Opinion ID: 617629
Heading Depth: 2
Heading Rank: 5

Heading: Hassebrock's Sentence

Text: Hassebrock challenges his sentence on three grounds: the propriety of the sentencing procedure, the substantive reasonableness of the sentence, and the authority of the district court to impose restitution.
As an initial matter, we review de novo the legal question of whether the district court followed the proper sentencing procedure, but we review factual findings only for clear error. United States v. Pulley, 601 F.3d 660, 664 (7th Cir.2010). Hassebrock alleges that the district court incorrectly arrived at a level 20 guideline with an imprisonment range of 33 to 41 months for a defendant with no criminal history. The United States Probation Office for the Southern District of Illinois (USPO) recommended this level, based on §§ 2T1.1(a)(1) and 2T4.1(H) of the United States Sentencing Guidelines (Guidelines), finding that the tax loss [2] resulting from the offense was greater than $400,000 but not greater than $1,000,000. According to the Guidelines, If the offense involved failure to file a tax return, the tax loss shall be treated as equal to 20% of the gross income ... less any tax withheld or otherwise paid, unless a more accurate determination of the tax loss can be made. U.S.S.G. § 2T1.1(c)(2)(A). The government determined Hassebrock's 2004 gross income to be $2,032,303.71. Twenty percent of this gross income is $406,460.74, which falls within level 20. In addition to this method of calculation, Hassebrock's accountant testified to an estimated tax liability of $599,121, and IRS Agent Michael Gilmore estimated the tax liability at $593,514. All three of these estimates exceed the $400,000 threshold, thereby making level 20 the appropriate sentencing guideline. Though Hassebrock does not present an alternative calculation on appeal, he contests the amount used by the district court. At the outset, we reject Hassebrock's argument that the district court could not have properly sentenced him in the absence of a filed 2004 tax return from Hassebrock to use to determine tax loss. Hassebrock cannot use the conduct that led to his conviction as the reason that he cannot be sentenced. Next, Hassebrock argues that the district court should have deducted the value of a safe containing at least $11,000 that was seized by law enforcement during the execution of a search warrant. He argues that these assets qualify as tax withheld or otherwise paid under U.S.S.G. § 2T1.1(c)(2)(A), but he provides no factual support that these assets were used as partial payment of his 2004 taxes owed. Finally, Hassebrock argues that legitimate deductions will reduce the amount of the assessment once his 2004 tax return is ultimately filed. We have recognized that tax loss refers to the amount of loss that the defendant attempted or intended to create through his tax offense and not to the actual amount of loss suffered by the government. United States v. Chavin, 316 F.3d 666, 677-78 (7th Cir.2002) (holding that unclaimed but legitimate deductions are not considered when calculating tax loss under U.S.S.G. § 2T1.1). It is well settled that the district court applies the Guidelines method of calculating tax loss unless a more accurate rate can be determined. See U.S.S.G. § 2T1.1(c)(2)(A); United States v. Hoover, 175 F.3d 564, 568 (7th Cir.1999). The district court is best positioned to determine whether any testimony or evidence presented by the defendant offers a more accurate estimate of his gross income. See United States v. Valenti, 121 F.3d 327, 334 (7th Cir.1997) (affirming the district court's application of the Guidelines method for determining tax loss rather than the defendant's); see also United States v. Wu, 81 F.3d 72, 75 (7th Cir.1996) (rejecting the notion that courts have any responsibility to comb the books of convicted tax evaders seeking ways in which they could have lowered their tax liability and their sentences). The district court in this case properly relied on the methodology laid out in the Guidelines to calculate Hassebrock's tax loss.
Hassebrock next challenges the substantive reasonableness of his sentence. We review the substantive reasonableness of a sentence for abuse of discretion, and a correctly calculated, within-Guidelines sentence is entitled to a presumption of reasonableness. Pulley, 601 F.3d at 664. The district court accepted the findings of the Presentence Investigation Report (PSR) and imposed a sentence that fell within the Guidelines. The court properly considered the trial record, the PSR, Hassebrock's testimony, and the factors listed in 18 U.S.C. § 3553(a). [3] In support of a sentence on the higher end of the sentencing level, the district court noted that Hassebrock consciously disobeyed his obligation to pay taxes, joined a fictitious Native American tribe to avoid his tax obligation, and attempted to pay taxes with fraudulent sight drafts. The court further criticized Hassebrock for failing to accept responsibility for his actions, a step that could have reduced the sentencing level. Referencing the § 3553(a) factors and using language that mirrors the introductory comments of U.S.S.G. § 2T1.1, Judge Reagan announced at the sentencing hearing: [T]he crux of this Court's decision to imprison Mr. Hassebrock is based upon two things. It is the need to deter criminal conduct and the need to promote respect for the law as well as just punishment for the offense. Only a sentence of incarceration can deter Mr. Hassebrock and others from tax evasion and failure to file, and a sentence of probation would not promote respect for the law, but encourage people to flaunt it. ... Because of the limited number of criminal tax prosecutions relative to the estimated incidents of such violations, deterring others from violating the tax laws is a primary consideration underlying these guidelines. Judge Reagan further concluded that the case involved greed and that therefore the punishment should include a monetary penalty. Hassebrock nevertheless contends that the district court issued an excessive sentence because it sought to make an example out of him as a tax protestor. He does not cite any specific factual allegations to support a claim of bias, and he fails to recognize that deterrence is an appropriate consideration in sentencing. The court's denial of the government's request for the cost of prosecution and the court's respectful comments toward Hassebrock further belie his claim of bias. Hassebrock argues that his lengthy sentence of imprisonment is wrongful in light of the fact that he was eligible to receive only probation; however, Hassebrock's own sentencing memorandum acknowledged that his convictions are not eligible for probation. Thus, the only argument that he is left with is that the Sentencing Commission erred in creating tax Guidelines that favor imprisonment over probation. While the district court was entitled to consider this argument, the district court was also entitled to reject it and apply a sentence in line with the Guidelines. Hassebrock also argues that the fine imposed is impermissibly severe. He points to the fact that the government requested the minimum fine but the court nevertheless imposed a fine of $74,000 (nearly the maximum fine in the applicable level). Yet the government sought the minimum fine not in the spirit of lenity, but in recognition of the size of that obligation that he has to the United States, referring to his restitution obligation. Judge Reagan reasoned that the fine of $74,000 was necessary to cover the costs of incarceration. District courts have the discretion to order a criminal defendant to pay the costs of incarceration. See U.S.S.G. § 5E1.2(d)(7) (In determining the amount of the fine, the court shall consider ... the expected costs to the government of any term of probation, or term of imprisonment and term of supervised release imposed. ...); see also United States v. Turner, 998 F.2d 534, 536 (7th Cir.1993). In determining the sentence, the district court carefully considered the § 3553(a) factors, particularly the nature of the offense and the need for deterrence. The court did not abuse its discretion in imposing a within-Guidelines sentence for the serious offenses that Hassebrock committed. Hassebrock's arguments are unavailing and fall significantly short of rebutting the presumption of reasonableness that we accord to a within-Guidelines sentence.
Finally, Hassebrock challenges his sentence by arguing that the district court does not have the authority to order restitution in cases involving tax offenses and that the amount imposed is unreasonable.
We review de novo questions of law involving the district court's authority to order restitution. United States v. Webber, 536 F.3d 584, 601 (7th Cir.2008). The government properly acknowledges that restitution is not permitted pursuant to 18 U.S.C. § 3663 or 18 U.S.C. § 3663A for offenses that fall within Title 26 of United States Code. [4] However, a district court may impose restitution for Title 26 offenses as a condition of probation, see 18 U.S.C. § 3563(b)(2), or as a condition of supervised release, see 18 U.S.C. § 3583(d). Section 3583(d), the Supervised Release Statute, provides in relevant part: The court may order, as a further condition of supervised release, ... any condition set forth as a discretionary condition of probation in section 3563(b) and any other condition it considers to be appropriate.... See also U.S.S.G. § 5E1.1(a)(2) (In the case of an identifiable victim, the court shall ... 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.); United States v. Batson, 608 F.3d 630, 635 (9th Cir.2010) (The Supervised Release Statute, together with the Probation Statute, unambiguously authorizes federal courts to order restitution as a condition of supervised release for any criminal offense, including one under Title 26, for which supervised release is properly imposed.); United States v. Nolen, 523 F.3d 331, 333 (5th Cir.2008) ([R]estitution may be imposed if done so as a condition of supervised release in a criminal tax case, even in the absence of a prior definitive determination or adjudication of the amount of taxes owed, and if limited to losses from the crime of conviction.). Thus, it is clear that district courts possess the authority to impose restitution for tax offenses as a condition of supervised release. It is less than clear, however, whether the district court in this case actually did impose restitution as a condition of supervised release, rather than as an independent component of the sentence. The district court indicated some confusion as to its authority to order restitution during the sentencing hearing, and the PSR erroneously stated that restitution could be ordered pursuant to 18 U.S.C. § 3663(a)(3). Throughout the sentencing hearing, the government requested that the district court impose restitution and noted that the court's only authority for doing so was as a condition of probation or supervised release. Thus, although the district court did not expressly state the legal basis for its order of restitution, it had been made aware of the limits to its authority. The court linked the order of restitution to the sentence of supervised release on two occasions but stopped short of directly identifying restitution as a condition of supervised release. For example, during the sentencing hearing, Judge Reagan stated, Restitution shall be paid ... immediately. If you can't pay it immediately, payment will be due during imprisonment. If it is not paid during imprisonment, it will be a condition of supervised release. In the Supervised Release judgment form, the court referenced the order of restitution in a subsection labeled Special Conditions of Supervision but primarily in terms of how it would be collected. Because a district court can only impose restitution as a condition of supervised release, a defendant cannot be required to pay restitution until his period of supervised release begins. We are therefore troubled by the district court's oral and written statements that require immediate payment of restitution. Hassebrock has apparently heeded the district court's order and has started to make payments. The district court reaffirmed its requirement of immediate payment when it denied Hassebrock's motion to stay restitution pending appeal. When presented with a very similar situation, the Fourth Circuit determined that a remand was necessary. United States v. Dean, 64 F.3d 660, 1995 WL 493006, at  (4th Cir.1995) (per curiam) (unpublished table decision). In Dean, the Fourth Circuit concluded (and the government conceded) that the district court's restitution order making payment due immediately indicated that the district court must have ordered restitution pursuant to 18 U.S.C. § 3663(a), rather than § 3583(d) or § 3563(b)(3). The Fourth Circuit held that the restitution order was without statutory authorization and remanded to allow the district court to consider the issue of restitution as a condition of supervised release. Id. The district court's immediacy requirement, along with its failure to explicitly label restitution as a condition of supervised release, leads us to the same conclusion in this case. The Second Circuit, however, decided not to remand when confronted with a sentence in which the district court did not clearly set forth the basis for its order of restitution. See United States v. Bruno, 234 F.3d 1263, 2000 WL 1715254, at -4 (2d Cir.2000) (unpublished table decision). The Second Circuit noted that the district court had not cited to any statutory authority for its order, that the PSR did not reference § 3663(a), and that the judgment form listed restitution as one of the Additional Supervised Release Terms. Id. Despite acknowledging that the district court's oral statement may have been ambiguous, the Second Circuit found no reason to believe that the court was not imposing restitution as a special condition of supervised release. Id. at . By contrast, the record in the present case is not simply ambiguous but also conflicting, which does gives us reason to believe that the court did not impose restitution as a condition of supervised release. For Title 26 offenses, a district court is only authorized to impose restitution as a condition of probation or as a condition of supervised release. Given that the government carefully explained the court's authority, it seems likely that the court was aware that it could only impose restitution as a condition of supervised release. But because a degree of uncertainty remains, we remand for the limited purpose of allowing the district court to clarify the statutory basis for its order of restitution. The district court does not have the authority to impose restitution pursuant to § 3663, nor does it have the authority to require immediate payment when imposing restitution as a condition of supervised release. The district court does, however, have the authority to reimpose the same restitution order, provided that the court clarifies that it is imposing restitution pursuant to § 3583(d).
Our concern with the district court's imposition of restitution rests only with the questionable basis and not with the actual amount. Despite Hassebrock's objections, we conclude that the district court did not abuse its discretion when it determined the amount of restitution to impose. We review a district court's calculation of restitution only for abuse of discretion, and we view the evidence in the light most favorable to the government. Webber, 536 F.3d at 601. The amount of restitution is limited to the losses caused by the specific conduct underlying the offense for which the defendant was convicted. See 18 U.S.C. § 3663A(a). The prosecutor must establish the amount of loss by a preponderance of the evidence. See United States v. Hosking, 567 F.3d 329, 332-33 (7th Cir.2009) (citing 18 U.S.C. § 3664(e)). Yet the Guidelines also recognize that it may be impossible to make a perfect calculation and that the court may need to simply make a reasonable estimate based on the available facts. United States v. O'Doherty, 643 F.3d 209, 218-19 (7th Cir. 2011) (quoting U.S.S.G. § 2T1.1, app. 1). We have emphasized that the district court has broad discretion to determine the procedures for calculating the amount of restitution. See United States v. Minneman, 143 F.3d 274, 284 (7th Cir.1998). We have encouragedbut not requireddistrict courts to articulate detailed findings of fact in support of their restitution awards. Id. at 285. In general, the USPO calculates the amount of tax loss using evidence admitted at trial and then recommends this amount for restitution in its PSR. As we have stated, A district court may rely on the PSR in ruling on factual issues in the sentencing context as long as the PSR is based upon sufficiently reliable information. When the court relies on information contained in the PSR at sentencing, it is the defendant's burden to show that the PSR is inaccurate or unreliable. When a defendant has failed to produce any evidence calling the report's accuracy into question, a district court may rely entirely on the PSR. United States v. Artley, 489 F.3d 813, 821 (7th Cir.2007) (internal quotation marks and citations omitted). Although the loss under the sentencing guidelines refers to the intended loss and the loss under restitution refers to the actual loss, the method of calculation is related. See United States v. Copus, 110 F.3d 1529, 1537 (10th Cir.1997). In this case, the district court adopted the PSR's conclusions in their entirety. The PSR arrived at an amount of restitution ($997,582.98) based on a tax amount owed of $593,557, representing actual loss, plus interest until the date of sentencing hearing. Hassebrock contends that his tax liability is approximately $1,600, but he provides no evidence in support of this assertion. [5] In contrast, the PSR relied on IRS determinations, bank records, and third party interviews to support its classifications of the income earned in 2004. The PSR's estimate was conservative in treating the majority of the checks made out to the Hassebrocks as allowable business expenses. The district court acted well within its discretion in calculating restitution based on the PSR's estimate and the evidence introduced at sentencing. Therefore, with the possible exception of the basis for ordering restitution, the district court imposed a sentence that was procedurally proper, substantively reasonable, and statutorily authorized.