Source: http://caselaw.findlaw.com/us-9th-circuit/1651569.html
Timestamp: 2014-04-19 12:10:08
Document Index: 678951797

Matched Legal Cases: ['§ 371', '§ 7212', '§ 7212', '§ 7202', '§ 7201', '§ 1343', '§ 1014', '§ 7201', '§ 7206', '§ 7201']

UNITED STATES v. KAHRE, Nos. 09–10471, 09–10528, 09–10529., December 05, 2013 - US 9th Circuit | FindLaw
UNITED STATES of America, Plaintiff–Appellee, v. Robert David KAHRE, aka Robert D. Kahre, Defendant–Appellant.United States of America, Plaintiff–Appellee, v. Lori A. Kahre, aka Donna Hall, Defendant–Appellant.United States of America, Plaintiff–Appellee, v. Alexander C. Loglia, Defendant–Appellant.
Argued and Submitted June 11, 2012. -- December 05, 2013
Before PROCTOR HUG, JR., JOHNNIE B. RAWLINSON, and SANDRA S. IKUTA, Circuit Judges.
Michael K. Powell and Michael J. Kennedy (argued), Assistant Federal Public Defenders, Reno, NV, for Appellant Lori A. Kahre. Lisa A. Rasmussen, Las Vegas, NV, for Appellant Robert D. Kahre. Joel F. Hansen, Hansen Rasmussen, Las Vegas, NV, for Appellant Alexander C. Loglia. Gregory Victor Davis, Mark S. Determan (argued), Department of Justice, Washington, D.C., for Appellee United States.
OPINIONAppellants Robert Kahre (Kahre), Lori Kahre (Lori) and Alexander Loglia (Loglia) challenge their convictions for various criminal tax offenses arising from their use of gold and silver coins to pay wages and thus avoid the reporting of payroll and income taxes. Appellants contend that dismissal of the indictments was warranted because Appellants lacked the requisite notice that their conduct violated applicable tax laws. Appellants also assert that a new trial was in order because the prosecutor should have been disqualified due to his status as a defendant in a Bivens1 lawsuit filed by the Kahres, and because the district court's prejudicial conduct and erroneous evidentiary rulings deprived them of a fair trial. In addition, Robert Kahre challenges the district court's denial of his motions to suppress and the sentence imposed. We affirm Appellants' convictions and Kahre's sentence.I. BACKGROUNDA. Third Superseding Indictment (Indictment)2The Indictment alleged that Appellants engaged in a conspiracy to avoid the payment of payroll and income taxes by utilizing a payroll system pursuant to which employees received their wages in gold and silver coins, which were later exchanged for cash. According to the Indictment, “the face amount of the coins was one-eighth of the amount of pay that the employee actually earned and received in the envelope of cash[.]” The Indictment alleged that Appellants failed to withhold the required federal income taxes, medicaid taxes, and social security taxes from the employees' wages, and that Appellants created false invoices to conceal the payroll expenses. The Indictment also alleged that Kahre marketed the payroll service to other contractors and charged an administrative fee for use of the payroll service.The Indictment charged all three defendants with one count of conspiracy in violation of 18 U.S.C. § 371, and one count of attempting to interfere with the administration of internal revenue laws in violation of 26 U.S.C. § 7212(a). Robert and Lori Kahre were charged with an additional count of attempting to interfere with the administration of internal revenue laws in violation of 26 U.S.C. § 7212(a).The Indictment charged Robert Kahre with forty-eight counts of failure to pay employment taxes in violation of 26 U.S.C. § 7202; four counts of attempting to evade or defeat taxes in violation of 26 U.S.C. § 7201; and one count of wire fraud in violation of 18 U.S .C. § 1343.The Indictment charged Lori Kahre with one count of making false statements to a bank in violation of 18 U.S.C. § 1014, and eight counts of attempting to evade or defeat taxes in violation of 26 U.S .C. § 7201.Finally, the Indictment charged Loglia with one count of filing false income tax returns in violation of 26 U.S.C. § 7206(1), and ten counts of attempting to evade or defeat taxes in violation of 26 U.S.C. § 7201.B. Pretrial Motions1. Kahre's Motions To SuppressIn his search warrant affidavit, Internal Revenue Service (IRS) Special Agent Jared Halper observed that, although Kahre's businesses were generating significant revenues, Kahre had not filed business tax returns or employment taxes since the early 1990s. Kahre also had not filed individual tax returns since 1991.Agent Halper averred that Kahre leased employees to various contractors, and withdrew cash from Bank of the West for the payroll. According to Agent Halper, Kahre withdrew $24,096,012 in cash between January 17, 2002, and October 31, 2002. Kahre's employees collected their wages at a warehouse located at 6270 Kimberly Avenue in Las Vegas. The employees received nominal amounts of gold certificates or gold chips, which they immediately exchanged for envelopes of cash. Kahre allegedly withheld “sixty percent of the employees' payroll․”Based on Kahre's conduct, Agent Halper stated that there was probable cause to believe that Kahre was engaged in a conspiracy to evade taxes and to interfere with the administration of the tax laws by the IRS. Agent Halper's affidavit reflected that evidence of Kahre's criminal activities could be found at the 6270 Kimberly Avenue, 6295 Grand Canyon, and 1555 Bledsoe Lane addresses (The Kimberly, Grand Canyon, and Bledsoe properties).In his declaration, Agent Halper related that IRS agents reviewed the search warrant affidavit prior to the searches. Kahre was subsequently arrested at Bank of the West pursuant to a state bench warrant for failure to appear, and the agents seized $230,913 in cash, which was provided to the IRS to satisfy Kahre's “unpaid federal income tax liabilities.” According to Agent Halper, Kahre had unpaid tax assessments of approximately $2,000,000.The district court ruled that Kahre's motion to suppress evidence seized when Kahre was arrested at Bank of the West was moot because the seized evidence would not be used at trial. The district court also determined that the government was not required to return the cash seized from Kahre because it was used to offset Kahre's tax liabilities.The district court granted in part and denied in part Kahre's amended motions to suppress evidence seized from the Kimberly, Bledsoe, and Grand Canyon properties. Because Kahre was not present during the execution of the search warrants, the district court held that Kahre lacked standing to challenge the manner in which the search warrants were executed. The district court concluded that, because the search warrant properly incorporated the search warrant affidavit, the warrant was not overly broad. The district court also held that the agents properly seized gold and silver coins relating to Kahre's payroll scheme. However, the district court granted Kahre's motion to suppress information and documents that were unrelated to the time periods specified in the warrants.2. Appellants' Motions To Disqualify the Prosecutor For Conflict of InterestOn October 30, 2003, several plaintiffs, including the Kahres, filed a Bivens action against the federal prosecutor, as well as other federal defendants. The complaint alleged, inter alia, that the federal defendants orchestrated an illegal raid of Kahre's properties, improperly arrested Kahre and stole $230,913 in cash from him.On October 4, 2004, the district court in the Bivens action denied the prosecutor's motion to dismiss premised on absolute immunity. Treating the complaint's allegations as true, the court denied absolute immunity because of the prosecutor's alleged involvement in planning the raids.The government subsequently filed two indictments against Appellants, and the district court in the Bivens case granted the government's emergency motion to stay the proceedings based on the pending criminal prosecutions. During the first trial, the jury was unable to reach verdicts, and the government subsequently filed the Third Superseding Indictment.Prior to the second trial, Kahre renewed a prior motion to disqualify the prosecutor because of a conflict of interest. In an attached declaration, Kahre's counsel related that the prosecutor had remarked that Kahre's counsel had “threatened [his] job and [his] pension,” making the case “personal.” Kahre filed a subsequent motion to disqualify the prosecutor because of his pecuniary and emotional interests in the Bivens action, and because the prosecutor had filed the indictments as retaliation for being named in the Bivens action.The district court denied Kahre's motion, ruling that automatic disqualification was not warranted due to the pendency of a Bivens action, and that the prosecutor's comments did not require disqualification on the merits.3. Appellants' Motions To Dismiss the Indictments Based on the Gold and Silver Coins' ValuationAppellants asserted that they lacked the requisite notice that their payroll payments in gold and silver coins were taxable at the coins' fair market value and that their conduct violated the tax laws. They contended that the lack of notice in the statutory language compelled application of the rule of lenity, resulting in a construction of the statute that was most favorable to them. The district court rejected the Appellants' argument, explaining that the applicable statutes were unambiguous regarding the elements of conspiracy to defraud the government and of willful failure to truthfully account for taxes owed. The district court added that the statutes' scienter requirements mitigated any vagueness and that the tax provisions patently articulated reporting and filing requirements.The district court eschewed Appellants' argument that they did not defraud the government because gold and silver coins used to pay employees should have been assessed at face value, rather than fair market value, for tax purposes. If, for example, an employee was paid with ten silver dollar coins, Appellants would argue that the employee received only ten dollars in wages. However, if each silver dollar had a fair market value of fifty dollars, the government assessed the wages at 10 x $50 or $500.00. The district court was persuaded that Ninth Circuit precedent, as well as that of other courts including the Tax Court, required taxation of the coins at fair market value. The district court observed that the tax code and corresponding Treasury regulations treated property, such as gold and silver coins used as compensation for services rendered, as taxable at fair market value.C. Trial Testimony and VerdictsGeorge Rodriguez (Rodriguez), who pled guilty to tax evasion, served as a foreman and superintendent for Kahre's business, Wright Painting and Drywall. According to Rodriguez, all employees were required to sign an independent contract agreement in order to receive their pay. The agreement was designed to shield Kahre and his employees from tax obligations by establishing a system of wage payments in gold and silver.Although Kahre told Rodriguez that he was an independent contractor, Rodriguez described himself as an employee of Robert Kahre's business. Kahre had the authority to direct Rodriguez in the performance of Kahre's duties, including what work to perform and when the work was to be performed. Kahre also instructed Rodriguez regarding the timing of hiring additional workers, and regarding where to purchase supplies and tools. Kahre also had the right to terminate Rodriguez's employment.According to Rodriguez, he and the other employees were paid in gold and silver on a weekly basis based on a system developed by Kahre and administered by Lori. Each week, Rodriguez received a single gold coin which he immediately exchanged for an envelope containing his $500 weekly salary in cash. All employees were required to accept payment in gold or silver coins, which coins were later exchanged for cash. Rodriguez never received W–2 forms reflecting his wages, and no deductions were made from his wages for income tax purposes.Rodriguez obtained tubes of gold and silver which he exchanged for envelopes of cash to distribute to the other employees. Rodriguez confirmed payroll payments after consulting payroll sheets generated by Lori. Payrolls were met with cash payments, and Rodriguez did not recall any employee who actually retained the gold or silver coins as wage payments.Heidi Molesworth (Molesworth), who pled guilty to tax evasion, was employed in Kahre's payroll office for five years. Kahre informed Molesworth that she was an independent contractor and she signed an independent contractor agreement. Nevertheless, Kahre paid Molesworth's wages in gold and silver coins that she immediately exchanged for envelopes of cash. Molesworth did not receive W–2 or 1099 forms,3 and never filed a tax return. Molesworth paid Kahre's employees in gold and silver coins. If an employee retained the gold or silver coins, the coins' fair market value was deducted from the cash wages due.Molesworth testified that she and Lori used false names on the payroll sheets to avoid having to pay taxes, and that it was standard procedure to use false names on employment verification forms. Although most other employees were paid using the gold and silver exchange, Molesworth and the Kahres did not use that system for payment of their own wages. Instead, envelopes of cash were prepared for payment of their wages. Robert Kahre received fees for administering the payrolls of other companies, for which he used the same coin/cash payment system he utilized for his employees.IRS Special Agent Ryan Rickey testified that, between 1999 and 2003, Kahre's companies paid $22,382,760.42 in wages. Between 1998 and 2003, the companies using Kahre to administer their payrolls paid a total of $95,042,952.14 in wages and Kahre received $14,100,087.10 in fees. Agent Rickey also testified that return filing histories reflected that Kahre did not file any tax returns between 1991 and 2006; Lori filed false returns from 1996 to 1999, and did not file any returns between 2000 and 2006; and Loglia did not file returns from 1998 to 2006.IRS Revenue Agent Sue Cutler estimated that, between 1999 and 2002, Kahre's companies paid Kahre a total salary of $1,956,738, and Kahre earned $14,100,087.10 in fees from other companies using his payroll services. Agent Cutler surmised that Kahre owed $2,049,172.97 in income taxes. Because Kahre did not file any employment taxes for his businesses from 1999 to 2003, Agent Cutler calculated an additional tax liability of $7,082,138.54.In his testimony, Robert Kahre explained that he developed his payroll system after the IRS seized his property and equipment from a failed business. Kahre met John Nelson (Nelson), who authored books and taught classes about the IRS and the monetary system, and Nelson's ideas influenced Kahre to develop the payment system at issue.According to Kahre, he developed his gold payroll system because the United States government had debauched the national currency and utilized inflation to confiscate the wealth of U.S. citizens. Kahre relied on court cases and the Gold Bullion Coin Act of 1985 that approved gold coins as legal tender. Kahre devised the independent contractor agreements to reflect that the IRS was a foreign agent for the World Bank and the International Monetary Fund (IMF). In Kahre's view, by collecting taxes for the IRS, employers illegally served as foreign agents for the World Bank and IMF. Kahre relied on several federal statutes, regulations, and “Presidential Documents” in the process of developing his payroll system to avoid the collection of taxes on behalf of foreign agents.Loglia testified that, like Kahre, he was influenced by Nelson's ideas about monetary history and monetary policy. Loglia believed that Congress approved the use of gold coins as an alternative to paper currency. Because of his interest in gold payments, Loglia agreed to work for Kahre, and stopped filing tax returns in 1993, since his income, calculated in accordance with the face value of the gold and silver coins, was below the filing threshold. Loglia believed that there was legal precedent supporting the gold payment system, and he calculated his income based on the coins' face value on the ground that coins can be legally used to pay debt. Loglia was of the view that federal statutes and the Gold Bullion Coin Act of 1985 supported the gold payment system considering that coins were approved legal tender, and that gold clause contracts were legally authorized.Lori Kahre testified that she started to work for her brother, Robert, in 1988. In 1993, Kahre commenced paying Lori her wages in silver dollars, and Lori thought the coins were legal tender based on Congressional acts. Lori was persuaded that the coins were legal tender because a coin shop did not collect taxes when exchanging cash for the coins, and the companies utilizing Kahre's payroll system never challenged the transactions.Initially, Lori filed tax returns based on the face value of the silver coins. In 2000, Lori determined that she received between $63 and $125 wages per week, based on the face value of the coins. Because her wages calculated on the face value of the coins were below the threshold for filing taxes, Lori did not file any tax returns between 2001 and 2006.The jury found Kahre guilty on all counts. Loglia was acquitted of conspiracy, but convicted on the remaining counts. The jury found Lori guilty on all counts with the exception of one count of willfully attempting to evade or defeat tax.D. SentencingThe presentence investigation report (PSR) calculated that Kahre had paid $25,572,307.17 in cash wages to his employees, and failed to withhold $10,891,791.72 in taxes. The PSR also determined that Kahre paid $95,175,992.14 in cash wages to the employees of thirty-five contracting businesses and thereby obstructed the collection of $40,847,545.80 in taxes. The PSR estimated the potential tax loss of Kahre's payroll scheme at $51,739,337.52. The PSR estimated an additional $5,696,466.10 in tax liabilities due to Kahre's failure to file tax returns in 1992, 1993, 1999, 2000, 2001, and 2002. Combined with the tax losses from the payroll scheme, the total potential tax loss was $57,435,803.52. From these calculations, the PSR recommended a total offense level of 39, with a guideline sentencing range of 262 to 327 months' imprisonment.4 The PSR calculated $16,060,104.72 in outstanding restitution from Kahre's personal tax liability of $5,168,313.00, and $10,891,791.72 in tax losses from the payroll scheme.During the sentencing hearing, the district court determined that a base offense level of 30 was supported by the trial testimony and relevant conduct, and rejected Kahre's objection that the applicable guideline range was 51 to 63 months. The district court held that there was ample support for an obstruction of justice enhancement, and that a downward adjustment for acceptance of responsibility was unwarranted. The district court concluded that the recommended restitution amount was supported by the jury's findings and the evidence at trial. After deciding that a downward variance was warranted, the district court sentenced Kahre to 190 months' imprisonment and three years of supervised release. The district court also ordered $16,060,104.72 in restitution with $10,891,791.72 “to be jointly and severally owed by co-defendants.”The district court sentenced Lori to seventy-two months' imprisonment, four years of supervised release, and $31,900 in restitution, and sentenced Loglia to twenty-six months' imprisonment, three years of supervised release, and $83,000 in restitution.Appellants timely appealed their convictions and Kahre timely appealed his sentence.II. STANDARDS OF REVIEW“We review de novo the district court's ruling on a motion to suppress.” United States v. Russell, 664 F.3d 1279, 1280 n.1 (9th Cir.2012) (citation omitted). “The court's factual findings are reviewed for clear error ․” Id. (citation omitted).“The district court's determination that the predicate law was clearly established is a question of law which we review de novo.” United States v. George, 420 F.3d 991, 995 (9th Cir.2005) (citation omitted).“The district court's refusal to disqualify the prosecutor is reviewed for abuse of discretion.” United States v. Davis, 932 F.2d 752, 763 (9th Cir.1991), as amended (citation omitted).“We review evidentiary rulings for abuse of discretion, though we review de novo the district court's interpretation of the Federal Rules of Evidence․” United States v. Urena, 659 F.3d 903, 908 (9th Cir.2011) (citation omitted).“This Court reviews the district court's interpretation of the Sentencing Guidelines de novo, the district court's application of the Sentencing Guidelines to the facts of a case for abuse of discretion, and the district court's factual findings for clear error.” United States v. Dann, 652 F.3d 1160, 1175 (9th Cir.2011) (citation and internal quotation marks omitted).“A factual finding that a defendant obstructed justice is reviewed for clear error․” United States v. Garro, 517 F .3d 1163, 1171 (9th Cir.2008) (citation omitted). “A district court's decision about whether a defendant has accepted responsibility is a factual determination reviewed for clear error․” United States v. Rosas, 615 F.3d 1058, 1066 (9th Cir.2010), as amended (citation omitted).“A restitution order is reviewed for an abuse of discretion, provided that it is within the bounds of the statutory framework. Factual findings supporting an order of restitution are reviewed for clear error. The legality of an order of restitution is reviewed de novo.” Dann, 652 F.3d at 1175 (citation omitted).III. DISCUSSIONA. Denial of Kahre's Motions To SuppressKahre contends that his arrest and the seizure of payroll funds at Bank of the West were the products of an illegal, pretextual search. The district court declined to address this issue on the merits, concluding that the motion to suppress was moot because the government was not introducing the seized evidence at trial. The record confirms the district court's conclusion that the seized evidence was not introduced at trial, thereby rendering the motion to suppress moot. See United States v. Arias–Villanueva, 998 F.2d 1491, 1502 (9th Cir.1993), overruled on other grounds by United States v. Jimenez–Ortega, 472 F.3d 1102, 1103–04 (9th Cir.2007).In any event, suppression was not required merely because the arrest and corresponding search by federal agents were premised on a state warrant. See United States v. Hudson, 100 F.3d 1409, 1415–16 (9th Cir.1996) (upholding the validity of a federal agent's arrest and search premised on a state warrant). Because the agents acted pursuant to a valid state arrest warrant, the payroll funds were properly seized in the search incident to Kahre's arrest. See United States v. Tank, 200 F.3d 627, 631 (9th Cir.2000).Relying on Fed.R.Crim.P. 41(g),5 Kahre contends that the payroll funds seized during his arrest should have been returned. However, Rule 41 is inapplicable, as the seized funds were applied to Kahre's tax liabilities pursuant to a notice of levy. See United States v. Fitzen, 80 F.3d 387, 388–89 (9th Cir.1996) (“[A]n IRS tax levy will defeat a Rule 41(e) motion․ Regardle