b as ed o n t h e complexit y of a case is statutorily
appropr iate and has been established in case law as adequate. See § 3161(h)( 7)(B )(ii) (allowing for continuance s wher e “the case is so unusual or complex

. . . that it is unrea sonable to expect adequate
prepa ration for pretria l proce eding s or for the trial itself within the [s eventy -day trial clock]”). The third “con t i n u an ce ” grante d by the district court was also proper ly justified at trial as

exc l u d ab l e. Thoug h the district court did not desig nate the order a continuance , but rathe r a “cr iminal case manag ement order ,” and though it did not discuss the § 3161 fac tors in the order , the
court sufficie ntly descr ibed its rea soning in the rec ord in response to defe ndants’ motion to dismiss

. The c ourt stated: - 7 -Nos. 10-1748, 10-1753

United States v. Stone, e t. al. [O] n November 5, 2008,

. . . defe nse counsel advised that they could not rea listi cally be prepa red for trial any ear lier than fall 2009, g iven the rolling discovery they wer e rec eiving from the g overnme nt. Counsel for defe ndant Peg g s indicated that a ‘firm’ trial date in the fall of 2009 would be ‘idea l.’ On November 6, 2008, being uniquely situated, this Court deter mined to continue the case fur t h er b as ed on the ends of justice and sche duled trial for September 15, 2009. The district court stated that the defe ndants consente d to this delay

. See id. at 8 (“D efe ndants L arse n and Stone

. . . acknow ledg ed that they had also consente d to delay s in their case [up to the one-w eek continuance g rante d September 22, 2009].”). The court discussed the § 3161(h)( 7)(B ) fac tors, noted that a court must base continuances on these fac tors, and stated that the court was require d to set forth its rea soning in the r ecor d. The c ourt then held: All the time betwee n Decem b er 1 2 , 2007 and today , September 22, 2009, is excludable under the ends of justice exception.

. . . As this Court rec og nized in the very first cont i n uance g rante d to defe ndants, it has relied upon 18 U.S.C. 3161(h)( 7)(B )(ii), and [(B)( iv)] which provides the following : [provides the rele vant (h)( 8)(B ) fac tors]. This case is not the norm. The fac tual predic ate for a statutorily authorized exclusion of delay is clea rly est ablished. As defe nse counsel has emphasized from the beg inning of this case , the nature of the evidenc e ag ainst their clients is complex, far -re aching , and immense.

. . . [T] here is an estimate somewher e that the number of document s disclosed by the g overnme nt for revie w by defe nse counsel is 638,000. This Court has hear d over and over from defe nse counsel a litany of t he complex ities of t he case, the voluminousness of t he documents, the burdens on the sole prac titioner defe nse attorney s . . . , the extensive trave l

. . . t hat was nece ssitated, all adding up to the reque st for and need for delay

. . . . [D] efe nse counsel descr ibed the manag ement and analy sis of the hundreds o f t h o u s ands of documents as “daunting ,” and the prepa ra t i o n for witness examination as “cha lleng ing.”

. . . I n g ranting the reque sted delay s in this case , this Court found and reiter ates here today that it was unrea sonable to ex p ec t ad eq uate prepa ration for pretria l proce edings or for this trial itself within the time limit s established by this section of the statute. The complexit y of the case an d d ef ense counsel’s repe ated requests for additional time to prepa re motivated this Court’s decision to g ran t continuance s and delay trial until today

. The en d s of justice serve d by continuing trial until today clea

rly outweig hed their interests and the public’s interest in a speedy trial.
- 8 -Nos. 10-1748, 10-1753

United States v. Stone, e t. al.

Id. at 13. The district court’s detailed explanation of its rea soning demonstrates that its desig nation of the delay from Nove mber 6, 2008 to September 15, 2009 as a proper ly excludable ends-of-justice continuance was not an abuse of d i s cr et i o n. The court’s use of the past tense in its explanation highlig hts that it descr ibes the motivation that exis ted at the time the delay was imposed. The court discussed t he § 3161(h)(7)( B) (ii) and (iv) factors, which wer e adequate rea sons for its decision t o g rant the continuance

. That defe nse counsel may not have reque sted a continuance is not fata l. See § 3161(h)( 7)(A) (desc ribing a continuance as being “g rante d by any judge on his own motion or at the reque st o f t h e d ef

en d ant or his counsel or at the reque st of the attorney for the Gover nment”) (empha sis added)

. The fac t that the continuance was not desig nated as such, but rathe r took the form of setting the trial date in a case -mana g ement order , is also not fata l. An ends-of -justice continuance

can be found even when a delay is not desig nated as such by the court. United States v. Spring , 80 F.3d 1450, 1457 (10th Cir. 1996)

. The eff ect of the district court’s case -mana g ement order was to
g rant a continuance , and that continuance was proper ly justified by the court’s rea soning in response to defe ndants’ motion to dism iss. Theref ore, the district court did not abuse its discretion when it held that the roug hly ten months of delay cause d by the case -mana g ement order was an excludable continuance under the Speedy Trial Ac t. T h e d is tr ic t c o u

r t g rante d a fourth continuance on September 15, 2009, g iving the prosec u ti o n

one wee k to depose a witness who lived in L ondon. The district court stated that it had deter mined

- 9 -Nos. 10-1748, 10-1753

United States v. Stone, e t. al. that the ends of j ustice we re be st served by g ranting the one- wee k continuance . The district court did not abuse its discretion when it held that this continuanc e wa s excludable. I n summary , the only non-excludable day s that elapse d befor e Stone and L arse n’s trial beg an

on September 22, 2009 wer e the day s betwee n their app ea ranc e on October 29, 2007 and codefe ndant Peg g s’s motion for a continuance on November 8, 2007. The rema inder of the time befor e trial was cover ed by the 180-day continuance g rante d Dec ember 12, 2007; the 180-day continuance
g rante d J une 16, 2008; the t en-month continuance gra nted via the c ourt’s ca se-mana g ement order of November 6, 2008; and the one-w eek continuance g rante d on September 15, 2009. The district
court did not abuse its discr etion in holding that these continuance s wer e excludable from the trial clock.

I I I For t h e fo re go i n g rea sons, the district court’s denial of defe ndants’ motion to dismiss the indictment ag ainst them is AFF I RMED. Corres p o n d in g ly , defe ndants’ reque st that their convictions be re verse d is also DENI ED.

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